Sistema Complementario de Administración Monetaria – SCAM

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scamJust when you thought the government’s arcane currency control system couldn’t get any weirder, along comes the Complementary System for Currency Administration (officially SICAD, though I still think my acronym is more a propos.)

We’ve already described the way SICAD creates red-tape on a scale Kafka might think up if you slipped some burundanga into his drink.  We’ve marvelled at the government’s determination to push ahead with a system that even the experts can’t make heads or tails of.

But we couldn’t have guessed that the allocation mechanism would be so bizarrely opaque, the published “results” of the first auction overlook one small detail: the actual price auction winners will have to pay for their dollars.

This is, in a very real sense, a devaluation to a secret exchange rate!

This may be down to the fact that the Ilícitos Cambiarios law makes it a crime to publish any exchange rate other than the official (though fantastical) CADIVI rate at Bs.6.30 per US$. As that’s the lowest bid allowed in SICAD auctions, we know the average winning rate must be above that. But it’s a crime to tell us how much above that. Bonito ¿no?

Then again, as commenter CACR notes, these guys are so far gone they’ve started legislating via press release. The first auction’s convocatoria – the official announcement sent out by the Central Bank telling banks when and how they would hold the first auction – set out a new “Fondo Nacional de la Renta Petrolera” – a new spending fund for the extra bolivars above the official rate yielded by these dollar auctions.

But hang on a minute: convocatorias aren’t places to create spending funds. Convocatorias aren’t published in the Gaceta Oficial: they’re not laws, they aren’t even regulations. They’re public notices, something closer to a press release than a statute. And yet that, that’s what these guys are using to create multi-million dollar spending funds these days. No doubt the oversight on that one’s going to be water tight.

Come to think of it, I bet I can guess where the flying checks from that “Fondo Nacional de la Renta Petrolera” are going to be ending up

1 COMMENT

  1. Like I said yesterday, it’s time to break out the popcorn and just watch the telenovela that is “The Bolivarian Republic of Venezuela en plena accion”! Porque asi, asi, asi es como se gobierna!!!

  2. Hey Quico,
    I rectify my post. In the Convenio Cambiario there is a mention of the fund but it is not imperative:
    “..el diferencial en bolívares entre la tasa de la postura adjudicada y el tipo de cambio oficial para la venta fijado de conformidad con lo previsto en el Convenio Cambiario Nº 14 podrá ser dirigido a la creación de un fondo del Ejecutivo Nacional, destinado a gastos en moneda nacional para el desarrollo de los sectores productivos”
    The convocatoria creates and names the fund with no legal basis or specifying who ordered the creation or who signed the paper.
    “Toda postura que supere el precio oficial de la divisa generará un diferencial que permitirá
    la creación de un fondo en bolívares, cuyo nombre será Fondo Nacional de la Renta
    Petrolera”.
    We complained about FONDEN because it was created by laws that violated the Constitution, now we have a fund created by a mix of broadly worded regulations with press releases violating constitutional principles.

      • Im rereading it and I think you are right, they are pretty much violating the Constitution through a press release by creating the fund through the convocatoria.

        Pero bueno el comentario en Caracas, es lo dificil que es meterse en el sistema y que te den los dolares, no lo inconstitucional y corrupto que es. Por eso estamos como estamos

  3. Your ealier post says: “Ever since the Illícitos Cambiarios Law was approved in 2010, buying, selling, and even mentioning the price of black market dollars in Venezuela has become a crime punishable by up to 7 years in prison.”

    If that is what it says, then publishing the SCAM rate would be legal, because it isn’t “black market”.

          • The constitution and the Ley del BCV do provide for certain currency and financial matters to be regulated via agreements between the BCV and the Ministry of Finance ( via Convenios Cambiarios) , havent checked the scope of these regulatory powers granted these agreements but they are broad , they may also have the right to regulate certain matters through so called resoluciones and providencias administrativas which dont actually always get published in tandem with a related convocatoria ( they just jiggle the gaceta oficial publication date) . art 17 of the ley de ilicitos cambiarios does provide for fines to be applied to whoever publishes (including via electronic means) currency quotes different from the “official value” of the currency .

