The Puzzle of SICAD: First Auction Result Above Bs. 10 Per US$

March 26, 2013

Sicad

El Mundo and financial sources are reporting that in the first SICAD auction, the average price at which the Government will sell foreign currency is over Bs. 10. Different sources say different numbers, but in the end they all say it is above Bs. 10. (EL Mundo says Bs. 12 to Bs. 15, I heave heard the average was Bs. 11)

I find this whole thing really puzzling. If I never understood why the Government wanted to make an issue of this, I now don’t understand why they rushed the whole thing to the point of holding the first auction today and announcing the results tomorrow. Chavismo has never been dumb about when to do things, so what is the rush?

I mean, when I left Caracas on Friday banks did not know how the whole thing would work and by Monday they had sufficient offers to hold the first auction?

Call me dumb, or call me puzzled.

If it is shortages, not one dollar assigned tomorrow will help anything arrive in Venezuela or be produced in Venezuela before the April 14th. election.

But, a second devaluation with a value of the currency above Bs. 10, essentially implying an almost doubling of the previous official exchange rate, simply makes no sense three weeks before the election.

Last week, El Mundo published an article quoting Datanalisis saying that the first devaluation on Feb. 8th. reduced the Government’s popularity by 20 percentage points by the beginning of March before Chávez died. Then, the popularity reportedly jumped back up when Chávez died, making things almost even. What this shows is that the topic of a devaluation is a sensitive one and now Capriles can charge Maduro with devaluing twice in 100 days and by a huge percentage.

The Government clearly gains nothing from giving this ammunition to the opposition. Economically, three weeks, including dead Easter week is such a short time, that waiting would have made no difference.

The only possible argument is that this is the result of some sort of internal struggle for control over economic policy, if true, I would hate to see what happens after April 14th. if Maduro wins, if these are the salvos, I don’t want to be around when they start shooting each other.

But in the end, this is very puzzling to me, I see no reason for this new devaluation at this time, it seems senseless, illogical, simply a puzzle…

49 Responses to “The Puzzle of SICAD: First Auction Result Above Bs. 10 Per US$”

  1. Lechozo Says:

    Internal struggles? Noooo

    In unrelated news, Barroso’s face was deleted from the picture


  2. Reblogged this on danmillerinpanama and commented:
    So Venezuela has devalued the recently devalued Bolivar yet again. Is there a reasonable explanation? Probably not, but there seems to be even less reason now than before el Presidente THugo died to look to reason to explain what happens in Venezuela .

    a second devaluation with a value of the currency above Bs. 10, essentially implying an almost doubling of the previous official exchange rate, simply makes no sense three weeks before the election.

    Will it hurt Maduro’s chances of election and help Capriles? Capriles seemed already to have been having a pretty good week.

  3. Quest311 Says:

    Why would the gov’t approve liquidations for Cadivi 1 when Cadivi 2 yields so much more bang for the gov’t buck. I see the gov’t shorting Cadivi 1 in order to push everybody to Cadivi 2 at the higher rate. Cadivi 1 will probably be extinct very soon.

  4. deananash Says:

    Birds fly, babies cry and idiots do idiotic things. Why ask why? Or, better still, “Who is John Galt?”

  5. Dr. Faustus Says:

    “If it is shortages, not one dollar assigned tomorrow will help anything arrive in Venezuela or be produced in Venezuela before the April 14th. election.”

    A prime example as to how the incompetence factor could quickly turn this election. But I didn’t think that they would be THAT stupid.

  6. Mick Says:

    I would think the timing might make more sense if Chavez cronies were the ones “winning” the dollars. They want to secure as many dollars as possible with the possibility of a loss looming.

    • TV Says:

      Chances are they will have plenty of time. If Caprilles is declared winner in April by some miracle, the ‘courts’ will delay his inauguration until January 10th for sure. That’s plenty of time to steal a lot of money, then blame the subsequent problems on him.

  7. Marilu Ravelo Says:

    Importante:

    Cmo se perdieron las elecciones.

    • syd Says:

      Me gusta – gracias. El tipo parece serio, sin complejo del yo, y con las credenciales apropiadas para su estudio. Espero que la información llegue a las autoridades necesarias.

  8. PM Says:

    It seems like Maduro is already trying to make changes. They appointed Eudomar Tovar as new CADIVI President.

  9. Mike Says:

    This is a trial balloon to find out the real value of the BsF. Why now? Why not? It will have zero influence on the election. Maduro will win, period.
    Plus they could always set the max. bid at say 7.50 or whatever. Crazy? Of course, but what does one expect from the people running the country who send a 1.8 Billion BsF check via red baloons to Chavez in heaven? Plays well with el Pueblo.
    Also we have now been waiting for about 10 years for this economic collapse to happen in no more than xx months (xx < 10), but it never does. With the wealth reserves of Venezuela, it never will, because all they need to do is e.g. play a bit nicer with the oil giants (corporations), and investment will flow in again immediately. Economic interests trump ideology when the shit is about to hit the fan, the filthy rich military Boligarchs will make sure.

