GUYANA ECONOMIC & COMMERCIAL ROUND-UP APRIL 2006

UNCLAS SECTION 01 OF 03 GEORGETOWN 000405 SIPDIS SANTO DOMINGO FOR FCS SIPDIS E.O. 12958: N/A TAGS: EAGR EMIN ELAB EFIN EAID BBSR BEXP GY SUBJECT: GUYANA ECONOMIC & COMMERCIAL ROUND-UP APRIL 2006 Refs: A. Georgetown 329 Contents of April 2006 Guyana Economic/Commercial Highlights: ¶1. Mining: Diamond, Bauxite Production Increase ¶2. Trade: Guyanese Companies to Participate in Orlando Trade Fair ¶3. Agriculture: Exports of Non-Traditional Crops High Despite 2006 Flood ¶4. Financial system: Excess Liquidity, Declining Interest Rates ¶5. Investment: Financing Deal for Teperu Quarry ¶6. Transportation: Three New Airlines for Guyana by June ¶7. Investment Climate: Parliament Passes Competition and Fair Trading Bill ¶8. Legal Framework: Consumer Protection, Income Tax Legislation ¶9. Statistic of the Month: Tax Evasion -------------- -------------- Diamond, Bauxite Production Increase -------------- -------------- ¶1. The Guyana Geology and Mines Commission (GGMC) recorded a significant increase in diamond and bauxite production for 2006 compared to the corresponding period last year. The bauxite sector declared a production of 435,519 tonnes at the end of the first quarter when compared to 341,868 tonnes produced up to March 2005, an increase of 27 percent. The figures represent increased mining activity at Omai Bauxite Mining Inc. (OBMI) at Linden and the Bauxite Company of Guyana Inc. (BCGI) on the Berbice River. The GGMC also reported that 107,150 karats of diamond were produced for the first quarter, while 89,132 karats were produced for the corresponding period in 2005, an increase of just over 20 percent. Gold production, however, declined from 41,390 ounces in the first quarter 2005 to 40,224 ounces for the first quarter in 2006. However, GGMC expects production to increase, as several companies are currently conducting advanced exploratory studies to recover reserves. Guyana Goldfields in the Cuyuni River, Region Seven, and Strata Gold which operates at Tassawini in Region One have both projected reserves in excess of 1,000,000 ounces each. -------------- -------------- Guyanese Companies to participate in Orlando trade fair -------------- -------------- ¶2. Guyanese companies are expected to participate in the 1st Caribbean American Business Expo and Conference from June 1 to 3 in Orlando, Florida. The Guyana Office for Investment (GOINVEST) is coordinating companies' participation as part of its efforts to showcase Guyana's products and promote investment. The Expo will take place at the Central Florida Fair and Exposition Park, and twenty-seven companies are expected to participate. Products to be exhibited include nibbi and wooden furniture, pharmaceuticals, leather and wooden craft, fresh and processed foods, gold and silver jewellery, basketry and leather footwear. In 2005, GOINVEST hosted and/or attended trade fairs in St. Lucia, Canada, the United States and Suriname. -------------- -------------- Export of Non-Traditional Crops high despite 2006 flood -------------- -------------- ¶3. The New Guyana Marketing Corporation (New GMC) reported that approximately 861,198 kilograms of non-traditional crops were exported during January and February 2006 as compared to 519,842 kilograms for the corresponding period in 2005, an increase of 66 percent despite the floods of early 2006. Although traditional cultivating areas, including Crabwood Creek, Corentyne, Mahaica, Mahaicony, were affected by the flood, sourcing from other areas such as Linden and the Berbice River region facilitated the increase. Non-traditional export produce promoted by the New GMC includes watermelons, pumpkins, plantains, pineapples, eddoes, limes and dry coconut bound for markets in CARICOM, North America and Europe. The General Manager of New GMC, Nizam Hassan, also cited his agency's focus on farmers' training. One-hundred fifty farmers recently participated in a post-harvest training program coordinated by the New GMC and USAID's Guyana Trade and Investment Support (GTIS) project. -------------- -------------- Excess Liquidity, declining interest rates GEORGETOWN 00000405 002 OF 003 -------------- -------------- ¶4. Moen McDoom, chairman of The New Building Society (NBS), Guyana's leading mortgage bank, observed that the decline in the economy has contributed to a reduced demand for credit and has resulted in excess liquidity in the banking system at the bank's annual general meeting on April 24. According to McDoom, this has forced financial institutions to reduce interest rates on deposits. NBS interest rates have declined by 1 percent over the past three years while commercial banks have had a decline of approximately 0.08 percent. The chairman said this could lead depositors to seek other forms of security in foreign currency. Despite