Uncooperative mining sector could derail Norway pact – US Chargé in briefing

-‘highest’ brain drain cited

In a briefing for a US energy official, the US Embassy said his 2010 visit had come at an interesting time as there were protests by miners over new mining regulations linked to the Low Carbon strategy and that an uncooperative mining sector could unhinge the related Norway forest deal.

Giving an overview of Guyana early last year, then US Chargé d’Affaires Karen Williams at the Embassy in Georgetown, in a cable to Washington noted the protests by miners over new regulations requiring miners to provide six months notice prior to mining. Given the growth potential in the industry, she said miners were worried that the new regulations would hurt their livelihood.

“Large scale protests held in late January and early February required President (Bharrat) Jagdeo to intervene. He convened a stakeholders’ meeting with miners on February 11 to clarify the GoG’s position and allay fears. During that meeting, he signaled his belief that the Reducing Emissions from Deforestation and Forest Degradation (REDD) memorandum of understanding with the Government of Norway…takes precedence over revenue generated from mining royalties. Implementing REDD remains a top priority of the Jagdeo administration, but an uncooperative mining sector could derail the Norwegian agreement”, she related.

On the energy front, she said that the US Embassy here believed that President Jagdeo’s administration’s “penchant for micromanagement” suggests that oil and gas royalties would only intensify political wrangling over budget allocations.

She said that Jagdeo exerts full control over the executive and legislative branches of government, and faces little pressure to devolve power to local government or semi-autonomous agencies. The cable was released by whistle-blowing site, Wikileaks, last week.

Several oil companies are exploring for oil here with Spanish-Argentine company, Repsol, as well as Canadian company, CGX Energy, planning to drill wells here later this year. An onshore well drilled earlier this year in the Rupununi came up dry.

Williams noted that Jagdeo is term-limited with his second term expiring later this year. She however related that the media had speculated that Jagdeo may either seek a constitutional amendment to allow a third term or seek to defer elections and continue as President beyond 2011.

She said that Jagdeo is promoting growth in renewable energy and high-value, non-traditional agriculture through the Low Carbon Development Strategy (LCDS) but is also seeking to develop off-shore oil and gas. “Revenue-sharing from oil and gas royalties to local jurisdictions would be a politically complicated affair under the current system of local government financing,” Williams said.

She stated in the cable, that while the Guyana Revenue Authority is probably not ready to administer a large surge in oil and gas revenue, it now has a functional organizational structure, a better trained technical staff, and good information technology systems for revenue management. This baseline of revenue management capacity is a suitable target for the Energy Governance and Capacity Initiative intervention in Guyana, she said.

Meantime, Williams pointed out that Guyana faces many development challenges: a political climate that threatens the country’s ability to consolidate democracy; weak democratic institutions and inconsistent rule of law; an HIV/AIDS epidemic that stifles the country’s development and strains an already overburdened health sector; and an unstable security situation with bursts of violent upheaval. “These factors all contribute to the highest rate of “brain drain” in the world – almost 90 percent of skilled professionals and college graduates move overseas,” the cable said.

Williams noted that US interests in Guyana are shaped within the context of these challenges and centre on stopping the spread of HIV and AIDS; encouraging market-directed, socially responsible growth; preventing visa fraud and illegal migration; further consolidating democratic governance; and protecting US interests against transnational crime. “Drug trafficking, alien smuggling and other transnational threats are increasing concerns threatening investment and development,” she added.

“Despite Guyana’s richness in natural resources, the economy faces significant obstacles in reaching its full potential, including a shortage of skilled labor, poor infrastructure, and political instability,” she said.