Breaking News: Ice cream production was down in the first quarter of 2023 as compared to the same period in 2022.
What might be behind this slump? A surge in imports of Haagen Daz Dulce de Leche? Lactose intolerance? Sadly the Bank of Guyana does not go into such details in its 2023 first quarter report which is as quaint and as outdated as it is unhelpful in our understanding of how our economy operates. Putty production for example was also down according to their often malleable statistics.
More seriously the report states the Consumer Price Index declined by 0.6% for the first quarter. Are all the people who complain about price increases on food to this newspaper each week in our cost of living feature deluded? But the bank with a straight face states: “The inflation rate stood at -0.6 percent at end-March 2023, mainly due to declines in prices in categories of food, medical care & health services, clothing and transport & communication.”
Even the President has as recently as last month said, “I don’t need to remind you of all the measures we put in place to cushion the effect of the cost of living.”
Those figures which can be safely trusted are those for oil production and that subsector’s complete domination of this country’s economy within the space of just four years.
In Q1 2023, oil exports were US$2.67B or 90% of the country’s total exports of US$2.98B. We can assume that by the time the Third FPSO Prosperity comes on line in the fourth quarter with 250k more barrels per day, oil will make up well over 95% of exports. It simply shows the staggering size of the consortium’s operations here and how it dwarfs all our existing sectors while still being haphazardly regulated by Vice President Jagdeo and his handful of helpers. Petroleum Commission be damned!
At the same time the once mighty sugar industry brought in US$200,000 in the first quarter having achieved a modest increase in production to 10,000 MT. It is a far cry from annual production figures of over 200,000 MT even as late as ten years ago. So one must wonder how long the government can keep up this charade of a rebounding industry even as the President claimed recently production would reach 150K MT by 2027. To date no private investor has been lured to take over any of the estates and the feeble management of GuySuCo continues at an annual cost to the taxpayer this year of $4B.
Rice production improved for the first crop thanks to better weather but as reported by this newspaper and the President himself, labour costs are hurting Guyana’s competitiveness – a direct result of demand for similar workers from the oil and construction sectors. Loans to the agriculture sector contracted by 9.3% in the first quarter. The decline of these two primary crops would continue what has been a decades-long hollowing out of rural economies and communities which in turn spurs internal and external migration among young people.
The government tacitly acknowledges this both by propping up the sugar industry and with its part-time jobs programme that now employs some 6000 people in Region Six as compared to far fewer in the more highly populated Region Four. VP Jagdeo also announced a $200,000 cash grant to 700 small busi-ness owners. It is one way to stimulate that region’s economy and keep people “down on the farm” if only temporarily. What these 6000 workers do, no one really knows although there have been sightings of them picking up garbage on the roadsides. So much for the World Bank’s “high income” economy.
Also combatting the rural economic malaise through alternative agricultural products can only go so far although there are plenty of opportunities in cash crops to feed the ravenous oil sector.
As for gold, the Bank of Guyana numbers do not in any way reflect actual production in what is a com-pletely unregulated and untaxed industry. No one has a clue. Declarations by local and licensed dealers were down by 23.9%. It was only thanks to an increase of 65.4% from Aurora Gold Mine Inc. (AGM), that the overall decline was only 5.3%.
This begs two questions: what is the point of the Minister of Finance’s budget projections – he projected growth of 12.7% in 2023; and why is it that the mining sector gets concessions when it consis-tently fails to return royalties to the treasury?
Among the generous measures announced in September 2020 were tax concessions for recapitali-zation; the reversal of Value Added Tax (VAT) on heavy-duty equipment/machines; and removal of requirements for licences on equipment and the transportation of fuel. In 2022 there were more gifts valued at $1.9B including the removal of the 10% tributors tax, the reduction of the final tax from 3.5% to 2.5% per cent and the removal of value added tax (VAT) on lubricating oils.
It would seem that the government cares little about collecting taxes from certain sectors now that the oil revenues are gushing in. That’s fine, but leaving the system in place only undermines institutions and encourages wider lawlessness including smuggling and worse – a practice much in the news these days. As the FBI estimated back in 2016, between 50 to 60% – or 15,000 oz per week – were being smuggled out of the country with some not originating in Guyana but rather Colombia and Venezuela.
The other issue of interest is the exchange rate that remains unchanged at $208.5 to the US dollar. Guyana effectively has a fixed rate and there has been some debate whether this is the optimal policy for the economy. A stronger currency might not hurt non-oil exports as one might suppose since so many of the inputs (rice for example) are imported. A stronger dollar would also reduce costs on consumer goods far more effectively than the tax break given to shippers last year. This might then in turn alleviate wage pressure. And perhaps there is something non-financial, something almost emotional, in the need for Guyana to have a strengthening currency so as to project the new status of our country, especially within the Caribbean after decades of humiliation. A stable exchange rate is not a virtue unto itself and is not the be all and end all of export competitiveness. Many highly developed economies survive quite well with large fluctuations.
What is clear from this report and the other data is that the shape of this economy is increasingly one all about oil and the related industries of construction, hospitality and real estate with growth in the former at 14.3%, while the mortgage and other services sectors increased by 4.1% and 3.9%.
Guyana’s economy is in good shape but it is a sharply different shape from only a few years ago.
As oil continues to grow it will be the sector around which all others will revolve. Spreading the benefits of that energy both geographically and demogra-phically must be a priority.