this however, NBS announced another successful year with a profit of G$365M (US$1.8M),while maintaining the lowest interest rate for housing loans in the financial sector. Maurice Arjoon, another NBS executive, also expressed concern over the liquidity situation and said that this is due to the sharp decline in private sector credit, coupled with cautious and conservative lending policy adopted by the commercial banks. He also cited an increased demand for GOG Treasury bills. NBS' mortgage lending reportedly peaked at $2.72 billion (US$13.6M) in 2005, which was described as a record achievement despite the floods earlier in the year, which had a negative impact on the housing sector. NBS anticipates that with the infrastructure development in new housing schemes, there is likely to be a greater level of activity in the establishment of new homes. -------------- -------------- Financing deal for Teperu quarry -------------- -------------- ¶5. The Guyana Bank for Trade and Industry (GBTI) provided a letter of credit valued at US$5.25M to BK International for the recommencement of quarrying operations in Teperu, Region Ten. According to media reports, in addition to the US$5.25M provided by GBTI, the company was contributing $350M (US$1.75M) and another US$5M is slated for the purchase of equipment. The number of staff on site is expected to increase from 40-plus to 110 persons. Mazaruni Granite Products Limited (MGPL),which previously operated the Teperu and Itabu sites, went into receivership in May 2003 and thus removed competition from the sector, causing the remaining supplier to increase prices. At the handover ceremony, Prime Minister Samuel Hinds acknowledged unsuccessful attempts by other companies at quarrying but said ". that with efficient management and expertise the venture can be a successful one." The investment by BK International comes at a time when public and civil works are being tremendously hindered as a result of the shortage of cement and stones on the local market. -------------- -------------- Three new airlines for Guyana by June -------------- -------------- ¶6. More details have emerged about the three new airlines that received approval last month to begin operations in Guyana by June 2006 (Reftel). Caribbean Air Systems will provide a regional service connecting Guyana to Belem, Cayenne, Paramaribo, Port of Spain, Curacao, St Maarten and Santo Domingo. Travel Span Guyana Inc. will offer a direct service from Georgetown to New York. Meanwhile, E-Jet will service the Georgetown to New York and Georgetown to Toronto routes. The new airlines now have to process their permissions for the foreign destinations and develop their markets. -------------- -------------- Parliament passes Competition and Fair Trading Bill -------------- -------------- ¶7. The National Assembly approved the Competition and Fair Trading Bill on April 10 following consensus by a Special Select Committee set up in December 2005. The Bill is based on CARICOM model legislation developed in 2003 to ensure that there is harmonization of national competition laws within the context of CARICOM Single Market and Economy (CSME). Among main provisions and features of Bill are to: promote, maintain, and encourage competition and enhanced economic efficiency; prohibit anti-competitive business conduct which restricts competition or constitutes the abuse of a dominant position; and promote the welfare and interests of consumers. Although supported by the main opposition party, People's National Congress Reform, some opposition legislators argues that a few clauses could allow for abuse of the dominant market power. GEORGETOWN 00000405 003 OF 003 -------------- -------------- Consumer Protection and Income Tax Legislation -------------- -------------- ¶8. The National Assembly passed the Consumer Protection Bill and the Income Tax Amendment Bill on April 20. The former aims to promote and protect consumers' interests in relation to the supply of goods and services and creates a Consumer Affairs Commission and a Consumer Protection Tribunal. The latter implements a Taxpayer Identification Number for use on all documents in the transaction of business with the Central Bank, the Guyana Revenue Authority and any other public agency. This is a part of a program that Crown Agents of the United Kingdom is implementing for the more efficient running of customs and income tax administration. -------------- -------------- Statistic of the Month: Tax Evasion -------------- -------------- ¶9. On March 30 the Office of the Auditor General released its Report on the Public Accounts of Guyana for the Fiscal Year Ended 31 December 2004. Among the key findings: "In relation to the Internal Revenue Department, there were 4,431 registered companies. However, only 468 submitted tax returns". BULLEN