Caracas Chronicles

Over the years, we’ve been hard on traditional Venezuelan media outlets. Sometimes, we’re really hard on them. So it came as a refreshing surprise to read the latest reportage from El Nacional’s Siete Días, written by the paper’s investigative journalism unit. (Sorry, in Spanish)

The folks in charge of the piece went through the painstaking effort of finding out just how many ways there are to scam the country’s foreign exchange controls. They talked to the operators, the movers and shakers, and the analysts, most of whom spoke under condition of anonimity, of course. The result is a tour de force that is not entirely surprising, but still contains a lot of detailed information on the scam that is Cadivi. (I use the verb “is” because controls still exist, just under a different name).

Hopefully, stories like this will be news to many folks who still think that exchange controls can somehow be made to “work.” Time and again, our politicians announce a currency exchange control – when will we convince ourselves that, no matter who is in charge, these systems are always perverse?

The authors talk about fake companies getting dollars, about insider trading regarding which sectors would get funds, and about the scam of the Rusad registry – a necessary and highly prized piece of paper, without which you cannot access cheap dollars. It reads like a tour of your septic tank, and hopefully some day it will be required reading to understand the wasted opportunities of the chavista years.

The part that stood out for me:

Companies registered with Rusad are sold and rented out for millions. Some people were simply in the business of creating fake companies that had their paperwork in order, and trading them when they were ready to ask for cheap dollars for “importing.” We learned about this by talking to middlemen, who spoke to us under condition of anonymity. On the web, you can find people who supply more than two companies at the same time. Others do not have an ample selection in their portfolio. One vendor whom we contacted last week about a possible company told us, “we sold it already, and the signing of the documents will take place in a few days.”

“Do you have another for sale?” we asked. The question prompted an indignant response from the other end of the line. “What do you think? That this is easy?”

There you have it. Milking the system … such hard work.