Guyana - Transfer Pricing

GuyanaGuyana, one of the most corrupt countries in Latin America, is noted especially for links to the illegal drug trade. Guyana has a particuIar reputation for money laundering and, given that trade in timber accounts for most Guyana's official export earnings, it is likely that at least some of that trade is associated wityh money laundering.

The unit prices cited in the ITTO's fortnightly "Tropical Timber Market Report" indicate that the difference between the unit prices for Guyana's log exports are remarkably small relative to unit prices for equivalent products exported from other producer countries. The difference might well be attributable to transfer pricing fraud. Given that, during 2005, logs account for almost all India's (and half of China's) timber imports from Guyana, and that India and China (primarily India) account for more than half of Guyana's log exports, India and China may well be complicit in such fraud. The loss of export revenue attributable to transfer pricing fraud might amount to US$ 10mi during 2005. That amount represents some 2% of Guyana's export revenue (of US$ 500 million, roughly half of which was then attributable to gold, diamonds and sugar, and a further 10% to timber).

One might expect that such a large percentage in lost revenue would prompt donors to at least claim to be applying effective pressure on the government of Guyana to substantially reduce those losses. Logs, sawn wood, and plywood accounted for approximately 40%, 30%, and 20% of the RWE volume of Guyana's timber exports during 2005.

During early 2006, Guyana's larget timber enterprise, Barama, received an FSC certificate pertaining to the management of 570,000ha (i.e. less than one third of the area) of its forest concessions. This FSC certificate does not reflect Barama's illrepute - which include alleged economic crime (concerning transfer pricing fraud and the granting of the very lage area of its forest concessions and its generous tax treatment), failure to respect the rights of workers and indigenous people, and procuring wood from dubious sources. Although Barama - owned jointly by Samling (a controversial subsidiary of Lingui Developments from Sarawak) and Sunkyong (a major conglomerate from Korea) - is in effect the sole producer of plywood in Guyana, the granting of that FSC certificate should not be deemed to imply that Guyana's plywood exports (or indeed other products made or traded by Barama) are either legal or from sustainably managed forest.

Guyana's second largest timber company, Demerara Timbers, is said to be owned the Prime Group of Singapore - which might be a shell company and which is related to owners of the notorious Rimbunan Hiijau.

http://www.globaltimber.org.uk/guyana.htm