Ecce Vickrey

Ecce Vickrey
Para entendernos: The Original Vickrey Auction is on the left, Giordani’s Modified Vickrey is on the right.

Setting aside the insane, Kafka-on-Burundanga administrative side of the new SICAD system, there’s a second set of questions that are more macroeconomic in nature – i.e., what’s the price of SICAD dollars likely to be, and what’s that likely to do to inflation? And what the what is a “Modified Vickrey Auction”, anyway?

Well, we know what a Vickrey Auction is. It’s a sealed-bid auction where the top bidder wins, but pays the second-place bidder’s offer price. Vickrey Auctions are the darling of economic theorists, and have spawned a whole academic literature, because they have some special characteristics. In 1961, William Vickrey demonstrated that, uniquely, his pricing rule “makes it a dominant strategy for bidders to report their values truthfully, even when they know that their reported values will be used to allocate goods efficiently.”

What Vickrey Auctions are very good at, in other words, is eliciting accurate information from bidders about just how much the auction good is worth to them. A Vickrey Auction is precisely the mechanism you’d want to institute if your goal was to establish an accurate reference price for the dollar without out-and-out floating it. For an economist, that is a very good thing.

For Finance Minister Giordani, on the other hand, it’s dreadful. A straight out Vickrey would probably see SICAD dollars priced at several multiples of the CADIVI rate. Bs.15? Bs.25? Who can tell? What’s clear is that it would amount to a hardcore devaluation.

What we can tell is that the inflationary impact of a sudden jump in the alternative rate – not to mention the humiliation-quotient for Giordani of letting everyone see the CADIVI emperor parade around stark naked – would be unacceptable.

The government has no interest in creating a mechanism where a real reference price for the dollar can be established. Which, of course, is where the “Modified” bit comes in.

Officially, the auction will be modified only in that it will take the average of all winning bids as the price for all dollar buyers, rather than the second-highest bid. In fact, it’ll go much further than that.

The first element of “modification” is to note is that the auctions are off-limits not just to private individuals but also to any firm that wasn’t registered with CADIVI/SITME beforehand. (There’s a separate angry-rant to be made here about how this bias in favor of incumbent firms limits market contestibility, generates arbitrary rents for businesses simply based on when they started, hampers entrepreneurship and deepens precisely the oligopolic features chavismo claims to fight but, whatever, one rant at a time…)

Already that first modification badly undermines the system’s efficiency as a way of generating a reliable reference price for the dollar – we’re no longer going to find out about the relative scarcity of U.S. dollars to Venezuelan bolivars in the economy as a whole but rather in an arbitrary subset of it.

Much worse, though, is this little slip of the tongue from Giordani in yesterday’s press conference. When pressed on what prices the system would yield for dollars, he said, “Tiene que ser una cosa democrática, abierta, con tope” – (“it has to be a democratic thing, open, with a ceiling“).

This is an ambiguous formulation – he could be referring either to a price ceiling or a volume ceiling. His analogy with the allocation system used for bonds makes it seem as though it’s a volume ceiling (Hattip: GG2013), yet politically the notion that they’ll allow bids to rise as high as needed within a tight volume ceiling seems demential – my guess is that, whether that’s the initial intention or not, the system will gravitate towards a price ceiling.

A price ceiling – whether announced or implicit – would do to a Vickrey Auction by way of modification very much what Cecilia Jimenez did to that Ecce Homo fresco by way of restoration: it mangles it beyond any recognition.

The whole point of Vickrey is to elicit “truthful” bids for the good being auctioned – set out an administrative top and you’ve entirely undone it. It’s unclear, in fact, in what sense it’s an “auction” at all any more, except as one commenter suggested, that whomever pays the meatiest bribe gets the dollars. (I’m still consulting on this point – suddenly theorists with expertise in auction design are the hottest commodities out there!)

One possibility is that they announced this before Giordani and Merentes had actually reached an agreement. Merentes, the Central Bank chief, did explicitly say that dollars would go to the highest bidder, which is plainly inconsistent with Giordani’s “con tope” approach. (It’s also inconsistent with Vickrey’s second-bidder price system, pero bueh…)

I suspect that, when it’s all said and done, there’s just one aspect of Vickrey that these jokers intend to keep: the sealed bids. Since bids will be sealed, Giordani will be able to award dollars at any price he wants and call that the auction-winning average bid price, without anyone being able to check.

