Reading the Fair Prices Law is hazardous to your health

/ January 31, 2014

ley de precios justosI read the Fair Prices Law and I got a huge migraine. I wrote about it for FP (the law, not the migraine). The value added:

“The effect of the bill is clear: entrepreneurship in Venezuela is now an illegal activity. Thanks to this bill, the basic freedoms that should guide any society — freedom to innovate, private property, even the right to a fair trial — have essentially been taken away. Everyone, from lowly street vendors to the executives of multinational corporations, runs the danger of landing in a Venezuelan jail if a government bureaucrat thinks they are charging too much.”

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19 thoughts on “Reading the Fair Prices Law is hazardous to your health”

  1. The one thing they should be building up to improve economy, confidence, is the one thing they are dedicated to destroy

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  2. The FP piece is excellent !! It makes a clear and succint assesment of the Law and what it entails :, the end of business as a free productively run activity . The implications for the future of Venezuela’s economy are not promising. What really stands out is the zany idea that ‘fair’ prices are something which can be determined on a firm credible basis by some beaurocratic procedure , with no consideration of how market forces actually operate . Its like signing into law some anti gravity bill in the hope that it will allow cows to fly. That there are people in govt that attribute to this law the magic capacity to prevent and erradicate the inflation and shortages that now plague Venezuela is unbelievable !! Something for Ripleys or some Psychiatric Case Book. !!. My cup of disbelief once again ‘runeth over’.!!

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    • There was a recent objection by a minister in a barney about sales-prices of food articles where he said (I cannot provide the specific reference), “We subsidize foods by 80% for them to be sold at fair prices….”: which, in regard to reality-challenged mentality, says it all.

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  3. This bill makes selling a barrel of oil at 100$ illegal. What’s the cost of production? 20$? From now on, PDVSA has to sell it at 26$.

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    • My guess is that the law does not apply to exported products, only to locally sold ones , In the case of oil , the calculation is really warped because different crudes and products, each with its specific (and variable) cost structure , are used to create mixed cargoes which are then sold at an specific price . Also a big part of the cost structure consists of royalties and taxes which although they go to the shareholder are not characterized as profits , so they help hike up the ‘costs’ and reduce the margin of official profits. Dont think that Pdvsa’s after tax profits are currently any where near the 30% mark.

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  4. One question: what does the law say about sale of goods where the “fair price” has not been determined?

    Is it illegal? If so, nearly all private business in Venezuela has been criminalized.

    What is the requirement of businesses to provide SUNDDE with documentation of their costs? And what is the punishment for those who are not (or allegedly not) in compliance?

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    • Where do you think that 94.4% of the working force IS?
      Half of the work force is self-employed.
      20%+ of the work force is employed by the state
      the other 20%+ is working in a private company.

      So only 20%-25% of the workforce is shielded from a crackdown on entrepreneurship (because they work for the state). The rest will suffer from less commissions, less employment opportunities, more arbitrary seizures of their merchandise (in the case of street vendors), and all around more economic uncertainty.

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      • The only reason there is a 20+% being categorized as ‘self-employed’ is because ‘living off your wits’ is not in the official vocabulary.

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      • Well, I do not think the government will punish the street vendors…at least not as long as the opposition is still alive and there are a few companies around.
        I do not know how the situation in Caracas is right now but in Valencia and around and in Margarita street vendors go massively to buy in the better off areas, with children and all
        and then go resell the maize flour, oil, etc in the city centre – much more expensive.
        The government won’t do anything agains them outside Caracas because it knows it would lose a lot of votes.
        These street vendors are of all kinds – from extremely poor to people who earn much more than your average legal shop keeper – none of them have had to fill in a tax form, much less pay taxes.

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  6. Don’t overlook the concept that under Cuban-Castro leadership, by intention, all citizens are criminalized in some way at all times.

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