          • If the wording is “official value”, and the government sells you dollars, officially, at that value, then, no sane judge could interpret publication of the official transaction as a crime. Of course, in Venezuela the statutes mean nothing, and everything depends on the caudillo, but still!

          • Venezuelan law allows literal interpretation of legal texts to be superceded by so called teleological interpretation of a provisions purpose , Evidently the purpose of art 17’s prohibition of publishing non official currency quotes is to prevent their use to aid unlawful currency transactions , which is definitely is not the case where SICAD transactions are concerned , so my guess is that SICAD quotes can be published without any problem. Also there is no practical reason for the regime to enforce art 17 literally , it may even want or even need for such quotes to be publicized to demonstrate to the public that the system does work to lower the value of the paralell dollar. Of course I respectfully defer to cacr210’s professional expertise. Legal issues are complicated!

    • It’s a bit tricky, the Law establishes the mentioning of the price as a misdemeanor:
      Artículo 17.
      Las personas naturales o jurídicas que ofrezcan, anuncien, divulguen de forma escrita, audiovisual, radioeléctrica, informática o por cualquier otro medio, información financiera o bursátil sobre las cotizaciones de divisas diferentes al valor oficial; serán sancionadas con una multa de un mil unidades tributarias (1.000 UT). En caso de reincid
      encia la sanción será el doble de lo establecido en este artículo.
      The key is how you interpret the word official, if you do it literally and interpret the word official as only the one set up by CADIVI, then mentioning anything other than 6,30 would be a crime, but if you interpret official as any rate set up by the government by law (well in this case a press release, but I mean the presumption of legality of SICAD as a government act) then it wouldn’t fall under the definition of article 17 of the Law.
      I’m more inclined to the latter interpretation, as criminal laws and laws that impose fines and sanctions must be interpreted restrictively in favor of defendants.

  4. Un detalle sobre la subasta. El gobierno cobrara los bolivares inmediatamente, pero liquidara los dolares cuando la mercancia importada llegue a puerto venezolano (en teoria de 3 a 6 meses despues de la subasta). Mientras tanto lo unico que existe en divisas es una carta de credito que vale lo que vale el papel impreso. Parece que este es un mecanismo para capturar bolivares y correr la arruga en relacion al desembolso de dolares.

    • Esa es la otra. Hay un elemento de prestamo forzoso en todo esto.

      Y yo me pregunto, si deposito mis bolivares y seis meses después, cuando llega la mercancia, el Guardia Nacional en el puerto se pone bruto y manda a devolver el envío, me devuelven la plata? Con o sin intereses?

      • If the law is applied with any measure of rationality , then the BCV issues a letter of credit payable to a foreign confirming bank upon the latter paying the price to the exporter on confirmation that the goods described by the participant in the Auction correspond to those inspected at the discharge port . Doubt very much that the GN will be capable of determining exactly what has been imported , an independent surveyor will have to be hired for the purpose with the agreement of all concerned , If the surveyor states that the discharged goods are the same , then BCV pays the confirming Bank . If the goods are found to be different from those mentioned by the participant in the auction then not only is the confirming bank not paid but I believe the goods may be subject to impoundment and there are sanctions for the participant for misrepresenting what he was importing.

        • “independent surveyor”!?!???!

          Eso será en Suiza, mi pana…

          No thinking GN is going to pass up the DELECTABLE matraca opportunities accruing to the guy with the little seal that certifies the shipment matches the dollar request. Ni pendejos que fueran…

          • If thats the case and inspections are entrusted to GN acting alone then Giordanis efforts to stem the hemorraging of USD to faked imports will come to naught and the regimes financial troubles will only get worse, Unless of course the fake importers are so well connected that the GN has to forfeit it usual matraca!! Meantime honest importers will just add the matraca to the cost of doing business in this country and raise its prices to the local consummer.

          • That is what happens when you attack the consequences of a problem instead of the causes by employing… the causes of the problem. You are going to resolve the distortions and corruption created by the controls by creating more controls. It’s almost an dadaist joke.

        • Further fun regarding the SICAD auction:

          I’ve spoken with a couple of differernt people in the last couple of days who had what I would describe as a “moderate” need for dollars in their businesses. Of the three bids, the average is in the upper 14’s. Apparently, from the same folk who spoke with other folk in similar needs, the story was much the same, though all are apparently paying a somewhat lower rate than their bids.

