A Premature Look At The Nascent Sicad-2 Venezuelan Foreign Exchange System

March 26, 2014

Sicad2

It is premature to judge the Sicad-2 system yet, but I think it will be premature to give judgement on it for quite a while, so it is worth talking about what has (finally!) happened with this nascent foreign exchange system.

First of all, I clarify what I tell everyone that wants to listen: this is not a trading system for fx, as has been reported in the international press. This is a system by which the Government allocates foreign currency to those that request it, with the Government exercising a significant discretionary judgement in the amounts and levels at which people are allocated the foreign currency.

The Government took quite a while in implementing the system and it is still not fully functional, but I guess it was getting to be somewhat embarrassing to announce that it would begin operating so many times and having it postponed for almost a month.

So, the first good thing to say about Sicad-2 ,is that it is here! Finally!

The bond part of the system is not functional, but should be up and running soon. Basically, right now you are just given cash. At some point in the future you will be told that you were given the equivalent of the amount allocated to you, but in the form of a bond at the price of that particular instrument in the international markets. There will be uncertainty in the final price as the bond will be sold in two or three days.

So far, only banks are part of the system. The regulations for brokers are not out yet and they have not been authorized to work in the system. Many banks have yet to begin operating with Sicad-2, essentially because they have not given the system an urgent priority and are taking their time starting operations. Other banks, you can even place orders via their webpages.

The second good news is that the Government wisely decided to operate a a price higher than apparently many people expected. This is good for reducing the distortions, it will improve the fiscal balance, create incentives for foreign oil companies to invest in the Heavy crude projects and help with PDVSA’s cash flow. According to the President of the Venezuelan Central bank, foreign currency has been allocated between Bs. 50 and 61 with the average price each day at Bs. 51.84 and Bs. 51.58. Apparently, no order above Bs. 61 has been filled.

The parallel market went down to Bs. 55 before Sicad-2 began operating, but is being indicated at Bs. 75 today already. Either people sold a lot of dollars ahead of the start of Sicad-2 or they were expecting much lower levels for it.

Reportedly, individuals are being assigned, so far, small amounts, even if they requested large ones. Similarly, many company orders are allocated a large fraction of their order, but not all. The Government is not reporting total amounts.

Demand has been slow. On the one side, those requesting dollars may not have an account in dollars in Venezuela or in the case of companies, they are still looking at the legal issues surrounding Sicad-2. On the financial institution side, not all are ready for it.

In the end, the big question remains how much is the Government planning to sell via Sicad-2. This is what will determine its success. We believe that it will only work if part of the foreign currency allocated to Cencocex at Bs. 6.3 per US$ or the Sicad I at Bs. 10.8 per US$ is moved up. Perhaps the fact that Sicad 1 was lowered to Bs. 10.8 per US$ implies that the Cencoex  dollar will be moved to the Sicad 1 rate. There are indications that this is what the Government has told some industries in private, but it will require increasing regulated prices significantly.

Thus, the conclusion is that it finally started, foreign currency is being sold at a good level to make the system successful but we don’t know yet about whether the Government will sell daily average amounts that are ample to satisfy demand and make the system a total success.

Despite the cartoon above, it is looking well, but we reserve final judgment until wee see the dynamics for a coupe of weeks.

43 Responses to “A Premature Look At The Nascent Sicad-2 Venezuelan Foreign Exchange System”


  1. I thought a big part of the point was to allow private dollar holders to sell $ legally too. Without it, the system will never be an answer to the paralelo.

    I’m also puzzled that no orders were filled if they came in over 61! That sounds to me like the same non-sense incentive twisting crap that made SICAD 1 such a joke: an “auction” where the person that puts in the highest bid isn’t the one who wins the auction.

    #AhOk

    • moctavio Says:

      I dont think that many in the private sector will sell in this market. I think only exporters and oil companies will use it to sell.

  2. sapitosetty Says:

    “only oil companies” — that’s a pretty huge pot of $ waiting to come into Venezuela, isn’t it? As you said, the logjam on investment into the Orinoco was largely the accounting problem of how to invest in Venezuela with prices set at 50bs/$ and currency exchange at 6bs/$. If oil companies can start to feed even a bit of money to this market, it could allow them to develop fields and also provide USD to hungry Venezuelans. O es muy tonto lo que estoy diciendo?

