Dear Editor,
Businesses and citizens alike should be prepared for a significant downturn in our economy over the next 12 months which has already started. The new government in its quest to embarrass the previous administration has created a lack of confidence in our economy that has seen rippling effects across the nation. There are now indications of a stimulus package which will amount to more than bailouts in many sectors in order to portray themselves in a positive light and give the impression that they have really understood the position.
The handling of the Venezuela claim issue has also dug a hole in both the local and foreign investor confidence level. In addition, the failure of the government not to fulfil its 100-day economic promises by blaming an empty treasury is unrealistic. The 2014 end of year numbers had no prediction of a major deficit in the 2015 outlook therefore their excuses point to borderline incompetence. The now pro-government media seem to have lost all of the expert analysts, or we are in some form of self-imposed media ‘quiet zone’?
Had the new Finance Minister been following global trends, he would have seen that commodities prices have been on a downward spiral. Oil prices dipped below $50 a barrel this week, while gold slid 2.2% to the lowest level in five years. Investors around the world have pulled over $1 billion from the commodities sector during the second quarter as noted by the EPFR Global. Instead of having his entire staff and paid consultants busy digging up dirt on the PPP/C, he should be paying attention to the fact that the US interest rate is about to be increased, and with the decline in commodities prices this will contribute to the decline of our dollar. While President Granger runs around the world complaining about Venezuela, Guyana’s economy is left unattended by what seems to be staff focusing on scoring political points.
There are indications that our exchange rates against the US dollars will go up soon and one of the reasons is that our local investors are buying out the currency at an alarming rate, causing a ripple effect across our economy. In addition, we have seen our exports revenues tumble with hundreds of containers of rice sitting on our wharfs. Many of our new large gold mining investors will see prices falling below the cost of production causing them to close operations or face potential losses. Sugar prices fell this week by 4.4% to the lowest prices since January 2009, and our next door neighbour, Brazil, has seen their currency drop 17% against the US dollar this year.
The following are the steps to a real-time stimulus:
- There is need for the administration, as their first step, to look at the value added production industries the PPP/C had initiated in the commodities sector ‒ sugar to ethanol and energy, rice to cereal and other products. Major incentives should be proposed for these industries as outlined by the previous administration.
- Continue the trend of reducing corporate taxes in order to effectively put some stimulus in our declining private sector
- One of the major pillars of the PPP/C plan was transport economics. Brazil needs our waterways, and especially with the decline in sugar prices, Brazil needs to lower their cost of transport as the largest sugar producer in the world. Paving the road to Lethem and construction of the deep water harbour need to be immediate Version 2.0 implementation. Transport economics can see a rapid new industry in our nation and infuse multiple new developments across the region. A new housing strategy can be tied to this programme.
- There can be a compromise with both Suriname and Venezuela in a tri-country partnership in developing our oil industry. Venezuela is a leading oil producer and I am sure an approach based on modern day negotiations can lead to better relationships.
Some of the current initiatives being pursued were all part of the PPP/C plan to continue the stable growth of our economy. Our nation had benefited from this approach over the last decade. It therefore begs the question as to why we are now in this situation in the middle of 2015. It is obvious that, with the change of administration in mid-year and the lack of an economic plan by the APNU administration, we have, for the most part, ended up with this self-inflicted economic slump. The private sector has acknowledged the decline and must play their part in looking at a more robust incentive package to ensure our previous successes continue.
Yours faithfully,
Peter R Ramsaroop
