In Venezuela, till yesterday we had two foreign currency exchange rates: one official and very restricted were the dollar cost 2,15 Bolívares; and the other, the black dollar (we call it “the real one”) which is three times more expensive than the official dollar. Then, president Chavez made an announcement that has shocked the country: a Bolivar devaluation, the first official one in at least five years and the introduction of another exchange rate. For now on we have three exchange rates: one, Chavez said for food, health and priorities with the dollar at 2,60 Bolívares, two for the rest with the dollar at 4,3 and three, the black dollar that will rise uncanny levels in the upcoming days
For non informed readers here are two simple truths behind the announcement. First, the Bolivar has been at least 50% devaluated. Prices will double and salaries will worth half what they used to, from one day to another. Second, food and other priorities will not be offered to us, consumers; at the cheap 2,60 dollar price. They are not offered to us today at the official dollar rate, they cost even five times more what they should cost if they were offered at the official rate. Three, the foreign currency market is still controlled and that has uncomfortable for not saying catastrophic consequences for all of us.
For keep talking about the consequences of this, I have to explain more in detail how does our control exchange works. I have to tell the story of this measure and other economical moves of my president. For the most, this story will sound silly and ignorant of many economical basic principles. I must clear up that I’m not making (I won’t ever do that on this blog) an economical analysis – pardon the expression - I suck at it. I don't know a lot about economics. I barely passed the few classes I had to take on the subject during my years in the university. Then, to remain loyal to this blog nature and purpose, I will tell you a control exchange story, from a personal perspective; how it does affects me as a citizen, at least the part that I’m aware of.
Was in 2003? 2004? I don't remember well. Chavez launched a control exchange measure. We all heard and many mistakenly believed that it was temporal. But five- six years is a long time for a temporal thing. From that day forward, the government established an official dollar and a way to access a limit quantity of dollars at that rate.
I’m only going to speak about how the control exchange affects the people who need to travel and the ones who need to buy something online. Those are the only things I need dollars for and the only ones I can speak with certain knowledge of the subject.
So, for those items, initial limits were put in 5000$ a year for travelers abroad, 4000$ a year (if I remember well) for shopping online. The arrangements for getting those dollars were pretty simple: you had to print a form available in CADIVI' web site (CADIVI is the government agency in charge of the foreign currency) and bring it to the bank. I did it a few months after the measure was launched, when I traveled to Mexico with a group of my university for a student competition. It was piece of cake for me: I took the form to the bank, and the bank activated this card that looked like a credit card for being suitable to work abroad; but you put money in it as it was a debit card.
One or two years later (I don't keep the track because I haven't traveled abroad ever since), the control exchange became more strict. The new limits: 2500$ a year for travelers abroad and just 400$ a year for shopping online. Plus the "debit look like credit" cards were forbidden. Only people with credit cards could access the government' cheap dollars (talking about socialism…) and the arrangements became more complicated. Luckily, thanks to a program between my university and a bank, a credit card is given to every student at his last year of the university. So even jobless, I have a credit card; with a very small credit but credit card at least.
Second time I needed CADIVI dollars was early this year when I started making my plans for attending graduate school. I needed the 400$ dollars to shop online. More exactly, I needed 175 to pay for my TOEFL test (Test of English as a Foreign Language) in order to start filling the requirements for entering any graduate school abroad.
The arrangements for asking those 400$ dollars were just crazy: three brown folders, with four dividers. Inside each folder, two CADIVI forms (printed from its Website) and a copy of my ID. All the documents were separated by dividers. Plus I had to print and paste detailed labels to identify all the folders and dividers. None of those tricky details of how to prepare your CADIVI application was specified anywhere, there was no instructions telling you to bring brown folders and print labels. So I made a couple of unsuccessful visits to the bank before I knew how to do it – quick advices from one bank employee or from a friend who was doing the same. On my third visit, the bank finally received my application. Then I had to wait a few weeks for the approval. They finally did it and I could take my TOEFL using CADIVI cheap dollars with my student’ small credit card.
I call them CADIVI’ cheap dollars because naturally, as the government dollars became more and more strict, and the arrangements more complicated (on the paragraph below I explained the most simple one. Travelers needed to make longer and more detailed folders); a black market rise.
