Ford's Profits in Latin America Wiped Out as Venezuela Devalues Currency by 44%

TTAC Staff
by TTAC Staff
ford s profits in latin america wiped out as venezuela devalues currency by 44

Ford Motor Company assembly plant in Valencia, Venezuela.

Ford Motor Company announced last week that instead of making money in Latin America this year, it will likely lose $350 million in the region because the government of Venezuela devalued its currency, the bolivar, by 44%. Ford is currently holding more than $700 million in bolivars that it cannot exchange or repatriate. The Venezuelan government is trying to conserve its hard currency reserves and it will not give Ford dollars for bolivars. FoMoCo, which has built vehicles in Venezuela since 1962 and currently operates an assembly plant in Valencia, really doesn’t have any options other than to write down the loss. The car company can’t very well try to exchange currency on the black market. Other international companies, including Toyota, face similar situations with their operations in Venezuela.

The 44% devaluation in the bolivar is the second this year, following a 32% devaluation in February. Currency controls in place for the last decade have made dollars scarce in Venezuela. Foreign reserves were reported to be at a nine year low this month. With a weak domestic currency and shrinking reserves of hard foreign currencies, companies in Venezuela have had a difficult time arranging imports, resulting in shortages of imported good ranging from meat to tires.

One reason analysts give for Venezuela’s currency issues has been growing government deficits. Government revenues from exporting oil have gone down as the country’s oil fields experience natural decline. The deficits are exacerbated by the government subsidizing the price of gasoline so consumers only pay about 5 cents per gallon, a subsidy that is reported to be phased out to bring the price up to about $1.60/gallon..

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  • Lorenzo Lorenzo on Jan 01, 2014

    Venezuela is not all of Latin America. It isn't even close to the largest country in Latin America, or even just South America. The big problem countries in South America are Venezuela and Argentina, two countries that have a long history of repeatedly squandering their national wealth and that of their citizens. Economic and political stability is hard, and though others in the region have had their problems, those two are the worst offenders, and represent risks that are excessive, though Peru and Bolivia are getting close. Ford would be better off getting out of Venezuela and spreading its investment primarily to Brazil, Colombia and Chile, countries with reasonable stability and markets representing two-thirds of South America's population.

  • WildcatMatt WildcatMatt on Jan 14, 2014

    Communism was just a red herring.

  • Kwik_Shift There are no new Renegades for sale within my geographic circle of up to 85 kms. Looks like the artificial shortage game. They bring one in, 10 buyers line up for it, $10,000 over MSRP. Yeah. Like with a lot of new cars.
  • Ribbedroof In Oklahoma, no less!
  • Ribbedroof Have one in the shop for minor front collision repairs right now,I've seen more of these in the comments than in the 30 years I've been in collision repair.
  • Tassos And all 3 were ordered by Fisker's mother. Seriously, given Fisker's terrible record of Failure in the past, only an utter loser, (for example, VGhost or Art Vandelay?), looking for a BEV terrible enough to be a proper replacement of his 11 mile range Fiat 500E, would order one of these. (apart from Fisker's mother)
  • Tassos And all 3 of them were ordered by Fisker's mother.Seriously, after Fisker's DISMAL record of UTTER FAILURE in the past, only a GOD DAMNED MORON would order this one.