Back Matter

Back Matter

Author(s):
Masahiro Nozaki, Tobias Roy, Pawel Dyczewski, Bernhard Fritz-Krockow, Fanny Torres Gavela, Gamal El-Masry, and Rafael Portillo
Published Date:
March 2009
    Share
    • ShareShare
    Show Summary Details
    APPENDIX Suriname’s Economic Structure

    Suriname’s economic structure has changed over time. Large-scale agriculture brought with it immigration in the early twentieth century, setting the mark for today’s diverse and multiethnic society and opening up larger parts of northern Suriname to economic development and settlement. The economy and society shifted markedly with the advent of the dominant bauxite industry, which evolved rapidly after the outbreak of World War II. The bauxite sector created a steady and substantive income for the state, which also led to rent-seeking behavior in large parts of the public sector and government. The rent-generating extractive industry, combined with the consensus approach of a multiethnic society, provided distinct stimuli for the creation of a large public sector, but one that was not fully efficient. The dominance of the bauxite industry also constituted a mixed blessing for the manufacturing and services sectors, which benefited from the sector’s demand for goods and services, but which saw their export and earnings potential undermined by the appreciation and real wage pressures emanating from the bauxite sector. In the economic literature, this is a typical case of Dutch disease.

    The first section of this appendix describes the main extractive industries—bauxite, gold, and oil. The extractive industries, in particular bauxite, marked Suriname’s development in the late twentieth century. Bauxite mining and processing remains at the core of the Surinamese economy, providing a continued resource flow to the economy and the state. Long-term prospects remain favorable for the sector. Gold mining and oil extraction have become increasingly important in the Surinamese economy. Gold mining has a long history in Suriname, but this mainly has been undertaken in the form of informal mining operations in the interior; the formal gold mining industry is only a recent development. Oil extraction has become one of Suriname’s largest commercial industries since 1980.

    The second section of this appendix describes the main agricultural industries in Suriname. The main agricultural products comprise rice and bananas, both of which have undergone rapid changes in recent decades. Although rice farming continues to dominate agricultural activity in Suriname, it was affected adversely by weak macroeconomic policies in the 1990s, continued infrastructure and organizational problems, and the erosion of preferential market access to the European Union (EU). Banana production has been carried out by a state-owned company in the past decades. The industry is recovering from a collapse of the state-owned company in 2002, which was brought about by poor management, labor strife, and an erosion of market prices and access.

    Extractive Industries

    Bauxite

    In the twentieth century, Suriname’s economy was transformed from an agriculture-based economy into a mining economy. In the years following World War I, the Suriname Bauxite Company—now known as Suriname Aluminum Company, L.L.C. (SURALCO) and a subsidiary of the American firm Alcoa—began exploiting bauxite deposits in eastern Suriname. The company has mined and exported bauxite since 1922. Large-scale bauxite mining began in the 1940s, when the company completed the construction of a new plant alongside the Suriname River.43 The Paranam plant exported initially bauxite and later alumina, mainly to the United States. During World War II, Suriname provided 80 percent of the U.S. raw material requirement for aluminum processing (Box A1).

    Box A1.Bauxite, Alumina, and Aluminum: A Brief Primer

    Bauxite: This is an aluminum ore composed mainly of aluminum oxides, together with oxides of iron and titanium and sodium silicates. After refining bauxite, alumina is the intermediate product, leaving as the main residue an iron-rich red mud.

    Alumina: This white powdery aluminum oxide results from refining bauxite. A natural form of aluminum oxide is corundum, or rubies and sapphires in their gem-quality form. About 90 percent of all alumina is used for aluminum production; the remainder is used in abrasives, water-treatment chemicals, and fire-retardant coatings. It is also used in toothpastes, lamps, and compact disc cleaning kits.

    Aluminum: Smelting alumina into aluminum metal is energy intensive and the process is usually undertaken near inexpensive hydroelectric power sources. The process separates the aluminum from the oxygen. Aluminum is highly resistant to corrosion and is lightweight. Aluminum is also highly malleable, a good heat conductor, and easily machined and cast. It is widely used in transportation, beverage packaging, construction, and electrical applications.

    Suriname was once one of the world’s largest producers and exporters of bauxite. Suriname’s share rose to more than one-fourth of world production immediately after World War II, but has declined since then. The country lost its leading position in this field to Jamaica in the early 1950s, to Australia in 1969, and to Brazil in the 1980s (Figure A1). Currently, the share of Suriname in world bauxite production is relatively small, accounting for less than 3 percent of the world’s production.

    Figure A1.Bauxite Production

    (In thousands of metric tons)

    Sources: World Metal Statistics Yearbooks (1986, 1995, 2005).

    The Brokopondo agreement

    The activities of the main bauxite company, SURALCO, are set out in the framework of the Brokopondo agreement.44 The 1958 Brokopondo agreement signed between SURALCO and the government provided SURALCO with a 10- to 20-year concession for exploration—depending on the progress of exploratory work—in a 500,000-hectare region and rights to exploit 20,000 hectares for 75 years. SURALCO also agreed to build a dam in the Suriname River with a hydropower plant at Afobakka, an alumina-refining facility, a road between Afobakka and Paranam, and an aluminum smelter at Paranam. The agreement provided fiscal incentives. SURALCO secured exemption from customs duties on imports of materials and equipment for the construction, expansion, and operation of the hydroelectric works, alumina plants, and aluminum smelter for a period of 75 years. Also for 75 years, Suriname would not levy duties on exports of bauxite, alumina, aluminum, and any downstream products from these commodities. At the expiration of the agreement in 2033, the bauxite mines are expected to be depleted, and the power station and the artificial lake will be transferred to the government.

    The Afobakka dam was one of the central elements of the Brokopondo agreement. This dam was one of the first major hydropower projects in the world built in a tropical ecosystem. Alcoa invested more than US$150 million to build the Brokopondo hydropower plant in 1959–64, which started generating power in 1965. However, Brokopondo’s installed capacity of 189 megawatts has never been reached. SURALCO used the electricity in its own bauxite production activities, but also sold a portion of the generated energy to the government for use in the national grid. Initially most of the electricity generated at the plant was used by SURALCO in the bauxite refinery and smelter, and all the generated power was sold to the government after the closure of the aluminum smelter at Paranam in 1999.

    Political developments and corporate investment decisions led to the uneven expansion of the industry. Civil unrest severely disrupted activity in the 1980s (Figure A1). The industry recovered by 1993 in the context of increased political stability, and with a significant expansion in investment by the two mining companies, SURALCO and BHP Billiton. Beginning in 1993, they invested US$217 million over a five-year period. Of this amount, US$136 million was invested in 1996–97.

