Second least populous country in South America, Guyana is experiencing a moment of transformation in its economy. In 2015, the American company ExxonMobil discovered large oil reserves in the Guyanese territorial sea, wealth whose exploitation is making the small former British colony of less than 800,000 inhabitants – whose main economic activities were sugar and rice production and mining – become one of the fastest growing countries in the world.
In 2020, Guyana’s Gross Domestic Product (GDP) had the highest growth on the planet, having increased by 43.5%. Last year, the evolution of Guyana’s economy continued to be among the largest in the world, growing by 19.9%.
According to data from the Financial Times, crude oil production, which started in 2019, is expected to reach 340,000 barrels a day this year, and the Guyanese government’s projection is that it will exceed 1 million barrels a day in three years.
If the future looks promising, however, Guyana fears the oil curse – as the phenomenon is called in which abundant reserves of the commodity do not generate development for the country, with wealth wasted by corruption, bureaucracy and the inability to diversify the economy and bring better living conditions to the majority of the population.
Avantika Chilkoti, international correspondent for the British magazine The Economist, was recently in Guyana and found that oil is already having an effect on other sectors of the country’s economy, such as greater demand for transport and investments in civil construction. But will the small South American country be able to fulfill the transformative potential that its reserves herald?
“The Guyanese people don’t need to look far to see how oil can be a curse on the economy. To the west, they have Venezuela, where oil bankrolled the corrupt socialist dictatorship. They are also neighbors with Trinidad and Tobago, where oil optimism was high for a while, but it led to crime and social tension,” Chilkoti said in an Economist podcast.
The journalist pointed out that offshore oil production is a highly specialized industry, “so you only need a small maintenance team, much of the work is done by machines”.
“Local enterprises will not be used, because there are only a few companies in the world that produce ducts and tools suitable for the service. A big risk for this oil boom to go wrong is corruption,” added Chilkoti, citing political divisions in Guyana.
The Guyanese government projects the country’s economy to grow by nearly 50% this year, but when oil is taken out of the account, the change should be less than 8%.
Infrastructure plans include Brazil
In an interview with the Financial Times, President Irfaan Ali highlighted that investments are being made with oil money to diversify the Guyanese economy and bring about the dream of development.
“We are not only investing in health and education to meet the needs of Guyanese, but also as important generators of foreign currency in the future so that Guyana can become a health and education hub for South America, the Caribbean and the huge diaspora residing in North America,” he said.
Ali also highlighted infrastructure plans that include Brazil, such as a project with operator Abu Dhabi Ports for a deep-water port in Guyana that would serve the north of the neighboring country and a highway connecting the largest economy in South America.
In September, Guyana is due to complete the next round of licensing to explore new oil blocks and is looking for partnerships to create and manage a state-owned oil company.
The idea came about because the assessment is that the contract with ExxonMobil could have been more advantageous for the country: a 2020 report by the NGO Global Witness pointed out that Guyana would have lost up to US$ 55 billion in the agreement with the American company.
But the government is also considering an auction, from which ExxonMobil and its partners, the American Hess Corporation and China’s CNOOC, which control all oil production in the country today, must be excluded. The next steps could be decisive for Guyana to avoid the oil curse – or be one more to be haunted by it.
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