It was the cheapest of times, it was the most expensive of times…

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Because el raspaíto is not just a river in Egypt.
Because el raspaíto is not just a river in Egypt.

In Time Magazine, Girish Gupta gets a rare chance to expose Distortioland in all its contradictory glory.

Venezuela [is] simultaneously one of the most expensive and one of the cheapest countries in the world: take-out noodles can cost $30 or $3 depending on whether you have access to the local currency or US dollars; a night at a five-star Marriott hotel costs $700 or $70. It is the same principle that [allow those who have] access to US dollars, to fly so cheaply…

Some business visitors here are paid expenses in US dollars at the official rate even though they obtain their local currency on the black market. One young European business consultant, who asked not to be named, was able to pay off his entire student loan after a month’s work in Venezuela. Those with foreign health insurance plans that pay out in foreign currency are able to make a more than ten-fold profit on claims. For example, a visit to the doctor can turn a profit of $115. This is because an appointment costs around 800 Bolívares, which is noted on the claim form. The insurance company then converts this at the official rate and pays out $127. But, if the patient had initially converted US dollars on the black market to pay for the appointment, the actual cost of the vist would have been around $13. Similarly, with such arbitrage, an MRI scan can net a profit of around $500. A week-long stay in the hospital can be even more lucrative, bringing in more than $10,000. This has turned a few foreigners here into hypochondriacs.

I know how hard it can be to get an editor to go for one of these exchange control stories. It’s abstract, it’s confusing, it’s hard to fit into a cookie cutter narrative. So hats off to GG for getting this into print. Not easy. Not easy at all.

1 COMMENT

  1. The article is fantastic! Over the holidays in Colombia I told many people about the thirty-dollar-nickel experiment (buying bolívares at parallel, buying gas and selling in Colombia). Their faces were priceless. One week later and I could’ve gotten together an expedition to San Antonio del Táchira

  2. I love the – how to put it – creative germ at the center of the CADIVI scamiverse. I mean, it’s like a life-force, an animating spirit giving rise to more and more different scams than any one person could possibly think up. That travel insurance thing? That’s genius! The sad, evil genius of white collar criminaldom, sure, but genius just the same…

    My one “but” is that Girish misses the nub at the center of all this. Bs.6.30 dollars are hush money for the military. It’s not really possible to make it any more succinct than that. THAT’s why they exist. His piece elided that. It’s too bad.

    • The thing with the military is that they are no longer a compact sized caste as they were in the old days when all military men knew each other from having a common regional origin or from having gone to the same military schools or from sharing a distinct professional culture which aspired to be technocratic and in which careers criss crossed each others repeatedly. now the armed forces are much larger , atomized into many small rival groups and circles and organizationally into many different independent commands . In the old days it wasnt difficult for a man with charisma inside the caste to gather a group of his comrades and organize a coup. now I would wager is very near impossible . The govt has probably made sure there is a chaotic command structure with many countervailing groups where the only the most loyal get an effective command . The govt of course uses a system of generous rewards (both lawful and unlawful) to keep the military in general happy and enternained . But the caste mentality is gone and with it much of the threat that an united military might offer an entrenched regime. Military men also are usually fearful of handling the political side of things, of having to confront a large hostile population , for the most part they dont see themselves as politicians. Only if things get desperate may some of them dare attempt to intervene and then weight in how many others in the armed forces are willing to stay quiet or follow them .

    • It was the cheapest of times. It was the most expensive of times. It was the most dangerous of times, trying to sweat the arbitrage in situ.

    • I believe, apart from cheap food for Mercal/priority medicenes, the real reason for 6.30 is for accounting purposes to boast to the world of the “high” dollar Venezuelan minimum wage/GDP/etc achievements of the “Revolution”.. Upper Venezuelan military traditionally have raked off very high hard currency commissions on large arms purchases, which is their real boondoggle. It was even rumored, after April 11, that Chavez deposited in Swiss banks (safe then) $1 mill. to each of his top 3,000 military officials…

    • You can think it’s hush money for the military. I can think that too. Girish can certainly thinks that as well but: does he have enough proof to show that to foreign readers who are not aware of the whole Venezuelan system?
      One of the things I have realised lately is how little the military component is heard of abroad. Yeah, they (almost) all knew Chávez was a military man and the guys who keep following Venezuelan news know there are quite some military in power…but the majority of readers, even there? Nope, I don’t think so.

      • Regarding the military, some of my relatives in Tachira spend most of their recent days buying up whatever products they can find and then going to the Colombian border, selling them to the military, who in turn sell it at a huge profit in columbia.

        From what they tell me it’s a smooth operation (as most money making machines tend to be) with orderly lines and occasionally crude signs with prices. Obviously, there is no fear of getting ‘caught’ because who would catch them? They (the military) are the authority. Are the political powers that be helpless to do anything about this? Do they turn a blind eye to ensure military loyalty? Are they in on it too or too busy in their own arbitrage schemes? I would suggest all of the above being true.

        In some parts of the mountains, the guerrilla also act as the middlemen and offer competing rates for arbitrage seekers. Those wary of the military go there.

        What a country.

    • I don’t think the piece meant to be an in-depth critical exposé of the circumstances surrounding the FX control in Venezuela, Quico… it’s more of a guy pointing at something odd and yelling “wow, you guys, come check this shit out!”

      Readers in Seattle or London or Hong Kong don’t necessarily care about the political situation in the deep third world, they just want something to mention casually at happy hour with friends: “did you guys read that piece on Time about Venezuela? that is crazy, we should go there and travel the world for 500 bucks…” (which of course, they won’t do)

      • Indeed. Lately when someone asks me about Venezuela I look at the person for a second or two and if I think it’s worth it, I tell him/her to read one of our blogs, period…or I just say: “you don’t want to know”. Only if the person asks a very specific question do I bother to answer. At this stage anyone who doesn’t know won’t have the interest to delve into the whole socio-economic analysis of the whole mess, not for a minute.