    Aluminum production ceased with the closure of the smelter in 1999. The smelter was considered inefficient by international standards, with annual production capacity of about 27,000 metric tons, in an industry in which optimum capacity is about five times as high. Both the short- and long-run marginal costs of the smelter were considered to be higher than those of other smelters owned by the parent company Alcoa. In contrast, Paranam, the alumina-refining facility operated by Alcoa and co-owned by SURALCO (55 percent) and an affiliate of BHP Billiton (45 percent), is operating efficiently by international standards. Continued investment in the refinery has gradually increased output. The expansion of the refinery, completed in February 2005, increased the facility’s total capacity to about 2.2 million metric tons per year.

    The industry has opened up new mines to maintain and expand production. The old Coermotibo and Lelydorp III mines near Paranam were nearing depletion and new mines came into operation in 2006–07 when SURALCO/ BHP began mining bauxite at the Kaaimangrassie and Klaverbad mines in Commewijne. Both companies made a joint investment of around US$200 million to develop these successor mines and build access roads and a bridge over the Suriname River leading to the new mines. The deposits in the immediate areas are estimated to contain 75 million tons of bauxite and are expected to last until 2010. The access roads and new bridge will be handed over to the government once the mining operations end.

    Contribution to the economy

    The sector has been the cornerstone of the Surinamese economy since before World War II. Bauxite mining and processing accounted for about one-third of the country’s GDP in the post–World War II period. Despite the industry’s expansion—as a result of the Brokopondo agreement—the bauxite sector’s contribution fell to about 15 percent of GDP at the end of the twentieth century. The sector has benefited from the creation of a trained workforce and ancillary industries, while the Brokopondo project put in place the main electricity-generating facility of the country.

    The sector provides a significant contribution to balance of payments inflows and fiscal revenue. In terms of foreign exchange inflows, the bauxite sector represents about two-thirds of the total value of exports. Direct tax revenues from the bauxite industry for 1996–2005 averaged about 4 percent of GDP, or about 14 percent of total fiscal revenue. 45 In addition, government revenue benefits indirectly from income and consumption taxes on company workers’ salaries and spending and the revenue generated from the activity of local contractors. However, the share of the bauxite industry in total employment is relatively small. The sector employs directly about 1,400 workers, less than 2½ percent of the labor force.

    Outlook

    The prospects for Suriname’s bauxite sector are promising. Although mining and processing in the current areas of activity around Paranam are bound to reach depletion points over the medium term, there are expansion plans to exploit the extensive bauxite reserves in western Suriname.46 Exploration for bauxite reserves in the area has identified high-quality ore in a mountainous area of 2,800 square kilometers of tropical rainforests. Bakhuys, the most promising area in the west, is estimated to hold bauxite reserves of about 200–700 million tons.47 As a further step toward exploiting the area’s bauxite resources, the government signed a memorandum of understanding with SURALCO and BHP Billiton. The agreement grants permission to conduct studies for an integrated aluminum industry complex, that is, new bauxite mines and refinery operations, an aluminum-smelting plant, and a hydroelectric dam in the area.

    Bakhuys could become a large integrated mining, hydropower, and processing project. This project could require investment of up to US$3 billion and could include an alumina refinery and, eventually, an aluminum smelter. Exploration and feasibility studies are well advanced and negotiations between the government and bauxite companies SURALCO and BHP-Billiton about specific features of the project are under way. Critical to the exploitation of the resources is the availability of transport infrastructure and energy. For this purpose, the 72-kilometer-long railroad from Bakhuys to the port at Apoera could be rehabilitated. SURALCO will complete a feasibility study for a 400- to 500-megawatt hydroelectric power facility, which would be sufficient to operate an aluminum smelter with an annual capacity of 275,000 to 300,000 tons.

    Oil

    Background

    The Suriname-Guyana basin could become a significant oil producer in the region. In its 2001 report, the U.S. Geological Survey suggested that the Suriname-Guyana Basin was probably one of the last remaining poorly explored regions for oil production in the world. The potential oil reserves in the basin were estimated at about 15 billion barrels. To date, Suriname has extracted only modest amounts of oil from onshore locations, but most of Suriname’s oil reserves are likely to be found offshore (Box A2).

    Box A2.Geology and Oil Exploration in Suriname

    Geology. The Suriname-Guyana Basin was formed in the Jurassic Age (150–200 million years ago), when Africa and South America drifted apart. The basin’s geology contains rock that strongly resemble the oil-rich rock formations in eastern Venezuela and Trinidad. Oil deposits in the onshore Tambaredjo oil field are thought to have migrated some 100–200 kilometers upward and inland from the “Canje Source Kitchen” out at sea into what is now known as the “Tambaredjo Trap.”

    Oil quality. The oil that is currently being extracted from two onshore areas is of a “heavy quality.” The older of the two areas is the Tambaredjo production area (Tambaredjo and Tam-baredjo North-West fields), 55 kilometers west of Paramaribo, and the younger is the Calcutta field several miles further west. Proven reserves in the Tambaredjo fields are estimated at about 84 million barrels, and in the Calcutta field at 23 million barrels. It is estimated that there are additional probable reserves in these fields of 32 million barrels (Table A1).1

    Maritime dispute. In June 2000, Suriname’s navy forced the Canadian oil company CGX Energy to halt operations in an offshore area for which it had signed an exploration contract with the government of Guyana. The CGX Energy concession block is part of a larger maritime area claimed by Suriname and Guyana. In February 2004, Guyana referred the matter for arbitration to the United Nations Law of the Sea Tribunal, and a ruling in favor of Guyana was passed in September 2007.

    Exploration and prospects. Prospects for new oil finds are most promising in the coast off Suriname and Guyana. Since 2004, after the tension over the maritime dispute with Guyana abated, Staatsolie signed a number of contracts with foreign oil companies for explorations of offshore blocks east of the disputed area and well within territorial waters. Contracts were signed in 2004 with the Spanish company Repsol YPF and the Danish company Mearsk Oil, in 2005 with the U.S. company Occidental Petroleum, and in 2007 with the U.S. company Murphy Oil.

    Exploration contracts. Staatsolie holds the sole mining rights for oil in Suriname. However, foreign oil companies can participate in Suriname’s oil industry by entering production-sharing agreements with Staatsolie. These generally stipulate that the partner company bears the sole exploration risk. In the event of a commercial find leading to oil production, royalty in the form of an agreed percentage of gross production will be paid to the government. In turn, the partner company will be reimbursed an agreed share of gross production to recover its exploration, development, and operating costs (so-called cost oil). Finally, the remaining production after deducting royalty and cost oil will be shared according to a negotiated formula between the contractor and Staatsolie (so-called profit oil). The contractor has to pay (in foreign currency) income tax on profit oil as well as other taxes, fees, or duties. Material and equipment used in petroleum operations are exempt from import duties, and there are no taxes or duties on the export of petroleum products. The partner company is guaranteed contract stability, including fixed income tax rates for the duration of the contract.

