The Indecent Genealogy of Exchange Controls


The foreign exchange system is nothing new and the current one -not the first in Venezuela’s history- is the longest-lasting one to date. After 13 years, we tend to forget the details… so, inspired by Perez Abad’s Wednesday announcement, I’ll try my hand at a stroll down Venezuelan forex control memory lane.

This craziness started on February 2003, when the Government announced what should have been a temporary foreign exchange control and CADIVI was born.

CADIVI wanted to think he was an only child….but he was obsessively aware of the permuta, the secret, shameful love child hidden away in an attic. The Government didn’t like the permuta, claimed it was harmful for the economy and in mid 2010 decided to ban it. In turn, the Government created SITME to provide an alternative for the economic agents that used to trade with the love child.

SITME was not an exemplary child and the Government decided to get rid of it on February 2013. Jorge Giordani -the, at the time, Minister for Planning- claimed that SITME was the “blanket of Venezuelan bankers” and close to US$ 25 billion in capital flight were “lost” through it.

But there is an even more shocking figure: according to Giordani, one of the brains behind Venezuela’s complicated net of government controls, from 2004 to 2012 around US$ 215 and 250 billion fled Venezuela. That’s 33% to 40% of the dollars Venezuela received vía oil and non-oil exports in those years.

In 2013, CADIVI turned into CENCOEX. Also, SICAD 1 was born on March 2013. Originally they said it would follow a Vickrey auction format: a sealed-bid auction in which the highest bidder wins but the price paid is the second-highest bid. What followed ressembled no Vickrey auction I’ve ever heard of. SICAD 1 was a pathetic little weakling next to its older sibling: for every dollar assigned vía SICAD 1 in 2013, CENCOEX assigned more than 19.

A year later, SICAD had grown to over three times its original size and its fraternal twin was born: SICAD 2. So in 2014, for every dollar assigned vía SICAD 1 and 2, CENCOEX assigned close to 2. No se me pierdan, ok?

it’s not about reorganizing the system, it’s about eliminating the distortions and arbitrage possibilities.

But the heavy burden of imports, foreign debt and “commitments” to international suppliers -the Government refuses to call it “debt”- forced the Government to reorganize the foreign exchange system.

More announcements came on February 2015: CADIVI – now named CENCOEX – would be used to assign dollars for priority sectors (food and medicines), SICAD 1 and 2 would be unified and SIMADI was born.

But the three-tiered exchange rate system was a major fail last year. SICAD practically stopped operating, SIMADI assigned an average 4,14% of all official dollars and CENCOEX assigned 58% fewer dollars than in 2014.

This showed what most economist have been saying for quite a while: it’s not about reorganizing the system, it’s about eliminating the distortions and arbitrage possibilities.

And…here we are again. The Government just announced yet another new foreign exchange system: SICAD was officially killed, CENCOEX is now DIPRO and SIMADI is now DICOM. Apparently, the actual announcement was a simple name change.

So, to  recap:


Cadivi + Sitme


Cadivi becomes Cencoex

Cencoex + Sicad 1

Cencoex + Sicad 1 +Sicad 2

Sicad 1 and 2 are unified

Cencoex + Unified Sicad + Simadi

Cencoex is now DIPRO

Simadi is now DICOM


CADIVI, CENCOEX or DIPRO, however you may want to call it- is a 13 year old child. But control years are sort of like dog-years, so I say it’s close to 91. At least living in a country where you can’t always find food or medicines, that’s how long it feels. The rest of its siblings were born pretty weak and the only strong one seems to be the love child, now banished execrated, reviled, scapegoated for everything…but going strong.

We don’t have much hope for this family…


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  1. It was announced yesterday that between $5.5 & $7 billion would be allocated to DICOM this year.

    Good luck with that.
    Where is the money going to come from?
    Even at the lower amount of $5.5 billion that’s around $155 million a week.
    Don’t make me laugh.
    It will never happen.

    The black market immediately reacted by devaluing the Bolivar even further.

  2. Good post; the system is still clear as mud. Or at least, that’s what I thought until I studied the diagram illustrating this article. Then, I KNEW.

    The designer of that graphic should take a bow.

  3. Annabella and readers, help me out. What would happen if PDVSA just sold its dollars at the market rate, no bidding, just first come first serve. …and price controls were lifted. What amount of hurt is the government trying to prevent and is the present system more hurtful?

    • The dollars MUST be allowed to be sold by anyone else in addition to the government, which means “END OF THE MONOPOLY”.

      Destroy the price regulations, destroy the monopoly quotas, and the black market instantly disappears, because everybody could just stick their tongues to anybody selling at “unfair” prices and go buy somewhere else.

      As long as the possession of dollars remains as a crime, there’ll be a monopoly and thus a black market.

      And this applies with everything that’s scarce and being smuggled by illegal vendors these days.

      But chavismo will fight with all its power to avoid this, for two reasons, which are the very reasons of the creation of the controls in the first place:

      1) It would end their easy as a pie method of multiplying ill-gotten gains, boli-spawn and all the other swindlers that have sucked dry Venezuela’s reserves would find themselves without their illegal method of living when they could no longer buy dollars at a low price to resell them in the black market.