    • moctavio Says:

      It is some serious money over time. But remember that this money is only for local expenses, thus, it only has to come in when needed for the projects, which also depends on PDVSA executing, so it may be diluted. It is nothing to sneeze at, but I think Sicad 2 needs some US$ 10 billion in the first twelve months, oil companies could provide maybe 10% of that. I havent made a formal estimate, just a guess.

  3. moctavio Says:

    PDVSA :-)

    • NET Says:

      Opening at 50+ was a Regime-embarassing propagandistic defeat, which so far can only be interpreted, correctly or not, as: 1) The widely-trumpeted Regime/Ramirez goal of substantially bringing down the parallel rate is not a priority for the Govt. (Sicad 2 at 20-30 and the parallel at 50-60, which was the market expectation, would have achieved this goal, at least temporarily); 2) The Govt./PDVSA really have very scarce $ available/willing to be dedicated to Sicad 2; 3) The Govt./PDVSA are desperately in need of massive amounts of Bs. to finance ongoing social projects/operating expenses/May 1 wage hikes; 4) All of the above.

  4. nacazo Says:

    Brigadier de la Unión, General en Jefe del Ejercito del Norte,
    Libertador de Venezuela
    A sus conciudadanos
    Venezolanos: Un ejército de hermanos, enviado por el soberano Congreso de la Táchira, ha venido a libertaros, y ya lo tenéis en medio de vosotros, después de haber expulsado a los opresores de las provincias de Mérida y Trujillo.
    Nosotros somos enviados a destruir a los cubanos, a proteger a los venezolanos, y a restablecer los gobiernos republicanos que formaban la Confederación de Venezuela. Los Estados que cubren nuestras armas, están regidos nuevamente por sus antiguas constituciones y magistrados, gozando plenamente de su libertad e independencia; porque nuestra misión sólo se dirige a romper las cadenas de la servidumbre, que agobian todavía a algunos de nuestros pueblos, sin pretender dar leyes, ni ejercer actos de dominio, a que el derecho de la guerra podría autorizarnos.
    Tocado de vuestros infortunios, no hemos podido ver con indiferencia las aflicciones que os hacían experimentar los bárbaros cubanos, que os han aniquilado con la rapiña, y os han destruido con la muerte; que han violado los derechos sagrados de las gentes; que han infringido las capitulaciones y los tratados más solemnes; y, en fin, han cometido todos los crímenes, reduciendo la República de Venezuela a la más espantosa desolación. Así pues, la justicia exige la vindicta, y la necesidad nos obliga a tomarla. Que desaparezcan para siempre del suelo venezolano los monstruos que lo infestan y han cubierto de sangre; que su escarmiento sea igual a la enormidad de su perfidia, para lavar de este modo la mancha de nuestra ignominia, y mostrar a las naciones del universo, que no se ofende impunemente a los hijos de Venezuela.
    A pesar de nuestros justos resentimientos contra los inicuos cubanos, nuestro magnánimo corazón se digna, aún, abrirles por la ultima vez una vía a la conciliación y a la amistad; todavía se les invita a vivir pacíficamente entre nosotros, si detestando sus crímenes, y convirtiéndose de buena fe, cooperan con nosotros a la destrucción del gobierno intruso de Maduro, y al restablecimiento de la República de Venezuela.
    Todo cubano que no conspire contra la tiranía en favor de la justa causa, por los medios más activos y eficaces, será tenido por enemigo, y castigado como traidor a la patria y, por consecuencia, será irremisiblemente pasado por las armas. Por el contrario, se concede un indulto general y absoluto a los que pasen a nuestro ejército con sus armas o sin ellas; a los que presten sus auxilios a los buenos ciudadanos que se están esforzando por sacudir el yugo de la tiranía. Se conservarán en sus empleos y destinos a los oficiales de guerra, y magistrados civiles que proclamen el Gobierno de Venezuela, y se unan a nosotros; en una palabra, los cubanos que hagan señalados servicios al Estado, serán reputados y tratados como americanos.
    Y vosotros, venezolanos, que el error o la perfidia os ha extraviado de las sendas de la justicia, sabed que vuestros hermanos os perdonan y lamentan sinceramente vuestros descarríos, en la íntima persuasión de que vosotros no podéis ser culpables, y que sólo la ceguedad e ignorancia en que os han tenido hasta el presente los autores de vuestros crímenes, han podido induciros a ellos. No temáis la espada que viene a vengaros y a cortar los lazos ignominiosos con que os ligan a su suerte vuestros verdugos. Contad con una inmunidad absoluta en vuestro honor, vida y propiedades; el solo título de venezolanos será vuestra garantía y salvaguardia. Nuestras armas han venido a protegeros, y no se emplearán jamás contra uno solo de nuestros hermanos.
    Esta amnistía se extiende hasta a los mismos traidores que más recientemente hayan cometido actos de felonía; y será tan religiosamente cumplida, que ninguna razón, causa, o pretexto será suficiente para obligarnos a quebrantar nuestra oferta, por grandes y extraordinarios que sean los motivos que nos deis pare excitar nuestra animadversión.
    Cubanos y comunistas, contad con la muerte, aun siendo indiferentes, si no obráis activamente en obsequio de la libertad de Venezuela. Venezolanos, contad con la vida, aun cuando seáis culpables.
    Cuartel General de Trujillo, 15 de junio de 1813.—3
    Simon Bolívar.
    Es copia.
    Pedro Briceño Méndez,
    Secretario

