A Cuban’s Take on Venezuela’s US Dollar Rules

A Cuban's Take on Venezuela's US Dollar Rules
September 27, 2013
Yordanka 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.

http://www.havanatimes.org/?p=99075