An estimated 27.4% of Venezuelan gov't imports never happened

According to think tank, overbilling amounted to USD 15.4 billion

The economic research firm believes that 39.7% of imports made by Venezuelan government entities were simulations (File photo)
Saturday February 23, 2013  12:00 AM
Ten years after forex restrictions were put in place in Venezuela, distortion accentuates. Imports at a low exchange rate seem to be increasingly encouraging overbilling and other procedural practices.

In 2012, official and private-sector imports reached USD 56.3 billion and, from that total, USD 15.4 billion (27.4%) comprised fictitious sales, according to estimates prepared by consulting firm Ecoanalítica, which show that most overbilling was done by government entities.

Overbilling entails stating a sale price higher than the actual price. This leads to an allocation of currency greater than the one needed to acquire the goods. In previous currency-control periods, like from 1994 to 1996, this was a common practice; as imports grew, so did inflated invoices.

To combat those practices, Jorge Giordani, the Planning and Finance Minister, said in an interview with local journal Ciudad Caracas earlier this month that "when a system for currency controls is created, the other extreme, those who intend to sidestep it, is automatically spawned. You can go on the chase, but they always find a way: overbilling, containers full of rocks and other forms of chicanery to reach their goal: buying cheap and selling dear.  But the administration system remains firm, and we will not change it."

For nearly a third of imports to involve overbilling, the main incentive lies in the exchange rate. Economist José Guerra points out that "currency controls are associated with importing at cheaper dollar rates, thus leading to overbilling. Subsidized forex rates boost these practices" and adds that "this cannot take place without cooperation from other entities."

To identify fictitious transactions, Ecoanalítica reconciled outgoing capital with inventories and found that the outflow of funds from the public sector cannot be explained other than through overbilling; therefore, it estimates that out of all public-sector imports, which amounted to USD 21.7 billion, 39.7% were fictitious.

For the private sector, results were lower. 19% of this sector's imports, amounting to USD 34.6 billion, involved some sort of overbilling.

Last December, Cadivi authorities announced that a group of companies had been fined for this type of practices and claimed that many were suspended from using the forex system and reported to the General Attorney's Office. Nevertheless, the status of those investigations has not been specified to date.

A marked difference

José Guerra believes that "the incentive for incurring in fictitious transactions is much too big because the difference between the official exchange rate and the unofficial exchange rate is far too extensive."

Government spokespersons acknowledged that they have failed in regulating the parallel market. In recent days, Nelson Merentes, president of the Central Bank of Venezuela, said that "the Sitme system was developed to prevent the unofficial dollar rate from surging, but since October it failed to fulfill its purpose. Then, one of the variables, which was keeping the rate within a manageable range for the economy, was lost."

The Sitme system has been discontinued, and now imports will be processed through Cadivi while a new body will be created to govern forex policies.

Translated by Félix Rojas Alva
The end of a cycle

Hundreds of thousands of demonstrators took to the streets of Brazil on March 13 to demand the ouster of embattled President Dilma Rousseff, carrying banners expressing anger at bribery scandals and economic woes. A banner read "We don't want a new Venezuela in Brazil."

fotter clasificados.eluniversal.com Estampas
fotter clasificados.eluniversal.com Estampas