Lured by oil: foreign investors pumped over US$4B into Guyana in 2022

Jul 11, 2023 News

---

…ECLAC says figure represents new regional record

Kaieteur News – A report by the United Nations Economic Commission for Latin America and the Caribbean (ECLAC) has revealed that Guyana, once again, recorded the region’s highest Foreign Direct Investment (FDI) inflows, which totalled US$4.389 billion in 2022.

The report titled: ‘Foreign Direct Investment in Latin America and the Caribbean, 2023’, states that this result is similar to the record inflows in 2021 (only a -1.5% change). This performance, ECLAC said, is due once again, to foreign investors’ interest in the country’s hydrocarbon sector. Hence, the natural resources sector accounted for 99% of FDI inflows into the country in 2022, although inflows into the sector were 2% lower than in 2021.

The report further stated that project announcements registered in 2022 by an Exxonmobil-led consortium indicate that the country’s hydrocarbon sector will continue to receive large investments in the coming years. In this connection, the United States-based oil company ExxonMobil had announced a US$ 10 billion investment project in the country. The report also noted that Guyana has been expanding not only its oil reserves each year, but also the oil produced and the revenues derived from the resources. It said, “The share of the oil, coal and natural gas sector in Guyana’s FDI flows averaged 71% between 2016 and 2021, when the first investments linked to discoveries in the Stabroek block were made.”

ECLAC’s report further noted that projections indicate that Guyana will consolidate its position as the world’s fourth largest offshore oil producer by 2035, ahead of countries such as the United States, Mexico and Norway. It said the dynamic performance of the sector is supported by the volume of oil development project announcements in the country.

Expounding in this regard, ECLAC was keen to note that while projects totalling US$ 8 million were announced in Guyana in 2020 (the first investments in the oil sector since 2013), a total of US$ 33 million was announced in 2021, and in 2022 the figure surged to US$ 10.033 billion. “All of these investments were made in the initial (upstream) phase of the value chain. In a hydrocarbon market that is increasingly competitive, in terms of both price and carbon intensity, Guyana’s oil is highly competitive,” the report said while noting that most of the resources extracted in the country are of the light variety, with low exploration costs and an emissions intensity below the world average.

ECLAC also noted that royalties and tax revenues from exploration of the resource are projected to total US$13 billion by 2029. “These figures highlight the economic importance of oil production for Guyana, and the potential for the country’s future productive development represented by the use of these resources,” the report said.

OTHER NATIONS

Overall, ECLAC noted that in 2022, global foreign direct investment (FDI) inflows fell by 12% compared to 2021 and totalled US$ 1.29 trillion, a decline that was due largely to significant divestments in Luxembourg. In Latin America and the Caribbean, however, there was a record rebound of foreign direct investment. In 2022, FDI inflows to the region grew by 55.2% compared to 2021, reaching a record high of US$ 224.579 billion. Since 2013, annual FDI inflows to the region have remained below US$ 200 billion, meaning that the recovery in 2022 marks an important investment milestone for the preceding decade. This recovery was seen in the main recipient economies and was characterized by a marked interest in services, renewed interest in hydrocarbons and continued interest in manufactures in the countries that have built the largest capacity. With this increase, FDI inflows to the region also rose to 4.0% of GDP.

With respect to Antigua and Barbuda, ECLAC said it saw FDI totalling US$ 196 million in 2022, lower than the previous year (-20%), but in line with the levels received in the years prior to the pandemic. Investment inflows into Grenada continued to recover following the decline in 2020, and totalled US$ 160 million, up by 14%compared to 2021. After recovering sharply in 2021, FDI in Saint Vincent and the Grenadines totalled US$ 86 million in 2022, down 46% from the previous year.

Investments in Saint Lucia also decreased (by 22%), totalling US$ 67 million in 2022. FDI inflows to Dominica amounted to US$ 28 million in 2022, down 16% from the previous year. In 2022, Saint Kitts and Nevis was unable to sustain the recovery in investment in the aftermath of the pandemic and received US$ 16 million in FDI, down 41% from 2021. FDI inflows to Suriname remained negative in 2022 (- US$ 5 million). However, the variation was positive compared to 2021 (96%), when this figure had been higher.

Lastly, Trinidad and Tobago recorded negative FDI inflows (-US$ 914 million) in 2022. An analysis of the components of FDI shows that the most significant disinvestments were due to the repayment of intercompany loans. The origins of these disinvestments were mostly from the United Kingdom (negative inflows of US$ 2.232 billion), as well as from Canada, Barbados, the Kingdom of the Netherlands and Saint Lucia. Meanwhile, investments from the United States amounted to US$ 1.337 billion.

---

• Foreign Direct Investment, Guyana, investors, Latin America, United Nations Economic Commission

---