Caracas Chronicles

Is a fourth exchange rate on its way? El Nacional’s very own economics Lois Lane, Blanca Vera Azaf, seems to think so. The money quote:

“The proposal – which awaits President Nicolás Maduro’s approval – says that people will have to buy dollars through a separate auction mechanism, a different version of the SICAD system currently in place. This new system has not been designed yet, but it would start operating in 2014.

Cadivi would continue selling dollars at a subsidized rate of BsF 6.3 per dollar, but restricted to 24 privileged economic sectors. Natural persons (i.e., not companies) would have to purchase currency at a higher rate.

As for travelers, the proposal says they would obtain dollars via auctions through the yet-to-be-designed mechanism: they would receive their dollars at the rate determined by the system via their credit cards. It is not yet known if the caps on the amount of dollars people can buy would remain in place.”

A quick note: the nature of the problem with Cadivi is not the 6.3 rate, it’s the arbitrary value that dollars get, and the discretionary policies through which they decide who gets what and when.

If you start giving tourists dollars at, say, BsF 14 per buck, the black market will eventually shoot up to BsF 75 and you will find yourself in the same place: with a severely distorted market rife with opportunities to make a quick buck.

The more tiers of prices at which you sell dollars, the more opportunities to get money for nothing. The only thing this new “mechanism” does is change the identities of the players benefitting from these massive distortions.

The only way out of this mess is to free the exchange market, but that is something the government simply refuses to do. Instead, it continues coming up with lame attempts to try and save an unsaveable situation.