U.S. Firms Find Asia’s Currency Shifts Navigable

U.S. companies are scrambling to reassess their operations in Thailand and the Philippines, whose high-flying economies have been thrown into chaos as a result of drastic currency devaluations.

A group of Southern California business executives was assured Wednesday by a visiting Thai diplomat that the government hopes to take steps to alleviate the impact of the devaluation of the baht on foreign companies.

But the impact of the currency shock in Southeast Asia varies widely among U.S. companies, depending on the size of their exposure and the type of business they are conducting.

Among those most vulnerable are energy firms, whose contracts are often negotiated in local currency and extend over long periods of time. Texaco Inc., for example, is trying to amend financing terms of a baht-denominated contract for a 700-megawatt power plant in Thailand.

The Texaco partnership, known as TECO, is seeking to amend its contract to protect against future currency shifts. Its customer, the Electrical Generating Authority of Thailand, is considering the request.

“We’re very confident we’ll be able to come to some form of agreement,” C. Glyn King, a manager in Texaco’s Universal City office, said Wednesday.

But many doing business in that part of the world, including small operators, are savvy to the impacts of currency shifts and are quick to protect themselves against any negative spillover.

John Blazevich, president and chief executive of ZB Industries Inc., a large San Pedro-based shrimp importer, said Thai shrimp farmers immediately increased their prices after the currency devaluation, partly to compensate for the higher price of imported shrimp food.

“These farmers are wired,” he said. “They all have cell phones and they know what has happened to the baht and have raised their price within minutes.”

The Thai economy is suffering a fiscal hangover caused by massive overbuilding, real estate and stock market speculation and a slowdown in exports. Last month, the government ordered 16 insolvent financial companies to find buyers or close their doors.

On Wednesday, David Proctor, chairman of the Thai Banks’ Assn., a group of 50 foreign banks, said he had been assured by Thai officials that foreign and local creditors would be treated the same in the government’s bailout of the troubled companies, which have been closed temporarily.

Thai Deputy Foreign Minister Pitak Intrawityanunt told U.S. executives in Los Angeles that his government was considering such steps as lowering tariffs and agreeing to change terms of contracts, as in the Texaco case, to alleviate the effect of the devaluation.

Generally, a weaker currency helps exporters by making their goods cheaper and hurts those dependent on imported goods or raw materials.

For example, Parsons Corp., the Pasadena-based engineering firm, says it hopes to benefit from lower labor costs at its regional office in the Philippines, where it employs 300 to 400 people doing production work for customers around the world.

U.S. multinationals routinely protect themselves by getting paid in dollars when possible, using local currency to pay local bills and buying financial instruments that pay off in the event of a currency devaluation.

The Big Three U.S. auto makers, who view Southeast Asia as a key export platform and market, could benefit if the weakened baht translates into lower labor and production costs.