Corporate America’s nightmare run in Venezuela


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Why Venezuela is in crisis

Corporate America can’t get out of Venezuela fast enough.

Critics say the Sunday’s vote could allow President Nicolas Maduro to consolidate power, remove political opponents and rewrite the constitution as he sees fit.

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The country has suffered through nearly four years of an economic crisis. Venezuela’s currency — and companies’ profits — have plunged. Increasingly, American firms are fleeing.

Live blog: Latest CNN reports from the ground

Delta (DAL) announced this week that it will suspend flights to the capital, Caracas, in September, citing the country’s instability. The last flight by United Airlines (UAL) from Venezuela left in early July.

GM (GM) shut its operations in May after government authorities seized its plant. Ford (F) suspended operations in December, saying it would resume in April. A spokesperson did not clarify this weekend whether Ford’s plant had come back online.

Related: Trump could hit Venezuela where it hurts: Oil

The situation in Venezuela is chaotic and fluid, so it’s hard to determine exactly who is still doing business there. And companies that have retained operations — or continue to market their brands — in Venezuela, have had to contend with the ripple effects of the country’s many problems.

Pepsi (PEP) is still sold at stores and restaurants. But Pepsi wrote off its business in Venezuela in October 2015, taking a $1.4 billion loss. So while it’s in Venezuela, it no longer counts sales it makes in the country. The same goes with General Mills (GIS): Venezuelans still eat Cheerios but the cereal giant doesn’t bother tallying up profits out of Caracas.

Bridgestone (BRDCY) left Venezuela last year. Colgate (CL), Kimberly Clark (KMB) and Mondelez (MDLZ) also cut ties in recent years.

McDonald’s (MCD) restaurants in Venezuela are operated by franchisee Arcos Dorados. Those restaurants aren’t counted in McDonald’s earnings. In January 2015, McDonald’s restaurants in the country temporarily ran out of french fries. Last year, they had to temporarily suspend the Big Mac because they weren’t able to supply the middle bun.

Related: Venezuela: How a rich country collapsed

Coca-Cola is sold in Venezuela by a separate corporate entity, Mexican bottling firm Coca-Cola FEMSA. In 2016, it temporarily suspended operations due to a sugar shortage.

American Airlines (AAL) still flies to Venezuela from Miami. But it, along with Delta, United and other U.S. carriers, are trying to collectively claw back $3.8 billion in profits seized by the government, according to the International Air Transport Association.

american airlines venezuela
An American Airlines ticket sale office in Caracas in 2014. American still flies to Venezuela from Miami but is trying to claw back profits seized by the government.

Related: Venezuela’s hyperinflation is jaw-dropping

Oil drilling company Halliburton (HAL) still operates some oil rigs in Venezuela. But it has cut back production, citing millions in unpaid bills from Venezuela’s state-run oil company, PDVSA. Last week, the company announced it took a $262 million charge during the second quarter due to its operations in Venezuela.

Chevron (CVX) has a partnership with PDVSA, known as Petropiar. But PDVSA remains saddled in debts that it can’t pay. It offered a Russian state-run oil company, Rosneft, a 10% stake in Petropiar in March, according to a Reuters report, citing industry sources.

ExxonMobil (XOM) has been in a legal battle with PDVSA for several years over property Venezuela’s government seized in 2007.

PDVSA owns U.S. energy company Citgo, which has also suffered from its parent company’s financial woes.

Consulting firm KPMG still has a presence in the country. In the week leading up to the vote, tear gas was fired near its office in Caracas.

–CNNMoney’s Jackie Wattles contributed to this report

CNNMoney (Caracas) First published July 30, 2017: 12:49 PM ET


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