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Category — Energy Privatization

‘Theft of the Subsoil’ (Guillermo Yeatts on Latin/South America mineral-rights reform)

“[There is] a general economic maxim: public [government] resources are really private, owned and exploited by a political elite, while private resources are really public, owned and managed by a multitude. Government-owned resources do not ‘belong to all of the people’ and allow ‘self determination;’ they belong to none or a very few.”

- R. Bradley, Foreword to G. Yeatts, Subsurface Wealth: The Struggle for Privatization in Argentina (Foundation for Economic Education, 1997), pp. xv–xvi.

The recent reform of Mexico’s Constitution to allow private investment (up to $20 billion in production-sharing agreements) still leaves state-owned PEMEX with a legal monopoly for oil and gas development inside the country. But it is a start at reform that may turn into a deregulatory, privatization dynamic.

More, indeed, awaits to open the energy sector internal and external competition and to foreign investment in any amounts:

1) Competition to PEMEX in all oil and gas areas should be legalized;

2) PEMEX shares be allocated to the country’s private citizens;

3) Subsoil mineral rights should be assigned–with deed of title–to the (private) surface owners of land. Surface land not privately owned can be privatized with mineral rights attached.

Thus, Mexico’s recent reform can be seen as the first of four steps to fundamental reform so that mineral wealth can benefit the masses, not just a political elite. [Read more →]

February 6, 2014   No Comments

Federal Asset Privatization, Not a Higher Debt Ceiling (SPR a good place to begin)

As the battle rages over the federal debt ceiling, more pundits and even some politicians are taking a serious look at a solution that any private organization would have considered from the beginning: selling off assets to satisfy creditors.

Contrary to the doomsday rhetoric of Treasury Secretary Geithner, it is simply not true that the Congress needs to raise the federal debt ceiling, lest Uncle Sam default on existing obligations. On the contrary, large (but feasible) spending cuts, coupled with aggressive privatization of federal assets, would balance the books. There is no need to raise taxes or the debt ceiling.

The bonus to privatization is also market entrepreneurship in place of bureaucratic management. So the asset transfer would be good for both taxpayers and the private sector writ large.

I’ll outline the numbers, then focus on the possible objection to privatizing the Strategic Petroleum Reserve, a topic that should be of the most interest to readers of Master Resource.

The Scope of the Problem

When analysts ran the numbers about a month ago, the federal government was projected to spend about $750 billion more in the remainder of Fiscal Year 2011 (which ends on September 30) than it would collect in revenues. Therefore, in order to avoid raising the debt ceiling without defaulting on interest payments on existing debt, the feds would need to cut spending and/or increase revenues by that amount, just over the next four months.

In a political culture where agreements shaving a few hundred million dollars are touted as radical measures, the prospect of slashing $750 billion seems inconceivable. Indeed, this is why Brad DeLong and other leftist commentators think it is obvious that the “adult” thing to do is raise the debt ceiling already, since they can see no other alternative. [Read more →]

June 2, 2011   10 Comments