(Bloomberg) -- The draft version of legislation introduced by Venezuela’s Nicolas Maduro on Tuesday opens the door for bigger private investment in the nation’s economy, potentially undoing decades of state intervention.
The text of the “anti-blockade” law describes the executive as having the power to modify the property, management or administration of public companies and joint ventures, according to a draft seen by Bloomberg.
That could allow for further private or foreign investment in state-oil company Petroleos de Venezuela and the country’s oil sector, which has seen output plummet as a result of falling oil prices, mismanagement, graft and sanctions. Foreign investment in the nation’s oil sector has been capped at 49% since 2006.
“This could open the door for the state to hand over PDVSA’s management and even ownership of refineries to Iran, for example,” said opposition legislator Angel Alvarado, member of the National Assembly’s finance committee.
The draft legislation under consideration is before the so-called Constitutional Convention, the president’s parallel legislative body that’s deemed to be illegitimate by many countries. The draft version is currently being analyzed by the body’s economy commission and could be approved as soon as next week, according to a legislator that asked not to be named as they are not authorized to speak publicly on the matter.
PDVSA and the Oil Ministry didn’t immediately reply to requests for comment.
The law also opens up the possibility of returning dozens of expropriated companies -- from soap makers to cooking oil producers -- to their previous owners after most fell to ruin since the government took them over. The former owners, some of whom have since sued Venezuela at international courts seeking to recoup billions in lost investment, would be required to agree to quickly restoring production, the draft legislation says.
While Maduro blames the nation’s woes on a “financial blockade” and sabotage by business leaders and political opponents, Venezuela’s economic devastation is the result of a toxic mix of state intervention, subsidies, currency and price controls. Currently in its seventh straight year of recession, the economy is forecast to shrink another 20% this year in the midst of the pandemic and the collapse of oil revenues. Annual inflation is estimated at 2,400%.
Another article of the law could allow for the elimination of restrictions on the trade of certain strategic goods. This could lift long-standing restrictions on fuel trading, allowing private companies to import and distribute gasoline. Mounting shortages have paralyzed much of the economy in recent months and led to nationwide protests as U.S. sanctions have exacerbated what were once sporadic shortages.
The desperate need for fuel has intensified protests throughout the nation in the past weeks, with the Venezuelan Observatory for Social Conflict registering as many as 70 protests across 15 states Monday.
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