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
The Devil's Excrement 
March 19, 2013 at 11:24 pm
[…] cuộc bán đấu giá Chavista Style […]
March 19, 2013 at 9:33 pm
Considering that the Bolivar is now worth 1.5 times less than it was on the global market, who, except for the government that can subsidize the increase, is willing to take that kind of loss when you consider that the selling price of most items is under price control that the buyers are also under price control in selling their product.
This is just a bigger vice grip on private enterprise as none can continue to operate at a loss for very long. Unless oil goes to 150USD real quick this is a black hole and at some point the average Venezuelan is going to pay for it just like they did in the 90’s!
March 19, 2013 at 9:00 pm
Where are the dollars coming from? BCV’s foreign reserves are declining and they have restricted CADIVI, eliminated SITME and are selling very little in the black market. I don’t think they have enough supply to affect the black market rate. Miguel what is your POV?
March 19, 2013 at 10:17 pm
Liquidate the gold reserves. They’ve already started doing it, might as well finish the job.
March 19, 2013 at 8:30 pm
Black not coming down. Period
March 19, 2013 at 8:13 pm
So, to me it appears to be the same crap as Sitme but without the participation of personal clients and without the corruption of banks – which gave the sitme bucks to their buddies or kept these for their benefit.
Great!
March 19, 2013 at 6:23 pm
It certainly is a bizarre country that would choose a presidential option that guarantees its total ruin ; a country whose people prefer the option of voluntary slavery and poverty.
March 19, 2013 at 8:06 pm
Bizarre? Pardon my french, fucked up describes ir better. But you are right, it doesn’t make any sense.
March 19, 2013 at 8:09 pm
>>> … slavery and poverty OR DEATH!
a new rallying cry?
are carne mechada and black beans still buyable?
platanos will never disappear.
March 19, 2013 at 5:33 pm
Quico! I thought you had deleted The Devil’s from your bookmarks because you were no longer interested in things like the price of venezuelan bonds…and, all of a sudden, I find you here again requesting explanation about the new control system…
The Devil’s temptation is just too high, isn’t it?
I guess your bookmarks were re-instated.
March 19, 2013 at 4:46 pm
Why are they focussing on this now? Diversion. Classic Chavez tactic to avoid talking about the really important issues: usurping elected representatives and nicolas’s’ piss poor charisma.
March 19, 2013 at 2:10 pm
Individuals could send dollars to sitme, and get bs
at 4.2 deposited into their local banks. i.e. a thousand
usd gets turned into some 4200 bs.
so people need not apply for bs yet, because
the new twist excludes individuals.
March 19, 2013 at 2:41 pm
What??
Who would be stupid enough to sell $$ at Bs.4,2 or 6,3 or whatever other fantasy number they come up with.
March 19, 2013 at 3:40 pm
A one-way bs to usd conversion stream is what
they are trying to stop [bs keep buying less].
with a two way mechanism [bs->usd, usd->bs], upward pressure
is eased, and vzlans could join their neighbors in competing
for trade advantages.
March 19, 2013 at 3:46 pm
for example, a few bob sent to vzlan based relatives, even
at the old rate of 4.2, isn’t a bad way for vzlans working in
the states to help their less fortunates at home in caracas.
Philipines, mexicans and many others do it.
March 19, 2013 at 10:35 pm
what are you talking about?? this is a joke right?
March 19, 2013 at 4:20 pm
Actually, friends of ours quietly received their monthly pensions
in euros @4.2, and did what they could to survive. Not
everyone feels comfortable wheeling and dealing outside
the system.
March 19, 2013 at 5:22 pm
if the system is set up to screw you, you better work around it….
March 19, 2013 at 5:22 pm
^^^^ There’s an illustration of the problem. The system is broken, a dream, a fantasy. What you want is a market.
I hate systems. I ain’t crazy about markets either, but it’s 9-1 I’ll take the market.
March 19, 2013 at 1:33 pm
Las preguntas claves, as I see them:
-Will the price actually fluctuate? How much?
-Will they pre-announce the number of dollars to be auctioned over a given period of time?
-Will a price-ceiling be pre-announced?
-Where are the dollars going to come from?
-Will you fix the super-confusing post now on your main page!?! 😛
March 19, 2013 at 1:55 pm
They have not said. The original SITME was supposed to fluctuate by 5%, they never allowed it. Ramirez said there will be plenty of dollars, because PDVSA sells 41 billion a year to BCV and that will be used to feed CADIVI and SICAD; of course, those are the same dollars, that is why I think this is a devaluation in disguise. Fixed the post, had not done it earlier because I ahve been on phone ever since they held press conference telling people details are very scarce. This is all very improvised, what I dont understand is why this topics is deserving so much of their attention.
