A FAQ about the new “Law of Fair Prices and Costs,” using chavismo’s own words.
Q: So I hear there is a new Law of Fair Costs and Prices. What’s it about?
A: The Law of Fair Costs and Prices is a tool to deepen socialism. It was written because the exercise of monopoly power and the unceasing accumulation of capital has resulted in high profit margins that cause the constant rise in prices and the exploitation of the people. Business people have decided to set whatever price they want, with no regard for international parameters or for costs.
With this in mind, the President, with the highest commitment to revolutionary ethics and with the sole purpose of re-founding our fatherland, wrote this Law by-passing the National Assembly. It clearly states that every company that sells a good or service in Venezuela has to register their prices and their costs with the Superintendent for Costs and Prices. The Superintendent will then determine the fair price for these goods and services, based on the cost information provided.
Q: Wait, the government is going to set the prices of all goods and services?
A: The law applies to people and companies, foreign and domestic, public and private, who produce, import or sell goods and services within Venezuela. If your company does not qualify under that very specific criteria, this law does not apply to you.
Q: So … you’re going to estimate the fair price? How do you do that?
A: Affirmative, Comrade. We will do so by applying the latest statistical economic models that we have not informed the public about, and by using the data provided to the Cost and Prices System.
Q: What if my costs change or increase?
A: As Article 19 of the law clearly states, costs are not allowed to be higher than what is reported to the Superintendent. We will enforce this by using the Army and the National Bolivarian Police, which to this date only operates in certain parts of Caracas.
Q: What if the Superintendent sets a price that is too low? Can I appeal?
A: Yes, you can appeal. We have yet not worked out the details of how that appeals process works.
Q: What kinds of costs can I include?
A: You can include direct and indirect costs, as well as distribution and sales costs, general and overhead expenses, as well as a modest earning that takes into account expectations and risk.
Q: What happens if I get caught selling at the wrong price?
A: If you get audited, you have to give the auditors everything they want. If you get caught, you can be fined, you can be stripped of your right to engage in commerce, or your store can be shut down. If you get shut down temporarily, you must continue paying your workers’ salaries. We will base the fines to any infraction on the principles of equity, proportionality, and above all, rationality. If you don’t register you will be fined 15 minimum wages. If you get caught a second time, you will be shut down for 90 days. If you get caught a third time, your rights to engage in the trade of your choice will be temporarily suspended for a period of ten years.
At any rate, read the law, which devotes about 80% of its text to the many horrible things that will happen to you if you don’t do what we say. We really thought this through.
Q: Who is the new Superintendent?
A: The brilliant economist, Karlin Granadillo.
Q: Wait, won’t this cause scarcity?
A: No. There is no scarcity. When this happens, it’s a mode of pressuring the government. It’s just that businessmen are keeping their products in their warehouses. There is no scarcity in Venezuela, there is hoarding. As the superb economists of the Centro Internacional Miranda have told us, this law will not repeat the mistakes of the Soviet Union or Cuba because, you see, now we have computers.
Q: How is the Superintendent going to possibly monitor all prices of all goods and services?
A: We are counting on the assistance of the people, organized under their Communal Councils. They will let us know when a particular price does not match what is in the registry. Besides, our acronym is SUNDECOP, which is kind of like Robocop, only badder, and more socialist.
Q: How do we add the information to the system?
A: Through the Superintendency’s simple-to-use web page, which everyone in Venezuela, no matter how remote or no matter how small the business, should be able to access and use.
Q: What costs are not allowed?
A: Costs from having a third-party produce your goods, or costs stemming from changes in the presentation of a product or other artificial costs.
45 thoughts on “FAQCh”
A 15 year old could run the country better after readin a book on economics 101.
This is just about the stupidest move they could possibly make in an election year.
The shelves will be empty if they are able to enforce it which I highly doubt.
Already to buy quality meat here in Margarita you must go to the smaller butchers who pay no attention to price controls. You want meat you pay the price.
It will cause unemployment especially in view of the new labour law.
Well there you have it – we have arrived at full bore communism.
To all those idiots who swore that we would never be here when I was saying the exact opposite – you made your bed, now sleep in it.
Actually, I don’t see the problem in them doing this during an election year (from their perspective, of course). All they have to do is not enforce the law until it is convenient for them to do so. Whether they close a business or two right before the elections to see if they gain some votes, or they wait to use this law on their adversaries should they win next year’s elections, the fact of the matter is that they have the tools to legally kick you out of doing business, and that is exactly the kind of power you’d like to have if you want to be ruling indefinitely. Just saying.
You want meat you pay the price.
And there you have it.
Substitute any good for meat and the statement holds.
My head just exploded. Thanks, comrade.
