February 19, 2024 • 51 mins
Jay Mandle, a professor emeritus of economics at Colgate University, joins host Arif Rafiq to discuss whether Guyana, now the world's newest petrostate and fastest-growing economy, can leverage its newfound oil wealth to change its destiny and avoid the "resource curse."
By 2035, Guyana could become the world's fourth-largest producer of oil. But it faces a host of challenges in exploiting these resources for the benefit of its population. In this episode, Mandle and Rafiq these obstacles, including climate change, longstanding ethnic and racial divisions, and threats from neighboring Venezuela.
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Guyana: Can the World’s Newest Petrostate Change Its Destiny?
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Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
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You're listening to the Pivot brought to you by Globely News where we discuss the leaders,
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states, networks, ideologies and technologies that are reshaping the world order.
Visit our website at globely.news.
That's globe ly dot news.
Hi everyone, welcome to the Pivot.
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My name is Arif Rafiq and I'm your host.
Since 2021, the tiny South American country of Guyana has been home to the world's fastest
growing economy.
And that growth has been fueled by oil.
Guyana has lots of it.
In fact, Guyana has the largest oil reserves in the world on a per capita basis.
And by 2035, Guyana could be the world's fourth largest producer of oil.
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Guyana's newfound fortune brings with it both promise and peril.
Guyana has long been one of the poorest countries in the Western hemisphere.
And so there's hope that the oil revenues can transform the country's economy and improve
the lives of its people.
But alongside the promise of prosperity, there's also the peril that this opportunity can
be squandered as it has been in so many other resource-rich countries.
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Guyana also faces a host of other challenges to its oil ambitions, including climate change,
longstanding racial divisions, and renewed threats from neighboring Venezuela.
And so to address the question of whether this tiny country of 900,000 people can change
its destiny, rejoined by Dr. Jay Mandel, a professor emeritus of economics at Colgate University,
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and a member of the University of Guyana Green Institute Advisory Board.
Dr. Mandel has studied Guyana for more than half a century and we're very lucky to have
him on.
Dr. Mandel, thank you for joining us.
Arif, thank you for having me.
It's a pleasure to have an opportunity to have a discussion about Guyana.
So Guyana strikes oil in 2015.
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It starts pumping oil by 2020.
I'd like you to help our listeners understand how big a deal this is for Guyana, given the
deep poverty in the country.
What was the state of the economy before oil started being produced?
Yeah, this is an enormous big deal, probably unprecedented in recent history throughout
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the world, where a country which was one of the poorest, comparable to Haiti in the Western
hemisphere, now is the beneficiary of an enormous inflow of, well, which is raising the per capita
GDP of the country soon to be the level close to or not equal to the United States of America,
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which of course shows the misleading nature of using GDP to evidence a standard of living
because in the, in the country, because though the oil has been pumping and the revenues
coming to the government have been skyrocketing.
The question remains, how much of that is distributed to the population in the form of
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rising standards of living.
And it's the nature of the experience with regard to petroleum that means that unless there
is purposeful work to do that kind of distribution, it doesn't occur because the revenue, largely
revenue revenue comes into the government.
The industry does not create very many employment opportunities.
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And so the effect of the revenue is still to be determined by what government policy
is and to date, and it's early days, so it's a little bit unfair to do this, but to date
there has been some but not much redistribution from the government back to the, to the population
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of the country.
Right.
And so, you know, these phenomenal growth figures that we've been hearing in the press,
I think 60% a 60% GDP growth rate last year or in 2022 and then 30% after that, that
only tells a small piece of the story.
And the real question is the distribution of those windfalls and it's very early in the
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game, but at this point, there's no significant demonstrable impact on the average guy needs
person.
And so I think in terms of, you know, the future question, that's ultimately what has to
be the focus and that's going to be the focus of our discussion.
Yeah.
But before we get to the question of these windfalls, along with poverty, Guyana has had
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a longstanding division on the basis of race.
There are two major ethnic groups, the Afro-Caribbean and the Indo-Caribbean and just to summarize
for our listeners, Afro-Caribbean's make up about 30% of the population, they trace their
ancestry back to enslaved Africans who were brought to the Caribbean during the transatlantic
slave trade from the 16th to the 19th centuries.
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Indo-Caribbean's make up a slightly larger percentage of the population, about 40%.
They descend from indentured laborers who brought by the British primarily between the mid-19th
and early 20th century.
And then there are indigenous peoples and communities that are mixed, but these racial
divides have had a really big political impact on the country, the largely shaped voting
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behavior.
And for most of the countries independent history, Guyana gained independence from Britain
in 1966.
It's seen the alternation of power between parties that largely represent one of the two
major racial groups.
Now, a document of my question to you is, how important is race still today in Guyana?
I want to go back because there is a history to this.
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When the first independence movement in Guyana and the effort to shed the country from British
colonialism was created, and this movement was created in the late 1940s.
And into the early 1950s, the leading group, the leading political party called the People's
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Progressive Party was initially bivacial, led by Chetty Jagan on one hand, Indo-Gyenees
and Forbes Burnham on the other hand, and Afro-Gyenees.
And the tragedy of the country was that that alliance broke apart.
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And so it was not as if there have not been significant efforts and some history to a multiracial
Guyana.
But from 1955, when the party split, and then the independence movement was interfered
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with by House side agents, the great great, the colonial power, and the United States
fearing Jagan's flirtation with communism.
So there has been some manipulation that has interfered with what could otherwise perhaps
have been a different history altogether.
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But today, that racial division especially shows up politically, not so much in the social
life of the country, walking down the streets of Georgetown and you don't see any segregation
of the kind that used to exist in the Southern United States.
To come election day, the dominant parties still are racially based, the PPP, the version
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of the PPP that exists now is an Indo-Gyenees party.
The version of the opposition party is largely based upon the Afro-Gyenees electorate.
And this has been harmful.
The fact that there is such a racial and ethnic division has impeded the progress of the
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country to consolidate, and in this case, take advantage of the expert, what limited
expertise is in the country, half of the population, the virtually half of the population is unavailable
to the government to formulate a appropriate policy.
Right, and it seems like the political system is stuck in the past framework that to some
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extent was shaped by the dividing rule policies of outside powers.
There have been attempts by a third party, the alliance for change, to break from this
racial politics that has dominated the country since roughly the post-independence period
into today.
How successful has it been?
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There have been several efforts at what are called third party, third party, politics in
the country, and the AFC was part of those efforts.
Join the opposition party in the election that occurred in 2015, but there were little
electoral support.
And so in the alliance that was created, the AFC had only a small and marginal voice in
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actual policy formation.
And it is unlikely that they will be part of an alliance again when the next election
comes in 2025.
And so though there have been efforts at it, and the most important, in my view, effort
in that regard was in the 1970s when the working people's alliance was quite effective in
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challenging the autocracy of the Burnham government of that period, a movement that was led by
Walter Rodney and Emma, you know, historian and well-known third world activists.
So there have been efforts in that regard, but still the stereotype view of the electoral
process of being dominated by ethnicity and race among the two dominant parties still holds.
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So this political bifurcation, at least for the foreseeable futures is here to stay.
And naturally when you have tens of billions of dollars flowing into a country, the question
of what to do with it is a political question.
And it's the central question of politics of who gets what, when and how, and in a racially
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stratified poor country, this kind of newfound wealth really has a potential to compound
these divides, if not handled correctly.
And we'll get into the question of what to do with the wealth in a bid.
But first I want to talk about the deal itself.
So an Exxon mobile led consortium that consists of has and the state owned China National
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Offshore Oil Corporation or CNOOC discovered offshore oil in Ghana in 2015.
They signed a deal with the Gainese government in 2016.
