Nationalization of businesses (foreign or domestic owned) more often than not result in adverse effects on a country’s economy. The experience relating to Guyana’s sugar, bauxite, rice, and other industries are illustrative as there was reduced productivity, inefficiency, mismanagement, lack of creativity and innovation, among other negatives. No need to cite statistics as these sectors displayed reduced production and Guyana’s economy grew negatively following nationalization of major industries. Yet one Anthony Vieira (Guyana SN Sep 4) is suggesting the expropriation of the oil and gas sector in order “to teach Exxon a lesson who is boss”.
In his missive, he made comparison of Booker’s Guyana with Exxon and the oil and gas sector. He stated that Booker’s dominated Guyana’s economy through the sugar industry resulting in the late dictator Forbes Burnham expropriating the multinational interests in Guyana in 1976. He charged Burnham with using bullying tactics and hints the same for Exxon. We know how the consequences of the nationalization of nationalizing Bookers and sugar, the most productive sector of the economy – collapse of the economy and sanctions from Western countries.
For those who may be too young to know, Bookers, as the British conglomerate was commonly known, operated the sugar industry in what was then British Guiana continuing after independence in 1966. The sugar baron owned the estates and five Booker Line ships in support of sugar exports, as well as other business. It also owned estates in Guyana, Jamaica, and other territories.
Comparing the Booker’s dominance of Guyana to Exxon, Mr. Vieira insinuates that the oil giant is able to do whatever it wants in the country with the government having no checks and balances and or interest in keeping them in line within the law. Exxon has largely operated within the law and has no control over the judicial, legislative, and executive institutions.
With reference to Bookers, he said that Burnham “was intent on showing them who was boss and so he decided initially not to nationalize them, but to instead impose a sugar levy which he announced in his New Year message in 1974.”
Notwithstanding the factual inaccuracy in his statement – the company was indeed nationalized – Vieira admitted that this was a major economic (and political) blunder. He stated that “just about 10 years after nationalization, the Guyana sugar exports dropped from almost 300,000 tons per year to about half that amount …”. So, by Vieira’s own admission, nationalization did not work out well. Similarly, nationalization of the Bauxite industry also led to the decline of production to half after a few years. And the same happened in the rice industry when government went into cultivation and production. The private sector outpaced the government in yield per acre in both sectors.
Vieira made some bizarre statements. He penned: “Bookers owned significant assets in Guyana while Exxon owns not even one square inch of land or property … . So when Exxon decides to leave Guyana, there will not be one square inch of fixed assets which we can seize in case they don’t keep their guarantees to us.” That comment is not accurate as Exxon has assets worth tens, if not hundreds, of millions in American dollars operating in Guyana jurisdiction.
But why this obsession with seizing foreign owned assets in Guyana as Burnham did “to show them who is boss”, is he (inadvertently) advocating for Exxon to buy up lands and real estate at a time when assets are beyond the affordability of Guyanese. If Exxon acquires these assets as he suggests, with its spending power, who will benefit the most? Won’t Guyanese be priced out of the market?
Vieira stated that Booker owned a multitude of ‘side companies’ which allowed them to buy all their raw material, products and services from themselves at an exorbitant cost to Guyana. Exxon has not been accused of operating in such crooked ways. News reports stated that Exxon contracts other companies – firms that have no connection to them – for supplies, services, and the like. These include drillers, vessel builders, caterers, transportation providers, and shore base services from local business operators such as the Guyana Shore Base Inc., and more recently, the Vreed-en-Hoop Shorebase that is being constructed.
Ensuring companies adhere to the laws of the land is a function of effective governance. We can all agree that this must be the environment in which all oil companies are made to operate. The government must also uphold and adhere to the law and not violate contracts.
Mr. Vieira’s tactics of seizing assets and nationalizing companies to teach them a lesson must be confined to the garbage heap of history.