Venezuela’s Law of Fair Prices Goes into Effect

The Law for Fair Costs and Prices, which aims to stabilise prices, guarantee access to goods, and to attack inflation, currently at near 26% per year, came into effect.

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The Fair Costs and Prices Law will come into effect in its first stage, today (ABN)
The Fair Costs and Prices Law will come into effect in its first stage, today (ABN)
By Tamara Pearson - Venezuelanalysis.com
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Mérida, November 22nd 2011 (Venezuelanalysis.com) – The Law for Fair Costs and Prices, which aims to stabilise prices, guarantee access to goods, and to attack inflation, currently at near 26% per year, came into effect today.

The law allows the government to limit the prices charged for goods and services across broad sectors of the economy. Chavez passed the law by decree in July using an authority that the National Assembly granted him last year for 18 months under an Enabling Law.

Representatives of the ministries of food, commerce, basic industries and mining, planning and financing, and the Venezuelan Central Bank (BCV) were involved in the elaboration of the law, which creates a National Superintendency of Fair Costs and Prices. The new institution will regulate, administer, supervise, inspect, and control prices charged to consumers. It will also be responsible for sanctioning those in violation of the law when necessary.

Legislator Ramon Lobo, speaking on VTV today, said the national executive decided to implement the law because of “certain practices, such as monopolies, where in the process of buying and selling products and services... certain economic groups dictate the standard prices in the market”.

Today the government will begin the first phase of implementing the law, which involves inter-institutional auditing of companies’ internal pricing structures of personal hygiene, food, and household products. It will set a maximum selling price for those products on 15 December, and companies will have one month to print the price on the products.

The government is freezing prices- that is, prohibiting increases on a list of eighteen bathroom and cleaning products, such as toothpaste, toilet paper, and dish detergent, while they are being audited.

President Hugo Chavez called on the lawyers and public servants doing the auditing to not let themselves be "bribed" by the companies. "Be careful of corruption," he said.

The second phase of applying the law will begin in January next year, and will involve the revision of pricing structures for a list of medical products, according to Minister for Science, Technology, and Intermediate Industries, Ricardo Menendez.

As stated in the law, companies can be punished for charging more than the designated prices, including a prohibition to sell the product, or inspectors can stamp or confiscate products.

Lobo responded to the criticisms of some business people that the law will generate more inflation and scarcity, saying that the law will be applied “at all stages of the chain, that is, in production, distribution, and marketing”.

Private companies in Venezuela continue to hoard certain regulated basic food goods such as milk and oil, which are now impossible to find at the regulated price, and are sold on the black market at higher prices. The companies do this not only to obtain greater profits, but also to put pressure on the government. However, in some cases, there is also corruption within the state production and distribution sector.

Lobo said that the National Superintendency of Fair Costs and Prices would set prices according to the characteristics of the goods. Companies are obliged to present their financial records, which will then be used to calculate costs and price ranges for individual products.

“It’s a flexible mechanism which will adapt to the specific circumstances in the national economy. We request that the population trusts in the social and economic policies that the national government is implementing, as they are in favour of the vast majority,” Lobo concluded.