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World > South America > Guyana > Economy (Notes)

Guyana - Economy (Notes)


ECONOMY
With a per capita gross domestic product of only $974 (2006), Guyana is one of the poorest countries in the Western Hemisphere. The economy made dramatic progress after President Hoyte's 1989 economic recovery program (ERP). As a result of the ERP, Guyana's GDP increased 6% in 1991 following 15 years of decline. Annual economic growth was consistently above 6% until 1997, but has been stagnant since then.

Developed in conjunction with the World Bank and the International Monetary Fund (IMF), the ERP significantly reduced the government's role in the economy, encouraged foreign investment, enabled the government to clear all its arrears on loan repayments to foreign governments and the multilateral banks, and brought about the sale of 15 of the 41 government-owned (parastatal) businesses. The telephone company and assets in the timber, rice, and fishing industries also were privatized. International corporations were hired to manage the huge state sugar company, GUYSUCO, and the largest state bauxite mine. An American company was allowed to open a bauxite mine, and two Canadian companies were permitted to develop the largest open-pit gold mine in Latin America.

Most price controls were removed, the laws affecting mining and oil exploration were improved, and an investment policy receptive to foreign investment was announced. Tax reforms designed to promote exports and agricultural production in the private sector were enacted.

Agriculture, forestry, fishing and mining are Guyana's most important economic activities, with sugar, bauxite, rice, timber, sea food, and gold accounting for 70%-75% of export earnings in 2006.

The rice and sugar industries performed well in 2006. Rice export earnings, for example, rose 20% from $46.2 million in 2005 to $54.6 million in 2006. Sugar, too, saw a strong climb in earnings from $118 million in 2005 to $145 million in 2006. There are dim hopes for the sugar industry in the near future. A new European Union arrangement signed in 2007 gradually phases out long-standing preferential treatment for Guyana sugar exports over the next three years. Prices for sugar are expected to drop significantly, reducing income from the commodity by as much as 30% in the coming years.

Over the past two years the forestry and fisheries sector have recorded strong performance, contributing 15%-20% to export earnings. Forestry, in particular, is viewed as a strong income opportunity for the country. The industry is also under increased scrutiny as questions are raised over the management and enforcement of contracts of its forestry concessions. The government is considering calls to ban the raw export of certain types of logs in favor of value-added export opportunities that will bring in more foreign exchange.

The stagnant mining sector recorded minimal growth in 2006. Bauxite export earnings rose to U.S. $67 million in 2006, a slight increase over 2005. Gold export earnings experienced a similar increase, reaching $114.4 million in 2006 compared to U.S. $111 million in 2005.

The engineering and construction sectors recorded 12% growth in 2006. Most of this was driven by new hotel construction in the buildup to Guyana?s hosting of the Cricket World Cup in March 2007. New housing projects also spurred the sector forward.

As with many developing countries, Guyana is a heavily indebted poor country (HIPC). Reduction of the debt burden has been one of the administration's top priorities. In 2006 the government continued to pursue initiatives to bring the external debt stock and debt service to a sustainable level. At the end of 2006, these two indicators stood at U.S. $920 million and U.S. $22.6 million, respectively. In March 2007, the Inter-American Development Bank (IADB) provided 100% debt relief for Guyana?s outstanding loan balance and interest as of December 31, 2004, amounting to U.S. $467 million. Immediately preceding the IADB write-off, both the IMF and World Bank also granted $237 million in debt relief, bringing the total to U.S. $701 million.

Also in 2006, through the Paris Club debt relief process, the government concluded an agreement with Japan, which provided for 100% write-off of principal and accrued interest, amounting to $591,327.

Guyana's extremely high debt burden to foreign creditors has meant limited availability of foreign exchange and reduced capacity to import necessary raw materials, spare parts, and equipment, thereby further reducing production. The increase in global fuel costs also contributed to the country?s decline in production and growing trade deficit. The decline of production has increased unemployment. Although no reliable statistics exist, combined unemployment and underemployment are estimated at about 30%.

Emigration, principally to the United States and Canada, remains substantial. After years of a state-dominated economy, the mechanisms for private investment, domestic or foreign, are still evolving. The shift from a state-controlled economy to a primarily free market system began under Desmond Hoyte and continued under PPP/C governments. The current PPP/C administration recognizes the need for foreign investment to create jobs, enhance technical capabilities, and generate goods for export.

The foreign exchange market was fully liberalized in 1991, and currency is now freely traded without restriction. The rate is subject to change on a daily basis, but is generally stable.


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Notes and Commentary
People
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Government and Political Conditions
Historical Highlights
Foreign Relations
Relations with U.S.





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