Several mega-projects have been announced but never come to fruition

Dear Editor,

Over the past five years, the Guyana media has been constantly publishing information on a number of mega projects that have received government endorsement, in many cases, government and government agencies exchanging letters of intent; signing memoranda of understanding, agreements in principle, and apparent firm agreements; and granting franchises to companies and organizations for their implementation.. While being cognizant of the fact that projects of this scope normally have long gestation periods, I have tried to keep track of their progress with a view to determining the probability of them coming to fruition. We appear to be inculcating a mega project fetish, and an alacrity to endorse the spurious ideas and proposals of a new breed of entrepreneurs, without even pausing to investigate the viability of their proposals, or even their bona fides, to determine their business acumen, their technical expertise or their capability to raise the finance associated with these projects before endorsing them and announcing them to the nation and to the rest of the world. This approach appears consistent with the proverbial drowning man grabbing at straws- often, almost in childlike fashion accepting, without question, anything that appears to involve massive investment, as a solution to our economic problems. What these announcements do is raise the hopes and expectations of the Guyanese people only to have them dashed when the projects simply disappear from the radar screen, and also expose us to ridicule in the eyes of the rest of the world. Just to mention the most notorious of these projects:

In July 2003, the domestic and certain foreign media were inundated with reports of the US$10 billion Investe Brazil project which would convert the undeveloped Roraima State of Brazil, to an industrialized region with a buzzing industrial zone in Boa Vista, finally satisfying the perennial Guyanese dream of a paved highway linking Boa Vista with a deep water port on the Guyana Atlantic coast, construct a massive hydropower project somewhere in Guyana, burst open the Guyanese hinterland to a flow of inhabitants and foster the establishment of a myriad of industrial and agricultural projects all the way from Linden to Lethem.

I well remember the excitement aroused in Guyana by this project- the frenzied signing of memoranda of understanding and the dispatch of a high powered delegation to Brazilia to discuss the project, and the heated domestic debate over the best location for the deep-water port.. In my letter to Stabroek News in July of the same year, I questioned the basic viability of the project and suggested that Guyanese temper their excitement, pointing out that the Roraima State did not possess the economic fundamentals to justify the development of a project of the magnitude envisaged, that Guyana did not have the population, nor the ability to attract immigrants to develop the territory to be traversed by the road, nor could I see the economic justification for the investment needed for an outlet to the Atlantic through Guyana when Boa Vista already had paved road access to the Atlantic via fully developed and operational deep water ports at Manaus on the Amazon and Porto Ordaz on the Orinoco. I further expressed skepticism about the US$2 million feasibility study and the finalization of contracts for work on certain stages of the project in less than six months from the date of the announcement.. I have been trying for the past three years to get a progress report on the project and was not surprised when I read, a few weeks ago that Investe Brazil had gone into liquidation – a development that probably explains the Guyana Government’s recent commissioning of a fourth feasibility study of the Road to Brazil.

In 2006, there was again heightened interest and excitement over the Alcoa Trinidad aluminum smelter with what was considered a firm agreement for the construction of an alumina refinery in Guyana to satisfy the second stage of the project. Again there was the flurry of activity with visits by high level Government officials to Trinidad to discuss the alumina refinery and explore the possibility of Guyana bauxite being involved in the first stage of the project. Again I warned, in a Stabroek News letter that “the Trinidad smelter was not a done deal” since the field of aluminum was littered with similar projects which never saw the light of day, that my interpretation of the report on the statement by the Prime Minister of Trinidad about a Guyana refinery did not amount to an agreement but probably just a suggestion, that I could not see the economic justification for an alumina refinery in Guyana to supply a Trinidad smelter when Alcoa was already in the process of significantly increasing alumina capacity in Suriname, Jamaica and Brazil, and had substantial capacity in Spain and the US that could economically supply that smelter, and that, in any case, the likely time line for the development of the Alcoa project would hardly allow for a Guyana alumina refinery before 2020. The trail appears to have gone cold on the Trinidad smelter due, it is reported to widespread protests from residents of the villages close to the location identified for the smelter, environmental groups over the negative environmental impact of the smelter, and local economists and politicians who saw the utilization of the country’s gas resources for providing subsidized power for an aluminium smelter as an inefficient allocation of the country’s resources. However, while this project appears to be in limbo, the Trinidad government is engaged in negotiations for two other smelters at a different location with no mention of a Guyana alumina refinery being involved. These projects are already being subjected to some of the same environmental, economic and political pressures as the Alcoa project, now supported by seismologists questioning the geological stability of the new location, and are likely to experience the same fate, placing in jeopardy, the prospect of a Guyana alumina refinery, piggy-backing on a Trinidad aluminuim smelter.

