Economic Doldrums Reach Guyana
GEORGETOWN, Guyana (AP) _ Every morning, businessmen, travelers heading abroad and even an occasional diplomat wait outside Georgetown’s banks to buy U.S. dollars. Many are turned away.
The acute dollar shortage is just one symptom of the recession now facing Guyana, just recently hailed by the World Bank for its successful tightfisted fiscal policy.
Race riots, falling gold prices and a cumbersome bureaucracy have frustrated President Janet Jagan’s goals of marketing Guyana’s vast mineral and timber resources and rain forest tourist attractions.
Guyana’s economy shrank 2.4 percent between January and July after growing by an average 7 percent annually through the 1990s, causing nervous investors to send their earnings abroad.
``We are not sure how much. ... No one is sure,″ said Allan Parris, managing director of Citizens Bank Guyana Ltd.
But everyone blames the capital flight for causing an acute dollar shortage.
``It is going to drive people crazy unless something is done,″ said Hardat Singh, who needs dollars to buy foreign-made articles for his import business, which sells everything from electrical wire to balloons.
Diplomats with the Guyana-based Caribbean Community often have to place orders three weeks in advance to get foreign currencies from local banks. The alternative is the black market, where foreign cash is more expensive.
All this is vastly different from where Guyana seemed to be heading two years ago.
In 1996 World Bank President James Wolfenson visited Guyana and praised the government for abandoning decades-old dabbling in socialism, reducing foreign debt and privatizing state-run businesses.
Last year, Jagan’s People’s Progressive Party government claimed to have created more than 30,000 jobs, cut unemployment to below 12 percent and reduced the foreign debt from $2.1 billion to $1.5 billion.
The slide began in January, when Guyanese of African descent rioted to support opposition leader Desmond Hoyte’s charges of fraud in December presidential elections. Jagan is supported by Indo-Guyanese, a majority in the country of 750,000.
Weeks of race riots prompted Canada’s Saskatchewan Power to back out of a $22.5 million deal to buy 50 percent of the state Guyana Electricity Corp. It also hurt efforts to promote tourism, which earned a paltry $100,000 last year.
Guyana’s economy has taken other hits. World prices for gold _ Guyana’s second-biggest foreign exchange earner after sugar at an estimated $200 million a year _ have declined from $400 to $290 per ounce.
Omai Gold Mines, the country’s biggest, says most of its income is coming from futures contracts negotiated before the latest decline.
``We can’t do that all the time,″ said Omai spokeswoman Seeta Mohamed. ``It will eventually catch up with us in the long run.″
Southeast Asia’s financial crisis, meanwhile, cut demand for Guyanese rain forest timber, much of it harvested by Asian firms. With industry sales expected to drop 35 percent this year, local producer A. Mazaharally and Sons says it doesn’t have an overseas order for the first time in memory.
As nervous investors sent earnings abroad, the Guyanese dollar fell from 140 per U.S. dollar in December to 164. The Central Bank intervened last month, spending $15 million from its $300 million in reserves to support the local dollar, which has stabilized at about 150 but is selling at 159 on the black market.
Jagan recently blamed the downturn on continuing obstacles to foreign investment, including customs delays and the bureaucratic obstacles faced by foreigners wanting to lease land. Go Invest, a quasi-governmental agency, will analyze those issues, said Finance Minister Bharrat Jagdeo.
More is needed, warned Aubrey Norton, general secretary of Hoyte’s opposition People’s National Congress.
``If we don’t have new investment, it means that we don’t have new money in the system. The absence of a proper investment policy has affected the country,″ Norton said.