    • TV Says:

      You don’t hear about the Venezuelan economic collapse because it’s an ongoing process. It’s unusual in that it is a result of years of mismanagement with constant small negative adjustments. You just don’t see this profile elsewhere because the vast majority of governments are intelligent enough to stop the slide as it goes, or at least attempt to.

      • Mike Says:

        Sorry, you must have misunderstood me: I DO HEAR about the IMPENDING economic collapse for about 10 years now, as in “max. 4 months and everything will collapse” or “$$ reserves will last another 1/2 year and then supermarket shelfs will be empty because of lack of imports” and the like. Then it’s documented by some statistical analysis of why so an so will happen. Except it never does. But you say it’s an ongoing process. Would you please give us your best estimate for this process to come to fruition.? 50 years?
        Now please don’t get me wrong. For this crazy regime to fall, a dramatic event, e.g. REAL hurting food shortages due to macro-mismanagement and transparent fault of the read shirt fools must happen. Otherwise, one can see Cuba II (with resources) in the making and 50 years would not be such a bad estimate. BTW, for how long and how often has the demise of the Cuban regime been predicted by now?

        • TV Says:

          Maybe a few months, maybe a few years, and probably never. I doubt Venezuelan economy will implode anytime soon, it will simply become more and more dependant on oil income and practically nothing else. Unless oil prices collapse, and there is no reason to believe they will, Venezuelan non-oil economy will only gradually fade and fade and never actually collapse.

          This is actually far worse for the country than an acute collapse. Productive base will be more thorughly erased than a rapid collapse could achieve, it will be more permanent, and an acute collapse has a good chance of sparking a revolution. A gradual slide is unlikely to achieve that, especially since those suffering the worst of it are the ones who already oppose the government.

  10. Rene Says:

    Miguel, no será para quitarle presión al paralelo? Derrepente para que no llegue a 30 antes de las elecciones?

    • moctavio Says:

      Por que no vender esos $ en el paralelo, nadie se entera y tiene mas efecto?

      • Pedro Says:

        Seguramente por el paralelo el gobierno recibía menos que los 14 que va a recibir. El resto se lo lleva o llevaban las “redes de intermediarios” disque financieros. Eso aunado a la disminución de la oferta hizo que no les quedara mas remedio que sacar este esquema de subastas. Si no lo hacían, el pais estalla…humilde opinión de alguien que no sabe mucho de economía..

  11. Lucia Says:

    “If it is shortages, not one dollar assigned tomorrow will help anything arrive in Venezuela or be produced in Venezuela before the April 14th. election.”

    … maybe what they need is the bolivars?

    • m_astera Says:

      My thoughts as well. Maybe they need the Bs.

      The real exchange rate, as usual, is very close to the price of a two litre bottle of Coca-Cola.

  12. captainccs Says:

    George Soros taught the Bank of England that it is impossible to defend an impossible exchange rate. Free markets’ job is to discover real prices and the unmentionable free rate is much closer to the real rate than the artificially set one. The de-facto government is not yet at half the truth.

  13. Tomate Says:

    My guess is that this is a political decision… He thinks he has already won the elections and does not want during the first few weeks of his term a devaluation that would have competing Chavistas single him out as the author of the paquetazo… right now is he still is responsible but is more of a grey area…

  14. m_astera Says:

    An incompetent candidate, an incompetent government, two devaluations, no vision, no plan, no coherent campaign for president. My guess is they aren’t bothering because their whole strategy rests on manipulating the voting machines and totals. They know they can win by cheating, why bother with anything else?

  15. Charlie Says:

    Last devaluation was before carnival and they feel this minimized the effect on their popularity. They need BsF’s now and feel that just before Easter may be a good time to do it as a lot of people are already on vacation. By Monday not as many people will be thinking about for there will be other pressing issues to keep everyonr busy.

  16. John Barnard Says:

    What is the price of dollars on the street?

    • island canuck Says:

      In Cucuta, Colombia the rate that we mustn’t speak about dropped about 50 centimos. Hardly a big reaction.

  17. ErneX Says:

    Sistema Complicado de Administración de Divisas.

  18. Glenn Says:

    The rate that we mustn’t speak about will also not be posted on a website apparently. In very much Chavez fashion, Maduro ordered the arrest of the people responsible for lechuga.com, a website providing the current black market rate. Lechuga has since closed the website, twitter and facebook accounts.

    • Moraima Garcia Says:

      Glenn, in truth there is more to the Lechuga Verde case, apparently they were running a scam, selling people dollars at lower prices (apparently dollars they got from SITME) and at some point they stopped paying peolple. There is a web page of the victims with very direct threats to the people of Lechuga Verde. Not sure if the creators of the site have been arrested or even if people really know who they are, but from what you can read online it seems they were not saints wanting to give us information about the real price that must not be mentioned.

    • island canuck Says:

      There’s been some confusion about this.

