1. NS4540 Winter Term 2017 Guyana’s New Oil Discovery
Oxresearch Bolivia: Buoyand Growth Will Slow, July 20166

2. Overview
Robert Looney, “For Lessons on How Not to Handle its Oil-Rich Future, Guyana Can Look to Africa,” World Politics Review, February 1, 2017
In December 2016 Guyana’s large off-shore oil field was confirmed
At 1.4 billion barrels of oil, one of Latin America’s largest fields
Oil revenues expected by 2020
Good news comes with a warning
Other countries in Guyana’s situation have generally failed in using oil revenues productivity
Often the county would have been better off without the discovery of oil

3. Best Practices Easy to list best practices
Build strong institutions and governance structures that can channel influx of revenues away from corrupt officials and into productive activities
Government should invest to diversify the economy
The government should not spend the money until it arrives
Official should establish a sovereign wealth fund to smooth out expenditures
Easy advice to give but as the African experience illustrates very difficult to implement

4. African Experience I
Ghana, Uganda and Mozambique all recently resembled Guyana’s current situation
Sudden influx of oil revenues on the horizon
Rising popular expectations of a rising quality of life
Inadequate governance structures
Ghana
Democracy like Guyana
Very difficult for democracies with competing parties to show restraint before oil money arrives
Borrow on anticipated revenues
Now in significant debt troubles with economy on verge of collapse

5. African Experience II Mozambique
Like Guyana, little support for private sector
Easy to evolve into a dual economy
Rather than develop private sector opted for mega-projects – massive foreign owned projects in resources
Despite 8.1% growth between 1993 and 2000 and 8.2% from and 7.% since. Still:
50% of population lives in poverty
No change in Human Development Index beween 2009 and 2014
Income inequality increasing

6. African Experience III
Guyana (although improved in last two years), Uganda and Mozambique have all had increases in corruption rankings since the early 2000s with Guyana’s most pronounced
Like Uganda and Mozambique, Guyana is considering massive infrastructure spending even before oil revenues begin
All three countries share a connection to China for finance and construction
Opaque nature of China loans and construction operations, opens up opportunities for massive corruption

7. Assessment
With oil Guyana will have a chance to leave behind powerty and despair
Experience of oil rich African states suggests without significantlyimpooved governance and transparency prosperity unlikely to follow
Country will simply exchange one set of problems for another.