US embassy cable - 05GEORGETOWN1273

UNCLAS SECTION 01 OF 02 GEORGETOWN 001273 
 
SIPDIS 
 
SIPDIS 
 
SANTO DOMINGO FOR COMMERCIAL SERVICE 
 
E.O. 12958: N/A 
TAGS: ECON, BTIO, PGOV, EAGR, EFIN, ENRG, GY 
SUBJECT: President's Economic Vision for Guyana 
 
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Summary 
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1.  At a December 1 speech to the Georgetown Chamber of 
Commerce, President Jagdeo threw away his speech and instead 
spelled out, unscripted, his economic vision for Guyana's 
future.  His remarks highlight a strategy for Guyana's 
infrastructure, macroeconomic policy, and growth sectors. 
 
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Ambitious Plan for Renewable Energy, Modern Communications 
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2.   Jagdeo emphasized the importance of renewable energy to 
Guyana's future, citing three potential sources.  All three 
renewable energy sources would offer far lower marginal 
costs than the Guyana's current diesel-fueled electricity 
generation which produces the second most expensive 
electricity in the world at US$0.24, US$0.30 and US$0.36 per 
KwH respectively for residential, industrial, and commercial 
consumers. 
 
-- Hydroelectric: Jagdeo wants to see 100 megawatts (MW) of 
hydroelectric generation within five years.  Studies 
indicate that Guyana has sufficient water resources to 
develop 7,000 MW of hydroelectric power, compared to the 
incumbent power company's 123 MW of installed capacity. 
(NOTE: Guyana has spent decades periodically flirting with 
the promise of harnessing the considerable potential of 
Guyana's rivers, without any tangible results so far.  The 
Chinese completed a small Hydro Power station at Moco Moco 
on the Brazil border in April 2004, but it failed a few 
weeks later after a landslide caused extensive damage.) 
 
-- Wind: Wind energy is feasible along the coast and a 
Curacao-based company is constructing an initial 11 MW wind 
farm at Hope Beach in northeastern Guyana.  Jagdeo strongly 
supports continued commercial development of wind energy 
farms. 
 
-- Bagasse: Jagdeo noted that the sugar industry will also 
contribute electricity through bagasse, a byproduct of sugar 
production.  Guysuco is building a cogeneration plant at its 
most modern sugar estate, Skeldon, which is expected to 
supply power to the national grid in addition to its own 
sugar factory. 
 
3. Jagdeo aims to upgrade Guyana's telecommunications 
infrastructure to provide broadband access to the 90% of the 
population living along the north coast. 
 
-- Telephony:  Jagdeo wants Guyana to be connected more 
closely with the world through lower international calling 
rates and said that he would not mind losing tax revenue in 
exchange for lower international telephone rates.  The goal 
is for GT&T to provide adequate bandwidth at competitive 
prices. 
 
-- Internet:  In terms of technology, Jagdeo said that he 
wants a computer in every Guyanese home and full coverage 
for broadband access along the coast.  (NOTE: Guyana's 
telecommunications monopoly GTT, a subsidiary of an American 
corporation, has fought deregulation every step of the way. 
GTT works hard to keep telecommunications rates among the 
highest in the world.  GTT's current rate for a 1024 Kbps 
internet connection is US$14,645 per month (sic!), plus 
US$4600 for installation.  Rates for international telephone 
calls vary from US$0.50 per minute to the U.S. and Canada to 
more than US$3 per minute to other countries.  As the 
monopoly internet provider, GTT filters out VOIP services 
and shuts down independent ISPs that try to offer VOIP in 
defiance of GTT's filters.) 
 
4. Education is the final piece of Jagdeo's vision for 
Guyana's infrastructure.  He said that access to education 
can no longer be the sole objective.  Policies must focus on 
improving the quality of education as well. 
 
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Jagdeo Commits to Keep Lid on Inflation 
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5.  Jagdeo described his approach to monetary and fiscal 
policy in unequivocal terms.  Guyana will continue its 
restrictive monetary policy, sterilizing foreign exchange 
inflows to prevent inflation.  It will not use inflows to 
finance its fiscal deficit.  Jagdeo committed to a 
controlled fiscal policy.  He said that his government would 
not propose a loose "election year" budget for the purpose 
 
GEORGETOWN 00001273  002 OF 002 
 
 
of currying voters' favor. 
 
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Engines for Growth 
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6.  Jagdeo pointed to three areas to drive Guyana's future 
growth. 
 
-- Services: Jagdeo supports the tourism sector in 
particular as a promising area for Guyana. 
 
-- Information & Communication Technologies (ICT): 
Development of the ICT sector depends on Guyana's success in 
vastly improving its technological infrastructure as 
described in Para 3.  Jagdeo wants to develop an ICT sector 
that can compete internationally and export its services. 
 
-- Cultivation of the Intermediate Savannahs: Guyana's 
savannahs lie far south of the coast as the rain forest 
gives way to grasslands traditionally used for cattle 
grazing.  These lands are arable but sparsely populated. 
Jagdeo sees an opportunity for their agricultural 
development. 
 
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Defiant on Sugar 
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7. Jagdeo closed his remarks with a firm defense of Guyana's 
sugar industry and its future.  Unbowed by the European 
Union's impending 36% price cut for ACP sugar, he spelled 
out an ambitious strategy to increase competitiveness. 
Guyana's sugar industry aims to lower production costs from 
17-18 U.S. cents per pound to 10-11 cents through aggressive 
investment and modernization.  To achieve lower unit costs, 
he cited a sugar production target of 400,000 tonnes of 
sugar per year (compared to approximately 325,000 tonnes in 
2004).  Greater efficiency will yield more sugar from 
existing cane fields, but Jagdeo also called for developing 
even more land for sugar production.  In the long run, 
Jagdeo sees Guyana increasing sugar cane production by a 
factor of three or four.  In his view, more sugar cane will 
support large-scale ethanol production in Guyana. 
 
Thomas