          I mentioned in the other SICAD post (http://caracaschronicles.com/2013/03/20/ecce-vickrey/#comment-76454) that I suspected there’d be a decided lack of transparency and the government would impose its own “average”. Barclays has implied much the same. While this is no shocker, to anyone reading this blog, I’ve actually come around to thinking that the Three Amigos honestly believed that they could break their enemy, the “speculatores” in the dollar with this auction and that they’ve been sorely disabused of the notion. They will never cop to the real average now that they know how bad it really is.

          While the auction represents a de facto devaluation, which has already been discussed here, the government has now a fabulous list of those most likely to seek the dolar paralelo. I can see the short-term black market rate easing somewhat, but this will just fuel inflation in a couple of months. (which will conveniently be after the election…)

          Oh, and the LCs. This is going to be a serious screw up with an archaic methodology of transfers in comparison to the modern banking world: this is normally a two day initial process followed by 30 seconds per each subsequent transaction. Two steps forward, three steps back. I’m already hearing about issues with them.

      • Otro “detallito”. Los bancos venezolanos están pidiendo a sus clientes que han recibido asignaciones de divisas del SICAD, un colateral en dólares en un banco en el exterior para garantizar la carta de crédito. Esto quiere decir que los importadores tienen un doble costo financiero, pues deben colocar el equivalente en bolívares en una cuenta local y además el equivalente en dólares (al cambio SICAD) en un banco en el exterior. El argumento de los bancos es que los proveedores en el exterior van a ejecutar la carta de crédito de todas todas, incluso si el SENIAT (organismo al que le corresponde confirmar que la mercancía es la que corresponde a la solicitud al SICAD) dice que hay alguna irregularidad con la importación. Si esto es así, es decir si el costo financiero se duplica para las empresas, serán muy pocas las que podrán importar bajo estas condiciones. Probablemente las grandes transnacionales del “imperio” serán las únicas que podrán “beneficiarse” del dólar SICAD, pues tienen el músculo financiero para asumir ese doble costo financiero. Sigue el delirium tremens.

          • Así es Quico. Esto no es un rumor. Me llegó de muy buena fuente. Claro, este colateral en dólares es lo que piden los bancos venezolanos para emitir la carta de crédito. No es algo que está en la resolución del MinFinanzas – BCV, pero es un requisito de facto.

          • foreign exporters are not going to rely on local banks LC’s to get their payment , they are going to insist on using foreign confirming banks which will condition their payment on certain conditions being met , i.e. the approval of the merchandize at the discharge port by an independent surveyor , They wont rely on a GN survey, neither will they aqgree to part with any money unless they are certain that in case the GN arbitrarily rejects a shipment and the BCV welches on its commitment their payment will be honoured So naturally they will demand some up front guarantee of payment from the Venezuelan Banks . Wherre is the up front guarantee going to come from ? from the importers who must have the resources to provide it , this means that only the most solvent and largest of importers will benefit from the system . Which of course means that the intended purpose of SICAD will fail to the govments chagrin . That is unless the system allows for independent surveyors to participate in the discharge port inspection which of course the GN will veto , or will it ? , given the ultimate economic political consequences?

  5. ‘But hang on a minute: convocatorias aren’t places to create spending funds.’

    A perfectly valid point, of course. And I’m all for reminding ourselves every so often that the rule of law is a joke in Venezuela. But aren’t we really, by now, just debating how many mafia bosses can dance on the head of a pin? I mean, all these spending funds are in blatant violation of Art. 314 of the Constitution anyway. (The one that says no type of spending not contemplated in the budget law is permissible). How much more unconstitional than ‘unconstitutional’ is it possible to get? I think we waved bye-bye to ‘constitutional’ quite some time ago, and ‘legal’ is no longer visible in the rear-view mirror.

  6. My idea for currency control, throw two empresarios at a time in a cage and let them fight for their life! Two walk in, one walks out! Thunderdome style. Its simpler and better to watch. Wait, youre telling me they already do that in prisons?

