On Thursday, U.S. automaker General Motors (GM - Free Report) said that it will immediately shut down its operations in Venezuela after its manufacturing plant in the country was unexpectedly seized by Venezuelan officials.
"[GM] strongly rejects the arbitrary measures taken by the authorities and will vigorously take all legal actions, within and outside of Venezuela, to defend its rights," it said in a statement. GM said the seizure showed a “total disregard” of its legal rights, and that authorities removed assets such as cars from company facilities.
It is not immediately clear why authorities seized GM’s plant. Located in Valencia, the plant employs about 2,700 workers, though it stopped producing any vehicles back in 2015, and has been only selling spare parts since then.
Venezuela is currently embroiled in a severe economic crisis. According to CNNMoney, the country’s economy declined by 18% last year, marking its third consecutive year of recession. Hyperinflation, which is when inflation occurs at an extremely rapid pace, has essentially wiped out the value of the bolivar, Venezuela’s currency, and unemployment is getting ready to surpass 25%.
GM Isn’t the Only One
As large-scale protests erupt against President Nicolas Maduro, major American countries are pulling business operations out of Venezuela.
Food and drink giants Pepsi (PEP - Free Report) and Mondelez MDLZ have both halted business operations in Venezuela over the past two years. The companies took massive $1.4 billion and $800 million losses, respectively, as a result.
Even McDonald’s MCD has had to scale back its business in Venezuela, temporarily stopping sales of its french fries and Big Macs due to food shortages. Coca-Cola (KO - Free Report) has also recorded multiple losses from its own Venezuela business, but it still operates in the country. In 2016, Coca-Cola had to briefly stop production due to the lack of sugar supply in the country.
Oil companies like Baker Hughes BHI and Schlumberger SLB have shut down their rigs stationed in Venezuela in the past year, citing unpaid bills from the government. The country is home to some of the world’s largest oil reserves, but because of its economic crisis, and these huge energy giants leaving, Venezuela’s oil production is experiencing a sharp decline.
Companies like Oracle (ORCL - Free Report) , Ford (F - Free Report) , General Electric (GE - Free Report) , and IBM (IBM - Free Report) , among others, have all mentioned the dangers of exposure to Venezuela in earnings reports over the last two years, and many have stopped counting any revenue from the country.
Airlines, too, have followed suit. With a considerable amount of their profits trapped in Venezuela, American (AAL - Free Report) , Delta (DAL - Free Report) , and United (UAL - Free Report) have trimmed down their flight services to the country. International carriers like Chile-based LATAM (LFL - Free Report) , Lufthansa (DLAKY - Free Report) , and Alitalia have all drastically reduced flights to Venezuela as well.
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