And that process of oil discovery to contract signing and actual production proceeds very
rapidly.
And there's been some significant criticism that the terms of the deal are simply too much
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in favor of this Exxon mobile led consortium.
So just to go over a few aspects of the deal, you know, the big picture is that it's literally
a sweet deal for Exxon.
Gainer produces light, sweet crude oil.
It's regarded as the best of its kind, its high energy, more efficient and cleaner.
And Gainese oil has a pretty low break even price of around $28.
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In terms of revenue sharing, traditionally we see 75% going to governments and 25% by
the oil producer.
But in this case, Exxon and Gainer are splitting at 50/50 or Exxon led coalition and Gainer are
splitting at 50/50.
The consortium also has a very large leasing area, roughly nine times greater than what
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Exxon average is elsewhere.
And then there's also the question of liability in the event of an accident.
And so this is offshore oil.
And so there's a potential for a spill into the maritime space off of Gainers coast.
And that could impact not just Gainer, but also its neighbors.
And if there is some sort of devastation, Gainer could be fiscally responsible in terms
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of compensating its neighbors and that compensation may, those financial penalties may exceed the
windfalls from this newfound wealth.
So back to you, Dr. Mendel, generally speaking, what is the state of state capacity in Gainer?
I'm talking about regulatory institutions, legal brain power, economic planning bodies.
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All of this points towards how it can manage this relationship with oil producers.
Is Gainer have that capacity right now?
This is the reason the person, it's important to understand history and the importance of
history in assessing contemporary development.
I mean, up until almost, literally the day before yesterday, this was a poor country in which
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its income was largely resulting from the cultivation of rice, the mining of gold to some extent
box.
I, sugar had historically been the remnant source of revenue in the country.
It had fine.
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And so the society was organized and its institutions were functional in a low level, low income
trap, largely agricultural and largely commodities, which did not involve very much processing.
So there was little capacity, virtually no capacity to handle this enormous influx of wealth
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and revenue that was coming from petroleum.
All the more this situation was exacerbated by the fact that the country had experienced
an enormous outflow of migration, one of the highest immigration rates up.
I need skilled, highly educated people in the world.
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And so it's inconceivable that the society could suddenly adjust its institutions, its policies,
its functions to this enormous amount of wealth.
That takes time that institutions have a history, people have a history, and still to this day
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the country is struggling to adapt what was primarily an agricultural, low income country
to a country that is now the beneficiary, that was in quotation marks, to a major inflow
of revenues.
So I mean people are aware of the need to adapt and change the society to these new circumstances
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but that takes a lot of time.
That takes a lot of time and there's a limited window to exploit this opportunity because
we're essentially in a transition towards a post fossil fuel economic order.
And so if they want to take it slow, the value of these commodities could very well dwindle
because the declining use in over supply.
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Yes, but there's a trade off there.
I mean the current government is committed to taking as much petroleum out of the ground
out of the sea as quickly as possible and you could understand the logic of what the
problem is if you they're in doing then the issue that becomes can the wealth be efficiently
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used and to what purpose should the wealth be efficiently used and that takes time and
consideration.
And so the real worry is if they if as they are doing now they are trying to maximize
the outflow there's a cost to doing that that is not being considered and may result at
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the end of the petroleum bloom less diversification less alternative than could otherwise have
been achieved if they had gone more slowly and made their institutional adaptations more
of a priority than is currently the case.
Right, and we'll go deeper into that in a bit.
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But in terms of addressing the question the skills deficit there's also one of the many
conundrums that Guyana faces.
There's an obvious need to train its labor force for skilled jobs in the petroleum sector.
But at the same time its population is very small and so there's a potential that it's also
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losing the opportunities to develop a workforce for a post oil economy.
And so is there a significant potential that let's say a few decades from now we could
have stranded assets both in terms of the infrastructure that's developed but also the
human capital.
We have to be careful because the question of timing is very uncertain.
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There's quite a bit of discussion about when Guyana's petroleum will lose its market.
That's very unlikely that it's going to run out of petroleum but the question of the global
transition away from fossil fuels is an issue and it's very uncertain but people are talking
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about 2050 something like that.
But there is ample time I think between now and whenever that time occurs to move in the
direction of a diversified Diamy's economy.
And that's the reason I myself am not particularly concerned with whether the deal is good, bad,
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or indifferent.
I am much more concerned with how the revenue is being used and used in two potential directions.
One, to do poverty alleviation.
People in the country still are very poor, very low income and may or as a question of how
much of the current generated revenue that goes to the government should be redistributed
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just immediately to alleviate poverty.
And then the second issue is are the resources that are being generated by petroleum being
used in a cautious, careful plan to achieve the diversified economy that really is required
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once the petroleum boom ends.
And so those are the two issues that are aluminum in the country and I consider those to be
the two issues of much greater importance than is the deal good, bad, or indifferent.
Right.
You've zeroed in on the key question of what to do with the money.
Now the scale of this deal and there could be other deals that emerge as a result of
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a contracts that are awarded to other producers.
But the scale of this deal is tremendous on a per capita basis.
And so in 2015 when oil was discovered, the guy has annual budget was roughly 1.1 billion
dollars.
Its GDP was 3.8 billion dollars.
It now earns roughly 1 to 2 billion dollars in annual revenue from the oil production.
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And that's expected to rise over the next decade and beyond as production increases, new
projects come online and the guineas government gets a greater share of revenue.
How exactly has the guineas government been spending this revenue so far?
Well, in the country there is an enormous change going on in its physical appearance.
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Highways are being constructed.
Houses are being constructed.
Hotels are going up all over the place.
And so there is evidence of transformation and the concern is not that there is no change.
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There is a lot of change going on.
But the question of whether there is careful planning, careful management, careful implementation
of all of these activities.
That question is at the moment unresolved.
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The question that is at issue here is when a country becomes the beneficiary of the inflows
that the guiana currently is.
That industry becomes a magnet for other sectors of the economy to be attractive to it.
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Business people, but if there are, there is a guyanese entrepreneurial class of limited skill
and limited financial resources.
And so those business people looking to the future see opportunities to service the petroleum
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industry.
And the market dictates that is what they should do.
So when that happens, however, the private sector becomes attached to and involved with
petroleum.
Were those people, for those business people, to be attracted to and invest in alternative
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industries would be in effect to go against the market.
And the only way that that would occur is if there is public policy incentives of a considerable
amount that would induce business people to make the investments in the alternative sectors
of the economy that they otherwise would not be.
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That takes a very sophisticated public sector that would investigate on its own what are
the industries that could could function in guiana.
What would be required to induce the private sector to make those investments?
If that's not done, the country's economy will remain lopsided in the direction of the
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petroleum.
This is called the resource curse.
And what is not going on sufficiently at this time is the construction of that public
sector institution that can guide the economy in a way that the market alone will not do.
And right now we see a lot of investment or spending on road development and things like
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that are essential in many ways.
But there is the risk that the oil revenue and flows may simply amount to at least in
the short term to well transfer to state preferred contractors like companies that build
roads and other types of public works.
Do we see any indication of greater public spending on education, health care and skills development?
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Well, you know, at the moment there is a major teacher strike going on in the country.
And it's interesting to hear the debate that the government has taken a very strong line
in opposing the teacher's union and its demands arguing that instead of giving the
money, increase money to the teachers, they are building schools and facilities and those
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facilities will enhance the lives of the teachers.
Now there is an argument there and the argument is that there should be a priority that is
assigned to, for example, buildings.
They had a disastrous fire in which a good number of children were killed in the fire.
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So there was a reason to do that.
But this is an issue that should be subjected to discussion and debate.
How much of the money should go to infrastructure?
How much of the money should go to the teachers who, after all, are low paid?
