Indexing of the Venezuelan Economy Proposal
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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.
The proposal
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.
Nation Budget
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.
@juanmolina
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Hello @juanmolina, This as a proposal makes sense and sounds good, the point is that if they would really carry it out and what methodology the government would use to implement it, I would like to know a little more about this case.
See you soon.
Hello, friend @tocho2.
I am also curious to see how this proposal would be implemented in real practice, since, in theory, everything looks very good.
Sadly, we know the capabilities of the representatives of the National Administration.
So they will use the US dollar stability?
That would be their plans.
We know that the US Dollar is not stable, but compared to the Venezuelan national currency, the Dollar seems very robust.
In addition, all financial operations in Venezuela have been set in USD for years. Although the government says otherwise.
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Thanks, Bro.
welcome buddy
It's an interesting proposition, but what I don't like is that it is going to be applied too late after people have gone through too much work and lost too much money due to inflation.It is something that should have been done many, many years ago and not when we are practically hopeless.
Hopefully, and that this indexing will help to improve the situation in the short term, because it is what we need, long-term solutions will do us much more damage.And the positive point is that it is good that after so much disowning about the dollar they are realizing that now they need it as a very important reference for the economy.
Nothing about Venezuela's situation makes sense to me. If it was a way to destabilize the region, it failed.
Are things actually improving? Worsening? Or the same longsuffering feeling?