The alternative – honoring the real average winning-bid – would leave Giordani in an impossible bind. Because both CADIVI and SICAD will be drawing from the same pool of Petrodollars, there’s a zero-sum dynamic between them. A dollar sold through SICAD is one that can’t be allocated via CADIVI, and vice-versa. Supply too few dollars to SICAD, and the average bid will spike to politically unacceptable levels. Reroute dollars away from CADIVI to bring down the average SICAD bid and suddenly you’re scrimping on the essential imports of food, medicine and procurement goods that CADIVI specializes in. It’s a Catch-22.

Conociendo al personaje, it’s unthinkable to me that Giordani will allow such a dynamic to develop. What we’re heading to here is a kind of “dirty auction” – with both CADIVI and SICAD exchange rates determined administratively, and with excess demand bleeding off to the illegal black market.

That high-pitched whirring sound you hear, by the way, is William Vickrey spinning in his grave.

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  1. Another craziness is the time frames. In SITME importers basically had to do a line and wait until it was their turn to get an allocation, even if it took people randomly from the line and not first comes first served.

    In this system it implies that there will be biding cycles (daily?). Which means that all those that didn’t win, will have to apply again the next day and do it all over again. Imagine the overhead. The paperwork for the banks.

      • I was just imagining a parallel universe in which this blog discussed the transformative nature of new home ownership for destitute refugees with the same depth and vigour as it treats the workings of currency exchange mechanisms.

          • That was an exceptionally good discussion of the housing question, but it softpedalled the fact that it isn’t “new home ownership”, it’s “new home occupation”, since you don’t get security of tenure, and you can’t sell your home if you need to move elsewhere.

          • Touche. Though the title of the preceding post would have been more appropriate: “Department of Comes-Round-Once-a-Year”

        • There are plenty of long-term destitute refugees still in temporary Kafkian quarters waiting for “the transformative nature of new home ownership.”

        • Ah, but this has everything to do with that topic. After all, how many refugees have purchased dollars prior to moving to Miami, New York, Canada, San Francisco, Australia or other places prior to buying or renting a home there?

          I am sure that the transformative nature of homeownership has greatly affected them knowing that their property would not nominally be subject to government confiscation.

          What would it be to live in a land where property rights are respected and one owns what one owns. “Expropriar!” Is a detestable word and the province of tyrants.

        • Exactly! Opposition supporters are just upset that they need to work more like the rest of us to get their dollars. I know a lot of people that got dollars with CADIVI, and the system works. So what if we need to navigate through confusing rules and bureocracy?

          With Giordani choosing the “winner” of the auction, this new system should democratize the process even more. It is the government that should decide who gets an assignment of dollars. The fact that they haven’t been specific about it is clear: it is not purely a highest-bid-take-all system, but a bid that also takes into account who the requester is, and how they will help the country with the requested dollars.

          Still bleedin’ red!


          • The Venezuelan private sector is corrupt and backwards! So it makes sense to favor entrenched businesses in Venezuela, if this system allowed individuals and new businesses to access dollars it could undermine one of the central tenants of popular power: The destruction of efficient private business and the centralization of all economic power in the hands of the president!

            Onward to socialism! I bleed red as well (I checked to make sure)!!!

          • Righto:
            “With Giordani choosing the “winner” of the auction, this new system should democratize the process even more.”

            Democratic as in “Some are more equal than others” you mean. This decision is to be taken by a guy that has no clue whatsoever on how markets, manufacturing and resource allocation works. The monk that thinks Marx had it right and whose theories have been disproven time and again. ‘Na Guara!

            There is one aspect that does “make sense” and that is with limited access to a certain valuable good, ie, dollars, it is correct to allocate them according to how this can be used for the greatest good effect for the common good, seeing as how we are so f’ed up thanks to 14 years of mismanagement it now comes to “deserted island economics” to run the country.

            The problem comes when it is not the common good that will be served, but the interests of whoever games and cheats the best.

            It should also be a shame, Kurt/Cort, that we do not have market forces allocating the goods in question, but artificially manipulated constructs. I know this is anathema to you, but a free market with some regulation and consequences is more preferable to straightjacket economics.