And that kind of discussion having to do with how should the resources that are being generated
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by the petroleum sector, that discussion is not sufficiently engaged in Guyana partially
because of the racial divide, that the way the country is configured politically, the
party that is in power and the ethnic group that is thereby empowered, do not share with
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the opposition party and the different ethnic group.
They don't share enough trust with each other to have this kind of meaningful discussion.
So this teacher strike, which is quite serious, teachers have been out for considerable
time now, kind of illustrates the conundrum that the country faces.
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They have limited human personnel and they can take advantage of only some of it, the
group of the personnel that's associated with the political party that is in power.
And so the hashing out of how actually to use this resource in the most efficient way,
which takes the liberation and discussion doesn't sufficiently happen.
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Right.
They focused on building a consensus in terms of how to use this money that would not only
add to stability, to policy making and help ensure that the public interest is better
mad, but it also helps ensure that some of these decisions are not overturned by it by
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the next government.
Good point.
That's right.
Yeah.
So in terms of these different potential uses for the funds, there are host of other energy
producing countries that have adopted different models, some quite close to Ghana and others
quite distant.
And so let's start with some of Ghana's neighbors, Venezuela, Trinidad and even Suriname,
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are oil producers?
Are there any lessons to be learned from their experiences?
I know a great deal more about Trinidad and Tobago than I do about Venezuela.
Everybody knows that Venezuela has been a disaster in terms of avoiding the resource curse.
Trinidad is an interesting case where they had, not nearly as much as Ghana, but they had
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a tremendous boom and there was really quite an extensive discussion about how to proceed
with it.
And the two sides in the discussion were something similar to what I think will occur in
Ghana now.
On one hand, there was the side that says domestic content means that we can hire, a lot
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of firms can engage in contracts with the petroleum sector and the private sector, the
firms that provide these services to the Trinidad and Tobago petroleum sector, will by virtue
of their providing those services become skilled and able to use the skills that they
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learn in servicing the petroleum sector.
That will help Trinidad and Tobago become a modern economy.
The other side said no, they get trapped, you know, the kind of argument that I was just
making, they get trapped in providing continued services to the petroleum sector and then
therefore when as has occurred in Trinidad and Tobago petroleum receipts and importance
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and they're left with some sector left natural gases important on the lopsided nature of
the economy because of the resource, the attraction is the attraction of the resource,
resources of the petroleum.
The attraction then means that when petroleum receives, they're back to a single kind of
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economy in which they're not diversified but much poorer.
So the lesson from Trinidad and Tobago, I think is one that is important that Diana's
look at because it's the same experience in Trinidad, the Trinidad that's going to eventually
occurring Diana and between now and then it's important to build a non-petroleum sector
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of the economy that can survive after petroleum is gone.
Right.
And you know, other oil rich regions and countries have taken distinct approaches in terms
of managing oil revenue and even directing some of it towards their populations in a
direct way through dividend payments.
So for example, Alaska has the Alaska permanent fund and you know, last year roughly $1,300
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were paid to each of its residents in the form of an annual dividend.
Other countries such as Norway have established sovereign wealth funds that are pretty exemplary
in terms of their transparency and prudent managing of these funds.
Diana has established what's described as a sovereign wealth fund, the natural resource
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fund.
What do we know about it?
Well, we know it's big and we also know that government has been tempted to tap into
that to an extent that was not anticipated a hell of thought.
That's a temptation that exists because this whole process of what's due with the wealth
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has not been subjected to care for deliberation and discussion.
The issue that you raised, the issue of providing a grant to the population such as exists
that's in Alaska has been discussed in Diana.
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It's under the heading of what's called the Buckston proposal.
This was initiated by a now retired economics professor at the University of Diana Clyde
Thomas.
It has not neither party has taken this as a proposal that it wants to carry into power.
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It's obviously the single most rapid way of inducing poverty in the country.
Nothing would beat it, especially as I mentioned before, the industry is not labor intensive.
The revenue that comes into the country, petroleum goes to only a few individuals and so allocating
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this amount of some substantial amount of that inflow to the population would do wonders
for the reduction in poverty.
There are obvious arguments made that perhaps it will provide a decent Senate for the people
to want to engage labor force.
I doubt it.
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That's not the problem in Alaska and I doubt that the problem with Diana.
Another related part of it, Diana has a reputation for being subject to considerable amount
of corruption.
Well, the amount of corruption that would be feasible would be considerably reduced if
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a large fraction of the money that comes into the government went directly to the population
rather than in the hands of public officials who are under continuous temptation to take
their more than their fair cut out of that money.
I return, for example, in all of the discussion that we've had, that there has not been sufficient
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hair and deliberation and maybe even a slow way of the process of allocating to infrastructure
and buildings and highways and the rush to spend may come at a cost that will be experienced
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in the future when the opportunities to use the wealth for diversification will have
not been adequate.
Right, right.
At least a partial direct transfer to all adult citizens would at least ensure that everyone
at least has a sense that they're getting a piece of the pie.
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Another argument with regard to that, the one that I adopted and discussed with people
in Diana but with Tenoevel, I must say is that the party that accepts a universal grant
will no doubt win over some adherence from the ethnic group that they are weak with.
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It would be a way of breaking down the ethnic division of the political process and I'm
afraid that that has been rejected because the leadership of the two divisions in the
political process have an estimate interest in the division because it seems to me clear
that the one party provided resources to the opposition population, that would be a mechanism
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for breaking down the ethnic division and they had not taken advantage of it.
Right, yeah.
And if you look at both how the elections turn out in terms of the split between the two
largest parties, it overlaps with largely aligns with the ethnic division.
So this 40, 30 split, roughly a 50, 40 split to some extent in terms of the general elections.
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So the politics is very much frozen and it disincentivizes political actors who are concerned
with electoral timelines to really try adopt measures that break the status quo.
That's right.
So another complication for Ghana is this question of climate change and here Ghana finds itself
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in a bit of a paradoxical situation.
It faces the threat and an immediate threat of rising sea levels and so the more oil the
world uses, at least they're radically speaking, the more acute Ghana's climate crisis becomes,
or the climate threat becomes.
But at the same time, somewhat say it would be crazy for Ghana and not to avail itself
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of this immediate opportunity in terms of these, the inflows of billions of dollars from
oil revenues.
Before we get to the specifics of Ghana's climate challenge, one possibility is that
developed countries simply pay Ghana not to extract its oil.
Do you find that proposal to be practical?
Well, no.
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And there has been way to bit of discussion at the cup.
One of the United Nations meetings with regard to climate change, quite a bit of discussion
with regard to precisely that.
And it pertains in Ghana with respect to the tropical rainforest, which is a wonderful
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carbon sink and is a resource in the struggle with regard to climate change that has to
be preserved.
So Ghana has recently obtained some funding to be to compensate it for preserving the
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forest, but it is limited and it has been under great duress to get this thing done.
Mostly this discussion has been of frustrating to countries of the south.
We have to all have not been the source of climate change because what they are asking
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for is resources to allow them to adapt to climate change.
And though at the recent COP28 meeting, there was a very serious discussion of that provided
by the countries of the south, but the donors have been very reluctant to provide the level
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of resources that would require to do that.
This is a question, this is really an ethical question because the victimization comes from
a handful of the developed countries.
The countries that are the victims are asking for compensation and it has been very slow
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and very inadequately provided to them.
I doubt that that is going to change very much.
So I guess with respect to the question that you raised, is it feasible?
Is it realistic?
I think it is unlikely.
Guyana is itself going to be both the source of the petroleum and therefore contribute to
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climate change.
I can't accept, I do not accept that Guyana should issue the benefits of petroleum.
