With a population of 500,000 and covering an area of 165,000 square kilometres, former Dutch colony Suriname is the smallest sovereign state in South America. The country has been plagued by civil war, coups and political turmoil since winning independence in 1975. Against this challenging political backdrop, Suriname has endured inevitable economic difficulties.
While some of these difficulties remain today, a degree of political stability has descended, bringing with it a more attractive and dynamic economic environment. President Dési Bouterse, elected in July 2010, is taking steps to encourage economic development and in particular to attract foreign investment into the country. In 2012, FDI inflows were $582.2m, with the US, Belgium and the Netherlands key investors.
The government identified its newly established Investment and Development Corporation Suriname (IDCS) and the Ministry of Foreign Affairs as the institutions responsible for attracting foreign investment to Suriname. In 2011 it set the target to increase GDP by 6% each year until 2016 to reduce the national savings gap, which currently stands at 12%, and to reduce the 4% government budget deficit in the same timeframe.
According to the IDCS, Suriname presents a compelling investment opportunity due to its wealth of natural resources and agricultural assets. In 2011, bauxite alone accounted for 70% of the country's export income and 15% of its GDP. Other sectors offering development and investment potential include agriculture, forestry, fisheries, information and communications technology, and offshoring. The government also offers incentives to foreign investors, such as tax exemptions, a reduction in the cost of business start-ups and land concessions. Investors can also benefit from the country’s strong trade relations with both Europe and the Caricom single market.
One company that has long been taking advantage of the aluminium reserves in Suriname is Pittsburgh-based mining company Alcoa, which has had a presence in the country since 1916. The business, now known as Suriname Aluminum Company, produces about 3150 metric tonnes of alumina each day at its Paranam location.
Oil exploration firm Kosmos Energy, meanwhile, announced at the end of 2011 that it was to take advantage of the recent discovery of offshore oil reserves, drawing up two production sharing agreements with Staatsolie Maatschappij Suriname, the national oil company of Suriname. These contracts were the firm’s first acreage acquisition outside of west Africa.
The Bombay Investment Group (BIG) has been present in Suriname since 2010, in areas including gold mining, refining and exporting. The investment firm also accounts for about 10% of Suriname’s rice production and 2.5% of banana production. BIG is looking at further opportunities to invest in the country, particularly in agriculture.
While it is clear that Suriname’s efforts to attract foreign investment are starting to pay dividends, difficulties remain in terms of economic stability, and in 2012 GDP growth fell short of its 6% target, reaching 4.5%. Furthermore, according to think tank Heritage Foundation, the country’s economic freedom score fell between 2011 and 2012, reflecting substantial declines in monetary freedom, freedom from corruption and labour freedom.
For those companies willing to take a long-term view and put faith in the government to continue its aggressive economic reform, opportunities abound, but the country still has a long way to go if it is to achieve the targets it has set for FDI and economic growth over the next few years.