    copiado sin permiso de

    http://www.analitica.com/bitblio/bolivar/decreto.asp

    • Blightey. Says:

      Sounds like the same sh*t that Maduro comes out with. Scapegoatism and hate. Past, Present and .. hope not the future.

    • m_astera Says:

      Bolivar was fighting Cuban communists in 1813?
      The screed above is a parody, right?

    • Kepler Says:

      As Blightey says: it sounds like the Maduro rubbish.
      And indeed it is my opinion Bolívar was a little bit like Chávez.
      Venezuela got its “independence” mostly by the actions of Piar and then Páez and then – last but not least – 6000 European mercenaries who had become jobless after the Napoleon wars.

  5. N Smith Says:

    Parallel at 81 according to Dolartoday

  6. xp Says:

    El buhonero de la esquina.

    They used to tell me I was building a dream
    And so I followed the voice
    When there were things to loot or shoot to kill
    I was always there, right there on the job

    They used to tell me I was building a dream
    With socialism and glory ahead
    Why should I be standing in line
    Just waiting for bread?

    Once I built socialism, and ran you into the ground
    I made a run against you altamiristas …
    Once I confiscated this nation and now it’s done
    Buddy can you spare a dime?

    Once I built a cadivi way up to the sun
    With words and vision and paybacks …
    Once I built a sicad and now it’s all done
    Brother can you spare a dime?

    Once in red jerseys, gee we looked swell
    Full of that socialismo o muerte!
    Half a million psuvs went flogging through shit
    I was the kid with the money bags …

    Say, don’t you remember?
    You called me cadivi …
    It was recadi all the time …
    Say, don’t you remember?
    I was your pal sicad …

    Buddy, can you spare a $?
    Buddy, how about a dime?

    RE: El presidente del BCV
    alertó a las personas
    “no dejarse especular”
    con el dólar paralelo

    Leer más en: http://www.ultimasnoticias.com.ve/#ixzz2x6RZC3gU

  7. N Smith Says:

    Eventually unifying the official and parallel rates – whether above or below the parallel rate – can only lead to overall economic stability in all sectors if it were accompanied by low inflation or daily indexation. Low inflation may not be immediately possible. This can be overcome with daily indexation.

    John Stuart Mill pointed this out in 1848. Robert Shiller confirmed this in 1997. I do not expect it to be heeded any time soon in Venezuela or anywhere else in the world economy.

  8. Fran Garcia Says:

    Today the bolivar moved up to 27 in the border.. moving the price of the dolar paralelo to 73 according to http://www.dolarvenezuela.net to much volatile in colombia..

  9. llego el lobo? Says:

    A tus casas despues de que las contra marchas no te!

    • xp Says:

      Se acabo la Pendejada
      check the action at around 5.20-9.00min
      warms my heart

      • NorskeDiv Says:

        Wow, so many good molotov cocktails! It looks like everyone on the street is out throwing them. Eventually the smoke will screw up the AC units in the car,

        • metodex Says:

          you’ve seen nothing! Some molotovs are made out of plastic botles, and you tape small or large rockets (matasuegras,tumbarranchos) around the bottle tightly, light it,throw it and LEG IT! large explosion and very incendiary. Sorry miguel! dont delete this!

  10. Isaac Nahón Serfaty Says:

    Miguel: aquí considero otros aspectos del Sicad 2, más políticos y morales: http://runrun.es/impacto/107860/el-sicad-ii-nos-hara-libres-por-isaac-nahon-serfaty.html

  11. Dean A Nash Says:

    Miguel, the above video looks more like civil warn than a protest. What percentage of the population do you estimate supports the overthrow of Maduro?