The black market grew so much that the government forbid the media to talk about it. For a while now, is illegal here to speak about parallel market or black dollars, to publish any information about exchange rates and so on. For the government it’s like it doesn’t exist. But for the rest of us, is impossible to rely on roughly 3000 dollars a year for a variety of expenses. So the black market became even blacker: more speculative. A blog now is our only source for information on black market rates.
For common citizens, black market represents a big trouble. Let’s say you want to travel abroad but you don’t have a credit card or that CADIVI dollars are not enough to afford your trip. You rely on black market dollars. First, they can be even three times more expensive than CADIVI dollars. And they have all the problems a black market has: they might not be real. Must of us buy the dollars to friends or relatives but what if you are in a hurry and don’t have any choice but buying those dollars to a stranger? Second, you must take them to your trip in cash. Your Venezuelan credit card only works with CADIVI dollars – if it works at all. Unless you have an account abroad or something, you have to take sometimes a very big amount of cash with you and in a country like mine that’s just crazy and dangerous.
The government, on the other hand, benefits from its policy of hiding the existence of a black market. The official economic indicators, from poverty to inflation are made based on CADIVI dollars. But they are a lie. In Caracas Chronicles I just read that when you have several prices for the same good, the result is corruption. And speculation too. In a country where virtually everything is imported (and if its something is produced here, you can count for sure that it has been done using imported materials); everything costs sometimes even twice the black dollar value.
Of course, CADIVI regulations are not bad for everybody. A lot of people have taken advantage from it by performing the simple mechanism of obtaining CADIVI dollars and selling them to black market prices. Or let’s say importing something using CADIVI dollars and selling it twice the black market prices, meaning 5 or six times its original value. Imagine the profits.
At the end of this year, CADIVI announced even more restrictions for the use of its dollars. The 2500$ for travelers a year is now a fantasy. Travelers can access to certain amount of CADIVI dollars according to their travel destination and the length of their trips. The amount can vary without any logic: for trips to Asia, Oceania and Europe you can have the top 2500$ or even more, but for trips to Colombia and the Caribbean the amount is ridiculous. If I’m not mistaken, the people who travel to Colombia can only access to 300$ CADIVI dollars. Internet dollars are still 400$ a year but I heard I have to make all the arrangements again to get access to those dollars. And history tells me that those arrangements are probably even more complicated than the ones I have to make last year. But for me it’s a must: I have to take the GRE (Graduate Record Examinations).
With this new devaluation, my mind is wondering about our new daily life with all the goods even more expensive than what they used to. My boyfriend and I were joking about staying at home all the weekends and forgetting about our anniversary dinner because it will be impossible to pay for a movie ticket or a dinner with the new prices. But it’s silly to think about weekend night outs when all our family budgets will be affected and we don’t know how we are going to face it, to get through it. I haven’t found a job ever since my graduation and I have no hopes to find one in the near future. Logic tells me that no one is going to hire new employees with the coin 100% devaluated from one day to another.
My race to graduate school and without a job looks almost impossible. The GRE cost about 180$. In Bolivares, it will cost me double than what it used to. Also, the application fee for any university goes in a range from 50 till 100$. To increase your chances of being accepted somewhere, you must apply to four or five universities. If I was already worried because my 400$ dollars a year might be not enough, now I’m worried because my small credit card probably doesn’t have the limit for covering twice what I was planning to spend on graduate school applications. And I still don’t know if they are new arrangements to apply for CADIVI dollars. As usual, those details are not published anywhere and you find out about them by rumors or talks with bank employees.
I’m figuring out how to adjust to this life changing event. I’m not surprised by it. We are already used to skyrocketing prices and non logical government controls that do not fix the economy but instead, only make the citizen’s life harder. Our inflation was about 25% last year. I have notice that for a while now, products are not labeled anymore. I haven’t seen a can with a price printed on it in, well, a long time. To label is unpractical as prices changes daily. So this story about prices rising and inflation is nothing new for us. It will just be an increase of something we are already used to. Plus, we were all expecting the Bolivar devaluation, we all saw this coming.