    1 Proven reserves of oil have a likelihood of at least 90 percent of being found and extracted. Probable reserves have a likelihood of 50–90 percent of being found and extracted.
    Table A1.Crude Oil Price Comparison(In U.S. dollar s per barrel)
    1992200420052006
    Spot price119.037.853.464.27
    Average realized price “Saramacca”12.828.438.646.63
    In perce nt of spot price67.275.272.372.6
    Sources: Various Staatsolie Annual Reports; and IMF staff estimates.

    The simple average of U. K. Brent, Dubai, and West Texas Intermediate oil.

    Oil exploration and production

    Oil production has become one of Suriname’s larger commercial extraction industries. In December 1980, the state-owned Staatsolie Maatschappij Suriname, N.V. (State Oil Company of Suriname) was established and charged with overseeing and developing all oil exploration and production activities in the country. One year later, a commercial oil find was made in the Tambaredjo field in the Saramacca District about 55 kilometers west of Paramaribo. Since extraction began in November 1982, oil production increased steadily, reaching levels of around 4–5 million barrels during 2002–05 (Table A2 and Figure A2). The number of employed staff grew from 340 in 1990 to about 650 by 2005.

    Table A2.Annual Crude Oil Production(In millions of barrels)
    200020012002200320042005
    Brazil463.2472.7531.1546.1539.2596.3
    Colombia252.1228.1210.6197.4193.0191.9
    Suriname4.54.74.54.34.14.4
    Trinidad and Tobago44.641.444.548.944.952.8
    Venezuela1,151.61,098.7950.4852.3933.3936.1
    Sources: U.S. Department of Energy, International Energy Annual 2005; and Staatsolie Annual Report 2006.

    Figure A2.Petroleum Production

    (In millions of barrels)

    Sources: Staatsolie Annual Reports, 2000–06.

    In March 2006, Staatsolie started extracting oil from the new Calcutta field to the west of the Tambaredjo field. After exploration and drilling in the area, proven reserves in the Calcutta field are estimated at about 23 million barrels. The new Calcutta field boosted annual production from 4.4 million barrels in 2005 to 4.8 million barrels in 2006, a level that is expected to be maintained over the coming years.

    Suriname’s oil production and reserves are modest by international standards and is dwarfed by that of its neighbors in the region. Of its regional neighbors, the second-smallest producer, Trinidad and Tobago, extracts about 12 times the oil output of Suriname.48 Likewise, Suriname’s proven oil reserves are limited compared with other regional oil producers. As of 2005, Suriname’s proven oil reserves were about one-tenth those of Trinidad and Tobago.

    The outlook appears promising. In addition to the numerous oil exploration contracts signed or under consideration with foreign firms, Staatsolie is actively investing in exploration activities. Seismic data in the offshore area showed promising results and are being analyzed to determine locations for additional and targeted seismic tests and drilling.

    Refining and marketing

    Staatsolie built an oil refinery in 1995–97. During 2004–06, the refinery processed on average about 2.6 million barrels of crude oil annually, producing diesel, asphalt bitumen, and various fuel oils. After an overhaul of existing facilities in 2005, a US$300 million expansion is planned that would increase processing capacity by 40 percent.

    Staatsolie sells most of its crude oil production domestically. About two-thirds of petroleum sales go to SURALCO, which pays in U.S. dollars and uses the heavy crude to generate electricity at its alumina refinery in Paranam. In addition, more than 30 percent of Staatsolie’s sales are exported or sold as bunker fuel to vessels that call on Suriname’s ports, bringing its total foreign exchange earnings in 2006 to around US$240 million (or about 92 percent of sales), while local sales amounted to the equivalent of about US$21 million in 2006 (Table A3).

    Table A3.Key Oil Indicators
    199220022003200420052006
    Staatsolie’s net income (millions of US$)12.023.928.435.567.898.5
    Crude oil productions (millions of barrels)1.64.54.34.14.44.8
    Average realized crude oil price (US$ per barrel)12.821.726.328.438.646.4
    Total sales revenue from oil products (millions of US$)20.2104.1114.7117.7173.7240.5
    In percent of GDP4.910.911.210.312.715.1
    Proven reserves (end of year, millions of barrels)43.5111.0110.085.0107.088.0
    Sources: Various Staatsoilie Annual Reports.

    Staatsolie’s financial position

    Staatsolie is the most profitable state-owned enterprise in Suriname. Over the first 25 years of its existence, Staatsolie produced 57 million barrels of crude oil with sales totaling US$1.2 billion. During this period, Staatsolie earned about US$470 million in net profits and paid about US$150 million in income taxes, while transferring another US$175 million in dividend payments to the government. However, Staatsolie was also affected by the turbulence of the 1990s (Box A3).

    Box A3.Staatsolie during the 1990s

    Staatsolie’s profits turned negative in 1991. The income position became untenable in the early 1990s, as annual inflation and depreciation accelerated and Staatsolie was forced to use the pegged official exchange rate of Sf 1.8 per US$1 for its export earnings, whereas its foreign exchange needs had to be met at the much-depreciated parallel exchange rate. In October 1992, a new foreign exchange regime was introduced that granted Surinamese export companies, including Staatsolie, access to a special and more favorable “auction exchange rate.” Consequently, Staatsolie’s fourth quarter sales (October–December 1992) were more than 66 percent higher than the total sales in the preceding three quarters.

    Staatsolie’s Income Position
    1989199119931995
    (In thousands of SF)
    Operating revenues22,92634,569576,556
    Operating costs17,74636,876224,876
    Income before taxes5,180−2,307351,680
    Income taxes2,3190160,494
    Net income after taxes2,861−2,307191,186
    Average exchange rate used (guilder per US$)1.81.839.1451.2
    Average CPI inflation rate (in percent)0.826.0143.5235.6
    (In thousands of U.S. dollars)
    Gross sales and income12,95319,53114,73834,513
    Operating costs10,02620,8345,74822,116
    Profit before taxes2,927−1,3038,99012,397
    Income taxes1,31004,1036,396
    Net profit after taxes1,616−1,3034,8876,001
    Sources: Various Staatsoilie Annual Reports.

    Near-hyperinflation forced Staatsolie to denominate all its accounts in U.S. dollars in 1995. As inflation accelerated rapidly in 1994–95, Staatsolie’s accounting system in local currency became meaningless. Also, most revenue and loan repayments were denominated in U.S. dollars. Consequently, in 1995, the company formally introduced the U.S. Generally Accepted Accounting Principles (US-GAAP) and denominated its accounts in U.S. dollars.

    Impact on the economy

    Despite its small size by regional comparison, Suriname’s oil sector is quite substantial relative to the country’s GDP. In 2006, gross proceeds from crude oil production, refining, and trading totaled US$240 million (15 percent of GDP). Although the rise in gross proceeds during the past few years reflected to a large extent the recent increase in oil prices, the increase in production volume also provided an additional boost to gross revenue.

