Wednesday 30 October 2013

A Unique Resource Curse…Or Is It?

It seems quite strange to speak about a resource curse in Guyana. After all, the debates on this topic have focused almost exclusively on the performance and impact of large multinational mining and oil and gas companies, none of which are operating on or off of Guyana’s shores at present (the days of Omai seem like a distant memory). But as we have come to learn over the years, nothing is as straightforward as it seems in this vastly under-populated country: its identity crisis, specifically, how, despite being situated squarely in South America, its people appear as Caribbean in their mannerisms and attitudes as the ‘islanders’; how its Low Carbon Development Strategy (LCDS), which was supposed to become a centrepiece of national development and a ‘quick-fix’ poverty-alleviation strategy, has quickly become a debacle; and its regressive democracy and politics, underpinned by racial tensions, themselves relicts of the colonial period. The dynamics of its resource curse ‘epidemic’ are no exception.

Guyana’s resource curse has been particularly distressing for me. Unlike most mineral economies in sub-Saharan Africa, Asia and elsewhere in Latin America, the country’s gold mining industry is comprised entirely of indigenous and Brazilian small and medium-scale operators. I have dedicated my career to raising awareness of, and creating a ‘space’ for, these operators, the economic contributions of whom have been – rather strangely – neglected by donors and governments across the developing world for decades. In Guyana, however, successive governments have done just this: reserve land for their own small and medium operators, and not succumb to the pressures of international donors that have lobbied for the allocation of mineralized territories to foreign multinationals. As a result of these efforts, gold mining, backed almost exclusively by indigenous wealth, now generates over US$700 million in revenue annually in Guyana, making it by far the country’s largest industry.

The ‘results’ of this policy approach, however, appear little different to those of the developing countries that have fast become to focus of our lengthy tirades on the resource curse, few of which have much to show from the booming and sprawling large-scale mining industries that now populate vast sections of their landscapes. Although the anatomy of Guyana’s gold mining economy differs markedly to that of, say, Ghana or Tanzania, its salient developmental features do not, the most significant being what I often refer to as the ‘laziness’ of its institutions. The steady stream of revenues provided by gold miners seems to have made the government complacent. It appears to have shied away from supporting other sectors of its economy, the resulting Dutch Disease now most noticeable in the country’s sugar and rice trades, which have long been important sectors of the national economy. The former has suffered tremendously in recent years from a skills shortage and a change in global trade policies, which have resulted in a decline in exports to the European Union; the sustainability of the latter is precarious, at best, given how exports are determined heavily by an oil-for-rice agreement forged with neighbouring Venezuela, a country which experiencing a resource curse of its own.

There are a number of other disturbing similarities between Guyana’s own resource curse and the ‘epidemics’ of those which now engulf countries where foreign large-scale mining industries dominate the economy. The first is the inappropriate – or rather cavalier – attitude of its government officials toward economic diversification. Much like the policymakers I have encountered over the years in countries where foreign-controlled large-scale mining activities are now rooted, Guyana’s politicians seem to be in denial about the resource curse and therefore, unwilling to take proactive measures to avert it or prevent it from intensifying. This was quite evident during a conversation with the country’s Minister of Finance, in response to my comment about there being ‘no other industries apart from gold mining in Guyana’, responded, quite animatedly: ‘what are you talking about?...we [Guyana] have a burgeoning sugar industry and flourishing rice trade’, seemingly oblivious to the aforementioned problems plaguing both of those sectors. How can a problem be fixed if it is not acknowledged by senior-ranking officials?

A second similarity is the concentration of ownership and finance. Critics often draw attention to how, in the likes of Ghana, Tanzania and Peru, gold mining activities are controlled by a small group of multinational corporations which, as a result, wield a considerable amount of influence over the economy and local politics. But a similar dynamic persists in Guyana, the key difference, of course, being that the gold mining economy is controlled by a handful of indigenous elites, multimillionaires with lavish houses and cars, and who have made countless investments abroad. A final point relates to where revenues are going – or more specifically, where they are not going. The criticism of the large-scale mining multinationals operating in the developing world is that they repatriate most of their profits, and take advantage of lax regulations and policies to import equipment and supplies without having to pay duties and invest locally. The same problem, however, persists in Guyana, the difference being, of course, that it is the group of elite small-scale miners who are taking millions of dollars of gold out of villages such as Mahdia and reinvesting very little in the community. These miners certainly flaunt their wealth by erecting large houses and hotels but elect not to contribute to developing domestic value-added industries such as agriculture and manufacturing, which would certainly provide greater economic benefit to the country than the fancy cars they import from abroad; the capital flight is enormous.

Thus, whilst Guyana’s mining experience has the look of being more favourable for domestic growth, the outcomes are very much the same and challenges very real. It goes to show that it does not matter whose hands the extractive industry are in: if there is little policy recognition of the implications of being one-dimensional economically, the resource curse will quickly become a reality.