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Guyana means business.

MOST DEVELOPING COUNTRIES have to contend with exploding populations and shrinking resources. Guyana has the opposite problem: a huge land area and not enough people to exploit its abundant natural wealth. Guyana's population is around 600,000--fewer people than live in Washington, D.C.--in a country the size of Great Britain. Some 90 percent of its people live along the narrow coastal strip that hugs the Atlantic Ocean, leaving most of this South American nation's resource-rich interior virtually uninhabited.

In January 1991, Guyana was formally admitted into the Organization of American States (OAS). Theyear before, it won a hard-fought entrance into the U.S. Caribbean Basin Initiative--which removes customs duties on most Guyanese exports into the United States. As a one-time British colony, Guyana is already assured duty-free entry into Western Europe through the European Community's Lome Convention, a trade-and-aid program for 69 former colonies in Africa, the Caribbean and the Pacific. Observers say that for the first time since the late 1970s, this little-known country has a real chance ot exploit its resources and turn around an economy that has been sliding for years.

"Guayana is gaining more and more credibility among the international community. It has respected its debts and is open for investment," said Jean Demers, a mining analyst for Cambior Incorporated of Montreal, Canada. Cambior, along with another Canadian firm, is seeking US$150 million to mine what may be one of the largest gold deposits in South America. Jeffrey Prosser, chairman of Atlantic Tele-Network, which in January officially acquired 80 percent of Guyana's state-owned telephone company agrees: "Five to seven years from now, Guyana will be the most profitable subsidiary we have. We believe the potential is grea." Sentiments such as these are repeated among executives from the United States to the United Kingdom. The Salt Lake City, Utah-based Leucadai Corporation plans to buy controlling interest in the Guyanese electricity network. Similarly, the sugar giant Booker-Tate of Great Britain has won a government contract to manage Guyana's troubled sugar industry.

Nonetheless, the 83,000-square-mile Cooperative Republic of Guyana--wedged between Venezuela, Surnimae and Brazil on South America's northern coast--has more than its share of economic woes. Because of rampant inflation, Guyana's per-capita income is now believed to be under US$350, making it one of the poorest nations in the Western Hemisphere. Before winning its independence from Great Britain in 1966, however, the former British Guiana was a relatively prosperous colony, its wealth derived from sugar, bauxite and rice exports. But low prices for those key exports, combined with years of financial mismanagement, have hurt the country's economy and sparked massive emigration to the United States, Canada and England. In fact, for the last few years, Guyana has been importing sugar and rice for domestic consumption, though rum exports have increased and are finally making a mark on the worldwide liquor market (see sidebar).

In 1990, according to Finance Minister Carl Greenindge, Guyana's gross domestic product declined by 3.9 percent, compared with a decline of 5.1 percent in 1989--following a poorer-than-expected performance by the nation's bauxite and sugar industries. Bauxite production came in 15 percent below target in 1990 and sugar production came to 130,000 metric tons, 30,000 tons below the target set by the industry and 34,000 tons less than actual production in 1989.

Government experts say a big part of the problem is unreliable electricity. Residents of Georgetown, the country's capital, are without power for an average of 10 hours a day. But a recent announcement by Leucadia that it plans to acquire 60 per cent of the state-owned Guyana Electricity Corporation (GEC) could improve this situation. "The government is interested in getting away from thermal power and into hydropower," said Haslyn Parris, Guyana's Deputy Minister for Planning. "In the case of Guyana Electricity Corporation, the government will cooperate closely with Leucadia to try to resolve in the near term the mess we have now." Parris is overseeing not only the privatization of GEC but also the sale of Guyana Telecommunications Corporation to Atlantic Tele-Network of the U.S. Virgin Islands, as well as the eventual spinoff of Guyana Airways to Ireland's Aer Lungus and other interested parties.

Leucadia already has a stake in the national power systems of Barbados and Bolivia. David Mitchell, a bord member of the Bolivian Power Company and Leucadia's chief Guyana consultant, said the company's long-tern plan is to install a US$200 million thermal plant outside of Georgetown to increase power generating capacity. According to Parris, Guyana now has 70 megawatts of total installed capacity, but can only utilize between 27 and 30 megawatts a day. The country currently spends US$6 million a month on imported oil from Venezuela, about half that amount going to fuel the country's bauxite industry. President Desmond Hoyte recently said one of Guyana's most important priorities was "to improve the reliability of the electricity supply."