—Socialism is a philosophy of failure, the creed of ignorance, and the gospel of envy, its inherent virtue is the equal sharing of misery…
Sir Winston Churchill
Apparently, you can´t include advertising in the media among your costs: that would handily kill two birds with a single stone. I wonder whether other promotional activities, including, fliers, sponsorships, etc., are also excluded.
You sure this is not a Chiguire post?
I’m really feeling sorry – aside for the people in general – for the next president. There is not going to be a way to mend things in order to have a relatively healthy productive system.
DA’s idea of a constituent assembly is making a lot of sense to me.
No question that a constituent assembly will be necessary. There has been enough damage. And, there is legal doctrine in place.
Recovery from these morons is going to be tough.
The only economists mentioned here, all government emplyees, are of the ‘brilliant’ type. I therefore donned dark glasses to run the video of the VTV interview with the Top ‘Fair-Prices’ Lady though they proved to be insufficiently dark to prevent an uncomfortable dazzle. Undeterred, with a view to serving fair play and all that, I soldiered on until the end. An unbiased summing-up reduces to a single, multi-faceted AARRGGHH. As for those facets, feel free to fill in your favorites.
I vote for “brilliant” or, if you will, “dazzling”. It takes an exceptional mind to discover that, if regulated prices don´t cover costs, a business, like the butcher shop or a dairy, can still make a reasonable profit selling, say, lottery tickets on the side. The video is one more proof that now Venezuela has achieved — nay, surpassed — first world status. Roll over Bachmann and tell Cain to moose.
I’m not exactly sure where “chavismo’s own words” end and JC’s begin (nor am I sure there’s any meaningful difference in substance), but here are some thoughts.
“the President…with the sole purpose of re-founding our fatherland”
Dios mio – the “Exposicion de Motivos” actually says this…! Is that just starting?
“Business people have decided to set whatever price they want, with no regard for…costs”
It’s OUR job to disregard those.
“We have yet not worked out the details of how that appeals process.”
But it will function precisely as well, with an equal number of revisions (zero), once we do.
“You can include…a modest* earning that takes into account expectations and risk”
*”modest” may be negative. As for risk, well, there’s no way to quantify the risk of expropriation, arbitrary rule changes, the cost of government corruption, etc, so it may as well be zero, which is how we will count it.
“If you get shut down temporarily, you must continue paying your workers’ salaries”
But since you’re shut down, those salaries won’t count as costs, so don’t ask for a price increase to make up for that.
(End of quotes) I see the barter economy making a HUGE comeback very, very soon.
Fine as long as it also applies to all government purchases both in country and abroad! The names and amounts received of all involved in the transaction be posted on the internet. Further, all transactions of La Sangre de Venezuela (OIL) must also be publicly be disclosed and they will provide documentation to all other governments to determine if crimes have been committed.
I’ll leave you with this. Not that I think there is a remote chance that something good will come out of the law itself, but this can cause so much damage that it might prove to be Chavismo’s last self-inflicted shot to foot. We’ll see…
Tough call: laugh or cry on this one.. what’s truly amazing is the dismal ignorance level of the 50%, or whatever, of the people who still buy into these utterly retarded and draconian rules. As usual, it’s mainly a problem of corruption, lack of any ethical values and/or education in our country.
Ok, you have in place a series of laws that don’t work – exchange controls, price controls, expropriated companies that don’t work, etc., etc. This has created shortages, inflation, price gouging & structural collapse.
You could bite the bullet & admit your plans haven’t worked & return to a free economy or… you could enact a draconian law that will allow you to control every facet of every business in the country hoping like hell that this will change things.
Unfortunately more controls are a road to even worse disasters. I think he wants us to fall to the level of Haiti. It’s one thing to know that he’s as crazy as a loon – it’s quite another that all the sycophants around him allow this to continue.
A lot of people will have a lot to pay for when this is finally over.
Put me down on the side of cheap, plentiful, fresh and tax deductible for everything, I mean hell you already got free gasoline, why not free pork-chops?
The true objective is to kill the economy, hungry people will not discuss Chavez rule, orders, etc. They will be too busy scavenge for food.
Welcome to Zimbabzuela.
It’s not the “too busy” factor that will prevent them from speaking out. Hunger will drive them to seek handouts from the government, which will happily be providing some – not a complete, balanced diet 7 days a week, as they can’t afford to do that, but often enough (like a slot machine payout) to keep hope alive. The “not discussing” will come from fear of being put on the “no food” list.
I read somewhere that guards and related security expenses were not allowed in the costs breakdown.
Is there a way to know what’s included and what’s not? I couldn’t find anything is that useless web page, not even an application form.
I am nearly at a loss for words. This is so obviously unworkable, I can’t believe they are presenting with a straight face. Honestly, the only moral way for any businessman to deal with this is to go John Galt, shut down his business, and go on strike.
