April 1, 2019 Print

Venezuela, a country once known for its bountiful oil reserves and vast economic potential, has experienced one of the most shocking declines in recent memory. For Centro de Divulgación del Conocimiento Económico para la Libertad (CEDICE), the driving force behind this downward spiral is socialist government policies.

With the aid of an Atlas Network grant, CEDICE funded “Citizen Oil,” a research and outreach initiative that explores the benefits of privatizing the oil industry.  In broad terms, the goal of the project was to influence Venezuelan oil policies and legal reform in favor of a more free-market approach.

CEDICE contends that by allowing private citizens to participate in the oil industry again, the oil-related sector will become more efficient, effective, and lucrative. Their research, led by Venezuelan lawyer Jose Ignacio Hernandez, shows that reforming the oil industry will also drive broader economic freedom, a concept that has been absent from Venezuela for decades.

In a new paper, Hernandez traces the history of the Venezuelan oil industry and the implementation of state control over the energy sector. He argues that the transformation of Venezuela into a “petrostate” weakened the rule of law and economic freedom while simultaneously increasing a centralized economy and a “clientelistic” social structure.

Since 1998, the problem has worsened. Following the intervention of the state and the ensuing patronage in the energy sector, the once-promising oil industry began to stagnate due to inexperienced workers and a lack of investment.

To combat the problem, CEDICE asserts that the Venezuelan government must open the oil industry to private investors and curb the government’s monopoly on oil activities.

“The most remarkable outcome of our ‘Citizen Oil’ project is its inclusion as part of ‘Plan Pais,’” said project coordinator David Ludovic Jorge. Created by Venezuelan Parliament President Juan Guaidó and his team, Plan Pais is an action plan designed to revitalize the economy and improve public services once the existing regime is removed. “This is an initiative to discuss decisions and measures that will be taken when Venezuelan opposition come to power,” Jorge continues. “The initiative includes our core suggestion: opening the oil industry to private investors as a way to launch an economic revival.”

Although the situation in Venezuela continues to worsen, Jorge contends that this research is a vital part of beginning the road to recovery. “Even though people may think that the Venezuelan crisis means citizens are only worried about their basic needs, the true way to overcome the crisis is to make people understand its causes,” he continues. “This is undoubtedly the monopolistic and clientelistic approach to the oil business. It may seem like a paradox, but the dark climate, both political and economic, in Venezuela provide a good opportunity for citizens to discuss how this happened and what we can do to pave the way for a freer and more prosperous society.”

While Venezuela certainly has a long way to go, CEDICE’s dedication to restoring economic freedom will help them lead the way as Venezuela takes the first steps towards reforms in favor of economic liberalism.