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OO RUEHLMC
DE RUEHGE #0090/01 0551438
ZNR UUUUU ZZH
O R 241438Z FEB 10
FM AMEMBASSY GEORGETOWN
TO RUEHC/SECSTATE WASHDC IMMEDIATE 0217
INFO EC CARICOM COLLECTIVE
RHMFISS/HQ USSOUTHCOM MIAMI FL
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RUEHC/USAID WASHDC 0015
RUEHLMC/MILLENNIUM CHALLENGE CORPORATION WASHINGTON DC

UNCLAS SECTION 01 OF 04 GEORGETOWN 000090 
 
SENSITIVE 
SIPDIS 
FOR S/CIEA DGOLDWYN/PHUEPER/JWANG 
DEPT FOR WHA/CAR VDEPIRRO/SWHALEN 
USAID FOR MSCHLAGENHAUF 
DEPT PLEASE PASS TO DEPT OF INTERIOR FOR USGS CWANDREY 
DEPT PLEASE PASS TO DEPT OF INTERIOR FOR MMS KKUNKEL 
 
E.O. 12958: N/A 
TAGS: ENRG EPET EAID ECON ETRD PGOV GY
SUBJECT: SCENESETTER FOR MARCH 3-4 VISIT BY S/EGCI DAVID GOLDWYN 
 
¶1. (SBU) SUMMARY OF PROPOSED TRIP AGENDA:  Embassy Georgetown 
welcomes you to Guyana March 3-4.  On March 3 you are scheduled to 
meet with President Bharrat Jagdeo, Prime Minister Samuel Hinds, 
Foreign Minister Carolyn Rodrigues-Birkett, Finance Minister Ashni 
Singh, Bank of Guyana Central Governor Lawrence Williams, and 
Guyana Energy Agency CEO Mahender Sharma.  Hotel reservations and 
motorpool arrangements are being made.   Although we are waiting 
for confirmation for your meeting with Foreign Minister 
Rodrigues-Birkett and your lunch meeting with CEO Sharma, we expect 
both requests to be granted.  Post will provide additional updates 
and briefing materials through email to S/CIEA's Joe Wang and Paul 
Hueper.  END SUMMARY OF PROPOSED TRIP AGENDA; FOLLOWING TEXT 
PROVIDES SCENESETTER INFORMATION. 
 
 
 
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Overview and Context 
 
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¶2. (SBU) You are visiting at a particularly interesting time 
politically and economically.  Local elections are anticipated for 
2010 and national elections are scheduled for 2011.  Local media 
have speculated that President Bharrat Jagdeo may either seek a 
constitutional amendment to allow a third term or seek to delay 
elections and continue as President beyond 2011.  Economically, 
President Jagdeo is promoting growth in renewable energy and 
high-value, non-traditional agriculture through his Low Carbon 
Development Strategy (LCDS).  While pursuing renewables under the 
LCDS, he is also seeking to develop off-shore oil and gas. 
 
 
 
¶3. (SBU) Guyana has a population of 760,000, mostly along the 
Atlantic coast, a landmass equivalent to Idaho State, and a GDP of 
US1 billion.  It 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. 
 
 
 
¶4. (SBU) U.S. interests in Guyana are shaped within the context of 
these challenges and center on (1) stopping the spread of HIV and 
AIDS; (2) encouraging market-directed, socially responsible growth; 
(3) preventing visa fraud and illegal migration; (4) further 
consolidating democratic governance; and (5) protecting U.S. 
interests against transnational crime. Drug trafficking, alien 
smuggling and other transnational threats are increasing concerns 
threatening investment and development. 
 
 
 
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Mining Protest Impact 
 
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¶5. (SBU) Your visit also comes after several protests by mining 
workers over the GoG's new mining regulations to limit forest 
degradation as part of the LCDS.  The proposed new regulations 
require miners to provide six months notice prior to mining, while 
giving the Guyana Forestry Commission (GFC) veto power over miners' 
activities.  The gold and mining industry is one of the few 
industries that performed well in 2009.  According to the Guyana 
 
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Gold Board, small and medium scale miners declared a record 305,000 
ounces in 2009, yielding nearly US300 million, one third of 
Guyana's GDP.  The Guyana Gold and Diamond Miners Association 
(GGDMA) reported that the gold mining industry is projected to 
produce 500,000 ounces in 2010 and by 2015 over one million.  Given 
such growth potential, miners are concerned that the new 
regulations will hurt business and affect their livelihood. 
 
 
 
¶6. (SBU) Large scale protests held in late January and early 
February required President 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, which includes up to US250 million over five 
years, 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. 
 
 
 
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The Political Scene 
 
----------------------- 
 
 
 
¶7. (SBU) Politics in Guyana have traditionally broken along racial 
lines, with overwhelming support among majority Indo-Guyanese for 
the People's Progressive Party/Civic (PPP/C) and equally polarized 
support from the slightly smaller Afro-Guyanese population for the 
People's National Congress/Reform (PNC/R).  This trend continues, 
though inroads by the Alliance for Change (AFC) and other small 
parties suggest a lessening of racial identity politics.  The PPP/C 
is the party in power.  Bharrat Jagdeo has been President of Guyana 
since August 11, 1999, winning elections in 2001 and 2006.  Active 
in the international scene, he has visited Kuwait, UAE, Iran and 
Russia in 2010.  He also served as Chairman of CARICOM from July 
1-December 31, 2009 and is currently serving as Chairman of UNASUR, 
which highlights Guyana's unique position within the Caribbean and 
Latin America. 
 
