The Radical Option To Save Venezuela

Venezuela is in dire straits. Two and a half years of low prices have taken their toll on the socialist government that squandered oil wealth when prices were more than twice what they are today. Now, the country has almost no food, no water, no medical supplies, no currency, no electricity and no toilet paper.

Venezuela sits on the world’s largest known oil reserves but can barely pull enough crude oil out of the ground to send to its own refineries. Oil production in Venezuela has already dropped 12% this year. Granted, the electricity problem is not entirely the government’s fault, as Venezuela generates most of its electricity from hydroelectric plants and has been hit with a terrible drought. Without electricity the government has reduced the work week to only two days, and its oil pumps have not been able to produce more of the very product that the country desperately needs to sell.

Riots and street demonstrations are growing and the prospect of a coup or civil war is brewing. Here is a radical solution to Venezuela’s problem that might even save Maduro’s government (not that a socialist autocracy is worth saving): privatize the oil industry immediately.

A woman holds a sign with a message that reads in Spanish: “Maduro leave already……you are a nightmare!” during an opposition march in Caracas, Venezuela, Saturday, May 14, 2016. (AP Photo/Ariana Cubillos)

Step 1: Break up assets into pieces and auction them off.

Venezuela has the largest known crude oil reserves in the world. No single company will be able to pay enough to match what these assets are truly worth. Instead, the government should break up the map and auction off plots individually. Venezuela could even keep some assets to exploit later with a revamped national oil company or to sell at a later date. This is the easiest way to bring massive revenue to the country quickly. Even an immediate announcement of an upcoming auction might allow Venezuela to take some substantial loans to tide them over. Private companies will have to pay taxes in the future, and they will pump the oil much more efficiently.