BY MELINDA ELLINGTON
Photo by Grant Durr on Unsplash
Despite a history of turbulent politics, ethnic divisions, and fractious relationships with neighbors, Guyana has the potential to become one of the biggest success stories of the decade. The discovery of oil fields has flooded the nation with resources that could improve public services, civic participation, and economic development, lifting tens of thousands out of poverty. However, as history has shown repeatedly, a sudden influx of wealth can pose significant risks in countries without inclusive institutions, good governance, and sustainable policies. Since the discovery of oil in 2015, Guyana has experienced declining fragility, and the ensuing economic boom has made it one of the most improved countries on the Fragile States Index in 2023. However, economic growth alone is not enough to create a sustainable reduction in fragility. The nation’s long-term development will depend on its ability to navigate political challenges, take advantage of its resource wealth, and make investments in its future.
As a former British colony, Guyana faced many political, economic, and governmental challenges. After gaining independence from the United Kingdom in 1966, Guyana experienced a period of instability, with crises shaking the country’s institutions to a breaking point characterized by political violence along ethnic and racial divides and mass emigration.  Guyana’s political scene has been primarily dominated by the People’s Progressive Party (PPP) and People’s National Congress (PNC), founded and led by charismatic leaders Cheddi Jagan and Forbes Burnham respectively.  Under the PNC and Burnham, communist economic policies led to poor economic performance and massive debt accumulation. Then, despite the transition to more progressive economic policy under Jagan and the PPP, Guyana still experienced political polarization, corruption, and lacking economic opportunity, resulting in the exodus of skilled laborers.  Instability in the early stages of independence contributed to a bleak future, with persistently high Human Flight and Brain Drain scores on the Fragile States Index from the first edition in 2006. The absence of effective policy intervention, adequate public infrastructure, and economic opportunity for much of the population resulted in expanding poverty across the nation. These factors combined led to Guyana starting the 2010s as one of the poorest countries in the region with the highest suicide rate in the world.
Opportunities and Threats
Guyana’s lackluster trajectory rapidly shifted with the discovery of rich offshore oil deposits by ExxonMobile in 2015. These oil fields dwarf other recent discoveries, positioning Guyana to compete with the three largest producers worldwide, the U.S., Norway, and Mexico, and to surpass Kuwait as the highest producer of oil per-capita in the world. In 2022, Guyana experienced a staggering 57.8% economic growth , with public debt and inflation holding steady, despite much of the rest of the world struggling to stabilize their economies in 2022. Even when taking away oil income, Guyana reports that their economic growth is still in the top 5 nations worldwide – non-oil sector growth is projected to grow by 9.5% in 2023, due to the government’s dedication to diversifying economic outputs.
Despite these incredible opportunities, the challenges that Guyana must overcome are immense. Decades of impoverishment and neglect have left the nation’s infrastructure in dire need of an overhaul, and 48% of the population remain in poverty. While improving, the country continues to exhibit a negative migration rate, with many skilled laborers and highly educated individuals living abroad and sending remittances home, accounting for 7% of GDP. Racial, political, and economic class divides continue to be reflected in the rural-urban divide,  leaving large ethnic and geographic enclaves underrepresented. Politicians of the PPP-C party have stated their desire to work for all Guyanese citizens and collaborate with the second-largest coalition, comprising of A Partnership for National Unity (APNU) and Alliance for Change (AFC). However, those statements have yet to materialize in the form of concrete policies. Anti-corruption and transparency measures across the government are inconsistently applied, increasing Guyana’s vulnerability to corruption as government resources expand. Though Guyana’s resource wealth stands to change its development trajectory, significant challenges remain in the political landscape. Short-term financial gains need to be safeguarded against mismanagement and corruption if long-term sustainable growth is to be attained.
