Previous Quarterly Editions
Expropriation Risk: 51 51 53 53 ► Political Violence Risk: 38 39 39 39 ► Terrorism Risk: 15 15 15 15 ► Exchange Transfer and Trade Sanction Risk: 35 35 25 25 ► Sovereign Default Risk: 47 57 47 47 ►
TREND ►
Guyana has weathered the COVID-19-driven global economic slowdown better than many other countries in the region, thanks largely to a timely increase in state revenues from the expanding oil sector. This has enabled President Irfaan Ali to provide economic support measures during the dip in external demand, thereby limiting the rise of unemployment and under-employment.
The government’s main focus is on maintaining the growth of the oil sector by providing supporting regulatory framework and increasing public sector expertise in management of the oil sector and related revenues. At the same time, the government needs to manage popular expectations about the extent to which rising state revenues will have an immediate impact on socio-economic issues.
So far, the Ali government has maintained its approval ratings, with the president’s approval at 63% in August 2021, a year after taking office. This is a positive indicator for government stability, given that Ali’s first year in office has coincided with the COVID-19 crisis.
The government is perceived to have handled the crisis well, with case numbers averaging 100 per day. Simultaneously, the vaccination programme is rolling out steadily, with approximately 36.6% of the population having received at least one dose by August 2021. An ongoing challenge for the government will be to press ahead with the vaccination programme sufficiently to control an uptick in case numbers since May -- albeit still low when compared with the rest of the region.
There have been some sporadic anti-vaccination and anti-mask-wearing protests in Guyana, mainly in the capital, but these are not widespread and do not pose a major challenge to the government. There is a risk that if cases surge and the vaccination programme cannot keep pace with case numbers, this will negatively affect the government’s popularity and encourage more social protests.
Beyond COVID-19, the government’s focus in 2021-22 will continue to be on managing the risks associated with the influx of oil wealth into the country. This new wealth brings with it the risk of associated corruption and mismanagement of the new revenues. There has already been criticism that the terms of oil contracts with international companies have been overly favourable to investors.
This is one of the factors behind the government’s announcement that future production-sharing agreements will have better terms for the state. These contracts will be negotiated by a new energy regulatory body, to be established later in 2021. Creating this new body aims to depoliticise the revenue-sharing negotiations and professionalise the process, reducing the risk of corruption during the negotiation process.
Tensions with Venezuela have subsided over the course of the year, with bilateral relations having now returned to the status quo. This lowered risk level should continue into 2022, with Venezuela generally choosing to revive the border dispute at points when it is facing elevated domestic pressure and needs to deflect tensions onto Guyana.
There is minimal risk of expropriation in Guyana. The government is focusing on maintaining an attractive investment environment and improving the regulatory framework to bolster foreign investment, particularly into the oil sector. Legislation is in place to protect foreign investments.
Guyanese society is divided along ethnic lines between the Indo-Guyanese and the Afro-Guyanese communities, and these tensions can occasionally spill over into violence. This is closely linked to the political situation, split between the predominantly Indo-Guyanese People’s Progressive Party (PPP) and the mainly Afro-Guyanese A Partnership for National Unity/Alliance for Change (APNU/AFC). These ethnic tensions exacerbated the political stand-off of 2020, as APNU/AFC President David Granger delayed recognition of Ali’s electoral victory in an apparent attempt to cling onto power.
Ethnic tensions have declined somewhat over the year, with violent protests in September 2020 related to a racialised killing now having died down. Although the risk of political violence has reduced from the high levels seen around the 2020 election and the September murders, the ongoing ethnic divide means that there is potential for relatively small incidents to spark renewed protests.
A challenge for Ali is to manage the perception that his PPP is governing primarily for the Indo-Guyanese rather than for the whole country. His government has declared its commitment to improving ethnic relations but thus far there have been limited concrete policies designed to achieve this goal.
There are no active terrorist groups in Guyana and the country has not been mentioned by international terrorist groups as a specific target. There is a long-term risk that the growing presence of international oil companies could prove a potential target for terrorist groups, but this is considered unlikely at present.
A greater risk is the country’s financial system, which remains vulnerable to misuse for terrorist financing despite several moves to strengthen its AML/CFT regime in recent years. The government launched a new National Risk Assessment process in 2020 and held a workshop with the World Bank to discuss the findings in mid-2021. Although no legislative agenda for AML/CFT reform has yet been announced, the workshop discussions indicated that the government plans to improve the supervisory framework and expand the regulatory purview of AML/CFT legislation, to bring more companies and sectors under supervision. If achieved, this would reduce the financial sector’s vulnerability to money laundering and terrorist financing.
There are no foreign exchange controls in place in Guyana and neither the government nor the central bank appear to be considering such controls. Instead, it is in Guyana’s interest to maintain an open foreign exchange and trade regime in order to support the growing oil and oil services sector, which is dominated by foreign companies. Guyana maintains positive trade relations and is not the subject of any sanctions.
A steady increase in state oil revenues will mitigate the risk of a sovereign debt default. Guyana’s economy is set to grow by 16.4% in 2021, after growth of 43.4% in 2020, with oil revenues driving this growth. The bulk of Guyana’s sovereign debt is via concessional loans from international bodies and development partners. As a result, Guyana has limited US dollar-denominated debt, with most of its debt issued in local currency for a primarily domestic market.
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