Archive for March 26th, 2013

The Puzzle of SICAD: First Auction Result Above Bs. 10 Per US$

March 26, 2013


El Mundo and financial sources are reporting that in the first SICAD auction, the average price at which the Government will sell foreign currency is over Bs. 10. Different sources say different numbers, but in the end they all say it is above Bs. 10. (EL Mundo says Bs. 12 to Bs. 15, I heave heard the average was Bs. 11)

I find this whole thing really puzzling. If I never understood why the Government wanted to make an issue of this, I now don’t understand why they rushed the whole thing to the point of holding the first auction today and announcing the results tomorrow. Chavismo has never been dumb about when to do things, so what is the rush?

I mean, when I left Caracas on Friday banks did not know how the whole thing would work and by Monday they had sufficient offers to hold the first auction?

Call me dumb, or call me puzzled.

If it is shortages, not one dollar assigned tomorrow will help anything arrive in Venezuela or be produced in Venezuela before the April 14th. election.

But, a second devaluation with a value of the currency above Bs. 10, essentially implying an almost doubling of the previous official exchange rate, simply makes no sense three weeks before the election.

Last week, El Mundo published an article quoting Datanalisis saying that the first devaluation on Feb. 8th. reduced the Government’s popularity by 20 percentage points by the beginning of March before Chávez died. Then, the popularity reportedly jumped back up when Chávez died, making things almost even. What this shows is that the topic of a devaluation is a sensitive one and now Capriles can charge Maduro with devaluing twice in 100 days and by a huge percentage.

The Government clearly gains nothing from giving this ammunition to the opposition. Economically, three weeks, including dead Easter week is such a short time, that waiting would have made no difference.

The only possible argument is that this is the result of some sort of internal struggle for control over economic policy, if true, I would hate to see what happens after April 14th. if Maduro wins, if these are the salvos, I don’t want to be around when they start shooting each other.

But in the end, this is very puzzling to me, I see no reason for this new devaluation at this time, it seems senseless, illogical, simply a puzzle…