Remember SICAD? Remember THIS guy?

Better call in the big guns... (extra points to the first commenter to identify this guy.)
Better call in the big guns… (extra points to the first commenter to identify this guy.)

You don’t? Don’t feel bad: nobody does.

After a single dollar auction back on March 24th, the new parallel-to-CADIVI system for distributing dollars whimpered off into the oblivion where it should always have dwelled.

No pragmatic decision-making of any kind seems forthcoming from the clique in power.  CADIVI is still sclerotic and no functioning replacement for for the now mothballed SITME system, there’s just no way to source anywhere-near-legal dollars in this economy. And in our nunca bien ponderada economía de puertos, no dollars=no stuff.

But maybe the mechanism is a red herring here. Quite aside from the mechanics of dollar-allocation, they just don’t have any dollars to allocate on hand in the first place.

Even if there was a huge crisis in the Middle East tomorrow sending oil prices skyrocketing to $250/barrel leaving the Central Bank awash in greenbacks, it would still take time for importers to get those dollars, place their orders, get them delivered to Puerto Cabello and distribute them to consumers.

Another way of saying that is: it’s going to get worse before it gets better.

Which brings me to the photo above. Remember that guy? See, I’ve been mulling a theory these last few days.

I think we’re living in an alternate-universe. It’s 1989. And Jaime Lusinchi has just been re-elected president. 

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  1. Yes and: not just currency exchange. This is when the billions of dollars that have been stolen from the country could really come in handy. And this is when having the “reserves” available in hard currency in other countries, rather than useless and much-devalued blocks of gold in Caracas, would be useful. And hell, this is when having decent credit with suppliers would be useful. What’s amazing is that all the economic bad news we saw out of Venezuela from 2003 to 2011 was in an environment of essentially rising oil prices (other than a big hiccup in 2008 that was useful in that it shook out a bunch of bezzle). With the next 10 years more likely to see steady or declining oil prices, there aren’t many good options. Though for a few billion bucks here and there, this one is appealing:

  2. >>>> …there’s just no way to source anywhere-near-legal dollars in this economy.

    Currency controls are about to wither on the vine. Jorge Giordani, a name that will live in infamy.
    Unfortunately, without controlled currency exchanges, we will be in for a bumpy ride.

    P.S. Antonio Cova Maduro, que en paz descanse
    [I remember him well]

  3. No fue solo ministro de Caldera. Fue ministro de Lusinchi, de CAP, de Caldera, entre otros cargos en la adminstración pública.

  4. The level of mismanagement is so beyond believable that I’m starting to wonder if it’s intentional. I just can’t come up with a reason for such a claim other than to say people of even moderately good intent cannot be this bad!

  5. “After a single dollar auction back on March 24th, the new parallel-to-CADIVI system for distributing dollars whimpered off into the oblivion where it should always have dwelled.”

    Might I disagree here? SICAD is/was the only foreign exchange system that was honest with its clients. For the first time people holding Bolivars were allowed to bid for Dollars at a price ‘they’ were willing to pay. That’s efficient. That pushes out eliminates the black market rate. It’s honest. Yup, some people/businesses were willing to pay 25 or more Bolivars to get a single, crummy dollar. During the first auction the government NEVER released the auction prices. They couldn’t. They were too embarrassed. It bespoke economic reality. Rather than being relegated to ‘oblivion’ (see above), SICAD should be brought back with all auction bids being transparent to the public. Open everything up. That’s simply classic economics.

    • SICAD, as I understand, has yet to deliver one single dollar to the successful bidders, some two months or so after their only auction–Merentes is talking about trying to channel more dollars through Cadivi, probably to try to keep inflation from escalating too much. The problem remains, the number of dollars needed in 2013 is at least double the number of dollars that will be available….

