Prosperity or resource curse ?: Guyana hopes for great oil wealth

Little Guyana in northeastern America is a poor country. But wealth is palpable: huge oil deposits have been discovered off the country's coast. Guyana dreams of becoming the richest country in the world. The black gold may not only be a blessing, but also a curse.

Guyana is a tiny country, less than 800,000 people live in the former British colony in the northeastern Atlantic tip of South America – framed by Venezuela, Brazil and Suriname. Britain had incorporated the colony for the cultivation of sugar cane. Since independence a good 50 years ago, the country has lived mainly from agriculture and mining – bauxite, the raw material for the production of aluminum is extracted in Guyana.

Guyana sees the great opportunity for wealth outside, on the high seas. "In 2015 there was a very large oil discovery about 200 kilometers off the coast of Guiana. In addition, very high quality oil", explains Latin America expert Federico Foders in the ntv podcast "Again what was learned".

Ships bring materials to an oil platform off Guyana.

(Photo: REUTERS)

In Guyana, they expect to be able to extract 750,000 barrels of oil a day, one barrel per capita every day. "If Guyana does that, it could produce $ 30-35 billion worth of oil by 2030," said Federico Foders. An astronomical sum for the small country, currently the gross domestic product is just under four billion US dollars.

"Dutch disease"

The way out of poverty lies dormant under the Atlantic, that's how people think in Guyana. But a look at other oil nations shows that this includes more than large deposits. In West African Equatorial Guinea, for example, black gold only enriched the ruling family. And also in Nigeria, the eighth largest oil exporter in the world, the population does not benefit. What is particularly worrying for Guyana is the view of neighboring Venezuela, which produces more than 60 million crude oils a year and has the world's largest oil reserves: the socialist country is nonetheless bitterly poor, inflation gigantic and political unrest have been the order of the day for years .

This phenomenon is known as a resource curse or "Dutch disease," says Federico Foders. "There was a huge find of natural gas in the Netherlands in the 1960s, but it became a curse for the country because the entire economy pounced on it. This neglected other sectors of the economy. The Dutch disease also has many countries in Africa and South America affected. "

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There is another problem in Guyana. Apparently, the deal the country made with the US oil company Exxon Mobil, which is supposed to develop the deposits, is a pretty bad one. The contract is said to provide for only 52 percent of Guyana’s oil revenues, with the rest kept by the Exxon consortium. "It would normally be between 65 and 80 percent," says Foders.

Corruption is the order of the day

It is not clear whether the oil companies actually ripped off the leadership of Guyana because details of the agreement have never been published. Transparency is a foreign word in the country. That is why corruption, problem number three, is flourishing: "It is an ongoing issue throughout Latin America, Guyana is no exception," says Forders. Hopes rest in the new President Mohamed Irfaan Ali, who won the election only recently after months of counting votes. Ali wants to ensure more transparency, better manage government revenues and, in the long run, improve the standard of living of the population – through state oil pensions such as those in Arab oil nations.

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(Photo: imago / robertharding)

So far, however, the promise has remained empty, because Guyana is currently sinking into political chaos, problem number four. Ali won the election, but the current President is still his predecessor David Granger. Because he refuses to acknowledge his defeat and leave the oil billions to his successor. "Both major parties and civil society are fighting for the expected wealth," says Forders. "Unfortunately, I don't have a good forecast for Guyana because we also have to assume that oil consumption in the world will decrease in the next 20 years." In Guyana, the curse of resources may have started before the first barrel of oil was sold.

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. (tagsToTranslate) Economy (t) Guyana (t) Opec (t) Commodity Oil (t) Commodity Trading (t) Commodity Prices (t) Oil Production (t) Oil Companies (t) Oil Price (t) South America