Without One Piece Of Evidence
We’ll get Down The Rabbit Hole in a minute…but first..
Prosecutor Tarek William Saab announced that the Fundaredes activists were jailed for “baseless accusations.” You know, the hate law. To make.. “public statements without one piece of evidence is unforgivable.” Call me crazy but almost all Chavista statements (accusations) have one thing in common, they are unsubstantiated. They constantly reference “external agents” in their conspiracy theories and they always say “we have proof ” telling us it will be revealed at the appropriate time… which is never.
Maduro’s new National Assembly (92% Chavista) voided 740 orders passed by the 2015 National Assembly. The Communications Minister went on to say that any country that supports the 2015 National Assembly is out to “steal Venezuela’s riches.” Uhhh.. after the Chavistas plundered the country there aren’t any riches left.
And in other National Assembly news, when a proposition came to the floor to debate the gas crisis, yes it’s still going on, PSUV (the Chavistas) all agreed it was a result of sanctions. Certainly nothing they did or are doing, like sending much needed oil to Cuba.
And in case you’re wondering, Telesur and Prensa Latina (Cuba) both published stories about the TSJ rejecting the latest UN report on regime abuses (you know, little things like human rights violations).
And now, Down The Rabbit Hole we go …
…So now you have less products available and consumers are forced to settle for inferior quality. Then the populace was put in the untenable position of not being able to afford many of these due to currency devaluation, inflation, then hyperinflation. The average Venezuelan could only afford subsidized products and even those were in short supply. People waited in line for hours when word circulated that a delivery was scheduled. After hours in the hundred degree heat they would have to be content with a couple of bags of rice,flour,or pasta as it had to be rationed. That said, you better not be too far back in line or they would run out. After some rioting and looting the military had to oversee deliveries.
Today availability is better but almost nothing is affordable to the average Venezuelan on their two dollar a month minimum wage. That might buy you a couple of bags of flour, maybe even a few vegetables (but only the real cheap ones), but that’s it!! Quite a fall from the pre “21st Century Bolivarian Socialism” levels of $175 – $200 a month (which we thought was low at the time but…well..). As with so many things Chavismo related, the minimum wage debacle deserves a detailed conversation so let’s just say that price controls did nothing but hurt the Venezuelan people. So what about currency controls?
Well, it’s broken record time again and I’m apologizing in advance for the tedious nature of the content. These Chavistas make simple things complicated but what you’re about to see is ridiculous. Hang in there. It will blow your mind. Oh, and imagine trying to manage your finances through all of this.
In 2003 when Chavez instituted currency controls it was primarily to prevent dollars from leaving the country.It was intended to be a temporary measure which lasted about 17 years. Remember, in the US, income tax was intended to be temporary. The bolivar had long been accepted only in Venezuela and a few border areas due to its unstable nature so having and retaining dollars to conduct business was necessary by both the government and individuals.
All business in Venezuela was to be conducted in bolivares and the government would control all bolivar/dollar conversions. There wasn’t much of a black market at the time as the rate (notice I said the “RATE”) the government used was about the same as the parallel market. The main benefit was the government’s ability to ration the allocation of dollars to the many multinational corporations doing business in Venezuela.
The airlines are a good example.There were 23 international airlines servicing Venezuela. Today there are about 7 (depending on Maduro’s mood). With all those tickets being converted to bolivares and deposited in Venezuelan banks it was a sizeable amount of money the government could sit on and gradually be repatriated by the airlines. It was annoying to the airlines but they were willing to put up with delays in the re-conversion process because they were making a good profit.
Without getting into the specifics at each stage of the Chavez/Maduro years let’s just look at the overall structure of the currency controls. There have been six (or is it seven?) different configurations of currency controls in general and four (or is it five?) different auction mechanisms.Think about that for a second. If you are considering doing business in a country or visiting a country, in most of the world, you have a pretty good idea what the rules are regarding currency conversion. In Venezuela they have overhauled their currency policy, on average, every three years or so under Chavismo. Generally the changes involved some new way for the government or well connected Chavistas to profit from the system.Here’s one example that will blow you away, at least if you’re not Venezuelan (they’re used to this Chavista corruption madness).
In June,2014 this was the scenario :
official exchange rate – 6.3 bolivares/dollar
black market rate – 71 bolivares/dollar
note : The black market rate fluctuated daily while the government rate remained the same for over a year which is a bit suspect when inflation at the time was 100% (those were the good old days, it has since been over 1,000,000 % and currently stands around 2,500%)
The government rationed conversion of bolivares to dollars through a byzantine regime of authorizations so only the well connected could get approval to exchange their bolivares for the six point three rate leaving businesses and individuals to fend for themselves on the black market.Arbitraging between rates became a Chavista obsession and produced many Chavista millionaires. Here’s how it worked.
Take 6.3 bolivares and buy a dollar. Sell that dollar on the black market for 71 bolivares. Take that 71 bolivares and buy $11.27. Sell that $11.27 on the black market for 800 bolivares. Take that 800 bolivares and buy $127. In a few simple steps you have just turned EVERY DOLLAR INVESTED INTO $127!!!
The world is awash in bank accounts of Chavista millionaires created doing this and siphoning dollars out of government accounts and into their own. If they didn’t take all their money out of the country they took their bolivares and bought hard assets to preserve their capital.
With the fall in oil prices and their depressed state over the next few years the government had to be more judicious with allocating dollars for bolivares. Their version of restraint was no money for non-connected individuals, no money for businesses, no money for importing food or medicine, and forget about money for the electric grid, PDVSA infrastructure,or pretty much anything else. The one area where they did act somewhat responsibly was in continuing to make their bond payments. This was out of self-preservation as they were still borrowing billions and lenders take a dim view of bond defaults.
To be continued….
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