A different kind of debt straightjacket

Jun 13, 2021 Editorial

Kaieteur News – Third World societies live with heavy debt burdens and Guyana is no exception. We had more than our share before, when Guyana earned the disdainful distinction of being deemed a ‘highly indebted’ country. Generous foreign debt relief and earlier careful governmental action brought noticeable improvement. Today, our leaders are taking this country down that same heavily indebted road again. The difference this time is that the possible debts can be sourced to Exxon’s draining deal terms, fuelled by glaring political feebleness. This was made clear to Guyanese by KN under the headline “ExxonMobil deal leaves all citizens shackled to debt trap for decades” (KN June 8). Exxon and its shareholders enjoy billion-dollar prosperity, while Guyana and its peoples stare at the bleak possibility of poverty. It is the contradiction of being so potentially rich, yet so actually poor. The Exxon deal has some built-in debt obligations that could dash all local hopes. What should set us free shackles us and enslaves us, via the legal schemes and contractual skullduggeries of Exxon’s fox like leaders. That ugly Production Sharing Agreement has “some of the world’s most oppressive provisions.”
There is the provision for interest. By some inexplicable reasoning, this provision “allows ExxonMobil to recover any and all interests it racks up on loans borrowed to fund the development of oil projects in the offshore concession.” Repeat: any and all interest charges are recoverable by Exxon. Those charges come out of our pockets and given the billions in American dollars used, that could be hundreds of millions (US) annually in interest payments to Exxon for funding local oil projects. When such possibly massive interest numbers are subtracted from oil revenues due, then the reality is that little is left for Guyana. It is so horrendous, so unthinkable, that even “the International Monetary Fund have said there is no economic logic for allowing this and had advised the Government to prohibit oil companies from recovering the interests and other financing costs.” When even the IMF, not known or possessing of a reputation for friendliness to poor countries, can say something like that, then this is grim for Guyana.
It is why this paper is in favour of a provision that prohibits such interest recovery that either eliminates or reduces considerably other gouging financing costs. This is piracy, the equivalent of modern-day corporate robbery, the most barefaced kind imaginable, and so much that it is sickening. University of Houston instructor, Tom Mitro, called it for what it really is: “the abusive use of debt by the operators, since Guyana is essentially standing all the costs.” It is why we are so much against government’s indifference and resistance to working tirelessly towards ways that give Guyana serious relief. But that is not all, for there are other draining and damaging provisions in Guyana’s contract with Exxon. According to KN, “the country will essentially foot the bill for any legal fees that Exxon incurs for action brought against it by the State.” And there is more of the same ugliness, same haemorrhaging of the nation’s prospects, because “if there is any environmental damage,” Guyana must somehow persuade the courts that the high, almost insurmountable, standard (violation) of “gross negligence” occurred. There would be that hard to-pin-down requirement imposed on Guyana, which is of the intent of Exxon. With such a challenge, recovering is as good as dead. Our brightness could crash into darkness before we know it.
But there is still some more that traps us, hurt us in this one-sided relationship with Exxon. Any move by this country that negatively impacts Exxon’s profit projections will have to be made good by Guyana. We have to make up the difference for that, and for money spent on training Guyanese and expenses related to removing Exxon’s equipment post-production. As one expert noted, “Guyana will not have enough money from the oil projects to save significantly as well as to cover budget deficits…and a 2025 debt load of US$20B.”
When all this is considered, we are handcuffed, chained around our waists, have a ball-and-chain around our ankles and nailed to the ground. That looks, sounds and smells like poverty. As the oil drains, so does our blood.

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A different kind of debt straightjacket

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