telesur | In 2004 and 2005, after winning the recall referendum against him, Chavez launched an offensive to boost local production. “Endogenous development” went hand in hand with declaring that the Bolivarian revolution was heading toward socialism. Land reform began in earnest. Mission Vuelvan Caras began to train the urban poor in agricultural and other skills. Tens of thousands of cooperatives were set up. Almost all of these failed.
The reasons were many, but one of the most potent was that oil prices began to rise sharply. It was just so much easier to import everything, than to build a whole new system of production. And with more people consuming much more, there was a lot that needed to be imported.
This presented Venezuela's traditional elite with an unexpected opportunity. For they still owned most of the companies that did the importing. Since losing control over the state oil company, they had been desperate to claw back their share of its income.
They set about developing one of the greatest scams of all time. It was based on acquiring cheap dollars from the Central Bank for false or manipulated imports, and then speculating on the growing gap in exchange rates.
This is how it worked. Private importer Mr. A applies for US$ 1,000 to import 100 cases of groceries. This costs him 6,300 bolivars (at the government's main preferential rate of US$ 1.00 = Bs. 6.30, in place until earlier this year). Mr. A then has several options. He could decide actually to import all 100 cases. But instead of selling them to his wholesalers at a price based on what he paid, US$ 10 or Bs. 63 per case, he sells them at a price based on the illegal, parallel exchange rate (US$ 1.00 = Bs. 500.00, early last year), that is Bs. 5,000 per case. In other words, he makes a killing in bolivars. But it is much more likely that Mr. A imports only 50 cases, or less, which he sells in the same way and still makes a handsome profit. With the rest of the dollars he was given, 500 or more, he can do several things. He can change them back into bolivars at the parallel rate, but he'd probably rather keep them for a while offshore until the rate goes up even further. Or invest them in something else abroad. Or keep them in his own private dollar account for a rainy day. In other cases, Mr A didn't import anything at all. He basically stole all of the dollars.
Big private companies in Venezuela did the same thing on a much larger scale. In 2013, the then head of the Venezuelan Central Bank, Edmee Betancourt, said that the country had lost between $15 and $20 billion dollars the previous year through such fraudulent import deals. The Central Bank's own figures show that between 2003 and 2013, the Venezuelan private sector increased its holdings in foreign bank accounts by over US$ 122 billion, or almost 230 percent. In 2014, Chavistas campaigning for an audit of the public debt estimated the total amount lost over the same period through fake imports and similar mechanisms amounted to an incredible US$ 259 billion.
It is likely that many of the 750 offshore companies linked to Venezuela in the database released from the Panama Papers have been used to recycle this money.
Venezuela's largest food manufacturer, Polar, has interrupted production several times in recent weeks because, it says, the government hasn't given it the dollars it needs to import its raw materials. But over the years, Polar has been one of the very biggest recipients of preferential dollars for imports. And from somewhere it has found enough dollars to develop new production facilities in the United States and Colombia.