Prison Sentences In Venezuela’s New “Just Prices” Bill

January 27, 2014


Daniel has given you a neat angle on the new ¨Bill for Just Prices¨, which implies that if Jeff Bezos ever set foot in Venezuela he would have to go to jail. But Mr. Bezos is very unlikely to set foot on this country. But I want you to give you a slight different angle, the consequences for those that live in Venezuela. What they will face under the new Law. Now, I am not a lawyer, nor do I want to bore you with the details of the new Bill. I just want to point out how absurd, even medieval and fascist the whole Bill is.

Thus, I will concentrate on the prison sentences that local people will supposedly get for violating the Bill and the reasons for it:

–Take for example Article 51, which says more or less: “Those who sell goods or services at prices above those fixed or determined by the SUNDDE (The Superintendency created in the Bill to supervise everyone) will be sanctioned with prison terms of between eight and ten years.

The Bill is actually quite ambiguous, it is one thing for the price to be “determined” than for it to be “fixed”. The SUNDDE can “determine” at any time that your price was excessive. This will create a legion of of SUNDDE employees looking to determine prices so they can ask for a bribe.

Now, just to make sure, the Bill details what it means to say “Those who sell”. It is not only the owners, but also the administrators of companies that would be responsible under this new regime of threats and terror that is about to begin in Venezuela. In fact, I expect many owners to say “Forget it!” and just close shop, the same way I expect many Managers to say “Forget it!” and resign to their positions once they figure out what it entails under the new Bill.

But contrast Art. 51 above with Article 57, for example, which says: “Those who buy basic products in order to make money, to resell them at prices higher than those established by SUNDDE will be sanctioned with between 200 and 10,000 tributary units. Note the difference? If you make or sell something and violate the regulations, you get eight to ten years of jail, but if you are just a reseller (Mostly street vendors, I presume) you will have to pay between Bs. 21,400 and Bs. 1,070,000 (US$ 1,893 and US$ 94,690 at the new newfangled Sicad rate. Thus, you can extortion everyone, the penalty is just different, oligarchs get eight to ten, aspiring capitalists who are part of the “people” get to pay a fine (or a bribe!)

–It gets better. Article 55 says “Those that carry out actions or incur in omission that directly or indirectly affect the production, imports, gathering, transportation, distribution or commercialization of goods will be sanctioned with ten to twelve years of jail.

Subtle, no? Imagine you engage in a protest, block traffic: Ten to twelve years because you affected distribution or transportation. Or suppose you supported that protest, then you indirectly helped those guys. See it? This gives the Government carte blanche for jailing people. And they will!

— Article 58. Those that “condition” the sale of regulated goods or services by SUNDEE will be sanctioned with prison between two and six years.

Of course, it will be up to this new super bureaucracy, the SUNDEE, to determine what this conditioning means. You rent a store to someone and put in that they have to paint the store, not you, well, tough, you go to jail. Think about it, contracts will not be able to have any condition whatsoever or else! No soup for you! And jail too!

–Finally, there is an article that says that those that get involved with contraband (out f the country, of course) will be punished with jail sentences between 10 and 14 years.

Jeez! I wonder where they will be able to find new personnel for the National Guard. Unless, of course, the military s exempt from this. Which could happen, this is, after all, a revolution.

There you have it, It will be so easy to go to jail, so easy to charge you and convict you, that I ask: Would you work for a company or start a company that would be subject to this Bill?

No way Jose, as The Village Voice used to say.

The Bill, of course, has dozens of other nuances and penalties, I just thought I would highlight the worst ones. If you find comparable ones, please note in the comments.

And inflation? Will surely be higher in 2014 than in 2013, new Bill or not.


84 Responses to “Prison Sentences In Venezuela’s New “Just Prices” Bill”

  1. weber grills Says:

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  2. noel Says:

    I find it fascinating that there is so much discussion about how to calculate a crazy cap on commercial profits and little about the big picture. For example, and perhaps because of concerns about personal security, I read very little about Miquelina’s interview and the choices he raised. One could say that at 94 he has nothing to lose, but still.

