CADIVI makes its first distribution of foreign exchange to productive industry

<a href=www.vheadline.com>Venezuela's Electronic News Posted: Friday, May 16, 2003 By: Jose Gregorio Pineda & Jose Gabriel Angarita

VenAmCham's Jose Gregorio Pineda (chief economist) and Jose Gabriel Angarita (economist) write: After more than 110 days of "foreign exchange restriction," the Foreign Exchange Administration Commission (CADIVI) has distributed $8,000 to national industry, out of a total of US$1.2 billion set aside to meet the pent-up demand accumulated since January 21, 2003. This distribution generates no expectation whatsoever of an improvement in foreign exchange rationing.

While this was happening, the national government decreed the Exceptional Economic & Social Development Plan through Supply of Food & Other Products which Complement the Basic Consumption Basket ... the program, published in Official Gazette No. 37689, calls for a $261 million investment to purchase 501,000 tonnes of foods in the next 180 days.

We initially expected the exchange controls to function as a "residual system" for the private sector, with discretionary handling only in favor of the public sector or favored beneficiaries. But our initial expectations have come up short; the facts have turned out to be far more adverse for the private sector and not even this first payout of foreign exchange suffices to overcome the idea that a continuation of this rate of foreign exchange distribution will provoke a drastic contraction of the private sector and foster the State's transformation into the supplier of the goods and services needed for consumption.