Allay fears that the only thing growing in Guyana is the number of FPSOs

Sep 11, 2022 Letters

Dear Editor,

I find it necessary to address a recent Guyana Chronicle article which denies the onset of Dutch disease here in Guyana, entitled: No Dutch Disease. The claim that fears of Dutch Disease are unfounded when there have been very severe declines in several non-oil sectors is in of itself evidence of Dutch disease. This is because a classic symptom of this malady is the neglect of smaller sectors, in favour of a dominant sector like the oil and gas industry. After all, if a 55.9% decline in something as prominent as sugar does not raise the warning flag, it’s unclear what will.

Reflect, for a moment, on what the national reaction would be like if Guyana didn’t have oil, but also faced the difficulties that we have seen all year in the sugar industry. Do you really think this catastrophe would have been allowed to fester to the point that we now face a 55.9% decline relative to the same time last year? Of course not! We have seen lots of aggressive talk, but have we avoided a monumental collapse? No.

Second, the government’s performance in maintaining a diversified economy must, at the very minimum, be measured relative to its own goals. How can a government predict a 25.1% increase in rice production for the year, and end up with a 22.4% decline at the half year mark? Either the government’s original predictions reflect extreme incompetence or the rice sector has been neglected. This, again, points to a focus on oil at the expense of supporting the other industries.

Third, some would have you believe that this is all due to last year’s floods, and December’s rains, but when the government prepared its estimates for the year was it not aware that there had been floods? After all, was the budget not presented in late January? Of course, it is possible that rice will undergo an unbelievable turn around, but with a 47.5% gap between expectations and reality at the half-year mark no reasonable person would be optimistic.

Similarly, the government predicted that fishing would grow by 5.8% but it has declined by 19% so far this year. What has been the result of the government’s efforts to obtain fishing licenses from Suriname, other than national humiliation? Further, have fishermen been able to return to their accustomed fishing grounds, or are they still displaced by oil exploration? If that is not Dutch disease then nothing is. At this point, I hope my learned colleagues will not attempt to reply that Dutch disease can only be narrowly defined as the result of a change in exchange rates. Neither of their responses mentions exchange rates, so I think that ship has sailed.

Now I want to loop in the manufacturing and gold sectors to demonstrate a broader point. The declines we are seeing in Guyana’s non-oil sectors are not unique and isolated but spread across many prominent sectors. Are we to look at the simultaneous decline of such important sectors as gold, manufacturing, fishing, sugar and rice, which have formed the backbone of Guyana’s economy in varying measure over the years, and say to ourselves that all is well? If this is all due to bad luck, as it seems some would have readers believe, then I would humbly suggest that perhaps a different government might bring better luck.

Finally, I will point toward an argument I find fascinating. GAWU has stated that the only way to turn GUYSUCO around is to increase sugar workers’ wages. Obviously if wages in the oil and gas sector exceed those in sugar workers will be tempted to leave. A classic example of Dutch Disease is the migration of workers from the agricultural sector to other sectors of the economy with higher wages. It is therefore interesting that some in the society seem anxious about the symptoms, even though the diagnosis escapes them. Does this mean higher wages are necessary for GUYSUCO to succeed, or is it greater productivity? I would argue the latter, and in fact, I believe that increasing each industry’s productivity will allay the fears many Guyanese have that the only thing growing in Guyana will be the number of FPSOs.

Yours,

Elson Low,

Economic and Youth Advisor to the Leader of the Opposition