The Exchange Game of Thrones: Notes on the “end” of DICOM (I)

At this point in the situation of the country and economic policy, the best thing to do when understanding what is happening and to foresee what may happen, is to take a break, learn to separate the “noise of the nuts”, assume that not always things are what they seem and above all, avoid the incontinent analysis of social networks, where they often sneak in many fakes that little help clarify the picture.

In this regard, we must also take into account that the communication style – to put it some how – adopted by the government in economic matters, contributes a lot to obscurantism and confusion. And it is not only that the spokespersons, official versions and explanations were eliminated, replaced in the least bad of the cases by tweets where nobody knows if the community manager or the owner of the institution speaks; (but also) when any unofficial spokesperson without competence in the matter (as happened with the famous gazette of the salary increase at the end of April) informs or confirms something that doesn’t then happen. It also happens that when something is communicated, it does not necessarily coincide that what is said finally ends up being done.

But in addition, it is seen that the most radical change from the communicational point of view of economic policy, is that it no longer happens (which was criticized so much) that they announced things that were never done. However, the change was not to match what was done with what was said. Rather it went to the other extreme: no longer announcing things that are not done, now they do things that are not announced.

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This change does not seem accidental: and that is beyond communication deficiencies (which there are), it coincides with the drift of economic policy towards a set of measures that are at odds with what the government ideologically claims to defend and for whose communication they may be aware that recourse to purely technical language does not necessarily convey.

It can be argued whether this change of course is conscious or forced by the circumstances. Some say it is conscientious, to the extent that the government “jumped the other side of the political spectrum” (talanquera) in economic matters. But there are also those who say that these are tactical movements, due to the interventionist and coup pressures. Or that they are fine strategies tending to mislead the adversaries and place them in difficult situations, a little “to the Macri”, who for electoral reasons was forced to move from liberalism to the rescue of the “populist” policies of price controls disassembled by himself. In the case of our government, it would be the same but in the opposite direction: from the “populism” of controls to bitter liberalism forced by circumstances and as a survival strategy.

As this field of motivations is difficult to elucidate, the truth is that we can only say three things in this respect: 1) that this step has been taking place in slow motion and disorderly, but firmly for at least three years. 2) That the main terrain from which it operates is that of currency and monetary matters. And 3) whatever the motivations, the same seems to hold in an understanding of the currency-exchange issue, which not only is not helping to overcome the situation, but is locking the government into a dangerous dead end and contributing to sink it more in the swamp of contraction and crisis.

What happened earlier this week with the DICOM theme is the latest chapter in this story. A mysterious resolution of the BCV circulates unofficially without anyone being responsible for its content. Which gives rise to a number of speculations, including the supposed end of DICOM. Today, Wednesday, May 8 – two days after it circulated – the resolution can be found on the BCV’s website, although it is necessary to click through 7 links, so that only those who are familiar with the page or the regulatory issues associated with the BCV can find it. No one has come out to give an explanation. Even the president was on national television on Wednesday 8 in the afternoon along with the main figures of the economic cabinet and never mentioned the issue.We only know that the operation of money exchange tables (also known as Forex Dealing Desks) in banks was authorized, which is an alternate or different mechanism to DICOM that other advanced ones have called “liberation” of the dollar.

Was the DICOM eliminated?

To have an answer to this question we must go back to what was said in the first paragraph: one thing is usually noise and others are nuts and things are not always – and almost always not what they seem. On the one hand, it happens that the resolution of the BCV does not say anywhere that the DICOM is eliminated, since in the best of cases it is inferred from its content. But it also happens that although all analysts “killed” it, in fact the DICOM is still working: yesterday Tuesday 7 and Wednesday 8 there were auctions, there is another called for tomorrow and the BCV is taking the official exchange rate there.

But on the other hand, it also happens that the DICOM has already died and been revived on previous occasions. Assuming that this time it did not die (or at least not yet), it has died at least three times, reviving as many, and mutated into something else.

During its first two lives, DICOM retained the modality of being a mechanism for allocating public currencies to the private sector. But that ended in September of 2017, when it died a second time and it was said to be forever, because it would be replaced by a mechanism that would no longer be auctions and that would work based on a basket of currencies other than the dollar. But 4 months later DICOM revived: retaining the mechanism of auctions and operating with dollars, being that what changed was that the State did not allocate the private ones and that there was only an official exchange rate, to the extent that the DIPRO, for which the government advanced in the official exchange unification. But that DICOM lasted until August 2018, when, within the framework of the reforms of that month and the monetary reconversion, etc., it died and revived, converted into what it is today, its great novelty being the exchange unification, not among the types of official exchange (because by then there was already only one), but between the official and the parallel ones. Additionally, the policy of non-allocation of foreign currency generated by the State to the private sector was maintained and deepened.

In this respect, declaring the DICOM (dead) is a mistake of haste, but also has the risk of losing sight of what is ultimately the most important: that between death and death, DICOM has been dismantling not only the exchange control of the State, but the exchange regime in general terms.

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Has not DICOM worked?

