Economy of Suriname

The backbone of Suriname's economy is the export of alumina and small amounts of aluminum produced from bauxite mined in the country. In 1999, the aluminum smelter at Paranam was closed and mining at 'Onverdacht' ceased; however, alumina exports accounted for 72% of Suriname's estimated export earnings of US$496.6 million in 2001. Suriname's bauxite deposits have been among the world's richest.

Inexpensive power costs are Suriname's big advantage in the energy-intensive alumina and aluminum business. In the 1960s, ALCOA built a US$150-million dam for the production of hydroelectric energy at Afobaka (south of Brokopondo), which created a 1,560 km² lake, one of the largest artificial lakes in the world.

In 1976-1977 a 100 km long single track railway was constructed in West Suriname from the bauxite containing Bakhuys mountain range to the town of Apoera on the Corantijn river, to transport bauxite by river to processing plants elsewhere. The construction of this railway was financially funded by the Dutch government's independence/severance payments after November 25 1975. After completion of this railway and associated facilities, for political and economical reasons it was never actually used and was left to be overgrown by the jungle. Also plans to construct a dam in the Kabalebo river were developed but never fully executed.

In 1984, SURALCO, a subsidiary of the Aluminum Company of America (ALCOA), formed a joint venture with the Royal Dutch Shell-owned Billiton Company, which did not process the bauxite it mined in Suriname. Under this agreement, both companies share risks and profits.

The major mining sites at Moengo and Lelydorp are maturing, and it is now estimated that their reserves will be depleted by 2006. Other proven reserves exist in the east, west, and north of the country sufficient to last until 2045. However, distance and topography make their immediate development costly. In October 2002, Alcoa and BHP Billiton signed a letter of intent as the basis for new joint ventures between the two companies, in which Alcoa will take part for 55% in all bauxite mining activities in West Suriname. The government and the companies are looking into cost-effective ways to develop the new mines. The preeminence of bauxite and ALCOA's continued presence in Suriname is a key element in the U.S.-Suriname economic relationship.

A member of CARICOM, Suriname also exports rice, shrimp, timber, bananas, fruits, and vegetables. Gold mining is unregulated by the government, and this important part of the informal economy (estimated as much as 100% of GDP) must be brought into the realm of tax and environmental authorities. Suriname has attracted the attention of international companies in gold exploration and exploitation as well as those interested in extensive development of a tropical hardwoods industry and possible diamond mining. However, proposals for exploitation of the country's tropical forests and undeveloped regions of the interior traditionally inhabited by indigenous and Maroon communities have raised the concerns of environmentalists and human rights activists both in Suriname and abroad. Oil is a promising sector; current output is 12,000 barrels a day, and regional geology suggests additional potential. 'Staatsolie', the state-owned oil company, is actively seeking international joint venture partners.

At independence (November 25, 1975), Suriname signed an agreement with the Netherlands providing for about US$1.5 billion in development assistance grants and loans over a 10- to 15-year period. Dutch assistance allocated to Suriname thus amounted to about US$100 million per year, but was discontinued during periods of military rule.
After the return to a democratically elected government in 1991, Dutch aid resumed. The Dutch relationship continues to be an important factor in the economy, with the Dutch insisting that Suriname undertake economic reforms and produce specific plans acceptable to the Dutch for projects on which aid funds could be spent. In 2000, however, the Dutch revised the structure of their aid package and signaled to the Surinamese authorities their decision to disburse aid by sectoral priorities as opposed to individual projects. Although the present government is not in favor of this approach, it has identified sectors and is now working on sectoral analyses to present to the Dutch.

After a short respite in 1991-1996, when measures taken in 1993 led to economic stabilization, a relatively stable exchange rate, low inflation, sustainable fiscal policies, and growth, Suriname's economic situation deteriorated from 1996 to the present. This was due in large part to loose fiscal policies of the Wijdenbosch government, which, in the face of lower Dutch development aid, financed its deficit through credit extended by the Central Bank. As a consequence, the parallel market for foreign exchange soared so that by the end of 1998, the premium of the parallel market rate over the official rate was 85%. Since over 90% of import transactions took place at the parallel rate, inflation took off, with 12-month inflation growing from 0.5% at the end of 1996, to 23% at the end of 1998, and 113% at the end of 1999. The government also instituted a regime of stringent economic controls over prices, the exchange rate, imports, and exports, in an effort to contain the adverse efforts of its economic policies. The cumulative impact of soaring inflation, an unstable exchange rate, and falling real incomes led to a political crisis.