 
 
¶8. (SBU) President 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. 
While the GoG includes a range of ministries and agencies which 
should play a role in managing oil and gas revenues, the Jagdeo 
administration's penchant for micromanagement suggests that oil and 
gas royalties would only intensify political wrangling over budget 
allocations.  President Jagdeo is term limited; his second term 
expires in late 2011. 
 
 
 
¶9. (SBU) Now more than a decade overdue, local government elections 
are anticipated to be held in 2010; re-registration is complete and 
a voter education campaign is underway, though so far voters show 
little enthusiasm for learning.  Two other key issues need to be 
resolved in advance: 1) Parliament must constitute several 
commissions with oversight responsibilities for local governance; 
and 2) dedicated funding for municipalities, currently at the whim 
of various ministries, needs to be established.  A bipartisan 
committee supposedly is looking at these issues, but it has made no 
substantive progress.  Revenue-sharing from oil and gas royalties 
to local jurisdictions would be a politically complicated affair 
under the current system of local government financing. 
 
 
 
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Economic Conditions 
 
GEORGETOWN 00000090  003 OF 004 
 
 
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¶10. (SBU) Despite its 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. The country is entirely dependent upon 
imported petroleum products for energy generation, rendering it 
vulnerable to price volatility, as recently experienced in the 
commodities surge of 2007-08 when the rising price of crude had 
painful ripple effects on the cost of living, external balances, 
and the competitiveness of Guyana's products on the world market. 
The LCDS seeks to diminish this vulnerability by constructing a 
hydropower station at Amalia Falls, providing more than four times 
the county's current power consumption.  In addition, the LCDS 
seeks to invest REDD payments in high-value, non-traditional 
agricultural products for export and other low-carbon sectors like 
business process services, as well as human capital necessary for a 
more knowledge-based economy.   The LCDS does not envision 
developing oil and gas resources.  Guyana's per capita GDP of 
approximately US1,300 makes it one of the poorest countries in the 
Western Hemisphere. 
 
 
 
¶11. (SBU) In November 2009, CGX Inc., a Canadian oil firm, 
announced plans to begin exploratory drilling in Guyana's exclusive 
economic zone during 2010.  CGX expects to begin production in 2011 
and ramp up output to 300,000 barrels per day by 2016.  ExxonMobil, 
Shell, Repsol, and other energy companies also hold petroleum 
prospecting licenses off-shore of Guyana.  CGX is concerned that 
border disputes between Suriname and Guyana could potentially 
affect business development.  Security is a major concern for the 
company. 
 
 
 
 
 
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Previous Success in Promoting Better Fiscal Management 
 
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¶12. (SBU) Between January 2008 and January 2010, the 
USAID-administered Millennium Challenge Corporation (MCC) Threshold 
Program i) helped reduce Guyana's fiscal deficit by restructuring 
the Guyana Revenue Authority (GRA), ii) streamlined the business 
registration process at the Deeds Registry, iii) modernized the 
GRA's customs procedures, and iv) effected several other 
complementary reforms at the Ministry of Finance, Guyana Office for 
Investment, Parliament, and National Procurement and Tender 
Administration.  The Threshold Program represents a significant 
success for U.S. economic development efforts in Guyana.  Lessons 
learned by Post during the program's implementation may usefully 
inform proposed interventions by the Energy Governance and Capacity 
Initiative in Guyana's fledgling oil and gas sector.  In addition, 
the program's success in modernizing the GRA provides a better 
foundation on which the EGCI may build capacity among Government of 
Guyana (GoG) agencies in responsibly managing oil and gas 
royalties. 
 
 
 
¶13. (SBU) Through implementing the Threshold Program, USAID/Guyana 
established effective working relationships with senior leadership 
within the GRA, transferred knowledge and skills to hundreds of its 
technical staff, and succeeded in transforming key components of 
the country's fiscal management - how it collects and accounts for 
taxes and sanctions delinquent taxpayers.  Given this experience, 
Post believes that the EGCI could enjoy similar impact by deploying 
a similar program targeting the GRA and other relevant government 
 
GEORGETOWN 00000090  004 OF 004 
 
 
agencies. 
 
 
 
¶14. (SBU) The GRA's overall effectiveness and efficiency has been 
increased dramatically as a result of the program.  While the GRA 
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.  Post believes this baseline of revenue 
management capacity is a suitable target for EGCI intervention in 
Guyana. 
 
 
 
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Currency 
 
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¶15. (SBU) USD is accepted at major hotels and businesses in Guyana. 
Credit cards are also accepted, but are not recommended for use. 
The exchange rate is 1USD equals roughly 200 GYD. 
WILLIAMS