Wedged between Brazil and Venezuela, Guyana could easily go unnoticed. It has fewer than 750,000 people and a per capita income of $4,300, half the regional average, qualifying it as the hemisphere’s third-poorest nation.
At the moment, Guyana also might be its luckiest. Having struck big oil offshore starting in 2015, industry experts reckon total reserves at around 2 billion bbl. That bounty could make Guyana immeasurably rich and Latin America’s biggest producer in less than a decade—or just another Trump-hole.
History abounds with tales of raw-material bonanzas turned into, at best, a mixed blessing for poor countries. Dutch disease, corruption (think Venezuela and Nigeria), life support for dictators: The gift of oil comes with many afflictions. A classic International Monetary Fund study found that living conditions in oil-rich nations in sub-Saharan Africa were no better or worse than countries without oil.
“Equatorial Guinea comes to mind,” Rice University energy scholar Francisco Monaldi told me, in reference to the Central African dictatorship that, after striking oil in the 1990s, went in a matter of years from desperately poor to desperately rich.
“We know historically that, if you’re poorly managed when you received the windfall, you’ll likely have difficulty capitalizing your bounty for development,” said Monaldi.
The example is not lost on Guyana, which has a vibrant if flawed—“partially free,” according to Freedom House—democracy, but frail institutions and admittedly scarce human capital to manage the coming wealth. “Guyana has almost zero capacity now for dealing with oil and gas,” Jan Mangal, petroleum adviser to President David Granger, said recently at the University of Guyana.
While officials in Georgetown quickly disavowed Mangal, his comments were hard to ignore. With major oil set to flow as soon as 2020, authorities are bracing both for the shock of wealth and its attendant woes. The bounty will not come all at once: Exxon and other producers will use most of the early oil to pay down startup costs. But that will only delay the impact. “It’s like drinking from a fire hose right now,” Vincent Adams, a Guyanese engineer who recently retired from the US Department of Energy, told me.
Read the full column here.
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