Every single
exchange control regime in Venezuela’s history has ended badly. By
having these controls in place, Governments delay making tough
decisions and things get so stretched that by the time realistic
policies are implemented, the price the population has to pay for the
mismanagement is huge.
exchange control regime in Venezuela’s history has ended badly. By
having these controls in place, Governments delay making tough
decisions and things get so stretched that by the time realistic
policies are implemented, the price the population has to pay for the
mismanagement is huge.
The current exchange
control is no different. We have seen many people become millionaires
off it. Like those that had bankrupt companies that miraculously
recovered thanks to the Government recognizing their foreign debt at
the official exchange rate Or those that brought empty containers for
which foreign currency was approved but only air was actually imported.
And, of course, there are those that act as intermediaries and make
huge commissions every time CADIVI, the foreign exchange control
office, approves something for someone. Many indeed have made large
fortunes out of it since 2003.
control is no different. We have seen many people become millionaires
off it. Like those that had bankrupt companies that miraculously
recovered thanks to the Government recognizing their foreign debt at
the official exchange rate Or those that brought empty containers for
which foreign currency was approved but only air was actually imported.
And, of course, there are those that act as intermediaries and make
huge commissions every time CADIVI, the foreign exchange control
office, approves something for someone. Many indeed have made large
fortunes out of it since 2003.
There are also,
of course, the shortages. As the Government requires more and more
paperwork and authorizations, imports don’t flow well. This is part of
the current bottleneck with many imports. But there are other problems.
As the Government owes banks more and more (currently about a billion
US$), banks have begun asking companies to guarantee letters of credit,
this makes things flow even slower, then more shortages follow. The
latest is that the CADIVI website is unable to accommodate all users.
Thus, companies have people 24 hours a day trying to print requests and
approvals to get their stuff. Things are so bad, that I talked to
people at two companies last week that told me they have not even
processed one order for next year, which starts in three weeks, because
they have yet to complete everything for 2007. Shortages could be
really bad the first two months of next year.
of course, the shortages. As the Government requires more and more
paperwork and authorizations, imports don’t flow well. This is part of
the current bottleneck with many imports. But there are other problems.
As the Government owes banks more and more (currently about a billion
US$), banks have begun asking companies to guarantee letters of credit,
this makes things flow even slower, then more shortages follow. The
latest is that the CADIVI website is unable to accommodate all users.
Thus, companies have people 24 hours a day trying to print requests and
approvals to get their stuff. Things are so bad, that I talked to
people at two companies last week that told me they have not even
processed one order for next year, which starts in three weeks, because
they have yet to complete everything for 2007. Shortages could be
really bad the first two months of next year.
Then,
there are those that once the parallel rate became much larger than the
official rate, made a business of it, as I described in the Oligarca Burguesito post
a while back. Between those illegal requests and the legal ones for
Internet and travel dollars outflows ballooned 300% this year, as
people tried to take advantage of the huge difference between the
official exchange rate (Bs. 2,150 per US$) and the parallel exchange
rate (Bs. 5,650 per US$ last Friday).
there are those that once the parallel rate became much larger than the
official rate, made a business of it, as I described in the Oligarca Burguesito post
a while back. Between those illegal requests and the legal ones for
Internet and travel dollars outflows ballooned 300% this year, as
people tried to take advantage of the huge difference between the
official exchange rate (Bs. 2,150 per US$) and the parallel exchange
rate (Bs. 5,650 per US$ last Friday).
Jut for
background, every Venezuelan is entitled yearly to US$ 3,000 to order
stuff through the Internet and US$ 5,000 when you travel, as well as a
US$ 500 cash advance before you travel. To get the travel part, you
have to provide the first time an airplane ticket.
background, every Venezuelan is entitled yearly to US$ 3,000 to order
stuff through the Internet and US$ 5,000 when you travel, as well as a
US$ 500 cash advance before you travel. To get the travel part, you
have to provide the first time an airplane ticket.
But
rather than make the exchange control more flexible, the Government in
its infinite belief of the capabilities of its bureaucracy, its simply
adding layers upon layers of rules and people that are now reaching the
limits of the absurd.
rather than make the exchange control more flexible, the Government in
its infinite belief of the capabilities of its bureaucracy, its simply
adding layers upon layers of rules and people that are now reaching the
limits of the absurd.
