Tiny Guyana may soon be thrust into the ranks of the world\u2019s top oil producers<\/p>\n
Hi there, welcome to another Plain English lesson, number 247. The full lesson is available at PlainEnglish.com\/247. I\u2019m Jeff, JR is the producer, and you are the best audience in the world. That\u2019s what someone said last year and I couldn\u2019t agree more.<\/p>\n
Coming up today: Oil is starting to flow off the coast of Guyana, a tiny South American nation of less than a million people. How will Guyana use its newfound oil wealth? That\u2019s what we\u2019ll explore on today\u2019s lesson. In the second half of the audio lesson, we\u2019ll talk about the English phrase \u201con par with.\u201d The video lesson at PlainEnglish.com\/247 is about the word \u201cbarely.\u201d And of course JR has a song of the week.<\/p>\n
It\u2019s called \u201cblack gold\u201d: black, because that\u2019s how it looks when it comes out of the ground, and gold, because it makes everyone who touches it rich. Despite all the press and attention around renewable energy sources in recent years, oil is still a major driver of the world economy.<\/p>\n
So when ExxonMobil announced in 2015 that it had discovered oil sandstone reserves about 125 miles off the coast of Guyana, the fortunes of South America\u2019s third-poorest nation looked a bit brighter. At the time, neither ExxonMobil nor the Guyanese citizens had any idea exactly how much oil would eventually be found. Today, the scale of the discovery is clearer.<\/p>\n
Guyana is sitting on about 8 billion barrels of oil, enough to put it in the top 20 countries in the world, in terms of total oil reserves. The country struck a deal with ExxonMobil that allows the American company to extract the oil and pay the country\u2019s government a royalty. ExxonMobil hopes to be extracting 750,000 barrels of oil per day by 2025. The fortunes of Guyana\u2019s 780,000 citizens may\u2014and I emphasize may\u2014change forever.<\/p>\n
Guyana is a poor and struggling country. Public education for children is abysmal: although kids spend twelve years in school, they graduate having learned only about seven years of material. Four-fifths of its university graduates leave the country, so meager are the opportunities at home. Over 90 percent of the country\u2019s inhabitants live in low-lying areas that are prone to flooding; though the country is about the size of S\u00e3o Paulo state in Brazil, the vast majority of its land area is uninhabited, dense forest. Guyana\u2019s infrastructure is weak: barely seven percent of roadways are paved and power cuts are common. Infant and maternal mortality is high. Guyana has the world\u2019s highest suicide rate.<\/p>\n
Oil riches could transform Guyana. The country\u2019s GDP per person, in nominal terms, is about $5,000, the third-lowest in South America, ahead of only Bolivia and Venezuela. Some estimates suggest the nation\u2019s GDP per person could more than triple, putting it well ahead of many other countries on the continent and on par with regional leaders like Chile and Uruguay.<\/p>\n
Unlike many countries in Latin America, Guyana does not have a state oil company and doesn\u2019t have a well-developed oil extraction industry. It will therefore allow ExxonMobil to extract the oil, and it will charge a royalty for each barrel of oil extracted. A royalty is simply like a tax applied to the amount of a resource that is taken from the ground.<\/p>\n
The government set up a sovereign wealth fund to hold the royalty payments. A sovereign wealth fund is like a big national savings and investment account. This is a model followed by Norway, which has built up enormous national wealth, and many Middle Eastern countries.<\/p>\n
According to Guyana\u2019s plans, the sovereign wealth fund can only be used for long-term projects like infrastructure\u2014which the country badly needs\u2014and not to pay for day-to-day expenses. In principle, this is unquestionably a good idea. If you have any doubts about that, look at neighboring Venezuela, which used its oil wealth to shower citizens with money and buy votes\u2014only to see that money collapse as the supply of oil depleted.<\/p>\n
Foreign bankers are said to be bombarding Guyana with offers to lend them money, backed by future oil royalties. The government has wisely rejected these offers, not wanting to bury its citizens in debt so soon after the discovery. Better to be patient and control their own destiny via the wealth-fund rather than go on a debt-fueled spending spree now, government ministers say. The fact that any government had the spine to stand up to that temptation is a reason for optimism. The finance minister said he was committed to avoiding the \u201cresource curse.\u201d The resource curse is the term to describe the pattern, repeated over and over around the world, where natural resource discoveries leave corrupt government ministers fat and happy, but the country\u2019s citizens as poor as ever.<\/p>\n
So Guyana is off to a good start. But there are some warning signs. Its politics are tribal. Instead of having two or more parties compete on the basis of ideas, the two main parties compete based on ethnic loyalties. This generally leads to favoritism, corruption, and a stagnation of ideas and progress. The current president, David Granger, was up for re-election on March 2. A winner has still not been announced and some fear he may be trying to manipulate his way into a second term. If he forces his way into a second term with a cloud over his head, his government will have lost much of its legitimacy. If he loses, the opposition party would take the reins of government and loosen some protections on the oil revenues.<\/p>\n
Guyana is on the cusp of a critical national decision. It can become more like Venezuela, Angola or Nigeria, whose leaders became wealthy and powerful but whose citizens were deprived of any benefit. Or it can become more like Norway, Singapore, or the US state of Alaska, where the funds are saved, reinvested, and ultimately used to benefit future generations.<\/p>\n