Of more recent vintage are the mega projects that could launch Guyana into the ethanol orbit. We read in July 2006 of the Anand Marketing Network US$140 million project to produce ethanol from sweet potato (not quite a mega project in terms of capital investment but staggering in terms of its specifications and projected output). The project is planned to develop a 50,000 acre potato cultivation in the Tacama region; construct a processing plant at the old Linden alumina plant site; and produce 150 million litres ethanol, 200,000 megawatts of green electric power, 120 million cubic metres methane, 150,000 metric tons organic fertilizer, 150,000 metric tons carbon dioxide gas and 20,000 metric tons ammonia. I have serious reservations about the viability of this project. It may be interesting to know how much sweet potato has been grown in the Tacama region and the extent to which studies have determined the technical and economic parameters for growing sweet potato in the white sands of the intermediate savannahs. Anyhow, since this project is still in the feasibility study stage, I would hold my breath, reserve my judgment and calmly follow its progress.

But before the dust has settled on the Anand Marketing Network potato project, we read in the local media of February 2007 of the Bio Capital, Brazil’s proposal to develop a 50,000 hectare (125,000 acres) sugar-cane cultivation somewhere in East Berbice, for the production of ethanol. I have not commented on this project even though I also have serious reservations about its viability. In the first instance, the agricultural scope of the project is alarming; 50,000 hectares is equivalent to the total acreage currently cultivated by Guysuco and all the independent cane farmers in the country. I am not sure that those who enthusiastically endorsed this project ever stopped to focus on its magnitude and the infrastructure that would be needed. I am an ardent advocate of large projects an
d am cognizant of the concept of economies of scale: I am, however cognizant of diseconomies of scale and wonder, if consideration has been given to the cost of irrigating the area identified for the project and its possible negative feedbacks on the existing sugar and rice industries in that region? The prospect of locating the project in the intermediate savannahs, has also been mooted: again, how much sugar-cane has ever been grown in the intermediate savannahs, and do we have any information on the technical and economic parameters for cultivating sugar-cane in the white sands of the Intermediate Savannahs? Time is, however, still running on this project, but I hope it would not go the route of Investe Brazil and the Trinidad smelter.

But while none of the exciting projects of the past five years appear to be taking root, I have, already, this year, read of three possible mega projects which, if implemented, would transform Guyana’s economy and propel us into the realm of a developed country. These projects are all dear to my heart and have been in my dreams for more than 50 years, hence I cannot resist commenting on them.

First, I read, in the January 28 international publication Metal Place of the agreement between the Guyana Government and Bosai Minerals Group Co. Ltd for an investment of CNY 5 billion (US$700 million) for the building of a 1 million metric tons per year alumina factory (refinery) in Guyana, with construction scheduled to start in June of 2009 and production two years later. While still trying to grapple with the low capital cost of the project which must have an associated bauxite mine and port and transshipment facility, and a two year, construction period, I then noticed, what appears to me as a cart before the horse scenario, that a CNY 7 billion (US$1 billion) “electrolytic aluminium factory” (I interpret this to be an aluminium smelter) with a capacity of 250,000 -500,000 tonnes would be set up to serve the alumina project. The estimated capital cost of the smelter, US$1 billion, is just about adequate for a 250,000 tonne smelter which would leave 500,000 tonnes alumina for export. The article did not say if this project would be on stream simultaneously with the alumina factory, if not, alumina exports would have to be 1 million metric tones until the smelter is operational making it imperative that a deep water port with a transshipment facility be developed along with the alumina refinery. I immediately scrolled further down the article to see something about the investment in a source of electric power for the smelter, but was deflated when I saw no reference to investment in an electric power project, which, in the context of Guyana, is most likely to be hydro power, (we should not rule out nuclear as in the case of the Suriname proposal), I then remembered the Synergy Holdings Amalia Falls hydro power project which now appears to be back on track and scheduled to be on stream at the same time as the alumina refinery and probably the aluminium smelter, but soon realized that the size of this project would not be adequate for even the minimum size smelter contemplated.- a project six times that size, requiring an investment of at least US$2 billion, needed for the 250,000 tonne smelter

But not to be undone (I assume the Government and Bosai had word of this), I read in the local media of 4 February, 2008 of the concept (apparently not yet a proposal ) by Enman Services Limited of the US$5 billion Turtruba hydro power project to produce 1,100 MW electricity with land and underwater power lines to supply electricity to other South American countries and Caribbean islands. I have come to accept the concept of the possible being infinite but I have also learnt that the actual is often extremely limited. While still grappling with the problem of the prospective South American and Caribbean markets for the output of this project, I am still trying to recover from the shock of the fibre optic cable that would transmit electric power to the Carib-bean. This project would have adequate capacity to supply the 250,000 tonne smelter with spare capacity for the domestic and export markets, but would probably have to be linked with the Amalia falls project (as insinuated by the proposer), to supply a 500,000 tonne smelter. It did not escape my attention, however, that the projected start-up date for the Turtruba project would be three to five years after the alumina plant is operational. Once again I would refrain from commenting on the prospects of this project coming to fruition. What surprises me is that the Guyana Government, one of whose ardent new supporters, in an article in Stabroek News to which I responded, posited that the bauxite alumina, aluminium industry was not for “small boys” but rather the preserve of the multi billion dollar transnational corporations, is now apparently confident that Bosai Minerals with published total assets of US$350 million is capable of undertaking projects of the magnitude being planned. However, since time has just started to run on these projects, I will keep my fingers crossed, hold my peace, and ardently follow their progress.

Yours faithfully,

Sylvester Carmichael

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