          • “I know lots of people that get their dollars with Cadivi and the system works!” Really yeah it works with “certains oils”., and yes with that certain companies getting $$$ that they go and resell, and everyone in their world is Happy!…try to deal with student cadivi…that was awesome!!!! that was so easy…the system works!!!!

  2. Quico, I have a question about this. It is still not quite clear to me, but, from what I read from the previous article and this one, basically there is only ONE winner to these Hunger Games. So, if two companies want to bid for dollars to buy the same product, only the best bid will get it right? How does that leave the other companies then, what can they do to get dollars? I really don’t see how this will fix the problem for small entrepeneurs like myself 🙁

    • It’s all terribly unclear. It seems like all companies that bid within a given bid-range will get dollars at the average bid between them. But who knows! It seems like they really don’t have it clear in their own heads either…

    • There will be many “winners” at whatever price the government decides. With, of course, the expectation that the firms either paid a high enough bribe or undue gratitude.

      If the government told you that you won and said “here’s your average that you will pay”, would you ask many questions?

      Game theory leads me to say no. Collaboration would benefit all participants in the auction, but discovery of the collaboration might lead to exclusion (and starvation) whereas accepting what you are told provides a drip of the cash flows needed to survive. Of course, the government now gets to pick winners and losers with better information to suit its needs.

    • And well yes I guess they would do Cadivi style…because a little bribe , you know who are going to be the winners…not small entrepeneurs….

  3. Hey Quico, I think you nailed it in the end. This SICAD Frankenstein will end up assigning dollars arbitrarily at a price set by Giordani and Co. Any real auction would make the associated exchange rate unacceptably higher than the official one, which would be seen as a devaluation.

    I think the whole Vickrey auction, modified or not, is just a bunch of BS, a smoke screen. I really doubt that they really know what they are actually talking about. First of all, as you point out, they can’t even be consistent with their story. One says that the dollars would go to the highest bidders and the other clown says that there will be a price ceiling.

    I have a couple of quibbles. First, technically the Vickrey auction, or any auction for that matter, doesn’t need to be open to any individual. I’m not an auction expert or anything remotely close to that but what the theory says is true given any set of bidders. Of course, different sets of bidders (with different valuations) generally imply different outcomes. But still each bidder reveals her true valuation.

    I think, however, you do have a point when saying that when you restrict so much who participates, it’s likely that whatever the outcome is will not reflect the “true” exchange rate. But I guess they are not interested in that anyways.

    So, the only real “modification” that auction has with respect to the classical one is that they allegedly will set the price as the average of all winning bids. Honestly, I have no clue whether the auction is still efficient . My gut tells me that in general it looses this property. But again, they are not interested in efficiency.

    My second quibble is with respect to what Giordani meant by “open”. I think it didn’t refer to the price. I think he referred to participation, which it’s also contradictory since only those registered in RUSAD can participate. Either way, it’s still confusing.

    • Great comment, Manuel. No comentas mucho, pero cuando comentas lo haces con sustancia.

      I know there’s an auction theory paper in here somewhere, with the Modified (Madurified?) Vickrey Auction.

      • Thanks.
        I know there is a literature on auctions with divisible goods (or a finite number – greater than 1 – of the same indivisible good). I guess this literature applies to the problem at hand. However, I do not know what the main results of this literature. As I said, I’m pretty ignorant about this field of Economics.

      • Mira, Nagel, no te hagas el loco que tu eres el único carajo around here que really sabe de estas vainas…al menos llevaste más de un curso de mechanism design y esa loqueras que hacen los microeconomistas

          • Pero daría para un segundo libro:

            “Gaming the Revolution: A Deconstruction of the Venezuelan Ministry of Finance under Giordani”


    • I kinda of disagree with you on only one point. While it may be true that some of the properties of the VA hold for any set of bidders -and I don´ know nothin´about auctions either- it is also truth that the amount of USD available for offering may be relevant for a tiny subset of bidders, while a a grain of sand in the desert in the larger set…I think they are betting they have more power to influence the outcome with the RUSAD+only already paid supplies restriction

        • I´m not sure either I have a point. You said: different set of bidders, different set of valuations, probably different outcome, right? I´m ok with that. But I think is not only that, since in some sense it is not an homogeneous item what you are auctioning. Lets say Giordani says: “Mañana es la subasta para el RUSAD codigo 24739” which is “chicken importers”…and for chicken importers US$ 250 million is enough to pay they registered debt with providers…while if you auction USD 250 million to the larger public the ExR goes ballistic… do I have a point?