  3. moctavio Says:

    There is US$ 3 billion of PDVSA and US$ 1.5 billion of Venezuela. I think they could try to exchange the 2014 for a longer maturity issue, the market would not take that well.

  4. Kepler Says:


    You have previously said Venezuela’s regime can plot along for some years until it has to deal with the bonds.
    Could you update us on this? (with us I mean us non-economists-non-traders)
    When exactly? How much money the government will have to give to traders?
    And what option does it have?
    I will try to translate that into Spanish and German if possible.

    • moctavio Says:

      There are few maturities in the bonds this year, 2015 and 2016. This does not mean they will survive, what I said was that I do not see a collapse in 2014 like many do. Beyond that I will take it one year at a time, two years with these guys is looong term, particularly with the uncertainty in oil prices. If they could not pay this year, they could, for example, nationalize the banking system, which has like US$ 5 billion in foreign currency and bonds. They could then force the banks to lend to the Government as much as they needed.

      • Kepler Says:

        Thanks again. Hm, I suppose that’s one of the reasons why Banesco bought firstly Etcheverría and now Novagalia…to transfer their assets there (also because it’s buying time in Spain if you have the dosh, of course)

        • moctavio Says:

          The Banesco strategy is very smart, buy cheap assets and if you get nationalized in Venezuela, you still have the Spanish part.

          • Kepler Says:

            What I would find interesting is to know how they can transfer fonds from Venezuela to Spain now. Can they beyond some basic payments through CADIVI-whatever-the-name-of-the-scheme?

      • Carlos Says:

        Do we have principal maturities now un 2014?? Do you think the country will honor the payment or exchange for longer and more expensive new bonds?

    • Ira Says:

      Hey, great opportunity for counterfeiters there!

      You could sell Monolopy dollars and tell people it’s Yuans:

      What the hell do they know what it looks like?

      • Kepler Says:

        Well, to be fair: I don’t think from the Zimbabwean point of view it is so much different – all other things considered equal – to learn to identify a fake dollar or a fake yuan – unless for a Venezuelan or a Mexican.

        You just have to mind: watch Comrade Mao’s watermark and scratch his hair to detect a real Yuan 🙂

        The real problem I see is the fact China doesn’t play anyone’s rules when it comes to deciding what parity its currency should have. It has kept the Yuan significantly undervalued and that’s what we know.

    • N Smith Says:

      Zimbabwe dollarized spontaneously in 2008 – the people decided, not the government. They use the US Dollar, Euro, British Pound, SA Rand and Botswana Pula as legal mediums of exchange.

      You can use any relatively stable currency as a unit of account. If they do a lot of business in the Chinese Yuan, then it is logical that they would include the Yuan in their multi-currency dollarization set-up.

      It could also be a good political move when it is estimated by Goldman Sachs that the Chinese economy would be in number 1 position with USD 50 trillion in GDP in 2050 with the US second with USD 34 trillion in GDP.

  5. Ira Says:

    OT! OT! OT! OT!

    My beautiful niece from Caracas just paid my wife a surprise visit while she was working overnight at Wal-Mart! First time in America! This is the one who works in geriatric mental health and hates all Chavizmo guts (from day one) like nobody’s business!!!


    Miguel, where should I take her and her boyfriend in Weston for the best VZ ex-pat experience!?

    • firepigette Says:

      Take her for a boat ride on the everglades.That is unique to the area

      • Ira Says:

        Yep–I think that’s going to be on the itinerary!

        That same day, after consuming a few dozen beers at my house, they went up to Orlando for a few days of shopping at the outlet stores–for resale in VZ, I assume.

        And I think a friend rented the car for them so it didn’t eat into their dollars allowance.

    • xp Says:

      Check out the community centers, and even libraries are well worth a visit.

  6. Ira Says:

    Ironically, the U.S. was at its strongest economically when retail markups were astronomical. Now, you know I ain’t no economist and I’m not citing figures, but consider this:

    Before the age of discount retailing in the U.S., which only came about in the ’60s really, it was VERY common practice to mark up hard goods 100% of wholesale (purchase) cost. And goods were sold to retailers at 100% of manufacturing cost.

