Guyana, one of the most corrupt countries in Latin America

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

Guyana
Guyana, one of the most corrupt countries in Latin America, is noted
especially for links to the illegal drug trade. Guyana has a particular
reputation for money laundering and, given that trade in timber
accounts for much of Guyana's official export earnings, it is likely
that at least some of that trade is associated with 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 largest timber enterprise, Barama, received
an FSC certificate pertaining to the management of 570,000ha of its
forest concessions. This FSC certificate was withdrawn later in 2006
after it became apparent that Barama had failed to comply with
improvements required to maintain that certificate. Of Barama's
218,551m3 log production during FY2005/6, a little over 10% of that
company's log production derived from the area covered by the FSC
certificate and roughly two thirds derived from the 445,000ha of forest
over which Barama claims harvesting rights. Given that Barama's 1.6mi
hectare concessions expire in 2016, it is remarkable that such a small
proportion of Barama's log production derives from its concessions.
However, the window of opportunity for such exploitation is short (such
"rights" tend to be illegal and they expire prior to 2016), making it
unlikely that management of these forest areas is sustainable.

The lower of the two charts above, which covers only some of Guyana's
timber exports, indicates the extent to which China's imports of logs
have surged during 2006 - giving rise to much of the current concern
about transfer pricing and illegality. It also demonstrates that some
of Barama's efforts to gain FSC certification might have been motivated
by a desire to increase sales to the USA - Barama's exports to the USA
having halved during the first five years of this decade (reflecting
efforts by leading customers, e.g. The Home Depot and Lowes, to ensure
sustainable procurement.

Barama's illrepute includes allegations of economic crime (concerning
transfer pricing fraud and the granting of the very lage area of its
forest concessions and its remarkably generous tax treatment), failure
to respect the rights of workers and indigenous people, and procuring
wood from dubious sources. Barama - initially 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. Most of its key workers and labourers
are ethnic Chinese - some of whom are said be indentured to gangs from
China (to repay debts or to emigrate from China) - fuelling resentment
within Guyana. FSC certification would greatly help overcome these
negative perceptions - which depress the price of the plywood (and
other timber products) which importers procure via Barama.

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. Demerara
Timbers is said to have recently been acquired by BaiShanLin.

Jaling Forest Industries and Garner Forest Industries have forest
concessions of 164,800ha and 92,737ha respectively. An almost bankrupt
investment company with no experience of forestry, China Timber
Resources (listed on the Hong Kong stock exchange but incorporated in
the Cayman Islands and, until May 2007, known as Seapower Resources
International) owns 95% of Jaling and 100% of Garner through subsidiary
shell companies - Wide Resources (also referred to as Wild Resources)
and Vastrich respectively. Ownership of Jaling and Garner had
previously been dominated by the (ethnic chinese) Chan family which has
interests in the Karlam saw mill at Linden. Mr Danny Chan is chief
executive of Jaling. China Timer Resources increased its ownership of
Jaling from 51% to 95% by acquiring shares from a Mr Liu Feng Lei who
had acquired those shares from the Chan family subsequent to loosing
ownership control of Jaling in September 2006.

A state-owned timber enterprise from Wuchang (Northern China) was to
log Jaling's concessions despite having no experience of tropical
forests. It is likely - see the next paragraph - that another ethnic
chinese entity, Guyana BaiShanLin International Forestry Development
Co. might have logged Jaling's concessions. These arrangements are akin
to "landlording" which is illegal in Guyana (unless personally
authorised by the President). The resulting timber was to be exported
through a joint venture partly owned by a Mr Chu Wenze - a hardwood
floor dealer - who is chief executive of BaiShanLin. Ironicaly, Guyana
might prohibit the export of its most valuable (flooring) species
during 2008.

BaiShanLin (part owned by a residential housing company from Beijing
"BUCC" whose indentured work force in Dubai went on strike during 2007)
has also taken over Jaling's operations in Linden (the location of the
Karlam mill). BaiShanLin was registered during the month in which 51%
of Jaling's shares were acquired from the Chan family. Its subsidiary,
BUCC Wood, asserts that BaiShanLin has been granted wood cutting
licences for 1.2 million hectares of Guyana's forest. During April
2007, Bai Shan Lin was prohibited from exporting logs, partly as a
consequence of its failure to comply with its obligations. Two weeks
later, Jaling's Timber Sales Agreement was suspended due to
non-compliance by whoever was then logging on behalf of Jaling. BUCC
Wood is a jointly-owned subsidiary of BaiShanLin and BUCC established
at the end of 2006. It claims to sell 200,000m3 of imported logs
annually and, in Beijing, to process (some of this into) veneer and
flooring. BUCC Wood gives the impression that Guyana is its sole
supplier, that its logs enter China through ports near Zhangjiagang,
Shanghai and perhaps Tianjin, and that at least some of the products
made from those imports is subsequently exported. However, China is
unlikely to declare the import of more than 70,000m3 of logs and
5,000m3 of sawn wood from Guyana during the whole of 2007.

BUCC Wood appears particularly to promote logs of locust wood (Hymenaea
courbaril) from Guyana in its marketing material. The export from
Guyana of logs of this species - and crabwood/andiroba (Carapa
guianensis) which BUCC also markets - is prohibited. Authorities in
China have been obliged to "correct" the statistics of imports from
Guyana which they declare to the ITTO so as to exclude reference to
this species. BUCC Wood also markets logs of bulletwood (Manilkara
bidentata) from Guyana - a protected species.

The depth of BaiShanLin's apparent engagement in Jaling begs the
question "what is the linkage between BaiShanLin and China Timber
Resources"?

In April 2007, Guyana's Minister of Agriculture, Guyana's Commissioner
for Forests, and China's Ambassador to Guyana ventured into the
interior to attend a community meeting about certification of logging
in the Iwokrama Reserve - begging the question whether the purpose of
the latter's (uninvited) visit was to bully or bribe on behalf of
ethnic Chinese interests.