Archive for December 15th, 2013

What’s With Maduro’s Plan To Allow People To Import Cars?

December 15, 2013


Just before the election and completely out of the blue, the Maduro Government announced that it would allow both individuals and companies to import one car during the next 12 months. The only conditions for this would be that you open an account in dollars in a Venezuelan bank (mostly Government owned ones) and that you can not sell the cars for 36 months. Up to now, there has been no information on whether there will be limitations on what type of car you can bring. You simply have to bring your bucks, deposit them and pay all of the taxes, which will be in Bolivars at the official rate of exchange, i.e. they will be not be that large if you have greenbacks abroad.

The strange thing is that nobody asked for this, nor suggested it, it came as so many Chavista decisions are made, they decided to do it and announced it.

So, what gives? I have seen nobody to attempt to explain this decision, a sort of market friendly decision, very un-Chavista-like.

My theory is that the Government realizes that with the lack of foreign currency right now, the automotive sector is one in which it simply does not have the money to satisfy demand. After two years of 100,000 cars sold per year, in a market of at least 200,000 per year if no more, there was simply no way the Government would spend another billion and a half per year to satisfy demand. At the same time, not satisfying demand, continued to drive prices higher, cars are scarce and importing chimbo Chinese cars was not working, you still have go pay for them. And it was a huge racket anyway.

Enter a market friendly, screw the private sector solution: Let those that have savings in foreign currency bring the dollars and the cars. That way, have the wealthy finance the supply of cars, partially helping to solve the problem. At the same time, it would also ease the pressure on the Government to give foreign currency to local car manufacturers to build cars or import cars, bypassing the private sector and reducing their profits.

If implemented correctly, the plan will work. Many companies and individuals with foreign currency abroad will take advantage of this window of opportunity to solve their car problems. Others will simply take advantage of it to change the model they drive, the used car hitting the market. Others will turn this into a business, bringing cars under the name of everyone in their family and selling them via a private document without transferring the car until the 36 months are up. In fact, it has even been suggested that there could be a Sicad auction for importing cars, in which case you know someone will make a lot of money with this new policy by the Government.

A good pragmatic solution to a problem, even if for the wrong reasons.