That would be something that would be so outrageously irresponsible with respect to the
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poverty in the country that I can't accept that.
On the other hand, Guyana at the same time is going to be the victim of climate change.
90% of the population of Guyana lives on the coastal plain that is both below sea level
and going to and is threatened from inundation from the interior.
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Guyana is going to be confronted with the need to re-displace, they're going to be confronting
the problem of displacement of the population from the coastal plain to other places in
the country.
Then that in turn then threatens the question of where they're going to go is the tropical
rainforest going to be decimated in order to provide locations for these people to live.
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So Guyana is caught in the in between both as a petroleum producer and in that sense a
contributor to climate change but on the other hand that provides a very amount of wealth
to the country.
And then on the other hand as sea rise occurs the coastal plain is going to be inundated
and country will be the victim of the process.
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Talk about a paradox there is a definite paradox.
Right, right.
And I share your realism.
You know when we look at developed countries they've talked the talk on climate and compensating
developing countries for pollution that they've caused and along their paths toward becoming
developed countries but they really haven't walked the walk and so whenever we have these
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cop meetings recently they've been held in oil producing states for the UAE.
And now Azerbaijan this year and developing countries really have to squeeze as much as
they can out of developed states and so there's a lot of this performative talk about climate
and it often amounts to greenwashing what are very damaging economic policies of these countries
(40:57):
over the past decade and even till today.
And it should be noted that Guyana has done a pretty good job in terms of preserving its
forests and it's overperformed in many ways compared to many other countries and so what
it's facing on its coastline is quite tragic given that all that into account.
Now getting to what's happening on its coastline you'd already addressed it to some degree
(41:20):
but we have around 90% of its population lives along the coast and there's talk of its
capital Georgetown being inundated with water by 2030 could be submerged by 2030.
There are some of these very dire predictions and so this is not simply just a PowerPoint
(41:42):
presentation by a climate activist you know filled with dark scenarios the clock is literally
ticking and and there are plans to shift much of the populace towards I guess the central
part of the country there's plans for developing the smart city, silica city.
Could you talk to us about what the Guineas government is trying to do in terms of shifting
(42:06):
its population from this coastal area to the center?
There are three forms of the emigrific change that the country is going to have to confront
soon.
One is the one we just finished talking about.
The fact that a substantial number of the Guineas population is going to have to move
from the coastal plain to someplace else.
(42:28):
That's one internal migratory flow.
A second migratory flow is into the country.
That is the form of the skill workers that the industry, the petroleum industry will require
and which are not available domestically.
And then third there's another flow, a flow of low income, not very technically skilled
(42:53):
people who will be attracted to the country by virtue of the wealth and the spillover that
comes from the wealth from petroleum.
So at the moment the country is looking in the next five, ten years at a substantial
dislocation of its population from the coast on one hand and an inflow of people servicing
(43:21):
the industry and attracted to the industry.
This will require a major change in the spatial distribution and location of the population.
Up on the road from the coast to Lyndon, what's called the Sazdike Lyndon Highway, the
(43:43):
government is constructing a new city, land which they've called Silica City.
Very little of the detail of the city has been made public.
It's being designed interestingly enough not by Gainese but by the architects and other
(44:04):
technical people at the University of Miami.
The little that has been made available seems to suggest that it is being designed for the
technical people who will be servicing the industry and coming in one of the three inflows
(44:26):
of the population.
It's not designed for very large numbers of people.
It is relatively small and it is perhaps a partial response to the dislocation that's
going to go on as I say.
It looks like it's going to be responsive to the inflow of technical people.
(44:49):
At the moment the population dislocations that will occur from the coast and from the people
who are for example being attracted from Venezuela who are not technically skilled but are just
attracted to the industry.
That remains an unresolved problem and the Silica City almost certainly is only the beginning
(45:16):
of the process of the construction of alternative places for the people to live.
That's not an easy thing to do when the constraint with regard to the forest is introduced a couple
years ago.
I now regret because I sort of made the argument that it was easy to find the relocations
(45:44):
for the people that were affected by climate change in the interior.
Now I have my doubts because of the need to both protect the forest and in addition protect
the population that lives in the forest, people are called Amerindian people.
(46:04):
It will require quite some serious thinking about where the dislocated people from the coast
and the people who are coming into the country will have to be re-resied.
As you mentioned the capital city almost certainly is going to have to be relocated and pretty
soon as you mentioned the projection is that they're going to be inundated by 2030.
(46:31):
It's not easy to relocate a capital city.
This is not just the question of population, it's the institution's agraromate that makes
the country function.
Right.
Re-settling this massive population will have costs and it could eat in too much of the oil
revenue.
So Ghana could end up breaking even as a result of all this.
(46:52):
It depends on the numbers and there are a lot of variables involved.
But this is a very costly venture and when you move people you have to make sure that
they have employment opportunities not just places of residence and so you have to create
an economic ecosystem out of scratch.
And then the question of the ethnic division in the country arises as well.
(47:13):
Is one group going to be favored compared to the other group and what kind of social
intentions will be result will result right now that is perceived in the question of people
being upset in the first place because they have to move.
Right.
And so that's why it points to the need for consensus based decisions to kind of ensure
that people's needs are being met and we don't have disagreement down the road and
(47:37):
disgruntlement and successor governments overturning decisions because to move thousands, tens
of thousands of people are more is a huge decision and to have people stuck in a state of
limbo is simply in terms of where they reside is something that's going to not just up end
people but potentially anger at them.
(47:58):
Yep.
Now, we're nearing the end of our discussion and what other complication for Ghana is that
neighboring Venezuela has renewed claims over Ghana's esokable region which makes up 40%
of Ghana's land area and it's off the coast of this region where the current oil is being
produced and Venezuela had conducted a referendum in December, essentially a sham referendum
(48:22):
and it gives, it notionally gives the government the authority to try to quote unquote reclaim
this area.
It's also bolstered.
It's military presence nearby and in the short term it looks like these threats from the
Maduro regime are about posturing locally ahead of elections and maybe trying to intimidate
the Ghana's government and getting some concessions from it but down the road there is the potential
(48:47):
that Ghana may also have to spend more money on securing its borders and that would take
away money that could be directed at bettering its own people.
Now, a final question, if you were asked by the Ghana's government for advice on how to
best leverage the bananza.
If they asked you to make three recommendations, what would they be?
(49:07):
Well, obviously the first one is education to be a successful participant in the global
economy means that the population of Ghana would be much better educated as now.
Secondly, I, myself, would recommend the part of at least a substantial part that revenue
(49:35):
coming in the distributed in a universal way to do something like ask, unless I do so for
two reasons.
One, because the best way to eliminate or reduce poverty in the country and secondly, because
it has the potential of breaking down the political division, the necessary.
(49:58):
And then third, I would take advantage of the spirit that countries have had in trying
to move an economy in the direction away from what the markets will dictate and to the
creation of a diversified modern economy.
(50:21):
And for that, what would be required is, listen to the creation of the highly trained
center of experts with respect to investment decisions and allocation decisions, called
to creating a free alternative economy.
(50:43):
One is central to everything.
Hovery alleviation is the desired outcome, identifying institutions and society which would
move the society away from its monodabell of just petroleum and to create a diversified
economy.
(51:05):
All of that is very hard to expect to occur when a country is spending as it comes in maximizing
current expenditures and have not taken the opportunity to seriously contemplate what is
the feature really going to look like post petroleum.
(51:28):
And that was Dr. J. Mandel of Colgate University.
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(00:07):
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Hi everyone, welcome to the Pivot.
(00:28):
My name is Arif Rafiq and I'm your host.
Since 2021, the tiny South American country of Guyana has been home to the world's fastest
growing economy.
And that growth has been fueled by oil.
