Oil corrupts weak governments and Guyana’s is far from strong- The Economist notes

Jul 04, 2017 News

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– Says “It will take better politicians to resist the corrosive power of petrodollars”

The coalition Government is not dubbed internationally as a strong one. This should not come as a major shock to many as Transparency International has over the years been placing Guyana among the most corrupt countries in the world. The APNU+AFC government has not been able to remove that perception.
However, now that oil is on its way, the country will be placed more under the microscope, attracting attention from organizations and countries that probably never knew of the country’s existence or perhaps just never paid it any attention.
In fact, Guyana has caught the attention of one of the largest business magazines in the world—The Economist. That newspaper has labelled the government of Guyana “far from strong” in an article published a few days ago.
The Economist is an English-language weekly magazine-format newspaper owned by the Economist Group and edited at offices in London. The Economist offers authoritative insight and opinion on international news, politics, business, finance, science, technology and the connections between them. It has long been respected as “one of the most competent and subtle Western periodicals on public affairs.” Its circulation is 1,554,948 and is liked by over eight million on Facebook.
The article on Guyana appeared in the Americas section of the print edition under the headline “The gusher of Guyana. Will oil corrupt a small Caribbean State?” It was noted in the strap line of the article, “It will take better politicians to resist the corrosive power of petrodollars.”
The magazine described Guyana as one of South America’s poorest countries. “But perhaps not for much longer: Guyana has struck black gold.”
The article that was anonymously written noted that by 2020 ExxonMobil, the world’s biggest private oil firm, expects to be pumping oil in Guyanese waters, with Hess and Nexen, its American and Chinese partner firms.
It continued, “In the past two years they have found reserves of around 2bn barrels. Five more promising prospects will be drilled by 2018, and then perhaps a dozen more. Guyana could be producing 120,000 barrels per day by 2020, and more than 400,000 by the mid-2020s.”
The Economist said that even with oil at under $50 a barrel, the oil found can generate vast wealth for a nation of just 750,000. But the Guyanese seem strangely underwhelmed.
It was noted that little of the work will be done onshore. “Guyana has few engineers and no heavy industry. A global glut of refining capacity means there is no point in Guyana building its own. Oil will be pumped into giant vessels, then shipped directly to foreign markets.”
The Economist said that since, as it seems, little work will be generated for Guyanese, the main question is “How the government will spend its share of the windfall?”
Talks about a sovereign wealth fund and projects to boost long-term growth were highlighted in the article.
However, The Economist noted that Guyana already had diamonds and gold, and little of that wealth was shared.
The article said that horse-drawn carts still traverse the City weaving through “the Georgetown traffic.”
It was stated too that “State-owned sugar producers gobble subsidies. Cash will be tight until the oil starts flowing. Retail sales are down. Nightspots are closing. “Businesses are scared to invest,” says an accountant. He blames a crackdown on money-laundering and graft. Others blame a newish local office of America’s Drug Enforcement Administration for reducing the flow of drugs cash.”
The article reflected Minister of Natural Resources, Raphael Trotman’s desire to have Guyana sign up to the Extractive Industries Transparency Initiative (EITI), which monitors mineral revenues to stop them being stolen. It noted, too, that the Guyana Oil and Gas Association (GOGA), a recently formed coalition of private firms and individuals, aims to promote transparency in the industry.
“But oil tends to corrupt weak governments. And Guyana’s is far from strong; the country has a history of corruption and its politics are bitter and racially polarized.”
The Economist said that Guyana faces a risk of its petrodollars being squandered on more sugar subsidies and pay rises for the “unproductive public sector. The next election is due in 2020 just when the oil starts to flow. The victor could enjoy a well-lubricated quarter-century in office.”
The original article can be read at: https://www.economist.com/news/americas/21724385-it-will-take-better-politicians-resist-corrosive-power-petrodollars-will-oil-corrupt

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