CARACAS, Venezuela — Venezuela’s acting President Delcy Rodríguez signed a law Thursday opening the country’s oil sector to privatization, reversing a principle of the self-described socialist movement that has ruled the country for more than two decades.
The reform will undoubtedly be her government’s signature policy as it positions the oil sector – Venezuela’s engine – to attract the foreign investment needed to revive a long-crippled industry. Rodríguez introduced the measure less than a month after the brutal seizure of then-President Nicolás Maduro in a US military attack in the Venezuelan capital Caracas.
Rodríguez, facing oil workers and ruling party supporters, signed the bill less than two hours after the National Assembly approved it. At the same time, the US Treasury Department officially began easing punitive measures against Venezuelan oil imposed by the first Trump administration and expanded the ability of US energy companies to operate in the South American country.
Rodríguez also spoke Thursday with U.S. President Donald Trump and Secretary of State Marco Rubio, who explained to U.S. senators at a hearing a day earlier how the administration plans to handle the sale of tens of millions of barrels of oil from Venezuela and monitor where the money flows. Venezuela has the largest proven crude oil reserves in the world.
The moves by both governments pave the way for another radical geopolitical and economic shift in Venezuela.
“We are talking about the future. We are talking about the land that we are going to give to our children,” Rodríguez said of the reform.
Rodríguez proposed the changes earlier this month after Trump said his administration would take control of Venezuela’s oil exports and revive the ailing industry by luring foreign investment.
The legislation promises to give private companies control over the production and sale of oil, ending state-owned Petróleos de Venezuela SA’s monopoly over those activities and over pricing.
A private company “shall assume full management of operations, at its own cost, expense and risk, after demonstrating its financial and technical capacity through a business plan approved by” the country’s oil ministry, according to the law. The legislation stipulates that ownership of the hydrocarbon reservoirs on which a company will carry out activities remains with the state.
The new law also allows for independent arbitration of disputes, removing the mandate to settle disagreements only by Venezuelan courts, which are controlled by the ruling party. Foreign investors view the involvement of independent arbitrators as crucial to protect themselves from future expropriation.
Rodríguez’s government expects the changes will serve as guarantees for major U.S. oil companies that have so far hesitated about returning to the volatile country. Some of these companies lost investments when the ruling party adopted the existing law in favor of Venezuelan state oil company PDVSA 20 years ago.
In addition, the revised law changes extraction taxes, setting a 30% royalty cap and allowing the executive branch to set percentages for each project based on capital investment needs, competitiveness and other factors.
Ruling party member Orlando Camacho, head of the assembly’s oil committee, said the reform “will change the country’s economy.”
Meanwhile, opposition MP Antonio Ecarri urged the assembly to add transparency and accountability provisions to the law, including the creation of a website to make funding and other information public. Noting that the current lack of oversight has led to systemic corruption, he argued that these provisions could also be considered legal guarantees.
These guarantees are among the most important changes that foreign investors look for when entering the Venezuelan market.
“Let the light shine in the oil industry,” Ecarri said.
Oil workers, dressed in red overalls and hard hats, celebrated the bill’s passage, waving a Venezuelan flag at the legislative palace and then joining lawmakers in a demonstration with ruling party supporters.
The law was last amended two decades ago when Maduro’s mentor and predecessor, the late Hugo Chavez, made heavy state control over the oil industry a pillar of his socialist-inspired revolution.
Elected in 1998, Chavez expanded social services, including housing and education, thanks to the country’s oil bonanza, which generated an estimated $981 billion in revenue between 1999 and 2011 as crude oil prices soared. His 2006 amendments to the Oil Industry Law required PDVSA to be the main stakeholder in all major oil projects.
Tearing up the contracts that foreign companies signed in the 1990s, Chávez nationalized vast assets of American and other Western companies that refused to comply, including ExxonMobil and ConocoPhillips. They are still waiting for billions of dollars in arbitration awards.
From those heady days of lavish state spending, PDVSA’s fortunes turned — along with the country’s — as a drop in oil prices, corruption and mismanagement eroded profits and hurt production, first under Chávez and then under Maduro. In 2013, they fell into the severe economic crisis that pushed more than 7.7 million Venezuelans to migrate.
Sanctions imposed by successive US administrations have further crippled the oil industry.
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