CADIVI

Comisión de Administración de Divisas (CADIVI)
Formation 5 February 2003
Headquarters Caracas
Region served
 Venezuela
Leadership
 Alejandro Fleming
Budget
 50 billion USD (2009)
30 billion USD (2010)[1]
Website cadivi.gob.ve

CADIVI (Comisión de Administración de Divisas - Commission for the Administration of Currency Exchange) is the Venezuelan government body which administers legal currency exchange in Venezuela. Exchange controls under CADIVI were adopted on 5 February 2003 in an attempt to limit capital flight,[2] in the aftermath of a two-month strike/lockout aimed at toppling the government, which saw GDP fall 27% during the first four months of 2003.[3] The official buy/sell exchange rate was initially fixed at BsF. 4.28 / BsF. 4.3 (respectively) [4] per US Dollar (USD). Currently the official buy/sell exchange rate is fixed at BsF. 6.3 (respectively) [5] per US Dollar (USD).

According to the Bank for International Settlements, "The Central Bank of Venezuela (BCV) fixes a monthly allocation of foreign currency to be administered by CADIVI, purchases foreign currency from residents, and sells foreign currency to the public and private sectors subject to approval from CADIVI."[6] Under Venezuelan law PDVSA must sell its foreign exchange to the Central Bank, thereby providing the bulk of foreign currency in Venezuela. The Venezuelan private sector requires more foreign exchange for imports than it generates for exports, and is dependent on the Bank to satisfy the difference.[6]

A similar agency, RECADI, had been set up in 1983, to manage a system of differential exchange rates and capital controls,[7] and disbanded in 1989 when the differential exchange rate system was abolished.[8] RECADI saw widespread corruption, and became a substantial scandal in 1989 when five former ministers were arrested, although the charges were later dropped.[9]

In 2008, the Chavez government removed three zeroes from the bolivar, thus creating a new currency known as the bolívar fuerte (eng. "bolivar") but kept the currency pegged to a higher rate against the dollar than the market value. Since 2003, this has created a scarcity of foreign currency, as confidence in the bolivar declined, and foreign exchange, especially the U.S. dollar, was in greater demand.[10]

References

  1. ↑ Budget of Venezuela for 2010 "Venezuela's budget for 2010"
  2. ↑ CADIVI, CADIVI, una medidia necesaria
  3. ↑ Jones, Bart (2008), Hugo! The Hugo Chavez Story From Mud Hut to Perpetual Revolution, London: The Bodley Head. p386
  4. ↑ CADIVI Convenio Cambiario 2, CADIVI
  5. ↑ Gaceta oficial n° 40.108
  6. ↑ 6.0 6.1 Bank for International Settlements (2005), "BIS Papers No 24: Foreign exchange market intervention in emerging markets: motives, techniques and implications", May 2005
  7. ↑ George D. E. Philip (2003), Democracy in Latin America: surviving conflict and crisis?, Wiley-Blackwell. p143
  8. ↑ Kevin J. Middlebrook (2000), Conservative parties, the right, and democracy in Latin America, Johns Hopkins University Press. p130
  9. ↑ Damarys Canache, Michael R. Kulisheck (1998), Reinventing legitimacy: democracy and political change in Venezuela. Greenwood Publishing Group. p123
  10. ↑ "The Use of Foreign Exchange Controls to Promote Economical Stability". earnforex.com. Retrieved 8 July 2013.