Enabled to Destroy [UPDATED]

This is how a well crafted CADIVI binder should look like.

Twenty Four hours before the Enabling Act expired Nicolas Maduro signed 28 new laws to “diversify and secure the economic growth of 2015.”

Let us rewind to one year ago, when the Venezuelan National Assembly, thanks to the (gerrymandered) chavista majority, issued an all powerful Enabling Act to “enable” president Maduro with legislative super powers to enact laws without consulting the legislative body. In this case, the president was “enabled” —doesn’t get old, don’t it?— for the purpose of issuing laws to fight corruption and something about an economic war according to the “PLAN OF THE HOMELAND conceived by our Eternal Commander.”

Twenty Four hours before the Enabling Act expired Nicolas Maduro signed 28 new laws to diversify and secure the economic growth of 2015. It’s okay to feel nauseous, even to barf a little in your mouth.

Twenty Four hours before the Enabling Act expired Nicolas Maduro signed 28 new laws to diversify and secure the economic growth of 2015. And what was in this 28 laws? It is hard to know for sure. They should have been published in Wednesday’s Official Gazette, but they weren’t. No one has seen them yet, so we won’t try to epitomize on what they are about.

Amongst the most scandalous bits, however, Maduro spoke of a tax reform which will eliminate several tax benefits, deductions, and exemptions in the Income Tax Law (including the elimination of the inflation adjustment) and increases the tax for luxury items and services from 10% to 15% (on top of the 12% VAT). Also, the tax on several alcoholic beverages was increased: The tax over wine jumped from 15% to 35%, and other alcoholic beverages were punished with an increase that went from 25% to 50%. This was on Tuesday. Maduro went on to ramble about several other laws that had nothing to do with fighting against corruption or the economic war, and some that seemed to be close to tackling the fiscal issues that are suffocating the country. But no. 16 laws were introduced, the remaining laws would be explained on the following day.

Twenty Four hours before the Enabling Act expired Nicolas Maduro signed 28 new laws to diversify and secure the economic growth of 2015. Come Wednesday. Jose David Cabello, head of the Venezuelan Tax Authority, spoke before the looting started: “The new alcoholic beverage tax rate will not apply to beer. Beer is the drink of the people.” Later on, Maduro announces several other laws and reforms: Changes to the the Organic Law of the Armed Forces that grant further recognition to the chavista militia; the creation of the Anticorruption Police in the Anticorruption Law, as well as a new provision that allows the president to cover up any information regarding a corruption case; Law for the Police Revolution (seriously), aimed at restructuring all Venezuelan police corps; reform of the Public Contracting Law which creates a state run fund that will collect all Social Responsibility contributions (guess that this will test the new Anticorruption Police); and several other announcements decorated with the President’s elegant jargon. [There’s been talk about a modification to the Law Against Organized Crime which includes cyberterrorism. So nice of them to take us into account]

Twenty Four hours before the Enabling Act expired Nicolas Maduro signed 28 new laws to diversify and secure the economic growth of 2015. Enabling Acts are not democratic instruments. In fact, they sort of beat the purpose of democracy. They have been in the Venezuelan Constitution (s) for a long time now. Before 1999 they were a sort of a break-the-glass-in-case-of-fire recourse limited to economic and financial emergencies. After 1999, however, the concept was broadened and now allows for all sorts of abuses and misinterpretations which render them as instruments of absolute legislative power for the executive branch. A self induced coma by the National Assembly.

Twenty Four hours before the Enabling Act expired Nicolas Maduro signed 28 new laws to diversify and secure the economic growth of 2015. The Enabling Act expired on November 19th 2014, a Wednesday. Maduro sort-of-summarized and sort-of-announced some of this 28 laws. None of them appeared published in the Official Gazette as legally required. It is possible that if one was to flip through the binders elegantly placed in front of the President’s desk, one would realize that these were props full of nonsensical CADIVI forms carefully crafted by a Miraflores’ interns for the occasion. One shouldn’t be surprised, however, if a day, a week, a month from now, all these legal instruments appear published in a backdated Official Gazette. After all, (allegedly) these are the same guys who copypasted Chávez’s signature to several presidential decrees while he was out of commission.   

Twenty Four hours before the Enabling Act expired Nicolas Maduro signed 28 new laws to diversify and secure the economic growth of 2015. Yeah, that happened.

UPDATE: It’s Thursday! And as we were asking for it the Official Gazette was published. We haven’t seen the complete text yet, and it must be available later on in the day, or tomorrow, or whenever. Two things Maduro failed to mention:

  1. The tax reform includes modifications to the Stamp Tax Law and the Science, Technology and Innovation Law. The latter is important because this law, as it was before the reform, included a significant (parafiscal) contribution companies had to pay to a fund administered by the Science and Technology Ministry. Considering Venezuela is a country where private companies end up paying up to 65% in taxes and other levies, this modification is relevant.
  2. The Exchange Regime Law was also modified. No need to explain why this may be relevant. 

The Official Gazette is dated November 18th 2014, only 24 of the 28 laws were published. They’ve got one more day to surprise us.

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      • That was the right behavior of the norm: to make inflation rate a parameter so that correct amounts could be calculated regardless of how high or low it was. By doing away with inflation adjustments we’re back to square one, when low inflation was just gone and people/businesses cried foul after realizing taxes were too high due to inflation.

