By Jerry Haar and Cristina Caus
A cursory view of the political, economic and social environment in South America does not instill optimism. Economic and political challenges across the region erode the confidence of both local and foreign investors, reducing the likelihood of a strong post-pandemic recovery in the region.
Only one nation on the continent offers economic prospects – extremely bright ones, in fact – that are destined to catapult the nation towards sustainable prosperity – Guyana. According to the International Monetary Fund (IMF), Guyana is expected to reach 37.2 percent in 2023 and 45.3 percent in 2024.
The principal driver of economic growth in Guyana is oil. Guyana outranks Saudi Arabia, Norway, Qatar as country with world’s second-highest oil reserves per capita. A consortium led by ExxonMobil discovered the first major oil deposits in May 2015, more than 100 miles off Guyana. Hess, China’s CNOCC and other multinational oil companies and suppliers will continue to expand their investment and operations in Guyana and fortify linkages between upstream and downstream activities.
While almost all the attention in the media has been focused on investment in the oil sector, it is important to emphasize that trade, not just investment, is of vital importance to the Guyanese economy, particularly in light of the fact that it encompasses a diversity of sectors and industries and is more labour intensive than resource exploration and extraction.
Guyana’s value of imports of goods traded totalled $975 million at the end of the first quarter of 2023, representing a 31.3 percent increase when compared to the same period in 2022. The leading imports during this period were fuel and lubricants, contractors’ machinery, and special-purpose machinery. The top three trading partners of imports for the first quarter 2023 were Trinidad and Tobago, the US and China. Guyana’s main export partners are the US, Singapore, and the United Kingdom; and in terms of commodity exports these comprise sugar, gold, bauxite, aluminum, rice, shrimp and timber.
A member of CARICOM, Guyana enjoys preferential market access to the US under the Caribbean Basin Trade Partnership Act (CBTPA) and has an Economic Partnership Agreement with the European Union (EU).
For a resource-based economy like Guyana’s the competitive challenge in the 21st century is diversification. Light manufacturing, with exports destined for Caribbean Basin trading partners, and services, especially with the increasing demand for nearshoring, along with non-traditional agriculture and agribusiness embody the diversified mix that can provide value-added for Guyana.
Be that as it may, the pre-requisite for competitiveness is a well-developed functioning infrastructure – physical, financial, technological and human – that allows a nation to capitalize on its existing assets while developing and sustaining new ones. For example, minister of health Dr Frank Anthony has revealed that there has been much interest from local and international private sector bodies to develop a biomedical hub to expand the manufacturing of pharmaceuticals. Without turning out a sufficient number of high-quality biomedical and related professionals and technicians (who remain in Guyana rather than emigrate), such a goal is not feasible.
Within the realm of trade, Guyana confronts both external and internal barriers that impede its ability to compete effectively. In terms of external barriers, while some external barriers remain to Guyana’s exports, tariffs and quotas are far less restrictive today than in past generations. The remaining barriers are mostly non-tariff measures (NTMs) and are often imposed for legitimate reasons of health and safety. Increasingly there is a newer class of restrictions that seeks to serve larger environmental or social goals. These NTMs are most evident when it comes to trade in goods but can also be seen in the services sector. Just as exports of goods might be constrained by (for example) health and safety standards, exports of services can be constrained by partners’ restrictions on visas or refusal to recognize the qualifications of Guyanese professionals.
Guyana faces more tariff barriers in South-South than in North-South trade. The data show that other developing countries generally extend duty-free or low-duty treatment to the raw materials coming out of Guyana’s mines, wells, and forests, but they often impose high tariffs on fish, raw and processed agricultural products, and alcohol. Apart from the United Arab Emirates, where most tariffs are low, the developing countries very often protect products such as rice and sugar with tariffs as high as 50 percent (Ukraine), 65 percent (China), or even 90 percent (Panama).
The picture is quite different for the major developed-country markets, of which only Japan still erects anything like a tariff wall on products of interest to Guyana. Virtually all of Guyana’s exports to Canada and the European Union enter duty-free, whether on a most favoured nation (MFN) basis, via the Canadian CARIBCAN program.
In essence, however, the magnitude of cross-border movement of goods and services is determined more by the competitiveness of national firms and the environment in which they operate at home than by the trade barriers that foreign governments choose to impose, waive, or remove.
As for internal barriers, a range of capacity limitations, from inadequate infrastructure to deficits in human capital, can adversely affect the country’s ability to produce and export competitive goods or services. The same may be said for taxes or regulations that discourage entrepreneurship, or policies that tolerate inefficiency and corruption. Similar points may be made with respect to regulatory matters associated with the financial sector. On the one hand, it can be costly to come into compliance with measures taken by some of Guyana’s partners with respect to Anti-Money-Laundering and Combating-the-Financing-of-Terrorism initiatives. On the other hand, failure to comply with such measures can leave an economy vulnerable to abuse by elements that are criminal or worse.
Certainly, the greatest internal barrier to trade for Guyana is its unenviable ranking in the World Bank’s Doing Business reports. When it comes to the “trading across borders” component of the report, Guyana beat only one of the 19 countries used as comparators in this strategy. The amount of time and money required to import and to export is excessive compared to most other countries.
While the future for Guyana is bright indeed, the country would be in an even stronger position if it increased diversification into manufacturing and services, introduced more Guyanese value-added into the production chain, streamlined bureaucracy, eliminated many of its VAT measures, and adhered to pro-market principles in guiding its policy agenda.
The 2021 UNCTAD report Guyana: A National Trade Strategy provides a path forward. Travelling down this route will surely produce dividends for the country, the private sector (foreign and domestic) and its citizens at large.
