From the Editors of VenEconomy
The Administrative Ruling No. 011 issued by the National Center for Foreign Trade (Cencoex) imposing new requirements, amounts and restrictions to Venezuelan travelers hides several aspects that go far beyond the arguments given by the Government for a more rational use of foreign currency or putting a stop to the citizens traveling abroad just to take advantage of the dollars allocated to them at preferential rates. It even goes beyond the discussion of whether it is a right or a benefit that the Government grants to citizens traveling abroad, or if it segregates the private banking system in the management of foreign currency for travelers, or the apartheid that thousands of citizens who do not have access to the public banking system are subjected to.
In addition to all these truths, this administrative ruling clearly shows that a government that has handled the biggest flows of foreign currency in the entire history of the country has left Venezuela with a severe dollar drought, largely caused by generous financial handouts to other countries and the rampant corruption from the ruling elite. And the serious thing is that this administrative ruling won’t help patch the hole of Venezuela’s huge deficit. Calculations suggest that while this new foreign exchange regime may save the country between $2.8 billion and $3.2 billion this year, that’s peanuts since to cover the domestic requirements of foreign currency it would take between $16 billion and $23 billion.
This administrative ruling also evidences the complete failure of the foreign exchange controls imposed by Venezuela’s ruling regime since 2003. Just like the collapse of price controls and the control over all economic activity that both Hugo Chávez and Nicolás Maduro gave a lot of support. A collapse concealed beneath high crude oil prices that, once they began to steadily decline, heavily affected the lives of Venezuelans with unparalleled inflation and scarcity. As Luis Vicente León, the head of polling company Datanálisis, put it in his article "10 notes regarding the changes in the dollar quotas for travelers by Cencoex," published by local digital magazine Prodavinci on April 11: "The real core of the issue here is that no one can make use of their money with freedom."
The Administrative Ruling No. 011 also makes clear that this is a government that resorts to lies and manipulation to cover up its failures and keep blaming others for them. Instead of dealing with the necessary easing of foreign exchange controls, it resorts to a de facto devaluation in a covert way. First of all, with a mistaken perception that the measure will only affect a few thousands of Venezuelans who don’t belong to the Government’s electoral target. A mistaken perception all the way, indeed. The foreign exchange distortions are to blame for thousands of Venezuelans (including the Government’s own supporters) taking advantage of their dollar quotas when traveling abroad. In some cases, many of them obtained some easy juicy profits from this activity thanks to the complicity of friends working for the State’s foreign exchange bodies. Second of all, because the State persists in obviating the massive corruption from the so-called "Bolivarian bourgeoisie" that emerged from the foreign exchange control system, which has bled Venezuela to death through illegalities such as: 1) The "hiring" of shell companies by the State via direct foreign exchange allocation and without any accountability, an operation in which about $20 billion in funds were embezzled, according to Venezuela’s former planning minister Jorge Giordani. 2) And the illegal issuing of "diplomatic passports" to white-collar criminals, who laundered large sums of money through Banca Privat d’Andorra and the Swiss branch of London-based bank HSBC.
The administrative ruling also confirms that the foreign exchange controls have served, and still do, as a mechanism of political and economic control over large sectors of the population. It ruined the national productive sector, which is seeing the worst case of harassment on the part of the State in all its history. It has dramatically reduced the population’s purchasing power and worsened the shortages of food, medicines and basic goods as never before.
And lastly, it confirms that the Maduro administration will not rectify the course towards the precipice.VenEconomy has been a leading provider of consultancy on financial, political and economic data in Venezuela since 1982.
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Venezuela Gaceta Oficial - Reduction of Cadivi-Cencoex Travel Allowance - 9 April 2015 by Latin American Herald Tribune