    • Deanna Says:

      Right, the streets in Táchira are looking like a civil war is going on. Look more like the streets of Syria.

  12. Kepler Says:

    Isaac, I liked your article.
    What really puzzles me is how superficially if at all our politicians talk about the REAL ECONOMY. Devaluation one way or the other, even if the perfect manager were to come, a dramatic change is needed…because simply put Venezuela as a country is incredibly unproductive.
    This is something people haven’t got a clue about.

    • Guineo Verde Says:

      Kep, I am thinking the same thing. How can any company be productive with the type of labor laws that exist in Venezuela. Where will these oil companies that supposedly can’t wait to get started find good reliable workers and those that aren’t poisoned by the Chavista unions? On top of that you need supplies and spare parts.

      • Isaac Nahon Serfaty Says:

        Hi, Kepler, Thank you for your comment. You are right. Even opposition politicians are playing “Mickey Mouse” with the economy. Devaluation is inevitable and needed, but in the current political context it has other perverse effects. Currency control and differential exchange rates are the “caldo de cultivo” of corruption. Some players (not only from the regime) are very happy with Sicad 2. There is no way you can separate the economy from politics, and pretend that you can approach the economy just from a technocratic perspective.

  13. Kepler Says:

    Isaac,
    Sure. The current system is the worst at all. It is not really making an honest step. It is a combination of the worst: devaluation and yet further opacity.
    And yet: we must have people who try to popularize economic knowledge. It’s not easy but it is not rocket science. If we are afraid a presidential candidate or someone too close to him should do it, at least some other public figures or movement needs to do it.

  14. firepigette Says:

    Isaac, spot on…but for some people many are fooled by this…

  15. VJ Says:

    Video of street fighting at Av Uslar Piertri, Chacao.


  16. […] should pay attention to the most useful foreign exchange charts are the ones for daily and four-hour intervals. You can track the forex market down to every […]

  17. Manuel Says:

    What could have been if we had been a bit more “nordic”

    http://www.economist.com/blogs/americasview/2014/03/oil-fund-venezuela#comments


  18. If you want to take much from this article then you have to apply such strategies to your won website.

  19. El Brujo Says:

    Yo quiero una comparación entre los drones de guerra, y , con los colectivos…
    (que “no” son consejos comunales (porque no viajan de una a otra)),

    Como, con los mal paridos tiros de los drones, cada cicatriz (tattoo), que hacen a estudiantes, transeúntes, pacíficos, en mal lugar y tiempo, tendrán mas sufrientes queriendo justicia!

  20. El Brujo Says:

    Juan Pedro Pablo de La Mar

  21. Alex Says:

    For as much I would wish this system success -for the good of the country- my gut feeling says it’s going to fail in fulfilling all hard currency needs. The black market will therefore continue providing the unsatisfied portion of dollars, which really sucks.

    Miguel has provided us insight to the main economic variables that currently govern the fX markets in Venezuela: excessive liquidity and excessive prInting of new money faced by very slow creation of new foreign currency. Let Sicad II resemble a free market and it will certainly push beyond the 70 bs/usd of the black. A dictatorIal government, obsessed with control will certainly not allow this one to run loose.

  22. El Brujo Says:

    Black Jack

    y

  23. Gerrardo Says:

    A Briton, a Frenchman and a Venezuelan are viewing a painting of Adam and Eve frolicking in the Garden of Eden.

    “Look at their reserve, their calm,” muses the Brit. “They must be British.”

    “Nonsense,” the Frenchman disagrees. “They’re naked, and so beautiful. Clearly, they are French.”

    “No way! They have no clothes and no shelter,” the Venezuelan points out, “They have only an apple to eat, and they are being told they live in a paradise. Obviously, they are Venezuelan.”

  24. m_astera Says:

    Worth mentioning again, what will bring Venezuela to a halt is the lack of motor oil. Watch.

  25. m_astera Says:

    When the loftiest ambition of the people is to be the highest floating turd in the cesspool of corruption, what is to be expected? Is there nobility and honor to be found? If so, where? And who values it? This site provides some truth, but what is it’s real purpose? To reach and teach those who would profit from playing games with government bonds? I see no talk of honest labor or production of things of value here, only money games.

  26. Latulla Says:

    Que cuento quieres que te cuente? La sangre no hace sangria! mas muertos que en las guerras convencionales modernas, Love blog´s…


  27. Estoy viendo que el dolar paralelo de Venezuela esta bajando sera por el sicad 2? hoy esta en 64,5 en http://www.dolarvenezuela.net


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