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description= 5 posts published by moctavio during February 2015;
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Text of the page (random words):
he detention of leopoldo lopez but the immediate reaction and condemnation of the detention for the opposition taking advantage of the government s low popularity will not be easy the opposition lacks access to the media and has precarious financing if its leadership were to be jailed the battle would become even more uphill to obtain 2 3 of the deputies in the national assembly any possible electoral discrepancies would never be investigated chavismo would achieve its goal of keeping power no matter what clearly there seems to be no one that opposes maduro within the government at this time going forward repression is likely to increase as the government sets aside any pretense of being democratic not pretty posted in uncategorized 31 comments simadi may be a system but it is not a market february 12 2015 just my luck that last night just as i pushed the publish button i received a copy of foreign exchange agreement 33 regulating the new market different than the cencoex bs 6 3 per us system and the bs 12 sicad system then this afternoon i received the regulations for the securities part of simadi in some sense it is good that it happened this way otherwise lst night s post may have been too long complex and boring to give you my punchline right away simadi may be a system but a market it ain t in fact it an extraordinarily complex and bizarre system for buying and selling currency it even makes you wonder why it is that way simadi has three parts 1 the cash retail system 2 the bank cash system 3 the bank and broker securities system let s look at each of them 1 the cash retail system this market called menudeo will function via foreign exchange houses and banks and be devoted only to individuals minimum is us 300 and it will be limited to us 300 per day us 2 000 per month and us 10 000 per year for each individual how does it work you go to your bank or exchange house and buy or sell dollars at yesterday s exchange rate for the system this will also be yesterday s rate the referential rate for credit card transactions and custom duties 2 the cash bank system this is likely the weirdest one minimum is us 3 000 you also buy at yesterday s rate however each bank can only buy and sell foreign currency with its own clients that is there is no interbank system or market you buy and sell only with the clients of your bank and at yesterday s price to make it even weirder banks can not hold positions that is they can not buy dollars for their own account in this system only by buying selling cash from clients and selling buying cash to other ones if they buy too much on a given day they have to sell any excess foreign currency to the venezuelan central bank oh yeah if you are a client and want to do either you have to send the bank either the bolívars or the us to the bank ahead of time only if they are there is the bank allowed to do the transaction 3 the securities system the securities system will operate in the bolivarian stock exchange where all authorized brokers and banks can operate they can buy or sell dollar denominated securities in exchange for bolivars at an agreed rate however they can not do transactions with anyone but their clients and other brokers and banks can not be your client i e you have the sellers you can find buyers among your clients that s it when you sell the bonds in us the dollars from the transaction have to go to your venezuelan banking system dollar based account in this market brokers and banks can take positions i e they can buy for example dollars from a client keep it and later sell it to another client but not to another broker or bank oh yeah the central bank does have to approve the transactions you close thus this is no market this is just a bizarre system why do you need to do this via an exchange is a mystery except that the government wants to keep tabs of transactions but there are no bids or asks the clients of your institution to use the language of the regulations agree on a price and you do the transaction at that price but you don t talk to other market players you only look at previous transactions and try to have your clients agree on a price what does this mean the price has a strange way of being constructed there is no market per se if you are a bank or a broker you can only sell however many dollars your own clients sell to you i suspect that government owned banks will have a huge advantage as the government the largest generator provider holder of foreign currency will likely give its own banks bonds or foreign currency to trade they will have a gigantic advantage over private banks once again leave the private sector out of it as much as possible maybe the word marginal refers to the role of the private sector in all this the parallel market still exists moreover there will be arbitrage now not only between cencoex and sicad and the parallel rate but there will also be arbitrage between simadi and the parallel rate and a privileged few will make a lot of easy money market it is not just a bizarre and complex system to exchange foreign currency par for the course from chavismo posted in uncategorized 64 comments venezuela another marginal fx system february 11 2015 i waited until today to write about yesterday s announcements about the new fx system because we were promised for today some decrees relating to the rules that would oversee these supposedly new fx system but much like everything that has happened so far in 2015 there are new delays and who knows when these new rules will come out and in any case they may be irrelevant anyway or to use a word that is en vogue the details of the rule may be marginal to the whole subject and its future maduro took three weeks in january traveling around the world begging for money then he took four days after coming back to give a speech in which he announced that in the next few days we would know the details about this newfangled state of the art new system for doing what people have been doing for centuries exchanging one currency for another but the few days for this complex task took three weeks and it was not until yesterday that we heard some details details the new system has three parts the first two are a rate for cencoex same name of bs 6 3 same number per us and a rate for sicad same name which will start at bs 12 same number again per us thus so far 66 of the new three part system is identical to what has been in place since april 2014 in fact it is so identical that even the percentages of foreign currency indicated by the minister that will be sold in each market are practically the same as estimates of how foreign currency was distributed last year in the two systems and then there is the new and marginal third fx system which will be called the sistema marginal de divisas simadi marginal system for foreign currency really you can t make this stuff up now about the only thing we know about this new system for real is that it will have a price higher than the old sicad 2 system and that it will be called simadi which is the subject of numerous jokes including si stema de ma duro y di osdado the rest is having to take at face value what the minister of finance and the president of the central bank said about it i it will be a system subject to market forces free floating ii it will have no limitations or restrictions iii it will operate via banks brokers and exchange companies