Merida, 4th December 2013 (Venezuelanalysis.com) – From today, Venezuelan citizens and residents who have legally acquired dollars will be able to open foreign currency accounts in public Venezuelan banks. They will also be able to use those accounts to purchase cars overseas, following a decree that President Nicolas Maduro signed yesterday.
“This measure is [an economic] relaxation that I consider necessary, a market measure in order to force the lowering of prices and facilitate new mechanisms of investment and saving in foreign currency, in dollars and Euros, in Venezuelan accounts,” Maduro said.
Public banking minister Rodolfo Torres said this afternoon that 52,575 dollar accounts for importing new vehicles had already been opened following the signing of the decree yesterday. A minimum amount isn’t required to open such an account, but once it is opened the person should request a vehicle import license through the commerce ministry, which should then be taken to Suvinca (Venezuelan Industrial Supplies CA), to buy the vehicle.
The import measure is part of decree 625 which regulates the production, import, and prices of new and used vehicles. According to the decree, the government will first conduct a probe into the industry to establish the actual costs of production and assemblage. Car manufacturers will have to report to the ministry of industry and commerce once a week on their production that week and any needs they have.
The decree also states that the selling price of used vehicles can’t be higher than that of new ones, as is often the case. Because of inflation, people are usually able to sell their cars for more bolivars than what they bought them for, and some people buy cars as a more stable way of saving. While within Venezuela there are speculators and organised mafia selling cars, there are also strong import taxes on Japanese and US brands, though Chinese company Chery receives exchange preferences.
Hebert Garcia, minister for air and water transport and head of the Superior Organ in Defence of the Economy said that many people, “the majority of which are authorised dealers” buy first hand cars at the official rate with currency from CADIVI, then exhibit them with “sold” signs, to later sell the car as second hand, at a black market rate.
Garcia said many such cars have been found stored by relatives on their land or in their garages, to later be sold on websites like tucarro.com
Further, the minister for the western region, Isis Ochoa stated today that DeCaro Motors in Lara state had profit margins of 200-1000%. DeCaro allegedly sold Ford Explorers for Bs 982,384, but also charged customers an extra Bs 200,000 to 300,000 to join a waiting list. The 2013 market price of the car is US$29- 40,000, or Bs 182 – 252,000. Ochoa said that later the first buyers of the car would sell the car at “speculative amounts” of Bs 2.5 million. She said an inquiry would be opened into DeCaro.
Minister for basic industries, Ricardo Menendez said that during inspections, authorities had found that General Motors was charging 6-7% on a tax that didn’t exist, and that Encava, which produces buses and mini buses, received dollars through the state but paid a fake overseas company which belonged to them for vehicles and spare parts. The fake company charged higher prices for the products, and then Encava in Venezuela also increased the price.
Maduro also met with the heads of car manufacturers to discuss their production and governmental inspections in order to establish “fair prices” for locally assembled cars. Should manufacturers meet the government’s requirements a sign of “guaranteed fair prices” will be hung in their doorway.
He also signed a decree with Peugeot to establish assembly factories in Venezuela and to create a joint venture between the French company and the Venezuelan government. Maduro estimated the company will produce 15,000 vehicles per year, with the first set ready by the end of 2014.
In order to implement the measure in which those with dollars can open bank accounts and purchase cars, Maduro also signed a partial reform to the Law of Unlawful Exchange. Those who participate in illegal currency exchange could also be sent to prison for 6 to 12 years.
Further, he signed Decree 628, published in yesterday’s Official Gazette number 40,307, creating a special, temporary presidential commission to verify the allocation of foreign currency to public and private institutions from 2011 to 2013. The commission will make sure the allotted currency was used for the purpose it was requested. It will be made up of five citizens, including Attorney General Luisa Ortega Diaz.
The commission will also be responsible for creating a System of Information and Registration of companies and institutions that have received foreign currency “in order to establish priorities…by sector and activity”. It will also analyse international market pricing in order to determine national prices, and will inform the relevant institutions of any crimes committed related to currency use.
The newly enforced car decree regulates the law on car prices passed in August this year by the National Assembly, and some aspects of the decree such as the bank account measure are only valid for six months.
The law set limits for the sale of second hard cars that are under ten years old according to their cost price, taxes paid, mileage, and condition, and the law states that second hand cars can’t be sold for higher than 90% of the price of new cars of the same model.
In September some car assembly worker union representatives asked Maduro to reconsider the law, arguing that it was better to provide currency to Venezuelan assemblers than to encourage imports of vehicles.
According to the 2011 census, 27.7% of the population has a car, and 8.6% have motorbikes. The car figure is down from 30.2% in 2001, as more people are using motorbikes. However Maduro estimated that in 1998 the average number of occupants per car was 10.9, and now it is 5. While inflation has varied over the last decade, purchasing power has steadily increased, seeing more people make large purchases such as cars, motorbikes and white goods.