      2) It would mean the end of the political reason for the controls, the corpse stated in a particular brand of a megalomaniacal fit that “I won’t let the businessmen to have money, because they MIGHT fund the enemies of my revolution, no, there won’t be any money for them, never!”.

      The exchange controls were made as a political tool to “pauperize” the country and to take away all the possible financing to opposition, which coupled with the monopolization of everything for the sole purpose of gaining dominance over the population in the country.

  4. (continued) What exactly is it, other than capital flight, that the government is trying to prevent? Could this government survive that kind of devaluation? Would consumers see more products on the shelves in say, a couple of months? Thanks.

    • The current gov’t wants to have full control over the entire country and make the population completely dependent on them. A free exchange rate would be responsible policy but would remove the goody bag that they dole out among themselves and from which they ocassionally provide crumbs to voters. The chavistas see the gov’t as the “coroto” which they need to control rather than a job of being stewarts of the economy and protectors of the interests of the population.

  5. If all the world were one country, and it placed a trade embargo on Venezuela, then Venezuela could not import foods and raw materials replacement parts and other things it needs to produce. The world is not one country, and it does not embargo Venezuela. But Venezuela, with its official monopoly on the sale of dollars, places an embargo on all the producers within it.

    The other side of the picture is that Venezuela (the official executive government, ministers, and state apparatus), by importing foods and selling them way below market value and producer costs, is undermining Venezuela’s own production.

    There is the economic war, the one waged by the government against free markets and against itself.

    (En mi version del espanol, para que se confundan los gringos y los de habla ispana a la vez.) Bajo el nuevo sistema de cambio, como con la anterior, Venezuela se impone su propio embargo. Embargan hasta materias primas, que no se pueden importar sin permiso (divisas) del gobierno. Claro, si hubieran dolares sobrantes para todos, seria subsidio directo – selectivo, pero un subsidio. Por el otro lado del comercio, importaciones y ventas de comidas por debajo del precio del mercado y por debajo del costo de producirlas, subvierte los insumos y las producion de companias locales. Una comedia de errores disenada en algun infierno economico, todo al reves, y el gobierno quejandose de una guerra econmica que se fomentan contra ellos mismos.

    The entire “idea” of messing with free markets is just wrong. The function of government is to provide a stable environment in which people are free to pursue their own interests. It will not result in a utopia, and things will not be “perfect” and things will not be “equal.” There will still be hungry and unhappy people, but the majority will be free to pursue their own lives and their own economic interests with the respect and consideration for others which is inherent in mankind. Capitalist free market countries realize that, and have operated like that for many years – which is why these are the poorest and unhappiest nations in the world with the lowest standards of living, countries no one in their right mind would ever want to move to!

    • A free market economy may improve things but not to the extent of replacing the magic oil fantasy kingdom we have lived in for many decades now , oil may still help but it will not be able to provide the magic sustenance of the past , we will be much poorer and…. inwardly lost ……getting used to hard times is much more difficult after you ve known so much prosperity …….the explanation will be there but will we inwardly accept it without playing the blame game against whoever assume the tasks of government ??……. Where is the voice that can point the way towards some future hope …….there will be no miracles and much bitter dissapointment…….., the narrative has not been created that can lead the country to belief in some worthwhile future after the disasters of these years…………we have gone thru sometime like a lost war experience … we are orphaned from a world view that sheltered us and made us feel good about ourselves , what will replace it ….the old old nostrums of the miracle efficacy of education and a renewed ethics and the pursuit of agriculture and honest industry ……how will we fare as a second bigger edition of Salvador or Honduras ….!!

      • “Ooooh, man … don’t hit me with them negative waves so early in the morning.”

        Most beautiful beaches
        Mountains where you can drink water right off the ground
        Cattle land
        Fish-stocking land
        Gorgeous Capital at night
        Architecture unrivalled in the rest of the world
        Warmth of the people
        Most gorgeous women in the world
        Alma llanera
        Which country can do that?

      • I don’t mean to make light of what you’re saying. A lot of people were faked-put over the lies of communism/ socialism. Sometimes when hard times hit, people come together. There is a lot of work to do to unravel the mess, and a lot of economics – I mean practical economics, like food supplies, restocking and re-seeding farmland, reestablishing shops, repairing infrastructure, as well as getting an equilibrium in forex and balance of trade. But all it takes is that ray of sunshine in the morning, and seeing improvement. A lot of money and talent dodged the devastation, but get the legal system in a positive direction, and those smart guys may come back, not just for the opportunity but for their native soil.

