Global monetary and financial authorities

Chad Guinea

Guinea promises superior transparency than Chad for oil or any other point-source extractive investment particularly because of constitutional checks and balances to executive power and integration with global monetary and financial authorities. Chad has stronger financial balance sheet fundamentals, particularly regarding inflation, but faces significant structural challenges absent in Guinea, foremost of which is concentration of power in the executive, where such centralization has already presented obstacles to international monitoring and oversight, specifically the President rewriting the constitution to remove democratic checks and balances. As IMF staff point out in a June 2011 technical assessment regarding disarray in Guinean financial and monetary data, “[r]eal sector statistics are incomplete, and published with insufficient timeliness to support economic policymaking” (Ross and Martijn 2011:

Likewise while Chad’s balance sheet information shows continuity over a greater period of years than Guinea’s, if there is reason to suspect the government tells investors and global authorities whatever it wants them to think, comparing balance sheets too specifically results in a discussion of inaccurate data to inadequate data. Compelling evidence suggests such critical evaluation may be prudent, particularly when considering Chadian government financial and policy statements.

Exogenous macroeconomic, geographic and demographic factors also suggest higher risk to information transparency and economic stability including basic private property rights and the rule of law in Chad beyond balance sheet performance. These factors suggest that while Guinean financial performance is less than transparent and what information is available is probably highly debatable at the current time, accuracy and performance will improve much faster and will deliver more stability and deeper, perhaps full transparency, over the medium to short-term future than is likely to take place in Chad even given total reversal of centralization of power. This report considers these factors from such wider exogenous perspectives first, then restricts focus to specific economic and social policies and factors within both countries.

The basic political difference between these two nations reduces to a known, existing threat to resource transparency in a military dictatorship (Chad), versus unknown risk in a new, democratic but struggling and fractured political system recovering from military overthrow in Guinea. What is to prevent the Guinean system from transforming into a Chadian-type closed, basically private, only superficially democratic autocracy based on violent repression? That seems to be the prior situation only recently (McSherry 2006: 24). The disarray in Guinea can actually be considered an asset if international investors, donors and authorities have access to and participate in rebuilding democratic policies and institutions where checks and balances can prevent the type of autocratic centralization into what is effectively a black box in Chad. The Guinean reconstruction process has produced significant and verifiable evidence of transparency, integration and power sharing that indicate such autocratic centralization could likely be diffused or prevented by external actors even if the current state of information and institutions exists largely in a state of disarray. These differences are aggravated by local geographic factor endowments which suggest existing trends will likely persist.

Guinea has more advantageous resource, location and geographic assets

The Republic of Guinea, also called interchangeably Equatorial Guinea and Equatroguinea, is located on the Gulf of Guinea while Chad is entirely landlocked. The Guinean oil deposits are located offshore, which allows for access to international inputs and markets, whereas Chadian access to external markets have been dependent on a pipeline to the Atlantic through Cameroon, although an infant refining industry has come online within Chad that should fulfill domestic demand, mitigating consumer prices and supply disruption (Ladd 2011: n. p.). The point-source location of oil deposits in Chad apparently aggravates ethnic factionalism that contributes to the existing political situation, which consists of a number of distinct religious and hereditary groups that vie for power within and across internal and national borders (Boggero 2009: 20). These competing factions result in unequal distribution of political and military power that reinforce ongoing centralization in a number of specific ways described below. The Guinean oil deposits exist outside the easy physical control of any particular group or clan although they are refined on islands in the Gulf of Guinea (Republic Of Equatorial Guinea Ministry Of Finance And Budget National EITI Coordination Office 2010: 4). The result is less pressure for economic and military domination through control of extractable resources by one party, unless they have a navy that can defend the island from international military forces.

