The news last week that the Government of Guyana had earlier this year written to Chinese Ambassador Cui Jianchun requesting a loan of upto US$1.5B for six infrastructure projects perhaps went over the heads of many readers. However the issues surrounding this highly controversial initiative are significant on many levels.
To recap, the loan request covered the following projects:
1) Hydropower facility (Amaila) US$750M
2) East Bank/East Coast Road Link US$150M
3) West Coast Super highway to Parika US$200M
4) East Coast upgrades US$200M
5) Upgrade of hinterland connections US$100M
6) Upgrade of selected community roads US$100M
In principle, borrowing at a concessionary rate as low as 2% in what looks like an inflationary world makes a lot of sense. There should not be much concern that the country can pay off such a loan quite comfortably. We can keep our oil revenues which might rise to as high as US$2B by the end of 2022. We might even earn some interest if the government stops delaying setting up the sovereign wealth fund. Fifteen months into this administration and we are yet to see the amendments to the Natural Resource Fund Act. The dithering on what should be some minor tweaks is disturbing and one cannot but conclude that the government does not yet want to be held to the level of accountability and transparency for the investment and spending of oil revenues which the legislation requires. For example various independent committees need to be formed to make decisions on how to invest the funds and all money to be spent must be incorporated into an annual budget and debated in Parliament.
So the China loan looks like a way to escape this scrutiny for the time being while the PPP/C makes sure it fulfills its pre-election promises to the people of Guyana in its first term.
The biggest risk however is that by taking the Chinese money it is a given that only Chinese construction firms will execute these projects. At this juncture we feel no need to recall all the issues surrounding projects done by Chinese firms in Guyana. That said we will point out that the Skeldon Sugar Factory was not only a US$187M disaster in and of itself but it was the primary cause of the slow collapse of the sugar industry, resulting in the massive infusions of taxpayers’ money and the subsequent loss of thousands of jobs. That is not only us saying that: then President Jagdeo warned in October 2010 that if the factory failed then “sugar was dead”. The Cheddi Jagan International Airport expansion project is another national embarrassment – poorly conceived and executed it is now ten years in the making and well over budget.
So the PPP/C must be aware that while they may wish to fulfill their manifesto in time for 2025 they also run a huge risk of having a bunch of barely started projects mired in controversy and cost overruns. And by putting all their eggs in the Chinese basket they are also excluding construction firms from other countries that might be able to execute projects more quickly and to a higher standard. Why are we trying to do these projects on the cheap when money is not really an issue? Brazil for example has world class infrastructure built by its own firms, and if we want closer relations then what better way than by engaging its companies? It is not always about the money.
And this leads to the final aspect of the loan request, the diplomatic consequences. Readers will recall that when US Secretary Pompeo visited Guyana and Suriname last September he warned, “We’ve watched the Chinese Communist Party invest in countries, and it all seems great at the front end and then it all comes falling down when the political costs connected to that become clear.” And Pompeo called for the two countries to consider American firms. This was followed up a month later with a high-level delegation led by the International Development Finance Corporation with a lot of excitement that American investment in infrastructure would follow. All that seems to have fallen by the wayside while American construction companies have to date shown scant interest in Guyana.
Even with a change of administration, America still considers China the number one threat to its global hegemony and specifically to its interests in the Americas. This loan request will be anathema to Washington and has the potential to weaken our relationship with the only country with the muscle and interest to enforce democratic values and keep a covetous Venezuela in line. But Guyana has made a clear choice here and along with its recent reaching out to the Gulf States and to India, is saying it wants relations with countries that don’t come with strings attached. Of course the history of the PPP/C and the US is long, on the one hand helping to restore democracy in 1992 and ensuring an accurate election result last year while on the other the CIA backed disturbances of the sixties, and pre 2015 when the party expressed its annoyance at US Ambassador Brent Hardt with a “fitting and feral blast”. No worries with China in that department. That’s all well and good until there’s another election crisis or jet planes are swarming over Eteringbang or even Georgetown.
When one weighs all these issues it is hard not to conclude that taking a substantial loan from China has the potential to steer Guyana down a dangerous diplomatic path. Even if the PPP/C is willing to take that chance, one can add that given the track record of Chinese construction projects here it might also spell problems for the country. There is far too much secrecy with this government and it points to a deeper concern: both through excessive borrowing and also by sitting under a waterfall of oil revenues any government will feel it is less answerable to its citizen taxpayers. Finally, for a party that only won office by a 1% margin, does it have the authority to bind the country to a loan that may reach an amount almost equal to the national budget?
