Venezuela has a preferential exchange rate for importers of essential goods like food and medicine. Pictured, a market in Caracas, the capital. Natalie Keyssar for The Wall Street Journal


Doing business in any foreign country can be risky. Then there's Venezuela.

 With the highest inflation rate in the Americas and at least five currency devaluations in the past decade, the South American country is a corporate guessing game.

 In just over a year, Venezuela has concocted a system of three exchange rates, fueling a black market for greenbacks.

While many multinational companies continue to cling to more-favorable exchange rates for accounting purposes, those days may be numbered.


A line forms outside a Dia Dia Supermarket in Caracas. Venezuela's rapid inflation and complex exchange rates have contributed to shortages. Natalie Keyssar for The Wall Street Journal


"We're looking at enormous losses coming for businesses. This is only the beginning," warned Ángel García Banchs, a director at Caracas consulting firm Econométrica. "The only thing that can resolve this problem is a complete overhaul of the economic model."

 Venezuela's prices on everything from butter to flat-screen TVs are set without warning by the government, which also caps corporate profits at 30%. Any profits evaporate quickly, however, because inflation is almost double that.

 And expanded price controls imposed by Venezuelan President Nicolas Maduro, who succeeded late leftist firebrand Hugo Chávez in April 2013, have exacerbated shortages of basic items such as corn flour, car batteries and toilet paper, triggering violent street protests since early February.

 The country's foreign-exchange system puts companies on an uneven playing field, depending on their business. At the government's official rate for companies that import essential goods, such as food and medicine, a U.S. dollar costs 6.3 bolivars. Companies invited by the government to participate in a middle-tier rate system can effectively buy a dollar for 10 bolivars. For companies in the next and newest tier, 50 bolivars fetch a dollar, leaving them to ponder the true value of their Venezuelan factories and inventories.



For anyone unable to get dollars through official channels, the black-market rate is roughly 70 bolivars. The U.S. currency is vital to Venezuela, which imports as much as 80% of what it consumes; 96% of its exports are petroleum products.

Ricardo Sanguino, president of the Venezuelan legislature's finance commission, said recently that authorities are working to unify exchange rates and jump-start the country's stalled economy.

But for now, at least, companies face the quandary of which exchange rate to use when they close their books at the end of the quarter. So, investors should brace for more write-downs.

Avon Products Inc. switched to the newest government-sanctioned rate in the first quarter and took a $42 million charge, while Estée Lauder Cos. absorbed a $38 million hit. The majority of companies still are calculating asset values using more-favorable exchange rates.

Since the beginning of April, more than 100 international companies have mentioned Venezuela's currency exchanges in their financial filings as a drag, or potential drag, on earnings, up from eight in the year-earlier period, according to data provider Morningstar.

Goodyear Tire & Rubber Co. , Herbalife Ltd. and Energizer Holdings Inc.,  have said they would need to take write-downs of $235 million, $103 million and $62 million, respectively, if they revalued at the new rate.

Some business deals aren't getting done because there aren't enough dollars to pay suppliers. Venezuela's top industry chamber, Conindustria, estimates that the government owes its members $10 billion.

Auto makers have been especially hard hit because they lack the dollars to pay their suppliers. Fuel Systems Solutions Inc.,  a New York-based producer of natural-gas fuel systems for cars, didn't sell a single part in Venezuela between October and April because car makers have been strapped for dollars, said Pietro Bersani, the company's chief financial officer.

Ford Motor Co. which temporarily stopped local production of its Fiesta and other vehicles, moved to the mid-tier exchange rate in this year's first quarter and booked a $310 million charge. Ford said it concluded it would need this exchange to access dollars in the future. The company declined to say if it would adopt the most recent exchange rate.

"We have received a commitment from the Venezuela government to help resolve the issues and to get our production up and running by the start of next month," Ford said in a statement.

General Motors Co.wrote off $400 million in the first quarter, and said every 10% devaluation of the bolivar from the mid-tier rate would force another $100 million write-down. Chrysler Group LLC wrote off $129 million in the quarter, and warned "there may be significant changes to the exchange rate in future quarters."

At the same time, businesses stuck with a lot of bolivars must get creative. MercadoLibre Inc., an online marketplace based in Buenos Aires, is investing its Venezuelan profits in commercial real estate to hedge against inflation, said Pedro Arnt, the company's CFO.

Mr. Bersani, of Fuel Systems, doesn't expect "clarity or something close to clarity" on the fate of the bolivar anytime soon. Certain central-bank posts need to be filled, and the government needs to establish a permanent, workable currency policy, but he said he is "not so pessimistic" that a solution ultimately can be found.

Others aren't so sure. Sick of the uncertainty, some foreign airlines are pulling out of the country altogether. Air Canada said in March that it would stop flying to Venezuela, and Italy's Alitalia plans to follow suit next month.
Humberto Figuera, head of the Venezuelan Airline Association, said Monday that carriers will have to set ticket prices using the most expensive exchange tier of 50 bolivars-per-dollar as of July 1.

Wolfgang Koester, chief executive of FiREapps, which advises clients on currency risk, said at some point, executives are going to say, "I can't see the endgame, and I'm out."



—Vipal Monga contributed to this article.