Guyana amid the world economy By Dr Prem Misir
Guyana Chronicle
February 26, 2002

GUYANESE critics seem to have a penchant for isolationist explanations for problems in the political economy. For instance, they attribute the current economic sluggishness totally to the Government’s policies and programs. These critics make minimum or no attempt to anchor their explanations of the economic conditions in the realm of the global economy.

The political commentaries seem to liken the Guyana economy to a vague experiment in a laboratory. Daily remarks present erroneous evaluations of and grandiose prescriptions for the economy. But these critics make a feeble attempt to show how their recommendations can be transformed into reality. It’s not sufficient only to say what should be done, but also to show how the ‘what’ is converted into practicality. Many critics present their evaluations and prescriptions without factoring the world economy’s impact on the Guyana economy. By so doing, their criticisms of the economy remain in the realm of experiment and vagueness. What is happening in the global economy?

The world economy
Some central bankers, at their annual meeting of the Federal Reserve Bank of Kansas City in Jackson Hole, Wyoming, USA, in 1998, acknowledged that the current global economic conditions are the worst they have witnessed so far.

According to the United Nations Conference on Trade and Development (UNCTAD), the world foreign direct investment in 2001 will be about US$760 billion, a reduction from US$1271 billion in 2000. Further HBSC Holdings estimates that global trade, after rising 12.6% in 2000, will show an increase of only 0.9% in 2001 and 2% in 2002. Morgan Stanley & Co reduced the growth rate forecasts for the United States, Europe and Latin America to a small range of 0.1% through 1.5%.

The East Asian economies (China, Hong Kong Special Administrative Region, Indonesia, Korea, Malaysia, the Philippines, Singapore, Taiwan, and Vietnam) are in dire straits. Japan and other parts of East Asia are experiencing deep recession. The Gross Domestic Product (GDP) at the third quarter of 2001 for Japan was 0.5% (OECD). The IDE, JETRO provide the following data on the East Asian economies. The growth rate of the economies of these East Asian countries were estimated at 3.7% in 2001, that is, about half the growth rate of 2000. Excepting China and Vietnam, the other eight East Asian economies were estimated to have a growth rate of 0.9% in 2001, representing an economic slowdown. Real-term exports of Malaysia, Taiwan and Singapore were likely to experience double-digit decreases in 2001. Again, excluding China and Vietnam, the aggregate growth rate for the other eight East Asian economies is estimated to be a mere 3.1% in 2002. East Asian economies, excepting China and Vietnam, are definitively facing an economic slowdown.

The Western developed world has not fared any better than the East Asian countries, as data from OECD, Eurostat, National Statistical Offices, and the economist suggest. Great Britain and Canada’s economies have become sluggish. The Gross Domestic Product at the third quarter of 2001 for Canada was -0.2%, and for Germany it was -0.1%. The GDP at 2001 for the USA was only 0.1%, for the UK, 0.3%, and France -0.1%. Between July and August 1998, falling share prices in the U.S. erased $4 trillion from the world’s financial wealth, and this decline continues to bug its financial system. Industrial production in the developed world was at an all-time low, too. Industrial production in 2001 for the UK was -2.4%, Germany -0.2%, Canada -3.0%, Japan -12.7%, and the USA -6.3%.

Latin America also is bedeviled with lingering economic woes. The entire Latin America had a total GDP of only 0.5% in 2001.

Argentina’s economic crisis may have serious consequences for the rest of South America and indeed, the world. The causes, according to Feldstein, are an overvalued fixed exchange rate (pegged at one peso per dollar since 1991) and an excessive foreign debt. The exchange rate fixed at a very high level, meant that Argentina exported very little and imported excessively. Argentina’s total GDP was -3.8% in 2001.

Venezuela, one of Guyana’s closest neighbors, saw its currency value decreased by 16%, with the dollar possibly stabilizing at 1,100 to 1,400 bolivars. Its GDP for 2001 was estimated at 2.8%. Brazil, another close neighbor to Guyana, had an estimated GDP of 1.7% in 2001. Suriname, one of the three countries bordering Guyana, had a GDP of -1.0% in 2000.

