CAPITALISM'S ACHILLES HEEL Dirty Money and How to

Playing the Game 29
mercial invoices, leaving the amounts not covered by the invoices to be settled
by other means. Okay, suppliers now had part of their money and were
waiting for the rest.
Argentines by the thousands became expert at keeping an entirely separate
set of books, even a separate set of entities, to sell part of their imports
or goods produced from such imports. Revenues from these unrecorded
transactions and unregistered entities were then taken to a bank for deposit,
with instructions to convert and transfer the proceeds into the depositors’
dollar accounts abroad. From such dollar accounts overseas, the balances
due on underpriced imports were settled. The net result was straightforward;
the importer paid substantially less VAT taxes and, with off-the-books revenues
and an open pipeline to a foreign bank account, topped up dollar balances
out of the country. At least that’s what happened until the Argentine
economy virtually collapsed.
That is on the import side, but how can you overprice exports that
you’re selling into competitive markets and stay in business? That makes no
sense. Unless the government pays you a subsidy to export; then it makes
sense. Take India, for example, which sometimes pays a percentage of the
value stated on commercial invoices to encourage exports from the country.
In recent years, incentives have often covered products with entirely domestic
content, such as leather goods, quarried granite, cotton garments, and
forest products. So, the Indian seller makes an agreement with his foreign
buyer to overprice the export. With the overpriced invoice the seller goes to
the Indian authorities and collects, say, the inflated 20 percent subsidy.
Meanwhile, the cooperating buyer can pay the overpriced amount in return
for a credit against future shipments or not pay the full invoiced amount after
asserting some spurious claim. Once again, everyone is happy, even the
government that, for awhile, doesn’t realize it’s been cheated. Finally reality
dawns, and most countries have now curtailed direct cash payments for exports.
Export subsidies remain rich and varied, however, including tax and
tariff exemptions, subsidized loans and credits, and reimbursements for storage,
transportation, insurance, market research, trade fairs, and promotions.
Lots of exporters continue to get rich off their government’s programs, so be
alert to this money-making opportunity.
I have been talking primarily about transactions between unrelated buyers
and sellers who cooperate to misprice trade, shifting money abroad and
in some cases making a little extra locally. An even bigger opportunity is