In less than one month, this author read with much amazement and amusement three pieces of supposedly economic and financial analyses from three different sources/authors on Guyana’s economic affairs, namely: one international media group, the Economist Magazine publication; one unpopular energy think tank, the Institute for Energy Economics and Financial Analysis (IEEFA); and one so-called international economist, Terrence Yhip, (whom is regarded by some persons as a world renowned economist). The article published in the popular Economist Magazine by Alberto Miranda, in its March 26, 2022 edition with the sub-heading “Invest or Squander” and a substantive title, “Guyana’s tiny population braces for gusher of petrodollars”, is arguably characterised as a world-class illustration of mediocrity at best and / or seemingly propagandistic on an international level. The other referenced articles were carried in Kaieteur News (KN) on April 3, 2022 with the captions: “Guyana may not steer clear of failure with oil if fatal flaws in oil deal not corrected…” and “don’t be fooled by rising GDP, oil already widening gap between rich and poor”.

Given the increasingly growing global prominence of Guyana on the back of its emerging petroleum sector and enormous projected windfall from the oil wealth, this level of attention is expected albeit these articles are sometimes fraught with varying degrees of inaccuracies, disinformation, and sometimes seeking to advance the agenda of certain groups. And worse, often times come across as derogatory and disrespectful to small developing countries like Guyana, insulting the intelligence of the policymakers, local professionals and analysts, and the population at large. Though the articles are perhaps a good read for anyone who knows nothing much or nothing at all about Guyana’s political, social and economic landscape (both historic and current contexts), just about 10 per cent or less of the “Economist edition” article contained factual information. However, the article can be described as one where the author failed miserably in conducting thorough research which ought to have been used as the basis of the author’s opinions and assertions. Any good analyst or economist would ensure that they do their homework; clearly, this wasn’t the case. With respect to the other referenced articles carried in KN: these, too, can be reduced to the description of the poorest quality of analyses – profoundly flawed and disappointingly weak coming from so-called international analysts / economists.

COUNTERARGUMENTS TO THE IEEFA
“GUYANA MAY NOT STEER CLEAR OF FAILURE WITH OIL IF FATAL FLAWS IN OIL DEAL NOT CORRECTED”
This article is a deeply flawed comparative analysis of Angola with Guyana and / or it would appear that the authors (Tom Sanzillo and Gerard Kreeft) deliberately omitted some critical facts regarding that country’s (Angola) historic social and economic context altogether.

The authors (Sanzillo and Kreeft) argued that Guyana is in a weak position to accomplish its ambitious and aggressive development goals. To support this view, the authors sought to draw comparisons to Angola wherein they argued that oil was discovered in Angola in 1955 and deep-water exploration took off in the 1990s, noting that the country produced approximately 1.4 million barrels per day and that the country is trying to increase production. Despite its resources, the authors argued that “four decades of oil production have created neither prosperity nor fiscal stability for Angola”. At the end of 2020, for example, the authors argued that the national debt stood at US$76 billion. As such, with the assistance of the International Monetary Fund (IMF), World Bank (WB) and others, Angola has managed to juggle its year-to-year obligations with a combination of refinanced or forgiven debt. The authors argued further that despite the country is so rich in natural resources, one in three Angolans live below the poverty level and more than half live on less than US$1.90 per day. To this end, Sanzillo argued that an unbalanced economy and a corrupt government are cited as major factors driving this level of inequality.

A DISINGENUOUS COMPARATIVE ANALYSIS BY SANZILLO AND KREEFT?
In the Sanzillo and Kreeft article, the authors failed to acknowledge several notable facts surrounding the Angola situation, for example:

1) Oil exploration in Angola began over a century ago

2) Angola’s first oil production commenced in 1956 (Benfica Oil Field – onshore production)

3) In 1968 the first offshore discovery was made, by Gulf Oil in Cabinda

4) 1969 first offshore oil production commenced

5) Angola’s population in 1956 was about 5.1 million people which increased to 34 million or by 560 per cent by the end of 2021 (65 years later).

6) Angola’s GDP in 1980 stood at US$6 billion which increased to US$62 billion by end of 2020, representing 90 per cent growth in 40 years.

