A Cuban’s Take on Venezuela’s US Dollar Rules
Caridad
HAVANA TIMES — The issue of the US dollar – the legislation that surrounds it, its exchange mechanisms and people’s access to it – is one of the things about the Venezuelan economy I find most curious.
Another thing that caught my attention is the country’s low levels of agricultural and industrial production, as well the apparently abundant opportunities to open up small businesses without having to pay a cent to the State for licenses, without having to endure all that sinister red tape one comes across in Cuba, even when one simply wants to sell coffee or pastries.
Given this lax business legislation, I was quite surprised about the country’s restrictions that prevent citizens (including businesspeople) from securing US dollars in a “normal”, direct way.
Following Venezuela’s 2002-2003 crisis, when the country experienced a capital flight that threatened its economy and political system, the government established a hard currency exchange mechanism, more specifically: the Hard Currency Administration Commission (CADIVI).
Since then, all Venezuelans wishing to travel must submit to an incredible bureaucratic procedure at CADIVI and their bank (after presenting their air ticket) which could traumatize the Dalai Lama himself. No few travelers get to the day of their trip without ever having received the blessed dollars.
What’s more, the virtual sum disbursed (through a credit card) depends on the country one wishes to travel to. Many people don’t get their cards activated until 2 or 3 days after their arrival at their destination, and you can only use a certain amount of money a day.
I’m not even scratching the surface here. There are so many requirements, restrictions and stories surrounding this whole mechanism that I would need 3 days to cover them all.
If this procedure is exhausting for the regular traveler, I don’t even want to think what businesspeople go through to get their hands on some dollars.
When the State places so many hurdles on the way of acquiring US dollars, you can expect the creation of a parallel market where people can acquire the currency – at a slightly higher price. I say “slightly higher” because that’s how it was until about a year ago.
Before Chavez’ illness became news, the difference between the “official” and “parallel” dollars ranged from 4 to 8 Bolivars. This year, the official dollar went up from 4.30 to 6.30 Bolivars, and, at one point, the parallel dollar was somewhere between 12 and 16 Bolivars. Today, it’s over 45.
All of this has happened in less than 2 years, which is the time I’ve been living here.
Prices at privately-owned stores (which constitute the majority) go up in pace with the parallel dollar. So, if I go out to buy a carton of eggs which cost 25 Bolivars some months ago, I’ll find it at around 100 Bolivars.
This has led to all kinds of things, from store owners who hide products to sell them at much higher prices like the small mafias (particularly concentrated in the State of Maracaibo) that hoard flour, milk and toilet paper to re-sell it on the black market. We could also mention the rationing of certain products in high demand outside of the capital, but that is another complicated issue.
Getting back to the issue of the dollar, I am somewhat bemused to see how Venezuelans have almost outdone us Cubans in terms of finding loopholes in the system.
At this point, almost everyone knows that getting one’s hands on US dollars and re-selling them is a killer business (as is, for instance, selling Venezuelan gasoline in Colombia).
I know someone who will “take care” of all CADIVI requirements for you in exchange for your “dollar quota”. This way, you avoid having to go through the painful procedure and don’t even have to buy a plane ticket (if you’re only interested in getting the dollars).
Others don’t want to risk getting conned and buy their tickets. As a result of this, air fares have begun to go up and it’s becoming increasingly difficult to book these with only a few months’ notice.
Still others (those with more money in their cards), actually take the trip and even have places where they can “milk the card”, that is, take out the money without making any actual purchases (by giving the store owner a “tip”). There are plenty of tricks and ways of getting around the law.
The Venezuelan government has expressed its good intentions through an alleged “all-out war against corruption” (while simultaneously limiting the power of those entrusted with this war). Meanwhile, Venezuela’s production indices continue to be very low. It doesn’t even produce much food, only oil.
It would be easier and better for the Venezuelan Government to just float their currency on the international market like all other currencies and allow the market to value it. No more corruption and no more jumping thru hoops trying to exchange it.
Problem is Venezuela uses 60% of the revenues for legitimate business and 40% for subsidizing the poor.
That’s laudable, however, they are sacrificing the rest of the citizenry to pull these uneducated poor from their former status. Its a bit like getting a Model T started in cold weather. Takes a lot of pushing and warming to get these uneducated masses where they can sustain themselves.
It is laudable that this is the first administration in Venezuelan history to address the beggarly poor. Interestingly, many of these previous poor have made it into the haves and are middle class or higher and no longer back their former benefactor but lambast the largess of their benefactor helping others in their tail.
Amazingly, many of these former poor not only lambast the process and their government but have joined the opposition as if they were always part of it. Fickle is human nature and mercurial in character.
It takes at least 2 generations to remove most poor from their previous life, however Venezuelans to their credit have done it in less then one generation for those that have made the transition. Nevertheless, there are still many needing help to join mainstream Venezuelans and that’s still going to take much oil revenue to do it.
And of course the US Government is there like wolves around lambs, awaiting to disenfranchise the country in allocating their natural resources and pay the Oligarchs under the table as previously. Its better to pay a percentage under the table then the legitimate price that benefits all Venezuelans.
This of course is called Democracy US Style and Venezuelans wanting a fair price for their commodity are DICTATORS. Bastards these dictators, you know. We need democracy US style and Mr. Capriles will be the key for its arrival!
The Venezuelan government will do nothing to stop the corruption for the simple reason their policies foster it and the people who profit most from it are the government’s most powerful supporters. The problem will get worse until the economy collapses. At that point, Maduro, declaring an emergency, will resort to radical measures backed up by brute force. That will be the end of Venezuelan democracy and sovereignty.
The point about sister nations is well made. Still, I remember a certain Mr Chávez proclaiming Venezuela and Cuba to be ONE country. ALBA, is it solidarity among rulers or people? When will be the day that there will be visa free, let alone custom free travel, as happens increasingly in the European Union, When will a Cuban be able to use the currency they are being paid in and spend it in St Vincent and the Grenadines or Dominica? That will be the day when ALBA does what it says on the tin. Not now.
It is ironic that Cubans must change Cuban money into USD in order to convert to Bolivars. There is no direct exchange provided in Cuba nor Venezuela. So much for sister nations….
the laws of supply and demand always find a way to work. both venezuela and argentina have thriving black markets for dollar exchange in spite of harsh regulations.