Question

3)provide two recommendations for multinational companies who are either currently operating in Venezuela, or may be interested in establishing operations in Venezuela. Make sure your recommendations are detailed and specific, and also provide justification for your recommendations. Essentially, explain what the recommendation is, why it should be implemented, and how it can be implemented.

4During the Chavez years, many multinational companies either reduced their investment in Venezuela or completely left the country. Provide two recommendations for the Venezuelan government to implement to reverse this trend. When explaining your recommendations, use the guidelines expressed in question 3.

Answer 1

The crisis in Venezuela has intensified over the last few years as commodity shortages, civil unrest and political clashes have intensified.

However, Latin America 's regional executives and corporate centres are unlikely to be at the forefront of the country's crisis, at least from a business perspective. This is because most multinationals have left the Venezuelan market over the last three years, in the face of increasing difficulties in repatriating profits; importing raw materials and finished products onto the market; getting compensated by local partners and the Venezuelan government, and more recently due to complete expropriation and confiscation of factories

Major Recommendation

1. As evident from the past At least 64 S&P 500 companies — around 13 per cent of the total — posted regulatory filings warning investors of write-offs or exposure to asset devaluations as the bolivar continued to lose value against the US dollar.

Companies must adopt proper risk management practices for management of currency and translation risk due to devaluation of relative currency.

2. Balance sheet exposure of subsidiaries should be reduced when planning to expand operations in this region.

For Government

1.A bet on a long-term profitability market in Venezuela. Energy firms appear to enjoy more favourable operating conditions — as the Venezuelan government is seeking to protect its main industry — and are locked in longer-term and greater capital projects that are less vulnerable to the cyclicality of political changes by their design..

Government should tap on this opportunity to enhance capital inflows into the country and help improve the gdp of the nation.

2.The Venezuelan government would allow free elections, and the newly established opposition government would pursue a more orthodox and aggressive economic reform package. This could include restructuring Venezuela's external debt with the help of institutions such as the International Monetary Fund. In this case, the economic recession would worsen in the short term, but allow for a stronger recovery in early 2020 on the back of the investment recovery. In this scenario, multinationals would be advised to take a more proactive approach and resume investments as soon as possible, while simultaneously negotiating outstanding receivables and recovering expropriated assets with the government.