CARACAS (Reuters) - Venezuela’s efforts to put hard currency in the hands of dollar-starved businesses, to ease embarrassing shortages of consumer goods, are instead drawing complaints from trade groups who say they have no idea where the money has gone.
The central bank says it allocated $859 million through a new foreign exchange mechanism meant to complement a decade-long currency control system by ensuring importers are able to bring in products ranging from chicken to newsprint.
But business groups representing industries which the government said received U.S. dollars insist that only a fraction of their affiliates got approval for greenbacks, and those that did got only a small portion of what they sought.
The confusion comes as state officials are recognizing that the currency controls have been exploited for billions of dollars via fictitious imports by shell companies.
“The auction was a disaster for us,” said Frisned Pinate, president of Canidra, the country’s principal auto parts association, adding that fewer than 10 of the 250 affiliates were approved for dollars through the system known as Sicad.
“This is not an auction, this is simply a lottery. They don’t sell to the highest bidder. It’s more like ‘It worked out for me because I had a winning ticket.’”
The new mechanism, called Sicad, was launched in March to complement the currency controls created by late socialist leader Hugo Chavez that have been a cornerstone of Venezuelan economic policy since 2003, despite growing signs of corruption and inefficiency.
Originally created to stop capital flight and inflation, the controls offer huge profits for those who play the system by buying dollars at a preferential rate and reselling them at almost seven times that on an illegal black market.
Three of the four Sicad auctions have been restricted to firms in 11 sectors including companies selling toys, school supplies, and textiles, and businesses in two free-trade zones.
Industry groups representing nine of those sectors told Reuters that few or none of their members were approved for dollar transfers, and said they had not received clear answers from state officials about where the money went.
The associations typically account for just a fraction of the total number of businesses operating in a given sector, but their members tend to be the most experienced companies with the largest billing turnover.
The central bank did not respond to an email seeking comment on how the auctions were run.
The central bank said in May that “a considerable amount” of hard currency went to shell companies last year, estimating that the 2012 import bill was $17 billion more than warranted.
That diverted dollars away from productive enterprises that need to import machinery not available in Venezuela, or raw materials such as wheat for bread flour.
“We have companies that are shutting production lines and slowing operations to make their raw materials last longer,” said Mariela Osorio of the textile industry group Cavediv.
“Some small business have already given up on the Christmas season because they do not see a short-term solution.”
None of that group’s members were among the 399 textile companies that the central bank said were approved for dollars in an August auction, Osorio said.
Many now worry they may not be able to ensure supplies of products for the Christmas season, when Venezuelans historically indulge in fine scotch whiskey and Italian sweetbreads and purchase cell phones or designer clothing as gifts.
Business leaders have pressed authorities to publish the names of which companies received disbursements under Sicad. Finance Minister Nelson Merentes has said this would violate privacy rights.
Venezuela’s state currency board, Cadivi, provides dollars at the official exchange rate of 6.3 bolivars for priority goods such as food and medicine, but companies say it is as much as a year behind in fulfilling requests.
Cadivi disbursed $31.1 billion in 2012, according to its web site. A Cadivi official said the agency’s president was not available to provide more updated figures or comment on the complaints about delays.
Sicad sold $200 million in a March auction open to all businesses, and then three subsequent auctions that provided $659 million for companies in specific sectors. It also sold another $103 million to private individuals.
President Nicolas Maduro said in September that his government was creating a third currency mechanism to work in parallel with Sicad and Cadivi, but officials have not provided details on how it would work.
Meanwhile, Maduro is stepping up inspections of companies deemed to be hoarding goods or intentionally slowing production in what he calls part of a Washington-backed “economic war.”
“Some of the bourgeoisie are forming shell companies to make fictitious import requests ... and then using the dollars for speculative purposes,” said Vice President Jorge Arreaza during a televised speech last week.
Officials have made vague suggestions that the third currency exchange system would provide dollars at a rate based on supply and demand, offering more transparency and ultimately greater likelihood of resolving the shortages.
But local media reports indicate this has run up against resistance from ideological hardliners who see adopting market mechanisms as a betrayal of Chavez’s legacy.
Merchants now worry about dollar supplies to import Christmas presents such as bicycles and toys.
Though the government auction set aside dollars for bikes, Julio Pena of the business group Cavebici says cycling stores were passed over in favor of “corner shops that sell a little bit of everything, like bikes, hardware, paper supplies.”
Without access to dollars in the next 10 days, “our sector can’t ensure (Christmas) supplies, not because we don’t want to, but because we are not being given the tools we need to work.”
Editing by Daniel Wallis, Walker Simon and Clive McKeef