THE VOICE OF THE LIBERAL DEMOCRATS Impact of Brexit on Guyana will be mixed

Jul 20, 2016 News

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By Sase Singh
INTRODUCTION
The fallout from the UK referendum that will end in its exit from the European Union (EU) can be a great lesson on why politicians should never disconnect from the people. According to Jamaica’s Prime Minister Andrew Holness, as quoted in The Miami Herald, the EU was “an integration construct on which our very own CARICOM was modeled and to which we have often looked for guidance and best practices.”
But this column is not about the impact of Brexit on the UK, or even Brexit’s impact on the Caribbean region. It aims to offer some insight on what Brexit means for Guyana.

GUYANA’S EXPORT AND BREXIT

From the accompanying table, we can see that for the first four months of 2016, some 57% of Guyana’s exports were to USA, Canada, and Panama. Less than 7% went to the UK – most of which was raw sugar sales. Even if there is a reduction of the quantity of raw sugar purchases from the Silvertown Cane Sugar Refinery in London as a result of the vote, there is still enough time to skillfully mitigate most of the adverse impact from such a situation. But the process for Guyana has to start today.
Therefore from an export perspective, the Guyanese economy will most likely take a modest hit from Brexit. This situation from a trading perspective is certainly not Guyana’s “Operation Bagration”, which was the Soviet offensive in 1944 that pushed the Germans into a state of surrender.
We can ride out any trade turbulence from Brexit if we do our homework early. I am hopeful that Foreign Affairs Minister Carl Greenidge will present a White Paper to the Guyana Parliament on this issue very soon, which will lay out a persuasive and in-depth report on how Guyana plans to mitigate the challenges from Brexit.
BREXIT AND AID TO GUYANA
Guyana’s biggest risk remains the negative impact on the Economic Partnership Agreement between the Caribbean Forum (CARIFORUM) and the EU. Also, the direct aid contribution that flows through the European Development Fund (EDF) to Guyana should be a major concern to keep policymakers up at night. It will be “fair game” if the EU seeks to revise all deals that bring commercial advantage to the CARIFORUM members, including Guyana.
This is not to say that the EU will necessarily eliminate those preferential treatments. But let’s be true to ourselves, the EU has very little in the way of a relationship with Guyana outside of the UK. So without the UK present at the table to advocate for Guyana, we should not expect special treatment from the EU.
As the pressure builds to strengthen the EU’s position globally, and in the absence of the UK lobby, Guyana and some other developing countries may become mere observers to a process, as the Germans, French and Italians take centre stage.
This is not to say that the EU will necessarily eliminate those preferential treatments, but I expect Guyana to be weakened in the post-Brexit era in the EU, unless we take proactive measures now. One such measure that easily comes to mind is the strengthening of diplomatic ties with the Germans.
Maybe opening an Embassy in Berlin would not be such a bad idea, in order to build this vital future relationship. As an off-shoot of that relationship, it is hoped that Germany can use its position to support Guyana’s case.
We have to remember that the UK is one of the largest contributors to the EDF. The EDF is a critical contributor to our ongoing sea defence maintenance programme. With the UK’s contribution of some US$2.5 billion annually to the EDF set to evaporate post-Brexit, the next round of the EDF (the 12th), which is set to start in 2020, can see a reduction in the aid flow from the EU to Guyana.
This is reason enough to strengthen our Brussels Embassy and for emphasis, also going directly to the real power broker in Europe – the Germans.
Guyana also has to start cultivating a more progressive relationship with alternative funding sources – Chile, Mexico, Sweden, Norway, Japan and so on. We also have to deepen our alliance with our regular friends – the ABC and BRICS countries. This situation can be a door-opener in how we re-invest ourselves to become more effective on the global stage, especially if the UK shifts those former EU-bound EDF funds to the British Commonwealth Office.
BREXIT AND INVESTMENT VIS-À-VIS GUYANA
Unfortunately, Guyana is one of the worst investment locations in the world. Even if private UK investors are forced to look for alternative investable locations, countries like Jamaica and Trinidad will always “outrank” and outshine Guyana hands down, until GO-Invest wakes up and the Ministry of Business gets its act together.
Guyana is right now ranked 121 out of 140 countries on the Global Competitive Index.
On the basic requirements needed for Foreign Direct Investments, a stable macroeconomic environment, we are ranked 120 out of 140 countries. Even Haiti, the poorest country in the Caribbean Region, is ranked higher than Guyana on this indicator.
To further complicate matters, Guyana does not even have a Sovereign Credit Rating, which every conceivable independent country of the world has, including a very bankrupt Venezuela. This Sovereign Credit Rating is the principal tool used by private fund managers in conducting their due diligence on whether a project in a nation is an investable opportunity or not.
On the other hand, if the investment is a reverse flow from Guyana to the EU, it may make better sense (post-Brexit) to set up shop in Amsterdam, using Surinamese connections, rather than in London. I would not be shocked to read in the future that DDL has brought an alcohol business in Suriname before 2020 as part of its strategy to use this as a vehicle to drill deeper into the EU.
BREXIT AND GUYANESE IN THE UK
Fortunately, the migration wave to the UK has stalled for many years now, and Guyanese have alternative locations where they prefer to migrate such as the USA, Canada, and the Caribbean. But for those in the Guyanese Diaspora residing in the UK, they are fairly settled people who prefer to pay into the welfare system rather than suck it; so they are assets to the UK. The Guyanese Diaspora in the UK will not be under any threat, especially in light of the upcoming UK-USA-NAFTA alliance, which can create net economic growth for the UK even after it exits the EU.
CONCLUSION
So in the grand scheme of things, the Ministry of Foreign Affairs should consider ramping up its capacity in Brussels and Berlin by 2018 with world class negotiators to ensure that Guyana’s interest is protected in the EU. But if we play our cards right, Guyana should be fine, in spite of Brexit.
With his experience in the ACP, I am convinced that Minister Greenidge is well prepared for this project over the next three years. I wish him the best of luck on a very tough job ahead.

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