Suriname elected a new government in May 2000, but until it was replaced, the Wijdenbosch government continued its loose fiscal and monetary policies. By the time it left office, the exchange rate in the parallel market had depreciated further, over 10% of GDP had been borrowed to finance the fiscal deficit, and there was a significant monetary overhang in the country. The new government dealt with these problems by devaluing the official exchange rate by 88%, eliminating all other exchange rates except the parallel market rate set by the banks and cambios, raising tariffs on water and electricity, and eliminating the subsidy on gasoline. The new administration also rationalized the extensive list of price controls to 12 basic food items. More important, the government ceased all financing from the Central Bank. It is attempting to broaden its economic base, establish better contacts with other nations and international financial institutions, and reduce its dependence on Dutch assistance. However, to date the government has yet to implement an investment law or to begin privatization of any of the 110 parastatal, nor has it given much indication that it has developed a comprehensive plan to grow the economy.

State-owned banana producer Surland closed its doors on April 5, 2002, after its inability to meet payroll expenses for the second month in a row; it is still unclear if Surland will survive its current crisis. Moreover, in January 2002, the current government renegotiated civil servant wages (a significant part of the work force and a significant portion of government expenditure), agreeing to raises as high as 100%. Pending implementation of these wage increases and concerned that the government may be unable to meet these increased expenses, the local currency weakened from Sf 2200 in January 2002 to nearly Sf 2500 in April 2002. On March 26, 2003, the Central Bank of Suriname (CBvS) adjusted the exchange rate of the U.S. dollar. This action resulted in further devaluation of the Surinamese guilder. The official exchange rate of the US$ was SF 2,650 for selling and SF 2,600 for purchasing. With the official exchange rate, the CBvS came closer to the exchange rate on the parallel market which sold the U.S. dollar for SF 3,250.

Currency

From 2004: Suriname dollar (SRD) = 100 cents; USD 1.00 is ca. SRD 2.70 (Jan 2004)

Before 2004: guilder, gulden (florin) (Sf, SRG) = 100 cents, SRD 1 = SRG 1000; coins had extremely low official value and a much higher collector's value; their official value has now been multiplied by 1000: the value in SRD cents is equal to the former value in SRG cents. The same applies for "currency notes" (SRG 1 and 2.50).

Surinamese guilders per US dollar - 2,346.75 (2002), 2,178.5 (2001), 1,322.47 (2000), 859.44 (1999), 401 (1998)
Note: during 1998, the exchange rate splintered into four distinct rates; in January 1999 the government floated the guilder, but subsequently fixed it when the black-market rate plunged; the government then allowed trading within a band of SRG 500 around the official rate

Statistics

Fiscal year:</b> calendar year

GDP:purchasing power parity - US$1.48 billion (1999 est.) GDP - real growth rate: -1% (1999 est.)

GDP - per capita: purchasing power parity - US$3,400 (1999 est.)

GDP - composition by sector:
agriculture: 13%
industry: 22%
services: 65% (1998 est.)

Population below poverty line: NA%

Household income or consumption by percentage share:
lowest 10%: NA%
highest 10%: NA%

Inflation rate (consumer prices): 170% (1999 est.)

Labor force: 100,000

Labor force - by occupation:agriculture NA%, industry NA%, services NA%

Unemployment rate: 20% (1997)

Budget:
revenues: US$393 million
expenditures: US$403 million, including capital expenditures of US$34 million (1997 est.)

Industries: bauxite and gold mining, alumina and aluminum production, lumbering, food processing, fishing
Industrial production growth rate:6.5% (1994 est.)

Electricity - production:2.008 billion kWh (1998)
Electricity - production by source:
fossil fuel:24.65%
hydro power:75.35%
nuclear:0%
other:0% (1998)

Electricity: consumption:1.867 billion kWh (1998) exports: 0 kWh (1998)
imports: 0 kWh (1998)

Agriculture - products: paddy rice, bananas, palm kernels, coconuts, plantains, peanuts; beef, chickens; forest products; shrimp

Exports:US$406.1 million (f.o.b., 1998)

Exports - commodities: alumina, aluminum, crude oil, lumber, shrimp and fish, rice, bananas

Exports - partners: Norway 24%, Netherlands 23.8%, United States 21.7%, France 7.3%, Japan 4.9%, United Kingdom (1998 est.)

Imports: US$461.4 million (f.o.b., 1998)

Imports - commodities: capital equipment, petroleum, foodstuffs, cotton, consumer goods

Imports - partners: United States 31.2%, Netherlands 17.3%, Trinidad and Tobago 16.1%, Japan 4.3%, United Kingdom 4%, Brazil (1998)

Debt - external: US$175.6 million (1998 est.)

Economic aid - recipient: Netherlands provided US$37 million for project and program assistance, European Development Fund US$4 million, Belgium US$2 million (1998)

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