    This was how it was done, it was “the” accepted formula, and putting the Depression aside (easy for me to do now, huh?), it worked pretty good like this. Granted, we did all our own manufacturing in those days, but even today, I bet our retailers still pay the Chinese at least 100% above their manufacturing costs.

  7. m_astera Says:

    As others have pointed out above, Cuba is a rousing success from the POV of the Castros, their cadre, and their wannabes. The aim is to make Venezuela a larger version of that success: 21st Century Feudalism.

  8. Dave Hill Says:

    With communists it’s always “not their fault.” Just like Obama. It’s because of global warming or Herbert Hoover. Marxist ideology is perfect and can never be wrong.

    • RattInnaCage Says:

      Dave, as soon as I saw you used the word Communist and then tied it to the President of the United States stopped reading ’cause this isn’t a fiction site.

    • Island Canuck Says:

      Agree, loco de bollas

    • Carlos Says:

      Beg you pardon but…Mr Obama is a professional and proud american citizen politician, who won 2 unquestionable elections, with a strong background in the House, that probably would like to support and help minorities, poorer and weaker people. This is just what I would expect from a democratic president.
      Tax the rich and feed the poor is the key of society preservation and mutually beneficial for both sides, not communism.
      These communist thugs like Chavez, Maduro, the Castro brothers, Ortega, etc are centuries away from Mr Obama.

  9. Kepler Says:

    OT but not so OT, we need to inform about these economic distortions and about how bad Venezuela is really doing but we have to do that in Spanish.
    So I copy this I wrote somewhere else. A suggestion: add information about inflation of Venezuela compared to the rest of Latin America and real GDP growth not just with Colombia and Ecuador but with such countries as Mexico, Chile, Uruguay.

    En serio, gente: alguien puede ayudar a mejorar este artículo de Wikipedia?

    Edition wars and I don’t think many act properly. We need to be more Catholic than the Pope to beat them.
    It is true Chavistas lurk and seem to live there. Things have changed only slightly. Still, the issue is how we react to that.

    1) you don’t do a big edit in one go, just keep in mind one article and do a tiny edition one week, then another
    2) you never ever say something like “the government screwed it up” or the like. You write Chavista minister stated blabla (preferably you can put some big words they say), you add a link of theirs…and then you add what one of our deputies or newspapers said. Even if they seem to cancel each other, you will see things will go to our favour.
    3) you preferably add things that are neutral as well – where a ministry is located or the code for something in the article about Apure
    4) you fix a couple of spelling errors (it’s extremely easy to find them in texts about Venezuela)
    5) you add in your edition some warning like “por favor, mantener el estilo enciclopédico”.
    6) When possible, add the tag for “fuente requerida” when they write some rubbish.

    We have a problem in Venezuela. Everyone says “aquí tiene que llegar alguien a componer esta vaina”. It’s everyone of us, a wee bit, a minute or two a week.

  10. arco Says:

    I’ve never met a Venezuelan who enforce the law.
    So this law is also worthless.

  11. Ronaldo Says:

    Dang, Where do I apply to become a SUNDDE inspector?
    On second thought, this is Venezuela. SUNDDE inspectors are likely to get shot for demanding too big of a bribe.

  12. Roy Says:

    Sounds like the whole thing is another mechanism that will allow another whole set of thugs to steal from us. The only difference being that this set of thugs won’t even pretend to be anything other than thugs.

  13. carlos Says:

    This law entitles for any kind of punishments even for the most legal importers, like the ones that import goods using appropriate importation licenses and Cadivi funds.
    30 % apllied over standard cost od goods will be an operational loss, 30 applied to standard cost and operational expenses befor taxes will be a breakeven, the same 30 applied AFTER INFLATION adjustements would be a nice profit…
    Worse for companies importing goods at black market rate, like watches, large HIFI , furniture, wallets, fashion goods, etc,,.. seniat inspectors usually do not accept the loss in currency as a cost or expense chargeable to cost, they just look the valuation at customs and paid duties.. and I think these new SUNDD inspectors will be worse