Guyana has lots of it.
In fact, Guyana has the largest oil reserves in the world on a per capita basis.
And by 2035, Guyana could be the world's fourth largest producer of oil.
(00:53):
Guyana's newfound fortune brings with it both promise and peril.
Guyana has long been one of the poorest countries in the Western hemisphere.
And so there's hope that the oil revenues can transform the country's economy and improve
the lives of its people.
But alongside the promise of prosperity, there's also the peril that this opportunity can
be squandered as it has been in so many other resource-rich countries.
(01:18):
Guyana also faces a host of other challenges to its oil ambitions, including climate change,
longstanding racial divisions, and renewed threats from neighboring Venezuela.
And so to address the question of whether this tiny country of 900,000 people can change
its destiny, rejoined by Dr. Jay Mandel, a professor emeritus of economics at Colgate University,
(01:42):
and a member of the University of Guyana Green Institute Advisory Board.
Dr. Mandel has studied Guyana for more than half a century and we're very lucky to have
him on.
Dr. Mandel, thank you for joining us.
Arif, thank you for having me.
It's a pleasure to have an opportunity to have a discussion about Guyana.
So Guyana strikes oil in 2015.
(02:03):
It starts pumping oil by 2020.
I'd like you to help our listeners understand how big a deal this is for Guyana, given the
deep poverty in the country.
What was the state of the economy before oil started being produced?
Yeah, this is an enormous big deal, probably unprecedented in recent history throughout
(02:23):
the world, where a country which was one of the poorest, comparable to Haiti in the Western
hemisphere, now is the beneficiary of an enormous inflow of, well, which is raising the per capita
GDP of the country soon to be the level close to or not equal to the United States of America,
(02:49):
which of course shows the misleading nature of using GDP to evidence a standard of living
because in the, in the country, because though the oil has been pumping and the revenues
coming to the government have been skyrocketing.
The question remains, how much of that is distributed to the population in the form of
(03:12):
rising standards of living.
And it's the nature of the experience with regard to petroleum that means that unless there
is purposeful work to do that kind of distribution, it doesn't occur because the revenue, largely
revenue revenue comes into the government.
The industry does not create very many employment opportunities.
(03:36):
And so the effect of the revenue is still to be determined by what government policy
is and to date, and it's early days, so it's a little bit unfair to do this, but to date
there has been some but not much redistribution from the government back to the, to the population
(03:58):
of the country.
Right.
And so, you know, these phenomenal growth figures that we've been hearing in the press,
I think 60% a 60% GDP growth rate last year or in 2022 and then 30% after that, that
only tells a small piece of the story.
And the real question is the distribution of those windfalls and it's very early in the
(04:21):
game, but at this point, there's no significant demonstrable impact on the average guy needs
person.
And so I think in terms of, you know, the future question, that's ultimately what has to
be the focus and that's going to be the focus of our discussion.
Yeah.
But before we get to the question of these windfalls, along with poverty, Guyana has had
(04:41):
a longstanding division on the basis of race.
There are two major ethnic groups, the Afro-Caribbean and the Indo-Caribbean and just to summarize
for our listeners, Afro-Caribbean's make up about 30% of the population, they trace their
ancestry back to enslaved Africans who were brought to the Caribbean during the transatlantic
slave trade from the 16th to the 19th centuries.
(05:03):
Indo-Caribbean's make up a slightly larger percentage of the population, about 40%.
They descend from indentured laborers who brought by the British primarily between the mid-19th
and early 20th century.
And then there are indigenous peoples and communities that are mixed, but these racial
divides have had a really big political impact on the country, the largely shaped voting
(05:27):
behavior.
And for most of the countries independent history, Guyana gained independence from Britain
in 1966.
It's seen the alternation of power between parties that largely represent one of the two
major racial groups.
Now, a document of my question to you is, how important is race still today in Guyana?
I want to go back because there is a history to this.
(05:53):
When the first independence movement in Guyana and the effort to shed the country from British
colonialism was created, and this movement was created in the late 1940s.
And into the early 1950s, the leading group, the leading political party called the People's
(06:17):
Progressive Party was initially bivacial, led by Chetty Jagan on one hand, Indo-Gyenees
and Forbes Burnham on the other hand, and Afro-Gyenees.
And the tragedy of the country was that that alliance broke apart.
(06:38):
And so it was not as if there have not been significant efforts and some history to a multiracial
Guyana.
But from 1955, when the party split, and then the independence movement was interfered
(06:58):
with by House side agents, the great great, the colonial power, and the United States
fearing Jagan's flirtation with communism.
So there has been some manipulation that has interfered with what could otherwise perhaps
have been a different history altogether.
(07:19):
But today, that racial division especially shows up politically, not so much in the social
life of the country, walking down the streets of Georgetown and you don't see any segregation
of the kind that used to exist in the Southern United States.
To come election day, the dominant parties still are racially based, the PPP, the version
(07:43):
of the PPP that exists now is an Indo-Gyenees party.
The version of the opposition party is largely based upon the Afro-Gyenees electorate.
And this has been harmful.
The fact that there is such a racial and ethnic division has impeded the progress of the
(08:07):
country to consolidate, and in this case, take advantage of the expert, what limited
expertise is in the country, half of the population, the virtually half of the population is unavailable
to the government to formulate a appropriate policy.
Right, and it seems like the political system is stuck in the past framework that to some
(08:31):
extent was shaped by the dividing rule policies of outside powers.
There have been attempts by a third party, the alliance for change, to break from this
racial politics that has dominated the country since roughly the post-independence period
into today.
How successful has it been?
(08:52):
There have been several efforts at what are called third party, third party, politics in
the country, and the AFC was part of those efforts.
Join the opposition party in the election that occurred in 2015, but there were little
electoral support.
And so in the alliance that was created, the AFC had only a small and marginal voice in
(09:19):
actual policy formation.
And it is unlikely that they will be part of an alliance again when the next election
comes in 2025.
And so though there have been efforts at it, and the most important, in my view, effort
in that regard was in the 1970s when the working people's alliance was quite effective in
(09:45):
challenging the autocracy of the Burnham government of that period, a movement that was led by
Walter Rodney and Emma, you know, historian and well-known third world activists.
So there have been efforts in that regard, but still the stereotype view of the electoral
process of being dominated by ethnicity and race among the two dominant parties still holds.
(10:13):
So this political bifurcation, at least for the foreseeable futures is here to stay.
And naturally when you have tens of billions of dollars flowing into a country, the question
of what to do with it is a political question.
And it's the central question of politics of who gets what, when and how, and in a racially
(10:35):
stratified poor country, this kind of newfound wealth really has a potential to compound
these divides, if not handled correctly.
And we'll get into the question of what to do with the wealth in a bid.
But first I want to talk about the deal itself.
So an Exxon mobile led consortium that consists of has and the state owned China National
(10:57):
Offshore Oil Corporation or CNOOC discovered offshore oil in Ghana in 2015.
They signed a deal with the Gainese government in 2016.
And that process of oil discovery to contract signing and actual production proceeds very
rapidly.
And there's been some significant criticism that the terms of the deal are simply too much
(11:20):
in favor of this Exxon mobile led consortium.
So just to go over a few aspects of the deal, you know, the big picture is that it's literally
a sweet deal for Exxon.
Gainer produces light, sweet crude oil.
It's regarded as the best of its kind, its high energy, more efficient and cleaner.
And Gainese oil has a pretty low break even price of around $28.
(11:44):
In terms of revenue sharing, traditionally we see 75% going to governments and 25% by
the oil producer.
But in this case, Exxon and Gainer are splitting at 50/50 or Exxon led coalition and Gainer are
splitting at 50/50.
