As the EU continues to cast its net further and wider than ever before there are concerns that bully boy tactics could wreck some of the early stage property markets around the world. Guyana is the latest country to come under pressure from the EU with regards to trading conditions with EU partners and is in line to lose a considerable amount of trade unless an alternative deal can be brokered.
The Economic Partnership Agreement (EPA)
The Guyana situation is just one of many which are ongoing after the EU instigated a round of Economic Partnership Agreements with 78 African, Caribbean and Pacific countries. The EPA was the brain child of Peter Mandelson prior to his decision to leave the EU and rejoin the UK government and covers trade between EU and non-EU countries.
While many agreements have been in place since as far back as 1975 with regard to the treatment of export taxes, etc it seems that we are entering a whole new era. Many of the smaller Caribbean countries such as Guyana have blossomed with the help of EU trade but this could drop substantially over the coming months.
While the EPA relates directly to importing and exporting of goods it has been expanded to take in a number of new areas which Guyana has taken offence to. It appears that the EPA currently on the table involves the opening up of service markets and the relaxation of rules governing overseas investment. In affect the EU is looking to take on board a number of affective ‘affiliate’ partners.
Previously known as British Guiana, Guyana is a small country on the north east coast of South America with a population of less than 1 million. Over the years it has been the subject of years of infighting, an economy which has been dominated by drug trafficking and tensions with a number of neighbours. However, there have been signs that the economy was picking up and relations with a number of larger countries in the region were starting to soften.
The government has begun a worldwide campaign to promote the area as a tourist attraction and we have seen a number of major tour operators move into the area. This has led to substantial infrastructure improvements and the building of a number of hotels and resorts to attract more and more overseas visitors.
The economy has been growing at around 5% in real terms for the last few years and while inflation is running a little higher than the government would like, at 6%, it is still good news compared to inflation rates of the past. This has led to something of a feel good factor in the country which has transferred over to the property markets with a growing number of tourists expected to visit the area in the coming years.
As we have mentioned above, Guyana has traditionally been an agricultural based economy and while this is changing, the sale of goods such as rice, rum and seafood to EU partners does make up a large part of the country’s income. By withdrawing the ‘preferred status’ position which the country currently holds within the EU we would see an immediate jump in export tariffs to traditional EU markets – although there is talk of a slow burn clampdown on sugar of which Guyana is the largest exporter in the area.
However, the signs are that the country could lose upwards of $100 million a year in lost trade, something which could decimate a country of Guyana’s size. The government has suggested that they would be willing to sign a trade only EPA agreement but there is speculation that the EU has left an all or nothing deal on the table in the knowledge that Guyana will need to come around at some stage.
There are hopes that tourism will one day replace exports as the main income stream for Guyana and while they are on track for this, it will not happen over night. However a $100 million loss of income from EU trade will mean less and less funding for the country’s infrastructure and other essential areas of development.
While much of the Guyana economy depends upon agriculture and exports to the EU and other areas of the world, the government has been trying to reduce this dependence of late. The last few years has seen a substantial pick up in interest from UK property investors with the Commonwealth link still strong between the two nations. TV programmes such as Channel 4’s ‘A place in the sun’ has had an impact as well and led to a number of surges in interest in property in Guyana.
The main attractions seem to be the potential for growth in the economy as it continues to move away from an agricultural based economy to more of a services based country. The increase in the services sector has also led to higher employment and a better standard of living for many in the area. However, even after this property prices are still relatively cheap in Guyana with many investors discovering great value for money.
Tourism always has been and always will be a major element of any property market but this spate with the EU could substantially reduce visitors and income from this area. This in turn will have an impact on the overall wealth of Guyana which does not bode well for the property market.
Up until this point the government has been very good to the overseas investors and is still actively looking to bring in more and more overseas investment. However, there is concern that the EPA deal will loosen the governments grip on the reigns and see a surge of overseas investment which could get out of control. The last few years has seen the economy and the government move to a more traditional tax based economy which although a shock at first is now starting to pay its way.
The EU EPA has the potential to not only stop developing nations such as Guyana in its tracks but recent actions have been seen as a warming to others to toe the line. As many of the countries in talks with the EU about the EPA depend upon EU trade they may have very little choice but to sign up. Just as former partners begin to hit the path to growth it seems as though the EU want a bigger slice of the action and the EPA looks like being a means to this end.