  14. Jackson Says:

    Trying to second guess why the regime does this or that. In the end, it’s more of the same. Some say it’s fear. If you have ever been around people with personality disorders and you are aware, then this is the same thing. Buy time without regards to the consequences. Things are not that bad down there compared to other countries so the regime has lots of wiggle room to manuever. The opposition acts confused and unaware

  15. nacazo Says:

    wikipedia said:

    “For example, Lactantius wrote that Diocletian “by various taxes he had made all things exceedingly expensive, attempted by a law to limit their prices. Then much blood [of merchants] was shed for trifles, men were afraid to offer anything for sale, and the scarcity became more excessive and grievous than ever. Until, in the end, the [price limit] law, after having proved destructive to many people, was from mere necessity abolished.”[13] As with Diocletian’s Edict on Maximum Prices, shortages lead to black markets where prices for the same good exceed those of an uncontrolled market.”

    The more things change the more they stay the same.

  16. nacazo Says:

    It is not ineptitude. They want to create scarcity. They want people to depend on the government for their needs like in cuba.

  17. Reblogged this on danmillerinpanama and commented:
    How to fix an already broken economy: throw as many producers and sellers of goods in jail as possible and impose fines on the rest. That’s sure to make them behave; or something. Not only that: it’s entirely consistent with the Chavista Idiotology ideology, so what could possibly go wrong?

  18. VJ Says:

    Devil…….. I got a question !
    Earnings regulated by the “ley de precios y ganancias justas” are before or after EBITDA ?
    Thanks !!!

    • moctavio Says:

      VJ, I feel like making a joke, but it is no laughing matter. This 30% number that Maduro pulled out of thin air is absurd. Nobody knows how it will be applied, neither how it will be balanced with inflation accounting. (30% could be a loss, for example).At the same time, some businesses have very small margins. I dont even know if they will handle EBIOTDA. I do know that when companies are checked, they ask for receipts, if you are a manufacturer, they tend to leave you alone, if you are an importer, they calculate your profit as the difference between receipts and sale prices with little regards for salaries and indirect expenses and costs. Crazy!

      • N Smith Says:

        Miguel, If you were not doing inflation accounting in terms of a DAILY INDEX you are simply fooling yourself – which businesses and accountants and economists in Venezuela are doing with inflation-accounting in terms of the monthly published CPI. This is very basic.You cannot disprove this.

      • Roy Says:

        Miguel, If your business is one which requires extensive bribery (such as importing) you certainly cannot claim those costs as part of your costs. Therefore, unless they pay further bribes to avoid going to jail, the 30% figure is a joke.

  19. jak Says:

    “–It gets better. Article 55 says “Those that carry out actions or incur inomission that directly or indirectly affect theproduction, imports, gathering, transportation, distribution or commercialization of goods will be sanctioned with ten to twelve years of jail.”

    Maduro, GUILTY

    • Ronaldo Says:

      Articulo 55 sounds like they want to make a free market system. Really! They want to stop all intervention, good or bad. Suppose a businessman doubles production and drops the price 25 percent– Does this mean he will be sanctioned with ten to twelve years of jail?

  20. Ronaldo Says:

    The conclusion I see is
    1. Production and sales of all goods will disappear. Prices will actually increase as goods become scarce.
    2. The government will sooner than later own all commercial enterprises
    3. Corruption and bribes will be part of all deals
    4. The Venezuelan prison system will triple in size and become a source of free labor for the government enterprises.
    5. Crime will soar as goods become scarce
    6. Maduro will sleep next to Chavez rotting corpse trying to get advice on running the country.

  21. captainccs Says:

    Miguel, forget the details of the “law.” What’s important is its purpose, to drive all private enterprise bankrupt to effect a total state takeover of everything
    (hookers included).

    • NorskeDiv Says:

      And eventually, once they have eliminated all the private competition and everything is owned by the state they will get on the privatization train. A few decades from now they will follow the examples of China and Russia, Chavistas will go from merely being wealthy to literally owning the country (with a minority share being held by their Chinese friends).

  22. Virginia Says:

    The end is speeding up. The end of Venezuela of course! It’s taken 15 years/ or 1.5 depending how you look at it to get to this..The rest will be defined, more or less within a year or so. And those dreamers who for so many years dreamed the dream that this, could not continue, will be prisoners in their own country! – Unable to leave and live elsewhere.

