Preparing the groundwork

By Rawle Lucas

Impressive Numbers
The combined output of crops, livestock and fisheries accounted for about 34 percent of the income generated by the Guyana economy over the last 10 years.  Mining and quarrying contributed an additional 13 percent.  Together, agriculture and mining are responsible for nearly 50 percent of the income that the Guyana private sector earns for its workers and owners. .

In any year, the four commodities of sugar, bauxite, rice and gold combined are responsible for bringing in the lion’s share, over 70 percent, of the foreign currency earned by Guyana. Gold and sugar have led the way for the last 10 years each accounting for about 24 percent of export-earnings. 

Despite the impressive numbers and the importance of agriculture and mining to the Guyana economy, investments in those sectors do not drive the importation of capital goods into the country. That honor goes to the construction industry and the transportation sector.   

Some Risk
Without specific enterprise information or detailed industry information, it is always risky to discuss productive capacity as reflected by expenditures on capital equipment or long term assets of any given economic sector.  Difficulties arise because such productive items depreciate overtime and, notwithstanding manufacturer’s specifications, the duration of their usefulness is as much a matter of guesswork as it is the way such equipment is used and cared for. 

Purchases can mean the replacement of aging equipment or it can signal the addition of new or additional capacity.  None of these concerns could be answered by examining aggregate figures on the importation of capital equipment found in the trade statistics of the country.   Annual price changes and the difference in technological advances further help to complicate discussions of such matters.  Tax policy also affects the rate at which private enterprise make capital investments.  Readers need to keep these caveats in mind as they go through this article.

Indication of Priorities
Yet, by looking at import figures on capital equipment, it is possible to get a sense of whether or not Guyana as a whole is laying the ground work for strengthening its productive capacity to meet future competitive challenges in the domestic and global economy. An important metric in this regard is the end-use of capital goods that are imported each year into the country.  By following expenditure trends on capital imports, Guyanese could get an idea of the industries or sectors in which the preparations for competition might be taking place.

They also give an indication as to whether or not investment spending is matching the priorities set out by the government to meet the promises of job creation and economic expansion.

Using the metric of capital imports by end-use is how we know, for example, that the agriculture and mining sectors are not investing heavily in capital equipment.  Without seeing the labor figures for the two industries, that trend could lead to the brazen conclusion that the two sectors are labor intensive. 
Within the last 10 years, imports of capital equipment for use in agriculture remained stagnant.  Since 1998, the annual share of the value of capital goods purchased for use in agriculture represented about 22 percent of the value of capital imports and basically remained the same throughout the decade.  It is hard to imagine how important the activity of mining is to Guyana and that only two percent of the value of the capital goods imported into the country over the last 10 years were geared towards the mining industry.  A look at the 2008 budget gave no indication that this was a matter of concern to the government and leaves me with the impression that investment in the mining sector would continue to move at snail’s pace.  

Emergence of Construction and
Transportation
The trend in the agriculture and mining sectors was overshadowed by the emergence of the construction and transportation industries as major income earners in Guyana.  Income in the mining sector has basically flat-lined in Guyana over the past 10 years. Growth in income averaged about 2 percent during this period. A decade ago mining contributed about 16 percent of the income earned in Guyana. Today, that figure has fallen to about 10 percent after declining by an annual average of 10 percent from 2002 to 2006.
A similar trend is noticeable in the agricultural sector. Rice, sugar and fisheries have always stood out as major contributors to the Guyana economy.  Sugar with 14 percent, rice with 10 percent and fisheries with six percent gave workers and owners nearly one-third the income of this country in 1998. Today, that figure is down to 21 percent having fallen by as much as 30 percent from where it was in 1998.

At the same time, those engaged in “other crops” earned five percent of the income and those in livestock received two percent of the income.  These two agricultural endeavors have made no headway over the decade and the income generated by them basically remained constant. 
With growth rates averaging 12 and 15 percent, the construction and transportation sectors have overtaken the agricultural and mining sectors as major income earners in Guyana.  Transportation accounts for 13 percent of income earned in the Guyana economy while construction accounted for about seven percent. It had surpassed rice as a major income earner, had caught up with fisheries and was challenging mining in importance to the Guyana economy. This shift in income allocation has also resulted in a shift in investment in productive capacity. 

In 1998, transportation equipment accounted for 18 percent of the value of capital goods imported into Guyana.  That figure had reached 30 percent by the end of last year, recording a 67 percent increase in value.  Over the period being observed, the importation of transport equipment into Guyana increased by an average of 8 percent each year. 

