Part 7
We explored the idea of the resource curse in six previous columns before analysing the cost aspects of the oil and gas contract. We took a break from this topic in the previous three successive essays. Last week’s essay looked at how recurring costs could have an interesting effect on the long-term average cost oil when several units of cost are pushed into the future. We still have to tackle many big topics such as the capital markets in Guyana and the recent GuySuCo ‘bond’ issue, heightened government borrowing against oil revenues (a stunning US$900 million for two-year disbursement), recent trends in company profits and other financials, recent developments in the foreign exchange market, the Consolidated Fund (again) and numerous others. However, it’s probably helpful to complete the discussion on the natural resource curse instead of leaving the series open ended.
I argued that in order to make a prediction on whether Guyana could escape the curse, we have to consider the conditions prevailing in the country today and the will to overcome them. These are the initial conditions. Two conditions were identified: the limited capacity to do research in Guyana and the present production structure. With some shrewd leadership, the former constraint should not be difficult to overcome given a large Guyanese diaspora. However, in the past twenty years experts from the diaspora, with the exception of a very few, appear politically connected to one of the main parties. With the entrenched two-party political system, this approach will continue to exclude people who can contribute but are unwilling to elevate party interests above national ones.
On the other hand, it will be very difficult to circumvent the present structure of production. I think Guyanese leaders regardless of political persuasion understand the necessity to change the makeup of what the country produces and exports, but it will not be easy. Trinidad and Tobago had its first drilling in 1857 and that was the situation until in 1910 the British established Trinidad Oilfields Ltd. Professor Jay Mandle argued convincingly that with over 100 years of experience, Trinidad and Tobago (TT) did not fundamentally change the structure of exports, although there was expansion of non-tradable production.