Guyana Focus
Although Guyana is forecasted to be the fastest growing country in the world in 2020, optimism over its economy will be overshadowed by a healthy dose of political uncertainty and social tensions.
With general elections scheduled for March 2, political tensions will reach a fever pitch as the two major parties, the APNU+AFC coalition and the PPP engage in an unprecedented struggle to seize the reins of power in a country that is poised to become one of the richest on a per capita basis before the post-election tenure of the winning party runs out five years thence.
It is highly possible that the battleground for power will be littered with accusations of rigged elections, accentuated by violence and social unrest. The incumbent APNU+AFC coalition will naturally want to hold on to power at all cost, while the opposition PPP will take all measures possible to regain power which it lost five years ago.
In the meantime, the 17 other fringe political parties which have registered to contest the elections will not make any significant inroad into the political support of the two major parties, although it is not unlikely that at least one of these parties could garner a seat. Prior to the elections, some of the fringe parties will merge while a few will decide not to contest the elections.
Foreign interference, both overt and covert, will likely play a major role in the outcome of the elections, albeit under the watchful eyes of a myriad of toothless foreign observers. Money from “big oil”, which is the result of favorable contractual arrangements, could also find its way into the elections process, with the expectation of more future benefits. The bottom line is that should a party other than the incumbent party win the elections, the newly elected party could change the terms of engagement of “big oil”, a possibility that could prove to be disruptive to their operations.
Regardless of which party wins the elections, accusations of corrupt electoral practices will dominate the post electoral environment, which could very well lead to social unrest and violence – especially if the incumbent party loses power.
Expectations of the emergence of a third force that will break the balance of power between the two major parties is unlikely to materialize. While such occurrence will be beneficial to the country, it is somewhat wishful thinking to believe that such an outcome is realistic.
On the economic front, revenues from oil and gas will set the stage for the economy to take off, although it will be at least three years or more before there is any material impact. However, the two major political parties will make grandiose promises based on the country’s potential wealth prior to the elections to win the support of voters.
For instance, incumbent President David Granger’s claims that oil revenues will be used to combat poverty starting in 2020 is somewhat far-fetched as the expected revenues this year is substantially less than the country’s annual oil import bill. In the meanwhile, the WPA has expectations of a direct cash transfer of oil wealth to the people, a thoughtless suggestion that defies economic reality. Incidentally, both APNU+AFC and the PPP have frowned on the idea of a direct cash transfer.
In his New Year’s message to the nation, Granger extolled his political mission, stating that during the next decade education and healthcare will continue to improve; information communications technology will be extended countrywide to link all regions and communities; citizens will have more employment opportunities and larger disposable incomes; public servants’ emoluments will continue to grow; public infrastructure will continue to be rehabilitated, upgraded and expanded; and more housing will be available for low-income families. It is hardly likely that most of these promises will come to fruition in 2020.
On the other hand, in its New Year's message, the PPP blasted the Granger-led administration for “gross mismanagement of the (oil) sector” and promised to take remedial action. “Their sad legacy in the sector comprises abject failure to put in place an effective regulatory framework and local content policy, as well as badly negotiated contracts that do not serve the national interest”, the party’s message stated. The PPP said its commitment for 2020 and beyond is to bring responsible economic management not just to the oil and gas sector, but also to all of the traditional and other new and emerging sectors of the economy.
Incidentally, the influx of oil revenues will raise countless questions about the use of the country’s new found wealth, with widespread speculation that much of it could be wasted by the government. However, the country’s Natural Resource Fund (NRF) Act 2019, which includes a budget transfer rule that ensures that fiscal transfers are determined by the expected financial return on the accumulated assets of the NRF in the long-run, will put constraints on the use of oil wealth, that is, if the NRF stipulations are observed.
In the medium-term, the rule envisages a transfer of around half of current oil revenue to the budget. This will ensure that part of the oil revenue is saved as a buffer against shocks and for future generations; and that higher public expenditure will not lead to debt growing at the same time as the NRF accumulates.
A flood of oil money and a huge influx of foreigners and foreign companies will lead to a massive increase in corruption which is already pervasive in the country. Both of the leading political contenders are already tainted with accusations of corruption and nepotism, which are expected to escalate during the year.
The perceived pace of implementation of the country’s Green State Development Plan will pick up during the year but it is not expected that any material impact will be made. In fact, there will be more idle talk about green development than real progress in the area.
In spite of growing concerns about economic diversification in the wake of the growth of the oil sector, the agriculture sector will continue to suffer from its traditional risks, among them massive flooding, poor infrastructure, and weak government support. Although inroads have been made in agro-processing, the country’s imports of foreign foods will spike dramatically, highlighting the failure to make progressive strides in this area, and putting the country’s food security plans at risk.
