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realclearworld

Reports from Venezuela: On a wing and a prayer

By Juan Cristobal Nagel in Caracas Chronicles:

On a wing and a prayer

Remind me again why we are here.The ongoing saga between international airlines and the Venezuelan government continues. Just when you thought airlines were going to get their money, the government is now suggesting they will only get paid in part, and at a much higher rate than previously thought.

According to El Mundo, the government is playing hard ball as usual, and is gunning to pay them 70% of what they owe, and at the Sicad I rate (roughly 11 BsF per dollar).

The way this works is the following: suppose Air Diosdado, for example, sold tickets to the Cayman Islands at BsF 1,000, under the promise that it would be able to translate those BsFs into dollars at a rate of BsF 6.3 per dollar. In other words, Air Diosdado sold the ticket for what it believed was $158.73.

Now, it turns out that the government will only recognize 70% of that debt,and pay it back at a higher rate. This means that the government only recognizes BsF 700 of every BsF 1,000 Air Diosdado sold, and that it will only pay them at BsF 11 per dollar, which comes out to $63. In other words, $158 that the airline thought it owned has become, thanks to magical chavista accounting, a mere $63.

Is it any wonder that airlines are leaving the country in droves?

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