    • Alexis Says:

      Venezuela can still fall a long way. A lot of people thought the system would collapse years ago, yet this slow collapse can linger for years still.

      The end will come suddenly one day, it will all look obvious in hindsight, but this is very difficult to predict.

      • NorskeDiv Says:

        Maybe something positive will come out of it if Venezuela does collapse, like Venezuela becoming a Chinese colony. They would sort out the crime problem pretty quickly, if nothing else to insure the safety of their oil workers, which is more than Maduro is doing.

  23. Dr. Faustus Says:

    And, ah, which of the newly created government bureaucracies will regulate the pricing of Venezuelan hookers? Are they allowed to charge ‘more’ than 30% if they’ve had breast implants? What about those high-priced hookers, the ones who wear real make-up and come to your hotel room? Do they get to charge more? There’s gotta be a codicil or something about hooker pricing in this new law. Right? This is so very, very confusing…..

  24. Iguana_Master_7000 Says:

    The way they are going, why not just outlaw inflation? That should do it!

    All they need is to pass a law that prohibits inflation, case closed!

    • N Smith Says:

      You cannot “outlaw” inflation. Inflation is the economic result or effect of creating too many Bolivars in the economy. The correct way to do it is to fire the governor of the Central Bank, like they do in highly developed countries, when inflation rises above a targeted level of say 2, 3 or 6 or 10 percent per annum.

      Inflation is simply created DURING HYPERINFLATION by creating too much local currency: period. Inflation is created by the Central Bank – during hyperinflation.

      During LOW inflation it is considered by most – not all – economists that inflation is the result of an increase in the general price level.

      Whatever the cause of inflation or hyperinflation, daily indexing or “correcção monetaria” stops ONLY the EFFECT OF inflation or hyperinflation. It does not stop actual hyperinflation because while the Central Bank creates too much local currency there WILL BE hyperinflation: Daily indexing only removes its effect completely.

  25. Getashrink Says:

    “And inflation? Will surely be higher in 2014 than in 2013, new Bill or not.”

    Why do you expect inflation to be higher in 2014 when the new bill is basically making inflation illegal?

    What I would expect is (much) higher scarcity levels.

    • moctavio Says:

      And you think it will work? With scarcity and deficit spending, inflation will roar out of the gate, law or no law. You can’t make inflation illegal, it has never worked. They have to allow prices to rise, if there is one thing they are afarid of is shortages.

      • Getashrink Says:

        It is not clear to me that inflation is preferable to scarcity in a communist mind. Inflation hits the poor the hardest. On the other hand, scarcity affects everyone just the same. Neither the poor nor the rich can buy what isn’t there. So, scarcity makes everyone equal, and as you know, there is nothing a communist values more than equality, even if it means equally screwed.

        • Caraqueño Says:

          Mugabe declared inflation illegal. Zimbabwe still managed to post the highest inflation in the world then. It is not a matter of preference it is reality. If you don’t let the prices re-adjust then you loose further capacity and therefore more scarcity. Problem with scarcity is Amor con Hambre no dura.

    • Autobot Says:

      “…he new bill is basically making inflation illegal…”
      There’s also laws here in Venezuela that make crimes, such as rape, theft and murder, illegal. Yet there is more than 90% of impunity for those crimes.
      The fact that a stupid law like this exists, doesn’t mean it’ll instantly solve the allegedly crimes, because in Venezuela, laws are made to screw the middle class, aka the scapegoats for the revolution.

  26. xp Says:

    I am amazed and humbled
    by the majestic sweep,
    the impled utopianism,
    unmatched by any other
    country big or small.
    Even Popes will need to
    bow their heads in recognition
    to our illustrious president’s
    sweeping and self-serving

    Presidente de la República

    Con el supremo compromiso y voluntad de lograr
    la mayor eficacia política y calidad revolucionaria
    en la construcción de socialismo,
    la refundación de la patria venezolana,
    basado en principios humanistas
    sustentados en las condiciones morales
    y éticas que persiguen el progreso del país y del colectivo,
    por mandato del pueblo,
    y en ejercicio de las atribuciones
    que me confiere
    el numeral 8 del artículo 236
    de la Constitución
    de la República Bolivariana de Venezuela
    y el numeral 2, literal c,
    de la Ley que Autoriza
    al Presidente de la República para
    Dictar Decretos con Rango,
    y Fuerza de Ley
    en las materias que se delegan,
    en Consejo de Ministros.