While sugar is on its deathbed, its revival might be made possible if the PPP emerges victorious. But it will be several years before the industry gets back on its feet if this eventuality materializes. For now, that will remain a pipe dream. Rice production, on the other hand, will continue to stagnate unless its supportive drainage and irrigation infrastructure is improved.
On the socio-economic front, crime will increase dramatically in 2020 amidst political chaos and the massive wealth divide. The country’s increasing cash economy will also be a fertile breeding ground for financial crimes. Reports of the involvement of the police in criminal activities will increase, escalating the population’s mistrust in law enforcement and casting a dark shadow over the possibility that there will be an abatement in criminal activities.
While there is some speculation that Guyana will change politically following the upcoming general elections, it would be naïve to assume that a legacy of political and racial differences would simply disappear and herald in a more cohesive nation with a common development agenda. That would certainly be ideal, but is more akin to a dream come true.
US oil major ExxonMobil on December 20th, 2019, announced that oil production had started from the Liza field, offshore Guyana, ahead of schedule and less than five years after the first find of hydrocarbons. It had said that this was well ahead of the industry average for deep-water developments.
Production from the first phase of the Liza field is expected to reach full capacity of 120,000 barrels of oil per day in the coming months, and the first cargo is set to be sold within weeks.
ExxonMobil’s Public and Government Affairs Advisor Janelle Persaud on Friday said that production continues, with an average of between 35,000 and 50,000 barrels of oil being produced per day. As production continues, this number is expected to grow.
The Liza Phase 1 development project features the Liza Destiny Floating, Production, Storage and Offloading (FPSO) vessel moored 190 kilometres offshore Guyana, and four subsea drill centres supporting 17 wells.
A second FPSO, Liza Unity, with the capacity to produce up to 220,000 barrels of oil per day is under construction to support the Liza Phase 2 development, and front-end engineering design is underway for a potential third FPSO, the Prosperity, to work the Payara field upon government and regulatory approvals.
ExxonMobil has said that by 2025, at least five FPSOs will be producing more than 750,000 bpd from the Stabroek Block.
The current estimated discovered recoverable resource from the Stabroek Block is more than 6 billion oil equivalent barrels. Esso Exploration and Production Guyana Limited is the operator and holds 45% interest. Hess Guyana Exploration Ltd holds 30% interest and CNOOC Nexen Petroleum Guyana Limited holds 25% interest.
This position was also communicated by AFC prime ministerial nominee, Khemraj Ramjattan, who said that essential elements of the Accord will be formally made public.
In February of 2015, the original Cummingsburg Accord was made available to the public. Analysts say neither APNU nor the AFC would be keen to have to defend the stipulation in the revised accord that if it was returned to office PM Ramjattan would not be able to accede to the Presidency. This presidency would remain with APNU and it means if a new President had to be appointed, APNU+AFC would have to do the same thing that the PPP/C did in 1999 to enable Bharrat Jagdeo to become President. This step-down, step-up process had been condemned by several stakeholders in society in 1999. Reports are that this process is enshrined in the revised Cummingsburg Accord.
The non-release of the full revised agreement will likely raise questions about whether the coalition is really committed to transparency.
The Revised Cummingsburg Accord establishes the unified slate under which the parties will contest the March 2nd General and Regional Election.
Harmon iterated that the essential terms of the Accord include a provision that the prime minister will be selected by the AFC; the strengthening of the office of the Prime Minister, which office will continue to have charge over constitutional reform; a 30:70 split of all positions of authority, including seats in Parliament; and the distribution of ministries after consultation between the parties, as opposed to naming, up front, which ministry will be headed by a member of a specific party.
Under the previous Accord, the AFC was given the prime ministerial position, and 12 seats in Parliament. The 30:70 ratio is likely to eventuate in a decrease in this number.
These conditions are seen as a reflection of the belief that the party has lost support, particularly in light of its poor showing at the 2018 local government polls. The defection of an AFC member, Charrandass Persaud, resulting in the passage of a no-confidence vote against government in the House last year, is also believed to have influenced the negotiations.
Harmon had said that the Revised Cummingsburg Accord was so named as it retains some of the features of the old accord, while featuring changes which he said are informed by experiences with, and interpretations of the Constitution, as well as missteps experienced during the current term.
Harmon said that the other terms and details of the Accord outline administrative matters which deal with how the Accord will be administered. Those elements, he explained, which he said includes terms and conditions, will remain between the parties of the Accord, that is, the APNU and the AFC.
Leader of the Opposition, Bharrat Jagdeo, has criticised what he says is the secretive way in which the Accord was signed, and that it does not seem that the coalition, much unlike their approach in 2015, is keen in making the details of the Revised Accord, public.
Harmon, however, said there his party is not attempting to hide any mischief, and that in any case, Jagdeo, who is also the General Secretary of the People’s Progressive Party (PPP) has no moral authority to make such claims.
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