7) Angola suffered 27 years of a devastating civil war from 1975 – 2002 and all of the country’s infrastructure were destroyed. As such, revenues from the oil industry via taxes and royalties has contributed to the rebuilding of the country in terms roads, railroads, airports, schools and hospitals.

8) In one century of oil activities in Angola, there has never been an oil spill or blow out

9) Angola’s oil production is dominated by offshore operations where almost 75 per cent of production comes from offshore activities.

10) Owing to the increasingly competitive global market and lower oil price environment particularly challenged Angola’s high production costs which averages US$40 per barrel. Industry players emphasised the need for a more competitive environment.

11) Consequently, in 2018, the Angolan Government implemented several legal and other reforms and began restructuring the State oil company in response to stalled investments in 2014.

These reforms include, for example, a cut in petroleum tax from 20 per cent to 10 per cent while reducing petroleum income tax on marginal fields from 50 per cent to 25 per cent.

Putting the above key facts on Angola’s situation in the context of a comparative analysis to Guyana, implicitly stating that Guyana is likely to go down a similar path–is, therefore, deeply flawed and arguably disingenuous, demeaning and grossly misleading by the authors.

Angola’s onshore production started 65 years ago while its offshore production which accounts for about 75 per cent of that country’s oil and gas production started 52 years ago. Against the backdrop that Angola experienced a devastating civil war that lasted for some 27 years, which in turn destroyed almost all of its infrastructure, it can be safely deduced that Angola has only enjoyed 25 years of its oil production since onshore production did not and still does not account for more than 25 per cent of oil and gas production. Put differently, of the 52 years (five decades) in oil production, 27 years of revenue had to be diverted to rebuilding the country– that is rebuilding from bottom up – infrastructure that were destroyed during this civil war, and the other 25 years ought to have been dedicated to the continued rebuilding of the economy, and depending on the country’s fiscal space at the time, seek to expand and diversify its economy.

Obviously, the civil war is largely responsible for the status of Angola today because much of its resources instead of being utilised to bolster the economy and pursue a comprehensive diversification programme, and lift its citizens out of poverty, had to be utilised to rebuild the country’s infrastructure in the aftermath of a civil war that lasted more than two decades. This, coupled with an era of economic mismanagement and bad policies, according to the IMF reports, further compounded the issue.

Notably, it is largely on account of the pro-longed civil war that destroyed and stymied the development of other productive sectors, hence, why the country was only dependent on oil and gas. The oil and gas sector was also the only sector not affected by the civil war, since these activities were mostly offshore.

COUNTERARGUMENTS TO TERRENCE YHIP POSTULATIONS… “DON’T BE FOOLED BY RISING GDP”
Yhip, in his article, conducted a very good review of empirical literature on the notion that rising GDP does not necessarily lead to broad-based prosperity for all. Yhip sought to argue that based on the empirical evidence that exist, Guyana’s inequality gap will only widen instead of narrowing. In fact, the author suggested that this is already occurring.

Yhip, however, like Sanzillo & Kreeft and Miranda – have all failed miserably in conducting any credible, objective and scholastic analysis regarding Guyana and especially the current administration’s development agenda, economic policies and the current administration’s track record in economic stewardship – drawing from their previous term in office spanning 1992 – 2014. Had the authors so done in an objective and robust manner, the conclusions derived in such analysis would have been different and solid rather than the speculative nature of their analyses in its current form; divorced from Guyana’s historic, contextual, economic, social and political realities; and more so, the lack of appreciation for the ‘prudential pragmatism’ of the policy philosophy of the current Administration coupled with the development trajectory of the country.

Yhip did not perform any public policy analysis neither did he present any evidence specific to Guyana to demonstrate why his contention is such that, the inequality gap is widening in Guyana though there is rising GDP. (To be continued)
————————–
https://www.kaieteurnewsonline.com/2022/04/03/dont-be-fooled-by-rising-gdp/.
https://www.kaieteurnewsonline.com/2022/04/03/guyana-may-not-steer-clear-of-failure-with-oil-if-fatal-flaws-in-oil-deal-not-corrected-intl-analysts/
https://www.economist.com/the-americas/2022/03/26/guyanas-tiny-population-braces-for-a-gusher-of-petrodollars
Photo saved as Joel Header