Damocles' sword takes the form of price control in Venezuela

The Government of Venezuela announced this week that it will begin to supervise the sales of three companies, and a fourth will intervene for at least 180 days, which it accuses of speculating on the prices that will now be under the control of the Executive: a Damocles sword to merchants.

Alimentos Polar, the largest company in the sector in Venezuela and a member of the Empresas Polar conglomerate, is one of those affected. The government has subjected it to price controls, an unprecedented measure in a company of that size that the group has described as arbitrary.

Plumrose, dedicated to sausages, and a slaughterhouse in Turmero, in the central state of Aragua, have the same destination. The fourth company is Coposa, dedicated to the oilseed sector and on which falls an intervention that is already underway and that will last 180 days with the possibility of an extension.

All this is covered by the Fair Prices Law, approved in 2015, but why had its application been relaxed, what regulates it and what tangible consequences can it have on companies?

1.- THE LAW

The Organic Law of Fair Prices entered into force in November 2015 and was created under the umbrella of an enabling law, something that empowers the president, in this case, Nicolás Maduro, to govern by decree at a time when the Assembly Nacional (AN, Parliament) was still made up of a Chavista majority.

As lawyer Leonardo Palacios explains to Efe, "their training is unconstitutional" since "there was no mandatory consultation with the productive sectors and leaves the administration's action open without limit."

2.- WHAT REGULATES

The application of the law covers the maximum sale price of products, the profit margin that can be obtained from the sale of goods or services -20% for importers and 30% for domestic producers- the physical marking of the price of the products. products, as well as the system to determine the prices of those goods or services.

For example, it penalizes products marked with a price increase, failing to make visible the administrative signs required by law, or failing to display available goods.

Failure to comply carries penalties ranging from fines to prison terms of up to fifteen years, in addition to already intervening in the company.

The president of the Federation of Chambers and Associations of Commerce and Production of Venezuela (Fedecámaras), Ricardo Cussano, details that this is a law that "from the outset is punitive, which declares that guilt is presumed and you must prove your innocence."

3.- "ABNORMAL" PROCEDURE

Lawyer Palacios explains that, usually, the sanctions and measures taken by the National Superintendency for the Defense of Socioeconomic Rights (Sundde), an entity under the Ministry of Commerce, are "de facto routes", that is, they are taken without a due process: they are "anomalous, violating the rule of law".

The procedure should include a first visit to the company with an authorization for the inspection; Then, the manager in charge may visit the facilities, review and request different documents.

"It can be from the account book, the founding act of the company, import invoices, acquisition invoice, documents relating to other international companies, lists of clients or suppliers, economic studies," Palacios says, who assures that many times part of these documents is already in the possession of the Public Administration.

After reviewing and studying the case, the sanctions should be announced and the company would have the right to claim and have the case reviewed.

"There are procedures that are long, other expedited because they violate the taxpayer's right to act," says Palacios.

4.- WHEN DOES A COMPANY INTERVENE?

Whether the measure is price control or intervention, the Sundde mayors come to the company and live with the rest of the company's regular workers.

During the time the sanction lasts, these prosecutors go to the company to regulate prices, check procedures and shipments. In addition, they can request whatever document and procedure they require.

In the case of the intervention, the measure is stronger and involves the takeover of the company by Sundde.

5.- PRICE REGULATION AND INFLATION

The Chavista governments made food one of their flags and among the measures they have taken since they won the first elections in 1999 is to regulate the prices of basic basket products such as sugar, milk, cornmeal or toilet paper.

In a country where inflation has been constant, and has been engulfed in a hyperinflation spiral since November 2017, the prices of these products remained anchored.

6.- WHY NOW?

Although the law was in force, from the end of 2018 until this month the measures and controls on prices had been relaxed.

Cussano points out that the change was determined by the national blackouts that, since March 2019, suffered all of Venezuela and that left the country in darkness or with electricity intervals for several weeks.

"There were no points of sale (dataphones), the one who had the possibility used the dollar to buy or collect regardless of whether they sanctioned it," explains Cussano.

The dollar and its use was hitherto penalized in Venezuela - and theoretically continues to be - a country with exchange controls since 2003.

The strength of the "living waters of the economy" prompted, in Cussano's opinion, that the Government allow the use of the dollar and relaxed the measures of the Price Law.

"The law was still alive but the political convenience and the reality of the people forced not to apply it," he points out.

7.- AN EFFECTIVE MEASURE

All the sources consulted by Efe explain that at this moment the Government retaken the law as a "gimmicky measure" in view of the worsening of the economic situation of Venezuelans due to the quarantine by COVID-19, which has added to the shortage of fuel and the devaluation of the bolivar.

"The first impact is a paralysis of activity in the food economy areas, precisely those that are now attacking," economist Tamra Herrera explains to Efe.

8.- WHAT HAPPENED IN PREVIOUS OCCASIONS?

Cussano, Palacios and Herrera agree that on previous occasions, both price control and the intervention of companies led to a setback in the economy, produced shortages and the emergence of bachaqueo, the illegal reselling of products.

For this reason, they consider that this measure is now again a Damocles sword hanging over the heads of the merchants.

Alice Hernandez