This Tiny Country in South America is About to be Transformed by Oil Wealth

New York —Guyana’s population is not even that of Rhode Island’s, and yet, the South American country will soon be a considerable force in the continent’s politics. With a small economy mainly dealing in gold and tourism, in the near future, Guyana could have the world’s highest per capita income. Right now, the country is far off from that statistic, as it’s currently the second poorest country in South America. Massive oil field discoveries, however, are about the change that.

With a population of only 750,000, Guyana is likely to become an international player in the oil market after an enormous deal was struck with American petroleum giant, Exxon Mobil, granting the company the rights to drill recently discovered oil reservoirs.

More than eight billion barrels of oil and gas were discovered off the country’s coast. From the Exxon Mobil deal, Guyana is expected to bring in an additional $168 billion in yearly revenue. That is more than 120 times larger than the current government’s budget, according to Al Jazeera.

This discovery has led to an international race to exploit these newly found resources, with other oil companies like France’s Total and the United Kingdom’s Tullow Oil now exploring Guyana’s offshore fields, per Valerie Hernandez of International Banker.

The IMF predicts the country’s GDP will grow 86 percent in 2020. This number may grow to 300% by 2024. “This is by far the most dramatic and rapid economic transformation that any country in the Western Hemisphere has ever experienced,” says Michael A. Matera, Director of Americas Program and Senior Fellow at the Center for Strategic and International Studies. In 2019, Guyana’s economy only increased by 4.4 percent.

On March 20th, the country received its first significant payment for its reserves, receiving $55 million for 1 million barrels sent to Shell Western Supply and Trading Limited.

As the first millions flood into the government’s coffers, political unrest after countrywide elections in early March have generated talks of fraud and stymied Exxon’s ventures.

Guyana gained its independence from Britain in 1966, but since then it has been continuously haunted by ethnic tension between the two main groups in the country. Descendants of African slaves and Indian immigrants brought to South America to serve out a term of indentured servitude have been butting political heads for decades. The two dominant parties, the People's Progressive Party (PPP) and the People's National Congress (PNC), are largely divided by along ethnic lines.

A market in Georgetown, Guyana. Photo by M M from Switzerland - Georgetown, Guyana — *A market in Georgetown, Guyana. Photo by* *M M* *from Switzerland -* *Georgetown, Guyana*

The elections were seen as the most important in years, deciding who was to first lead the country with the newfound oil wealth. However, after credible concerns of voter fraud, Guyana’s supreme court has blocked the release of the results. The courts are now reviewing the case.

Many onlookers see the recent election debacle as the first sign of the resource curse — a common phenomenon where a country with an abundance of natural resources has weak political institutions and poor performance in other economic sectors.

Because the resource curse is now a well-known theory, it is likely Guyana’s leaders will pay attention to the failures of other oil-exporting countries like neighboring Venezuela. However, some experts have little faith. Such a drastic influx of oil wealth to a low-income country has not produced many success stories.

But there is hope. If Guyana allocates a significant portion of the profits to education and investment in other industries, they could escape this trend. Additionally, a sovereign wealth fund is being established to invest and diversify oil revenue in hope to protect Guyana from price fluctuations that have so consistently battered petroleum-rich countries. The courts ruling on the recent elections have yet to be announced, but their decision will likely indicate the immediate direction of Guyana’s future and its ability to cope with the good fortune.