Thought this might interest folks. This tightening is definitely
occurring and is, effectively, a process of selective devaluation.
Characteristically, there's no mention of the fact here is that these
folks can always get the $ they need by turning to the parallel market
[instead of having access to these subsidised $]. It would mean, though,
greater costs for these selected imports./m
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.
--
Michael A. Lebowitz
Professor Emeritus
Economics Department
Simon Fraser University
Burnaby, B.C., Canada V5A 1S6
Director, Programme in 'Transformative Practice and Human Development'
Centro Internacional Miranda, P.H.
Residencias Anauco Suites, Parque Central, final Av. Bolivar
Caracas, Venezuela
fax: 0212 5768274/0212 5777231
www.centrointernacionalmiranda.gob.ve
[email protected]
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