Permuta Redux

Rodolfo Marcos Torres: He’s a bank CEO…he’s a banking minister…he’s a bank CEO and a banking minister!

From the moment the government cracked down on the old dollar “swap market” (a.k.a., the permuta) back in May 2010, it was perfectly clear that something very much like it – only much more opaque, risky and illegal – would end up taking its place.

Now, a website called Wikianticorrupcion (which, in fairness, I only found out about this weekend) blows the whistle on the aggressively illegal new “structured notes”-based permuta.

Long story short, the Central Bank sells dollars for BsF4.30 that are then sold on to final buyers for BsF9.00 after a series of smoke-and-mirrors transactions to preserve plausible deniability and to pay off various stew-makers.

VenePiramides picks up the tale:

Las notas estructuradas son emitidas por bancos extranjeros a petición de una de las principales entidades bancarias estatales venezolanas, que buscan venderlas a empresas privadas -ante la escasez de dólares- a un precio que está entre 60% y 70% por encima del tipo de cambio oficial, según una fuente ligada al Ministerio de Planificación y Finanzas. Es conocido que uno de los impulsores de la estructuración de notas es el ministro para la Banca Pública y presidente del Banco de Venezuela, Rodolfo Marco Torres, quien influyó sobre el presidente Chávez para que en las últimas 3 emisiones ­que sumaron 9 millardos de dólares- los bancos públicos recibieran adjudicaciones directas de estos papeles. 

Wikianticorrupción says as much as 35% of the surcharge is going to fund PSUV’s election campaign. Other sources tell me they think that figure is far overstated. Much (or all) of the arbitrage margin probably ends up in the offshore bank accounts of an unholy alliance of National Office of the Treasury players, their bolibourgeois cronies in the banking sector and – according to one variant of the story – folks in PDVSA’s financial arm running a similar scam.

The scale of the scam is unknowable at this point, and unless an insider decides to talk, may never be known.

And all this is happening as people who did something similar back when it was transparent and legal remain in jail, for the second year running, awaiting the start (not the end, mind you, the start) of their trial on bullshit charges.

Back in the 1930s, bootleggers were among the fiercest opponents of moves to repeal prohibition in the United States: they knew their massive profits depended on keeping booze illegal. Keep that in mind the next time you hear a chavista blanche at the prospect of repealing CADIVI.

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  1. You know something is going on behind the scenes.

    All you have to see is the amount of imports for sale whether it be computers, electronic goods, fridges, clothes, watches, etc., etc.

    These retailers have been cut off from Cadivi for 2 or 3 years and the SITME fund only provides a small % of their needs. These transactions amount to millions of dollars monthly. One friend told me that they pay between Bs.8.8 & Bs.9.2 & usually trade in blocks of $100,000.

    This, of course, puts all these companies at great risk. If the government decided to go after them they would all be caught with their pants down.

    It’s a real Catch 22. In order to continue in business they need dollars but the government has forced them to do it illegally.

  2. Canuck, isn’t that standard practice in totalitarian countries or those trending in that direction? Create innumerable regulations, so no one can possibly comply, but enforce them only against your opponents? And only when convenient o the ruling party?

    • Ditto…

      This is all about Alejandro Andrade, Victor Vargas, the Gill brothers and their Bolivarian pals, nothing new…

      I´m just waiting for the announcement for their polo fields in La Carlota!

      • Beginning from the title, A night in the museum, hilarious. People should had known that someone who couldn’t even plan a half-decent coup did not have the organizational skills to half-decently run a country.

    • Au contraire, mon freres! Not excellent at all.

      That same “dumbass” has been misgoverning our country for 13-14 years while presiding over the biggest theft ever of natural resources and money, and at the same time 155,000 murders and a house divided are the most salient results.