Likewise, improving the country's telephone system was behind the recent purchase of Guyana Telecommunications Corporation by a company based in the U.S. Virgin Islands, Atlantic Tele-Network. ATN agreed to pay US$16.5 million and spend US$80 million on improvements over the next five years as part of the deal. ATN's biggest challenge will be doubling the number of lines in Guyana from 20,000 to more than 40,000 by 1993. "We are not satisfied with either the number of phones, or the time it takes to get a phone, or the quality of the service," said Parris. "In today's world, you have to have a partner that has access to technology. Atlantic Tele-Network is a relatively small player but has a certain aggressiveness that we like."

In addition to utilities, three other areas of Guyana's economy are receiving increasing support from the private sector: agriculture, tourism and oil exploration. Earlier this year, state-owned Guyana Rice Milling and Marketing Authority sold its Ruimzight and Wakenaam rice mills to Curacao Investment Trust Company Group, following a similar purchase of another rice mill by the East Caribbean Group of Companies in St. Vincent. In western Guyana, the government-owned Mainstay Holiday Resort has been sold to King David Enterprises of Canada, in hopes of spurring an "ecotourism" boom. Few tourists visit Guyana, though Kaiteur Falls, near the country's boarder with Brazil, is one of the largest waterfalls in the world, and possibilities for fishing and hunting are excellent. Private investment could transform Guyana's offshore landscape as well. On January 9, Mobil Corporation signed a US$2 million agreement with the Guyanese government for a 52,000-square-mile offshore oil concession, joining the Texas-based Hunt Brothers, which has been searching for petroleum off the Guyanese coast for the past two years.

Deep in the interior of Guyana, gold and timber are the main draw. Last year, Guyana's gold production came to 39,000 ounces, nearly breaking the all-time record of 39,507 ounces set 51 years earlier. The Guyana Gold Board says production would have been even higher were it not for December's heavy rainfall in important mining areas. The most exciting gold project now underway in Guyana is the Omai deposit in Essequibo County, western Guyana where Canada's Cambior Incorporated and Golden Star Resources plan to begin extraction of proven gold reserves estimated at 2.2 million ounces. Production on the 16-mile concession could start as early as July. According to the New Jersey-based newsletter Caribbean Update, the consortium plans to mine 250,000 ounces of gold annually during the first three years, tapering off the 200,000 ounces per year after that. Five percent of the gold is to go to the Guyanese. Guyana will also benefit from an income tax paid by the Canadians on the remaining portion at the rate of 33 percent for the first seven years and 45 percent after that.

Meanwhile, Reynolds Metal of Richmond, Virginia has invested US$25 million in a joint-venture bauxite mining operation with the Guyanese government--17 years after Reynolds' operations were nationalized by the former government of Linden Forbes Burnham. The new mines are at Aroaima in the Berbice River area; ore reserves there are estimated to be as much as 35 million metric tons.

The government of Guyana hopes that all this foreign investment will help curb the runaway inflation that has sapped consumer spending power by 30 to 40 percent a year. It now takes 109 Guyanese dollars to buy one U.S. dollar--the average daily wage--compared to an exchange rate of 20 Guyanese dollars to one U.S. dollar four years ago. The coming democratic presidential elections--which former U.S. president Jimmy Carter along with hundreds of international observers have been invited to monitor--has sparked even greater interest for investment in Guyana.

"A lot of people think that given these factors, there's a setting in which economic growth could resume," said one observer. "More than $600 million will have come into the country from international organizations between 1990 and 1992."

With free elections in sight, the potential for economic recovery is promising. And it is hoped that the investment boom will also encourage the return of a large number of Guyanese emigrants to their homeland to share in a prosperous future.

Larry Luxner, a frequent contributor to Americas, has recently visited Guyana, Suriname and French Guiana. He lives in San Juan, Puerto Rico.
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Title Annotation:includes related on Guyana's rum industry; Guyana's economic conditions
Author:Luxner, Larry
Publication:Americas (English Edition)
Date:Jan 1, 1991
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