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Guyana, one of the fastest growing countries in the world, fears the oil curse

The 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 exploration is making the small former British colony of less than 800 thousand inhabitants – whose main economic activities were the production of sugar and rice and mining – to 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, with an increase of 43, 5%. Last year, the evolution of Guyana’s economy continued to be among the largest in the world, growing 19, 9%.

According to data from the Financial Times, crude oil production, which started in 2019, is expected to reach 340 thousand barrels per day this year, and the projection of the Guyanese government is that it exceeds 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 most of the population.

Avantika Chilkoti, international correspondent from the English 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 people of Guyana do not need to look far to see how oil can be a curse for 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.

A journalist pointed out that offshore oil production is a highly specialized industry, “so only a small maintenance team is needed, much of the work is done by machines.”

“They will not be used local enterprises, 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 the political divisions in Guyana.

The Guyanese government projects that the country’s economy should grow almost 50% this year, but when oil is taken out of the account, the variance 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 dreamed 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 that resides in North America”, he declared.

Ali also highlighted infrastructure plans that include Brazil, such as a project with the operator Abu Dhabi Ports of 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, the Guyana is expected to make the next round of licensing for the exploration of new oil blocks and is looking for partnerships to create and manage a state-owned oil company.

The idea arose because the assessment is that the contract with ExxonMobil could have been more advantageous for the country: a report by the NGO Global Witness of 2020 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, which should exclude ExxonMobil and its partners, the also American Hess Corporation and the Chinese CNOOC, which control all oil production in the country today. 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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