Will the last firm in Venezuela please turn off the lights?

Caracas Chronicles recently had a fantastic post called “The Myth of the Bs.6.30 Dollar.”  It was written by an anonymous reader about the reality of getting foreign exchange legally in Venezuela.  I often talk about currency overvaluation, black markets, and capital controls in my development classes, but this is the first time that a participant has made it so clear that even the “lucky few” that have access to foreign exchange aren’t really so lucky after all.  I’m keeping this post for all of my future classes.  The system of acquiring legal foreign exchange in Venezuela is called CADIVI and here are some of the best excerpts from this person’s tale of woe:

Here’s how the long, tortuous process begins:

“Just to register in RUSAD and gain the olympian privilege of submitting a request to CADIVI, you need to tick a long series of boxes. Needless to say, you need to register your company, which is not as straightforward as you might think. Then you need to gather slew of stamps and certificates: a labor “solvencia” showing you’re in compliance with a thicket of labor rules, the INCES certificate, RIF, your IVA solvencia, your ISLR solvencia, your Fondo de Ahorro Obligatorio para la Vivienda (?!) solvencia, your municipal tax solvencia, etc. etc. etc. By the time you get the last solvencia on your list, the first one has probably already expired: go back and get it again. 

There is a 24 page document explaining the minute details you need just to be able to register to ask for dollars (not to actually receive them.  Some of these details include how you can (or cannot) bind papers together.

If you are importing anything non-essential (which apparently includes “chemicals, fertilizers, live animals and some minerals”), then you need to show that Venezuelan companies either don’t produce the product you want or at least not of sufficient quantity.  Welcome to import substitution industrialization folks.  You only thought (hoped) it was dead.

So, how do you prove that either of these facts are true?  According to the author, you need to either be exceedingly lucky or hire a fixer, (a.k.a., a gestor). This will cost you anywhere from 0.30 to 10 Bs per US$ requested, depending on the product. The process takes from 2 to 3 months, and you bear the risk of being rejected at any time for any reason.”

He or she points out that “in some cases, you may also need a SENCAMER certificate – don’t even ask – that’ll add another couple of months and 0.30 to 5 Bs per US$ to your tab.” lovely.

So what’s next in this government circle of hell:

“The next step is securing the Authorization to Acquire Foreign Currency. That one takes about a month. After this you are allowed to import under a set of very strict and always-changing CADIVI deadlines and requirements. Not complying with any of these can lead to your import being disapproved by MILCO and/or CADIVI, in which case you and your overseas provider won’t get paid.”

So how can you possible work on this and still run your company?  The short answer is you can’t.  The author recommends hiring 10 people if you are a small to medium sized business and 100 if you are a large one.  These people will spend 100% of their time on ticking the boxes and “supervising every step of the process, as a misplaced coma can – and will – cost you hundreds of thousands of dollars.”

After you’ve been approved, the sad fact is that you won’t get your actual dollars for another year. As the author rightly points out, no supplier is going to wait that long to be paid.  So now what?  The author recommends either hiring a “very expensive fixer (5 to 20 Bs per US$) to speed it up” or go to the black market to secure the dollars. If you go the second route, you have to ensure that the foreign supplier give you the dollars that CADIVI eventually pays out a year later.  Obviously neither of these options is very attractive.

The entire process takes between “15 and 24 stressful months, at a cost that could be anywhere between Bs.7 (if you’re very patient and unfathomably lucky) and Bs.30 per greenback.”  Good news though: Maduro in his infinite wisdom has decided that the process really needs two more layers of bureaucracy.

Given everything I read about the business climate in Venezuela, my question is how anyone can stay in business at all.  I’m surprised the economy functions at all.  The government seems hell-bent on driving all private companies out of business.

Release the hounds…

Argentina has an unfortunate monetary history and an unfortunate way of repeating their monetary mistakes.  There are Argentine critics from the late 1800s bemoaning Argentina’s inflationary ways and the complaints sound like they could have been taken straight from the 1980s.

I teach Latin American Economic Development and Argentina is the gift that keeps on giving, still managing to surprise me every once in a while. For instance, I’ve been amazed (as have my students) at the stories about fines and prison time for economists that dare to publish alternative (read: accurate) inflation statistics.

Now, government restrictions on the holding of dollars has turned people’s demand for foreign exchange into a cat and mouse (and dog) game.


A WSJ article (gated, here is an ungated version) documents how Argentines looking to buy dollars must do so on the black market in transaction locations metaphorically called cuevas (or caves). The sellers of foreign exchange are called cavemen.

The government bans people from saving money in dollars and travelers are allowed very little foreign exchange for travel.  The author notes that, “Travelers must submit an online request to the national tax authority just days before leaving, and they usually receive approval for much less than they requested.”

Businesses that need to buy foreign imports must get the government’s permission to do so before being granted access to buy foreign currency at the official rate.

But of course, this just results in black markets and corruption.  The government has a strong weapon in their arsenal however, namely the dollar-sniffing dog.  My question is, do dollars smell different than pesos?  Are they especially stinky?  Is this all a ruse to cause people to think twice before smuggling dollars?  It all sounds pretty suspicious.

They just unveiled the 100 peso bill though with Evita’s portrait so I guess they have their economic priorities straight.