Archive for July 21st, 2013

When You Thought You Had Seen Enough Corruption And Distortions In Venezuela

July 21, 2013

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While Chavismo/Madurismo continues to solidly embrace controls, creating ever more complicated systems, rules and regulations, there is daily evidence that the whole thing has become a Rubesque-like system whereby the system has become absolutely ineffective due to corruption and arbitrage. Despite the daily evidence, the revolution (?) presses forward with its brainless creation of economic rules and foreign exchange systems, where common sense and logic are completely absent.

Two items caught my attention in the last two days that absolutely make you wonder if these guys even try to use their brains when designing the whole thing:

1) The Head of the Venezuelan Association of Airlines said yesterday (today’s El Nacional, page 6) that during the last three months, occupancy in international flights has not exceeded 40%, despite the fact that flights are completely sold out and all tickets have been booked.

Do you know what this means?

Easy, with the large arbitrage between the official rate (Bs. 6.3 per US$) and the black rate (about four times more) the times of Oligarco Burguesito are back! The only way that occupancy in flights can be that low, is that organized Mafias are gathering cedulas, buying tickets and obtaining Cadivi dollars for travel. Say you buy a ticket to go to Spain with Iberia. I just checked, and on October 1st, I could go for Bs. 14,857 round trip. If you buy the ticket, get US$ 3000 for the trip in your credit card and 400 euros in cash, that is about US$ 3,520, which at the black rate is something like 116,000 bolivars, subtract the Bs. 14,857 and without bothering to travel you have made a tidy profit of around Bs. 100,000. Why bother to even travel and use the airline ticket?That cost money after all. Give the credit card to someone and have them use it to get cash or whatever.

Or organize twenty or thirty people like that and you yourself could go and take care of it, paying everyone one of them a fee for the use of their cedula in your endeavours.

And clearly someone is doing that right now, in massive numbers, if 60% of the seats flew empty before the summer season began.

2) You would think that scams and “guisos” would take a while to develop under the new Sicad rules. Well, corruption is so entrenched, that in the first Sicad auction corruption was already present in full force. Indeed, 127 companies of the health sector were assigned foreign currency. This health sector was defined as “only medical equipment and parts”. If these 127 companies were assigned the “average” amount of 166,000 dollars per request, we are talking about US$ 21 million for all of them.

The problem is that the Venezuelan Association of Distributors of Medical, Odontological, Laboratory and Similar Equipment, reported that of its 137 members not one was approved a single dollar (El Nacional yesterday).

Yes, not ONE, of the ONLY association that groups distributors of medical equipment and the like.

So, the mafias were in place even before the auction took place and they were generously rewarded. Except they went overboard and somebody noticed. The Government said it will “investigate”, “hold off” giving out the dollars and the like, but pardon me for being skeptical, if the Mafias are so entrenched, I am sure the same people that decided to award the dollars to what are mostly phantom companies, will carry out the investigation and nothing will happen.

So, all that complicated system, “checks” and “balances” and in the end, the dollars went to the wrong hands.

I guess in Chavista/Madurista la-la land, it is time to create even more controls…

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