  6. one month of strike, and that even made agriculture go to ZERO…it is amazing… My fingernails got hideous yesterday, now I know what to blame: El PARO

  7. How about Venezuela applying Cristina’s latest medicine: tax cheaters to repatriate their offshore $$, estimated at $ 160 Billions and forced to buy 4% US $ bonds (yeah sure, okay), to finance investments to boost oil output. 3 months amnesty and pay back-taxes, otherwise jail if caught. Not a bad idea, if she leaves legal offshore $ accounts alone. After all, tax cheating is a criminal offense most everywhere. I believe that the $$ mining opportunity for dirty Venezuelan money sitting in supposedly secret accounts is much bigger.
    Jeez, I am giving credit to this corrupt gazillionaire bitch, but I am sure that if this becomes law in Argentina, she will also bring home her dirty money. Sure….

  8. Matos Azócar podría pasar por un Giordani cualquiera. Recuerdo que tenía un discurso similar al del monje, obsesionado por los controles y con cierta alergia hacia el sector privado. La misma mentalidad que no es capaz de asimilar la crítica que nos llevó al desastre de Lusinchi, y al desastre del chavismo.

  9. Im not an economist but there appears to be something phony about thinking of the usd exchange rate as 6.30 (the official rate) or as 24 ( the black market rate) . Actually the operative exchange rate might be better understood as being equal to adding the usd brought into the venezuelan economy at the official exchange rate plus the usd brought in at the black market rate and then averaging both rates . thus if 100 usd are brought in at the 6.30 rate and 100 at the 24 rate then one would add 630 to 2400 giving us 3030 and then divide the result by 200 giving us an operative rate of arround 15 bs per usd (e.g. for purposes of calculating the impact of an official rate devaluation on inflation). Evidently if the amount of usd brought in at the official rate is reduced the percentage of the usd brought in at the black market rate is going to climb in turn causing the operative rate to climb. This means that the effect of a devaluation in the official exchange rate is going to have an inflationary impact which also depends on the amount of usd which are brought in at the official exchange rate vs the amount of usd brought in at the black market rate .
    Hence even if the devaluation of the official rate is small , if the usd brought in at the official rate falls and the amount of usd brought in at the black market rate rises ( the case now) , the impact on inflation is going to be much larger that the sole devaluation of the official exchange rate would suggest . I know economist cringe (rightly so!) when a non economist enter their domain with half baked notions , but Im really curious about these things.

  10. I never met Luis Matos Azocar in Venezuela. I met him here in Washington through common friends, in around 2006. Here he has done a magnificent job at the George Washington University, putting together from scratch a School of Governance focused on MBA’s designed for Latin American and Spain students, programs that now attract numerous candidates every year. Matos Azocar has dedicated much of his time to the study of Game Theory and Drama Theory, as applied to real life political and managerial dilemmas and has linked with pioneers in these fields , some of whom come to his MBA’s and workshops from abroad and from all over the country. I have been witness to some of this outstanding work and have had the fortune to participate, tangentially, in some of it. In the course of doing this I have become a very good friend of Matos, who lives in Washington in a modest fashion as an academic and who remains a true lover of democracy. I just wanted to let you know my view of this gentleman, now my very good friend.

  11. Although Matos Azocar was a minister of Jaime Lusinchi,that goofball was never reelected. In 1989 CAP II won the elections

  12. I met Luis Raul in 1987 on a flight from Caracas to Maturin. I expected a fire breathing Marxist and got a very smart, personable and intelligent individual. He was clear about the problems in Venezuela and knew a lot about agriculture and agribusiness and what we needed to fix to develop that sector. Unfortunately, I did not have the chance to catch him on his return, but the hour or 50 minutes talking to him were certainly worthwhile. Smart guy and I am glad he is here in the Empire.
    Lin Giralt

  13. >>> … Quite aside from the mechanics of dollar-allocation
    Allocating ‘a dedo’. like straight jackets [typically used to restrain a person who may otherwise cause harm to him/herself or others] belong in loony bins. Thankfully Zoloft is still available.
    Even today, spurious scandals of Azocar’s stay in govt. come graphically to mind. May he
    vegetate in peace in an ivory tower up in the imperio.


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