Roy I have said this since I can remember and nobody, I mean nobody seems to see the reasoning.
We are seriously considering officially closing our business after this high season, canceling all advertising & just accepting previous clients or recommended by people we know. We can cut our expenses in half & survive. The way things are going now we will not survive if we do not go off the grid.
Man, what a post!
The end of chavista attempts at ruling Venezuela through political economy.
The reason prices are high is because costs and risks are high. The reason for that is, among others, because we don’t produce shit and the dollars needed to import the shit we don’t produce are too expensive. The reason for that is because the government, instead of investing time and effort in ensuring that Venezuelans trust their leaders and their handling of the economy opted for the easy out of regulating the exchange rate. The solution to a problem caused by the government is to restrict the exercise of our fundamental freedoms.
It’s going to be downright hilarious to see the supreme court jump through socialist hoops to decide that preventing a person from exercising her economic freedoms (ten year prohibition from engaging in commerce??? WTF?) is not unconstitutional.
The leader has cancer and will likely never have to account for the wrongs he has done. Not so these judges and their endless paper trail of violations. A good opportunity to make alliances?
Also, a good opportunity to bet on predictions for the unintended and negative effects of this dimwitted policy. I know if I worked in marketing in Venezuela I would not be sleeping soundly right now.
“It’s going to be downright hilarious to see the supreme court jump through socialist hoops to decide that preventing a person from exercising her economic freedoms (ten year prohibition from engaging in commerce??? WTF?) is not unconstitutional.”
Laugh if you will and so will I but, for María Estela, that is no major feat. This would be an administrative not a political sanction. That person still has her economic freedom :to can buy whatever she wishes, from shampoo to equipment and supplies for whatever she wants to produce. The only limitation is that she cannot sell anything and that is clearly an administrative measure. Her Constitutional rights are intact.
LL mutatis mutandi
Oops! Luisa Estela. I guess I prefer to forget her name…
Luisa Estela, Luisa Estela, Luisa Estela, Luisa Estela
“Es peligroso meterse conmigo porque yo también soy como el espinito, que en la sabana florea… ”
Nah, the constitutional freedom I refer to is that of performing the economic activity of your choosing. Clearly selling shit is an indivisible part of it.
Excellent post. You cannot only pretend to be Katy but also pretend to be a Chavista.
Next time I want a post of yours impersonating Luisa Estella Morales Lamuño at a personal level…very creepy stuff.
On the content: I wonder how long it will take for this bomb to explode, to start to manifest in the supply chain. It’s all about timing and the billions in Chinese wares Chávez is going to get in exchange for Venezuela’s soul.
Chavistas keep talking about usureros. How come, I wonder, there are more usureros in Venezuela than anywhere else on Earth? They don’t ask this kind of questions. Their brains would just melt.
Mr. Kepler said-“It’s all about timing and the billions in Chinese wares Chávez is going to get in exchange for Venezuela’s soul.”
It is about forcing the Venezuelans to buy Chinese products, not content with sharing the market and allowing “capitalists” products on the shelves. If it were “free market” that would be different.
So, Chavez gives money, then tells you how and where to spend it? ANd,punishes those severely who disobey. Are we having fun, yet?
Daniel has written an excellent interpretation of this new law.
His main point is that this is not an economic law as they would have you believe but a political law that will allow them to control the inflow of funds to the MUD & threaten all business owners & service providers. Well worth reading.
This completes the cycle of money from China, returning to China..
What’s ironic about the chavez way is that it helps the rich. By capping prices, the rich will be able to buy more of anything with the same amount of money, leaving less of everything available for the poor. That’s when rations cards step in…
This is a recipe for mass starvation and food riots in our future. And when that happens, I have no doubt the Chavistas will blame the Imperialists and los esqualidos.
Great summary. It looks like Chavez is trying to galvanise his base for the presidential campaign by giving them even more opportunities to extort, blackmail and steal.
Out of shear morbid curiosity, would this law dictate what a private property owner could sell that property for? Not that any such restriction couldn’t be easily circumvented, but will they even try to?
And the only good thing about this law is that because of the amount of confused people who need the explainin’, we the four cats and the messenger working in this low level proffesional-actualization company will get our aguinaldos being paid by the profit of the two seminars (and soon a third) our boss has been giving on the theme. Heck, the boss could even took the chance and increaes the prices of all the seminars and workshops
At least, until the Gomierdo figures out how much people should pay for a Lopcymat workshop. or a seminar in Management and Productivity.
I read some here talking about the need of a new Constituyente… Yet again? When is it going to stop? on the 11th Republic? We do not NEED new constitutions, what we do need is proper enforcement. I believe it was Rafael Caldera who once said that Venezuela has some of the best legislation in the world. What we lack, and have lacked as a country since WAAAAAY before the current administration, is the will and the detailed, A-to-B-to-C mechanisms to enforce them.
