CADIVI CUTS MAXIMUM DOLLAR ALLOCATIONS TO

C O N F I D E N T I A L CARACAS 000003

SIPDIS

HQ SOUTHCOM ALSO FOR POLAD
TREASURY FOR RJARPE
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E.O. 12958: DECL: 12/31/2018
TAGS: ECON EFIN PGOV VE
SUBJECT: CADIVI CUTS MAXIMUM DOLLAR ALLOCATIONS TO
TRAVELERS BY HALF

REF: A. CARACAS 1758

B. CARACAS 647

Classified By: Economic Counselor Darnall Steuart for reasons 1.4 (b)
and (d).


1. (U) CADIVI, the government of the Bolivarian Republic of
Venezuela (GBRV) entity that administers foreign exchange,
cut the maximum dollar allocations to Venezuelans traveling
abroad by half for 2009. Each individual will be allowed to
spend up to USD 2,500 abroad on his or her Venezuelan credit
card, down from USD 5,000 in 2008. The maximum one-time
pre-travel cash allocation will drop from USD 600 to USD 500,
and the maximum allocated for credit card purchases over the
Internet from Venezuela remains the same, at USD 400 per year.


2. (U) The cut comes as no surprise, as Minister of Finance
Ali Rodriguez indicated December 19 that one was forthcoming
(though he did not mention the magnitude; ref A). The
purpose, as Rodriguez indicated, is to save dollars in a
period of low oil prices. Per CADIVI's website, in 2008
CADIVI has authorized reimbursement to banks of USD 4.5
billion for credit card purchases and USD 333 million for
cash for travelers through December 19. In the regulatory
note defining the cut, CADIVI also included several
provisions to try to reduce fraud, including a moratorium of
six months for newly issued credit cards and a measure
designed to make it harder to receive reimbursement for
purchases made just across the Venezuelan border.

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Comment
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3. (C) This cut will cause many of the Venezuelans who are
used to traveling abroad more angst about their situation in
Venezuela. Given Venezuela's overvalued official exchange
rate, CADIVI allocations make travel cheap for those who can
afford it. Every CADIVI dollar costs 2.15 bolivars (Bs),
whereas on the parallel foreign exchange market the rate is
currently 5.3 Bs per USD. Traveling on a CADIVI dollar, in
other words, costs less than half what it otherwise would,
and indeed can even be profitable for the traveler if he or
she brings back goods to sell. From a psychological
standpoint, some Venezuelans consider the CADIVI "cupo", as
it is called, as almost a birthright of the Bolivarian
Republic, a lifeline to the outside world they deserve for
enduring the current government. For these Venezuelans, the
cut is painful emotionally as well as economically.


4. (C) However painful to some, the cut in the CADIVI cupo
is unlikely to cause significant political damage to
President Chavez. Assuming in 2008 the average user of the
two credit card cupos used half of the maximum allocations,
about six percent of Venezuelans (1.7 million people) would
be beneficiaries. With the exception of some fraudulent
users (ref B),these six percent would be drawn almost
exclusively from Venezuela's upper and upper middle classes
(i.e., those with credit cards who travel abroad),the people
least likely to support Chavez. At the same time, the cut,
which analysts cited in a press reported estimated might save
the GBRV USD one billion in 2009, will not make a significant
dent in the shortage of foreign currency the GBRV will have
to contend with if oil prices stay where they are (septel).
End comment.
CAULFIELD