but there will be a limit in the latter however to participate in the market the rules will be the same as for sicad 2 you have to register open an account in us in a bank in venezuela and provide your last venezuelan tax return now according to maduro today from 3 5 of all foreign currency will flow through this system at today s oil prices that is about us 1 5 billion at the top range of 5 of course merentes and torres talked about anyone can sell in this market and that it would start near the parallel market rate and then go down yeah everyone is waiting to sell well pardon me for being so skeptical let s assume that the parallel rate is bs 200 it has never reached that but makes calculations easier if the government plans to sell only us 1 5 billion in this market during the whole year that would take barely bs 300 billion out of the monetary liquidity which stands at bs 2 trillion today that means that only 15 of the monetary liquidity has to go to the simadi in order to wipe out the us 1 5 billion that is peanuts more so when m2 has been growing steadily at a rate of 65 per year which means that another bs 300 billion would go into the system in just one quarter and a lot of it will also be looking to leave the country why easy let s look at the other side of the equation demand there is lots of pent up demand because essentially the parallel market has been illegal for the last four years many corporations refuse to participate if it is illegal but now they have a way of doing it if its is legal free floating and unlimited additionally given the shortages in the country companies people will use this new market to obtain foreign currency either to import to complete supplies or raw materials to produce stuff in venezuela or buy widgets to sell locally finally the market has been dry lately savers companies everyone with any sense of self protection will look to take its savings abroad via this market at a a time of increasing political instability and uncertianity given all this i expect much more than 15 of the monetary liquidity to go to this market and at this time it does not seem the government is making an effort to have more foreign currency by devaluing the other two rates nor to reduce the deficit which is financed by money printing thus i can only conclude that this market is unlikely to be free unlimited and market driven for the simple reason that the government does not want the rate to rise without control and if it tries it will eventually shut down the market much like it did in 2010 as the parallel rate will drive inflation no matter how marginal the government wants you to believe it is as we say in venezuela we have seen this movie before which means there will be limits regulations etc and in the end the system will look a lot like sicad 2 but at a higher price making it the same as that in place in most of 2014 but at a higher and controlled price and thus truly marginal p d pdvsa issued a 2022 bond without telling the market which it can use to supply the system it is a us 3 billion issue but its price will be around 34 at current levels so that it could contribute us one billion to this market i still think its not enough posted in uncategorized 24 comments venezuelan government flip flops between pragmatism and radicalism but february 8 2015 lines at a government owned supermarket in the middle of caracas almost daily now some people have written to me asking why i have been so quiet when so much has been going on in venezuela with the takeover of farmatodo and dia dia and the jailing of its owners the reason is simple yes there is a lot going on but to me what happened to farmatodo and dia dia is more of the same going back to the takeover of the coca cola warehouse way back in 2003 and going thru the nationalization and destruction of agroisleña or the dakazo or so many takeovers nationalizations and jailings that have taken place under the chavismo dictatorship after all chavismo took over dia dia a company founded in 2005 only to serve the lower strata of the population the sort of project the government should back and promote and not destroy which is all it is doing by taking it over after all it is merging it with the abastos bicentenario and stealing its inventory which was created when the government forcefully took a majority stake in cativen and its exito hypermarkets they have not been the same since and have lines as long or longer than those of the private sector thus there is really nothing much different happening with the events of the last few days or weeks what is puzzling and i don t have the answer for it is why chavismo or maduro takes this self destruction route if i knew i would have written a post about it because what the government is doing is sending very mixed signals on the one hand it dollarizes airline tickets airline cargo and talks about a new market i doubt it for foreign currency at a higher price than sicad 2 but on the other maduro keeps confronting threatening and acting like a dictator despite the fact that his popularity is in the low teens according to the latest polls so what gives i don t know the comandante eterno used to do the same thing when things got tough but he was chávez and maduro ain t so either maduro is getting bad advice or he is full of himself personally i don t think maduro can last this way until the parliamentary elections he can last but he will have to repress a lot of people in order to survive but we don t even know whether maduro is completely in charge or whether others are telling him what to do including his wife cilia but i am sorry to tell you the government is not acting as stupidly as many lead you to believe to start they got us 1 9 billion from the dominican republic which purchased its petrocaribe debt at less than half price then citgo sold us 1 5 billion in a 2022 bond at a yield to maturity with a coupon of 11 5 and borrowed an additional us 1 billion from banks by pledging terminals and its shares not bad us 4 5 billion at the blink of an eye in maduro s coffers jamaica could do the same and then maduro may decide to close his eyes and send the gold to london and problem solved for 2015 yeap just like that we are thinking 2016 and not 2015 oil is a many splendored thing indeed except venezuelans are in charge my guess is that maduro is betting hoping that oil bounces from here and psuv can keep control of the national assembly a tough and balancing act given that the country will only feel the under 50 oil prices in march and april lines could indeed be long by the time easter week comes around yes they are likely to become longer but things are really paralyzed right now as the private sector awaits a foreign exchange system that i don t believe will be functioning before easter yeap think about it you need to change the illicit controls bill to allow the new market to function this is at least two weeks from the time of he proposal since it has to be approved by the national assembly then you need to issue the new foreign exchange agreement between the government and the central bank which is just a decree but it has to follow the the bill approved by the assembly after that you need to issue the regulations for the market to function given that in one week venezuela and its government will be paralyzed by the carnival holidays even easter may seem optimistic for this indecisive government which in the end is the biggest handicap of the maduro administration it is not only indecisive but it has no clear view that a ...
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