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Guyana - economy
With a Gross Domestic Product (GDP) per person of only $500 in 1992, Guyana's economy was dramatically changed for the better, however, by the initiation in 1989 of President Hoyte's Economic Recovery Program (ERP). The program, developed in conjunction with the World Bank and the International Monetary Fund, 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 businesses. The telephone company and assets in the timber, rice, and fishing industries were privatized. A British firm was brought in to manage the huge state sugar company, GUYSUCO, and an Australian firm was hired to manage the largest bauxite mine. An American company was allowed to open a bauxite mine and two Canadian companies were permitted to develop the largest 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. As a result of the ERP, Guyana's GDP increased 6.1 percent in 1991 after 15 years of decline. Growth in 1992 was 7.7 percent and may be even larger in 1993.
The Jagan Government has pledged to the World Bank and the IMF that it will continue the basic reforms of the ERP. In July 1993, a Government white paper announced that "as a matter of national policy...the Government has decided to adopt a privatization strategy...for reducing its presence in the economy...in order to create a more competive and market-driven environment." The paper listed 16 of the remaining 26 state enterprises as eligible for privatization.
Agriculture and mining are Guyana's most important economic activities, with sugar, bauxite, rice and gold accounting for 75-80% of export earnings. Ocean shrimp accounted for another 15% in 1990, but declining catches reduced shrimp exports to 7% in 1991 and 4% on 1992. Other exports include timber, diamonds, garments, and locally assembled stoves and refrigerators. The value of these other exports increased from $11 million in 1990 to $59 million in 1992.
The government-owned sugar corporation, GUYSUCO, controls all sugar manufacturing operations as well as the marketing of raw sugar. With more than 23,000 direct employees, the sugar industry is the largest employer in Guyana. Most of Guyana's sugar goes to fill special sugar quotas granted by the European Community and the United States. Exports increased from $63 million in 1990 to $133 million in 1992.
In 1993, gold will become Guyana's second most valuable export, after sugar, with the beginning of production by the Omai Mine. Omai is a joint venture of two Canadian firms, Cambior (70%) and Golden Star (25%), and the Guyana Government (5%), and is operated and managed by Cambior. Omai expects to produce 280,000 ounces of gold a year for at least 10 years; at $375 an ounce, that will increase the value of Guyana's exports by some $100 million a year, or about one-third. In addition, officially recorded gold sales by individual miners to the government's gold board, as required by law, exceeded 100,000 ounces in 1992, a record, but it is widely assumed that most gold produced by these miners goes unrecorded.
The bauxite sector consists of two wholly government-owned companies, LINMINE and BERMINE, and Aroaima, a company owned 50-50 by the Government and by the U.S. firm Reynolds. Total bauxite production was between 1.3 and 1.4 million MT a year from 1986 to 1991. In 1992, however, production dropped by one-third, to 0.9 million MT, despite increasing production by Aroaima. This was due to deteriorating equipment and the lack of capital investment at the government mines. As a result, Guyana has lost market share to other producers. Since the early 1980s, due to high production costs and low world prices, the bauxite industry has been a net user of foreign exchange, draining funds from other productive areas of the economy.
Rice-growing is dominated by private farmers and millers, with extensive government involvement in allocation of foreign inputs, maintenance of infrastructure, and marketing. After rice production reached 183,000 metric tons (MT) in 1986, it dropped to 130,000 MT in 1988, due to bad weather, plant disease, lack of foreign exchange for chemicals and other needs, low prices paid to farmers, and a consequent decline in the number of acres planted. Rice recovered to 150,000 tons in 1991 and 168,000 in 1992.
In 1992, Guyana experienced a trade surplus with the United States, importing US$118 million worth of goods and exporting US$123 million. Other major trading partners are the United Kingdom and Venezuela.
Since 1986, Guyana has received its entire wheat supply from the United States on concessional terms under a PL 480 Food for Peace program. An agreement signed in January 1993 converted the program from a loan to a grant basis. The Guyanese currency generated by the sale of the wheat is used for purposes jointly agreed upon by the U.S. and Guyana Governments.
Guyana's external debt of $2.1 billion at the end of 1992, was equal to 560% of its GDP and debt service payments were equal to 46% of its earnings from exports. About half is owed to the multilateral development banks and 20% to its neighbor Trinidad, which until 1986 was its principal supplier of petroleum products. Almost all debt to the U.S. Government has, with Congressiional authorization, been forgiven. Net international reserves reached a historic low of negative US$488 million at the end of 1988, but by the end of 1992 had improved to positive $193 million. 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 decline of production has led to increasing unemployment. Although no reliable statistics exist, combined unemployment and underemployment are estimated at about 30%. Emigration, principally to the U.S. and Canada, is substantial.
The foreign exchange market was fully liberalized in 1991 and currency is now freely traded without restriction. The exchange rate stabilized at around 125 Guyana dollars to US$1 in late 1991, and remained at that level in June 1993
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