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

TTAC Staff
by TTAC Staff

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..

TTAC Staff
TTAC Staff

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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.

  • 3-On-The-Tree I’m sure they are good vehicles but you can’t base that on who is buying them. Land Rovers, Bentley’ are bought by Robin Leaches’s “The Rich and Famous” but they have terrible reliability.
  • SCE to AUX The fix sounds like a bandaid. Kia's not going to address the defective shaft assemblies because it's hard and expensive - not cool.
  • Analoggrotto I am sick and tired of every little Hyundai Kia Genesis flaw being blown out of proportion. Why doesn't TTAC talk about the Tundra iForce Max problems, Toyota V35A engine problems or the Lexus 500H Hybrid problems? Here's why: education. Most of America is illiterate, as are the people who bash Hyundai Kia Genesis. Surveys conducted by credible sources have observed a high concentration of Hyundai Kia Genesis models at elite ivy league universities, you know those places where students earn degrees which earn more than $100K per year? Get with the program TTAC.
  • Analoggrotto NoooooooO!
  • Ted “the model is going to be almost 4 inches longer and 2 inches wider than its predecessor”Size matters. In this case there is 6” too much.
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