        • I hear you. I’m an American and have been living in Caracas for over a year now. I just am at a loss whenever people tell me, “Oh awesome! Beaches, right? That’s great. I hear Chavez is crazy though.”…

          Yes. Beaches.

    • CADIVI has created an entire industry of Cobra-breeding around itself.

      You know there’re quite a few folks upstairs who do not want this racket to go away.

      • of course, same thing with the scarcity and the drug trafficking… or do you really believe Maduro when he says the political opposition is behind these key, profitable black holes?

  3. Think of it, less cheap dollars will be available to be distributed this year. And next year it will be worse, and so on and so on. We can all agree with chavismo there this is an irreversible deterioraton of the economy. So yes, plenty of corruption but the the truth is the arbitrage opportunities will be available to significantly less people from now on.
    As Miguel Octavio has explained in his blog, arbitrage has become an important source of revenue for Venezuelans, so this will certainly have an impact on people’s pockets.

    Less money, shortages, inflation,…perfect combo for social upheaval.

  4. Arbitrage profits are no doubt easy in Venezuela but the only way a foreign can profit is in services and stuff. Bring a load of dollars, convert to BF, buy shit loads of services and stuff in BF and live well. If I could bring a thousand dollars US today from outside and return tomorrow with 10,000 dollar US, hell we’d all be doing it.

    So maybe I’m missing something. Did the student pay off his student loan in BF? Euros? Dollars? Or was he buying and selling in BF then converting at the black market? Doesn’t pass the smell test for me.

    • He was buying VEF in the black market with his own dollars, to pay for his expenses.

      Then he sent the recipes in VEF to get reimbursed for his expenses. The reimbursement calculated the amount of USD for each VEF using the official rate.

  5. The way people have taken to cunningly arbitraging or gaming the opportunities for illicit gain offered by the regimes insane exchange control system is a sign that their primitive capitalist instincts are still in full sway , that you cant use speeches and propaganda to change a culture of raw pilfering, pillaging and profiteering into one in which people forego their inbred instincts to become the hallowed angels, the pure ‘new men’ of communist mythology .
    If anything the regime has through its maladroit policies and practices made those base predatory instincts blossom and become more ingrained . The corruption of the fourth republic has now methastizised thanks to the idiotic practices and policies of the Fifth.!.

  6. Might I suggest that the current Colombian-Venezuelan border can be easily compared to the old Ho Chi Minh trail. No matter how many B-52 bombers are flying overhead, or threatening edicts coming from Miraflores, all kinds of cool stuff will eventually make its way across that border. Fighting an arbitrage war on that scale is never gonna be a winner.

  7. You know what, for me, is the hardest part of being a Venezuelan living -and earning- abroad? That damn ethical conflict of interest where the existence of CADIVI / SICAD is actually, up to a point, beneficial for you…

    A couple of years ago, on a whim, I was able to travel to Los Roques just to impress the girl I was dating (currently my girlfriend, as you would expect). A great friend of mine, currently living in the US, was able to have a top notch honeymoon paying a few dimes on the dollar only by doing a quick stopover in Maiquetía…

    Superficial enough? Well, what about the more recent case where my grandmother fell ill back in Caracas, and I was able to afford a nurse to keep her company at home, all night long, for a measly 10 dollars a night?

    Does this turn me into a low-life cadivero? Does it take away any Vzlan ex-pat’s right to question the government whenever they travel back to Vzla and go out to expensive restaurants at a price that could only afford them fast food back in their current home countries? Aren’t I, my dear sick grandmother, and your average raspacupos all basically just reaping the blood diamonds of this heinous FX system?

    Guess CADIVI lends itself to philosophical questioning as well as an economic one…

  8. Well, this disprove the myth that the raspaíto is inherent to the viveza of the “venezolano” and that there are people from all over the world, willing to buy 100 dollar bills for ten bucks.

    • They are not alone. Many airlines are refusing the STRONG bolivare BF. Air Canada was joined by United, AA, Copa (Panama), Tame (Ecuador), CAP (Portugal). Air Europa lead the way. You can still leave Venezuela. Only catch is you pay in dollars. Of course in this way you are paying 10 dollars for that hundred dollar bill and not the other way around.

      Side note- heard yesterday the raspaito for Miami is reduced to $700 USD, about the cost for a family of four to spend four days at Disneyworld!

  9. Could someone explain how things work if a student wanted to study outside of Venezuela.

    What are their options? Would the government exchange their Bsf at 6.3 or do they have to go to the black market? If the government will exchange their money is there a maximum amount that they are able to exchange?

  10. Off topic: Back in November, four Iranians and one Afghan tried to board a Caracas to Vancouver Air Canada flight using fake tickets. The on-board crew discovered the discrepancy in the passenger manifest and the five were ejected from the plane. Does anyone know more and is this a one-off?

  11. Just one example of some of the many economic distortions: A dental check-up and teeth cleaning costs Bs. 600 whereas a small jar of peanut butter costs Bs. 300. WTF…?

  12. Now they think they are going to tell internet sellers like Amazon what prices they can charge for internet sales in Venezuela. Bet that works out great! Do they think Amazon will adjust prices just for Venezuela?! There will be a huge black market now in unavailable goods that will make Colombia and crooked chavista politicians rich. The stupidity of Marxists always boils down to one dumb idea: it is morally wrong to make a living on your own.

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