      Lechuagaverde.com was responsible for defrauding 100’s(?) of people by offering US$ at below market prices. After paying off a few early clients they just stopped paying the rest. A typical Ponzi scheme.

      I think its these owners who Maduro was referring to.

      In the meantime you will see efforts to block access to other sites inside Venezuela that post current rates. One notably is publishing the current price in Cucuta, Colombia (which is a legal & active market) & the Implicit rate (current Bs. in circulation (liquidity) divided by the international reserves on hand).

      Efforts to block access are pretty useless as they also have Twitter & FB accounts.

      • Glenn Says:

        Thanks for filling me in. Hearing it from Maduro I assumed it was repression. Guess I should cut him some slack? Nah…

    • Carlos Says:

      Lechuga was both a good popular reference for swap market rate and a big outrageous scam to many guys..their “free” quotes in blogspot, facebook, twitter, etc were the usual reference for ordinary people transactions. However, owners of Lechuga began to sell below their own published price, then paying Tom with Joe’s money… and finally leaving a lot of people with a big pain in the back… Ponzi again..

  19. Carlos Says:

    Ok.. auctioned 200 MM US$… only 384 companies (from the 7000+ RUSAD list) made the cut…… about 400 K US$ each…no bad at all…
    Question is: which was the minimal bid to make the cut??? 10..11…9…??? Nobody knows…
    And then…Which criteria did they use to further qualify companies that were accepted to bid??? by custom codes?? by CADIVI history??
    My company issued a bid at 12 /US$ … for only 100K…..with a 8 years strong active CADIVI record, never a complain, never messed with SITME, only CADIVI….. but we were not awarded in SICAD..at 12..
    Any idea?
    IMHO… more than 50-60% were “pre-awarded” to friendly companies..and certainly from state owned banks..

    • RG Says:

      Good question. Our bank only allowed bids up to 50k. Since it was a tryout we went with the minimum nonetheless, 30k @ 13. No cigar.

    • Roberto N Says:

      According to El Universal, citing, “off the record sources at BCV”:

      información extraoficial del Banco Central de Venezuela (BCV) señala que el tipo de cambio de corte fue de 10,5 bolívares por dólar, mientras que el promedio de las posturas estuvo en 12,5 bolívares por cada dólar.

      So no telling what the criteria was, really. The average was precisely between what Carlos and RG bid, but what really counts is what was the SECOND highest bid, which so far no one has said anything about.

      I agree with Carlos, probably the majority of those $200 MM went to “friendly companies” like election poster printers, washing machine importers and such.

  20. M Rubio Says:

    It just may be that they need the Bs. Here in the last couple of weeks the floodgates have opened for the campesinos to get credit to plant. And did I just see some about the government forgiving debts?


  21. Miguel, how about the solution to your puzzle is money for the campaign? they just awarded $200M at over Bs10, I’m sure they can take it from the cadivi allowance so everything about Bs$6.30 is for they to keep, to spend on the campaign, the new dollar arbitrage fonden.


  22. Whynot sell it in the black market quietly and getdouble?

  23. Quest311 Says:

    I’ll ask this again. Why would the gov’t sell dollars through Cadivi 1 if the new Cadivi (SICAD) pays the gov’t double? Is it off base to suggest that Cadivi 1 will be competely disregarded in the not too distant future?

    • Roberto N Says:

      Maduro mentioned a coule days ago that they were thinking of allowing anybody to bid in SICAD, not just companies, so perhaps CADIVI does have its days numbered.

      Pulling the plug on CADIVI before the elections is not a wise move, so they will probably continue CADIVI until after 14 April.

      They will probably continue CADIVI for individuals and relatively small transactions, then kill it at the right time, like 9 AM April 16.

    • island canuck Says:

      I certainly hope they don’t kill Cadivi anytime soon for travelers. We have a trip planned for this spring.


  24. [...] Related: The Puzzle of SICAD: First Auction Result Above Bs. 10 Per US$ [...]

  25. Mick Says:

    The public will never see the results because the purpose is to funnel money to their friends at a very profitable rate. Whether they are buying goods or just reselling, channeling money to their supporters is what is important.

  26. Carolina Says:

    Theoretically speaking, what could be a solution for all this mess?
    Eliminate the exchange control altogether and let the market level itself?

  27. Ira Says:

    “Last week, El Mundo published an article quoting Datanalisis saying that the first devaluation on Feb. 8th. reduced the Government’s popularity by 20 percentage points by the beginning of March before Chávez died. Then, the popularity reportedly jumped back up when Chávez died.”

    It’s simple:

    The Chavistas are going to claim that Chavez rose from the dead this upcoming Easter Sunday….yet DIED again…and they’re going to get the popularity points back.

    Hell, they can go on like this for YEARS.

    • Pedro Says:

      Ira, you are a genius. The “pajarito” resurrection speaks by itself..If I could only hope “el pueblo” were not that ignorant. My hope is hopeless unfortunately….These guys know how to manipulate “al pueblo” like a puppet…


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