Tuesday, March 19, 2013

Yet another devaluation

One of the big problems of the devaluation of February was that the SITME, the lone system to obtain foreign currency for those shun by CADIVI, was eliminated. So, for example, non essential imports as decided by the regime, who could not use CADIVI, still had a shot at SITME but for a higher price.  Today the SITME substitute was announced.

Still very foggy, but we can gather a few things already.

It will be an auction system so it means that the currency will slide progressively towards a more realistic exchange rate. Yet, the speed of that slide will be politically controlled so do not expect any time soon a more realistic cost structure for the economy. Let's say that for the start the regime will probably go to a 20% above the current official 6,3, which means for all practical purposes that the regime admits that 4,3 to 6,3 devaluation was not enough.

We assume that the regime will simply offer some of the PDVSA income directly to auction. In theory this could be a long term way to get out of currency exchange control. But you can be sure that this is not the long term objective of the regime. Still, if Capriles wins on April 14 it is a tool for that he will have already in hand.

It will be absolutely discretionary as the regime will decide in full who gets what. At least in CADIVI, if you got through all the hoops, met all criteria, you were assured an approval, though not a payment. With this new system it seems that the regime will not need to explain who gets what and when. That means more corruption to have access to foreign currency through that system. Ah! And in SITME you and I could try to get some foreign currency on our own, that option is not included, at least for the time being,.

In short, the regime is seeking more controls on economy as a way to deal with the disasters that abuse of controls have already created. The economic team that has been failing so badly for the last decade remains in place as Maduro has not dared to change Giordani at the helm, who we fail to understand why he wants to remain at the helm now that his pupil is dead. The only rational explanation was that Giordani objective all along was to destroy private business and that as a first step it was required that some of that wealth be transferred to pro Chavez bolibourgeois millionaire through corruption. But that group is much more susceptible to political blackmail in the future when even the Polar group has become a non entity. Giordani is and has been Havana's man all along


  1. Anonymous7:24 PM

    This program will not put food on the table or security on the street. It will however magically make the Chavistas look like they are actively fixing the economy. That is what it takes to win an election.

    Maduro and the Cubans will without a doubt become enriched even more. Guaranteed.

  2. Dr. Faustus10:24 PM

    "This program will not put food on the table or security on the street. It will however magically make the Chavistas look like they are actively fixing the economy. That is what it takes to win an election."

    From the post above, that is exactly correct. It's the only thing that makes sense. The financial actions announced today are for appearances only. If the store shelves are bare TODAY, and there is hoarding taking place all over Venezuela TODAY, the new SITME account cannot reverse this situation in time for the election. The only question that remains is,....why? This is simply an elaborate campaign gimmick.

  3. I don't understand how can there be an auction system with an artificial cap. If for example the cap where to be set at 8, and there is a shortage of dollars, then every auction will end up tied at 8BsF per dollar. And then what happens? Coin toss?

    I think I'm missing something about the system, could someone explain?

  4. I don't think there will be a cap on price so much as a cap on amount available.

    Nobody has any real details so far, so we'll just have to wait until next Monday to see what they come up with.

    Quico over at caracaschronicles has a post that makes sense of what is known so far, but anyone who claims to know the absoulte truth about this new devaluation is not correct.

  5. Anonymous6:27 PM

    This just in at 12:45 PM "Contraloría de AN solicita "confiscar bienes" del alcalde de Naguanagua" (Petition to National Assembly to confiscate Naguanagua Mayor's assets". This municipality has been under the opposition for years, and now that there is a Chavista governor...



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