Fmr. Pres. Sam Hinds defends Guyana crumbs from our gold and oil, as Publisher Glenn Lall responds

May 30, 2021 Letters

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Dear Editor

With regard to our natural resources, I believe like every Guyanese that we should always be looking to get a bit more directly and/or indirectly, but however well intended, it is inaccurate and there is great danger to believe and worse in preaching that we Guyanese are receiving crumbs from the ongoing extraction and commercialisation of our natural resources, gold and oil. WE ARE NOT.

To judge whether we are receiving crumbs or not, we must think of all the benefits we are receiving. They may be considered in three groups:

GL: Mr. Sam Hinds, you are either sick or insane, to say we are not getting crumbs.
The KN would have reported many times about the magnitude of incentives Guyana gave out compared to what we received.
I use as an example, RUSAL, BOSAI, Aurora Gold, Troy Resources, Bai Shan Lin, Omai Gold, Barama, etc.
KN reported that the duty free fuel alone, that Guyana gave to just RUSAL was US$100M and our bauxite disappeared.
Every year that company declared losses. They were even selling, competing with our local licenced fuel dealers, nice investment and business that is, Mr. Hinds.

i) Royalty, and/or a share in profits. Royalty is a percentage taken off the top, before anything else. Royalty and profit-share may be taken in kind or in cash assuming sales at prevailing world market prices (not a giveaway sale to some family member: although there have been lots of arguments about sale prices within a group of companies when there are no world prices).

GL: Did you read any contract before penning that letter Mr. Hinds?
If you did, you would have seen that Aurora Gold is paying what they decide to give us, meaning the sale price they, yes they, sell the gold for, and based on the price they tell us, they pay.
That’s the way to do business Mr. Hinds? You said, royalty comes out of the top, before anything else, read back the ExxonMobil (EEPGL) Contract.

ii) Taxes – Corporate income tax; taxes on imports, on purchases, on sales (if applicable), etc. These may be waived to the extent allowable by law, and as stated in the general regime. Note that these incentives and waivers are monies “foregone” by the Treasury, not paid out by the Treasury.

GL: Mr. Hinds, where is the investment, where are the promised taxes that these companies paying?
They came here empty handed with fancy proposals to get leaders like you to give them whatever they asked for in tax breaks and concessions, do no substantial investments, then they turn around and use the provisions in the sweetheart contract, hire a few locals and cart off the country’s wealth, that is investment and business Mr. Hinds. Please name the companies that brought meaningful investment here?

iii) Employment and personal income tax; the provision of organisation and structure, purpose and training to the workforce employed; supporting “local content” businesses; direct and indirect infrastructural development, etc.

GL: Mr. Hinds I would encourage as an elder statesman, to please stop spewing this nonsense about local content, and go back to school starting from Prep-A, or come let me teach you the meaning of those two words—Local Content.

Yes, when they hire a few of our citizens to work as guards, cooks and labourers, make some local purchases at the market and a few stores, you are proud of that Mr. Hinds?—Wow!

Mr. Hinds, you come across, singing from the same songbook as the rest of the politicians who are trying to convince the nation that our forest is red. Mr. Hinds is that local content to be proud of?

In certain circumstances like the opening up of new distant hinterland areas, some economists may calculate and argue that benefit (iii) is important and great enough to waive altogether or to put benefits (i) and (ii) at the lowest lawful values, so that the development can happen.
Note also, that if the project does not proceed there are no cash benefits (i) and (ii). All the benefits are only enjoyed when there is an ongoing project – No project: No benefits. Note too, that our investment regime of incentives, waivers and pre-qualifications is based on the nature and size of the investment – the regime is available to everyone whether local or overseas Guyanese, or foreigners of all nationalities.

GL: Mr. Hinds is less than honest, his arguments are less than hollow and his position that these sweetheart contracts are available to locals is far from the truth and is misleading. Locals are entitled to nothing whatsoever and they are made to pay more in royalty and taxes than any foreigner does. You can prove me wrong Mr. Hinds.
As to his position ‘No Project, no Benefits’ I would like to know which business school he went to. Because when it is you who have a project ongoing and we are still not benefitting, then of what use is that to a nation or its people?

Some countries may find it economically and financially beneficial to subsidise a key activity to a certain extent: a number of Caribbean Governments used to provide some cash support to hotels and airlines bringing in the tourists to keep the airfares low and the tourist flow high. The benefit is in the employment and economic activity created by the spending of the tourists.

GL: That’s laudable, every country does that, but no country or no one would give away their ‘behind’ to mess through their ‘ribs.’

We must think about all that we would not have had if there was no project, before engaging in any talk about crumbs.

What is often forgotten when one reads about 1,000 ozs. of gold mined and sold at US$1,800/oz. or one million bbls. of oil recovered and sold at US$60/bbl, is the cost of recovering and placing the commodity in the world market.
Those who say we are receiving crumbs are ignoring those costs, thinking that “our” gold and oil and other natural resources are being recovered and put to market at negligible costs. It is the easiest thing to forget the costs and the work and sacrifices involved when counting the money the other guy is receiving.

GL: What Mr. Hinds is proud of here, the gold and the oil we are putting on the international market has a recovery cost, but whose pocket that recovery cost is going into and what is the country getting out of that? It belongs to the people who are actually doing the work and Guyana is getting the short end of the stick, with a few low-end workers and some purchases in the local markets. Mr. Hinds are you saying this is what we should settle for and not call it crumbs, are you proud of that, is that investment and business that benefits all?