Guinea also has a more diverse initial endowment of primary resources for extraction than Chad. Guinea’s mineral endowment includes bauxite reserves, gold, diamonds and other precious gemstones, uranium, nickel and iron (Diallo, Tall and Traore 2011: 29-32), while Chad’s primary exports after oil are comprised mainly of cotton and other small agriculture and livestock (U.S. Department of State 2011e: n. p.). Guinea’s location between Gabon and Cameroon is a mixed factor. Gabon is one of the more politically stable, if not economically performing nations in the region, with bicameral democratic representation in a legislative assembly (U.S. Department of State 2011d: n. p.) that has the potential at least to diffuse centralization of power away from the type executive autocracy characteristic of Chad. Cameroon has been more politically volatile, with concentrated executive power resulting in appointed representation in most departments of government, censorship of media, expropriation of industry, and the removal of constitutional limits on presidential power that characterize authoritarian regimes (U.S. Department of State 2011b: n. p.). Cameroon’s situation is salient to Chad’s potential oil revenues given the conflict endemic in the two nations and surrounding region because of potential disruption to the Chad-Cameroon pipeline.

Chad’s geographic situation introduces military complications that leave the political system and economy vulnerable to disruption and such disruption has been central in shaping the institutions and balance of power governing every aspect of the current situation in Chad. Military disruption in Libya has driven some 70,000 refugees across the border into Chad (Ladd 2011). We can imply from the IMF’s typical codespeak “the government remains concerned about the security implications” (Ladd 2011) that there is more going on than migration; perhaps rebel recruiting or conflict over lifesaving supplies, or perhaps just potential conflict. This type of cross-border military externality is fundamental to Chad’s current political organization, because current President Deby originally seized power from his predecessor at the head of troops from Sudan just over Chad’s border to the east, and military conflict in Darfur, Sudan’s westernmost state and Chad’s immediate neighbor, has contributed to Deby’s consolidation of power, including through several coup attempts since 2000 which the executive allegedly used to justify constitutional revision removing checks and balances like term limits (Boggero 2009: 22). Winters and Gould (2011) make compelling arguments the World Bank actually facilitated Deby’s consolidation of power by underwriting the Chad-Cameroon Pipeline and two related oil extraction projects in Chad starting 2000 (229). That story sheds light on the mechanisms through which centralized control of point-source resource extraction can distort political and economic institutional formation especially combined with military conflict like Chad has been faced first on its eastern border (Sudan) and now from Libya in the north, since Deby seized power in 1990.

Chad-Cameroon Pipeline may have contributed to reduced oil transparency

“Today, Chad remains a corrupt and unstable authoritarian state with little hope for political liberalization.” (Winters & Gould 2011: 230)

In 2000, the World Bank signed off on roughly $70 million in loans to finance a 1000-km pipeline from oil deposits in southwestern Chad, through Cameroon to the Gulf of Guinea, under the justification that a significant share of the royalties would be earmarked to reduce extreme and widespread poverty in Chad. The infrastructure was completed ahead of schedule and an international public-private consortium began pumping oil after some delay in 2003 (Winters & Gould 2011: 235). Royalties began flowing into Chad, and Deby’s influence increased to some 70% of the elected Congress by 2004. The World Bank investment came with a monitoring board, the “College de Controle et de Stirveillance des Ressources Petrolieres (hereafter College)” (Winters & Gould 2011: 234), but Deby was able to stack the College, replacing the Central Bank head, the Supreme Court designee and other representatives, through what Winters & Gould call the “[p]atronage dynamics” (2011: 232) which seem to uphold the entire Deby regime. The College issued a scathing report that had no enforcement mechanisms, and which the Bank was powerless to mandate. Deby used the 2004 coup attempt from Darfur to revise the Constitution, removing term limits and other checks to executive power, and replace the elected Senate with an appointed privy council, all of whom he enacted through a plebiscite boycotted by opposition voters.

