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Constitutional Law on Agreed Prices

The Constitutional Law on Agreed Prices, decreed by the National Constituent  Assembly (Asamblea Nacional Constituyente -  ANC),  was published in Official Gazette No. 6.342 Extraordinary, dated November 22, 2017 (“The Law”).

Following are the most significant aspects of the same.

Purpose of the Constitutional Law

To establish the fundamental principles and bases for the Agreed Price Program (Programa de Precios Acordados), through dialogue and joint responsibility among  the various public, private, communal, and workers sectors, by means of the incentive to production, distribution, and commercialization of the goods and services that the National Executive declares as prioritized goods and services, taking the following aspects into consideration:

I.     Cost structure, in order to assure opportune, sufficient access and quality goods and services.

II.    Protection to the people and to all the actors that participate in production, distribution, and commercialization, all of the foregoing having regard to price stability, economic peace, and integral defense of the Nation.  

Scope of Application

The Law applies to natural and legal persons, of public and private law, that directly or indirectly participate or intervene in activities of production, conditioning, storage, transportation, manufacture, circulation, exchange, distribution and commercialization of the goods and services prioritized by the National Executive, as well as all matters related to the regime of importation and exportation of raw material and finished products.  

Agreed Price Program

 The Agreed Price Program (“The Program”) is governed by the following guidelines:

I.     The Program promotes the formalization of voluntary agreements on prices, quality, provision, distribution, and supply of prioritized goods and services, as well as mechanisms for their evaluation and monitoring, between the National Executive and the sectors and actors of the productive, distribution and commercialization area.

II.    The sectors and actors of the productive, distribution, and commercialization area that form the different economic circuits of the prioritized goods and services will be jointly responsible for the observance of the prices agreed through dialogue and negotiation.

III.  The productivity and the quantities produced are considered fundamental elements in order to establish the cost structure in the agreed prices. The prices so agreed will allow the earnings to be the result of a combination of productivity, production and distribution volumes, plus the commercial margin inherent in each product unit or service.  

IV.  The goods or services with the greatest national component with respect to imported supplies or goods will be encouraged and acknowledged for purposes of the agreed price. 

V.   The prices will be agreed in terms of their efficiency to assure access by the individuals to goods and services, replacement cost, and regular profit for these purposes, in the framework of The Program. 

VI.  The agreed price of the prioritized goods and services will be obligatorily observed by all natural and legal persons.

VII. The agreed prices will be reviewed and updated on a regular basis, as per   the behavior of economy and in the periods of time agreed. 

VIII. The raw material for the manufacture of the products defined as prioritized goods must be used for the production of the same.

IX.  The public, private, and communal sectors will promote, publish, and disseminate the agreed prices, specially through the media.

X.    Those who formalize Agreed Price agreements will be the only beneficiaries of the incentives resulting from such agreements.

Call to Negotiations of Agreed Prices

The National Executive will convoke the negotiations of Agreed Prices, through the entity determined by it, with the participation of the competent State agencies and entities, and of the sectors connected with the production, distribution, and commercialization of the prioritized goods and services. The agreements of The Program will be entered into directly between the aforesaid entity and the natural or legal persons that develop these economic activities. 

The Executive Vice-presidency will assume the Technical Secretariat of the negotiations of Agreed Prices. 

Cost Analysis

The analysis of the costs of the goods and services prioritized by the National Executive will be governed by the following guidelines.

I.     The various sectors of the area of production, distribution and commercialization will present their cost structures, through a formal notification of costs and prices, to the  Executive Vice-presidency of the Republic, in order to be analyzed at the negotiations of Agreed Prices, by means of the Computer System of the Price Administration (Sistema Informático de la Administración de Precios) (“The System”).

II.    The System will be subordinate to the Technical Secretariat of the negotiations of Agreed Prices, will be effectively linked to the public policies of production, distribution, commercialization, importation, and administration of foreign currency.  The provision of information to The System will be obligatory for all public, private, and communal sectors.

III.  Should there be joint costs in the production of specific end goods, the prices of the by-products derived from a principal product will be defined and established in the negotiations of agreed prices.

IV.  The Venezuelan State will establish the rate of exchange for estimating the cost structure, when applicable and according to the relative weight of the imported good or component in the structure of the relevant product.

V.   For purposes of The Law, replacement costs will be understood as the analysis of the inventories and their valuation will be a key element in the negotiation of the Agreed Prices. The valuation of the inventories will be acknowledged at the average weighted costs, at the inventory valuation method known as FIFO (First-In First-Out) or through another method determined in the Agreed Price agreements that assures compliance with the purposes of The Law.

VI.  The regular profit margin must be the result of the sectorial study and the application of the same must be differentiated as per the nature, seasonality, productivity, importance of the actors, region or locality, as well as the timing of the production and distribution.  

Validity and Updating of Agreed Prices

The agreed prices for the prioritized products and services will be periodically reviewed as per the nature of the same.

Said review will be made on the basis of the information available in The System or other sources of information.

The Program will establish a methodology for updating the prices, which will take into account the modifications of the prices that intervene in the relevant process of production, importation, and commercialization.

The updated price will be the result of multiplying the weights defined for each supply involved, remuneration and indirect costs by the new prices.  Therefore, the variation of the agreed price will be the result of the sum of variations of prices multiplied by the weight of each supply, remuneration, and indirect costs in the cost structure.

Incorporation of Goods and Services

The National Executive will be in charge of incorporating any good or service into The Program, taking into consideration its strategic importance for the satisfaction of the population’s needs.

State Competence to Fix Prices 

The State reserves to itself the competence to fix the prices of the prioritized goods and services, when required by special circumstances or by the general or social interest.

Repealing, Temporary, and Final Provisions

All provisions conflicting with The Law are repealed.

Failure to observe the agreed prices will be penalized in accordance with the provisions of the Decree with the Status, Value, and Force of Organic Law of Fair Prices until the Integrated System of Monitoring and Control for Sovereign Supply and Compliance with Price Policy (Sistema Integrado de Seguimiento y Control para el Abastecimiento Soberano y Cumplimiento de la Política de Precios) is created.

The Law will become effective upon publication in the Official Gazette.  

In order to access The Law, please click here

 

“NOTE: THIS INFORMATION SHOULD NOT BE CONSTRUED AS LEGAL ADVICE ON ANY SPECIFIC MATTER AND ITS CONTENT ARE INTENDED AS A MANAGEMENT ALERT AS TO CURRENT DEVELOPMENTS IN VENEZUELA, ANY SPECIFIC LEGAL QUESTIONS REGARDING THE POSSIBLE APPLICATION OF NEW OR PROPOSED LEGISLATION TO PARTICULAR SITUATIONS SHOULD BE ADDRESSED TO TRAVIESO EVANS ARRIA RENGEL & PAZ.”