  7. It’s amazing how these Socialists can come with precisely the scheme that can maximize corruption, opacity and disregard for the very concept of law.

    If it’s to be judged by its approach to things and its fruits, XXIst Century Socialism is not a project to redistribute wealth towards the poor, produce a more equal society and all that other crap. It’s really about producing the biggest and juiciest rackets on the Petrostate rent. The main scam that they are doing an effort to help the poor, produce a more equal society and all that other crap.

    • Loro Im not sure the racket part is intentional , many of them probably do live their delusion as real, The thing is that they lack the capacity to understand that the means they choose to implement their goals are going to be gamed by people steeped in the picaro values of Venezuelan society and become transformed into rackets . Naim has pointed out in one of his articles that the tragedy of the Chavez regime is that to pursue its goals it relies on what Venezuela lacks the most, which is: competent honest civil servants . The cult of the picaro is deeply ingrained in Venezuelan culture , Chavistas act as if there are no picaros among their number , that all picaros are oppo, They dont understand that their followers being Venezuelans, a significant number of them are going to be picaros and act accordingly,, that ideology alone doesnt make a dishonest man into an honest man .

      • I think it’s wrong to frame it as a “picaro”/sociological issue. It’s really about basic economic rationality. It’s not because they’re dishonest that people break the rules, it’s because the system is set up in such a way that if you coldly weigh the costs and benefits, it makes no sense to follow the rules.

        Chavismo is constantly telling people: listen up everyone, do NOT do Thing A. Granted, Thing A takes less work and will bring you more money than Thing B. But here’s the rule: you must do Thing B, even though is much riskier and more expensive and takes more time. Yes, granted, you’re very unlikely to be caught or disciplined if you decide to do thing A instead of thing B. But rules are rules, do thing B!

        …and then they’re surprised that people do Thing A.

        • A lot of black markets and mafias appeared during WW2 when scarcity and shortages started to appear, it’s the normal human reaction to scarcity. It’s the failed Communist attempt of changing human nature, just listen to any of Giordani’s speeches reganando people for being selfish. It

          • As Zizek says, African warlordism is absolutely intrinsic to the world capitalist economy and political order as is. You can stare at the same pin’s head and, instead of wondering how many whats, start wishing for an economic Utopia.

            Still folly, but we know it less well.

            Man, was that Mafiosos on a pin’s head image on the spot…

        • If you take the underground in Frankfurt , there is no booth with a person inside to pay the fare to , neither are there any closed doors which open when you put the fare in , there are no policemen at the enthrance either , you just buy your fare from the machine and walk in . Once in a trip to Brussels (before the Euro ) I changed a big wad of USD into local currency , the wallet with this wad fell from my pocket at the airport , which I noticed only when I got to the Hotel and was about to pay the taxi. I called the airport and reported my lost wallet , they had taken it to the police station and upon identification of the contents was there waiting for me , nothing was stolen . Honesty does not exclusively depend on the efficienct enforcement and punishment of transgressors , It also depends on the mores that cultures instill in peoples mind . Certainly external conditions and efectiveness of enforcement plays a big role in controlling peoples dishonesty but cultural factors also play a role . I once lived in a community where people never bothered to shut their homes doors and nothing got stolen . While important external controls arent the only factor . Thats exactly giordanis take on the matter, if you create draconian controls and punishments then people will be honest !! the subject is more complex that your understanding of my prior post or what you post above makes it out to be and certainly not within the scope of what can be discussed in this kind of format !!

          • I agree that there are cultural factors that play in things like this, but Venezuelans can follow rules and be rational when they see the utility of doing so, which is in part of the same reason why a Norwegian does so, a selfish rational decision. The Caracas subway is an example of that, people behaved there because they knew they will get faster to work and with less hassle.
            Right now, for example, and to recognize something in favor of the government, getting a passport has became very easy through an internet service, you ask for an appointment online, you go next week and you get your passport. You don’t hear now about gestores or anyone paying to get one because the system works perfectly well. The government is no creating an opportunity for gestores and employess to profit by establishing an effective nondraconian mechanism

          • There is a huge amount of serious academic research into peoples economic behaviour going back decades , the almost universal conclusion is that ‘the rational decision taker’ is a figment of the imagination of classic school economists and that there are strong irrational subliminal biases in most people that lead them to take irrational economic decisions., Totally agree with you that Venezuelans no less than other people can be rational in their economic choices but too often there are distorting cultural factors that lead us stray. Many Venezuelans ( and other Lat Americans ) are handicapped by ingrained cultural habits of thought or behaviour that mislead them in their economic judgments or behaviour. However Im with you that we have the capacity to become more rational in our judgments and behaviour and that under certain improved social and polticial conditions we can surmount those cultural handicaps that now hinder us.in our pursuit of such rational behaviour.