    El siguiente,


    DE PRECIOS JUSTOS etc.. etc..

    • xp Says:

      Imp …
      Imps are generally lonely and
      crave for human interaction and attention.
      Imps play tricks and jokes in a bid to
      seek the companionship of human beings.
      In many stories imps are depicted
      as playful creatures playing pranks
      on humans simply out of boredom.
      Can our pres have an impish side
      to his madness?
      Or can he plead insanity?

    • xp Says:

      Dictar Decretos con Rango,
      y Fuerza de Ley = spitting into the wind.

      or, in cruder terms … piss-ant piddling into the wind.

    • Roy Says:

      Language of the looters straight out of pages of “Atlas Shrugged”…

      • xp Says:

        Thanks Roy.
        Rand never loses relevance.

        Re the Dirty[30] Percent …

        “Contradictions do not exist. Whenever you think that you are facing a contradiction, check your premises. You will find that one of them is wrong.”
        ― Ayn Rand, Atlas Shrugged

        • Ira Says:

          Rand was a political and economic philosopher, and like many “regular” philosophers, her science isn’t a science and doesn’t pass the test of correctedness.

          Not to mention the fact that she was a bitter nut.

  27. Morpheous Says:

    A little bit of a fall in oil prices and we could see hyperinflation and hyper-shortages under these Bill. Of course, capitalism and the CIA would be the ones to blame.

    • N Smith Says:

      Venezuela has been in hyperinflation since Nov 2009.

    • N Smith Says:


      Miguel stated elsewhere on this blog:

      “as the destruction of the Venezuelan economy BY THE REVOLUTION marches on”.

      Venezuela has 56% official and 333% implied annual inflation (Prof. Steve Hanke estimate) and a sort of imploding economy, the details of which you know much better than I know them.

      Let us compare Venezuela with Brazil from 1964 to 1994:

      Brazil was in hyperinflation of up to 2000% for 30 years from 1964 to 1994, BUT they had a relatively stable non-monetary economy because they used “correcção monetaria” as follow:

      1. Their ACCOUNTANTS, BUSINESS MANAGERS AND BANKERS inflation-adjusted most (I can not say for sure all) monetary items (money loans) in terms of monthly indices and in the end a DAILY INDEX: their Unidade Real de Valor. In this way their ACCOUNTANTS, BUSINESS MANAGERS AND BANKERS overcame (counter-acted or made good) the destruction of the real value of their internal monetary unit of account by hyperinflation: Brazil´s ACCOUNTANTS, BUSINESS MANAGERS AND BANKERS eliminated THE EFFECT OF hyperinflation on the real value of monetary items. So, it did not matter how high hyperinflation went, their ACCOUNTANTS, BUSINESS MANAGERS AND BANKERS simply eliminated THE EFFECT OF hyperinflation by inflation-indexing most monetary items.


      2. Their ACCOUNTANTS, BUSINESS MANAGERS AND BANKERS also applied “correcção monetaria” to measure most of their non-monetary items in units of constant purchasing power in terms of, first monthly indices and, in the end, in terms of a DAILY INDEX: their Unidade Real de Valor.

      Their ACCOUNTANTS, BUSINESS MANAGERS AND BANKERS thus overcame (counter-acted or made good) the fact that hyperinflation destroyed the real value of their monetary unit of account (Cruzeiro, Real, etc.) at up to 2000% per annum – a figure much higher than currently in Venezuela.

      So, hyperinflation and mismanagement of their economy (CHAVISMO in the case of Venezuela ) did not destroy their non-monetary economy and where it destroyed their monetary economy, they eliminated its effect by inflation-indexing most monetary items.