But if one thing I don’t know is how this story ends. I don’t know how this story ends. This is an electoral year (crucial, legislative elections coming in September) so Chavez is taking a big risk by doing this. We are expecting new social moves that could make the economical crash more tolerable thus buying votes for the revolutions. For now things are just harder for everybody.
This New Year looks darker than our black dollar.
For non informed readers here are two simple truths behind the announcement. First, the Bolivar has been at least 50% devaluated. Prices will double and salaries will worth half what they used to, from one day to another. Second, food and other priorities will not be offered to us, consumers; at the cheap 2,60 dollar price. They are not offered to us today at the official dollar rate, they cost even five times more what they should cost if they were offered at the official rate. Three, the foreign currency market is still controlled and that has uncomfortable for not saying catastrophic consequences for all of us.
For keep talking about the consequences of this, I have to explain more in detail how does our control exchange works. I have to tell the story of this measure and other economical moves of my president. For the most, this story will sound silly and ignorant of many economical basic principles. I must clear up that I’m not making (I won’t ever do that on this blog) an economical analysis – pardon the expression - I suck at it. I don't know a lot about economics. I barely passed the few classes I had to take on the subject during my years in the university. Then, to remain loyal to this blog nature and purpose, I will tell you a control exchange story, from a personal perspective; how it does affects me as a citizen, at least the part that I’m aware of.
Was in 2003? 2004? I don't remember well. Chavez launched a control exchange measure. We all heard and many mistakenly believed that it was temporal. But five- six years is a long time for a temporal thing. From that day forward, the government established an official dollar and a way to access a limit quantity of dollars at that rate.
I’m only going to speak about how the control exchange affects the people who need to travel and the ones who need to buy something online. Those are the only things I need dollars for and the only ones I can speak with certain knowledge of the subject.
So, for those items, initial limits were put in 5000$ a year for travelers abroad, 4000$ a year (if I remember well) for shopping online. The arrangements for getting those dollars were pretty simple: you had to print a form available in CADIVI' web site (CADIVI is the government agency in charge of the foreign currency) and bring it to the bank. I did it a few months after the measure was launched, when I traveled to Mexico with a group of my university for a student competition. It was piece of cake for me: I took the form to the bank, and the bank activated this card that looked like a credit card for being suitable to work abroad; but you put money in it as it was a debit card.
One or two years later (I don't keep the track because I haven't traveled abroad ever since), the control exchange became more strict. The new limits: 2500$ a year for travelers abroad and just 400$ a year for shopping online. Plus the "debit look like credit" cards were forbidden. Only people with credit cards could access the government' cheap dollars (talking about socialism…) and the arrangements became more complicated. Luckily, thanks to a program between my university and a bank, a credit card is given to every student at his last year of the university. So even jobless, I have a credit card; with a very small credit but credit card at least.
Second time I needed CADIVI dollars was early this year when I started making my plans for attending graduate school. I needed the 400$ dollars to shop online. More exactly, I needed 175 to pay for my TOEFL test (Test of English as a Foreign Language) in order to start filling the requirements for entering any graduate school abroad.
The arrangements for asking those 400$ dollars were just crazy: three brown folders, with four dividers. Inside each folder, two CADIVI forms (printed from its Website) and a copy of my ID. All the documents were separated by dividers. Plus I had to print and paste detailed labels to identify all the folders and dividers. None of those tricky details of how to prepare your CADIVI application was specified anywhere, there was no instructions telling you to bring brown folders and print labels. So I made a couple of unsuccessful visits to the bank before I knew how to do it – quick advices from one bank employee or from a friend who was doing the same. On my third visit, the bank finally received my application. Then I had to wait a few weeks for the approval. They finally did it and I could take my TOEFL using CADIVI cheap dollars with my student’ small credit card.
I call them CADIVI’ cheap dollars because naturally, as the government dollars became more and more strict, and the arrangements more complicated (on the paragraph below I explained the most simple one. Travelers needed to make longer and more detailed folders); a black market rise.
The black market grew so much that the government forbid the media to talk about it. For a while now, is illegal here to speak about parallel market or black dollars, to publish any information about exchange rates and so on. For the government it’s like it doesn’t exist. But for the rest of us, is impossible to rely on roughly 3000 dollars a year for a variety of expenses. So the black market became even blacker: more speculative. A blog now is our only source for information on black market rates.
