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Asia-Pacific

Venezuela shutters stores amid price hike

(Agencies)
Updated: 2010-01-12 11:30

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Venezuela shutters stores amid price hike

A shopper pushes boxes of electronic items outside a store in Caracas January 9, 2010. [Agencies]

The devaluation is also affecting some foreign companies, which saw their shares fall as investors worried about how their businesses might be hurt.

Connie Maneaty of BMO Capital Markets said in a client note that Colgate-Palmolive Co. and Avon Products Inc., both based in New York, will be hurt by the devaluation because they have substantial sales in Venezuela.

Shares of Avon, which sells cosmetics, gift and home products, dropped 54 cents to $30.93 Monday. The stock of Colgate-Palmolive, whose products include Irish Spring soap and its namesake toothpaste, dipped 36 cents to $81.15.

Earlier in the day, Colgate-Palmolive said it expects a gain of about $60 million in the first quarter because it will see a lower-than-expected tax rate on money already made in Venezuela. After that, it expects quarterly charges of 4 cents to 6 cents per share in 2010 as money it earns in Venezuela will translate back into fewer dollars.

Avon said it was monitoring the situation but wouldn't comment further.

Paul Fox, a spokesman for Procter & Gamble Co. in Cincinnati, Ohio, whose brands include Pampers diapers and Gillette razors, was looking at the situation carefully to determine the devaluation's impact. Shares of Procter & Gamble dipped 24 cents to $60.20.

Spanish telecommunications company Telefonica also saw its share price slip 3 percent to euro18.50 ($26.88) in trading in Madrid. Telefonica says Venezuela provided 6.2 percent of company revenue as of the third quarter of 2009.

Patrick Esteruelas, a Latin America analyst at the New York-based Eurasia Group, predicted that multinationals involved in the consumer goods industry in Venezuela "are going to fare really badly out of this."

Esteruelas said the devaluation will strengthen Venezuela's ability and willingness to pay its foreign debt. He also said that oil companies working in Venezuela "will fare reasonably well" because their sales are in dollars and that oil service contractors will probably also find it easier to collect on unpaid debts owed by the government.

Spokesmen for the oil companies BP, Total and Chevron would not comment about how much of an impact those companies expect.