In fall 2005 when the Bank expressed concern Deby was not investing royalties into development and poverty reduction, Deby seized the Future Generations Fund (an escrow account within the Bank-controlled offshore royalty disbursement mechanism); the Bank retaliated by freezing $125 million in royalties and another $124 million in new supporting pipeline development spending. Since the fixed, i.e. immovable assets were already completed, Winters and Gould (2011) explain, under what is often called “obsolescing bargain theory” (233), negotiating power shifted to Deby, and with leverage from the U.S., France and publicity, Chad was able to renegotiate more favorable contracts with the Bank, expropriate over $450 million in taxes from the private Consortium firms which they claim they had already paid, under the threat of replacement with Chinese firms. Global oil prices spiked, and Chad cleared over $1 billion in revenues in the last year of the Bank’s project in 2008. Much of this increased income coincided at least with increased arms imports (Winters & Gould 2011: 240), no-bid contracts awarded to tribal Deby allies, pork projects like a new stadium and “inferior goods purchased at inflated prices” (Winters & Gould 2011: 236). The Bank itself admits its objective of “reducing poverty and improving governance in Chad” with the revenues from the pipeline “was not achieved” (Thomas 2009: n.p.). “[T]he principal reason for its overall disappointing outcome was the lack of government ownership,” concludes independent evaluator Vinod Thomas in the Program Performance Report transmission letter to World Bank executives (2009).

Guinea does not report similar military, political or geographic disruption

What is to prevent the same situation from happening in Guinea? Cameroon, Niger and the Central African Republic all have domestic track records of executive concentration, military takeover, human and civil rights violations, and economic collapse similar to Chad’s, according to the U.S. Department of State (2011b; 2011c; and 2010 respectively). These countries are even more politically and economically fragmented than Chad, however, and the missing factor is the active warfare or rebellion on the scale of Darfur, Sudan and now Libya faced by Chad on two active fronts, as well as the cross-border ethnic and hereditary alliances so prevalent in Chad’s institutional culture of clan-based patronage. Governance in Gabon appears to be balanced and checked beyond one single executive with more democratic, decentralized and transparent institutions for the moment at least (U.S. Department of State 2011e) although some authors argue the entire region shows symptoms of “Dutch Disease,” i.e. unbalanced domestic factor allocation, overappreciated currency and excessive debt from procyclical fiscal spending after the burst of a local export commodity bubble like falling global oil prices (Frankel 2010: 33). Both Chad and Guinea have in fact shown the procyclical tendency to increase government wage bills on rising oil revenue which Frankel (2010) and others include as symptomatic of this basket of economic policy mistakes (21). Guinea at least seems to have repented this common mistake (Nabe and Yansane 2011: n.p.) even if neighboring executives find this type of patronage helps consolidate power along lines Deby may have employed in Chad (Winters & Gould 2011: 236). This type of categorical renunciation of the mistakes that brought Guinea to complete institutional collapse does however constitute evidence of attempts toward transparency, especially when the goal is to stimulate continued investment in primary resource extraction once institutions have been reconstituted.

Admitting former policy mistakes is endemic throughout Guinea’s appeals for support to international development and aid organizations. The Governor of the Central Bank and Guinea’s Minister of Economy and Finance have requested oversight by IMF staff “so as to pave the way for a formal Fund arrangement later in the year, also in view of our objective to attain the completion point under the Enhanced Heavily Indebted Poor Countries’ Initiative”; to comply, they “intend to further strengthen our policies during the second half of the year,” in the June 2011 Memorandum of Understanding (Nabe and Yansane: n.p.). They promise to consult the IMF before implementing any policy change, and hold Legislative elections by the end of 2011, apparently by the very end. Deby probably made many similar promises on his way to autocracy but the difference is that he has a demonstrable track record breaking contracts and while the Guineans or newly-elected President Alpha Conde certainly could be setting up the global development community for similar nasty surprises, Conde et al. have not done such yet, while Deby clearly has. Nor does Guinea have hot wars spilling over or pushing tens of thousands of refugees into its country on two borders. The coastal situation is relatively docile compared to the Chadian strategic environment.