March 19, 2013 at 1:13 pm
I’m still trying to piece together how you came to this understanding:
“So instead of SITME, the Government will implement a Chavista style cuộc bán đấu giá (Vietnamese Auction)*, whereby there will be a reference price for the currency and it could vary by as much as 1% either way.”
I just don’t see that in the announcement.
March 19, 2013 at 1:15 pm
That was what was reported in the press in the morning and supposedly mentioned yesterday at BCV. Giordani today talked about Vickers auction. Posted too early 🙂
March 19, 2013 at 1:17 pm
A bueno! You better fix this, though: we’re all looking to you for guidance on this kilo de estopa.
March 19, 2013 at 1:24 pm
I am just making it even more confusing, which appears impossible.
March 19, 2013 at 1:32 pm
Hurrah!
March 19, 2013 at 12:47 pm
the bottom line is how many dollars will be made available through the system, and of course at what price??? 10/$? more, less? anybody want to venture here?
March 19, 2013 at 12:32 pm
Sicade will auction USD at a trolled [jötunn] price
y a su antojo. Bugger the bid/ask quotes.
March 19, 2013 at 12:33 pm
xp aka expat
March 19, 2013 at 12:40 pm
Sicade will keep knowing the exact cost of usd
and the precise value of nothing that looks
like chicken, an egg or the proverbial harina pan.
March 19, 2013 at 3:28 pm
Jotunn! Veldig morsomt!
March 19, 2013 at 12:09 pm
SITME was also an auction, did you know that?
No, it is all bits and pieces, apparently the Vietnamese system was replaced this morning by a Vickers system. This is nothing but CADIVI at a higher price at the end.
No way it starts on Monday, they are improvising, I dont get why they are making a big deal about this right now, most people dont care about buying dollars.
March 19, 2013 at 2:11 pm
Sure most people don’t care but the ones about to flee Venezuela would probably rather take dollars 🙂
March 19, 2013 at 11:58 am
Miguel I didn’t understand one part of your summary.
You said “…the foreign currency will have to go to dollar accounts in Venezuela so that the Government can exercise control over what the foreign currency is used for.”
Then you said: “Payment will be made directly to the provider…”
Does that mean that a supplier in Miami must have a US$ account to sell to someone in Venezuela?
That doesn’t sound too practical.
It also sounds like those companies that were cut out of CADIVI for the last 2 or 3 years will not have access to the system. If you import computers for retail sale for instance will you be able to got to this new system.
I don’t see this as having any significant effect on either the Black Market rate or the ability of small businesses to get their hands on any more dollars than in the last few years. Just more paja.
March 19, 2013 at 12:04 pm
Ya va, is there a document where the system is set out?
I don’t understand in which sense this is an auction at all.
March 19, 2013 at 12:19 pm
It was all very confusing (par for the course). he talked about letters of credit, which Venezuelan bank (other than Government owned) will issue letters of credit under current conditions? He talked about direct transfer. Of course it will have no effect, in the end, it all boils down to: Where are the dollars going to come from?
March 19, 2013 at 12:31 pm
“Where are the dollars going to come from?”
EXACTLY. There are companies that are more than 1 year behind in CADIVI payments. This is all just smoke & mirrors during an election campaign before the real economic disaster hits us.
My daughter in Maracaibo told us this morning the supermarket shelves are empty – no chicken, arena pan, etc., etc.
March 19, 2013 at 11:54 am
The 1% band is awesome.. In due time that can be phased out. 🙂
In favor of say um…. a 23.35% band based on the lunar cycle.
March 19, 2013 at 11:20 am
Control this, control that…..
And we live in anarchy.
The worst part is that most people agree with more controls. When you talk to someone about rising prices the answer is that there should be more controls, shortages: more controls. Everything is solved with controls, there is a disconnect between cause and effect.
The attitude is pervasive, I fly paragliders and we are always arguing with police of various types that try to prohibit our sport because it’s too extreme for them, the worst part is that when I tell someone they tend to agree. Too many people in this country are getting used to the goverment telling them waht they can and cannot do.
The famous : “Necesitamos una cachucha que ponga orden”.
March 19, 2013 at 11:00 am
More of the same!