      So, it is not CHAVISMO per se that is destroying the Venezuelan economy. The combined failure of Venezuela´s ACCOUNTANTS, BUSINESS MANAGERS AND BANKERS to implement “correcção monetaria” in Venezuela has in the past and is currently destroying the Venezuelan economy – and will continue to do so in the future as long as they refuse to implement “correcção monetaria” which is free and widely known in Latin America.

      No-one in Venezuela (except extorres) wants to discuss or even know anything about “correcção monetaria” which is another name for Capital Maintenance in Units of Constant Purchasing Power (CMUCPP) in terms of a DAILY INDEX.

      That is the problem: you people are not interested: you are only interested in a “political” solution when what is required is, in fact, an accounting solution and your ACCOUNTANTS, BUSINESS MANAGERS AND BANKERS are the ones to blame for the destruction of the Venezuelan economy – not CHAVISMO per se. Proof: it did not happen in Brazil with 2000% annual inflation AND “CORRECÇÃO MONETARIA” implemented by Brazil´s ACCOUNTANTS, BUSINESS MANAGERS AND BANKERS.

      For me just to state that CHAVISMO is NOT responsible – PER SE – for the destruction of the Venezuelan economy will upset readers of this blog so much that you would not even care to find out about the proven advantages of “correcão monetaria” in a situation like in Venezuela.

      • Roy Says:

        It sounds sort of like blaming the murder victim for failing to dodge the bullet.

        And, no matter how you slice it, whoever is holding uncorrected currency at the moment of devaluation loses.

        • extorres Says:


          Telling users to install an antivirus is not “blaming” them for an infected computer. Clearly the blame resides with the cracker, not the user. It’s all a matter of what can be done against a cracker that won’t stop.

        • N Smith Says:

          Of course: the worst asset to hold during hyperinflation is cash (un-indexed local currency).

          That is why the PERFECT (not that easily attainable) implementation of DAILY INDEXING is

          NOT ONLY

          (A) measuring all constant real value non-monetary items, e.g., salaries, wages, rent, fees, pensions, employee benefits, taxes, trade debtors, trade creditors, all non-monetary payables, all non-monetary receivables, issued share capital, all items in the profit and loss account, retained profits, all other items in shareholders equity, provisions, etc in units of constant purchasing power in terms of an index that follows all – at least DAILY – changes in the general price level

          BUT ALSO

          (B) inflation-indexing ALL local currency monetary items together with keeping all local currency cash – during the same general price level (normally one day) always in the banking system (not 100% possibe).

          The idea is to

          (1) eventually adjust all prices instantaneously every time the Central Bank creates inflation (creates too much local currency in an inflationary way) – so that it would stop doing that since it would realize that it serves no purpose since all prices adjust automatically –


          (2) the same as (1) would happen in the forex market. (2) would only happen when the internal monetary economy and the internal constant item economy are totally stabilized with indexation every time the general price level changes, i.e., at least DAILY and preferably instantaneously as described above. This would be a very advanced application of DAILY INDEXATION.

          • Alexis Says:

            Daily indexing would be totally illegal in Venezuela, and you would end up 8-10 years in jail while the government seize control of all your assets.

            In case you haven’t realized yet, all prices are fixed by the government and it is impossible to produce at that price.

            You still claim this isn’t a political problem? Come on, wake up.

        • N Smith Says:

          “Correcão monetaria” or DAILY INDEXING has the same EFFECT as Dollarization namely stabilization of the monetary and constant real value non-monetary economy, but “correcção monetaria” is completely FREE and Venezuela would maintain independent monetary policy which is ceded to the parallel rate country under Dollarization. Under official Dollarization Venezuela would have to come up with the parallel currency necessary to replace the entire money supply in the country. DAILY INDEXING is free.

          The stable unit of account under “correcção monetaria” is not the devastatingly expensive options of official Dollarization or a Currency Board both of which result in Venezuela losing the sovereign right to autonomously determine monetary policy within the Venezuelan economy, but an indexed local currency unit of account: an indexed Bolivar. That would be a Bolivar Forte.