The reason engaging outside parties supports oil transparency is because international financial firms, NGOs and development agencies can attempt to undermine the type of executive takeover Deby and many of the states surrounding Chad and Guinea have invariably fallen into. While Amnesty International “has no presence in” Guinea or Chad yet (Amnesty International 2011a and 2011b respectively) and the World Bank is prevented by mandate from intervening in domestic politics, Guinea is a candidate country in the Extractive Industries Transparency Initiative (EITI) (Balde 2011), and presumably will “Publish What [they] Pay” back from oil revenues into poverty-remediating infrastructure development like schools and hospitals once this initial infant period of institutional chaos is overcome. Existing publications promoting Guinean mineral endowment like the 2010 Malabo report (Republic of Equatorial Guinea Ministry of Finance and Budget National EITI Coordination Office 2010), and the fact they have an EITI Coordination Office at all, support Guinea’s intent and demonstrate practice toward oil transparency. Chad also has candidate status with the EITI and will hopefully publish what they pay too once that membership is approved. Deby has directed oil revenue into poverty mitigation projects and agreed to conform to the World Bank’s renegotiated terms after bluffing them down at the negotiating table before the original contracts expired (Winters & Gould 2011: 237). This points to the salient difference between these two nations even though one demonstrates far superior balance sheet performance than the other, the fact that they both say they intend to apply development revenue to poverty mitigation, but one of them has a demonstrated history of successful international brinksmanship violating contractual obligations and the other does not, yet. Nor do NGOs always have power affecting even the international development institutions their own home countries allegedly oversee within the international community, like the Bank and the IMF. Winters and Gould (2011: 231) cite prolonged and broad nonprofit sector resistance to the Chad-Cameroon Pipeline Project the World Bank simply ignored, with results approximating those the humanitarian groups predicted.

Does Guinea’s international integration contribute to oil transparency?

Some authors question whether such aid organizations and even donor nations exercise any real power within host countries after DFI has been put in place. Chad for example has spent decades under Deby at the bottom of the UN Development Programme’s Human Development Index for over a decade (Winters & Gould 2011: 231), and undercut Guinea in the 2010 Corruptions Perception Index (Tranparency International 2010: 3) by two points closer to lowest, at 171st and 168th (Guinea tied with Angola so there is no 169th); the point is, what if these negative indicators provide leverage for free or low-cost donor nation patronage that generates revenue strongman dictators then use to consolidate political domination (Frankel 2010: 15) rather than mitigate the poverty that put them on the list for international strings-free infrastructure development? If having consistently low quality of life indicators attracts effectively free infrastructure development for the poorest countries, perhaps a type of moral hazard is at work undermining incentives to improve. Frankel (2010) points out such an incentive to spend, if “well-intentioned politicians spend oil wealth quickly out of fear that their successors will misspend whatever is left” (32), which IMF oversight, and thus transparency, may help to counteract.

Guinea is controlling spending and diversifying beyond oil

Guinea signed a $700 million mining contract with firm Rio Tinto, which carries lucrative royalty and tax revenue as well as direct investment benefits like a railroad which the government will have a majority share in and which it can then use for passenger traffic (Ross and Martijn 2011: 10). “However, despite the country’s immense needs,” pondered the Guinean finance ministers, “these funds have been put aside for the moment so as to be able to reflect, in cooperation with our international partners, how best to use them for the development of the country in the context of a medium-term framework” (Nabe & Yansane 2011). This diversification points out the numerous other primary resource endowments the country can exploit in order to hedge oil price volatility, and holding the revenue demonstrates fiscal discipline, especially when it could quickly be spent on arms for the President’s retinue. Military spending has allegedly been reduced to 1% of GDP, compared to 3% of GDP earmarked for “restoring critical infrastructure and promoting agriculture with an emphasis on creating employment opportunities for youth and women” and “facilitate imports of rice and agricultural inputs” (Ross and Martijn 2011: 11). The reductions to government employment were mentioned above although both Frankel (2010) and the IMF fail to mention that these are some of the best-paying jobs that directly recirculate revenue into local markets via goods, services and housing consumption, perhaps with a multiplier. Likewise the new government has cancelled probably overblown procurement contracts from the military regime’s era (Ross and Martijn 2011: 11), readjusted volatile and expensive domestic oil price stabilizers while still retaining a reserve to subsidize gas prices for the poorest consumers / producers (Ross and Martijn 2011: 10), rolled military procurement under the Treasury, and committed to a pay-as-you go scheme for procurement overall instead of incurring new debt for government operating expenses (Ross and Martijn 2011: 12). The IMF staff are bullish and satisfied with government fiscal discipline (Ross and Martijn 2011: 32) and recommend no change to current agreements or policies.

