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UNCLAS SECTION 01 OF 02 CARACAS 000397 
 
SENSITIVE 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: ECON EFIN EINV ETRD PREL PGOV VE
SUBJECT: VENEZUELA: ACCESS TO CADIVI DOLLARS TIGHTENS 
 
REF: A. CARACAS 368 
     ¶B. CARACAS 003 
     ¶C. 2008 CARACAS 647 
     ¶D. 2007 CARACAS 2330 
 
¶1.  This message is sensitive but unclassified, please treat 
accordingly. 
 
¶2.  (SBU)  Summary.  On March 16, the National Assembly of 
the Bolivarian Republic of Venezuela (BRV) approved revised 
lists of products eligible for importation using the official 
exchange rate.  Imports at the official rate of 2.15 BsF per 
US dollar versus the free market rate of approximately 6 BsF 
per US dollar are, in effect, heavily subsidized.  The 
revision increases the number of products for which importers 
will be required to submit "certificates of non-production." 
Overshadowed by the economic measures announced by Chavez on 
March 21 (ref A), the revision of these lists likely has more 
to do with restricting access to cheap dollars than the 
protection of locally produced goods.  The effect of shifting 
more imports from the subsidized official rate to the free 
market rate will have strong inflationary impact.  End 
Summary. 
 
------------------------------ 
What is CADIVI and its Dollar? 
------------------------------ 
 
¶3.  (SBU) CADIVI is the BRV agency that controls the buying 
and selling of foreign currency at the official exchange 
rate.  The fixed official exchange rate, last revised in 
March 2005, is highly overvalued at 2.15 bolivars (BsF) to 
the dollar.  At present, importing products using CADIVI 
dollars costs the importer approximately sixty-four percent 
less than what it would using the parallel exchange rate. 
(Note:  The parallel exchange rate is used by individuals and 
companies without access to CADIVI dollars to exchange their 
BsF to dollars.  The current parallel exchange rate is 6 BsF 
to 1 USD. End Note.)  As CADIVI dollars are cheap, demand for 
access to these dollars far exceeds what the BRV is willing 
and able to make available in the face of an economic crisis 
caused by the drop in world oil prices.  Businesses have 
repeatedly complained about delays in receiving CADIVI 
authorizations and possible corruption by officials within 
the Agency (ref D.) 
 
----------------- 
The Product Lists 
----------------- 
 
¶4.  (SBU)  The newly published CADIVI lists reflect the move 
of many products from the preferred List One (not requiring a 
certificate of domestic non-production prior to importation) 
to List Two (requiring a certificate of non-production prior 
to importation.)  Broadly, List One is much smaller than 
previous lists.  From our review of the hundreds of products 
listed in the decree, List One continues to cover basic 
products such as wheat, flour, certain chemical components 
and additives, medicines, vitamins, medical supplies, basic 
foodstuffs, wool, cotton, certain types of heavy machinery 
and electronic products.   List Two now includes a wider 
range of items than previous lists, such as farm animals 
(horses, hens, turkeys, etc.), foodstuffs (i.e., sweet corn, 
certain types of fish, pears, carrots, limes, etc.), exotic 
building or furniture materials (rattan, bamboo), etc. 
Inclusion on List Two does not signal automatic refusal of 
CADIVI dollars, but companies seeking to import items from 
List Two face additional, lengthy bureaucratic obstacles, 
including a cumbersome process to certify non-production. 
 
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COMMENT 
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¶5.  (SBU)  The release of revised lists of items eligible for 
CADIVI dollars is not surprising in light of the BRV's 
ongoing money crunch.  The reduction of List One and 
expansion of List Two will probably lead to further 
reductions in CADIVI authorizations as more importers face 
another bureaucratic hurdle in trying to access cheap dollars 
for many products.  As we have seen with the recent cut in 
the maximum allotment of CADIVI dollars for travel (ref B), 
the changes in the CADIVI lists will largely impact the 
middle and upper-classes and companies that cater to them 
rather than Chavez's base.  The decree was released quietly 
several days before Chavez's dramatic announcement of his 
economic "package."  We expect more such actions taken by the 
government that will inevitably have a further impact on 
 
CARACAS 00000397  002.2 OF 002 
 
 
inflation. 
CAULFIELD