Indexing of the Venezuelan Economy Proposal
Recently, a proposal was presented to the National Assembly (Congress of Venezuela) to index the Venezuelan economy to the price of the dollar, that is, to establish a reference index.
Indexing is a technique applied to the economy that is responsible for adjusting fixed payments at a permanent rate, in order to maintain purchasing power in the midst of an inflation process.
In Venezuela, there is very large speculation regarding the price of the dollar.
Most people use the price suggested by a web portal called "Dolartoday".
They also use another web portal called "Monitordolar". The latter makes an average of all existing quotes. To our knowledge:
This instability in the price generates great speculation and external manipulation of the exchange rate since it does not obey any formal supply and demand criteria.
According to spokesmen for the current Venezuelan administration: "... the exchange rate has been used as a mechanism of the disturbance against the economy." In many respects, they are right.
It proposes that the salaries of the public administration and pensioners, plus the calculation of the public budget, be included in the indexing formula.
This would result in a decline in the hyperinflationary process, and thus all transactions could carry the same rate of inflation so that purchasing power does not fall.
When the nation's budget is formulated by the Executive, the resources provided would not lose their purchasing power and could be used to execute projects, buy, pay payroll, among other commitments that allow the economy to be motorized.
It could become a mechanism that would favor national industry and entrepreneurs because it will preserve the purchasing power of workers, which guarantees sufficient aggregate demand for the economy to be reactivated.