The latest one is that 31,000 people (given US$ 263 million if they all requested all the money) now have to supply
a barrage of forms and receipts for their purchases. Even more
remarkably, some of these rules are new, so that many (if not most)
will not have some of it. But even worse, who is going to review the
information provided? We are talking about 31,000 files, which would be
almost impossible to review in detail.
a barrage of forms and receipts for their purchases. Even more
remarkably, some of these rules are new, so that many (if not most)
will not have some of it. But even worse, who is going to review the
information provided? We are talking about 31,000 files, which would be
almost impossible to review in detail.
Some of what CADIVI is asking for now:
For your Internet purchases:
–ID and letter explaining all your expenditures.
–Copy of your credit card statement
–Receipt from the company that brought your stuff to Venezuela
–Receipt from the seller
–Invoice with your name on it, what you purchased detailed, price and where it was delivered.
First
of all, all of these rules are new, but they are asking 31,000 people
to provide them. What if your name is not on the Invoice? Or all of the
details? What if you sent it to a friend’s house in the US and picked
it up? What if it was a gift to someone somewhere else? What if you
used it to pay an international health insurance premium like many do?
Or to subscribe to an international satellite subscription system?
of all, all of these rules are new, but they are asking 31,000 people
to provide them. What if your name is not on the Invoice? Or all of the
details? What if you sent it to a friend’s house in the US and picked
it up? What if it was a gift to someone somewhere else? What if you
used it to pay an international health insurance premium like many do?
Or to subscribe to an international satellite subscription system?
There
are so many gray areas that this is pretty absurd. But let’s now look
at what they ask from those that spent the money while traveling:
are so many gray areas that this is pretty absurd. But let’s now look
at what they ask from those that spent the money while traveling:
–ID and letter explaining all your expenditures.
–Letter explaining how the money was spent
–Credit Card statement
–Details of how you spent the US$500 in cash advanced as well as the US$ 500 in cash you may withdraw
The last rule in particular, was never established before. Thus, nobody is likely to have receipts for how it spent the cash.
But, what’s the point anyway? What if I went somewhere in Europe to celebrate my high school graduation 30th
anniversary and I paid for the whole meal and it cost me US$ 4,800
courtesy of the Venezuelan Government at the lower rate of exchange? In
fact, what if I went to the best Restaurant in Lyon, France and spent
$4,000 in a bottle of wine? Nothing in the rules established any
restrictions, so what is the penalty if I supply (or invent) bizarre
reasons for my spending of the cash. Somebody with a sense of humor
could make up a lot of them, for example: I used the cash for the
purchase of US$100 in lottery tickets, I gave $50 to the church, spent
US$ 100 paying a round to everyone in a bar and $250 to go to and from
the airport in a helicopter. Would any of these be wrong? Illegal? So,
what’s is the point?
anniversary and I paid for the whole meal and it cost me US$ 4,800
courtesy of the Venezuelan Government at the lower rate of exchange? In
fact, what if I went to the best Restaurant in Lyon, France and spent
$4,000 in a bottle of wine? Nothing in the rules established any
restrictions, so what is the penalty if I supply (or invent) bizarre
reasons for my spending of the cash. Somebody with a sense of humor
could make up a lot of them, for example: I used the cash for the
purchase of US$100 in lottery tickets, I gave $50 to the church, spent
US$ 100 paying a round to everyone in a bar and $250 to go to and from
the airport in a helicopter. Would any of these be wrong? Illegal? So,
what’s is the point?
The point really is that
the controls are simply not working, but the Government is making it
more complex, creating more bureaucracy, making people lose more time
providing the information, but little of the waste will be stopped by
it.
the controls are simply not working, but the Government is making it
more complex, creating more bureaucracy, making people lose more time
providing the information, but little of the waste will be stopped by
it.
Those that do it illegally will find new
ways of getting around the controls, while those doing it legally will
save every bit of paper and provide the information to CADIVI that the
exchange control office will never have the time and/or capability to
check or the legal means to establish penalties.
ways of getting around the controls, while those doing it legally will
save every bit of paper and provide the information to CADIVI that the
exchange control office will never have the time and/or capability to
check or the legal means to establish penalties.
It’s
called running in place. Believing in the almighty power of an
extremely inefficient and incapable Government. But, as we say here, we
have seen this movie before and one day it will all blow up in the
bureaucrat’s faces and in our own. And apparently, until the next time
another Government decides to implement controls. So much for change
and the Vth. Republic and all that stuff.
called running in place. Believing in the almighty power of an
extremely inefficient and incapable Government. But, as we say here, we
have seen this movie before and one day it will all blow up in the
bureaucrat’s faces and in our own. And apparently, until the next time
another Government decides to implement controls. So much for change
and the Vth. Republic and all that stuff.
Even animals with the most basic intelligence learn from experience…
The Devil's Excrement 