Guyana Strikes Oil
What the Windfall Means for the Country—and the Region
Nearly 40 years ago, tragedy struck Guyana when a religious zealot with major charisma, Reverend Jim Jones, convinced nearly 1,000 of his followers to hole up in their socialist commune and commit mass suicide by drinking cyanide-laced Kool-Aid. The “Jonestown” massacre earned top billing in the news. On its cover, Time magazine ran a photo of dead bodies strewn next to a vat filled with the poisoned drink.
Guyana now faces another threat of self-destruction but on a much larger scale. The tiny South American country of roughly 800,000 people recently discovered a massive amount of oil in its territorial waters. (Venezuela also claims that territory.) The U.S. energy giant ExxonMobil, which made the discovery, suggests the existence of anywhere between 800 million and 1.4 billion barrels of high-quality crude, worth at least $44 billion at current prices, or 15 times the country’s total GDP. That’s an awful lot of cash for a country whose capital city still has dirt roads.
Of course, oil wealth in and of itself won’t destroy Guyana. But mismanaging the money certainly will. If Guyana fails to take appropriate steps, its politicians could end up blowing the largest fortune in the country’s history. In the process, they might turn Guyana into an even bigger basket case than is its neighbor, Venezuela.
gallegos_guyanastrikesoil_presrts2901.jpg Carlo Allegri / Reuters
President David Arthur Granger of Guyana addresses attendees during the 70th session of the United Nations General Assembly at the U.N. Headquarters in New York, September 29, 2015.President David Arthur Granger of Guyana addresses attendees during the 70th session of the United Nations General Assembly at the U.N. Headquarters in New York, September 29, 2015. President David Arthur Granger of Guyana addresses attendees during the 70th session of the United Nations General Assembly at the U.N. Headquarters in New York, September 29, 2015. Fortunately, the government of President David Granger appears intent on avoiding such a debacle. Granger, a retired military man, took over in 2015 after a 23-year chokehold of the leftist People’s Progressive Party. His administration is setting up new laws to shape the budding oil sector into a top oil producer; these include a local content law that forces oil companies to hire locals, a new oil regulatory agency, taxation legislation, and the creation of an infrastructure and savings fund, too. Meanwhile, he has promised oil companies a welcoming business environment that respects private property, and he has sought advice from resource-rich Canada and Norway on how to set up a sovereign wealth fund to save the Read the full article on ForeignAffairs.com