Guyana is missing valuable opportunities to export more under the Partial Scope Agreement with Brazil.
This is according to Foreign Affairs Minister Carl Greenidge who in a press briefing on Monday asserted that progress to improve the trade deal with Brazil is being hampered by Guyana’s lacklustre manufacturing capacity.
“The issue is this: If you have a partner and you are interested in doing trade with them, you have to have commodities that can be sold in that market. The situation we have with Brazil is that Brazil can offer us a wide range of products, 100 or more than we are able to offer to Brazil. Part of the reason has to do with the standards that are set by the Brazilians, as well as the types of things demanded by the Brazilians,” Greenidge explained.
According to the minister, there is no point in expecting that “we are going to be able to sell basic staples to a neighbour that has exactly the same ecology as you. If you want to sell plantain, eddoes, sweet potatoes, they grow both sides of the border. So you have to do something with them; add value, process them, deliver them as a different product. We are not able to do that to any significant extent.”
The importance of value added products and processing cannot be overstated. It is, however, an area in which Guyana has long lagged. In fact, Greenidge acknowledged that the manufacturing sector itself faces hurdles, having to contend with high energy prices, among other things.
Experts, for instance from the Global Green Growth Institute (GGGI), have pointed out that Guyanese are paying too much for energy. In Guyana, the Guyana Power and Light’s Demerara (GPL) interconnected system is fed with power by the Power Producers and Distributors Inc, itself powered by imported oil.
In the Finance Ministry’s 2017 Mid-Year Report, it was detailed that GPL’s expenditure increased from $9.3 billion in the first half of 2016 to $12.6 billion in the same period this year. Interestingly enough, this increase in expenditure was noted to be due to higher costs for heavy fuel oil, reinforcing the need for clean and renewable energy if the Government hopes to cut costs.
The Finance Ministry’s latest end-of-year outcome report which covers the year 2016 had stated that the manufacturing sector contracted by 9.5 per cent and not the 7.1 per cent Finance Minister Winston Jordan had projected in November of last year.
The decline in the manufacturing sector was linked to the shrinking production in agriculture. The manufacturing sector is heavily dependent on sugar and rice production, a fact that Jordan had acknowledged last month at a press conference earlier this year.
“Very little manufacturing activity takes place in Guyana… the last number I looked at manufacturing, without sugar and rice milling, (it) contribute(s) a mere five per cent to GDP (Gross Domestic Product), which is very low,” Jordan had told journalists at the press conference.
Moreover, with Guyana’s balance of payments deficit on the rise, the International Monetary Fund (IMF) asserted the need for the Government to be prepared for external shocks on the financial market.
According to IMF, Guyana’s vulnerability is due to the reliance placed on so few exports.
The balance of payments is statistical data on a country’s fiscal transactions, including imports and exports. To therefore record a deficit, Guyana would have had to spend more on imports, among other things, than it earned from exports.
According to the 2017 macro-economic report, Guyana’s overall balance of payment in the 2017 fiscal year showed a deficit of US$69.5 million. This is a hike when compared to US$53.3 million the previous year.
“Imports were slightly more than the US$1.59 billion projected at the time of the presentation of the 2018 Budget. As a result, the merchandise trade deficit of US$196.2 million was considerably higher than the projected deficit of US$147.2 million.”