      • Now they are going to get taxes paid in nominal amounts: Great (for the fiscal weakening of Chavismo)!! They are shooting themselves in both feet. Tax at nominal historical cost (as if there is no inflation!)!! Imagine that! Great: they will receive X (say 100) while inflation is 64% p.a. So, they will receive X (100) which is in fact x-64% = 0.34 of x or instead of receiving 164 (daily inflation-indexed) they will receive 100 in nominal value when it is in fact 34 in real value. What fools they are – and good for them!!. They will receive 34/164 (20.7% or one fifth!) of what they should have received if they were to have daily inflation-adjusted everything. Unfortunately, they will simply increase the money supply (and hyperinflation) to make up for what is missing – again in nominal value: and the vicious value-destruction cycle will continue – to the detriment of ordinary Venezuelans.

        Unfortunately hyperinflation won´t topple them. (See Zimbabwe).

        Do you think any bank can make a profit in Venezuela with negative interest rates? When accounting is done in real (daily inflation-adjusted terms) – representing the real situation, no bank is making / would be able to make a real (constant purchasing power) profit.

        But, I am a fool and idiot according to the readers of this blog.

        • I am told that with that change alone they will increase the revenue from the financial sector by $2billion (@6.35). I am just repeating a statement as I wasn’t walked by this calculation. Also, this is nothing. The pension obligations for next year are about $6billion.

          Another tidbit of info I got is that 130 private companies account for 92% of the revenue.

          Another change in the regulation that was due like a million years ago was the change in tobacco, which apparently wasn’t tax and it should be.

          Not everything is a crazy as you think (on the fiscal side).

          Naturally this only squeezes a bit more money from the private sector that can afford to be squeezed. But it doesn’t fix any structural problem.

      • Daily inflation-indexing all monetary items (items expressed in Bolivars) would eliminate only the total EFFECT of inflation (the real consequence of inflation) – not the concept of inflation: It would be as if there were no inflation, while there would still be inflation. That is what actually happens today with daily inflation-indexed government bonds in most of the world economies to the tune of USD 3 trillion globally.

    • They were going to eliminate the law of gravity, except that Maduro opposed it becsue he likes to use the word “gravedad” a lot.

      • While they are at it, they should decree that pi=3.00. The existing irrational number (3.14159…) is pesky and makes the arithmetic difficult.

  1. Maduro believes the enabling laws permit him to rewrite the law of supply and demand and the law of gravity.

    Enabling law power will be granted again next year for the elections so Maduro can change the voting process.

    • to assume that Maduro wrote even one word, or that he gave directions as to what the laws should say, is giving him WAY too much credit…

      es más, chico: I do not believe he read even 5% of the whole package he signed, and I put even less faith that he understood 5% of that which was explained to him. it’s not he’s not book smart, I doubt he’s even comic book smart.

  2. Please, lets talk about the $4bn added into the international reserves! Where do the $4bn come from?

    If I were Maduro & co, I would say, look guys we have stolen more than a $100bn between the 20 of us, lets put $4bn back, which BTW none of us will stole! and lets pay some bills, give some to the soldiers and buy some cheap stuff pal pueblo because even tough things are under control, the shit its a little to close to the fan. Consider it a investment to maintain all of us in power hasta el 2000 siempre, and whenever oil goes back to $100 we will charge it right back into our personal accounts in an orderly manner. Any comments? No? ok lets do it!

    • You mean the Italian Magic Trick in which they take $4bn imaginary dollars from one empty pocket and put it in a different pocket? Ta dahhh!

    • Here’s the “scoop”


      The hidden print: it’s a new tranche of borrowing from China and the funds were transferred to accounts in the name of the Venezuelan Central Bank. This, supposedly, was done because the previous tranches of the Sino Venezuelan joint fund were partially used as foreign reserves (something that was against the spirit of the former agreements, of a strict loans-for-projects regime).

      For my guess, I’m gonna go with Occam’s Razor: these 4Bn will go to finance the PSUV machine for the 2015 legislative elections while they will make very little adjustments to the exchange regime starting next year. I’m thinking raising the official rate to 12-15, keeping Sicad 1 (higher of course), and maybe merging the two Sicad systems onto one. And of course paying the bonds! We all know Maduro loves Wall St.. 😉

      • I dont think it is a new tranche, it is the June tranche. The Chinese have refused to approve new loans, they just refinance the old ones.

        • Ok that may be true; they might just be rolling over the previous loan agreements that are already paid in full. But it’s new indebtedness anyway. It’s obvious that the govt’s debt dynamics are out of control and could implode at any moment, if the economic decision-making keeps being on the wrong hands..

  3. Laws that I am anticipating for the future:

    1. Requirement for an Exit Visa to travel abroad (both Venezuelan citizens and foreigners).
    2. Permissions for all bulk goods being transported. No papers? Goods expropriated automatically.
    3. Formation of neighborhood snitch squads to monitor… oh, whatever the snitches don’t like.
    4. Formation of Labor Camps. These will be located close to the borders with Colombia and Brazil to ensure that people sent there escape and don’t come back to Venezuela.
    5. Power to expropriate the property of persons accused of “economic crimes”.

    The weird thing about totalitarian socialist governments is that they inevitably lead to the worst human rights abuses imaginable. And all with the best of original intentions.

  4. ¡El imaginar a maburro llorando y chillando de rodillas balbuceando que la CERVEZA seguirá costando lo mismo para que no le metan un golpe de estado es hilarante! xDDD

    Por otro lado… 28 leyes más que también serán nulas en el mismo momento en que termine el régimen podrido.


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