choices for Guyana’s trade policy framework
D. Tactical issue #1: Improving production and upgrading of traditional goodstraditional goods
As was stressed in Part II, the Guyanese economy is marked by its continuing (if shifting) dependence on the primary sector. Compared to other developing countries, the secondary sector remains small. At a time when many of its peers are becoming ever more engaged in global value chains, including the production of higher-value goods, Guyana has largely been confined to producing and exporting the same primary products that dominated the economy of our parents and even our grandparents. That is not for want of trying: Policymakers often hope to promote diversification of the economy, both vertically (i.e., moving up the value chain for a given sector) and horizontally (i.e., promoting the establishment and expansion of entirely new industries that are not unduly dependent on the country’s natural resource bases). For example, Strategic Goal 11 in the Ministry of Natural Resources’ National Mineral Sector Policy Framework and Actions is to “expand the number of businesses and economic activities that serve the mining sector (backward linkages) and that use the outputs of mining (forward linkages).”
The data reviewed here show both positive and negative trends, with important shifts in the production and exportation of traditional commodities. Whereas gold, bauxite and rice have done well, both in quantity and quality, the trends are not as favourable for diamonds and especially sugar.
Prior to the oil boom, Guyana was already the world’s most gold-dependent country. The calculations in Table 3 show that the value of gold production in 2018 was equal to one-third of the total national economy. Thus, despite the fact that China’s production of this metal was about 16 times larger than Guyana’s, gold was more than 300 times more important for Guyana in relative terms. The data reported by the World Gold Council also imply that more than twice the share of GDP is tied up in this industry than the national accounts suggest, presumably because the latter numbers more accurately reflect the profits retained at home, but even if one takes the Bureau of Statistics’ figure of G$110 billion in 2017 rather than the imputed value of US$1.2 billion that still amounts to a considerably higher share of GDP (15%) than any other country shown in the table.20 This is one of several industries where the principal challenge comes from demands for greater environmental stewardship. Mercury has long been a critical element in the processing of gold but is also recognized as a serious hazard to public health. The Minamata Convention on Mercury, which is named after the Japanese city where the dangers of mercury poisoning were first discovered, is an international treaty designed to protect human health and the environment from emissions of mercury and its compounds. It was concluded in 2013 and ratified by Guyana in 2014.
Parties with small-scale gold mining and processing industries must take steps to reduce the use of
Table 3. Global mine production of gold, 2010–2018
China 351.1 462.0 404.1 15.1 12.6 11.5 0.1
Australia 256.7 274.0 314.9 22.7 9.2 9.0 1.0
Russian Federation 203.1 252.7 297.3 46.4 7.3 8.5 0.8
United States 231.3 210.0 221.7 -4.1 8.3 6.3 0.1
Canada 102.1 151.2 189.0 85.0 3.7 5.4 0.5
Peru 184.8 171.1 158.4 -14.3 6.6 4.5 3.3
Indonesia 134.6 93.5 136.9 1.7 4.8 3.9 0.6
Ghana 94.3 106.3 130.5 38.4 3.4 3.7 9.3
South Africa 210.0 168.6 129.8 -38.2 7.5 3.7 1.7
Mexico 78.8 113.4 115.4 46.5 2.8 3.3 0.4
Brazil 71.5 90.4 97.1 35.7 2.6 2.8 0.2
Guyana 11.9 17.3 25.6 114.4 0.4 0.7 33.3
Subtotal 1 930.2 2 110.7 2 220.8 15.1 69.1 63.4
Rest of world 863.4 1 092.2 1 281.8 48.5 30.9 36.6
World 2 793.6 3 202.9 3 502.6 25.4 100.0 100.0
Source : Calculated from World Gold Council data at https://www.gold.org/download/file/7593/Gold-Mining-Production-Volumes-Data.xlsx; GDP shares calculated from World Bank data at https://data.worldbank.org/indicator/NY.GDP.MKTP.CD, based on 2018 production multiplied by a market value of US$46.9 million per tonne. Note that internationally reported values for the extracted wealth do not necessarily correspond to those actually captured by the exporting country and reported in the national accounts, and hence are reported here not as “Share of GDP” but rather “Relative to GDP.”
mercury and mercury compounds. Guyana is legally obligated to meet these requirements and making gold “green” is also in the environmental interests of the country. That said, these new standards will be costly.
Other traditional minerals make smaller contributions to national wealth. The share held by diamonds was, as shown in Table 4, a small fraction of 1 per cent. Guyana’s diamond mines yielded an average of 38 million carats per year in 2004–2008, according to the Diamond Producers Association, but this dropped to annual production of 13 million carats during 2005 per cent 2018.21 By contrast, bauxite production is rebounding. Moreover, as shown in Figure 16, Guyanese producers have moved to a higher level of processing of this mineral at home. The more processed version of bauxite, calcined bauxite rose to 54 per cent of total bauxite exports in 2010–2018, compared to 39 per cent during 2000
–
2009.Guyana’s rice industry is an exception to the general rule of contraction in the agricultural sector, and also offers a good example of both product upgrading (i.e., the move toward higher-value segments of this commodity market) and end-market upgrading (e.g., by adding Mexico as a new market for the country’s rice exports). Rice producers are expanding in both quantitative and qualitative terms, notwithstanding the post–-2015 set-back brought on by the El Niño weather pattern. As can be seen in Figure 17, from 2010 to 2019 the hectares harvested rose by 35 per cent, and production went up 89 per cent; this meant a 40 per cent increase in the per-hectare yield. The industry believes that its production could rise from 682,418 tonnes in 2019 to a million tonnes by the year 2029, for a further increase of 47 per cent.
