Did Tareck El Aissami just announce the end of exchange controls, chavismo’s goose that laid the rotten and profitable eggs?
In a speech before the National Constituent Assembly —weirdly called a “debate,” when there was nothing to debate—, El Aissami announced the repeal of the Exchange Crimes Law and of an article in the Central Bank Law that forbids foreign exchange transactions in the country. Said like that, it appears to be the end of chavismo’s exchange controls, easily the most economically-devastating policy of chavismo.
History has taught us to doubt any exchange policy announcement by this government.
But history has taught us to doubt any exchange policy announcement by this government. In the not-so-distant past, they’ve announced numerous exchange systems in which the rates would be set by “supply and demand” and even the hated “markets.” People would be able to exchange as much as they wanted, they said. Buy and sell, no limits whatsoever. SITME, SICAD, SICAD 2, SIMADI, DICOM, DICOM-Let’s-Try-Again.
In every case, the description of the new system sounded different from the previous iteration of controls, only to reveal another idiotic system with no other purpose than to hide the absence of a system. It was just some red-shirted guys sitting in a table, deciding who got what, taking their cuts (or taking all) and thinking of a number that looked random, but wasn’t.
The decree is vague and doesn’t say what happens with several key parts of the exchange controls. For example, it’s unclear if the Convenios Cambiarios are still in force. These exchange agreements govern how the government sells dollars to the Central Bank, and how the bank, in turn, sells them to people and financial institutions. What’s more, El Aissami said people would be able to “go to a bureau de change and make any exchange transaction.” Well, you can do that already! Albeit at an official rate that’s below the black market rate.
At the moment, it looks like the government is more interested in getting people to sell their dollars legally… and not so much in buying and sending abroad.
Tellingly, he didn’t mention banks, which would be the way you’d send money abroad. At the moment, it looks like the government is more interested in getting people to sell their dollars legally —get their piece of the remittances from the diaspora—, and not so much in buying and sending abroad.
As much as we’d like to see the end of exchange controls, it’s difficult to fathom how the government could kill them now. They don’t have any dollars to sell in an open and free exchange market to keep the bolivar from devaluing constantly, so they’d have to let the market dictate the official rate. If they do, it won’t be pretty: as we have all seen recently, exchange rates devalue rapidly in hyperinflation. The logistics would also be difficult to manage, since the government is finding it hard to make transfers abroad, thanks to FinCEN’s money laundering warning.
So let’s wait until they open the box of whatever they just approved in the ANC before we decide whether the exchange controls are dead. Once they do, you can decide by yourself by answering a simple question: Can I transfer abroad whatever amount of money I want to?
If you can’t, then the goose is alive.