The Caribbean economies also are experiencing an economic slowdown. Their total GDP, sourced from ECLAC, is presented as follows:

Antigua and Barbuda…2.6% (2000);…Barbados…-1.5% (estimated for 2001);…Belize…-2.0% (estimated for 2001);…Dominica…0.7% (2000);…Grenada …2.5% (estimated for 2001);…Guyana…1.0 (estimated for 2001);…Jamaica…1.5% (estimated for 2001);…St. Kitts and Nevis…7.1% (2000);…St. Vincent and the Grenadines…2.0%…(2000);…St. Lucia…0.6% (2000)…Trinidad and Tobago…1.0% (estimated for 2001).

Guyana’s economy
The sluggish global economy, indeed, has impacted Guyana. However, critics still have not assimilated the implications of this slowdown in the world economy. Trade union leaders making irresponsible demands for wage hikes exemplify only one of many cases of non-assimilation. Recently in Singapore, with soaring economic problems manifested by possible considerable retrenchments in the financial sector and rising unemployment, the Deputy Prime Minister Lee Hsien Loong called for a sustained wage restraint. The current economic scene in Guyana requires some form of wage restraint in the interest nation building.

Despite a sluggish world economy, Guyana’s economy has shown a fair amount of progress in 2001, as will now be outlined by a sample of developmental areas:

· The Guyana Sugar Corporation showed an increase in the sale of molasses. The price on the world market was US$80 per tonne as compared to US$30-40 per tonne in 2000.

· Sterling Products had sales in excess of $1 billion. This company was ranked among the top twenty Caribbean corporations.

· Banks DIH opened a new $130 million drive-through restaurant outlet on Sheriff Street. This outlet also houses a $4 million parking facility.

· BEV Processors and Bounty Farms opened a new stockfeed plant that produces high protein feed from fish and chicken waste.

· Guyana and Brazil have a trade pact that now enables fresh fruit, bottled rum, plywood, bauxite, and corrugated cardboard from Guyana to be traded with Brazil duty free.

· Western Union, a money transfer company, has now expanded its operations to 35 locations.

· Enman Services Ltd., a Trinidad firm, has signed a Memorandum of Understanding with the Government of Guyana, to establish a hydropower package at Turtruba (Marshall Falls). The hydropower capacity is 350 MW.

· The annual exports of Guyana’s major commodities - sugar, rice, dried bauxite, molasses, and timber/plywood - have increased in volume. The data below is taken from the Bureau of Statistics.

Sugar: 277 tonnes (2000); 157 tonnes (1991)

Rice: 208 tonnes (2000); 50 tonnes (1991)

Dried Bauxite: 2,421 tonnes (2000); 975 tonnes (1991)

Molasses: 39,776 kg. (2000); 955 kg. (1991)

Timber/plywood: 184 cubic meters (2000); 16 cubic meters (1991)

· A number of other positives based on a comparison made between the first half of 2001 and the first half of 2000 characterize this economy currently. The first half of 2001 showed the following: a higher national income; increase in earnings by deposit holders; reduced inflation rate; higher output in forestry, distribution, engineering and construction, non-durable goods industry, gold, and value added products in the mining and quarrying sector.

· Guyana’s consumer price index (134.4) compared favorably with Jamaica (179.0) and Trinidad & Tobago (126.0) at March 2001.

· Major impending physical infrasructural developments as the Berbice River Bridge, the Takutu River Bridge, and an upgraded Georgetown/Lethem Road, offer stupendous commercial horizons for both domestic and foreign trade.

· The Guyana Sugar Corporation is expected shortly to activate the modernization of the sugar industry.

· Major expansions are underway at Prettipaul Singh’s Investments and DIDCO.

Clearly, the slowdown in the world economy will impact the imminent Budget Estimates earmarked for the National Assembly. In this case, Guyanese need to concentrate on enhancing the economy rather than focusing on inappropriate wage/salary increases. Some trade union leaders attribute low wage/salary as the reason for migration from Guyana, and so urge Government and the private sector to pay higher compensation for their members. Make no mistake about why people migrate, and it’s certainly not solely because they have low compensation. A culture of high migration has become rooted for more than 30 years in this country, with many people constantly in the visa pipeline, awaiting the green light to travel to North America. This pipeline has an average waiting period of about 8-10 years. Many of these would-be immigrants are recipients of high compensation. Perhaps, migration today has become a fashion or trend. This being the case, migration may not an adequate basis for demanding higher compensation. The state of the Guyana economy, in the final analysis, must be the most significant factor in the determination of wage/salary. Keep in mind that the world economy impacts the local economic conditions.