        • What I see is that a lot of people will be in a funk when they discover that even if we do everything right , rebuild what Chavez destroyed , make ours a well run market economy, restore and reinforce the rule of law, somehow make govt more effective, with functioning institutions , the downfall of our oil wealth as the mainstay of our prosperity and the promise of a guaranteed better future will hit us hard … will leave us orphaned from a long cherished dream which helped define our national ethos and identity , which gave us the gift of always exhuberant spirits. The new normal wont be what Venezuela was before Chavez but something worse ……. specially as lot or our people come weighted down with a lot of inbuilt character flaws from decades or even centuries of bad customs ……social dysfunctions ….that will make it difficult to recruit them in the building of an improved system of life within a productive modern economy.

          Just read an interview given by Alex Capriles in El Estimulo recently , painting the state of prostration in which we are now living and how hard it will be to scape it ………I just dont thing that all people have the innate vocation and natural capacity to build prosperous growing market economies, part of the population does but the mayority are just dead weight whining and complaining about how their rights and privileges as Venezuelans are being robbed by a totally imaginary class enemy …..

          All our attention is phocused in getting the bastards our of Power but what do we have to bolster the prostrated spirit of people to assumme the challenges that they will now face , if we dont even have a route plan , a narrative to alllow us to find new hope in what now appearst to be a much more difficult situation…!!

      • BB,

        I am with Gringo on this one. You are being too negative. Yes, it is going to take a lot of hard work. And no, Venezuela is not going to return to exactly what it was. But, maybe that is not such a bad thing. Venezuela has all the advantages it needs to become a productive and prosperous country. In many important ways, it can become far better than it was before. The “magic oil fantasy kingdom” was fun for awhile, but it is time for Venezuela to live in the real world. It is harder work, but the rewards are more satisfying.


        Loved the reference to Kelly’s Heroes. One of my all time favorites!

        • Roy : maybe just a matter of emphasis rather than one of substance separates your views from mine , what I would really like is for some one to start preparing a road map and a guide book to go with it telling us what goals wen can pursue realistically and how we can get there from the abyss which is here and now …….. My concern is that I see in our fellows too much trust in the prospect that once the current obstacles are elliminated (and a liberal democracy restored) then almost automatically free market ideals will by themselves and without anything else take us to where we will feel content ……..and Im not all that confident thats the case …..there are barriers mental and even ethlogical that go deep into our history and culture that need sorting out and that I see no one beginning to address. !! I fear if we just go for the obvious solutions we will just turn into another failed country , just like we were before oil came into our lives….!!

          • BB,

            I understand your fears regarding the social and cultural issues. However, suffering and privation has a way of making people grow up. When I speak to many of the young people in Venezuela, I find that they are very aware that they will have to work their asses off for the next generation and carry the weight of the older generation that can’t change their world view. They accept it, and they just want to get started.

            Another thing that will happen is that many (not all, but many) Venezuela expats will return. These expats who have lived in modern countries will bring back with the knowledge of how things should be run. In addition, with foreign investment, will come foreign expats bringing expertise and modern cultural values and ideas.

            Truly, the situation is not as bleak as you think. When the rich kid’s trust fund runs out and he has to get a job, he probably thinks it is the end of the world. But, later in life, upon reflection, he may conclude it was the best thing that could have happened to him.

      • Bill, the hoja de ruta – the direction of the “plan” on the part of a responsible Venezuelan government – is to open up that stable platform for capital and markets. A critical part of that is currency, and part of that is foreign exchange which permits international trade. And the AN is doing that, reversing the reverse gears of “Chavismo” (whatever “Chavismo” actually is!). The rest is not up to the government. Which is where, if I read you correctly, your concerns are, that the “experiential mindset” of the majority of Venezuelans is to “spend oil money.” The US has the same problems, as does much of Europe – the whiners and complainers, the majority, view “the government” as “their oil money.”

        This article linked to shows what is real, not the illusion.
        This gaucho may not have a degree in economics, but I feel pretty sure he knows what he’s talking about. He says by 2017. If only the “government” would get sane, and real, and move out of the way;

  6. Pdvsa’s forex income from its export oil salses is currently insufficient to cover its forex expenditures , including goods and services which it needs to import to continue operations , money owed its offshore creditors , money or oil equivalent owed to China , Additional forex is being obtained using all kind of magicians tricks and small left overs from past transactions but its not enough to cover even a fraction of the countrys import needs , to supply the countrys forex needs the money has to come from outside Pdvsa , or from additional foreign loans but there is none of the former and not much prospect of the latter …….so the whole forex situation is one of desperate deficiency……!!

  7. Para que todo quede clarito, en vez de Dipro y Dicom, deberia ser Compro y Vendo. A Bs. 10, los Compro, como de mi COMpadre PROfessional, y a Bs. 206 se los Vendo, como a VENezuela, DO quiera.. Mas facil. Y con esos Bs. 206, bueno, ese es el “multiplier effect” o “la velocidad del chin-chin,” y los uso para mas Compro, para despues mas Vendo. La inflacion no existe. Esa no es contabilidad, si no que es nada mas que un cuento. A ponele pielna al pajalo loco, jejeje-jeje, jejeje-jeje … jejejejejejeje!

  8. Extremely well done- the amount of capital flight between 2003-2012 is incredible, but certainly( and sadly) was the smart money.


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