For common citizens, black market represents a big trouble. Let’s say you want to travel abroad but you don’t have a credit card or that CADIVI dollars are not enough to afford your trip. You rely on black market dollars. First, they can be even three times more expensive than CADIVI dollars. And they have all the problems a black market has: they might not be real. Must of us buy the dollars to friends or relatives but what if you are in a hurry and don’t have any choice but buying those dollars to a stranger? Second, you must take them to your trip in cash. Your Venezuelan credit card only works with CADIVI dollars – if it works at all. Unless you have an account abroad or something, you have to take sometimes a very big amount of cash with you and in a country like mine that’s just crazy and dangerous.
The government, on the other hand, benefits from its policy of hiding the existence of a black market. The official economic indicators, from poverty to inflation are made based on CADIVI dollars. But they are a lie. In Caracas Chronicles I just read that when you have several prices for the same good, the result is corruption. And speculation too. In a country where virtually everything is imported (and if its something is produced here, you can count for sure that it has been done using imported materials); everything costs sometimes even twice the black dollar value.
Of course, CADIVI regulations are not bad for everybody. A lot of people have taken advantage from it by performing the simple mechanism of obtaining CADIVI dollars and selling them to black market prices. Or let’s say importing something using CADIVI dollars and selling it twice the black market prices, meaning 5 or six times its original value. Imagine the profits.
At the end of this year, CADIVI announced even more restrictions for the use of its dollars. The 2500$ for travelers a year is now a fantasy. Travelers can access to certain amount of CADIVI dollars according to their travel destination and the length of their trips. The amount can vary without any logic: for trips to Asia, Oceania and Europe you can have the top 2500$ or even more, but for trips to Colombia and the Caribbean the amount is ridiculous. If I’m not mistaken, the people who travel to Colombia can only access to 300$ CADIVI dollars. Internet dollars are still 400$ a year but I heard I have to make all the arrangements again to get access to those dollars. And history tells me that those arrangements are probably even more complicated than the ones I have to make last year. But for me it’s a must: I have to take the GRE (Graduate Record Examinations).
With this new devaluation, my mind is wondering about our new daily life with all the goods even more expensive than what they used to. My boyfriend and I were joking about staying at home all the weekends and forgetting about our anniversary dinner because it will be impossible to pay for a movie ticket or a dinner with the new prices. But it’s silly to think about weekend night outs when all our family budgets will be affected and we don’t know how we are going to face it, to get through it. I haven’t found a job ever since my graduation and I have no hopes to find one in the near future. Logic tells me that no one is going to hire new employees with the coin 100% devaluated from one day to another.
My race to graduate school and without a job looks almost impossible. The GRE cost about 180$. In Bolivares, it will cost me double than what it used to. Also, the application fee for any university goes in a range from 50 till 100$. To increase your chances of being accepted somewhere, you must apply to four or five universities. If I was already worried because my 400$ dollars a year might be not enough, now I’m worried because my small credit card probably doesn’t have the limit for covering twice what I was planning to spend on graduate school applications. And I still don’t know if they are new arrangements to apply for CADIVI dollars. As usual, those details are not published anywhere and you find out about them by rumors or talks with bank employees.
I’m figuring out how to adjust to this life changing event. I’m not surprised by it. We are already used to skyrocketing prices and non logical government controls that do not fix the economy but instead, only make the citizen’s life harder. Our inflation was about 25% last year. I have notice that for a while now, products are not labeled anymore. I haven’t seen a can with a price printed on it in, well, a long time. To label is unpractical as prices changes daily. So this story about prices rising and inflation is nothing new for us. It will just be an increase of something we are already used to. Plus, we were all expecting the Bolivar devaluation, we all saw this coming.
But if one thing I don’t know is how this story ends. I don’t know how this story ends. This is an electoral year (crucial, legislative elections coming in September) so Chavez is taking a big risk by doing this. We are expecting new social moves that could make the economical crash more tolerable thus buying votes for the revolutions. For now things are just harder for everybody.
This New Year looks darker than our black dollar.