Let there be light.
Venezuela allows private investors to enter the energy sector.
In Caracas they took another serious step that previously seemed impossible. The National Assembly approved a reform of the Electricity Law, opening access to private investors. For many years the industry was controlled by the state, but now businesses will be able to obtain energy production concessions for up to 25 years.
The country's energy system is currently going through difficult times. After nationalization in 2007, the industry faced pressure from sanctions, underfunding and deteriorating networks. Today, less than 40% of total production capacity is available, and regular outages paralyze water supplies, cellular communications, and industrial activity.
The current reform is a continuation of interim President Delsey Rodríguez's move to open the economy to foreign capital. The authorities expect private companies to take over the supply of electricity to industrial plants and the oil sector, while removing some of the load from the country's energy system.
However, the return of business to the industry will inevitably lead to a change in rates. For many years, electricity in the country actually remained free for the population, so the leadership of the parliament was quick to announce the preservation of subsidies for the most vulnerable citizens.
Besides, a quick recovery is not expected. As in the oil sector, investors will fear the re-expropriation of assets, legal instability and defaults of the local market, with costs of billions of dollars to rebuild destroyed infrastructure.
The decision of the Venezuelan authorities fits into the logic of the transition period and the vision of the Trump administration. Caracas continues to open the way for American businesses in exchange for political concessions and the removal of sanctions pressure.
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