So instead of SITME, the Government will implement a Chavista style cuộc bán đấu giá (Vietnamese Auction, see Note below with clarification)*, whereby there will be a reference price for the currency and it could vary by as much as 1% either way. Of course, the Government will set this reference price and it will be way below the unmentionable parallel rate, so that almost everyone will bid for the reference price plus 1%.
Reportedly, the dollars sold in this market will have to be requested to strengthen the national production capacity and the foreign currency will have to go to dollar accounts in Venezuela so that the Government can exercise control over what the foreign currency is used for. The system will likely be run by the banks and the Venezuelan Central Bank and the banking system, so that no laws will have to be changed. Payment will be made directly to the provider and there will be checks that the materials and machinery arrive in Venezuela.
According to interim President Maduro, the new system will ” fill with happiness all of those that have production needs for their companies and other activities”. I guess the only one that will not be happy, will be the interim President when the system fails to have much impact on shortages and that other price that can not be mentioned.
The system will be supervised and controlled by none other than Minister of Planning and Finance Giordani, who the day before stated that he was against any new such system. Go figure…
Here is a diagram of the new simple system, taken form a TV screen from Giordani’s presentation:
So, call it SITME II or CADIVI II, new rules, a 1% band and no information where the foreign currency is going to come from to supply the new, new, improved, more confusing Chavista-style cuộc bán đấu giá system.
Note added: The Vietnamese auction was reported by El Mundo this morning as obtained by various reporters yesterday form the Venezuelan Central Bank. Today, Minister Giordani said it would be a Vickrey auction, In the end, the “auction” mechanism is just another layer of confusion to what sounds like a devaluation of the currency by the creation of a new CADIVI at a higher rate. This means the BCV will benefit and not PDVSA as Minister Ramirez was trying to do. In the end, this new system sounds complex and confusing.
*Thanks JG for the inspiration