    In recent years, revenues from oil production have overtaken those from the bauxite sector. The oil sector has become the largest single contributor to government revenue from the mining industry. In 2005, the revenue from the oil production sector amounted to 3½ percent of GDP or about 13 percent of total revenue collection, compared with 2½ percent of GDP and less than 9 percent of total government revenue in 2002. In 2005, most of the revenues collected by the government from the oil production sector were in the form of dividend payments (54 percent), followed by corporate income taxes by Staatsolie (about 37 percent). Revenues from the oil sector increased by 30 percent to US$79 million in 2006 as a result of higher production levels and higher average oil prices.

    Balance of payments

    The oil sector’s importance to the balance of payments is masked by its modest direct contribution to exports (only about 6–8 percent of total merchandise exports). Its much larger role becomes evident when Staatsolie’s crude oil deliveries to SURALCO are taken into account. These import-substituting local deliveries constitute a key component for SURALCO’s alumina exports and amount to around US$144 million or nearly 15 percent of merchandise exports in 2006.

    Gold

    Gold mining has become increasingly important in the Surinamese economy. While small-scale gold mining activities became significant in the 1980s, large-scale gold mining started only in 2004. This section describes the background of the gold sector in Suriname, its regulatory framework, the status of gold mining concessions and illegal mining activities, and implications for fiscal revenue volatility and vulnerabilities arising from this sector.

    Background

    Gold production in Suriname represents a relatively small share of world production (Table A4). Gold mine production in the Western Hemisphere was approximately 800 metric tons in 2005, representing a third of the world total production. The top three gold producers—the United States, Peru, and Canada—accounted for about three-fourths of the total gold production in the region, while Suriname production represented only 2½ percent of the total.

    Table A4.Western Hemisphere: Gold Production, 2006
    TonsPercent of Total
    Total765.8100.0
    U.S.A.251.832.9
    Peru203.326.5
    Canada104.213.6
    Chile40.85.3
    Brazil38.45.0
    Mexico38.25.0
    Argentina30.03.9
    Colombia15.72.1
    Bolivia9.61.3
    Suriname9.41.2
    Venezuela8.21.1
    Ecuador5.20.7
    Guyana4.10.5
    Honduras4.10.5
    Nicaragua2.80.4
    Sources: World Metal Yearbook 2007; and Suriname authorities.

    Gold mining has a long history in Suriname. Gold deposits in Suriname are located in the Guianas Shield,49 as part of a metamorphic rock formation that cuts through the Guianas from east to west. Gold deposits occur in primary form (mostly in and around reefs formed through the filling of cracks in the surface stone) and in secondary form (as gold nuggets or dust formed as a result of erosion on hill slopes or in local rivers and creeks). Gold mining started in the Sara creek area in 1876 and later in the Mindrineti and Brownsweg areas. The rich Lawa alluvial deposits were mined extensively starting in 1885, reaching 1,200 kilograms per year in 1908. Subsequently, gold production declined when most deposits were exhausted and artisanal mining replaced mechanized commercial operations. In the late 1960s, gold mining was virtually nonexistent.

    Informal gold mining in the interior has increased rapidly since the 1990s. Gold mining became an important source of income for the population in the interior after the end of the civil war in 1992.50 In addition, Brazilian gold diggers, who had expertise in hydraulic and small-scale mining operations, migrated to Suriname in response to the increasing scarcity of alluvial ores in the Brazilian Amazon.51 The high international gold prices in recent years have also made this industry more attractive.

    Regulatory framework

    Most gold is mined without a legal concession or government control. Holders of large-scale mining concessions have subcontracted gold mining operations, allowing informal miners to use their land for a fee, usually 10 percent of the production, but this constitutes only a small part of informal mining operations. As of January 2005, the government had granted about half a million hectares in concessions for gold exploration, exploitation, and small-scale mining, representing 3½ percent of the total land area, but only 2,000 hectares possess legal concessions for small-scale mining (Table A5).

    Table A5.Suriname: Gold Concessions
    Area
    TypeNumberIn km2In hectares
    Total area in concession455,568556,765
    Reconnaissance000
    Exploration204,199419,941
    Exploitation151,348134,824
    Small-scale mining10202,000
    Memorandum item:
    Total area of Suriname162,00016,200,000
    Source: Ministry of Natural Resources, Mining Department.

    The government has attracted foreign investment to expand gold production. With the approval of the National Assembly, the government reached agreements with foreign companies granting them mineral exploitation rights. The agreements provide incentives such as (1) exemptions on import duties on equipment; (2) guarantees regarding the unrestricted right to export gold, to repatriate capital and profits, to convert local currency in foreign currency at market rates, and to hire expatriate employees and contractors; and (3) international arbitration of disputes arising in connection with the projects.

    Small-scale gold mining

    Most gold is produced by small-scale artisanal gold mining operations. Suriname officials estimate that there are 10,000–20,000 small-scale miners in an area of approximately 20,000 square kilometers in eastern Suriname. These miners use rudimentary prospecting and extraction techniques and material, including high-pressure hoses and hydraulic pumps along with bulldozers, excavators, and metal detectors.52 This often entails the use of mercury to bind and purify the gold, which causes substantial health and environmental damage.

    The government has virtually no control over the informal gold mining activities in the interior. During the 1986–92 civil war, all but two of the government mining agency’s (Geologisch Mijnbouwkundige Dienst, GMD) outposts in the interior were closed and have not been reopened since. In the absence of a government presence, mining takes place with limited oversight and without social or environmental protection and controls. In addition, the government has received only scant income from informal gold exports.

    Small-scale miners are recruited mainly from the Maroon population from the interior and Brazilian immigrants:

    • After the cessation of the conflict in 1992, Maroons, who fought the central government during the war, moved into small-scale mining as one of the few possible economic activities in the interior. They maintain that their activity does not require government sanction, claiming the use and occupational rights over traditional land granted to them by peace treaties before Suriname independence, and confirmed by a treaty with the government at the end of the civil war.53

    • About 6,000–20,000 Brazilian garimpeiros have no legal residency or work permits in Suriname. Some are employed in the gold fields by Surinamese miners to take advantage of their expertise. The more successful garimpeiros have become independent mining operators or suppliers of mining equipment.

    Although activities in the informal gold sector are unrecorded, there are indications that the sector’s contribution to the domestic economy is significant. Government officials estimate that the industry is the second-largest employer after the public sector and that gold production in the informal sector represented around 15 percent of GDP in 1997–2001. The relative importance of small-scale mining on the economy of the country’s interior and the pervasive lack of a formal and monetized economy have led to gold assuming the function of currency in this region. As an example, some goods and services have become denominated and paid for in gold: fuel prices range from 20 to 30 grams of gold per container depending on the location, and digger wages are 30 percent of daily gold production.

