Venezuela steps up pressure on Smurfit Kappa
Irish packaging giant Smurfit Kappa has confirmed that its operations in inflation-battered Venezuela are the subject of a government "intervention".
The largest packaging group in the South American country, Smurfit Kappa's operations can now be targeted with additional inspections and audits covering areas such as tax, costs, pricing and employment practices.
Companies across the country, whose economy is in trouble despite massive oil resources, are being seized by the government as it tries to reverse the adverse impact of its own strident socialist policies.
Last month, a number of businesses and assets – domestic and foreign-owned – were put under government control. The businesses affected ranged from electronic stores to oil firms.
President Nicolas Maduro, who succeeded Hugo Chavez following his death this year, has accused firms of price gouging in an effort to deflect attention from an inflation rate running at an annualised 54pc and a lack of goods on shop shelves across the country.
Smurfit Kappa, which has 18 factories in Venezuela, said it was co-operating fully with the government. Its Venezuela operations account for less than 5pc of group profits.
The company "retains management" of its Venezuelan business and said it was "committed to operating its business to ensure the on-going supply of products and services to its customers".
In 2011, Mr Chavez said he wanted all the land owned by Smurfit Kappa in the country's Portuguesa region to be seized so it could be used to grow vegetables.
"We need to remove Smurfit from every square metre in Portuguesa," Mr Chavez said at the time.
Smurfit Kappa owns about 12,000 hectares of land in Venezuela and in 2011 the government issued precautionary measures over 7,200 hectares, with a view to eventually taking control of it.
Earlier this year, Venezuela devalued its currency, the Bolivar. That resulted in Smurfit Kappa recording a €142m reduction in the value of its net assets and a €28m reduction in the euro value of its group cash balances.
"The political situation in Venezuela is calm but challenging," Smurfit Kappa noted in its interim results last month.
"The economy continues to experience significant inflationary pressures and demand for scarce goods. As a result of the response to the shortages and the absence of one-off issues, the Group's converting operations are experiencing good demand growth."
The company previously said its operations in the country remained at continuing risk of being nationalised.