Chad is spending too much, unwisely

Chad on the other hand spent more on infrastructure than it agreed to and less on social welfare. Noland and Ghura (2011) cite the World Bank’s Public Expenditure Review in Chad’s IMF Article IV Consultation published October 2011, claiming that from 2004-2009, ” budget execution during that period did not reflect strategic priorities set in Chad’s Poverty Reduction Strategies,” and actually “hampered delivery of public services in health and education and other areas critical for economic and social development” (Noland and Ghura 2011: 12). Twenty-six percent of the 29% of missing social expenditure ended up in cabinet-level operations and infrastructure spending, and staff’s recommendations include “eliminating payments to government suppliers in excess of budget allocations” (Noland and Ghura 2011: 12-13). IMF staff warned Chad against just the type of procyclical spending Frankel finds damaging on theoretical grounds (2010: 18), which leave Chad “vulnerable to oil price shocks” especially in 2009, with the result of ” a sharp deterioration in both the fiscal and the external positions” (Noland and Ghura 2011: 13) i.e. too much spending and too much debt and balance of payments. Chad’s capital to risk-weighted assets is indeed slipping rapidly even without the new major infrastructure spending (Noland and Ghura 2011: 18). Whatever oil prices do, extraction is expected to contract after 2012 in the largest field at least (Noland and Ghura 2011: 8), which will be aggravated if prices end up low at the same time. Now is the time Chad should build a savings buffer against such events, rather than blow all the revenue on stadiums and railroads without any cash for operating inputs.

This spending is out of balance toward large, capital infrastructure without enough operating inputs to actually run them, which Chad apparently considers increasing, generating even more risk for a treasury with 88% of its revenues derived from oil extraction (Noland and Ghura 2011: 13). Chad’s public debt is not beyond the IMF’s comfort levels now but if new railroad and airport projects are not funded with enough concessionary (private-firm) revenue, these projects could very well put Chad out of compliance with agreed-upon debt benchmarks (Noland and Ghura 2011: 15), and that assessment was made on assumptions of growth levels around 7% GDP per year and stable oil prices, vulnerable assumptions to say the least. The military junta that toppled Guinea’s prior government in 2008 simply did not pay the national credit bill but the new government hopes to catch up arrears and enter positive debt service by the end of 2011, primarily by restricting expenditures to a cash-only basis (Ross and Martijn 2011: 33), and the fiscal discipline IMF finds in compliance with donor requirements (Ross and Martijn 2011: 37).