          • I guess you do. Will there really be different auctions for different goods (chickens, autoparts, etc.)?

          • A probable auction price cap will keep this new Sitme alternative within an acceptable devaluation range to the Government, plus, of course, obviate the Vickrey concept altogether. Insufficient PDVSA dollars will mean continued strong pressure on the Parallel rate. Interestingly, I believe that the new “Vickrey” rate may have to be used for accounting purposes by multinational corporations operating in Venezuela, many of which are forced to sell finished goods at Government-controlled bolivar prices, making it financially uninteresting/untenable for them to operate in Venezuela.

  4. It’s all about providing a “sensation” of truthful bidding and information.

    Think about the information goldmine this will provide the government. They will get a reference point to measure against the efficiency of their policies and a real peg versus the arbitrary one. Moreover, they will be able to identify firms in dire need of dollars (read: lucrative opportunities for manipulation) that can be exploited; if not by Cagadivi 2.0, then by some enterprising boligarch within the system who does have access to dollars. This new system, with its participants providing truthful information about the demand side will give the government insight into what/where/whom to target and what state they are in, financially.

    Of course the reference point will be arbitrarily assigned with what I suspect will be minimal transparency. But it will promote a further “sensation” of fairness as they crush the businesses that are distorting the marketplace, in their view, through high demand-side bids. I would be willing to bet that they believe that mashing down the high bidders will solve the “speculation” and “inflation” issues.

    • Wow, that’s Maquiavelic. Great point! Now I’m picturing this shady looking man knocking on the door of those high bidders which didn’t get lettuces to offer them the right amount of the green vegetable at the right price! Result: this shady looking man and his Monk will make tons of money.

    • “Moreover, they will be able to identify firms in dire need of dollars (read: lucrative opportunities for manipulation) that can be exploited”

      Not just the identity, but how much they’re willing to pay. They are systematizing “Cuánto hay pa’ eso?” a la “Brazil”

    • I kinda agree with that. There is something fishy about suggesting that they are going to design this very complex system…. and then throw a wrench by not exploiting the auction’s possible benefits. While it’s possible/likely they’ll screw up it’s implementation in a million different ways, it seems that preferential treatment is more easily handled in some other way. Why go through such lengths if your intentions are to simply give handouts or are looking for kickbacks? A new elaborate cover? I am not saying it won’t get dirty, but not necessarily by overt design. To paraphrase Napoleon why look for conspiracies when there are plenty of idiots to blame.

  5. A price ceiling – whether announced or implicit – would do to a Vickrey Auction by way of modification very much what Cecilia Jimenez did to that Ecce Homo fresco by way of restoration: it mangles it beyond any recognition.
    Hey! That’s not necessary, Who hasn’t wanted to run terminal experiments for fun and profit and a medium sized country?

    Think of it as Econ-Lab 101 for Elementary Ed. Majors

  6. I had to chuckle at the choice of posting the two paintings at the top, the original and then the,….the,…ah, ‘suggested improvements to the original.’ That was funny. Who thinks this stuff up? That’s what makes reading your blog so enjoyable. It’s so original. Well done!

  7. One thing we haven’t thought about: collusion in auctions. Notoriously difficult to detect, and in this case, it may keep the price of the dollar lower than the market owuld suggest.

    • Yes and no. You would have to have everyone collaborate assuming they were using an “average” based on submitted bids (no mention if they are weighted by volume of the bids, a $10,000 @ 24 VEB and a $250,000 @ 8 VEB. = 16 per or 8.615 per?). Otherwise, the outliers might point to the cheats. I would imagine that initial bids would be high based on the dearth of dollars. Otherwise, with so many players, only those offering what the government wants would be “winners”.

      Assuming everything isn’t arbitrary in the first place.

      The problem is that unlike a small auction with a few bidders, there will be many which while initial attempts at collusion only having a small shift in price given the lack of original organizational efforts. By the time it can play out to widespread gaming the system (which will happen, but in a different form), the government will have a pretty good idea of the demand schedule for a given supply.

      The average, instead of the traditional second bid, will also mask high/low marks making guessing more difficult. And of course, they could just assign the average per their own internal determinations based on bids…real versus their reality.

      Cheaters will get bounced…both arbitrarily and in actuality because they’ll stand out until everyone figures out what the bands will be as determined by the “winning” prices.

