17085
MasterCard Taking Advantage  of 200% Venezuela Inflation
World Economy

MasterCard Taking Advantage of 200% Venezuela Inflation

Venezuela’s economic collapse is driving factories out of business, leaving store shelves barren and wiping out workers’ purchasing power. MasterCard Inc. is doing just fine.
Two powerful forces are pushing Venezuelans to rely increasingly on credit cards amid the chaos: runaway inflation and soaring crime, Bloomberg reported.
People are racing to spend their money as fast as they can, trying to keep ahead of consumer price increases that Bank of America Corp. estimates could almost reach 200 percent this year. Yet because that inflation surge has decimated the value of Venezuela’s money, shopping with cash would require carrying around a brick-sized wad of 100-bolivar bills -- not a great idea in a country with the world’s second-highest murder rate.
“We’re enlarging our participation into the consumption of families, displacing cash, even though those families might be consuming the same or even less,” Gilberto Caldart, head of Latin America for MasterCard, the world’s second-biggest payments network, said in an interview in his Miami office. “That’s the paradox.”
While reluctant to delve into specifics, Caldart said that the company’s Venezuela business is growing in line with the rest of its Latin America operations, an amazing statement given the depths of the country’s recession. The International Monetary Fund predicts a 7 percent economic contraction in the oil-producing nation this year following a 4 percent decline in 2014.

 Forex Control
The Purchase, New York-based company does, of course, still face the problem of getting profits out of a country that tightly controls its dwindling supply of dollars through a maze of foreign-exchange restrictions. Those controls have driven out other multinationals: Air Canada has stopped flying to the South American nation; consumer-products giant Clorox Co. pulled out too; and Ford Motor Co. wrote down the value of its local business to zero.
MasterCard has an advantage there too, though. Caldart said the company collects dollars, not bolivars, for some of the fees it charges banks on each credit-card transaction. Mateo Lleras, a spokesman for MasterCard, declined to provide a specific revenue breakdown. American Express Co., one of MasterCard’s main competitors in the country along with Visa Inc., also collects fees in dollars, according to Marina Norville, a spokeswoman for the company.
The value of MasterCard’s bolivars trapped in the country is plummeting quickly. Since President Nicolas Maduro, the successor to the late Hugo Chavez, unveiled a new foreign-exchange market in February to give Venezuelans more access to hard currency, the bolivar has sunk 74 percent against the dollar.
MasterCard recently tried an unconventional hedge to protect the value of those bolivars. It took out a bank loan in local currency and then used the cash to buy property, whose value is typically set in dollars in Venezuela.

 

Short URL : http://goo.gl/x7dPQo

You can also read ...

Members discuss policies, regulation and flexibility to  help improve infrastructure.
Experts from APEC member economies spoke about the need to...
South Korea Business Groups’ Investment Rises 28%
South Korea’s top 30 conglomerates increased their investment...
China Eyes SE Asia Investments
Companies from the world’s second-biggest economy are...
Romania leads the pack in economic growth. The picture shows tires being inspected during production  at the Continental plant in Timisoara.
Economies in most of the European Union’s eastern wing...
Project awards in Bahrain plunged 84%.
Contracts awarded to build economic projects in the Persian...
Infosys is Asia’s No.2 software services developer.
Infosys Ltd. approved a 130 billion rupees ($2 billion) share...
Australia Economy Grows  With Strong Jobs Report
The strength of the Australian economy has been impressive of...
India’s Finished Steel Exports Surge 64%
Finished steel export jumped by 64.2% to 0.770 million ton in...

Trending

Googleplus