Thursday, November 20, 1997

Recadi rises from the dead

In a country in which the Government proudly announces in 1997 the completion of a highway on which work was initiated back in 1973, the belated results of administrative and legal initiatives should not be surprising. Nevertheless, we have indeed been surprised once again upon hearing rumors about the summons being issued, applications for reimbursement being submitted, fines being imposed, appeals being declared null and void and other such fine aromatic herbs. The clincher is that all of these are related to Recadi. Yes, ladies and gentlemen, Recadi - not OTAC - Recadi!

I remind my younger readers, who could be under the false impression that the follies of exchange control systems originated exclusively during this Government’s tenure, that in the early eighties a system of controls was implemented as an answer to new exchange rate realities during which the devaluation of the Bolívar was discovered. This system was known by the initials Recadi.

The Recadi system sent the wrong economic signals, stimulated unnecessary imports and allowed for blatant corruption though the misuse of the exchange benefits it offered. It was the most costly economic experiment in Venezuelan history. All of the accumulated losses racked up during the recent financial crisis don’t even come close to the cost incurred during the Recadi years. Only the fact that the Recadi debacle was spread out over several years diluted its effect and made it less visible as a disaster than the bank crisis.

Even though there was some opposition, the Recadi system so totally enveloped the national economy that it resulted in the creation of a kind of society of accomplices or accessories which then made it extremely difficult to correct as well as to punish the abuses that were committed under the system’s umbrella. We can still remember the comments relative to the infamous Chinaman of Recadi, the only person who, as an exception that validates the law, underwent judicial punishment.

Recadi, as does all official bureaucratic process, implied the elaboration and use of an incredible amount of documentation. This put to task the internal administrative capabilities of industry and commerce in Venezuela not used to working with government entities at certain levels. Local banks were brought into the game by the government, and against their best judgment were forced to dedicate several years and immense resources to documentation and issuing of bonds to cover incomprehensible obligations.

When Recadi finally disappeared, there was general relief all around. As a natural reaction, all parties actually involved in this involuntary process immediately began filing, stashing, hiding and losing all types of documents which could possibly remind them of their participation in this horrid chapter in economic history. New actors also surfaced to help purge filing cabinets of this damning material. New upcoming generations which never had to live through Recadi (50% of the country’s population), foreign investors and bankers. All, however, have something in common. When they see a file labeled “Recadi”, they rifle through it, define it as the product of a historic comedy and then send it to the trash bin with the efficiency, energy and arrogance of a newcomer.

Once this happened, however, official entities of all types and colors began spewing forth their edicts; the Central Bank of Venezuela, the Ministry of Finance, the banks and the different Administrative Courts.

“The Court XXX, in relation to the recourse ........... declares null and void the administrative appeal submitted by YYY against the decision issued by the External Private Debt Registration Commission in its resolution of February 1985”

“We are pleased to notify you that the Central Bank of Venezuela has requested the reimbursement of US$ XXX in advance payments for the following imports due to the fact that the corresponding documentation required to justify said advance payments was apparently not submitted on time.”

The questions that still remain to be answered are several. What strange power can manage to reactivate, almost fantasmagorically, files that up to now have been classified as “dead”? Is this the new Venezuela in which justice arrives late but does finally arrive? Could this merely be an example of “I’ll get you sooner or later”? Or could this simply be the result of the privatization of official business?

At least some conclusions seem clear: Save even your toll receipt! Watch out, OTAC is coming, maybe not this century, but certainly the next!

Daily Journal, Caracas, November, 1998