An announcement about nothing

/ February 10, 2015

Merentes on the tambora The Expectation-Disappointment cycle around Venezuela exchange-mechanism announcements is so well established by now, we barely get our hopes up any more. Today was no different. There was little about today’s press conference that the public didn’t already know or that wasn’t already so. Much like that well-loved sitcom, today’s event with Rodolfo Marco Torres and Nelson Merentes was an announcement about nothing. Anabella, with her sharp eye for numbers, has the cliff notes ready for those of you who missed it:

1. 6,30 Bs/US$ rate for food and health is still a go, including the resources needed for manufacturing in these sectors.

2. Sicad 1 and Sicad 2 have been rolled into one to form new and improved Sicad, which will start at 12 Bs/US$ per the price held at the last auction. This exchange rate “will be raised or lowered according to the economy’s needs”, and it will be the marker for the almighty cupo viajero and cupo electrónico (which survived the widespread rumor of its disappearance).

3. All new “SIMADI” enters the picture (Marginal Currency System), as a third method with an exchange rate that will fluctuate according to the market forces -just like in the real world. How free is it? Not that free. There’s a daily limit of 300 US$ for purchases in this system, and the money must be transferred to dollar-denominated accounts in domestic banks. Businesses and private individuals, we’re told, will be able to buy or sell either currency at some 3.792 venues, such as banks and brokerage firms.

What impact, if any, will the continuation three-tiered system have on the economy? Unless you have no idea what’s been going on in the country in the last few years, you can imagine. If previous announcements are any indication, there’s little chance results will vary. That means more bachaqueo, inflation and scarcity. It’s a great opportunity to remember that less than a year ago, Sicad 2 was presented as the solution to the imbalances in the economy. Rafael Ramírez himself said in March 2014 that the sequel to Sicad would feature a free floating dollars with no price bands or fixed rates. The same goal was set out for Sicad 1 and for Sitme (remember Sitme?) back when they were new. What’s remarkable about today’s announcement is how similar it is to the one last March. As one regular put it on Facebook, the announcement gave us “pen déjà vu”: esta pendejada ya la hemos visto.  Are we jaded? How could we not be? Stop bothering us with announcements: wake us up when (and if) the system is actually put into practice.

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42 thoughts on “An announcement about nothing”

    • Likewise.
      Not the first time that French has entered the blog-slang, such as Pendejos Sin Fronteras coming from Physicians sans Frontiers.

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  3. kind of reminds me of the opposition’s dilema, this people must have gathered together and decided that their best course of action was doing nothing. This is a great victory for bachaquerism and corruption. They’re going to just keep looting the rancho hoping that it doesn’t collapse.

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    • I have the theory that behind all this inaction is Cuba’s government and its interest for keeping Maduro in power at all cost so they can continue profiting from venezuela.

      Borrego has to be behind this.

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  5. The exposition as usual was shoddy and confusing , leaving a lot to the imagination , apparently:
    1.there are no limits on people bringin US $ in (unles they have to furnish some kind of proof of provenance)
    2, all who buy must have a local forex bank account ( which means that getting the puchased forex acually out may be subject to BCV interference and red tape)
    3. If the purchase is low then its limited to $300 per day but it can be done in any of the 3700 habilitated agencies .
    4. If the purchase is higher then it can only be transacted in the bolsa bolivariana with all that entails.

    Doesnt seem to go far enough in offering people what they need to start trading US$ n large enough amount to make a difference.

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  6. Same old, same old, way too few dollars, and a new “free market” entailing documentation/identification/probable tax payment proof for Bs./provenance proof/personal security risk for large transactions/etc–long live the real parallel market!.

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  7. These guys can’t stand free market prices for anything. Not TVs, not sneakers, not rent, not insurance, not food and certainly not dollars.

    What’s the “fair price of dollars” going to be any way?

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  8. Anyone who really believed the story of a free dollar under the state’s supervision is a naive fool. Same thing as those that still believe that there is any chance of running a business in Venezuela without at one point or other being extorted or threatened with jail by the government.

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  9. The worst part about it, I think, was that Marcos Torres said 70% of FX allocations will go through Cadivi at the 6.30 VEB/USD rate. This means that if SICAD gets another 15% of FX allocations, only 15% will remain for the new SIMADI system. Assuming annual imports of $30 billion for 2015, which is ballpark what we’re gonna get, that means SIMADI will only get $4.5 billion per year, or $22.5 million per business day, or 70 cents per Venezuelan per business day.

    That is not a lot at all. Considering the pent up demand from multinationals that haven’t been able to repatriate dividends for years and businesses that have seen their real earnings and savings diluted by inflation, the market clearing rate for a truly “free” SIMADI will have to be around 180 VEB/USD, perhaps higher, if supply is just $22.5 million per business day. If Cadivi really gets 70% of FX allocations, this system will face significant challenges, to put it mildly.

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    • Mr. Medium McPotatoes,

      As it is of my understanding the new system will rely on the dollars offered by the private and public sector. Therefore, there will be a minnimal FX allocation from the public sector.

      I wholeheartedly believe that there will be next to an integral of zero FX allocations from the public sector, rather it will use such system to purchase much needed dollars for the State to fullfil its international obligations.

      It will surely be interesting how the State’s “independent agents” will manipulate such system in order to create price distortions so that the State can purchase dollars at a cheaper price.

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      • The pent up demand is extreme. Too many bolivars chasing too few dollars, and it isn’t going to improve as long as La Placera keeps pumping out shiny new bolivars as fast as they can supply ink and paper. Why would the private sector forego its store of value beyond anything for immediate needs?

