As Venezuela gears up for municipal elections in December, which are likely to be viewed as a referendum on the government, the operating environment has become increasingly difficult for multinational companies. Venezuela has become a leading source of concern for LATAM executives over the last year, with unpredictable policy-making leaving companies without a clear outlook for the market. As such, the executives we work with are facing immense pressure to defend their current operating models in Venezuela given the market’s strict capital and import controls, rising inflation, price controls, product shortages, and currency volatility.
FSG recently published a report specifically addressing the business environment in Venezuela, and how companies are navigating the distinct challenges offered by the Venezuelan market. The report arms senior executives with the knowledge to:
►Anticipate how Venezuela’s business environment is likely to evolve: Companies have been struggling to navigate Venezuela’s ever-changing operating environment without a clear vision of the country’s short, medium and long-term trajectory. With the government proving unable to successfully shift the economy toward a more sustainable path, companies are looking for signposts to monitor to understand the direction of government policies, particularly relating to the exchange rate and inflation
►Make the case for maintaining a local presence: Executives need to reassess and communicate the long-term potential of Venezuela in order to justify their commitment over the near-to-medium term. LATAM executives who restate the case for Venezuela by focusing on the consumer spending and government spending opportunities, as well as the long-term prospects for a more business-friendly government will see greater success
►Navigate foreign exchange controls: The inability to access foreign exchange is not only hampering day-to-day operations, but in some cases, is calling the viability of Venezuelan operations into question. Companies need to understand what their alternatives for accessing foreign currency are, and what strategies other companies are pursuing to put their trapped cash to good use
►Protect assets against currency devaluation and inflation: High inflation and constant foreign exchange volatility has left many companies trying to protect the value of their assets in the market. Companies are exploring front-loading capital expenditures and buying commercial real estate, but do not have a clear way of differentiating between what investments are likely to be safest over the medium to long term
With the Venezuelan government showing no signs of reversing its interventionist policies over the near term, multinationals serious about keeping maintaining a presence in the market will have to successfully maneuver through these distinct operational challenges.