Those of us who lived through the nationalisations of the 1970s and early 1980s (like I did) would know that it is a real challenge to keep costs less than world market prices over which we have no influence. Indeed for most of the time we owned and ran the bauxite operations it was more a situation like costs $120, world market price $100. Over the 1940s, 1950s, 1960s many believed that we were getting crumbs for our bauxite (and most likely we were, then) and that was part of the drive for nationalization but when we owned it over the 1970s, 80s, 90s, 2000s we were putting in lots of money from our Treasury to keep the operations from closing (as subsidies to those communities including myself and family).

GL: Mr. Hinds keep dreaming and living in the past, maybe you will eventually be confirmed as the Guyana Ambassador to Washington DC, with that mentality.

Allow me now to respond directly to a question put to me earlier: if I (a Former Prime Minister and Minister Responsible for the GGMC) do not subscribe to the notion that Guyana and Guyanese are receiving crumbs then should I not show gold and oil contracts from other jurisdictions that are worse than the Aurora Gold and Exxon oil contracts.

I do not have any contract for any particular company in gold or oil in some other country, to show. But the matter does not end there – Governments and Companies are required to publish and make available lots of information in different places/agencies, local and foreign as required by law. Indeed as far as I can tell all the “secrets” that are being revealed have been taken from publicly available documents. Experienced, knowledgeable persons readily perform overall comparisons, which show that we are at least middling, in what our Government receives directly in royalty and/or profit share and taxes.

GL: I am surprised that he’s got the nerve to tell us that they signed away our resources without even checking to compare with other countries how they treated with managing their resources.
Any idiot signing a contract to do even a small scale operation with their resources, much less, a large scale project with the country’s wealth, would at the very least, check around, look around to see how these things are being done, see how countries managed their assets, the people’s assets. I am astonished Mr. Hinds.

In the case of gold, our GGDMA had obtained sponsorship about the year 2000 for one of the International Financial Services Companies to compare the investment regimes in about 20 significant gold producing countries. Our regime was about the most demanding (taking the most) with Royalty at 5% when most were at 2.5 or 3%; and our Corporate income tax was the highest. At that time of falling gold prices, our GGDMA argued for a lower royalty and we eventually settled for a sliding scale of reducing royalty for selling prices below US$400 an oz. About ten years later, with gold prices running high, our Government argued for an upward sliding portion of the sliding scale and set royalty at 8% for gold prices over $1000/per oz for large scale operations. Small and medium scale operations were exempted as they received no waivers on their general purchases.

GL: Mr. Hinds, Glenn Lall is not living in the past, I am not living in the past, this is a fast moving world and commodities are changing prices of miners every second of the day, stop dreaming and living in the past.

I can maintain with all confidence that our gold mining regime is not a regime of the least Government take – crumbs.
Concerning what we, Guyanese and Guyana, receive from our oil, I will take refuge in a number of writings in prose and poetry (appearing in all our newspapers over recent months, and presentations at Moray House) of that Guyanese émigré living in Midland Texas – Dr. Tulsi Dyal Singh. In particular I will refer to his article, which appeared in Stabroek News of March 2nd, 2021, “Guyana got 17.4% of oil sales in profit for 2020”. I quote one paragraph:

“To be clear Guyana got 17.4% of sales in its share of the profits plus 2% of sales
in its royalty receipts, making a total of 19.4%. Not bad in a generally dismal year
for the oil industry, especially for Guyana’s two main partners in this enterprise – ExxonMobil and Hess Corporation, both of which reported substantial losses for 2020.”

You don’t have to take my word that we are not receiving crumbs – go back and read the whole article and others by Dr. Tulsi Dyal Singh and other commentators too.
Some contracts may have a royalty of say 15%, seven and a half times Guyana’s 2%, they have no profit share, so for the year in question they would have received 15% of the oil, Guyana would have received somewhat more – 19.4%: not a bad share, not crumbs, but we would not have complained if it were a little bit more. As indicated here one has to read and compare agreements/documents in total so as not to get carried away wrongly with a comparison of one or two headings only.

I think that I have justified my view that we are not receiving crumbs and dribbles. Indeed our question should not/never be whether we are receiving crumbs or not, but about what alternatives are realistically available to us? What better alternatives can we make accessible to ourselves and apply ourselves at? In my experience getting bogged down in arguing and lamenting whether we are getting crumbs is to wallow and get lost in feelings of self-pity and victimhood; it provides us a cop out from doing anything constructive whilst inculcating destructive moods and attitudes and opening the door to recurring tantrums, which get us nowhere.

However, addressing the questions of what alternatives are realistically available to us, and looking to make better alternatives accessible to us, gets us knitting our brows, rolling up our sleeves and getting into action: gets our creative juices going, challenging ourselves and developing ourselves and country.

We Guyanese are a people of less than one million: with our history of slavery, indentureship and colonialism, in a world of 7,000 million we are understandably suspicious but we must be fair and reasonable. Our challenge is to avoid and overcome all in our history that might restrain our participation, survival and success in this huge evolved world of today and tomorrow, finding strengths in our history to serve us today, and developing partnerships with foreign peoples and countries of the world, for our mutual benefit.

GL: Mr. Hinds, you can continue writing but let me ask you, because you quoted Dr. Tulsi Dyal Singh, what are his credentials, and could you please ask him how he arrived at that figure and what methods were used to arrive at that percentage?
It had to be that he plucked that figure out of thin air and you believe, because I know many oil and financial experts who cannot, to this day, tell us what Guyana is really getting because of the way the contract is worded.
Mr. Hinds I want to tell you there is no publicly available financial record, for the day to day operations in the Stabroek Block or any of the other large scale operations in Guyana that one can definitely conclude what Guyana is really getting from these, investments. Have a good Sunday and God Bless You, Glenn Lall.

Samuel A.A. Hinds
Former President and Former Prime Minister.
Former Minister of Mines and Minerals.

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