The answer to this question can be tested in Freudian terms. If we go to the manifest objectives (that is, those for which it was said the DICOM was created: from the grandiloquents “to end the parallel dollar”, “to defeat the economic war”, “to put an end to the hegemony of the dollar” until the much more modest “create a reliable and safe private market with sufficient incentives to attract foreign currency to the country”) we are clear that it has been a resounding failure. But it is a resounding failure predictable and announced enough. To summarize the reasons given in these same pages, let’s say that the shortage of foreign currency always conspired against it (in the first place, scarcely more foreign currency has been traded for an amount slightly above 40 million US $, since in this country if the State does not inject foreign currency, there is no one who does so, since the private sector is incapable of generating it. But in the second place, the political confrontation and what we call at some point here “political hysteresis”, which is the refusal of private parties to support an economic mechanism proposed by the Chavez government for the simple fact that the Chavez government does …

But while this is so in terms of its stated objectives, we can say that, in effect, the DICOM has been very useful for the lifting of the control of public exchange and its gradual replacement by a control of the foreign exchange market by private parties, which is basically what is at stake here in the midst of the false dichotomy “exchange control vs. free foreign exchange market”.

Because it is in the middle of it that we find ourselves: below the most visible fight between government and opposition, between Trump and his local satellites against the Venezuelan population, there is a fight less visible but not less traumatic and fierce for the control of the throne of the foreign exchange market and the sources of foreign currency in our country.

In short, what has happened in each “death” and “failure” of DICOM is that the control of the foreign exchange market and the exchange policy is passing from the hands of the State to those of an increasingly smaller number of private entities, which are those that control the secondary market. And we are not talking here about Dollar Today, etc. We are talking about the great historical operators of the parallel exchange market, read: the private banks (including the exchange houses) and the big shots that move in what the analysts call “corporate segment”, which are the “clandestine” money tables that over time they were doing with oligopolistic control of the parallel exchange market, to the point of marking the trend of the parallel exchange rate, just as Cúcuta did in an almost exclusive period. What it does is to legalize these money tables, in that sort of doing by which what is left is a matter of fact, in which the government always seems to adopt in any situation as a measure of last resort and before which there is “no alternative” .

The “strange” case of Interbanex

The same day that the resolution of the BCV was “leaked”, the mysterious Interbanex announced the end of its activities through an official communiqué. The issue is that we never knew very well what those activities were, but what we are clear in is that it never became what it said it aspired to be when it surreptitiously appeared on January 26; three days later, by the way, the “guaidonazo” started.

But in this case, coincidentally, something similar to the “failure” of DICOM can be said: and even though Interbanex failed in its main objective, it was instead very effective in the task of advancing the transfer of control of the foreign exchange market. BCV-DICOM to private operators. And in fact, they say in their statement, when they say that the third phase of their project involved ” the emergence of other platforms (exchange) and the achievement of a competitive market in which the participants could make currency changes efficiently and freely. ”

Recall that Interbanex appeared in social networks on a weekend in January, tweeting that it was a currency exchange platform, approved by the Board of the BCV (although nobody knew the Resolution) whose radical difference with DICOM was that it was not only an exchange of foreign currency between private companies, but it was also operated and managed by private companies. This generated high expectations, in the middle, moreover, of a large vacuum of official information. On Monday, January 28, and according to its promise to start operations, the first thing that Interbanex did was to appear publishing a rate of 3,200 sovereign bolivars per dollar, which at the moment may seem low but at that time it was 640 bolivars sovereigns above the price of the parallel for the moment, what represented a difference of + 25%. With respect to DICOM, the difference was 1,116 sovereign bolivars above, that is, + 53%.

From then on, the exchange events of Monday the 28th and Tuesday the 29th took place. At midmorning on Monday, the until then main marker of the parallel market, that is, Dolar Today, adjusted its exchange rate to 3,188 sovereign bolivars per US $ , which not only meant practically unifying it with the recently appeared Interbanex but also giving it the position of a referential marker. And at the end of the day, after the corresponding DICOM auction closed, it ended up that it surpassed both Interbanex and the Dollar Today, with an official exchange rate of 3,290.12 sovereign bolivars per dollar. While all this was happening, the same Monday in the morning and also through a tweet, a bank meeting (public and private) was reported with both the BCV and the Economic Vice Presidency and the Ministry of Finance. The following day, through a press release from the BCV, a series of decisions on exchange and monetary matters were reported, basically, that the BCV would adopt an “exchange anchor” with an exchange rate of around 3,300 sovereign bolivars to the dollar.
If we have explained ourselves well, reading friend, you will have realized that such an adjustment of the exchange rate of such magnitude would have been extremely difficult, if not impossible, for the BCV to do so without the services of Interbanex. If it had not mediated, it would have been necessary to justify such a devaluation, but, thanks to its providential intervention, the subject was like the BCV, what it did was to recognize what “marked the market”. From a tactical and strategic point of view, it is an extremely elegant move, but one that has put us head-first in the current situation and whose consequences we do not know if fully foreseen by its promoters.

But what it has to do with these issues we will leave for the next installment.

Source URL: 15 y Ultimo

Translated by: EF/JRE

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