Example for exploration in Foz do Amazonas, Guyana suffers from “oil curse”

Since the American company Exxon discovered the first oil reservoir on the country's coast in 2015, Guyana has gone from zero offshore oil production in 2019 to almost 1 million barrels per day this year. Its proven reserves total 11 billion barrels. All of this caused the GDP of the 2nd poorest country in South America to increase six times. Guyana has become the fastest growing economy in the world and also the largest producer of oil per capita on the planet.

In a territory slightly smaller than the state of São Paulo, which has a population of just 950,000 inhabitants – almost a third of them living in the capital, Georgetown – it was expected that the neighboring country would be quickly emerging from poverty. However, as Juan Pablo Spinetto, from Bloomberg, shows in a report reproduced by O Globo, the “curse of natural resources” hovers over the nation, which has afflicted so many countries suddenly blessed with an abundance of mineral wealth. Like these nations, Guyana faces profound vulnerabilities: limited state capacity, weak institutions, labor shortages and geopolitical uncertainties.

The signs of the oil boom are everywhere. Excavators and dump trucks dominate the streets of Georgetown, packed with construction work. Citigroup opened a representative office in the city, while France opened an embassy last year, following Qatar, which did the same in 2023.

New units of American restaurant chains are popping up everywhere, from Wendy’s to Papa John’s and Starbucks, where the smallest coffee costs almost US$6. Hotels are being built to accommodate the increase in the number of visitors amid a true real estate fever.

Meanwhile, open sewage runs alongside Georgetown's main market, amid banners celebrating Guyana's journey “from sugar and rice to oil and gas”. Residents live squeezed between piles of trash and the facilities of one of the largest local construction companies working for Exxon. The $500-a-night Marriott hotel, located in the nerve center of the business community, ran out of water during Spinetto's stay. And interruptions in electricity supply continue to be an everyday reality in some parts of the country.

The Guyanese government's jingoistic outbursts regarding oil do not resist the search for reliable statistics. Official economic data shows many positive signs, such as increased vehicle sales. But there are no poverty indicators for years of extraordinary economic growth. While poverty estimates reach 58%, according to the Inter-American Development Bank (IDB), local economists speak of only 18% to 20%. A suspicious discrepancy.

The disenchantment of the population is noticeable. Research by the University of Guyana's Green Institute shows that for 43% of Guyanese, the benefits of growth are real but unevenly distributed. Another 27% said the economy under construction simply does not match the type of society they want.

Foreign oil companies were considered the least trustworthy institutions among those included in the research. And here comes Exxon again. The company is, by far, the largest investor and tax payer in the country. However, production sharing contracts in neighboring countries, such as Suriname, generally impose a royalty of 6.25% on gross oil production. In Guyana, the charge is just 2%.

Many Guyanese see Exxon as a behind-the-scenes force, giving it the unofficial role of Guyana's arbiter. The truth is that the company has expanded its control over the country, causing increasingly greater socio-environmental losses. And, obviously, it is exempt from responsibility when charged.

The “oil curse” was recalled by Suely Araújo, coordinator of Public Policies at the Climate Observatory, and by Délcio Rodrigues, director of ClimaInfo, in a live broadcast from the “Papo de Clima” community about the discovery at Foz do Amazonas. Data presented by Rodrigues on large fossil fuel producers reinforce the idea that oil only generated development in nations that already had economic diversification and strong institutional stability. Which is not the case in Guyana. And, to a lesser extent, not even from Brazil.

The analysis is valid for those who say that oil in Foz do Amazonas will develop Amapá economically and socially. “Everything is overrated when you sell this ‘oil package.’ We have municipalities across the country that receive high royalties and even have beautiful buildings, but they don’t have sewage treatment,” recalled Suely.