    Spillovers into the formal economy underscore the substantial expansion of gold mining in the interior:

    • Land transportation and heavy equipment. Imports of trucks and heavy mining equipment accounted for about 11 percent of imports in 2003. This includes equipment to haul spare parts, fuel, and food supplies, and to transport workers to the production areas along the main rivers; and tractors, bulldozers, and excavators to carry cargo and passengers along the trails, to clear land, and to build gravel pits in small rivers to wash out gold.

    • Air transportation. Miners charter about 75 percent of local airline flights to transport employees, food, equipment, spare parts, and, in the dry season, fuel.

    • Storage facilities for fuel. Storage and distribution facilities have been established, rebuilt, or enlarged in the interior to facilitate the provision of fuel to gold mining areas. It is estimated that around 15 million liters of diesel fuel and 50,000 liters of lubricant are used annually in small-scale mining operations.

    Small-scale gold mining operations have led to severe health and environmental consequences. Informal mining operations have caused soil degradation and deforestation, and the construction of gravel pits in streams has led to high silt content, affecting natural habitats in the rainforest. Mercury used by small-scale miners has led to long-term poisoning and high and persistent concentrations in lakes and streams.54 Conservation groups have tried with limited success to introduce alternative mining techniques.

    The central bank began purchasing gold directly in 1994. The Central Bank of Suriname (CBvS) started a gold purchase program in July 1994, buying gold through licensed private companies that previously had been smuggled to neighboring countries. Through this program, the CBvS increased its gold reserves during the bout of high inflation in August 1994–July 1995, with purchases peaking in 1999. The sales of gold to the CBvS declined in 2001 to 98,000 ounces, reflecting a fall in international gold prices, higher costs for diesel and other inputs, and the introduction of a gold purchase program in Guyana that diverted a substantial part of the Surinamese production.

    Regulatory changes in 2002 led to a substantial increase in gold purchases (Figure A3). In August 2002, the CBvS eliminated its program of direct gold purchases by licensing it entirely to the private sector. As of end-2004, seven licensed brokers had established facilities to buy gold from the informal sector, process it to separate out impurities and mercury contamination, and export gold. The CBvS also instituted pricing and taxation changes that increased the attractiveness of selling gold in Suriname, rather than smuggling it to Guyana.55 Combined with the increase in the international price of gold, this resulted in an increase in exports from small-scale mining operations from US$24 million in 2002 to around US$160 million in 2005 and a projected US$210 in 2006. The large increase in gold exports points to a reversal of the gold smuggling flow between the two countries.

    Figure A3.Recorded Purchases from Small-Scale Mining Operations

    (In millions of U.S. dollars)

    Source: Central Bank of Suriname.

    Large-scale gold mining

    A large gold mine opened at Rosebel in February 2004. The mine is operated by a subsidiary of a Canadian mining company and is located around 80 kilometers south of Paramaribo in an area covering 17,000 hectares. The concession includes exploration rights to 2027. The exploration and feasibility study took about six years and the construction about one year to complete, with total investment of around US$176 million. The new mine processed around 7¼ million tons of material and produced around 274,000 ounces of gold in 2005, or about US$140 million.56

    The economic impact of the gold mine has been significant. The new mine has provided direct employment since 1992, when the planning phase began. After the mine began operations, employment increased to around 1,100 workers in production, exploration, and construction. In addition, local expenditure, including wages, amounted to around US$30 million in 2004 (3 percent of GDP), while tax and nontax revenue added up to around US$5.4 million in 2004 and US$8.5 million in 2005 (Tables A6 and A7). Corporate income tax and dividends become payable in 2007 after the gold company and the government reached an agreement regarding new rules for the depreciation of investment.

    Table A6.Government Revenue from Mining Sector(In millions of U.S. dollars, u nless otherwise indicated)
    2002200320042005
    Contribution from oil
    Income tax9.021.621.522.5
    Dividend11.914.216.933.1
    Personal income tax3.84.35.05.4
    Turn over tax0.00.00.00.2
    Total24.740.143.561.3
    In percent of GDP2.33.12.93.4
    In percent of total government revenue8.911.311.112.4
    Contribution from gold
    Total revenue0.00.08.012.7
    In percent of GDP0.00.00.50.7
    Contribution from bauxite and alumina
    Total revenue42.046.663.757.3
    In percent of GDP3.83.64.33.2
    Memorandum item:
    Nominal GDP1,0951,2841,4901,801
    Sources: Suriname authorities; and IMF staff estimates.
    Table A7.Exports of the Mining Sector(In millions of U.S. dollars, unless other wise indicated)
    200420052006
    Crude oil
    Value43.553.696.5
    In percent of total merchandise exports5.55.97.7
    Gold, including informal sector
    Value275.9338.1441.5
    In percent of total merchandise exports35.137.135.3
    Alumina
    Value413.1446.6609.4
    In percent of total merchandise exports52.649.148.8
    Total of mining sector
    Value732.5838.31,147.4
    In percent of total merchandise exports93.292.191.8
    Total merchandise exports
    Value785.9910.31,249.6
    In percent of total merchandise exports100.0100.0100.0
    Sources: Suriname authorities; and IMF staff estimates.

    Formal large-scale gold mining has growth potential in Suriname. SURALCO has identified various gold deposits at its bauxite mining concessions and has announced a joint venture for further exploration with a U.S. gold mining company. The Canadian Resource Company (CANARC) is also active in its Sarakreek concession near Benzdorp.

    Longevity of mining activities

    Revenue from large-scale gold mining is relatively short lived compared with other mining enterprises. The life span of a gold mine is on average between 5 and 15 years, much shorter than the productive life span of mines exploiting other minerals. Bauxite mines, for example, can be operated for extremely long periods, leading to a lower volatility in exports and fiscal revenue. The new gold mine in Rosebel is expected to operate for 15 years, and export revenue is expected to increase rapidly in the first few years of operation to about 11 percent of total exports and decline subsequently. Fiscal revenue is projected to peak at 1 percent of GDP in 2008 and then to start falling gradually, absent new deposit discoveries.

    Agricultural Sectors

    Agriculture accounts for 9 percent of Suriname’s GDP, and cultivated land covers about 58,000 hectares across the northern plains. Rice is the most important crop, accounting for about 90 percent of agricultural land use, followed by bananas (Figure A4). The share of agriculture in GDP has declined over the past years, reflecting serious problems and volatility in rice production over the past decade and a collapse of the banana sector during 2002–03. With the recovery in banana production starting in 2004, agricultural output has also rebounded (Figure A5).

    Figure A4.Area Under Cultivation

    (In thousands of hectares)

    Source: Ministry of Agriculture, Animal Husbandry & Fisheries.

    Figure A5.Agricultural Output

    (In percent of GDP at market prices)

    Source: Ministry of Agriculture, Animal Husbandry & Fisheries.