The Guyanese rice industry is also moving to the higher rungs of that sector’s value chain. This means capturing a greater share of the final price: Whereas paddy brought an average of just US$291 per tonne in 2019, producers could instead get US$374 for cargo (brown) rice and US$489 for white rice. The value rose higher for parboiled rice, whether cargo (US$446) or white (US$567), while the US$638 paid for
packaged, parboiled rice was more than twice the price of paddy. Paddy’s share of total export value fell from 22 per cent in 2018 to just 5 per cent in 2019, while the shares held by cargo and white rice rose from 59 to 72 per cent. The next steps in this climb would be to increase the share for parboiled rice (white or cargo), which rose modestly from 9 per cent in 2018 to 11 per cent in 2019, and to advance from there to the packaged forms of the product (which held steady at 4 per cent in both years).22 Rice producers may need less assistance than any other Guyanese industry, being an efficient industry that can find a ready market for all it grows.
The same may not be said for sugar, which has been declining sharply for the better part of a decade. It is widely recognized that the costs of sugar production in Guyana cannot compete with those of Brazil and other major producers, and several estates have closed as a result. The one bright spot for this industry is in the increasing share of derivative products in exports, most notably molasses and rum. The data in Figure 18 show that during 2000
–
2012, raw sugar accounted for 94 per cent of all exports in this cluster;the share fell to 87 per cent in 2013
–
2018. Put another way, whereas in 2000 Guyana exported just 3 cents worth of rum for every dollar worth of sugar that it exported, by 2018 this value rose to 31 cents.These more lucrative products benefit from the special denomination of the Demerara name, a topic that we take up in Part IV.
Can this same process of upgrading be carried over to the oil and gas sector? There is no such expectation with respect to the actual refining of hydrocarbons, but there are other ways to spread the benefits more
Table 4. World diamond production, 2018
Botswana 3 535 24.4 24 378 145 19.0
Canada 2 098 14.5 23 194 90 0.1
South Africa 1 228 8.5 9 908 124 0.3
Angola 1 224 8.5 8 409 146 1.2
Namibia 1 125 7.8 2 397 469 7.7
Lesotho 377 2.6 1 294 291 13.5
Zimbabwe 210 1.5 3 255 65 0.7
Australia 181 1.3 14 069 13 <0.1
Sierra Leone 157 1.1 742 212 3.9
Democratic Republic of the
Congo 136 0.9 16 391 8 0.3
United Republic of Tanzania 82 0.6 386 212 0.1
Brazil 55 0.4 251 219 <0.1
Liberia 32 0.2 79 402 1.0
Guinea 18 0.1 293 61 0.2
Guyana 11 0.1 62 181 0.3
Subtotal 14 452 >99.9 148 269 97
Rest of world 13 <0.1 162 800
World 14 466 100.0 148 430 97
Source: Calculated from World Gold Council data at https://www.gold.org/download/file/7593/Gold-Mining-Production-Volumes-Data.xlsx; GDP shares calculated from World Bank data at https://data.worldbank.org/indicator/NY.GDP.MKTP.CD, based on 2018 production multiplied by a market value of US$46.9 million per tonne. Note that internationally reported values for the extracted wealth do not necessarily correspond to those actually captured by the exporting country and reported in the national accounts, and hence are reported here not as “Share of GDP” but rather “Relative to GDP.”
Figure 16. Guyana’s exports of bauxite, 2000–2018 (G$ billions)
Source: Calculated from Bureau of Statistics data at https://statisticsguyana.gov.gy/wp-content/uploads/2019/10/Annual_Exports_Selected_
Commodities_by_Value_1990_2019.xlsx
2000 2002 2004 2006 2008 2010 2012 2014 2016 2018
30
25
20
15
10
5
0
Calcinated Dried
Figure 17. Guyana’s production of rice, 2010–2019 (thousands of hectares harvested and thousands of metric tonnes rice equivalent)
Source: Calculated from data supplied by the Guyana Rice Development Board.
750
600
450
300
150 200
150
100
50
0 0
Hectares (Left scale) Rice (Right scale)
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
broadly and a policy to encourage local content remains under development. Policy in this field demands balance among at least four competing objectives: the interest of foreign companies in access to the resources, the interest of the domestic companies in securing their own share of this wealth, the interests of economic policymakers in promoting efficiency in this and other sectors, and the need to ensure that Guyana remains compliant with its international obligations. That last consideration is significant, with the WTO’s Agreement on Trade-Related Investment Measures establishing a general prohibition (with certain exceptions) on the imposition of certain “performance requirements” as a condition of foreign investment.23 Thirteen WTO members have faced challenges in which other WTO members have complained that their laws and policies violate this core obligation of the Agreement on Trade-Related Investment Measures (TRIMs).24 Guyana would do well to structure its policies so as to avoid becoming #14. That might be done in part by ensuring that the efforts to promote local participation in these projects do not cross the sometimes blurry line that separates soft encouragement from hard mandates.