4 ms·

That's precisely the problem. The govt decides who gets dollars at rate #1 (Bs.10/$) and who gets the other rates. Of course, only govt officials and friends ge

by rafaelm 11y ago

That's precisely the problem. The govt decides who gets dollars at rate #1 (Bs.10/$) and who gets the other rates. Of course, only govt officials and friends get rate #1. They establish a company in say, Panama. Their venezuelan company imports food from Panama at rate#1. They claim they imported 1 ton of food, for example, while they only actually bring in half a ton. Or they buy the food at a certain price and they overbill the govt. Expand that to every facet of an economy where EVERYTHING is imported: food, medicine, appliances, cars, tires,etc. The black market rate is at Bs.1000 per dollar. That's a Bs.990 difference. It's practically a money printing machine! Buy dollars at Bs.10, sell them at Bs.1000, restart the process. Over and over until there's no money left, which is our current situation.

sremani 11y ago
But who is selling the government USD for 10 Bolivars? I guess they are swindling from foreign investors trying to do business in VZ.
- CydeWeys 11y ago
  No one is lending them money anymore. They're swindling from their own citizens now, some of whom have incoming USD from out of country.
- slv77 11y ago
  The government nationalized their oil companies which, even at these prices, is still a reliable source of USD that is converted to Bolivars at the official exchange rates of 6.3 to 1. Importers could then bid for these dollars at different exchange rates to buy medicines and raw materials. As long as US companies like Kimberly Clark, Clorox, PepsiCo, Goodyear and airlines had access to import raw materials at the official exchange rates they could, on paper, be profitable but couldn't expatriate any earnings. They were also motivated by the threat of nationalization. Recently many of these companies have started to write off these earnings by marking down bolivar holding and writing down assets.
  - rafaelm 11y ago
    The oil company, PDVSA, has always been national. They are practically selling oil at the cost of production right now, so there's no money. Maduro said yesterday that during January , only $77 million entered the economy from oil sales, down from $37.000mm in January 2014. International companies have their assets tied up in worthless bolivares here [1], so that's the reason there are no tires for example, and if you find one in the black market, they cost around Bs.70.000. The minimum wage is Bs.13.000, after yesterday's raise. [1]http://www.ft.com/fastft/2016/02/09/goodyear-takes-646m-hit-on-venezuela/ http://www.ft.com/fastft/2016/02/09/goodyear-takes-646m-hit-...
    - slv77 11y ago
      The PDVSA didn't have the technical expertise and capital to fully explore and exploit their oil fields. The oil majors had stakes in several projects that were nationalized starting in 2007: http://www.reuters.com/article/venezuela-nationalizations-idUSN1E79I0Z520111201 http://www.reuters.com/article/venezuela-nationalizations-id... Exxon and ConocoPhillips filed arbitration claims which resulted in an attempt to repatriate PDVSA assets. That resulted in the planned sale of Citgo and may have also motivated the repatriation of gold reserves held overseas (but who knows). Citgo eventually ended up issuing $2.5B dollars worth of bonds which stripped the asset of a lot of it's value. Ouch on the price of tires.

by rafaelm 11y ago

sremani 11y ago

But who is selling the government USD for 10 Bolivars? I guess they are swindling from foreign investors trying to do business in VZ.

CydeWeys 11y ago
No one is lending them money anymore. They're swindling from their own citizens now, some of whom have incoming USD from out of country.
slv77 11y ago
The government nationalized their oil companies which, even at these prices, is still a reliable source of USD that is converted to Bolivars at the official exchange rates of 6.3 to 1. Importers could then bid for these dollars at different exchange rates to buy medicines and raw materials. As long as US companies like Kimberly Clark, Clorox, PepsiCo, Goodyear and airlines had access to import raw materials at the official exchange rates they could, on paper, be profitable but couldn't expatriate any earnings. They were also motivated by the threat of nationalization. Recently many of these companies have started to write off these earnings by marking down bolivar holding and writing down assets.
- rafaelm 11y ago
  The oil company, PDVSA, has always been national. They are practically selling oil at the cost of production right now, so there's no money. Maduro said yesterday that during January , only $77 million entered the economy from oil sales, down from $37.000mm in January 2014. International companies have their assets tied up in worthless bolivares here [1], so that's the reason there are no tires for example, and if you find one in the black market, they cost around Bs.70.000. The minimum wage is Bs.13.000, after yesterday's raise. [1]http://www.ft.com/fastft/2016/02/09/goodyear-takes-646m-hit-on-venezuela/ http://www.ft.com/fastft/2016/02/09/goodyear-takes-646m-hit-...
  - slv77 11y ago
    The PDVSA didn't have the technical expertise and capital to fully explore and exploit their oil fields. The oil majors had stakes in several projects that were nationalized starting in 2007: http://www.reuters.com/article/venezuela-nationalizations-idUSN1E79I0Z520111201 http://www.reuters.com/article/venezuela-nationalizations-id... Exxon and ConocoPhillips filed arbitration claims which resulted in an attempt to repatriate PDVSA assets. That resulted in the planned sale of Citgo and may have also motivated the repatriation of gold reserves held overseas (but who knows). Citgo eventually ended up issuing $2.5B dollars worth of bonds which stripped the asset of a lot of it's value. Ouch on the price of tires.