    Rice

    Rice farming dominates agricultural activity in Suriname. Of the roughly 80–85 percent of agricultural land used for rice cultivation, about one-quarter is farmed by smallholders and three-quarters by a dozen large farmers, including one government enterprise. Rice is sold both domestically and exported to the Caribbean and the EU, where it enjoys preferential access.

    Macroeconomic policies in the late 1990s adversely affected the rice industry. In particular, high nominal interest rates increased operating costs, and exchange regulations further exacerbated operations as the industry paid for imported inputs at the parallel-market exchange rate, while export receipts were surrendered at a substantially appreciated official exchange rate. These costs, coupled with a 50 percent drop in export prices during 1995–99, drove a number of operators out of business, and rice export proceeds fell from about US$35 million in the mid-1990s to an average of about US$10 million during 2003–04 (Figure A6).

    Figure A6.Rice Exports

    Source: Ministry of Agriculture, Animal Husbandry & Fisheries.

    Rice companies face infrastructure and organizational problems. The remaining rice companies operate with poor facilities and a weak capital base. The industry also suffers from limited vertical organization and integration, and infrastructure is poor (roads, irrigation facilities, and shipping and transportation systems), affecting efficiency and product quality. The more stable macroeconomic environment has supported recovery efforts in recent years, and recent international rice price increases could give the industry an additional boost.

    Suriname exports rice to the EU under preferential access. The access was granted to African, Caribbean, and Pacific (ACP) countries in the Cotonou Partnership Agreement signed in June 2000. Under this arrangement, two ACP counties (Guyana and Suriname) were able to export 125,000 tons of husked rice and 20,000 tons of broken rice to the EU at about one-third the customs duties applicable to non-ACP countries. In addition, 35,000 tons of rice were allowed to enter the EU duty free via overseas countries and territories (OCTs) of EU countries (subject to minimum value-added requirements in the OCTs).57 Suriname made extensive use of the OCT provision in the mid-1990s through exports to the Netherlands Antilles and Aruba (both of which are OCTs of the Netherlands).

    Suriname’s preferential access to the EU market is being substantially eroded:

    • With the introduction of more stringent safeguard measures by the EU to curtail rice imports via OCTs, Suriname’s rice exports through the Netherlands Antilles and Aruba dropped significantly in recent years.

    • The EU reduced its general external tariff for rice from €260 per ton to €65 per ton in 2000. Although ACP countries still benefit from a 65 percent discount on that tariff, this reduction implied a relative decline in preferential access in relation to non-ACP rice exporters.

    • The Everything But Arms (EBA) initiative, which was adopted by the EU in March 2001, is further undermining Suriname’s relative preferential access to the European market. This initiative grants quota-free and duty-free access to some 50 least developed countries (as defined by the United Nations) for all goods except weapons and armaments for an unlimited period. Neither Suriname nor Guyana qualifies for the EBA initiative. Special transitional arrangements were maintained for sugar, bananas, and rice, but the banana regime expired in 2006, and the sugar and rice regimes will expire in 2009.

    The EU is assisting Suriname to increase competitiveness to cope with the reduction in preferential market access. A €9.5 million grant facility over five years is being channeled through the rice farmers’ association to support primarily small farmers. It provides for (1) technical assistance to introduce high-quality rice varieties, raise yields, and improve processing and packaging; (2) investment in infrastructure, including irrigation, roads, and transportation systems; and (3) mechanisms to facilitate and finance credit facilities for small farmers.

    Suriname is seeking to diversify its rice exports markets. In late 2003, Suriname signed an agreement with Brazil to export rice under a reduced tariff of 4 percent (compared with a regular tariff of 11 percent) for a limited period. The rice industry is also looking increasingly to the Caribbean market, in particular Jamaica, to which it can export duty and quota free under Caribbean Community (CARICOM) rules.

    Bananas

    A state-owned company has been at the center of banana export production since the 1970s. The Surinaamse Landbouwberdijven N.V. (SURLAND) was formed in 1970 to incorporate a number of smaller government plantations into a single entity. As a result, SURLAND controlled 95 percent of all the land used for banana cultivation, the balance being farmed by smallholders for the local market. Since then, SURLAND has been the country’s sole exporter of bananas from its plantations in the Nickerie and Jarikaba districts, exporting its produce exclusively to the EU through the Fyffes Group in Ireland, while benefiting from preferential access arrangements under the Coto-nou Partnership Agreement (Box A4).58

    Box A4.The Banana Regime under the ACP-EU Partnership Agreement

    Suriname has exported bananas to Europe under the Lomé and Cotonou Agreements. The Cotonou Partnership Agreement provided for some 850,000 tons of banana from African, Caribbean, and Pacific (ACP) countries to enter the European market duty free on a first-come first-served basis under the so-called C quota (limited exclusively to ACP countries), including 38,000 tons from Suriname. ACP countries could also supply bananas to the European market under the A and B quotas of 2,200,000 tons and 453,000 tons, respectively, which they, however, would share with non-ACP countries—also on a first-come first-served basis. While bananas from ACP countries under the A and B quotas entered the EU duty free, those from non-ACP countries were subject to customs duty of €75 per ton. Beyond these quotas, bananas from non-ACP counties were subject to a prohibitive customs duty of €680 per ton, whereas bananas from ACP countries entered the EU at a reduced customs duty of €300 per ton. An interesting peculiarity of the EU banana regime is that the quotas are held by firms (so-called traditional operators) for imports into the EU from any of the ACP countries. There is an active “license” market whereby operators from the Caribbean, who own the rights to export larger quantities than they can produce, sell these rights to African operators who have high production capacity but own fewer quota rights.

    The preferential access that ACP countries enjoyed is being eroded. Following a successful challenge of the EU banana regime by the United States and Ecuador before the World Trade Organization (WTO) Dispute Settlement Body, the EU agreed to amend this regime in two steps, culminating in a replacement of the quota-based system with one relying exclusively on tariffs effective January 1, 2006 (WTO 2004). In January 2005, the European Commission notified the WTO of its intention to introduce the tariff-only system for banana imports at the customs duty level of €230 per ton for non-ACP countries without quota limitations. This tariff was later reduced to €176 per ton. ACP countries would continue to benefit from duty-free access for a quota of 775,000 tons to the European market up to 2008, and—for those who qualify thereafter—under Everything But Arms. The conversion of quotas into all tariffs for non-ACP countries will continue to provide limited protection to banana-exporting ACP countries, but the Caribbean countries, including Suriname, are likely to face stronger competition from more efficient banana producers in Africa and Latin America. To help the ACP countries adjust to the changes in the banana regime, the EU established a Special Framework of Assistance with commitments of €366.8 million for the period 1999–2009.

    Suriname’s banana industry collapsed in 2002. Annual banana exports had averaged about 31,000 tons or US$24.5 million during the 1990s, despite SURLAND’s serious financial problems, which reflected poor management, outdated technology, weak pest and disease control, and labor strife. Because of the downward pressure on banana prices in the European market, the Fyf-fes Group reduced its purchasing price for bananas from Suriname by about 25 percent in late 2000. As a result, SURLAND declared bankruptcy and closed its operations in April 2002 (Figure A7).