      A patina of fairness on what should be a fair system sans modifications…but as is, its still tilted heavily in the government’s favor and thus not what the real “market” would carry.

  8. After you bid, may you tell what you bid? “I bid $24.00 but didn’t get the dollars!” Or, “I got it at $27.00!” A website could collate this data, newspapers could consult it, it might be useful.

    • I envision a scenario where I bid Bs.22, everyone I talk to among my contacts bids between Bs.18 and Bs.23 – and the “average winning bid” announced by Giordani is, say, Bs.10.35. Nadie le va a creer, pero nadie le va a mirar el colmillo a ese caballo regalao…

      • Yep, that sounds about right. It would be a gift to the comprador-imperialist big bourgeoisie, running dog lackeys of capitalism, as you say, but only if Giordani likes ’em.

      • It seems to me that there wasn’t enough dollars to go around before, and there won’t be enough now. No matter what, it takes the same number of dollars to import what is needed. The only difference is how many Bolivars the government gains in the exchange…. but they can print money anyway. Am I missing something?

  9. And what about times? It’s clear that the three stooges – Merentes, Giordani and Maduro – have not reached an agreement. At least Giordani is trying to sink the boat with the cap thing, so it might take a while before they set everything.
    Cesar Miguel Rondon interviewed Jose Guerra and Vera Azaf (Toro’s favorite journalist) today and they mentioned that neither the private banks nor the BCV are prepared for the new system. The private banks have as much information as we do. And there’s no such thing as a control office in the BCV in charge of checkin imports, letters of credits and whatnot.
    It’s gonna take weeks before they can set the thing in motion. Even worse: as a consequence, food and supplies shortages will extend for months, given the unprecedent procedures and red tape…
    It’s gonna be fun to be in Venezuela in the coming months… not.

  10. The only way to break this perverse logic is by breaking with the laws of capitalist economy and stop playing games at it thinking you can outwit them while the masses suffer. We must expropriate the los Amos del Valle 100 families and the monopoly groups, national and multinational corporations and those who really control the Venezuelan economy ( banks, large companies and retailers) and who used their control to sabotage the democratic will of people. In the words of Ezequiel Zamora “lo que debe secuestrarse son los bienes de los ricos, porque con ellos hacen a guerra al pueblo, hay que dejarlos en camisa”.

    The reformists and bureaucrats tell us that this is not possible and some really have always fought the revolution from the inside by sabotaged, poly-tricks and other means to slow down the process.

    Against hoarding and speculation – expropriation of the means of production
    Nationalization of the means of production under the democratic control of workers
    Against the anarchy of capitalism – a democratic plan of production for the benefit of the majority and forward to real socialism.

    Rojo Rojito

    And its really not looking good form y’all election wise, polls are now saying anywhere from a 14-18% lost. I support the Bolivarian revolution and Capriles should be in jail for many reasons and this battle will be fought out after the election by the revolution against the reformists, bureacrats and those who try to stop it.

    • Sounds like you really believe what you say, and I normally would agree with you completely. However, what’s happening here in Venezuela is different. You need to consider that the Revolution may be the problem, because like Murphy’s Law… anything that can go wrong… will go wrong – in spite of anything we might believe. Beliefs can often get in the way of looking at what’s really going on.

    • With the new system in place, the government chooses who gets dollars and, let’s face it, who goes broke. It’s get on board or get out of the way!

      Look, Maduro IS Chavez! Of course people were always trying to sabotage the revolution from inside, how else do you explain the corruption and bureocracy that has plagued the revolution from the start? They are the ones happy that Chavez is gone, but look at Maduro now! Chavez chose wisely, as always. If you hear him speak, and even the way he dresses now, it’s just like the good ol’ Comandante. The other day it looked like he was wearing military fatigues! It does not look good for the escuacas at all!

      Bleedin’ red as always!


  11. If shortages get worse, what’s the likelihood of another Caracazo? And if the army takes over (to subdue riots), what is the likelihood that Cuba keeps getting oil?

    • “If shortages get worse, what’s the likelihood of another Caracazo?” Nobody is going to riot as long as they see their government sticking it to rich people and blaming the empire. In the end, that’s what the people voted for. It’s all spite.

