Latin Analysis: A New Oil Superpower in Latin America?
Guyana's President David Arthur Granger review an honour guard during Mercosur trade bloc annual summit in Brasilia, Brazil December, 21, 2017. REUTERS/Adriano Machado/File Photo
Guyana has been known for years as one of the smallest and poorest states within South America. This English-speaking country had long been perceived by international investors as a non-exciting capital destination, which ultimately translated into a lack of economic growth and low levels of human development for the Guyanese people.
Nevertheless, Guyana’s prospects for economic development dramatically changed when the American petrol-company, ExxonMobil Corp, discovered massive amounts of oil reserves on the Guyanese seaside in 2015. According to the firm, the oil findings are so extensive that it will allow the country to produce and export roughly 5.5 billion oil barrels in the following years.
This situation did not only imply that Guyana could potentially become one of the most important oil-producing nations around the globe, but it also has the potential of making it one of the wealthiest nations in the continent. Indeed, the panorama seemed so optimistic that even the International Monetary Fund (IMF) had predicted in 2019 that Guyana would accomplish a GDP growth of 86% by the end of 2020 and that it could even reach growth rates between 300% and 1,000% by 2025.
Invariably, this has meant that – for the first time in several decades – Guyana is once again seen by investors and the international community as one of the most promising emerging economies.
The spillover effect of the oil discoveries
The forecasts of growth given the newly found petroleum, seem to have had a spillover effect on several other economic and social aspects within the country. This is the case as the growing oil industry has generated new governmental efforts to improve the nation’s public education; mainly by centering funds and renovation projects around the University of Guyana (the country’s only higher education institution) with the purpose of preparing the Guyanese youths to pursue oil-related engineering careers.
As expected, the capital city of Georgetown has experienced increasing industrialization since the petroleum reserves were announced to the world. Consequently, entrepreneurship with the citizens has become the order of the day, causing a unique zenith of small and medium businesses within the area; primarily consisting of restaurants, farmer’s markets, and commodity-trading establishments.
Overall, this spillover effect is expected to benefit not only the capital, but to transcend and completely transform the Guyanese economy, such that it will allow the country to achieve something that many Latin American nations have tried to do for years and failed, which is to evolve from a predominantly agricultural-trading economy, to receiving massive capital as foreign direct investment and extensively exporting the black gold instead. Undeniably, this has the potential of giving Guyana a final and definite boost to evolve from a least developed nation to become a developed country.
Production of sugarcane and its ethnic implications
The growth of the oil sector, however, has not been beneficial for all the social spheres within Guyana. The fact that Guyanese President David Granger’s administration has decided to migrate the center of the economy from agriculture to oil, has meant that the sugarcane sector has been severely affected. This industry, which is part of the national identity of the Indo-Guyanese people, has re-sparked social tensions among this group and African-Guyaneses – group to which the current president is a part of. The Indo-Guyanese, who descend from the Indian Subcontinent, have even argued that the fact that the sugarcane industry has been abandoned so brutally is a form of economic oppression carried-out by Granger as a consequence of a historical rivalry among both communities.
The sudden lack of governmental support for agricultural production has been translated into a massive amount of unemployed people, which has led to suffering both financially and psychologically. This is because most families based in rural areas and dependent on a farmer’s income. Currently, these municipalities have become ghost towns as families have been forced to move given the increasing unemployment situation. Most men have become unemployed and families are now dependent on the lower salaries earned by the women, who primarily work as housecleaners. In addition to this, environmental groups have declared that the increasing sea levels will not only make the political decision of basing the economy on oil more costly, but that it will foremost impact Indo-Guyaneses who live near the coastline and would further keep marginalizing this community.
Naturally, these tensions among ethnic groups have been reflected in the political sphere, as political parties representing the interests of each ethnic group competed fiercely to win the march 2020 elections. However, in addition to an alleged lack of transparency, frictions reached such a high point that both parties and several members of the international community (such as the European Union, the United Kingdom, various international organizations, among others) requested votes to be counted several times before results were officially announced.
After the vote-counting process under the supervision of members of the Caribbean Community (CARICOM), the Organization of American States, and the US Chamber of Commerce, it was declared that the opposition party – the People’s Progressive Party (PPP) – had won the elections, thus making Dr. Irfaan Ali Guyana’s next president. Nevertheless, despite votes being counted on multiple occasions, Granger and his Partnership for National Unity / Alliance for Change party, refused to accept defeat and are still holding on to power, making tensions amidst parties more acute and gaining international disapproval. The outcome of this political rivalry will determine the economic and social future of both ethnic groups at stake.
The Venezuelan Guyana Esequiba
Despite domestic social and political conflicts, Guyana has managed to retain the attention of international investors. Even when several countries are now expecting negative economic growth as consequence of the COVID-19 crisis, Guyana’s GDP is still expected to boost. While the IMF’s early predictions seem too optimistic today, in April the organization stated that the country’s economy is still projected to grow 52.8% by the end of 2020. Considering that the world is approaching a global economic recession, this forecast is not disappointing and still means that the country will be one of the fastest-growing of the region. The positive prospects for development – especially during highly uncertain times – has once again awakened the interest of Guyana’s neighbor: Venezuela.
Venezuela’s bonds with Guyana are well-rooted on a shared post-colonialist history. Both countries were Spanish colonies during the 16th century and, in 1810 when most Latin American nations started becoming independent, Venezuela declared that the Guyana Esequiba (as they call it) was a legitimate part of their territory. However, in the following years it was occupied by the Dutch, and later on, by the British. Officially, Guyana became an independent republic until 1970, which makes it one of the youngest countries of South America.
Venezuela never ceased stating that the Esequiba was an integral part of its nation. The attachment is so that during Chavez’s ruling, an 8th star was incorporated into the Venezuelan flag to represent the said region. It can only be expected then, that the findings of oil would only make Venezuelan authorities ever more insistent of annexing the Guyanese constituency to the nation. Additionally, being able to control the large amounts of petroleum could significantly aid Maduro’s administration to improve the profound economic crisis in which Venezuela has been for several years.
This issue has been addressed by the international community, as it had been discussed for decades at the United Nations. However, as territorial tensions among countries keep becoming more acute throughout the years, UN’s Secretary-General, Antonio Guterres, decided to take matters to the International Court of Justice (ICJ), where it is still being discussed. Yet, regardless of which country the ICJ decides to favor, it is unlikely that any of the actors involved would peacefully settle with the final decision.
Therefore, it can only be concluded that matters are uncertain for the Guyana region, in both the domestic and the international domains. Economic forecasts for Guyana remain optimistic (especially compared to its neighbors) and it is still portrayed as one of the fastest-growing economies. The oil findings indeed represent a tangible possibility of a positive and long-lasting change for the Guyanese people. Now, it is only a matter of time to see who will get to decide over the oil such that it will become clearer if, in fact, the social, political, and economic future of the country can truly be expected to improve.