So the problem is procedural; it is of detail, of minuscule, day-to-day, accounting (actual book-keeping, not just “accountability”, which always sounds like a Politically-Correct synonym for Revenge), penny-chasing, boring, tedious work. Bureaucracy is not a bad word, it is established bureaucracies that make some of the best-run countries in the world great. Whatever law, good or bad, you have, it is the underlying compliance mechanism that makes it work. I remember several Venezuelan governments trying to set up burocracia de carrera laws in their final months in office, only for the next government to come and strike it down just after taking office.
Why? To get their own people -usually unfit for the positions- in place. And so the wheel has turned for decades.
It’s like having a carro tuneado, people. You can add your turbo, your Nitro bottles and fancy racing tyres (all those new laws and reforms), but if you neglect to change the oil and gaskets (the day-to-day bureaucratic work) regularly and adjust the coolant, the first time you take that thing for a ride the engine is going to blow into little pieces. And Venezuela has been pasando aceite for a very, very long time. So it is time to pop the hood and start tightening the thousands of little bolts that need tightening.
What a hypothetical new administration could do after assuming power is to use the massive amount of power granted by the Constitución Bolivariana on the executive branch to his advantage, to maybe fix or remove a bunch of those additions that are clashing with the engine. You might want a new one, but please, right now, let’s focus on getting the country firing on all cylinders.
Tom, I certainly agree with you in principle. When the Constitution turns into a wishlist, it represents nothing more than a majority view – and majority at the moment, not necessarily lasting long at all. That raises the temptation to rewrite it when the majority preferences change, and the Constitution ends up being as worthless as used toilet paper. All the more so because it’s transitory nature suggests that there are higher authorities and principles, so government officials (especially presidents) who walk all over the document generally get away with it.
I think, though, that Arria’s proposal is less about rewriting the entire document and more about creating enough changes to “re-found” the institutions, which would allow for an opportunity to appoint new people to various institutions (the Supreme Court, for a very significant example), and hold new congressional elections. While I definitely agree with the concepts you note, I also understand this desire, because it will be all but impossible to govern with all of those institutions blocking any semblance of progress.
The concept of a constituyente has been raised before, just to question whether or not to rewrite the Constitution and get rid of Chavez’s last set of ridiculous and problematic additions. My idea there was simply to go back to the 1999 Constitution in its original form – I think that largely addresses your concerns (on the document; enforcement is another matter) – but I wonder if that would accomplish what Arria is seeking to put into place. I also wonder if, given how much power has been shifted to the Presidency under Chavez by all his ass-kissing minions, how much a new President would be able to undo, if it would be enough to make a meaningful difference. I don’t know the answer, therefore I can’t decide if Arria has a good idea or not. Time will tell, perhaps.
Ha!, AIO, in Mexico they have a saying about ganarse la rifa del tigre… whoever wins the raffle, wins a tiger! I believe that is what’s in storage for a hypothetical new administration (I insist on hypothetical, sorry guys, someone has to assume the thankless task of remembering this illustrious forum to bring an umbrella to the parade, just in case). It is not going to be pretty, it will not be over soon, and it is going to leave a bitter taste on the throats of all involved. The smell of new is going to wear off pretty damn soon and the guy in power is going to have to be SUPREMELY intelligent, a Machiavellian-level manipulator to get anything done, if he or she can get anything done at all.
Also, isn´t there a mechanism in the Constitución Bolivariana that entitles the president to dissolve Congress in certain events? Something involving the ratification of the vice-president or somesuch? Not being intentionally vague here, just don’t remember properly.
Tom, sorry – I forgot I had some comments going in this thread (hard to keep track…). I’m glad someone read that treatise I scribed. I hope you come back to read this one, but I’ll keep it short (in case you don’t, but a good habit anyways).
I understand your hypothetical, and no argument here. Nothing will be easy, and everything together will be supremely difficult. I see some people talking about the next president making himself unelectable (for 2018?) by making the choices that are unpopular, but will be good for the country in the long run. I don’t envy the winner, because it will indeed be ugly. But amputation is ugly (before, during and after), and yet can be absolutely necessary to survive.
As for dissolving the Congress, the president can, but it’s very limited (Art. 240):
La remoción del Vicepresidente Ejecutivo o Vicepresidenta Ejecutiva en tres oportunidades dentro de un mismo período constitucional, como consecuencia de la aprobación de mociones de censura, faculta al Presidente o Presidenta de la República para disolver la Asamblea Nacional. El decreto de disolución conlleva la convocatoria de elecciones para una nueva legislatura dentro de los sesenta días siguientes a su disolución.
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