The consortium also has a very large leasing area, roughly nine times greater than what
(12:08):
Exxon average is elsewhere.
And then there's also the question of liability in the event of an accident.
And so this is offshore oil.
And so there's a potential for a spill into the maritime space off of Gainers coast.
And that could impact not just Gainer, but also its neighbors.
And if there is some sort of devastation, Gainer could be fiscally responsible in terms
(12:30):
of compensating its neighbors and that compensation may, those financial penalties may exceed the
windfalls from this newfound wealth.
So back to you, Dr. Mendel, generally speaking, what is the state of state capacity in Gainer?
I'm talking about regulatory institutions, legal brain power, economic planning bodies.
(12:54):
All of this points towards how it can manage this relationship with oil producers.
Is Gainer have that capacity right now?
This is the reason the person, it's important to understand history and the importance of
history in assessing contemporary development.
I mean, up until almost, literally the day before yesterday, this was a poor country in which
(13:21):
its income was largely resulting from the cultivation of rice, the mining of gold to some extent
box.
I, sugar had historically been the remnant source of revenue in the country.
It had fine.
(13:42):
And so the society was organized and its institutions were functional in a low level, low income
trap, largely agricultural and largely commodities, which did not involve very much processing.
So there was little capacity, virtually no capacity to handle this enormous influx of wealth
(14:09):
and revenue that was coming from petroleum.
All the more this situation was exacerbated by the fact that the country had experienced
an enormous outflow of migration, one of the highest immigration rates up.
I need skilled, highly educated people in the world.
(14:30):
And so it's inconceivable that the society could suddenly adjust its institutions, its policies,
its functions to this enormous amount of wealth.
That takes time that institutions have a history, people have a history, and still to this day
(14:52):
the country is struggling to adapt what was primarily an agricultural, low income country
to a country that is now the beneficiary, that was in quotation marks, to a major inflow
of revenues.
So I mean people are aware of the need to adapt and change the society to these new circumstances
(15:19):
but that takes a lot of time.
That takes a lot of time and there's a limited window to exploit this opportunity because
we're essentially in a transition towards a post fossil fuel economic order.
And so if they want to take it slow, the value of these commodities could very well dwindle
because the declining use in over supply.
(15:39):
Yes, but there's a trade off there.
I mean the current government is committed to taking as much petroleum out of the ground
out of the sea as quickly as possible and you could understand the logic of what the
problem is if you they're in doing then the issue that becomes can the wealth be efficiently
(16:00):
used and to what purpose should the wealth be efficiently used and that takes time and
consideration.
And so the real worry is if they if as they are doing now they are trying to maximize
the outflow there's a cost to doing that that is not being considered and may result at
(16:23):
the end of the petroleum bloom less diversification less alternative than could otherwise have
been achieved if they had gone more slowly and made their institutional adaptations more
of a priority than is currently the case.
Right, and we'll go deeper into that in a bit.
(16:45):
But in terms of addressing the question the skills deficit there's also one of the many
conundrums that Guyana faces.
There's an obvious need to train its labor force for skilled jobs in the petroleum sector.
But at the same time its population is very small and so there's a potential that it's also
(17:08):
losing the opportunities to develop a workforce for a post oil economy.
And so is there a significant potential that let's say a few decades from now we could
have stranded assets both in terms of the infrastructure that's developed but also the
human capital.
We have to be careful because the question of timing is very uncertain.
(17:32):
There's quite a bit of discussion about when Guyana's petroleum will lose its market.
That's very unlikely that it's going to run out of petroleum but the question of the global
transition away from fossil fuels is an issue and it's very uncertain but people are talking
(17:52):
about 2050 something like that.
But there is ample time I think between now and whenever that time occurs to move in the
direction of a diversified Diamy's economy.
And that's the reason I myself am not particularly concerned with whether the deal is good, bad,
(18:18):
or indifferent.
I am much more concerned with how the revenue is being used and used in two potential directions.
One, to do poverty alleviation.
People in the country still are very poor, very low income and may or as a question of how
much of the current generated revenue that goes to the government should be redistributed
(18:42):
just immediately to alleviate poverty.
And then the second issue is are the resources that are being generated by petroleum being
used in a cautious, careful plan to achieve the diversified economy that really is required
(19:02):
once the petroleum boom ends.
And so those are the two issues that are aluminum in the country and I consider those to be
the two issues of much greater importance than is the deal good, bad, or indifferent.
Right.
You've zeroed in on the key question of what to do with the money.
Now the scale of this deal and there could be other deals that emerge as a result of
(19:26):
a contracts that are awarded to other producers.
But the scale of this deal is tremendous on a per capita basis.
And so in 2015 when oil was discovered, the guy has annual budget was roughly 1.1 billion
dollars.
Its GDP was 3.8 billion dollars.
It now earns roughly 1 to 2 billion dollars in annual revenue from the oil production.
(19:51):
And that's expected to rise over the next decade and beyond as production increases, new
projects come online and the guineas government gets a greater share of revenue.
How exactly has the guineas government been spending this revenue so far?
Well, in the country there is an enormous change going on in its physical appearance.
(20:15):
Highways are being constructed.
Houses are being constructed.
Hotels are going up all over the place.
And so there is evidence of transformation and the concern is not that there is no change.
(20:36):
There is a lot of change going on.
But the question of whether there is careful planning, careful management, careful implementation
of all of these activities.
That question is at the moment unresolved.
(20:58):
The question that is at issue here is when a country becomes the beneficiary of the inflows
that the guiana currently is.
That industry becomes a magnet for other sectors of the economy to be attractive to it.
(21:20):
Business people, but if there are, there is a guyanese entrepreneurial class of limited skill
and limited financial resources.
And so those business people looking to the future see opportunities to service the petroleum
(21:46):
industry.
And the market dictates that is what they should do.
So when that happens, however, the private sector becomes attached to and involved with
petroleum.
Were those people, for those business people, to be attracted to and invest in alternative
(22:10):
industries would be in effect to go against the market.
And the only way that that would occur is if there is public policy incentives of a considerable
amount that would induce business people to make the investments in the alternative sectors
of the economy that they otherwise would not be.
(22:35):
That takes a very sophisticated public sector that would investigate on its own what are
the industries that could could function in guiana.
What would be required to induce the private sector to make those investments?
If that's not done, the country's economy will remain lopsided in the direction of the
(22:57):
petroleum.
This is called the resource curse.
And what is not going on sufficiently at this time is the construction of that public
sector institution that can guide the economy in a way that the market alone will not do.
And right now we see a lot of investment or spending on road development and things like
(23:21):
that are essential in many ways.
But there is the risk that the oil revenue and flows may simply amount to at least in
the short term to well transfer to state preferred contractors like companies that build
roads and other types of public works.
Do we see any indication of greater public spending on education, health care and skills development?
(23:45):
Well, you know, at the moment there is a major teacher strike going on in the country.
And it's interesting to hear the debate that the government has taken a very strong line
in opposing the teacher's union and its demands arguing that instead of giving the
money, increase money to the teachers, they are building schools and facilities and those
(24:15):
facilities will enhance the lives of the teachers.
Now there is an argument there and the argument is that there should be a priority that is
assigned to, for example, buildings.
They had a disastrous fire in which a good number of children were killed in the fire.
(24:37):
So there was a reason to do that.
But this is an issue that should be subjected to discussion and debate.
How much of the money should go to infrastructure?
How much of the money should go to the teachers who, after all, are low paid?
And that kind of discussion having to do with how should the resources that are being generated
(25:03):
by the petroleum sector, that discussion is not sufficiently engaged in Guyana partially
because of the racial divide, that the way the country is configured politically, the
party that is in power and the ethnic group that is thereby empowered, do not share with
(25:24):
the opposition party and the different ethnic group.
