Another absurd and incoherent decision by the incompentent Venezuelan Government on dollar quotas for its citizens

December 29, 2007

One of the most significant revelations of the last few months in
Venezuela was that of General Raul Baduel, when he said that in his one
year as Minister of Defense he never saw President Hugo Chavez at a
Cabinet meeting. This was later confirmed by General Muller, who was
brought back from retirement and later dismissed without ever seeing
the President once. This little tidbit explains a lot of what has
happened in this country in the last few years, in particular the
incoherence and inconsistencies in public policies. There seems to be
no coordination whatsoever and the so-called “philosophy” of the
revolution is not applied uniformly and/or very inconsistently. Add to
this the lack of quality of management and one can at least begin to
understand why we are where we are today.
 
This
comes to mind, because while it is good that the Government is finally
tackling the problem created with the quotas for credit card use for
the Internet and travel, the decisions so far, are totally incoherent
and certainly contradict the fundamental precepts of the revolution,
such as privileging those that have less, having all Venezuelans share
the oil wealth and giving access to all to the same services and
technologies.
 
As I reported a few days ago, the first measure was to prohibit the banking system from issuing pre paid credit cards and
ordering them to cancel the existing ones on January 1st. I have
explained the rationale behind the increased use of credit cards
before: As the difference between the official exchange rate and the
“parallel one” grew, it first became too large to pass up and later
became an illicit business in which people would pay others for their
quotas, using them for their businesses or to obtain foreign currency
which would then be sold in the parallel market at a huge profit, since
the difference of 165% between the official rate (Bs. 2,150 per US$)
and the parallel rate (Bs. 5,650 per US$) became too large by the end
of the year.
 
The opportunity became simply too
interesting to pass up. That new computer, ipod, camera, medicine,
book, watch, cell phone or whatever that you wanred, could be yours with a 62% discount
if you could get a credit card, then order something over the Internet
and use many of the courier systems that have sprouted in Venezuela to
bring your stuff. In fact, parents would get credit cards for all their
kids over 18, multiplying their availability. Companies began accepting
this as payment for insurance, travel packages and even for opening
brokerage accounts with cheap dollars. Later, operators of dubious
origin began the business of purchasing quotas, an industry sprouted
and a verb was even applied to the whole thing: planchar (Ironing, as
in there is money laundering and then there is now ironing your money).
In fact, I have lived the feeling it myself, I noticed this week that I
still have like $67 of my $3,000 left and have been looking at my
Amazon wish list to look at the combination of books that comes closer
to that amount. I also upgraded the body of my SRL camera for what to
me is really 250 US dollars. Not bad to go up to 14 megapixels with all
sorts of new features, bells and whistles. I really did not need to do
it, but I could not pass up the opportunity. Its called human nature,
hard to pass up the bargains.
 
According
to the CADIVI website, requests for credit card use in January were US$
268 million, ballooning to US$ 701 million this December, as everyone
sought to take advantage of this. Clearly, the problem is with the
exchange controls, but the Government is clearly not ready to remove
them, as they are both a source of power and corruption. The longer
they are in place, the worst it will be in the end.
 
Thus,
the Government began attacking the problem, which is good. The first
action was to publish a list, including the names and national ID
numbers of 5,000 people who had made questionable charges and had to go
to CADIVI. So much for protecting the privacy of the citizens. More
lists were later published, now removing the names and increasing the
paperwork that had to be submitted, asking now for letters justifying
expenses. This completely overloaded the exchange control office, which
does not have the staff to even receive this, and in the latest twist,
CADIVI has put the burden on the banks to check the paperwork. The
whole thing has been a charade anyway. If you showed uo, you are fine,
if you didnt you will have no quota next year, which as we will see is
not much of a punishment now.
 
Meanwhile, not
one Government official has made a formal move to find out where Mr.
Antonini got the US$ 800,000 he was carrying in his suitcase when he
left Venezuela and the criminals have become the honest Venezuelans
that took advantage of their quota, while the Government has yet to do
anything about trying to find those that were profiting from the system
by buying quotas. Not precisely a fair system.
 
The
second measure was the prohibition of pre-paid debit cards. For many,
particularly those with little money and thus not eligible to obtain a
credit card, this became not only a way of taking advantage of the
quotas, but it also eliminated the need to carry cash in dangerous
neighborhoods, where crime has increased 200% during the eight years of
the revolution, according to official statistics.
 
Thus,
with one swipe, some bureaucrat decided this and thousands of honest
people were left out in the cold with his decision. Even worse, this
was announced in mid-December and many people were about to go away for
the holidays, planning trips with their credit cards that will become
useless on January 1st. Fortunately, the date of implementation has now been postponed to January 11th.,
precisely to tackle this problem, but any competent manager should have
seen ahead of time the problem that was being created. That is what
management is all about, thinking ahead all implications of a
decision.
 
Clearly, the elimination of the
pre-paid cards would take care of most of the fraudulent use of the
quotas, but to everyones surprise, the exchange control office
announced yesterday that next year the new quota level would be US$ 400
for ordering via the Internet, a puny 13.3% of the old value.
 
Who came up with this number? Why the 13.3% solution? What is the rationale?
 
Of
course, there has been none given. But it is simply stupid. You are,
sorry if I repeat myself, punishing a large number of Venezuelans
because there are some criminals that the Government is simply
incapable of going after, that have taken advantage of the system.
 
But
think about it, the Government is reducing to US$ 400 the Internet
quota, which is the more popular one, as it does not require you to
travel abroad. Thus, it is the quota that more people, particularly the
less well to do, can take advantage off and benefit the most from.  In
contrast, the travel quota, which as of today is ratified to be US$
5,000 using your credit card plus an advance of US$ 600 in cash (600
euros if going to Europe), has been left intact. Moreover, the ones
that travel pay for their tickets, which are quoted in US$, at the
official exchange rate of Bs. 2,150, so they benefit once again from
the exchange controls, as their tickets are subsidized by the
Government. (A roundtrip ticket Caracas-Hong Kong in business class
costs US$ 5,800, which when you calculate at Bs. 2,150 becomes around
US$ 2,000, nice deal, no?)
 
And who benefits
from this largesse? Certainly not the poor, the disenfranchised that
Chavez and his Government are always crying about, but the oligarchs,
the well to do and, of course, those plugged in into the Government
that can afford to travel. Most Venezuelans are simply screwed, as
simple as that. So much for the oil now belongs to everyone.
 
But
the deeper problem is that the whole thing is incoherent. The new US$
400 quota is incommensurate with a travel quota of US$ 5,600. There is
no method to this revolutionary Government, no thinking, no decision
making, simply random acts by mediocre Government officials, each
acting on their own.
 
I will not comment too
much on whether US$ 400 a year is too low or too high. What is
incomprehensible is that if before it was decided in some fashion that
it should be US$ 3,000 that there can be any reasoning now that will
reduce it to US$ 400 all of a sudden, while maintaining the US$ 5,600
for travel. Clearly, one would think that those things ordered abroad
should be of more importance than more frivolous leisure travel for the
well being of the people of Venezuela.
 
And of
course, you have to wonder if the suitcase quota will also be reduced
by the same fraction, making the standard maleta carried by those
replacing Mr. Antonini one with US$ 106,666 in cash, so that all
Venezuelans are more equal. I doubt it, you need more in order to buy
the unconditional allegiances that Chavez wants and needs.
 
Unfortunately,
he also needs to prop up his popularity given the referendum results.
But with his collaborators making decisions like this, he seems to be
doing exactly the opposite, as he concentrates on an international show that will bring him very few votes in the future.

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