Guinea’s major weakness is monetary

After deposing the prior dictator, the military seems to have financed most of its expenditures by simply printing money (taking out credit from the central bank) without purchasing any foreign reserves (Ross and Martijn 2011: 3-6). The result, not surprisingly, was nearly a tripling of the money supply and thus the rate of inflation (and indebtedness), with a concurrent plunge in the exchange rate, by about 35% against the U.S. dollar (Ross and Martijn 2011: 3). This put upward pressure on food and energy prices, especially imports, for the consumer, at an already high (by U.S. Or Eurozone standards) inflation growth rate of about 8%, to an alarming, perhaps early-stage hyperinflationary rate of 21% per year, in a country with around 50% poverty rates. The new Guinean administration’s spending cuts of over 10% of GDP and increased bank reserve requirements and interest rates aim to draw off some of this excess liquidity; the central bank has gone back to setting exchange rates to commercial bank rates with a one-day lagged managed float. Hopefully these ongoing measures over time with no new credit draws will encourage import exchange for foreign reserves, which will then stimulate exports and deflate import prices such that the value of the Guinean Franc will hopefully regain some of its 2008 value (Ross and Martijn 2011: 4) and the domestic economy will start to shift back toward global markets and cash income tax instead of relying so heavily on spending its own future earnings buying inflated goods and services from itself. Chad’s money supply increased at a fraction of Guinea’s broad money growth rate over the same period, faster than GDP growth but not exorbitantly so, with even slower credit expansion (Noland and Ghura 2011: 8). Given 2010’s bumper harvest due to expanded cultivation and high rainfall, prices in Chad actually fell in 2011:Q1; although price growth picked back up later in the year, the result was a fraction of GDP growth and so the real effect at the cash register were probably negligible (Noland and Ghura 2011: 8). The IMF finds indication the public infrastructure projects have drawn off available skilled labor, causing wages to increase along with component input prices (Noland and Ghura 2011: 8). Increased public infrastructure investment will thus perhaps push price inflation in the short-term in these particular sectors at least until construction is over, due to the finite duration of such piecework contracts compared to ongoing earnings generated by actually operating such facilities, which Chad apparently does not find as much of a priority as building more plant. The result is that if this construction is pushing up wage demands for skilled labor, that competition will only last as long as the projects plus a lag.

Other barriers to trade that reduce oil transparency

The most obvious trade advantage Guinea has over Chad is its seacoast and ports. How will this enhance oil transparency? The faster and farther Guinea can integrate into the global economic framework, the more stake she will have in foreign investment, which is widely dependent on stable property rights, rule of law and open institutions. Increasing trade receipts can stabilize institutions if prosperity is disbursed throughout the economy, which makes internal military patronage of the Deby version unnecessary, superfluous and unattractive to investors and taxpayers alike. Investors would be reluctant to trade in countries where assets disappeared or went unaccounted for, and so more investors considering potential opportunities generally means more oversight and inquiry into government finance. Barring a negative-economic strategy like the “welfare queen” state described above where a poor country deliberately remains poor in order to be eligible for external aid, the incentive for transparency in general is increased commerce, better credit terms, and stronger export demand, which justify themselves given rational actors where those opportunities are available. “From a business perspective,” claims the Transparency International (TI) 2008 report on Revenue Transparency of Oil and Gas Companies, “such unstable environments raise investment costs, threaten profitability and add to investment and reputational risks” (Transparency International 2008: 10). Having a seaport is an asset compared to being perpetually landlocked between warring overlords in an otherwise subsistence economy. The IMF suggested a few small tweaks Chad could implement in their domestic policy that would encourage commerce outside of oil, minor inconveniences like “weak enforcement of property rights, judicial ineffectiveness, costly and unreliable electrical and telecommunications services, a lack of skilled workers, administrative and financial barriers to formally establishing a business, and the government’s persistent arrears to suppliers,” for starters (Nolan & Ghura 2011: 17). There were more but the picture emerges.

