A post as simple and basic and short as possible, to make sure you get it.
Over a month ago economy minister Giordani in a fit of despair shut down the open currency exchange market which allowed you to buy dollars by swapping trade-able stocks and bonds, in a kind of a higher bidder system. The system was not perfect but it allowed business and individuals willing to take a hit to buy the dollars they needed. And the hit taken was no small affair: at an official 2.6 exchange rate, a semi official 4,3 for some items, people had to pay 6 an up, and shortly before its closure around 8, and going.
Why was the swap market 3 to 4 times the value of the official dollar? For one very basic reason: the government was very stingy with the the dollars it gave at 2.6 or 4.3, in spite of these values fixed by a maxi devaluation last January. People needed to work, needed to keep their shops and manufactures open, needed to buy raw material to produce or goods to stack the shelves, so many decided to buy at 8 as the only alternative to shut down their livelihood. If you add to this that no one wants to save in Venezuela, chavista or not, you understand better the situation.
After weeks of angst, the government feeling that it needs to open an outlet outside of the CADIVI controlled currency exchange market decided to open one strictly controlled by the state, based on bonds held by local banks and, we assume or at least hope so, some dollars from PDVSA, the oil monopoly. It opened today and based on its initial regulations the only thing we can state safely is that the Venezuelan state does not have the money to finance its new scheme.
Why?
First, not everyone will be allowed in. You will need, to begin with, to have an account overseas under your name. Many will balk at that because it will be a way to reveal where their savings are, unless they open a second account. Thus the only people that will apply are those who do not care about any political or economical measure taken against them, those who are close to regime and those who have already enough money stashed out to leave Venezuela on notice if needed. In the country that invented the "Tascon List" and "Maisanta" programs, any such measures reekspolitical apartheid. In other words if the government is scaring away potential customers it is because it knows very well it cannot serve all.
Second, the amounts given are not something to write home about. The offer is not designed for the modern needs of a large industry. At best it will be enough to buy spare parts, small equipment, for which the complexity and delays of CADIVI force people to go and buy at any price. This is not the way to run a modern country. Probably that new scheme will not be enough to import the Scotch and wine "needed"! In addition the Central Bank, BCV, now in charge says that the dollars will be disbursed to those proving the need, whatever that means. That is, the BCV director will have the power to decide to import the Merlot he likes but the Syrah you like will not come anymore. Such restrictions and arbitrariness in allowance can only mean one thing: there is not enough US dollars to go around for all. This is not even a matter of control! It is just a matter of "being broke" and choosing which creditors you pay first.
What will happen?
The new system will fail because it is not designed to supply the lack of CADIVI which was the main reason for the defunct swap market that functioned until a few weeks ago. What will happen is that a totally illegal black market will be created where people will build a network of "friends" to swap among themselves bolivares for dollars. As such that black market rate will have to pay a risk premium because it is illegal! As such if you get your dollars that way you will probably end up paying soon 10 bolivares for a single dollar. And going up, and up, as Chavez keeps wrecking the economy.
But that illegal market will not be the answer. Since you cannot bill at that rate people who cannot access dollars for their business needs will either pay a hefty commission to some bureaucrat to get permission (corruption) or will close down their business. That is, the black market will be used mostly for people trying to ship out their savings. That black market will not solve scarcity, it might even aggravate it! We must thus expect higher inflation, higher unemployment, more corruption. Inflation is already above a 30% yearly rate and with the failure of the new exchange scheme it could be pushed easily as high as 50%!
And yet this will not stop capital fleeing the country, it will just slow it down and make it more of a business for the privileged few. For example, let's say that you import a certain type of silicon to assemble furniture you sell. You import each tube at 5 USD and buy 1000 a year. What you will say to your provider is that instead of billing you the 5,000 yearly supply, to bill you 6,000 now and give you the 1,000 difference as a "sale commission". Voila, your account in the US gets a tiny little bit fatter and CADIVI will only know about it if it bothers to check out and find a cheaper provider. But if there is only one provider, what can CADIVI do but to accept your surcharge? Imagine now that instead of a silicon stick we are talking of a special antibiotic only sold by two countries, one being the US and the other Brazil. Venezuela will allow you to buy the more "expensive" Brazilian drug for political reasons, and voila, now it is not 1,000 that you get out but as much as 100,000 in "commissions".
As usual like, as for with any of these controlling measures chavismo is constantly taking, the privileged few will always be able to find ways to escape the straight jacket while their employees will be denied that escape, be the "owner" a chavista minister or the director of a multinational trust. At the bitter end, the more controls chavismo puts up, the more it favors corruption and hurts the people it is supposed to help.
PS: in case you are still not getting it, what the Chavez administration did was yet a new devaluation except that few will have access to that rate. Expect a real one after the September vote, by January. The 2.6 rate of today will be pushed ruthlessly to 4.3.