Environmental sustainability is also a central challenge for Guyana’s growth moving forward. Despite receiving accolades for their efforts in forest preservation,  pollution resulting from some unregulated mining projects and a newfound dependence on oil income have put pressure on the nation’s dedication to environmentally friendly policies. With almost 90% of the population living along the coast and promised increases in oil production,  Guyana faces the challenge of pursuing growth at the expense of the section of its population vulnerable to climate change. A 2020 report on Guyana’s National Drought Mitigation and Adaptation Plan and two 2021 UN briefs on the impacts of climate change on different demographic groups show an ongoing pattern of rural-to-urban migration in response to climate change disasters. The government’s pattern of a reactive, crisis-mitigation approach to the effects of climate change needs to be adapted to a proactive, risk-management strategy, if there is any hope of comprehensive planning for a population increasingly exposed to droughts, flooding, and future sea-level rise.
Investment in Infrastructure
These challenges have been recognized by Guyana’s government, and planning is beginning to take shape to strengthen the small nation’s chances of success, boosting its score on the 2023 FSI. Maintaining that positive trajectory, however, will require follow-through on the ambitious promises being made by the current administration.
Investment in public infrastructure will be one of the most critical long-term investments that Guyana must make to support sustainable growth in the country. With almost 85% of the country’s landmass covered in forests, access to the interior remains limited. Massive investments into improved roadways within the country and connecting to neighboring Brazil are underway, with the aim to improve efficiency of transportation and regional trade. A new deepwater port that can service neighboring Suriname is also in development, promising the potential of a new regional trade hub. To counteract the environmental impacts of these projects, Guyana has also pledged to increase investment in renewable energy. Debates surrounding long-planned hydroelectric plants are ongoing and a loan from the Inter-American Development Bank and the Norwegian Agency for Development Cooperation is set to jumpstart the country’s solar power aspirations. The government has also heeded the needs of the population and begun to invest heavily in the nation’s educational system and healthcare infrastructure. Plans to improve quality of life and become a net exporter of health and education services have the potential to boost the region’s access to these services, in addition to Guyana’s own citizens.
The government’s Investment in public services and infrastructure like healthcare and education will be critical building blocks for a thriving country that can support the rapid growth we expect to see over the next few years. Equally important will be the diversification of income streams to ensure that Guyana doesn’t become overly dependent on oil as a single commodity export at the expense of other sectors, as so many contemporaries have. In addition to continuation of their expansion of sustainable timber farming, Guyana has an established industry in bauxite, gold, and sandstone production that could be further developed by leveraging aluminum processing in-country. While preliminary steps are being taken to strengthen a diverse array of industries, only a consistent commitment to this economic planning will result in long-term gains.
In an effort to avoid the pitfall of corruption and short-sighted investing, the Natural Resource Fund (NRF) was created to manage the financial windfall of Guyana’s oil reserves. Overseen by the Bank of Guyana, this process seeks to leverage the excess income of natural resources to improve overall quality of life for the citizens through forward-thinking investments in infrastructure, a green economy, and public services. This model has been used by many other nations but has not been without its flaws. An opaque series of policies and rotating officials overseeing the fund run the risk of corruption and inappropriate spending. Frequently, nations with otherwise comprehensive social and economic development plans fall prey to individuals and governments seeking to maximize their own profit over the long-term health of the nation. Strengthening anti-corruption and transparency laws will be decisive in Guyana’s success.
Too often have developing nations fallen into the trap of the Resource Curse, growing too quickly, and fostering cronyism and a reliance on a single industry. Guyana’s leadership is aware of the pitfalls that await if they are not careful – they are, after all, neighbors to Venezuela. The first years of Guyana’s oil boom have shown a nation eager to implement reforms across sectors to ensure sustainable growth for all members of society. Time will tell if a long-term commitment to reform and development overcomes pernicious short-term incentives. With good leadership, the right policies, and a steady eye on the lessons from other oil rich countries, Guyana will be able to forge ahead and reap the benefits of their windfall for inclusive development and unprecedented opportunity for the population as a whole. It is also in the interest of oil companies themselves to invest strategically in corporate social enterprise, and for impact investors to promote an enabling environment for peaceable livelihoods before it is too late, and Guyana becomes another cautionary tale.