NGOs may enhance oil transparency

Hopefully EITI membership will increase oil transparency for Chad and Guinea, but EITI itself has not been overly generous rating its own social impact in Nigeria, Gabon, Mongolia or at large (EITI 2011 pages 12, 16, 22 and 36, respectively), perhaps at all. Perhaps increasing global membership will strengthen the EITI’s and the global NGO sector’s pull with sovereign governments and the donor coalitions that fund them like the World Bank and IMF. On the other hand, almost all the IMF reports cited in this argument paper are attributed to “Chadian authorities and IMF staff estimates” (Noland and Ghura 2011: 4, e.g.); or the same for Guinea. The risk-averse investor would do well to question the accuracy of financial information stemming from the allegedly eighth- and tenth-most corrupt governments in the world (Transparency International 2010: 3). The IMF recognizes this literally, that in Equatroguinea at least the “quality of data is poor,” which it goes on to describe in terms like but not limited to “seriously hindered,” “irregular” and “weak,” especially “almost all items related to the balance of payments,” which “need improvements, in particular in the current account” (Ross and Martijn 2011: 7), i.e. bills and income are currently unknown. Transparency International might suggest “fictitious” as another descriptor. To be fair, information lags seem plausible when dictatorships fall and mercenaries run the government for a year or so. One way of looking at TI’s Corruption Perceptions Index is that all Guinea’s neighbors rank higher, making her the black sheep of the neighborhood. Perhaps this will encourage oil transparency if those countries provide positive examples Guinea can aspire to, especially if investors prefer effectively the same oil from them instead of Guinea over time. Hopefully since that report ranked a country that did not legally exist (Guinea in 2009) the 2011 report will be bullish on the Conde administration, buying valuable public relations and civic morale. Chad has the consolation of claiming at least they aren’t Sudan (Transparency International 2010: 3), not anymore at least in Deby’s case. If all Chadians pull in the same direction, maybe next year they can knock Burundi out of that hotly contested #170 Corruptions Perception bracket. Guinea is not far ahead but we can’t convict them yet because they are a brand new government. Chad we can.

The Oil Curse

This report has deliberately avoided analyzing either Chad or Guinea through an “Oil Curse” rhetoric, which usually appears just beside “Dutch Disease,” which was employed briefly above. Frankel (2010) convincingly undermines this seductive hypothesis by demonstrating all four possible outcomes have occurred simultaneously in similar scenarios: poverty / income disparity has decreased where oil revenues increased; poverty has increased where no oil revenues were present; income disparity has decreased where no oil revenues were present, and income disparity has increased where oil revenues were present (Chad, e.g.), all at the same time, i.e. under simultaneous global macroeconomic conditions. Most ‘Oil Curse’ explanations almost always include some sort of qualifier like “often” (Knowledge @ Wharton 2007: n.p.) to describe the “paradox of plenty,” where oil revenues “often” reduce economic growth rates (Transparency International 2008: 10). Often implies these results occur alongside their alleged causes less frequently than ‘usually’ or ‘always,’ and therefore the predictive capacity of this conceptual framework seems weak. Although the ‘Curse’ seems to be a real empirical phenomenon, there may be more reliable constructs, like the Fair model for example (ignored here for space), or IS/LM. Nicholas Donner (2009) critiques the underlying assumption he sees the Oil Curse hypothesis built on, that there is an “us and them” disconnect between consumer and point-source resource host country, and that poverty or extreme disparity of wealth within host countries is ‘their’ problem. The ‘their problem’ construct folds under literary-critical discourse analysis. Include the whole world in the group ‘us,’ and the Oil Curse myth evaporates, suggesting all the cool terms reveal is the boring old ‘global income disparity’ demographic. The absence of the term “Oil Curse” until now is not an oversight.

Policy Recommendations

Chad has an opportunity to integrate itself into the global community its leader has basically thumbed his nose at in the Libyan crisis. The delicate balance of power locked between war-torn Central African nations requires Deby to save face at home and across his borders. But a prudent strategist would realize there is more power abroad with the Big Men of Europe, the U.S. And China, and that his position in Central Africa could the keystone to regional stability given alliances outside, rather than across these limited, temporary and dynamic local potential threats. Deby should take the lesson from Egypt and Libya that no leader lasts forever, and the best way to guard against internal betrayal like the attempts he may plausibly have orchestrated is through alliance with the world outside Africa, not rag tag tribes of local mercenaries trading their long-term savings for immediate military consumer goods. Perhaps Deby is already playing China off against the western democracies. If he wants to promote his Muslim faction, alliance with other Arabs would deliver more true power than trying to police all sides of a country that has less strategic advantage than any of the surrounding nations and can be held hostage by a coalition amongst them. If he needs to save face, the Libyan refugee crisis gives him a way to court the global consensus without backing down from the tough pose back at home. After that, prudent development would suggest stop building heavy capital projects, start banking some savings against oil price volatility and/or / via paying down debt; get spending under control if possible, although that may be the conduit to domestic stability in the Chadian situation; but above all, build external connections, toward balance sheet and military stability because Chad does not have much to work with as a closed economy if oil disappears or someone discovers a technological method to break the current extraction monopoly. After that, start transition planning. Deby is pushing 70 after all.

