Key sectors: all, particularly extractives

Key risks: political instability; policy uncertainty; contract frustration, civil unrest

Guyana has failed its first crucial test since becoming an oil producer in late 2019: to conduct credible long-delayed snap general elections. Ten days since the 2 March vote was held, the winner has not yet been announced as the High Court ordered a vote verification be conducted in Region Four, the country’s largest electoral district, amid opposition-led fraud allegations. Even if the verification is properly done and all parties concerned accept the results, underlying tensions over the winner’s legitimacy are set to persist throughout the next five-year presidential term. The crucial and contested vote, which will define who will rule South America’s third poorest country into its recently inaugurated and highly transformative role as oil producer, has brought to the spotlight three key aspects to be closely followed: the potential for ethnic divisions to deepen, heightened political instability risks that might affect the business environment and uncertainty as to whether regulatory risks will increase irrespective of the final result.

Guyanese politics have long followed ethnic lines and voting on 2 March was no exception. The opposition People’s Progressive Party (PPP), backed by the Indo-Guyanese community which has been closely linked to the sugar cane industry, denounced fraud following suspicious delays in publishing results and controversial numbers granting victory to incumbent President David Granger in Region Four, which would translate into a nation-wide win. Granger’s ruling A Partnership for National Unity (APNU) and the Alliance for Change (APNU-AFC) coalition, supported by the Afro-Guyanese population, has made every effort to remain in power and delay the snap vote, which should have in theory taken place by March 2019 following a non-confidence vote on Granger in December 2018. Far from reaching a national consensus on how to manage the oil wealth, that according to the IMF could boost GDP growth to 85 per cent in 2020, the election underscored the potential for internal divisions and violent unrest just when stability is all the more needed.

Instability risks will be fuelled not only by exacerbated ethnic divides, but also by the potential lack of legitimacy – real or perceived – of the incoming administration. US, EU, UK and Canadian representatives in Guyana rapidly stated that the results from Region Four were not credible. This highlighted strong international interest in a legitimate government capable of enabling a smooth transition of power at a time when already-agreed and to-be-lured investment to develop the oil sector is high on the agenda. The electoral process needs to reassure both domestic and external actors that state institutions, including its checks and balances, are in good health. This is particularly important given PPP presidential candidate Mohamed Irfaan Ali’s numerous references at likely contract reviews based on the alleged fact that the deals were not properly negotiated. PPP officials, including Ali in late January, repeatedly stated they would not touch ExxonMobil’s contract to develop the Stabroek offshore block, which Granger renegotiated in 2016. In February natural resource watchdog Global Witness issued a report indicating that the country may had lost around US$55bln in that renegotiation. Controversy and uncertainty over the future of this and other agreements will linger on.

Guyana might still have time to decide whether oil riches will be a blessing or a curse. In light of recent developments, the window of opportunity for a positive outcome is closing fast.