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  HOME | Venezuela (Click here for more Venezuela news)

Venezuela Currency Controls Tightened -- Extending Even to Food Industry

By Jeremy Morgan
Latin American Herald Tribune staff

CARACAS – Anybody thinking that food imports have been ring-fenced from reinvigorated currency controls had better look at the dairy products industry, whose leaders are thoroughly cheesed off with the Foreign Exchange Administration Commission (Cadivi).

The Venezuelan Dairy Industries Chamber (Cavilac) claims that Cadivi abruptly “suspended” – or, according to another version of events, cancelled – authorizations for the release of hard currency that it had only recently approved for several companies.

Unconfirmed reports claim that Cadivi had cleared access to more than $100 million until its sudden decision early this week. Just why Cadivi changed its mind and whether or not the money will be authorized once again remain unclear.

Cavilac President Roger Figueroa said he hoped that that the decision would be reversed next week. In the meantime, Figueroa said that companies – whom he declined to name in the public orbit – were awaiting delivery of raw materials for which they wouldn’t be able to pay.

The problem, it would seem, is not just Cadivi, whose remit is limited to issuing permits. Successful applicants then have to wring the money out of the Venezuelan Central Bank, and the dairy industry says there are delays there as well.

Neither is it just the dairy industry that claims it’s going short of hard currency. The Venezuelan Packaging Chamber (Cavenvase) appears to be in similar difficulties, too.

Cavenvase President Mauricio Caycedo said that delays in obtaining foreign exchange had been building up since October last year. And, he added, since the turn of the year, “very little” hard currency had been released to his organization’s 28 member companies.

As a result of this, one company had been “paralyzed” for the last three weeks, he added. “There’s a great uncertainty because they don’t have supplies to produce,” he said.

Rather less surprising was a sharp drop in hard currency allowances for the telecommunications sector. Figures from Cadivi show that authorizations for these companies totalled $166.96 million during the first three months of this year, down 47.75% from $223.87 million in the first quarter of last year.

The sector includes subscriber cable television companies. Industry Spokesman Mario Seijas said cable stations were “very worried” about the delay in processing and authorizing their applications. Delays had stretched out to 180 days and a total of $80 million was at stake, he complained.

Cable stations rely heavily on imported material for a high proportion of their broadcasts. The only legal way they can finance these is by obtaining hard currency from Cadivi and the central bank.

Furthermore, the telecommunications industry has just lost its own ministry in a government reorganization. The old Telecommunications and Information Ministry has partly disappeared into an enlarged Science, Technology and Intermediate Industries Ministry and partly into the increasingly powerful Public Works and Housing Ministry overlorded by President Hugo Chávez’s comrade in arms and fellow former coupmonger, Diosdado Cabello.

Furthermore, the new “chief of government” of Caracas, Jacqueline Faría, has been appointed head of the national telecommunications company, Cantv. Faría now holds three top jobs – city chief executive, Cantv boss and president of cellular telephone company Movilnet.

Faría was directly appointed as city chief by Chávez over the head of Opposition Metropolitan Mayor Antonio Ledezma, who’s opted not to take things lying down. Faría has held several senior government positions including a stint as environment minister.

In the meantime, Cadivi President Manuel Barroso has lifted the lid on a potential Pandora’s Box of plans to change the controls on hard currency for people travelling abroad. By the way, these controls apply not only to Venezuelan citizens but also foreigners who live in the country.

He said plans were afoot to “design a new system” under which the amount of money people would be allowed to take out of the country would depend on where they where they were going and for how long – and, it’s suggested in skeptical circles, just why.

Cadivi says it hopes to have the new system up and running by August this year. Others suggest it’s likely to impose the change rather sooner than that, and probably with little or no warning.

This would be in line with the president’s view that people simply shouldn’t be able to secure hard currency for trips which he considers frivolous – shopping in Miami, for instance, or taking their vacations abroad.

Given that the Venezuelan currency, the “strong” Bolivar Fuerte, can’t be exchanged in most other countries, travellers have to obtain their dollars or euros before they leave. That is, unless, they have a healthy bank account abroad.

Now, or so it would seem, getting hold of hard currency is likely to become even more of an obstacle course than it already is. If, for instance, you’re tootling across the border for a week in Colombia, you may not get the full whack currently allowed by Cadivi of $2,500 – and that’s for a full year, all told – and perhaps only a small fraction of it at that.

Problems are also cropping up with people who spend on credit cards while they’re abroad. These consumers’ bills used to be paid off by their banks, which then got their hard currency from Cadivi within the next five working days.

Now no more, it’s being said. Banks are reportedly running into delays of months, with several banks -- Banesco and Banco Venezolano de Credito (BVC) most notably -- having to threaten to stop allowing the use of their credit cards abroad to force Cadivi to loosen the purse-strings. As of May 1st, Cadivi reportedly owed BVC more than $1.3 billion to cover just that bank's credit card use abroad.
Cadivi’s ever more evident tightening up of the currency controls is inevitably tied to the government’s expectations of oil export earnings this year. For the moment, the average price of Venezuela’s basket of medium grade and heavy crude oil is holding up better than some had thought, rising by $3.65 or 7.5% on the week before to close at $52.38 a barrel on Friday, according to the Energy and Oil Ministry.

That took the average for this year so far to $42.25 a barrel, a little above the forecast of $40 a barrel adopted when the government finally got round to revising the 2009 budget. In contrast with the seeming nonchalance with which the government first greeted the prospect of oil export revenues sliding in the wake of the global financial crisis, there appears to be only a limited degree of optimism in official circles now.

Forecasts at the Finance Ministry suggest that oil export earnings will likely total $33 billion this year. That would represent a drastic drop of 62% compared with 2008.

Furthermore, oil earnings are estimated to come out this year as a whole at not much more than the $30 billion the government deems to be the “optimal” level of official reserves for Venezuela’s economy. Further belt-tightening looks to be on the cards, with Cadivi getting tougher as times get harder.


 

 

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