    Figure A7.Banana Exports

    Source: Ministry of Agriculture, Animal Husbandry & Fisheries.

    The authorities put into action a rehabilitation program for the banana sector in 2002. Under the plan, a new company—the Foundation to Save the Suriname Banana Sector (SBBS)—assumed SURLAND’s assets and restarted operations, while the government assumed the financial liabilities of SURLAND. The EU is supporting this effort with €21 million in grants from the Special Framework of Assistance (SFA) fund, including technical assistance to double the industry’s productivity and yields to about 40 tons per hectare and to enable it to compete internationally once the preferential access of ACP countries lapses. The Inter-American Development Bank is providing a US$7.3 million loan to recapitalize the industry, with a view to preparing it for privatization. The SBBS is overseen by a steering committee that includes representatives from the donor community and other stakeholders. A new management team was hired to operate the SBBS; a new pay structure and revised employment regulations are being developed; and some of the former SURLAND employees have been retained on a temporary basis, pending the company’s privatization.

    The SBBS has begun operations to rehabilitate the industry and restore production. The development program included the acquisition of new machinery, transportation systems, irrigation, and planting material. About 2,370 hectares of land were cleared of old banana plants during 2002–03, and replanting started in the second half of 2003, using higher-quality varieties. With the rehabilitation program completed in early 2004, the planted area and yield per hectare increased significantly. By end-2005, production and exports of banana had rebounded and surpassed the average levels of the preceding 10 years (Table A8). Banana exports to the EU have resumed under a new brand name of “Switie” and sales have been diversified to include France, Ireland, Italy, the Netherlands, and the United Kingdom.

    Table A8.Suriname: Banana Prices(In U.S. dollars per box of 40 pounds)
    20042005
    Average production costs8.738.11
    Export price, FOB7.069.13
    Cost of EU license2.732.97
    Net export price, FOB4.336.16
    Net contribution, FOB−4.40−1.95
    Boxes exported (millions)1.152.13
    Source: Ministry of Agriculture, Animal Husbandry & Fisheries.

    Further improvements are needed before the banana sector becomes profitable. Over the past few years yields have exceeded their targeted levels, but the area of banana cultivation is lower than planned, and total output and exports are significantly lagging behind targeted levels by about half. This possibly reflects an overly ambitious development program for the SBBS at the outset. Moreover, in 2005 SBBS operated at a loss of more than US$4 million. Absent the current subsidy grant from the EU, significant improvements in productivity and reductions in unit costs will be needed before SBBS can become profitable.

    Bibliography

      Adhin, R., 2000, “Dollarization in Suriname: Some Policy Issues,” University of Suriname Journal of Social Sciences, Vol. 7.

      Baliño, TomásAdamBennett, and EduardoBorensztein, 1999, Monetary Policy in Dollarized Economies, IMF Occasional Paper No. 71 (Washington: International Monetary Fund).

      Braumann, B., and S.Shah, 2001, “A Case Study of High Inflation,” in Suriname. The Economy. Prospects for Sustainable Development, ed. by Pitouvan Dijck (Kingston, Jamaica: Ian Randle Publishers).

      Broda, Christian, 2004, “Terms of Trade and Exchange Rate Regimes in Developing Countries,” Journal of International Economics, Vol. 63 (May), pp. 3158.

      Broda, Christian, and Eduardo LevyYeyati, 2003, “Dollarization and the Lender of Last Resort,” in Dollarization: Debates and Policy Alternatives, ed. by E. LevyYeyati and F.Sturzenegger (Cambridge, Massachusetts: MIT Press).

      Davis, Jeffrey,RolandoOssowski, JamesDaniel, and StevenBarnett, 2001, Stabilization and Savings Funds for Nonrenewable Resources: Experience and Fiscal Policy Implications, IMF Occasional Paper No. 205 (Washington: International Monetary Fund).

      De Surinaamsche Bank (DSB), 2004, Annual Report 2003 (Paramaribo, Suriname).

      Dew, Edward, 1978, The Difficult Flowering of Suriname: Ethnicity and Politics in a Plural Society (The Hague: Martinus Nijhoff).

      Dixit, Avinash, 1992, “Investment and Hysteresis,”Journal of Economic Perspectives, Vol. 6 (Winter), pp. 10732.

      Dixit, Avinash, and Robert S.Pindyck, 1994, Investment under Uncertainty (Princeton, New Jersey: Princeton University Press).

      Easterly, William, 1993, “How much do distortions affect growth?Journal of Monetary Economics, Vol. 32, No. 2, pp. 187212.

      Economist Intelligence Unit, 2004, Suriname: Country Profile 2004: Main Report (London).

      Feige, Edgar, VedranŠošiæ, MichaelFaulend, and VelimirŠonje, 2003, “Unofficial Dollarization in Latin America: Currency Substitution, Network Externalities, and Irreversibility,” in The Dollarization Debate, ed. by D.Salvatore, J.W.Dean, and T.D.Willet (Oxford: Oxford University Press).

      Fritz-Krockow, Bernhard, 2001, “Deposit and Loan Dollarization in Haiti,” IMF Staff Report No. 01/04 (Washington: International Monetary Fund).

      Fritz-Krockow, Bernhard, and ParmeshwarRamlogan, 2007, International Monetary Fund Handbook: Its Functions, Policies, and Operations (Washington: International Monetary Fund).

      Gemerts, G., and others 1996, “Small-Scale Mining in Suriname: Problems and Opportunities” (Paramaribo, Suriname: Geological Mining Service of Suriname and OAS Special Mission).

      Guidotti, P., and C.A.Rodríguez, 1992, “Dollarization in Latin America: Gresham’s Law in Reverse?Staff Papers, International Monetary Fund, Vol. 39, pp. 51844.

      Gulde, Anne Marie, DavidHoelscher, AlainIze, DavidMarston, and GianniDe Nicoló, 2004, Financial Stability in Dollarized Economies, IMF Occasional Paper No. 230 (Washington: International Monetary Fund).

      Honohan, Patrick, AngingShi, 2002, “Deposit Dollarization and the Financial Sector in Emerging Economies,” Policy Research Working Paper No. 2748 (Washington: World Bank).

      The HWO Consultants, N.V., 2000, “Project to Curb Mercury Pollution and Promote Sustainable Mining” (Paramaribo, Suriname).

      Inter-American Development Bank, 2001, Governance in Suriname, Sector Study (Washington).

      Inter-American Development Bank, 2004, “Financial Dollarization,” in Unlocking Credit: The Quest for Deep and Stable Bank Lending (Baltimore, Maryland: The Johns Hopkins University Press).

      Inter-American Development Bank, 2005, Competitive Benchmarking in Suriname (Washington).