  12. The situation is shitty and they realize that it is very late to bring dollars and goods into the economy for this elections. Enter SICAD, which is not meant to work but to give the impression that ‘they are working hard to solve the problems of el soberano mesmo”

    To underline their “hard work” I am sure that they are going to put a couple of especuladores/importadores apatridas behind bars. Once that is done they will say that everything is going to be better and blah blah blah.

    A few days before elections they will move his holiness body to Sabaneta, by mule and declared 3 days of mourning while the mule gets there. And they will demand respect!

  13. Regarding this paragraph:

    “One possibility is that they announced this before Giordani and Merentes had actually reached an agreement. Merentes, the Central Bank chief, did explicitly say that dollars would go to the highest bidder, which is plainly inconsistent with Giordani’s “con tope” approach. (It’s also inconsistent with Vickrey’s second-bidder price system, pero bueh…)”

    I would like to know the following:

    Why would Merentes’ statement (that dollars would go to the highest bidder) be inconsistent with a Vickrey auction? After all, the highest bidder is supposed to win the bid, but pay the second highest- or in this case average- bid.

    • Given the lack of real details provided by the triumvirate of bankruptcy, I’d say it was either due to its ad hoc nature and Merentes either not understanding a Vickrey auction or wanting to call this construct a Vickrey auction despite it being nothing of the sort to make it sound that much more fair and equitable. Also, this could simply be his attempt at disimulacion, knowing full well most people understand an auction, but only a few with specialized knowledge understand the Vickrey option and have little power to expose the discrepancies between that variety of auction and what he’s saying.

      Either they’ve thought this out quite well and are fully embracing all the consequences and issues it will bring believing it will honestly be an interim fix, or they have no idea what they are doing. Given their track record, which do you think it likely is?

      • I think I may have communicated my query poorly, since this is more of a question for the author of the post (FT) than anything else. You see, the author is the one who claims Merentes’ statement is inconsistent with the bidding format by saying the words ” which is plainly inconsistent with Giordani’s “con tope” approach”. I just want to hear his explanation as to why this is the case, as I don’t understand how his assertion is correct.

        Thanks for replying though.

  14. Just heard on the radio the Universal Economics guy explain the system as follows , You have an average of quotes , People giving the highest quotes get served first , those with the second highest quote second and so on until people below the average get nothing . Lots of questions left ? Meantime Ramirez announcement that Pdvsa will make 40 odd billion available ( same as in 2008) to cover all US dollar needs means that lots of $ buyers are going to be left out and dry , this is definitely going to shake supply and push prices up!!

  15. Simply, they shouldn’t have the power to decide the administration of all those dollars, for even if someone who knows how to do it well is in charge, he can always have a stroke, make a mistake, or be pressured. Dame mi plata.

    • No, I don’t think so… it’s more like “hedging!” The government is in an awkward spot. The devaluation was too little too late, and what we see here is a targeted devaluation that is designed to soften the blow. However, it is actually making things worse because of all the uncertainty it is causing. In effect, the motive is to obscure the truth of chronic government failures, but the effect is uncertainty and confusion that is crippling the activities that the country has been surviving on and needs. OUCH!

  16. I bet you all that this Sicad engendro will last much less than its idiotic brother Sitme. It’s the closest thing i’ve seen of a government on full derision mode, playing jokes with the people. Sad picture. Huge stockouts. Will there ever be consequences to these balurdos for such irresponsible behaviour?

    They convoked the first auction for this week for 200 Million.
    But thet haven´t publish the clear rules in the Gazette yet.
    People in the Organo Superior para la Optimización del Sistema Cambiario, Cadivi and BCV must be ordering new SUV’s by now,

          • You only have the day of tomorrow to make the bids and the results will be announced on wednesday, this would astransparent as the Guaire

          • El Órgano Superior para la Optimización del Sistema Cambiario, se reserva el derecho de adjudicar o no a cualquier Empresa participante, de acuerdo a los lineamientos establecidos en las Convocatorias y cualquier otro que considere el Órgano Superior para la Optimización del Sistema Cambiario, previo consenso con el Ministerio de Poder Popular de Planificación y Finanzas y el Banco Central de Venezuela…

            Osea, “es un subasta en la que gana el que ofrezca más, a menos que no nos de la gana…”

