Caracas Chronicles

From the moment the government cracked down on the old dollar “swap market” (a.k.a., the permuta) back in May 2010, it was perfectly clear that something very much like it – only much more opaque, risky and illegal – would end up taking its place.

Now, a website called Wikianticorrupcion (which, in fairness, I only found out about this weekend) blows the whistle on the aggressively illegal new “structured notes”-based permuta.

Long story short, the Central Bank sells dollars for BsF4.30 that are then sold on to final buyers for BsF9.00 after a series of smoke-and-mirrors transactions to preserve plausible deniability and to pay off various stew-makers.

VenePiramides picks up the tale:

Las notas estructuradas son emitidas por bancos extranjeros a petición de una de las principales entidades bancarias estatales venezolanas, que buscan venderlas a empresas privadas -ante la escasez de dólares- a un precio que está entre 60% y 70% por encima del tipo de cambio oficial, según una fuente ligada al Ministerio de Planificación y Finanzas. Es conocido que uno de los impulsores de la estructuración de notas es el ministro para la Banca Pública y presidente del Banco de Venezuela, Rodolfo Marco Torres, quien influyó sobre el presidente Chávez para que en las últimas 3 emisiones ­que sumaron 9 millardos de dólares- los bancos públicos recibieran adjudicaciones directas de estos papeles. 

Wikianticorrupción says as much as 35% of the surcharge is going to fund PSUV’s election campaign. Other sources tell me they think that figure is far overstated. Much (or all) of the arbitrage margin probably ends up in the offshore bank accounts of an unholy alliance of National Office of the Treasury players, their bolibourgeois cronies in the banking sector and – according to one variant of the story – folks in PDVSA’s financial arm running a similar scam.

The scale of the scam is unknowable at this point, and unless an insider decides to talk, may never be known.

And all this is happening as people who did something similar back when it was transparent and legal remain in jail, for the second year running, awaiting the start (not the end, mind you, the start) of their trial on bullshit charges.

Back in the 1930s, bootleggers were among the fiercest opponents of moves to repeal prohibition in the United States: they knew their massive profits depended on keeping booze illegal. Keep that in mind the next time you hear a chavista blanche at the prospect of repealing CADIVI.