Previous Quarterly Editions
Expropriation Risk: 53 53 53 55 ▲Political Violence Risk:39 39 39 39 ►Terrorism Risk:15 15 15 15 ►Exchange Transfer and Trade Sanction Risk: 35 45 25 35 ▲Sovereign Default Risk:47 47 37 37 ►
TREND▲
Geopolitical alignmentEast 1 2 3 4 5 West
Alignment five years agoEast 1 2 3 4 5 West
Degree of contestationSettled 1 2 3 Contested
A key current challenge for Guyana is to balance its diplomatic and trade relations with China and the U.S., as relations between Beijing and Washington become increasingly estranged. China and Guyana have a history of trade co-operation and investment, which ramped up in the 2000s. While investment plateaued during the A Partnership for National Unity (APNU) government of David Granger in 2015-20, ties appear to have strengthened again under President Irfaan Ali, with the two countries celebrating 50 years of relations in June.
Guyana’s importance as a geopolitical and trade partner has risen sharply since the discovery of oil. Investors in the expanding oil sector primarily comprise Western firms, such as U.S. oil major ExxonMobil, meaning Guyana’s diplomatic stance must take account of this preponderance of Western investors. However, investment is not constrained only to Western investors. China’s oil company China National Offshore Oil Corporation (or CNOOC) holds a 25% stake in the ExxonMobil-led project.
The presence of both a U.S. and Chinese oil firm in one of the country’s largest oil exploration and development projects appears to represent Guyana’s diplomatic aim of balancing relations with both countries. Guyana is keen to maintain diversified trade relations, especially in the non-oil sector, and Chinese firms have become increasingly active in the infrastructure investment space over the last decade. Key investments include the Amalia Falls hydroelectric project, a new bridge over the Demerara River, and a number of road upgrade and expansion projects. So far, U.S. investors have been more focused on the energy and energy services sector, limiting areas of competition.
Given the current investment balance between China and the U.S., maintaining relations with both is not domestically contentious. There is some anti-U.S. sentiment domestically, but this is not reflected by a large pro-China lobby. For example, while the release in mid-2022 by VICE News of a documentary alleging that some Chinese firms had paid bribes in return for winning investment contracts in Guyana sparked some controversy in the country, but public sentiment appears to focus more on the risk of corruption linked to the oil industry rather than China in particular.
x
TREND ▲
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.
TREND ►
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).
President Ali came to power in 2020 pledging to build bridges between the country’s main communities. Two years on, limited progress has been made. In particular, pledges to introduce a constitutional reform have not yet resulted in a formal reform process, although the issue continues to be referred to by both the government and the opposition.
The opposition APNU/AFC is now framing the need for constitutional reform as an ethnic and electoral issue, especially the voters’ list which, the opposition claims is not representative and includes dead and migrated voters in a way that advantages the ruling PPP. The APNU/AFC is now demanding a voter list reform before local elections in early 2023, although this appears unlikely, given the PPP has stated it cannot unilaterally remove names from the list.
As such, there is potential for increased political unrest, especially around the local elections in early 2023. This will mark the half-way point of President Ali’s term, with disillusionment beginning to set in among some of the electorate and the APNU/AFC beginning to position itself for the next presidential and legislative elections. Rhetoric is becoming increasingly antagonistic, with APNU leader Aubrey Norton refusing to shake hands with President Ali on Emancipation Day on August 1, saying, “I do not shake hands with my oppressors”.
The leaders of all political parties have condemned violence and pledged to keep it out of the political arena. However, if rallies take place around the elections, these could spill over into isolated outbreaks of violence, although a broad outbreak is unlikely.
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 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 Anti Money Laundering and Countering the Financing of Terrorism (AML/CFT) regime in recent years.
In July, the government tabled the Anti-Money Laundering and Countering the Financing of Terrorism Amendment Bill 2022 for discussion in the upcoming legislative session. Passage of this amendment would ensure Guyana remains compliant with current international standards relating to AML/CFT.
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, 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 56% in 2022, after growth of 19.9 % in 2021, 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 U.S. dollar-denominated debt, with most of its debt issued in local currency for a primarily domestic market. According to the government’s mid-year budget report, as of the end of June 2022, total public debt stood at USD3.24 billion. Multilateral creditors held 66.6% of the external debt.
Return to contents Next Chapter
