Sunday, August 07, 2016

Corruption creativity

Two short posts this week end, for your reading pleasure. The first one on corruption latest updates.

The current crisis cannot be solved because the change in economic policies would result in the recognition that the robolución was a gigantic fraud. And I am not even discussing those who would go to jail. The point is that these people are not going to jeopardize their power or income. And yet these measures are possible without immediately questioning their power.

The first measures, not enough to solve the crisis but a must, are simple: stop sending Cuba its colonial stipend; remove price control and replace it with cash stipend to the populations at risk; rein in somewhat corruption so that at least a larger percentage of the state income goes to food and medicine purchase. Not that difficult, no?  Not only these measures are not even broached but corruption is worse than ever as there is less to steal. 

For example we have been offered a deal on DICOM dollars. Our contact would approve a certain sum every week so we can start paying our debts slowly, or at least purchase spare parts and the like. In exchange we need to give them 25% of what we get. That is, once we got the USD transferred to our account outside the country we are supposed to transfer 25% to a given account of a front man. Needless to say that this can only be done through the very opaque state banking system.

You would say "Daniel, that's not too bad and there is no other way to get foreign currency. Go for it!". But there is of course a catch. Once we sum up our expenses and the 25% "commission" the few USD we would get are not even 20% below the black market rate!  That is, I have in hand the proof that DICOM is just a tool for the regime to skim the private business still dysfunctionally working (and willing to pay the "mark up"). If in the middle of a national starvation and disease crisis the regime is unable to let go, even if temporarily, arbitration, then there is nothing to expect.

Note: clearly if the market is accepting a value so close to the black market value, then there is no need pretend that the bolivar value is not 1000 to the dollar.

Another corruption business model updating.

We have had recently "brokers" from Miami and Panama trying to short us on the foreign business we represent. They want them to sell and ship directly to them in Panama or Florida with the excuse that they have a client with access to foreign currency guaranteed. Since they are the ones that "found the client in Venezuela with dollars in hand" they want a commission from our provider. In exchange our providers would be paid directly in cash. No need for paperwork. Then the someone in Venezuela that has the approved USD would buy the lot from the "broker" at a mystery gross overprice (we have been offered our share if we wanted to go that way or at least shut up). It is all squared up by the "broker" and there is no need to go through decent but currency impaired intermediaries like us that, God forbid, would charge the market price. I let you ponder the multiple consequences of such schemes. 

I will just let you know that we have a pretty good idea of who that broker client is and they are, of course, tightly associated with the regime. Also, this makes sense for the "client" since the client will 1) get its share of the overprice paid to the broker, and 2) assuming that the client imports all of it, it will be more than its needs and he could resell enough of it at the black market rate to pay what corresponds to its own needs (we have advised our partners to stay clear of such "brokers").

So there you go, as long as currency control persists in the hands of these people there is nothing that can be done to improve the lot of my fellow countrymen. Regime change is the lone solution. 


  1. I wonder if all companies operating in Venezuela may not be guilty of violating the Foreign Corrupt Practices Act?

    1. Yes we are. At some point, just for basic survival, those of us who depend on imported items to function will have to cave in. The trick here is to do it for as low an amount as possible and try to obtain all the information we can for when justice comes back. But I can assure you that foreign governments know very well what is going on and understand. That is one reason why they refuse to lend to Venezuela.


  2. Boludo Tejano12:28 AM

    Once more, stories from the Belly of the Beast.

    So much for "dialogue." It's all about hanging on as best they can, or in the spirit of this article, hanging on to as much as they can for as long as they can.

    A further point about these deals is that like most business transactions in Cuba, these deals involve criminal acts. When nearly all is forbidden and very little is permitted in the economic realm, this is inevitable. The regime can step in at any time and lower the boom. Damned if you do, damned if you don't.
    But with such trivialities as money under the table to inspectors, this is old news, just ratcheted up.


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