        • Well, chavismo did everything in their power to make sure there was NO incentive to following the rules. And that nobody was ever caught (for real, and honestly) when doing something wrong. In fact, if somebody is caught and punished, it’s because they were fallen in disgrace / political enemies / too obvious / too dumb / a bigger rascal could profit from their fall. Por pend***os.

          And there’s the opaque nature of the proceedings, as well as the lack of scrutiny.

          Add to that the fact that the rules come from people like Giordani, and that on top of there being no incentive to follow them, actually the rules were either nonsense or impossible to follow in the present situation.

          Ever wondered if it’s nearly impossible to be issued a traffic fine in Venezuela? If ever you manage to get one (it might mean your car is impounded actually), wonder where in Hell would you go pay it?

  8. Quico and other knowledgeable readers,

    A question on the “Fondo Nacional de la Renta Petrolera”. If the reason why we are having a new exchange rate arrangement/devaluation is that the government is running out of money (big deficits, low reserves, tons of SITME-related debt issued to fund capital flight), then why are they creating a separate spending fund to allocate this money to? This doesn’t make any sense to me, along with every other aspect of the regime (of course).

    It seems that all other measures the government has been taking recently (somewhat cutting off fonden and the other slush funds, the first devaluation, the big cut in spending) were meant to increase the central government’s bottom line. Or is this Fondo just an account that will then be drawn down and given back to the CG?

    The alternative is that some boligarch/civil “servant” combo came up with this brilliant idea to squeeze even more money out of the state coffers.

    Wouldn’t it make more sense to let the Central Bank record this as valuation gains and then transfer the profits to the central government directly? Or would this be too cumbersome/lengthy?

    • Ah bueno nobody knows because the grand total of publicly available information on the new Fondo fits into a SINGLE SENTENCE in that convocatoria. My guess is that they’ll hand it directly to the Comando Hugo Chávez chamo…

      • Got it. I guess we’ll find out eventually.

        By the way, it may not be too long before they either scrap the SICAD and come up with something new or overhaul it significantly. This just seems unsustainable.

    • Convenio Cambiario # 9 orders Pdvsa to use its export divident earnings , 1st to cover its costs and corporate commitments , 2nd to pay its taxes and 3rd whatever is left to finance a fund dedicated to different kind of social and economic proyects (including las misiones), this Convenio is still in force as well as the regimes interest in continuing as far as it can with las misiones , perhaps at a reduced scale . By selling its foreign dividend earnings through SCAM the regime will be getting more bs . Getting more money for the USD it sells doesnt mean dismantling the whole system only perhaps slimming it down and perhaps trying to circunvent the big scams that were being made through Sitme ( which goal I doubt it will accomplish) . this is of course just conjecture , The regime is sufficiently unhinged that ultimately no rational explanations can be offered for what it does.

  9. Continuing with the legislation by press release, now, according to this AVN press release, the SICAD dollars will be liquidated this week and the verification of the goods would be posterior tot the wiring of the money as had been previously informed. Note the lack of citation of any legal source http://www.avn.info.ve/contenido/esta-semana-comienza-pago-divisas-sicad
    I´m guessing that this is another defeat for Giordani, because that previous control to the liquidation had his name written all over it.

    • But again this is not clear at all…

      Una vez que el BCV reciba la información sobre el comienzo del procedimiento de solicitud de la carta de crédito, procederá a acreditar las divisas correspondientes para que el banco haga los trámites que permitan confirmar la carta y el proveedor proceda a despachar la mercancía.

      Hold on, who would they be “acreditando” those dollars to? The commercial bank?

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