        • N Smith Says:


          Indexing is totally legal in Venezuela: it is currently implemented and has been implemented since 2009 in the form of the TOTALLY INEFFECTIVE International Accounting Standard IAS 29 Financial Reporting in Hyperinflationary Economies. IAS 29 is totally ineffective because it is being implemented in terms of the monthly CPI. IAS 29 does not specifically REQUIIRE the monthly CPI. The Daily CPI is also a general price level index as required in IAS 29. Venezuelan companies can thus LEGALLY use the Daily CPI WHICH IS “CORRECÇÃO MONETARIA” or Daily Indexing.

          All prices are not fixed by the government. I can read and have read various accounts on CC and this blog about many prices being set in terms of the parallel rate in Venezuala. I worked two and a half years in Angola´s hyperinflationary economy from 1994 to 1997. I know hyperinflation of 3200% per annum. I stopped the EFFECT OF hyperinflation in our company with accounting-dollarization which is a form of “correcção monetaria” or Daily Indexing. I am not recommending accounting-dollarization in Venezuela because the use of the parallel rate is illegal. It was not in Angola in 1996 and 1997.

          So, “correcção monetaria” is legal and can be implemented today via IAS 29 which is legally being implemented in Venezuela.

          • Alexis Says:

            In Angola, I assume you were free to set your prices as you desired, so hyperinflation was “easy” to waddle through by keeping everything relative to some daily index.

            In Venezuela, all prices are controlled one way or the other. Some goods have fixed prices which are updated whenever the government decides so.

            Other services, like restaurants for example, have to publish a list of prices and they can *not* change their prices for 6 months after publication.

            About any shop can get into legal trouble because they raised their prices “abusively” since last week/month.

            The problem is that there is hyperinflation, and the government does everything it can to pretend the hyperinflation doesn’t exist.

        • N Smith Says:


          The government would support “correcção monetaria” or DAILY INDEXING because it would stabilize the economy over a very short period of time AT NO COST.

          They would most probably give me a medal. Now you have a political reason to be against “correcção monetaria”: it would keep Maduro in power.

          On the contraty: the opposition could use it as a tool to take over power.

          I would accept a medal from any government 🙂

        • N Smith Says:


          Even the government would agree that when you apply “correcção monetaria” to all salaries and wages DAILY then you can also update all prices, rent, taxes, debtors and creditors, etc. DAILY. Workers would have constant real value salaries and wages updated DAILY. That solves the problem of prices increasing DAILY. Both employee benefits AND prices would be updated DAILY: problem solved.

        • N Smith Says:


          You have supplied the Venezuelan answer to Venezuela´s problem yourself: I am quoting you: (“is” is the present tense of was)

          “Hyperinflation is “easy” to waddle through by keeping everything relative to some daily index.”

          I agree 100% with you: that is “correcção monetaria”.

          Now tell that to your government or opposition since you prefer the political solution.

        • TV Says:

          No, he’s just pimping his book (or something) rather shamelessly and incessantly. I vote for IP ban.

    • N Smith Says:



      on the Blog: Capital Maintenance in Units of Constant Purchasing Power

      • Jackson Says:

        Mr Smith, you talk of a Brasil two to four decades ago with a very different (work) environment. Brasil always strove to succeed despite the handicaps. Venezueal does not even try.

        • N Smith Says:


          The millions of Venezuelans daily creating schemes to abuse the “system” and distortions in the Venezuelan economy disprove your statement millions of times daily.

          Daily Indexing is simply a NATIONAL “scheme” to show hyperinflation the middle finger.

          Nicolaas Smith
          Capital Maintenance in Units of Constant Purchasing Power

        • N Smith Says:

          If you do not DAILY INDEX you will eventually land up being Dollarized – either officially or spontaneously. The latter happens when the Bolivar has not value – no exchange rate with a foreign currency – and Venezuelans en masse refuse to accept it as a form of payment: they will only accept the parallel rate currency. That is spontaneous Dollarization. I hope Venezuela never gets to that.

    • Dave Hill Says:

      Fear not! Maduro speaks!! “For those that underestimate me, I say I’m a socialist and I know what I’m doing,” (We know what you are doing, too, you idiot!)

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