      I don’t think the adjective “excellent” fits in anywhere………


  3. Tell me if I’m wrong, but Mr. Toro, I think the Central Banks BUYS dollars from foreign institutions at BF 4.30 and then SELLS those dollars to private institutions at BF 9.00. Giving those prestigious, revolutionary finance ministers a hefty albeit artificial margin.
    Perhaps we may disagree, but what an absolute innovative idea: Buy Low/Sell High.
    Only revolutionary finance nerds could have come up with that,
    Conceptually, it is similar when, I go to vnzl and sell my dollars at BF 10 to strangers, @ BF 8 to friends, and @ BF 15 BF to my chavista family members.
    If I am right, you might wanna change your article as its says the CB Sells and then sells again.
    “Long story short, the Central Bank sells (buys?) dollars for BsF4.30 that are then sold on to final buyers for BsF9.00”

    • I think the site missed a step in explaining this.
      From what I can tell, it goes something like this: A “connected” broker abroad acting in concert with a local Venezuelan bank, offers foreign dollar-denominated financial instruments to the Venezuelan treasury. The Venezuelan treasury directs the Central Bank to pay the broker in US Dollars deposited in the brokers foreign bank account, the central bank “justifies” the transaction since the note itself is collateral.
      the Central Bank then negotiates the dollar-backed note to the “connected” local bank in Bolivares at the official rate – tacking on a “premium” to appear it somehow is making money. The Bank buys the instrument with Bolivares it got from exchanging the dollars at the street rate. I imagine they would then negotiate the notes abroad again, to recoup the original costs. So there is a juicy gain. It is a way to get short term financing and circulate more dollars lowering the price. At least I think that is how it would work.

      • By site I mean wikicorrupcion. and I think they might have omitted some details specifically this passage:

        “El BCV, con la garantía del certificado en dólares que posee la ONT, liquida los dólares a la cuenta del corredor en un banco en el exterior, que lo negocia, y luego el banco local relacionado, que es en realidad el gran coordinador de toda la operación, vende dichos dólares en el mercado paralelo y recoge los bolívares para pagarle al BCV lo convenido a la tasa oficial, más la prima acordada.”

  4. No, no, the BCV sells low. It’s the intermediaries (Banco de Venezuela, Victor Vargas, assorted other bolibourgeois) who buy low and sell high. They pocket the arbitrage margin. Some of which maybe – but who can tell? – send some of the margin on to PSUV’s campaign coffers…

  5. Quico: Most people can’t fathom the level of corruption that has been going on with foreign exchange and bonds. The Government/PDVSA/Central Bank never benefitted from these operations before 2010, nor they do now. It is the Boliburgueses making all the money. Don’t believe that PSUV BS, PSUV has all the money it wants already.

    These people have made BILLIONS over the years. Yes, billions and they are still at it. Look at Moris Beracha, the receiver in the Illaramendi case, says he made 170 million dollars and this was a minor operation for Beracha. Of course, Illatamendi stole like half a billion, or is being accused of doing it.

    When the brokers were intervened in 2010, the CIPCC showed many of them how the commissions were split and to which accounts. Not one person in the Government was persecuted.

    We never had a list of who was sold bonds cheaply for Bs. o you really think it was a fair distribution?

    The whole thing is so dirty, most people can’t even imagine it.

  6. The corruption started early, mind you. Back in 203-2004, when we were first registering our companies and foreign debt with Cadivi, intermediaries offered to get all that “approved” for us for a certain commission.

  7. I wonder if the people running the Great Venezuelan Racket of the XXIst. Century realize that with people investigating on them and publishing (on the Internet all of it), secrecy (or even discretion) and plausible deniability are now lost causes.

    Maybe it’s just us obsessive-compulsive sufferers that go into this kind , and it will take quite some time (or an infinity thereof!) before this gets to be generally known in Spanish, where it matters, in Venezuela, not just by those in on the scam. Or that there it will be taken to be business as usual, or not at all understood, how everybody else is being fleeced, nothing to see, move on.

    They might cow printed media and TV and might have state attorneys and judges on their side (or payroll). But they better hold on to power. And keep dismally bad telecommunications, Internet penetration and education in Venezuela too.


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