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Cablegate: Venezuela: Cadivi Rules Change for Travelers

VZCZCXYZ0030
RR RUEHWEB

DE RUEHCV #1463/01 3211523
ZNR UUUUU ZZH
R 171523Z NOV 09
FM AMEMBASSY CARACAS
TO RUEHC/SECSTATE WASHDC 0004
INFO WESTERN HEMISPHERIC AFFAIRS DIPL POSTS
RHEBAAA/DEPT OF ENERGY WASHINGTON DC
RHEHAAA/NATIONAL SECURITY COUNCIL WASHINGTON DC
RHMFISS/HQ USSOUTHCOM MIAMI FL
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RUEATRS/DEPT OF TREASURY WASHINGTON DC

UNCLAS CARACAS 001463

SENSITIVE
SIPDIS
ENERGY FOR CDAY AND ALOCKWOOD
HQ SOUTHCOM ALSO FOR POLAD
TREASURY FOR MKACZMAREK
NSC FOR DRESTREPO AND LROSSELLO
USDOC FOR 4332 MAC/ITA/WH/JLAO

E.O. 12958: N/A
TAGS: ECON EFIN VE CVIS
SUBJECT: VENEZUELA: CADIVI RULES CHANGE FOR TRAVELERS

REF: CARACAS 3

1. (SBU) Summary: Venezuela's foreign currency board, known by
its Spanish acronym CADIVI, is changing the rules by which
travelers can access foreign exchange at the official rate when
using local credit cards abroad. The new regulation has not yet
been published, but CADIVI's president has said it will include a
requirement for travelers to register each trip with CADIVI and a
sliding scale according to which the amount of foreign exchange
CADIVI would authorize for a given trip would vary according to
duration and destination. The requirement for registering is
already in effect. CADIVI authorizations for foreign travel have
declined in 2009 versus 2008, probably largely as a result of a
reduction in the overall limit authorized per traveler per year.
Many local analysts expect a further decline in CADIVI
authorizations for foreign travel in 2010. This outcome makes
sense from a political perspective, as these authorizations are
essentially a subsidy to Venezuelans traveling abroad. End
summary.

From an Annual "Cupo"...

2. (U) The Government of the Bolivarian Republic of Venezuela
(GBRV) has administered foreign currency controls since 2003
through a commission known by its Spanish acronym CADIVI. One set
of CADIVI regulations governs how Venezuelans can access foreign
exchange at the official exchange rate for travel and/or purchases
abroad. (Note: The official exchange rate is 2.15 bolivars
(Bs)/USD. The current parallel exchange rate is 5.4 Bs/USD. It is
thus to a traveler's great advantage to obtain dollars from CADIVI
rather than the parallel market. End note.) According to existing
regulations, a traveler is entitled to spend up to USD 2,500 per
year (known in Spanish as the "cupo") on one local credit card
while traveling abroad. The local bank that issued the credit card
may request reimbursement from CADIVI at the official rate up to
that limit. Each Venezuelan may also spend up to USD 400 per year
on Internet purchases using a local credit card and may purchase up
to USD 500 per year in cash before traveling, both at the official
exchange rate.

3. (SBU) The GBRV's policy of effectively subsidizing foreign
travel has the perverse effect (from its perspective) of
encouraging travel to the U.S. and demand for U.S. visas.
Travelers must wait several months to obtain appointments at the
Embassy for tourist and business visas because of heavy demand, but
this wait has not deterred tens of thousands of first-time
applicants.

...To Authorization By Destination and Duration

4. (U) According to CADIVI president Manuel Barroso, CADIVI will
issue a new regulation in the next several weeks governing how
travelers may access foreign exchange at the official exchange
rate. Per Barroso, travelers will have to register each trip with
CADIVI and will be authorized an amount for each trip depending on
the duration and destination of the trip. Barroso said in a press
interview that the online registration system will be available
starting December 7 for travel beginning on or after January 1,
2010. In the interim, CADIVI introduced on November 9 a
registration system for travel in December 2009. Barroso has not
revealed the scale that CADIVI will use to determine the amount
authorized for a given trip. He has hinted that an amount greater
than USD 2,500 could be authorized for long trips to far-flung
destinations. He has also stated that parents may purchase
additional cash in advance if they have children traveling with
them.


Comment: Why the Change?

5. (SBU) There are several possible explanations for the expected
changes. Barroso has hinted that one reason is to ensure that the
hard currency allocated for foreign travel is used appropriately.
In past years, there have been considerable reports of fraud
associated with credit card use. A previous CADIVI regulation
lowering the "cupo" amount also included several provisions
designed to reduce fraud (reftel), and CADIVI has taken action
against individuals suspected of fraud. By requiring travelers to
state the destination and duration of their trips and authorizing a
given amount per trip, CADIVI may conceivably further reduce the
incentives for fraud.

6. (SBU) Many local analysts suspect, however, that the primary
motive behind the changes is to reduce the total amount of foreign
exchange CADIVI authorizes for travelers. In 2008, CADIVI
authorized USD 4.8 billion for credit card use (including travel
and Internet purchases), or 10.3 percent of total CADIVI
authorizations. In 2009, credit card authorizations through
September were USD 2.5 billion, or 12.3 percent of total CADIVI
authorizations, on pace to end 2009 at approximately USD 3.3
billion. (Note: The expected drop from 2008 to 2009 probably
largely reflects the reduction in the cupo and associated
anti-fraud measures [reftel], as well as greater delays in CADIVI's
authorizing what banks have requested based on their customers'
credit card use. End note.) Many analysts think CADIVI will
authorize less for foreign travel in 2010 than in 2009, either
because the additional bureaucratic procedures prove too onerous
(perhaps partly by design) or because CADIVI authorizes less per
traveler. This outcome makes sense from a political perspective,
as CADIVI is currently essentially subsidizing foreign travel for
Venezuelans who are generally of the middle and upper class and
therefore less likely to support President Chavez. The new system
also will also allow the government to collect information on the
travel patterns of Venezuelan travelers who seek to access CADIVI
dollars. End comment.
DUDDY

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