The construction industry is not to be outdone however.  The importation of building materials has also shown remarkable growth.  A look back at the numbers in 1998 reveals that 22 percent of the value of capital goods brought into the country were for building construction.  By 2007, that figure had reached 36 percent and reflects a 64 percent increase in value from the start of the decade in review.  This means that more than one-third of the value of all capital goods brought into the country was intended for building construction.  Undoubtedly, the trend in construction is being fuelled in part by the resurgence in government procurement contracts aimed at rebuilding or expanding the physical infrastructure in Guyana.   

Bank Credit
With over two-thirds of the value of capital imports going to the construction and transportation, it is not surprising that bank credit to these two sectors has been increasing steadily over the years.  The value of outstanding credit to the construction sector jumped from G$2 billion in 1998 to over G$16 billion in 2007, an average growth of about 27 percent per year.  The banks see opportunity and are taking it. 

Bank lending to the transportation sector has not been as dramatic as in the construction sector.  The trend in bank credit shows that the value of loans grew by one percent over the last 10 years.  This observation is somewhat surprising given the economic opportunities that this sector presents for creating wealth.  That situation might be changing since bank lending has grown annually by seven percent over the last five years.  The reason for the comparative paucity of bank lending to private enterprise operating in the transportation sector is not clear but current trends point to a change in attitude. 

The expansion of the transportation and construction sectors is a good thing but would it be enough to position Guyana to take advantage of current and future opportunities.  The answer could be yes if the investments are supporting other income generating activities that provide jobs, better wages and export opportunities to build productive capacity of their own.

has been successfully applied in commercial farming in the Brazilian and Colombian savannahs where large-scale production of fruits, grain crops and livestock is practiced.          
-Thirdly: the expectation that a venture of such a magnitude would stimulate a concerted effort by savannah agricultural developers, farmers Government regulatory agencies, and service providers to combine efforts and resources for the collective benefit of all stakeholders.  Herein lies the philosophy and success of satellite farming schemes and growers associations, with which CCGA is well acquainted and will actively promote.  

-Fourthly: that the spin off benefits of the proposed production system would stimulate the development of secondary agricultural industries in livestock and other crops that would add sustainability and economic viability to savannah agricultural investment. 
 
Joint Venture Prospects: there do exist savannah agricultural leaseholders that are likely to become joint venture partners in a CCGA citrus industry initiative.  An opinion survey of the current leaseholders and agricultural developers yielded the following information.

General attitude to and receptivity of the concept of a savannah based Guyana citrus industry:  Positive and enthusiastic in the majority of cases
Preferred level of involvement and participation in the venture:  All respondents were interested in producing citrus fruit on their farms for sale to the CCGI processing plant.  This of course would be conditional on pricing arrangements and the cost effectiveness of their farm operations.  The majority of the savannah developers are not in a position to offer substantial liquidity as equity in any joint venture affiliation.  Suggestions of equity contributions in the form of services, land infrastructure and equipment have been made.

Satellite farming scheme participation:  This was unanimously acclaimed, and considered necessary for participation of local farmers.
Employment of integrated production systems:  Actively involved farmers have recognized the need for a farming systems approach to agribusiness ventures in the savannahs environment.  They anticipate that ancillary crops and enterprises would have equal support in a satellite-farming scheme.  In practical terms this means that commercial production and marketing systems would have to be developed for the selected commodities, including Minica 4 red peas, pineapple, hot pepper and sorrel, cucurbits and livestock feed grains.

Guyana Offerings:  A spirit of reciprocity will dominate the savannah agricultural investment plans of CCGA. Land is perhaps the most desirable element available to the CCGA in a Guyana citrus project.  The vast expanse of brown sand soils in the Intermediate savannahs considered ideal for citrus, will form the base of the agro industrial thrust.  But even more significant is the favorable geographical juxtaposition of the two countries, which would permit a two to three-day shipping round trip for delivery of farm and manufactured products and outputs, as opposed to the 30 to 45 days which obtains with shipments of citrus concentrate from Belize.  Such an advantage would convert to a 30% to 35% cost reduction in Citrus Grower’s operational bottom line. Indeed significant! 

Current Project Activity:  Plans for the establishment of citrus nurseries to provide the estimated one million virus-free citrus plants, which will be the foundation of the production orchards, are well underway.  Consultations are in progress with Government regulatory bodies on Plant Quarantine issues and a local citrus budwood certification programme.  Nursery infrastructure work has also commenced at one location in the Tacama Savannahs. 

In a subsequent article we will consider the implications and challenges of generating one million budded, virus free citrus plants over a 5 to 6 year period, to satisfy the planting requirement needs of CCGA and farmers participating in the Guyana Citrus Project.