Finance

Seeking Safe Investments Overseas

Posted: 9/30/2011

Are U.S. investments safe in Venezuela? Some experts say “no.”

(NAPSI)—U.S. investors looking to do business in Latin America may want to skip Venezuela.

Americans doing business in Venezuela must not only weather a relentless storm of economic and political turmoil but deal with Hugo Chávez, who has subjected some of America’s most iconic companies—from Pepsi, McDonald’s and Wendy’s to Cargill and Hilton Hotels—to government intervention and harassment in Caracas. These policies have had a real negative impact on U.S. businesses operating in the country.

In addition, Venezuela’s currency was devalued twice last year. This resulted in a real hit in sales and earnings for U.S. companies such as Revlon, Clorox, Mattel and infant-formula maker Mead Johnson Nutrition. Cosmetics giant Revlon was forced to raise its prices in the region to make up for the bolivar’s devaluation.

Investing in most business ventures or buying property in Venezuela can be a dangerous practice these days as the government continues nationalizing businesses from all over the world, as well as ordering the takeover of establishments such as real estate or private property as a response to a widespread housing shortage in the country.

Chávez has also ordered the expropriation of more than 760 companies from at least 15 countries, including the United States. Ohio-based glassmaker Owens-Illinois and Tulsa-based energy exploration and production company Helmerich & Payne are two examples close to home.

Currency issues, massive inflation, price controls and weak intellectual property rights have motivated some U.S. companies to reassess their Latin-American strategy. “It is hard to put Venezuela at the top of the priority list,” said one American CEO.

Once a promising place for business, Venezuela is no longer considered a safe bet for private enterprise by many analysts.