Why Venezuela's Devaluation Is Biting

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First came Colgate-Palmolive, but it wasn't alone for long. Halliburton, Avon, and Merck soon joined a rapidly growing list.

These companies and more have announced that they will take an earnings hit in the wake of Venezuela's latest devaluation of its currency, the bolivar fuerte, last Friday. And there is talk that more companies could join the crowd: just for starters, among U.S. multinationals, Goodyear is evaluating the impact of Venezuela's move, but has lowered its operating income guidance. Among consumer consumer-oriented companies, Heinz, Clorox, Procter & Gamble, and Arcos Dorados Holding, the world's largest McDonald's franchisee, are quite active in Venezuela, and in the energy sector, Chevron participates in six energy-related projects in the country.

(Read More: Finance Minister Chides Venezuela's Dollar "Nymphomaniacs" )

At least in some quarters, the devaluation appears to have been expected - which raises the question of why these companies weren't better prepared. Shouldn't they have hedged against this possibility?

Apparently, it's complicated.

In Venezuela, "there is very little a company can do to hedge their exposure," Willie Williams, director of institutional derivative sales at Societe Generale, told CNBC.com. "There is no non-deliverable forward market like in Brazil to hedge exposures. The best many companies can do is have expenses denominated in bolivars as well."

Even if a company could find a way to hedge bolivar exposure, it could be very costly, says Eduardo Suarez, a currency strategist at Scotiabank. Trading volume in the "formal market" for the bolivar is usually less than $100 million per day, he says, and "such a small formal market would probably mean very high costs for the large transactions multinationals would require."

There would be carrying costs for a hedge as well, he said. "Unless you time the hedge very well, you would be forced to pay a large negative carry to keep the hedges on for a prolonged period due to rate differentials."

(Read more: CNBC Explains: Currency Carry Trade)

True - but those weren't the only problems. "I think part of the issue is that many people became complacent into thinking that Venezuela would postpone any currency action until Chavez came back," says Gustavo Arteta, an emerging markets FX strategist at UBS.

So far the announced earnings hits have been relatively minor - but this was not the first time Venezuela has devalued the bolivar, and the companies who took hits do have significant exposure to Venezuela. Arteta wrote in a note to clients that "our initial reading is that the devaluation is not large enough," adding that the official rate is still not in sync with the black market rate. "We think that another devaluation to bring the official rate close to 9 or 10 should not be ruled out in Q2 or Q3."

Hopefully, multinationals will find that one less of a surprise.

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