OPIC-SUPPORTED INVESTMENT FUND IN THE REGION:

UNCLAS GEORGETOWN 000374 SIPDIS PASS TO OPIC - JENNIFER RENEE DOHERTY, INVESTMENT FUNDS OFFICER AND/OR JAMES F. HANSLEY, DIRECTOR, PRIVATE EQUITY SIPDIS E.O. 12958: N/A TAGS: EINV OTRA OPIC GY SUBJECT: OPIC-SUPPORTED INVESTMENT FUND IN THE REGION: GUYANA'S RESPONSE REF: STATE 57353 ¶1. As requested in Reftel, Post has reviewed AIC International Investments Limited's proposal and offers the following feedback. ¶2. There is a need for capital in almost all sectors in Guyana. Commercial banks are the main source for capital funds. During 2005, the average lending rates at commercial banks was 14.54%. There are no development banks for large scale- investments. There are two small sources of development financing for small to medium sized enterprises. However, we do not see any particularly noteworthy development impact. ¶3. Telecoms, power and tourism are areas where Post feels that the AIC funds are in sync with the economic development plans in Guyana. Currently, two American investors dominate the Telecoms sector in Guyana. Guyana Telephone & Telegraph Co., owned by Atlantic-Tele Network, has an exclusive license to provide line telephone service and also has a cellular license to operate in Guyana. Cel*Star, a new entrant into the telecoms sector, operates another cellular service. Both companies have publicly stated plans for expansion in their telecom networks. ¶4. The power company, Guyana Power and Light, although owned by the Government of Guyana, has recently announced its plans to purchase power from independent power producers, opening the window of opportunity for private firms to become involved in this sector. ¶5. Currently tourism entities in Guyana are small family run resorts and hotels. However, a number of these entities are upgrading facilities to meet the needs of tourists and sports enthusiasts visiting the Caribbean for World Cup Cricket in 2007. In addition, the head of Guyana Office of Investment recently mentioned the possibility of attracting casino/hotels to the country, a suggestion that has prompted some debate. This may be an area where foreign financing will be sought in the future. ¶6. The "buy out strategy" proposed by AIC may be difficult for the business class in Guyana to accept. In late November 2004, Trinidad conglomerate ANSA MCAL announced its consideration of the possible acquisition of an interest in Guyanese-owned distillery Banks DIH. From the time the announcement was made, Banks DIH employees staged picketing exercises outside the corporate offices of ANSA MCAL and the Guyana Stock Exchange in Georgetown, citing the possible loss of jobs as a consequence of the take over. Banners were placed at strategic locations in the city imploring the populace to support the company and encourage shareholders to reject any moves for a take-over. The business associations, including the Private Sector Commission and the Guyana Manufacturers Association, issued statements to the media with calls for the shareholders to be patriotic and act in the national interest. However, some sections of the Guyanese business community openly criticized actions of Banks employees, positing that such actions create an environment that discourages foreign investment in Guyana. ¶7. To Post's knowledge, neither the fund nor its principals have been involved in any transactions in Guyana to date. BULLEN