They don't share enough trust with each other to have this kind of meaningful discussion.
So this teacher strike, which is quite serious, teachers have been out for considerable
time now, kind of illustrates the conundrum that the country faces.
(25:50):
They have limited human personnel and they can take advantage of only some of it, the
group of the personnel that's associated with the political party that is in power.
And so the hashing out of how actually to use this resource in the most efficient way,
which takes the liberation and discussion doesn't sufficiently happen.
(26:13):
Right.
They focused on building a consensus in terms of how to use this money that would not only
add to stability, to policy making and help ensure that the public interest is better
mad, but it also helps ensure that some of these decisions are not overturned by it by
(26:34):
the next government.
Good point.
That's right.
Yeah.
So in terms of these different potential uses for the funds, there are host of other energy
producing countries that have adopted different models, some quite close to Ghana and others
quite distant.
And so let's start with some of Ghana's neighbors, Venezuela, Trinidad and even Suriname,
(27:00):
are oil producers?
Are there any lessons to be learned from their experiences?
I know a great deal more about Trinidad and Tobago than I do about Venezuela.
Everybody knows that Venezuela has been a disaster in terms of avoiding the resource curse.
Trinidad is an interesting case where they had, not nearly as much as Ghana, but they had
(27:28):
a tremendous boom and there was really quite an extensive discussion about how to proceed
with it.
And the two sides in the discussion were something similar to what I think will occur in
Ghana now.
On one hand, there was the side that says domestic content means that we can hire, a lot
(27:54):
of firms can engage in contracts with the petroleum sector and the private sector, the
firms that provide these services to the Trinidad and Tobago petroleum sector, will by virtue
of their providing those services become skilled and able to use the skills that they
(28:23):
learn in servicing the petroleum sector.
That will help Trinidad and Tobago become a modern economy.
The other side said no, they get trapped, you know, the kind of argument that I was just
making, they get trapped in providing continued services to the petroleum sector and then
therefore when as has occurred in Trinidad and Tobago petroleum receipts and importance
(28:53):
and they're left with some sector left natural gases important on the lopsided nature of
the economy because of the resource, the attraction is the attraction of the resource,
resources of the petroleum.
The attraction then means that when petroleum receives, they're back to a single kind of
(29:19):
economy in which they're not diversified but much poorer.
So the lesson from Trinidad and Tobago, I think is one that is important that Diana's
look at because it's the same experience in Trinidad, the Trinidad that's going to eventually
occurring Diana and between now and then it's important to build a non-petroleum sector
(29:46):
of the economy that can survive after petroleum is gone.
Right.
And you know, other oil rich regions and countries have taken distinct approaches in terms
of managing oil revenue and even directing some of it towards their populations in a
direct way through dividend payments.
So for example, Alaska has the Alaska permanent fund and you know, last year roughly $1,300
(30:09):
were paid to each of its residents in the form of an annual dividend.
Other countries such as Norway have established sovereign wealth funds that are pretty exemplary
in terms of their transparency and prudent managing of these funds.
Diana has established what's described as a sovereign wealth fund, the natural resource
(30:30):
fund.
What do we know about it?
Well, we know it's big and we also know that government has been tempted to tap into
that to an extent that was not anticipated a hell of thought.
That's a temptation that exists because this whole process of what's due with the wealth
(30:52):
has not been subjected to care for deliberation and discussion.
The issue that you raised, the issue of providing a grant to the population such as exists
that's in Alaska has been discussed in Diana.
(31:13):
It's under the heading of what's called the Buckston proposal.
This was initiated by a now retired economics professor at the University of Diana Clyde
Thomas.
It has not neither party has taken this as a proposal that it wants to carry into power.
(31:40):
It's obviously the single most rapid way of inducing poverty in the country.
Nothing would beat it, especially as I mentioned before, the industry is not labor intensive.
The revenue that comes into the country, petroleum goes to only a few individuals and so allocating
(32:04):
this amount of some substantial amount of that inflow to the population would do wonders
for the reduction in poverty.
There are obvious arguments made that perhaps it will provide a decent Senate for the people
to want to engage labor force.
I doubt it.
(32:24):
That's not the problem in Alaska and I doubt that the problem with Diana.
Another related part of it, Diana has a reputation for being subject to considerable amount
of corruption.
Well, the amount of corruption that would be feasible would be considerably reduced if
(32:45):
a large fraction of the money that comes into the government went directly to the population
rather than in the hands of public officials who are under continuous temptation to take
their more than their fair cut out of that money.
I return, for example, in all of the discussion that we've had, that there has not been sufficient
(33:12):
hair and deliberation and maybe even a slow way of the process of allocating to infrastructure
and buildings and highways and the rush to spend may come at a cost that will be experienced
(33:32):
in the future when the opportunities to use the wealth for diversification will have
not been adequate.
Right, right.
At least a partial direct transfer to all adult citizens would at least ensure that everyone
at least has a sense that they're getting a piece of the pie.
(33:53):
Another argument with regard to that, the one that I adopted and discussed with people
in Diana but with Tenoevel, I must say is that the party that accepts a universal grant
will no doubt win over some adherence from the ethnic group that they are weak with.
(34:18):
It would be a way of breaking down the ethnic division of the political process and I'm
afraid that that has been rejected because the leadership of the two divisions in the
political process have an estimate interest in the division because it seems to me clear
that the one party provided resources to the opposition population, that would be a mechanism
(34:45):
for breaking down the ethnic division and they had not taken advantage of it.
Right, yeah.
And if you look at both how the elections turn out in terms of the split between the two
largest parties, it overlaps with largely aligns with the ethnic division.
So this 40, 30 split, roughly a 50, 40 split to some extent in terms of the general elections.
(35:10):
So the politics is very much frozen and it disincentivizes political actors who are concerned
with electoral timelines to really try adopt measures that break the status quo.
That's right.
So another complication for Ghana is this question of climate change and here Ghana finds itself
(35:33):
in a bit of a paradoxical situation.
It faces the threat and an immediate threat of rising sea levels and so the more oil the
world uses, at least they're radically speaking, the more acute Ghana's climate crisis becomes,
or the climate threat becomes.
But at the same time, somewhat say it would be crazy for Ghana and not to avail itself
(35:54):
of this immediate opportunity in terms of these, the inflows of billions of dollars from
oil revenues.
Before we get to the specifics of Ghana's climate challenge, one possibility is that
developed countries simply pay Ghana not to extract its oil.
Do you find that proposal to be practical?
Well, no.
(36:17):
And there has been way to bit of discussion at the cup.
One of the United Nations meetings with regard to climate change, quite a bit of discussion
with regard to precisely that.
And it pertains in Ghana with respect to the tropical rainforest, which is a wonderful
(36:39):
carbon sink and is a resource in the struggle with regard to climate change that has to
be preserved.
So Ghana has recently obtained some funding to be to compensate it for preserving the
(37:00):
forest, but it is limited and it has been under great duress to get this thing done.
Mostly this discussion has been of frustrating to countries of the south.
We have to all have not been the source of climate change because what they are asking
(37:22):
for is resources to allow them to adapt to climate change.
And though at the recent COP28 meeting, there was a very serious discussion of that provided
by the countries of the south, but the donors have been very reluctant to provide the level
(37:44):
of resources that would require to do that.
This is a question, this is really an ethical question because the victimization comes from
a handful of the developed countries.
The countries that are the victims are asking for compensation and it has been very slow
(38:10):
and very inadequately provided to them.
I doubt that that is going to change very much.
So I guess with respect to the question that you raised, is it feasible?
Is it realistic?
I think it is unlikely.