      International Monetary Fund, 2003a, Suriname: Selected Issues and Statistical Appendix, IMF Country Report No. 357 (Washington). Available via the Internet: www.imf.org/external/pubs/cat/longres.cfm?sk=17031.0.

      International Monetary Fund, 2003b, “ROSC on Fiscal Transparency in Chile” (Washington).

      International Monetary Fund, 2005, Guide on Resource Revenue Transparency (Washington). Available via the Internet: www.imf.org/external/pubs/ft/grrt/eng/060705.pdf.

      International Monetary Fund, 2006, Suriname: Statistical Appendix, IMF Country Report No. 134 (Washington). Available via the Internet: www.imf.org/external/pubs/cat/longres.cfm?sk=19124.0.

      International Monetary Fund, 2007, Suriname Statistical Appendix, IMF Country Report No. 07/179 (Washington).

      Ize, Alain, and Eduardo LevyYeyati, 2003, “Financial Dollarization,” Journal of International Economics, Vol. 59 (March), pp. 32347.

      Kaufmann, Daniel, AartKraay, MassimoMastruzzi, 2005, “Governance Matters IV: Governance Indicators for 1996–2004,” Policy Research Working Paper No. 3630 (Washington: World Bank).

      Laurens, Bernard, 2005, Monetary Policy Implementation at Different Stages of Market Development, IMF Occasional Paper No. 244 (Washington: International Monetary Fund).

      Reinhart, Carmen, and KennethRogoff, 2002, “The Modern History of Exchange Rate Arrangements: A Reinterpretation,” NBER Working Paper No. 8963 (Cambridge, Massachusetts: National Bureau of Economic Research).

      Reinhart, Carmen, and KennethRogoff, and MiguelSavastano, 2003, “Addicted to Dollars,” NBER Working Paper No. 10015 (Cambridge, Massachusetts: National Bureau of Economic Research).

      Rogoff, Kenneth, AasimHusain, AshokaMody, RobinBrooks, and NienkeOomes, 2004, Evolution and Performance of Exchange Rate Regimes, IMF Occasional Paper No. 229 (Washington: International Monetary Fund).

      Savastano, M., 1996, “Dollarization in Latin America: Recent Evidence and Some Policy Issues,” in The Macroeconomics of International Currencies: Theory, Policy, and Evidence, ed. by P.Mizen and E.Pentecost (Cheltenham, United Kingdom: Edward Elgar).

      Schaechter, Andrea, 2001, “Implementation of Monetary Policy and the Central Bank Balance Sheet,” IMF Working Paper 01/149 (Washington: International Monetary Fund).

      Serven, Luis, and AndresSolimano, eds., 1994, Striving for Growth after Adjustment: The Role of Capital Formation (Washington: World Bank).

      Stiglitz, Joseph, AndrewWeiss, 1986, “Credit Rationing and Collateral,” in Recent Developments in Corporate Finance, ed. by J.Edwards, J.Franks, C.Mayer, and S.Schaefer (Cambridge: Cambridge University Press).

      Suriname Ministry of Planning and Development Cooperation, 2003, “Restructuring of the Banana Sector in Suriname,” Document18 (Paramaribo, Suriname).

      van Dijck, Pitou, ed., 2001, The Suriname Economy: Prospects for Sustainable Development (Kingston, Jamaica: Ian Randle Publishers).

      World Bureau of Metal Statistics, 2004, World Metal Statistics Yearbook 2004 (Hertfordshire, United Kingdom).

      World Trade Organization, 2004, “Trade Policy Review: Suriname,” WT/TPE/S/135 (Geneva, June14).

    The plant is named Paranam after the Para and Suriname rivers that border the mining concession areas.

    The government agency that oversees bauxite-mining activities in Suriname is the Bauxite Institute of Suriname. The main responsibilities of the institute include conducting research and analysis, providing policy advice, coordinating government activities, and assisting in the enforcement of applicable laws.

    The bauxite industry is taxed as follows: (a) a statistical fee of 2 percent is levied on the f.o.b. value of bauxite exports (whereas other exports are subject to a 0.5 percent fee), although no bauxite has been exported since 1987; (b) a statistical fee is imposed on imports by the bauxite companies at the rate of 2 percent on the c.i.f. value (whereas the general rate for imports is 0.5 percent); and (c) profit income by bauxite companies is taxed at a 36 percent rate.

    Before independence, the Suriname government had already decided to undertake a major investment project in bauxite mining in the area, which failed to materialize. In August 1970, the Suriname government and Reynolds Metals Company agreed to form a joint venture for the exploitation of the bauxite reserves in the Bakhuys Mountains of western Suriname and, in a next phase, of the bauxite reserves in the Coppename area close to the coast.

    Information provided by Alcoa. Alcoa website: www.alcoa.com/suriname/en/news/news_release/mining.asp.

    Despite its geological similarities to Suriname, Guyana does not yet produce oil in commercial quantities.

    The shield stretches from the Amazon River in Brazil to the Orinoco River in Venezuela.

    Most of the population of Suriname lives in the narrow coastal region. The population in the interior mainly consists of Amerindians (around 10,000) and Maroons (around 50,000), who have only limited contact with the formal and urban sectors of the population.

    The artisan miners in the Guianas have traditionally been referred to as porknockers, while Brazilian gold diggers are called garimpeiros.

    Hydraulic gold mining has been outlawed in gold-producing OECD countries owing to the environmental damage it causes.

    Treaty for Peace and National Reconciliation and Development, dated August 8, 1992.

    Mercury is used to bind gold and separate it from the dirt by creating a gold-mercury amalgam. Gold is then separated by heating the amalgam. In the process, the mercury evaporates and later condenses, creating a health hazard for workers and contaminating surface waters.

    In Guyana, sellers pay a 2 percent fee, based on the value of the gold to the Guyana Gold Board plus a royalty fee ranging from 3 to 5 percent based on the international price of gold. If international gold prices are below US$260 per ounce, the royalty is 3 percent; for prices between US$260 and US$285 per ounce, it is 4 percent; and for prices that exceed US$285 per ounce, it is 5 percent. This royalty fee is earmarked for the Guyana Geology and Mine Commission. In comparison, Suriname charges royalties of 1 percent and an extra royalty of 6.5 percent if the international gold price exceeds US$425 per ounce.

    The operation uses cyanide in a recirculated process instead of mercury, substantially reducing the environmental impact.

    European Union, 2005, various fact sheets on external trade, available on the Internet at: http://europa.eu.int/comm/trade.

    Suriname is one of the seven traditional Caribbean banana exporters together with Belize, Jamaica, and the four Windward Islands (Dominica, Grenada, St. Lucia, and St. Vincent and the Grenadines).

      You are not logged in and do not have access to this content. Please login or, to subscribe to IMF eLibrary, please click here

      Other Resources Citing This Publication