Every exchange control system has led to huge levels of corruption in Venezuela. CADIVI is no different. What is different this time around is the lack of checks and balances and fear. With other Governments in the past, reporters would denounce graft, an investigation would be opened and even if those responsible were not punished, those involved in the graft would stop doing it or try to hide it even more. This is no longer the case. Under Chavez, few things are ever investigated and the media is afraid to report things. Moreover, even if you knew all the details, who would you go to? The Prosecutor? The Comptroller? There really is nobody to go to as everything gets covered up even when Chavez and his Government know things are going on. In fact, Chavez has removed people from CADIVI, but quietly. He has also gone after one case, the infamous Microstar case, but this seems to be more about getting someone out of the way, rather than corruption.
So, without much further ado, here is a guide to CADIVI corruption:
- The Straight Bribe: This is the most common case. Want to accelerate your CADIVI request? Maybe a payment of Bs. 0.15 to Bs. 0.3 will speed it up dramatically. As someone I know told me: There is a CADIVI guy with a very fancy car and a nice house in Florida and I paid for most of it. Except for food and medicines, if you don’t go the straight bribe way, you are likely to see huge delays.
- The Inflated Invoice: Import something, but have your supplier inflate the price, without overdoing it. Then have your supplier keep the difference abroad and you can either keep that or bring it back at the swap exchange rate thus reducing the costs. You can avoid this hiring specialized companies, but most of them are American and we want no official dealings with pitiyankee companies, so we don’t use them. This is a revolution.
- The Forgotten Debt: In contrast to all previous exchange controls, this Government has given out foreign currency to pay debt. Find a business that is bankrupt or under impossible conditions to pay back the debt, buy the debt for ten or twenty cents on the dollar and then go to CADIVI and ask that you get paid the dollars at Bs. 2.15 per dollar. You will have to pay a little for this, but the margin s so huge it is worth it. This mechanism is practically exhausted as most of the debt available has been found and paid for at a huge profit.
- The Official Export: Find something you can get the Government to sell to you, say a Diesel tanker, an iron ore barge or a steel products, but pay them at international prices, but at the official rate of exchange. Turn around and sell the goods abroad in exchange for US dollars and turn around and sell the dolars in the swap market. Huge profits, just need the contact at the appropriate Government industry. CADIVI does not even have to get involved as long as you can get the export permit.
- The Carousel: Find something innocuous to import from Colombia, let’s say school notebooks, not food or anything that will get custom officials suspicious. Import it form Colombia at the official exchange rate of Bs. 2.15 per US$ and ship with a truck via one Colombian border point and immediately send it back to Colombia via another. Start the process again, getting import permits to bring the trick back. Same stuff, you just never sell it, just recycle it and move it around like a carousel.
- The Phantom Container: Set up a company in Panama that sells widgets. Get a permit to buy a couple of million dollars of widgets from it. Bring in a container full of boxes of widgets, but just fill the outside boxes with widgets, the rest are empty boxes. You get a couple of million to bring a few thousand dollars of widgets. The rest is pure profit.
- The Nouveau Travel Agent: Set up or buy a travel agency. Find people who have credit cards but cant afford US$ 5,000 for travel (plus a cash advance of US$ 500). Promise to take them to Panama, Aruba and the like, pay their hotels for a couple of nights and arrange a way to get them all of their quota. You pay their expenses, give them some cash and you keep 60-70% of the dollars purchased at Bs. 2.15 per US$, which you sell at the swap rate which is almost triple that.
- The Software Reset: I am told this is no longer being offered as new software is in place. But it used yo be very simple:You would pay somebody a fee to reset your quota so that it appears as if you have yet to spend your foreign currency. You can then travel again and take advantage of the Government’s largesse.
Have a different one that you know about first hand? Let me know…but you can see how huge fortunes have been made in the name of the revolution, but there is nobody to keep it in check.