The National Center for Foreign Commerce (, CENCOEX), formerly the Commission for the Administration of Currency Exchange (Comisión de Administración de Divisas CADIVI), is the Venezuelan government body which administers legal currency exchange in

Venezuela Venezuela, officially the Bolivarian Republic of Venezuela, is a country on the northern coast of South America, consisting of a continental landmass and many Federal Dependencies of Venezuela, islands and islets in the Caribbean Sea. It com ...

. The official buy/sell exchange rate was initially fixed at Bs.F. 4.28/Bs.F. 4.30 per US dollar (

USD The United States dollar (symbol: $; currency code: USD) is the official currency of the United States and several other countries. The Coinage Act of 1792 introduced the U.S. dollar at par with the Spanish silver dollar, divided it int ...

History

In 1983, a similar agency called "Differential Change Regime" (Régimen de Cambio Diferencial(RECADI)) was established to manage a system of differential exchange rates and capital controls, and disbanded in 1989 when the differential exchange rate system was abolished. RECADI saw widespread corruption, and became a substantial scandal in 1989 when five former ministers were arrested, although the charges were later dropped. Exchange controls under CADIVI were adopted on 5 February 2003 in an attempt to limit

capital flight Capital flight, in economics, is the rapid flow of assets or money out of a country, due to an event of economic consequence or as the result of a political event such as regime change or economic globalization. Such events could be erratic or ...

.CADIVI
CADIVI, una medidia necesaria
In 2008, the Chávez government revalued the Venezuela currency by a ratio of 1:1000, thus creating a new currency known as the ''bolívar fuerte'' (Eng.: "bolivar") but kept the currency pegged to a higher rate against the dollar than the market value. Since 2003, this has created a scarcity of foreign currency, as confidence in the bolivar declined, and foreign exchange, especially the U.S. dollar, was in greater demand.

Functions

According to the

Bank for International Settlements The Bank for International Settlements (BIS) is an international financial institution which is owned by member central banks. Its primary goal is to foster international monetary and financial cooperation while serving as a bank for central bank ...

, "The

Central Bank of Venezuela The Central Bank of Venezuela (, BCV) is the central bank of Venezuela. It is responsible for issuing and maintaining the value of the Venezuelan bolívar and is the governing agent of the Venezuelan Clearing House System (including an automate ...

(BCV) fixed a monthly allocation of foreign currency to be administered by CADIVI, purchases foreign currency from residents, and sells foreign currency to the public and private sectors subject to approval from CADIVI."

(2005)
"BIS Papers No 24: Foreign exchange market intervention in emerging markets: motives, techniques and implications"
May 2005 Under Venezuelan law

PDVSA Petróleos de Venezuela, S.A. (acronym PDVSA, , English language, English: Petroleum of Venezuela) is the Venezuelan state-owned oil and natural gas company. It has activities in exploration, production, refining and exporting oil as well as e ...

must sell its foreign exchange to the Central Bank, thereby providing the bulk of foreign currency in Venezuela. The Venezuelan private sector requires more foreign exchange for imports than it generates for exports, and is dependent on the Bank to satisfy the difference.

Exchange rates

The agency makes hard currency available to importers at several rates, with the best rate, CENCOEX, the official exchange rate 1 U.S. dollar for 6.3 bolivars, available to importers of food and medicine. A double rate, Complementary System of Foreign Exchange Administration (Sistema complementario de administracion de divisas (SICAD I)), twice the official exchange rate but still favorable, goes to importers of culturally important items such as Scotch, popular in Venezuela, and Barbie dolls, again, popular with certain demographics. A third rate, Alternative Foreign Exchange System (Sistema cambiario alternativo de divisas (SICAD II)), quite unfavorable at 50 times the official exchange rate, is offered to other importers. The black market rate, as of late December 2014, was 173 to 1 and rising rapidly. Publication of unofficial exchange rates within Venezuela is a crime; rates are published on external sites.

Fraud

Fraud In law, fraud is intent (law), intentional deception to deprive a victim of a legal right or to gain from a victim unlawfully or unfairly. Fraud can violate Civil law (common law), civil law (e.g., a fraud victim may sue the fraud perpetrato ...

is widespread, with importers, regulators, and ordinary citizens stealing billions from the Venezuelan economy using one mechanism or another. Importers, for example, may simply sell the hard currency on the black market and not import anything, only part of what they declared, or at grossly exaggerated prices. A regulator may charge extra for exchange.

References

External links