Venezuela currency woes hit Herbalife and other US consumer brands

Venezuela's convoluted currency exchange system – which has one 'official' rate for the government and another for importers of non-essential goods – has hurt foreign companies.

The actions of the Venezuelan government are undermining earnings for foreign companies and the positions of US investors. 

The latest example came Monday evening when the nutritional-supplements maker Herbalife reported that first-quarter profit fell 37 percent due to a foreign-exchange loss tied to the devaluation of Venezuela’s bolívar. The loss was a hit to Herbalife’s 17 percent owner Carl Icahn, the activist investor who has in recent months taken to defending Herbalife from accusations that it’s a pyramid scheme.

Herbalife’s first quarter earnings, however, suggest that Mr. Icahn might have been wise to watch Venezuela more closely.

“I don’t think US Investors are exactly itching to get involved,” says our correspondent in Caracas. “What I’m taking away from all this is that US companies that are still here are in it for the long run. They’re willing to incur these losses as they weather out the storm that is ‘21st Century Socialism’ as they likely posses a huge market share.”

Herbalife, which competes with Weight Watchers International, Nutrisystem, and Medifast, has benefited from a focus on emerging markets such as Venezuela and its well-known “Miss” culture, says our correspondent in Caracas, referring to beauty pageants, such as Miss Venezuela and Miss Universe.

“Herbalife is very popular down here,” our correspondent says.

But Venezuela’s convoluted currency exchange system has hurt foreign companies, which was forewarned last year by US hedge fund Pershing Square Capital Management LP’s William Ackman.... For the rest of the story, continue reading at our new business publication Monitor Global Outlook.