The sky is the limit for Equatorial Guinea if Legislative elections can deliver a stable plurality that will allow balanced diversity to check concentration of power in one party or junta as has so often been the case across Africa since decolonization. Alpha Conde has the chance to change the African dynamic and inspire the whole world, because Guinea has strategic placement on the coast, the climatic variation and agricultural endowments, and the diversity of mineral endowments that can fuel transition to self-sustaining independence. The strategic prognosis is largely the same as for Chad except for Guinea’s coastal access. Military alliance with the global powers outside the Camaroon-Gabon belt will allow revenue that used to be spent on perhaps justifiable defense consumables to be diverted into balanced development once the financial emergency is stabilized. This looks like transition to post-oil first perhaps through clean, concessionary but temporary light industry like coastal and jungle ecotourism, which would then support investment in mid-term infant industry, subsidized for a fixed period after which if unsustainable without public injection, would be converted into whatever competitive advantage revealed itself at that time. Again the key is to plug in, not drop out, look beyond the stockade wall and realize the military and economic power lies with the increasingly global consumer nations, rather than bickering with chieftains over hillsides and hereditary blood feuds. Neither Guinea nor Chad have enough extractable resources to pay and supply mercenaries forever. Guinea has a chance to break that cycle like few nations ever achieve. Anyone can topple a dictator, but the real task now looks like convincing a diverse, uneducated and unskilled agricultural and polyethnic population into participating in their own institutions. They may not be ready to believe such a thing is possible in coastal Central Africa. This analysis may be naieve if the elections are a sham as usual but they have a rare, precious chance. Then they should work on knocking Burundi down a peg on that Corruption Index. Call it cheap advertising.

Summary and conclusion

Chad and Equatorial Guinea are equally oil opaque right now for different reasons. Chad is run by dealbreaking military overlords who have a long track record of expropriating international investors’ oil revenues and Guinea is in absolute chaos following the military overthrow of a brutal dictator who ruled with an iron fist for decades. Guinea is desperate to convince the global community to help it integrate and has shown marked, real progress toward financial, diplomatic and social transparency, including allegedly democratic presidential and legislative elections, procyclical spending cuts and military procurement oversight, diversification away from oil dependence, and spending on employment for vulnerable populations and consumers. Chad is out of compliance with international spending agreements, budgeting and reporting commitments, seems to admit to unnecessary and probably inoperable capital expenditure, and apparently lacks stable property rights and judicial institutions among many other conditions that generally foster healthy and stable economic development. Both of these nations’ oil deposits will eventually run out, and compared to global competitors they are relatively insignificant and thus probably require somewhat high global oil prices in order to appeal to international investors. There has been a war in Chad’s direct neighbor Libya; the Sudan has seen unrest, rebellion and war particularly in Chad’s other direct neighbor Darfur. Chad has a lake; Guinea has the ocean. Guinea has rampant inflation; Chad is more financially stable but more despotic along Ghaddafi- or Hussein-type Big Man precedents. Inflation may be easier to fix. The most important difference however, remains that Guinea is a new country, is asking for help and oversight at least nominally, and does not actually have a track record breaking deals with the World Bank, the IMF, multinational oil companies, and basically the whole world like Chad does yet. Yet.

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