          • Toda postura que supere el precio oficial de la divisa generará un diferencial que permitirá la creación de un fondo en bolívares, cuyo nombreserá “Fondo Nacional de la Renta Petrolera”.
            ¿Qué lo administrará quien? Refondem?
            Lo más arrecho es que la convocatoria es la propia norma, no hace referencia a nada porque el Convenio Cambiario no establece cual es el regimen de las subastas. O sea esa normativa no existe la convocatoria es su propia fuente de derecho

  18. The purpose of this subasta is to make Maduro look good , forget the technicalities , Maduro promised that the 1st auction would take place on monday and he has kept his promise , the auction may be a manipulated auction , you call in your most trusted financial agents from the past (before formally convoking the auction) , tell them before publishing them roughly what kind of rules will apply and have an auction that maybe favours those whose loyalty can be trusted to play their part . The important thing is to have Maduro look as someone who takes quick efective action on problems, if you have supply problems later, thats not his fault , he did what he had to do!!

  19. Cacr210 maybe what your looking for is in the last paragraph of article 2 of Convenio Cambiario N°21 , the new fondo of course is not yet created and will have to be created before this provision can be put into effect .

    • I´ve seen it, but my point is that most of the procedure set up in the Convocatoria has no legal basis. Thus, the Ministry is auctioning 200 million dollars from the reserves with rules set up in a convocatoria posted online. About the Fund, rules as the Convenio Cambiario cannot modify the constitutional rule of budget legality, but obviously this is mero formalismo

      • I´m going to try.
        The Constitution, which is the supreme law of the land, establishes the following:
        Artículo 314. No se hará ningún tipo de gasto que no haya sido previsto en la ley de presupuesto. Sólo podrán decretarse créditos adicionales al presupuesto para gastos necesarios no previstos o cuyas partidas resulten insuficientes, siempre que el tesoro nacional cuente con recursos para atender la respectiva erogación; a este efecto, se requerirá previamente el voto favorable del Consejo de Ministros y la autorización de la Asamblea Nacional o, en su defecto, de la Comisión Delegada.
        No expenses can be made from the public treasury that were not approved in the budget law passed by the National Assembly, except for the exceptions laid out in the article that refer to unplanned situations meaning emergencies (and even in these cases ,congressional authorization is required)
        Indeed, a transitory disposition of the 2005 Law of the Central Bank established that 6 billion dollars would be transferred to a fund to be created. Fonden was then created by decree shortly after. The thing is that the Assembly cannot pass a law to grant discretionary power to the executive to handle half of the country’s budget with no accountability, because that is exactly what article 314 intends to forbid. Thus, although there are laws that allow things like Fonden or this new fund to exist, they clearly are unconstitutional and beyond the scope of the legislative power of the Assembly.
        Now, referring to the “convocatoria”, If you read it well, the procedure laid out in there is not established in the Convenio Cambiario, my guess is that there is no established procedure and they just made the stuff up for the convocatoria. All publics acts must be passed following procedures established in laws or at least administrative regulations, precisely to avoid arbitrariness and corruption, this is the basis of the principle of the rule of law . This people is auctioning 200 million out of the country’s reserve como se les sale del forro y nos los están diciendo en la cara. Lo que más me arrecha es que no haya más gente arrecha.

        • Cacr210: Than you for your patience and thoroughness in clarifying the legal issue for me. I understand now that even the creation of fondem (although having some apparent legal underpinnings) was unconstitutional and that a convocatoria is clearly not the right way of establishing a procedure such as is being applied in this subasta . About the arrechera aspect , you are probably familiar with the tale of the frog slowly boiled to death as he lay in water which was heated up by small gradual increments so the frog never reacted to the heat , we have become so accostumed to the regimes incremental lawlessness that only the most flagrant breach of law causes any response now!!

  20. Cacr210 ; Im sure much of what you say is right , but I seem to remember there is a Constitutional provision which gives the BCV acting in concert with the Executive (Ministry of finance) some special powers for legislating on financial and currency matters although Im not sure that this allows the auctioning authorities the power to go as far as they did . Maybe we should look at how the original fondem was set up and what was the legal basis to setting it up , there was a convenio cambiario reference to fondem somewhere. The Ley del Banco Central also had something to do with it. ( it was reformed to make fondem possible without actually naming it) . Wouldnt surprise me that the Government was in such a rush to conduct the auction in keeping with Maduro’s promise that they rode rough shod over key legal provisions !!


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