        This does nothing for inflation. If you have surplus dollars, why would you want to sell them if you did not have to do so, instead of sitting on them knowing that they will be more valuable in a week, a month, a year? I think you are overly optimistic about what dollars the private sector has (legitimately, not via the exchange mediums at lower rates from the government, because that will just drive up demand for those dollars) and their willingness to part with them.

        I agree insomuch that the state will manipulate…it just won’t function as intended. Moreover, the drip supply, will exacerbate the problem. By the time this thing effectively operates (if it ever does), the settling rate will be upwards of 200/$, probably around 225-240.

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  10. Maybe I get mixed up with my math but I always have a problem figuring out how much oil revenue Venezuela stands to make in a year . I take Venezuelas estimated yearly oil production of 2.350 kbd, to which I subtract 750 kbd dedicated to cover local demand . That gives me 1.6 mbd in exports which multiplied by 365 days gives me an annual export volume of 584,mbls which multiplied by 45 $/bl results in a total income of $ 26.280 bln.

    If that figure is right then after considering Pdvsa forex capex and opex expenses , funding of large scale industrial projects , payment of principal and interest on 113 Bln $ forex indebtedness I cant see how the govt has $30 bln to cover forex cost of basic imports for the population . The 70% allocation of $ 30 bln of Forex at a 6.30 exchange rate seems like a lot of balloney . The amount and percentage is likely much less except that they want to create the false impression that the average exchange rate isnt really that much higher than it was in the past .

    Also from some press reports the Minister said that the merged sicad system was to cover 30% of imports of less important , less basic needs so that the presumably free exchange system would feed it self not from govt earned forex but from private contributions . thats why its called marginal .

    All i see in these numbers is smoke and mirrors and a totally baffled public which never gets to recieve the hard meaty information it craves to have to understadn where we all stand .

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    • Maybe I get mixed up with my math but I always have a problem figuring out how much oil revenue Venezuela stands to make in a year .
      You will get even more mixed up if you read the PDVSA annual reports, such as claiming petroleum export income of $120 billion for 2012, with an average price of ~$100/bbl. How many phantom barrels, phantom dollars in that claim?

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      • The numbers get worse if we consider that 100kbd are sent to cuba to pay for services (normally worthless) for which Venezuela recieves not forex . Are these number totally out of kilter , is there something that Ive missed ??? why doesnt anybody mention them and what they mean .!!

        Frods mentioned the regime having 50 Bln US$ in external resources but whent I went through them it was clear that they were much smaller in size and couldnt be disposed of without a great deal of difficulty if at all . I also ran through a UBS report on what the govt and pdvsa has to pay this year , specially in the last quarter and I cant see how the govt is going to manage to pay all that money and still have enough to cover venezuelans basic liviing needs , so dependent on imports. !!

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        • According to an UBS report of 15 jan , this years debt service for the 1st semester is $ 4 bln and for he second semester is $ 6.2 bln , a total of $ 10.2 bln , if at 45$ a bl Venezuelas total forex income is of 26.280 bln you re left with US$ 16 bln to cover all your Forex outlays after paying your debt service.

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  11. Why in Gods green earth are they continuing on with this farcical tiered exchange rate system? If they’re worried about instant devaluation why not just do a scheduled walk towards a floating exchange rate in increments? If it’s just about arbitrage as some backwards patronage scheme, aren’t there far more quieter and efficient ways to just steal people’s money and be done with this? Even from a self-preservation standpoint, soldering on with this zombie exchange rate isn’t helping the regime or anybody else.

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  13. Can we refer to the combination as SICAD 1 & 2 as Sicad 1.5? This works wonderfully when it seems like instead of moving forward, it is more accurately a half-step backwards.

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  16. “pendejada”?

    This is newly coined, so not in any translating dictionary (and also of the class of words that wouldn’t be in the dictionary).

    So I guess at it: “Assholery”?

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    • newly cointed… not. Pendejo is, originally, a hair from the pubis, and since… I dont know when but I’m guessing centuries, an idiot. Pendejada, well, is what a pendejo does :P

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    • assholery is too strong of a translation of pendejada. I’d agree with RobertoN: silliness. I’d add, too, with a possible element of jerkdom.

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    • pendejada
      This is newly coined, so not in any translating dictionary (and also of the class of words that wouldn’t be in the dictionary).
      Not so new. I first heard the term years ago. While it is not standard Castellano de la Academia Real, it can be found at least in some specialized dictionaries, such as McGraw-Hill Diccionario del Argot : El Sohez. I bought my hard bound copy some years ago at a used book store for a dollar. Well worth the purchase price. And I quote:

      pendejada bobada, tontería.
      1)Olvídate de estas pendejadas: Juan Madrid, Crónicas del Madrid oscuroSiempre está diciendo pendejadas. CL
      2)Aquella mañana yo me le acercaba con qualquier pretexto y le decía pendejada tras pendejada,,, Sealtiel Alatriste,       Por vivir en quinto patio 1985, 1985 RAE-CREA.
      3)Todo esto me parecío una soberana pendejada,un disparate. Carlos Fuentes, Crístobal Nonato 1987, RAE-CREA.

      Other equivalents: idiotez. In Argentina: boludez, huevada.
      Silliness sounds ok. Stupidity, idiocy/idiocies, stupidity, nonsense. So on and so forth.

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  18. “Sistema MARGINAL de divisas”…

    With all the silly hatred chabobos have for the word “marginal”, they come to call this part of their funding stone with what they consider is one of the worst insults?

    Also, this’ll be the best way to wash your illegally aquired dollars, rojos rojitos, you managed to synapse two brain cells in your little heads! :D

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