Guyana Economic/Commercial Round-up: March 2006

UNCLAS SECTION 01 OF 02 GEORGETOWN 000329 SIPDIS SANTO DOMINGO FOR FCS SIPDIS E.O. 12958: N/A TAGS: ECON ETRD EAIR EAGR PREL GY SUBJECT: Guyana Economic/Commercial Round-up: March 2006 REF (A) GEORGETOWN 005, (B) GEORGETOWN 045, (C) 05 GEORGETOWN 1055, (D) GEORGETOWN 130, (E) GEORGETOWN 242, (F) BRIDGETOWN 530 (G) PARAMARIBO 199 Contents of March 2006 Guyana Economic Highlights: ¶1. Trade: Parliament Passes CSME-Related Bills ¶2. Agriculture: Bumper Rice Crop Expected, Slight Price Increase ¶3. Public Finance: Flat Income Tax at 33 1/3% ¶4. Investment: Two Airline Investors Considering Guyana ¶5. Bilateral Economic Activity: Cuban Lightbulbs -------------- Parliament Passes CSME-related Bills -------------- ¶1. The National Assembly approved two pieces of legislation pertaining to Guyana's compatibility with the emerging Caribbean Single Market and Economy (CSME). The Caribbean Community (CARICOM) Bill will give effect to the revised Treaty of Chaguaramas establishing CARICOM, including the CSME, while the Caribbean Community (CARICOM) Movement of Factors Bill recognizes the provisions of the Treaty related to the exercise by nationals of CARICOM of the right of establishment, the right to provide services to move capital into, within and out of Guyana to other member states of CARICOM. The laws apply retroactively from January 1, 2006, when Guyana became one of 6 initial members of the CSME (Ref A). -------------- Rice Harvest Begins in Wake of January Floods -------------- ¶2. Rice harvesting was ongoing countrywide in early March, with Region Two (Pomeroon/Supenaam) farmers anticipating a bumper spring crop. Farmers in Region Five (Mahaica/Berbice),experienced losses in excess of 19,000 acres due to flooding early in the year (Ref B). Harvesting in this Region was concentrated mainly in the coastal areas since the 19,000 acres lost were cultivated in riverain parts and on other plots which depended on the Mahaica, Mahaicony and Abary rivers for drainage. Farmers whose plots were destroyed are preparing to plant for the autumn crop with the hope of getting assistance with fuel, seed paddy and fertilizer from the Rice Producers Association (RPA) or the government. The price for paddy delivered to the local mills currently ranges from G$1,700 (US$8.45) to GY$2,200 (US$10.95) per 140-lb. bag. The General Secretary of the RPA noted that the prices for the grain increased from GY$1,600 (US$7.96) per bag after the last harvest, partly because of the floods but primarily as a result of a rise on the world market where semi-milled rice is US$260 per ton, up from US$200 per ton. -------------- Flat Income Tax at 33 1/3% -------------- ¶3. The National Assembly approved the Income Tax Amendment Bill March 2 after the ruling People's Progressive Party/Civic (PPP/C) rejected proposed amendments by the main opposition People's National Congress Reform (PNCR). The election-year bill raises the income tax threshold to $25,000 (US$124) per month or G$300,000 (US$1492) per annum from its previous level of $20,000 (US$100) per month or $240,000 (US$1194) per annum. In addition, the amendment removes a graduated tax bracket system in favor of an across the board 33 and 1/3% income tax rate, previously the highest rate. The Minister of Finance, Saisnarine Kowlessar, informed the National Assembly that the new income tax threshold will relieve some 20,000 persons from paying taxes and leave about G$800 million (US$4 million) per year more in the hands of taxpayers. Kowlessar also anticipates a higher level of tax compliance and that the simplification of the tax regime will free the Guyana Revenue Authority (GRA) to focus on other areas of revenue collection. However, the PNCR, although agreeing in principle with the increased threshold, pressed for a larger increase in the threshold and argued that the across-the-board would effectively increase taxes for some. EmbOff calculations show this is not true. -------------- New Interest in Airline Sector -------------- ¶4. The Guyana Civil Aviation Authority (GCAA) is processing GEORGETOWN 00000329 002 OF 002 applications for two groups of investors who have indicated interest in establishing airline operations in Guyana. A new operation could start in June. Director General of the GCAA, Chabeelanan Ramphul, said these groups have to satisfy a number of conditions, including adequate financing and cash flow projections for the next three years, before approvals are granted. The GOG is proceeding cautiously in vetting such investments since the collapse of Universal Airlines in August 2005 (Ref C) and the collapse of Guyana 2000 and Guyana Airlines before that. North American Airlines, a U.S.-flag scheduled charter carrier, is the only service offering non-stop flights to Guyana from the U.S., and a recent transport sector study called for a proactive approach in persuading airlines to operate in and out of Guyana so as to develop more regional air transport routes. In addition to North American Airlines, British West Indian Airlines (BWIA),LIAT, Caribbean Express and Meta (of Brazil) currently offer services to Guyana. -------------- Guyana-Cuba Energy Initiative -------------- ¶5. Prime Minister Sam Hinds launched the "Guyana-Cuba Energy Saving Initiative", a program which entails replacing incandescent light bulbs with energy saving lamps at no charge to consumers. This program is one of several Cuban government initiatives initiated following a visit by President Bharrat Jagdeo to Cuba during February 2006 (Ref D, E) and mirrors Cuban efforts elsewhere in Suriname and the Eastern Caribbean (Ref F, G). The Government of Cuba has offered to provide the GOG with almost 600,000 light bulbs for the program. According to a GOG release, Cuban technicians will visit homes to replace bulbs. The release stated that conversion is expected to reduce electricity consumed by 80 percent. An estimated 800,000 bulbs would be needed to cover the conversion exercise in areas being served with electricity across the country. Hinds noted that the project was launched in Linden because of the high electricity consumption in that community. The Guyana Chronicle Newspaper reported that "the bulbs are Chinese made, with the Philips brand name, and were obtained through an agreement between Cuba and China". COMMENT: The answer to the question posed in Ref F is three, according to photographs in April 6 newspapers depicting a team of Cuban technicians installing a fluorescent light bulb at the President's official residence. END COMMENT. BULLEN