Guyana is itself going to be both the source of the petroleum and therefore contribute to
(38:36):
climate change.
I can't accept, I do not accept that Guyana should issue the benefits of petroleum.
That would be something that would be so outrageously irresponsible with respect to the
(38:57):
poverty in the country that I can't accept that.
On the other hand, Guyana at the same time is going to be the victim of climate change.
90% of the population of Guyana lives on the coastal plain that is both below sea level
and going to and is threatened from inundation from the interior.
(39:20):
Guyana is going to be confronted with the need to re-displace, they're going to be confronting
the problem of displacement of the population from the coastal plain to other places in
the country.
Then that in turn then threatens the question of where they're going to go is the tropical
rainforest going to be decimated in order to provide locations for these people to live.
(39:45):
So Guyana is caught in the in between both as a petroleum producer and in that sense a
contributor to climate change but on the other hand that provides a very amount of wealth
to the country.
And then on the other hand as sea rise occurs the coastal plain is going to be inundated
and country will be the victim of the process.
(40:06):
Talk about a paradox there is a definite paradox.
Right, right.
And I share your realism.
You know when we look at developed countries they've talked the talk on climate and compensating
developing countries for pollution that they've caused and along their paths toward becoming
developed countries but they really haven't walked the walk and so whenever we have these
(40:31):
cop meetings recently they've been held in oil producing states for the UAE.
And now Azerbaijan this year and developing countries really have to squeeze as much as
they can out of developed states and so there's a lot of this performative talk about climate
and it often amounts to greenwashing what are very damaging economic policies of these countries
(40:57):
over the past decade and even till today.
And it should be noted that Guyana has done a pretty good job in terms of preserving its
forests and it's overperformed in many ways compared to many other countries and so what
it's facing on its coastline is quite tragic given that all that into account.
Now getting to what's happening on its coastline you'd already addressed it to some degree
(41:20):
but we have around 90% of its population lives along the coast and there's talk of its
capital Georgetown being inundated with water by 2030 could be submerged by 2030.
There are some of these very dire predictions and so this is not simply just a PowerPoint
(41:42):
presentation by a climate activist you know filled with dark scenarios the clock is literally
ticking and and there are plans to shift much of the populace towards I guess the central
part of the country there's plans for developing the smart city, silica city.
Could you talk to us about what the Guineas government is trying to do in terms of shifting
(42:06):
its population from this coastal area to the center?
There are three forms of the emigrific change that the country is going to have to confront
soon.
One is the one we just finished talking about.
The fact that a substantial number of the Guineas population is going to have to move
from the coastal plain to someplace else.
(42:28):
That's one internal migratory flow.
A second migratory flow is into the country.
That is the form of the skill workers that the industry, the petroleum industry will require
and which are not available domestically.
And then third there's another flow, a flow of low income, not very technically skilled
(42:53):
people who will be attracted to the country by virtue of the wealth and the spillover that
comes from the wealth from petroleum.
So at the moment the country is looking in the next five, ten years at a substantial
dislocation of its population from the coast on one hand and an inflow of people servicing
(43:21):
the industry and attracted to the industry.
This will require a major change in the spatial distribution and location of the population.
Up on the road from the coast to Lyndon, what's called the Sazdike Lyndon Highway, the
(43:43):
government is constructing a new city, land which they've called Silica City.
Very little of the detail of the city has been made public.
It's being designed interestingly enough not by Gainese but by the architects and other
(44:04):
technical people at the University of Miami.
The little that has been made available seems to suggest that it is being designed for the
technical people who will be servicing the industry and coming in one of the three inflows
(44:26):
of the population.
It's not designed for very large numbers of people.
It is relatively small and it is perhaps a partial response to the dislocation that's
going to go on as I say.
It looks like it's going to be responsive to the inflow of technical people.
(44:49):
At the moment the population dislocations that will occur from the coast and from the people
who are for example being attracted from Venezuela who are not technically skilled but are just
attracted to the industry.
That remains an unresolved problem and the Silica City almost certainly is only the beginning
(45:16):
of the process of the construction of alternative places for the people to live.
That's not an easy thing to do when the constraint with regard to the forest is introduced a couple
years ago.
I now regret because I sort of made the argument that it was easy to find the relocations
(45:44):
for the people that were affected by climate change in the interior.
Now I have my doubts because of the need to both protect the forest and in addition protect
the population that lives in the forest, people are called Amerindian people.
(46:04):
It will require quite some serious thinking about where the dislocated people from the coast
and the people who are coming into the country will have to be re-resied.
As you mentioned the capital city almost certainly is going to have to be relocated and pretty
soon as you mentioned the projection is that they're going to be inundated by 2030.
(46:31):
It's not easy to relocate a capital city.
This is not just the question of population, it's the institution's agraromate that makes
the country function.
Right.
Re-settling this massive population will have costs and it could eat in too much of the oil
revenue.
So Ghana could end up breaking even as a result of all this.
(46:52):
It depends on the numbers and there are a lot of variables involved.
But this is a very costly venture and when you move people you have to make sure that
they have employment opportunities not just places of residence and so you have to create
an economic ecosystem out of scratch.
And then the question of the ethnic division in the country arises as well.
(47:13):
Is one group going to be favored compared to the other group and what kind of social
intentions will be result will result right now that is perceived in the question of people
being upset in the first place because they have to move.
Right.
And so that's why it points to the need for consensus based decisions to kind of ensure
that people's needs are being met and we don't have disagreement down the road and
(47:37):
disgruntlement and successor governments overturning decisions because to move thousands, tens
of thousands of people are more is a huge decision and to have people stuck in a state of
limbo is simply in terms of where they reside is something that's going to not just up end
people but potentially anger at them.
(47:58):
Yep.
Now, we're nearing the end of our discussion and what other complication for Ghana is that
neighboring Venezuela has renewed claims over Ghana's esokable region which makes up 40%
of Ghana's land area and it's off the coast of this region where the current oil is being
produced and Venezuela had conducted a referendum in December, essentially a sham referendum
(48:22):
and it gives, it notionally gives the government the authority to try to quote unquote reclaim
this area.
It's also bolstered.
It's military presence nearby and in the short term it looks like these threats from the
Maduro regime are about posturing locally ahead of elections and maybe trying to intimidate
the Ghana's government and getting some concessions from it but down the road there is the potential
(48:47):
that Ghana may also have to spend more money on securing its borders and that would take
away money that could be directed at bettering its own people.
Now, a final question, if you were asked by the Ghana's government for advice on how to
best leverage the bananza.
If they asked you to make three recommendations, what would they be?
(49:07):
Well, obviously the first one is education to be a successful participant in the global
economy means that the population of Ghana would be much better educated as now.
Secondly, I, myself, would recommend the part of at least a substantial part that revenue
(49:35):
coming in the distributed in a universal way to do something like ask, unless I do so for
two reasons.
One, because the best way to eliminate or reduce poverty in the country and secondly, because
it has the potential of breaking down the political division, the necessary.
(49:58):
And then third, I would take advantage of the spirit that countries have had in trying
to move an economy in the direction away from what the markets will dictate and to the
creation of a diversified modern economy.
(50:21):
And for that, what would be required is, listen to the creation of the highly trained
center of experts with respect to investment decisions and allocation decisions, called
to creating a free alternative economy.
(50:43):
One is central to everything.
Hovery alleviation is the desired outcome, identifying institutions and society which would
move the society away from its monodabell of just petroleum and to create a diversified
economy.
(51:05):
All of that is very hard to expect to occur when a country is spending as it comes in maximizing
current expenditures and have not taken the opportunity to seriously contemplate what is
the feature really going to look like post petroleum.
(51:28):
And that was Dr. J. Mandel of Colgate University.
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