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Saturday, 25 January 2014

PART 2: HOW TO MAINTAIN A COMPANY´S CAPITAL CONSTANT IN REAL VALUE IN A HIGH OR HYPERINFLATIONARY COUNTRY

HOW TO MAINTAIN A COMPANY´S CAPITAL CONSTANT IN REAL VALUE IN A HIGH OR HYPERINFLATIONARY COUNTRY - PART 2
PART 2

C. Daily CPI: in the process of being written ....

The Daily CPI to be supplied daily on the internet by (in descending order of preference)

1. Central Bank
2. National Institute of Statistics
3. National Institute of Chartered Accountants
4. Chamber of Commerce and Industry
5. By the company itself using the widely recognized Unidad de Fomento formula if none of the above entities provides the Daily CPI.
6. US Dollar daily parallel rate to be used during or even before severe hyperinflation. 

The Daily (or even hourly - in severe hyperinflation) USD black market rate is used either

(i) When capital maintenance in units of constant purchasing power in terms of the Daily CPI falls too far behind the US Dollar parallel rate when the black market rate is, in fact, the correct indicator of the general price level,

or

(ii) When the government stops supplying CPI data when the daily USD parallel rate is the only reliable indicator of the general price level.

To be continued ...

Nicolaas Smith 

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