You don't have to be on LSD to come up with an auction mechanism like SICAD…but it helps

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Bizarro_World_001So the first analysis is in on the operation of the new alternative-to-CADIVI dollar auction system. (And yes, I had to put the scare-quotes in bold type because the particular mechanism they’ve come up with resembles a traditional auction in precisely the same way a juice box resembles a Shakespearean sonnet.)

How to Put this? Um. Well, if SICAD was a live auction, it would go something like this.

Auctioneer: I have here one crisp new dollar bill. Let’s see, do I hear any bids?

Bidder 1: Bs.29!

Auctioneer: twenty-nine I have twenty-nine twenty-nine twenty-nine twenty-nine…

Bidder 2: Bs.27!

Auctioneer: twenty-seven twenty-seven twenty-seven can i do better than 27…

Bidder 1: Bs.20!

Auctioneer: twenty twenty twenty I have 20 20 20 20 do I hear…

Bidder 2: Bs. 15!!

Auctioneer: fifteen fifteen fifteen…I have fifteen…any better…going once, going twice…SOLD

For Bs.10 with 90 cents to the gentleman here!

Yup, that’s how auction-like SICAD is…basically, there’s a band – apparently between Bs.9 and Bs.20 or so. If you bid within it, you get dollars at Bs.10.90 – for individuals, more for companies. Otherwise, no.

In other words, BCV is allocating dollars entirely arbitrarily not to the highest bidders, but to bidders within an entirely arbitrary “band”.

That band is never announced – not before the auction, not after. It then assigns the dollars at a single price that’s also arbitrary and also never announced – since that would be illegal, it not being “the” official rate.

And because there’s just one price, some people get dollars  for less than what they bid, but also – and this is some perverse shit – some people have to pay more than their bids!

And if you happen to bid above or below the secret band? NO DOLLAR FOR YOU!

The thing that stands out to me – aside from the perversity of describing this bodrio as an auction is that this will add yet another layer of mad perversity to the carpeta calvary. Imagine, you can put together a beauuuutiful importer’s carpeta with your pro-forma invoices from your suppliers and everything and then the price you’re assigned dollars at is just different from everything you’ve based your paperwork on! So what’s going to happen when you get audited?

Shudder, folks, just shudder…

1 COMMENT

  1. Bond allocations were identical, each one of the infamous Bs./dollar bond allocations was different in ranges, amounts, etc. If you new the secret sauce, you could score big, like the health equimpent people did in thi Sicad sale 🙂

  2. Its very funny, how they used Vickrey´s name in the first auction to justify the arbitrariness of what it is a directional dollar allocation when the point of using an auction system is to avoid corruption by establishing a objective parameter to award a good (the highest bidder) I guess Sistema Arbitrario de Asignación de Divisas a los Panitas didn’t look very well on official BCV Stationery

    • Yeah, and after everyone’s done bidding, the BCV will assign the greenbacks for Bs. 10.90. Or whatever the random number generator they’ve got in the back says.

    • Yup, and that would deprive the government of the only possible benefit of this faux-auction: It tells them what different companies are willing to pay. That is useful information for those who decide who to reward with dollars.

      • It also allows them to give the dollars away to cronies, so they can grow rich off the nations’ wealth. Isn’t this the whole point of Bolivarianism in the first place?

  3. This can’t really be happening. I would love to get my hands on an official report issued by the BCV itself.
    I am baffled:
    1,085 companies throughout Venezuela where given on average $166,359 @ 10.9 Bs/$.
    And these companies were sold dollars because they were the lowest bidders? or because they happened to bid at BCV “band”? Band?
    This is so staggering, I am confused.

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