Increasing home foreclosures, job losses, rising fuel and food costs and ongoing outsourcing is testing the financial limits of the US economy. As leading economist gauge the health of the nation, consumers in the US are beginning to react fearfully by thinking twice before they spend. Large banks continue to take a financial hit, many of them swallowed up by one time competitors due to their over-ambitious investments in risky mortgage loan programme. Experts both conservative and liberal all agree on one thing; a recession is looming for the United States. Considering the dependence of the US economy on consumer spending, a pessimistic consumer could well be the “final nail” which drives the US economy into recession. The classic “chicken and the egg” dilemma occurs. No jobs, no income, no spending, no jobs.
Why should Guyana care? Why should the common man in the street care about the health of the US economy? Well you should care because your family members in the United States pump more than $450M each year into the Guyanese economy through remittances. In addition, around 16% of Guyana’s exports accounting for more than $300M are bound for the United States each year. In other words, an ailing US economy upon which we depend for more than $750M annually in foreign exchange is a tremendous risk which Guyana can ill afford to ignore.
According to the US Department of Labor, Bureau of Labor Statistics, from January through November 2007, the US logged a total of 13,734 layoff events (seasonally adjusted), accounting for a total of 1,408,852 persons. These numbers were higher than January-November 2006 when the totals were 12,627 and 1,328,251, respectively.
Let’s follow a theoretical flow of remittance dollars in Guyana. Many Guyanese spend these dollars to meet their basic needs of food, education, healthcare and shelter. Many also spend on consumable items like entertainment, clothing, shoes, etc. The understanding is that the money which is spent is then used to pay salaries, local expenses, community contributions and capital investments due to expansion which serves to create more jobs and strengthen communities. The government also benefits from corporate taxes and employee payroll taxes. These dollars are also circulated within the Guyanese economy so everyone benefits from remittances. In addition, to the extent that people are paid, then they will spend which provides fuel to the engine of economic growth in a country. To the extent however that these dollars are invested abroad in the form of property purchases, bank holdings and other forms of overseas expenditure, Guyanese citizens really reap no rewards from spending their hard earned dollars with such companies.
The prevailing and commonsense position of course is for Guyanese to produce more, to add more value to products locally and for consumers to focus on buying locally in order to create more jobs and circulate more money within the Guyanese economy. Much of the production expansion necessary to insulate Guyana against US economic woes, rising food and fuel prices and high unemployment rates will only occur if we can attract massive investments from abroad and change our spending habits locally.
Every investor considers risk in making the determination to invest in a venture. Investors tend to attempt to minimize risk by familiarizing themselves with the business environment, studing risk factors and trends and focusing on understanding the culture and climate of the countries in which they wish to invest. In theory, the riskier the project, the higher the potential reward. Commonsense dicatates that very few smart people would entertain high risk projects for very little potential reward. Investors looking to Guyana must assess risks of crime, corruption, effects of massive poverty, high cost and questionable reliabilty of basic infrastructure like water, electricity and telecommunications and of course political risks of instability, bias or stalling in the approval process based on any real or perceived threats.
My own view however is that, more than ringing endorsements or words of discouragements, the real indicator of Guyana’s viability as an investment destination is whether investors; aware of the risks, still continue to invest in the Guyanese economy. As an investor myself, having gone though the same assessment, my early view is that the rewards are worth the risks. I encourage all Guyanese overseas to take a second look at Guyana, talk with investors…(not potential competitors), visit a few times, re-acquaint yourselves with Guyana, talk with the Go-Invest agency and logically review the risk reward proposition offered by Guyana. Ask yourself, why so many foreigners continue to brave the risks to invest in Guyana. Clearly, they see and upside to the Guyana economy. Guyana is a country which you need to understand and absorb for yourself before you make any major decisions. I encourage you to take the first step, Guyana needs you for inoculation against the potential cold pending from a USA sneeze.
