In his article SN 2021/08/01, “Working for the poor in the face of relentless fake news”, Dr CY Thomas identified six negative findings in Guyana as “noise and absurd” without mentioning fatherhood or personal responsibility. I want to comment on Dr CYT’s sequel, in various ways: The six big negatives:
1. – distort the economic outlook; no one is distorting the economic outlook. Everyone is waiting for the production and export data. These data should be consistent with usable national reserves and national funds loanable to local businesses; not the direct foreign inputs that foreign entrepreneurs and partners are required to bring into the national economy to pay for their imported products tax-free.
2. – disincentive for economic agents; CYT has yet to identify these anti-national agents and whether they come from the owner or non-owner classes, poor or rich Guyanese.
3. – curb investment spending; CYT has not yet clarified whether this phenomenon is part of the “incompleteness” of the 2016 contract or artificial fake news, or the lack of project implementation skills in Guyana.
4. – undermine self-confidence; CYT has a lot of explaining to do here. Is it individual or systemic?
5. – erosion of trust; CYT must again explain this historical societal artefact by also examining the output and input data of the population of Guyana. The United States is clear on who to trust.
6. – and divert attention from the growth of inequalities and poverty. CYT – That would be relatively easy, as the Americas are full of ancient slavery laws in form and substance. Low wages and cheap goods produced abroad help the local poor because their jobs are outsourced. The wages of the poor can hardly catch up with the property classes that are now redefining the status quo, Guyana’s new frontiers and its corporate social function. There is no consistent discussion of these six negatives. They’re just hanging over the head.
I will comment on CYT’s other accusations or complaints as follows:
1A. The incompleteness of the quote from the 2016 CYT oil deal: There is a third complementary feature, which is not easily perceived, however. That is, Guyana PSA represents what economists call an “incomplete contract”. The contractor has full and incomplete terms: “full” terms – zero import duties, except for petroleum used as domestic fuel.
“Incomplete” terms – Environmental risks and catastrophic losses will weigh on Guyana’s poor. They are not conditional contracts. The same goes for the secondary input-output requirements of an old big sister economy grappling with a whole new growing oil economy.
CYT QUOTE ON RENEGOCIATION: Position 1
“Such a renegotiation can never be ruled out as a future rational option”! The theory of incomplete contracts postulates that, independently of the public statements on the contracts of the party to the PSA Guyana 2016 indicating “no renegotiation”,
CYT QUOTE: Position 2
Given this dynamic, the shrill noise and absurd calls to renegotiate Guyana’s PSA are little more than a poorly disguised pretext for the complicit pursuit of political, personal and self-promotion agendas. . The poor cannot be served by ignoring the current unbalanced contract. CYT should be aware that there is no link between the current budget and Guyana’s capital budget. All residual cash held is sterilized at the New York Federal Reserve. A direct source of transfer payments to Guyana’s poor has yet to be defined. The absence of enabling laws approved by Parliament will harm the poor; it is not serving the poor.
2A. On Synergy, Guyana revels in the combined association with Big Oil.
However, there is nothing “synergistic” about the 2016 contract; just a pound of flesh. The conditions are well defined to capture all the external benefits of the first cash flows in Guyana’s capital budget so that Guyana can minimize its debt structure and optimize its portfolio cost of debt. This suboptimal debt is no different from Guysuco’s debt structure that CYT is familiar with.
3A. Tax system
QUOTE 1 CYT: “One is the synergistic relationship of the individual elements of the tax system (ie, deductions, taxes, allowances, credits, as well as other terms and conditions)”. The second is that the tax system has both written (tangible) and unwritten (intangible) components. These include such elements as trust and goodwill between the Parties to the Agreement;
QUOTE 2 CYT:
“Last week’s column aimed to reinforce the critical importance of two features of the tax system, which is enshrined in Guyana’s 2016 Production Sharing Agreement (PSA) with ExxonMobil and its partners.” Guyana gave up its tax policy levers, assessed the profits taxes paid by Guyana, sir, non-trade deal, a lot of goodwill that results in an appreciation in the price of the entrepreneur’s shares and nothing for the poor of Guyana from Guyana’s profit share (not an inch or a blade of entrepreneurs’ future profit payment). Guyana, which pays entrepreneurs’ taxes, gets no consideration, just no value of goodwill on Guyana’s balance sheet or budget.
4A Very Strong Incentives to Cheat in a Zero Sum Game, Guyana Vs Contractor Plus Partners, Measurements, Cost Estimation and Auditing:
CYT QUOTE: “avoidance of zero-sum lawsuits”. All oil recoveries come from Guyana’s oil wealth. The total is fixed. Any slip of the Guyanese plate falls directly on the knees of EXM. This is the real incentive for moral hazard to trick Guyana into a zero-sum contract. Capital recoveries of up to 75% and unaudited reports showing exactly where the royalties are coming from or whether Guyana is also paying royalties on its share or the multinational share or recoverable head office costs are part of zero-sum lawsuits. undefined of CYT. This zero tax regime could be challenged and declared unconstitutional. I ignore all these 60/600 block fiascos.
5A. Quote from CYT’s proposal – “As I had previously suggested, the formation of a national oil company, NOC, for the onshore gas project to be built by ExxonMobil and to be funded by the PSA’s oil cost offers the ideal entry point for this. “Who will ring the cat and foot the bill? CYT’s proposal is incomplete.
Ganga Persad Ramdas