Suriname-Netherlands row downplays economic progress

Suriname-Netherlands row downplays economic progress

The Surinamese government recently partnered with Spanish energy firm CEPSA and became a full voting member of the Caribbean Development Bank. However, the Dutch denouncement of the Surinamese executive branch shows that this country may suffer from a lack of presidential legitimacy, which could inhibit investment.

Dutch legislators requested to arrest Surinamese President Desi Bouterse on cocaine trafficking charges while he visited South Africa last week to pay his respects to the late Nelson Mandela.

Although sovereign immunity prevented an arrest of Bouterse, the denouncement alone raises serious questions about the future business climate of Suriname. Furthermore, the friction between Bouterse and the Dutch legislature indicates that until Suriname implements structural constitutional change, it will face pressure from a strong European Union member and may suffer economically because of a lack of international legitimacy.

Suriname is a fast-growing economy dependent on increased foreign investment. The past two decades have shown that the liberalization of global trade has allowed countries with economic profiles such as that of Suriname to join both multilateral and bilateral trade agreements. The institutionalization of trade liberalization, which is embodied by the World Trade Organization (WTO), also brings to light the role of reputational factors and international political legitimacy in increasing trade and attracting investment.

If Suriname is going to continue to grow economically, it will have to eventually sign on to deeper investment treaties with the EU, the same way other Latin American governments are doing. The Netherlands may prove to be a roadblock with many anti-Bouterse legislators in parliament. The EU is particularly important to the continued growth of the Surinamese economy because it buys most of Suriname’s exports—25% of exports end up in the EU. Bouterse should care about the Dutch legislature. If the situation worsens, the Netherlands can leverage its influence in the European Parliament and European Commission to dissuade the EU from trading with Suriname.

Although it might seem that Suriname is in a precarious economic and political situation in the international arena, note that the country is still growing at 4% annually, according to the World Development Indicators. It is clear that as of now, Dutch denouncements of the president have not been successful in deterring investment in Suriname despite its poor rule of law and human rights record. A reason for this may be that investors are primarily interested in investing in a country with high state capacity and an organized central government.

On the surface, Suriname fits the bill of a country with an integrated economy and relatively attractive markets despite having very weak civil liberties, high levels of corruption and low regulatory efficiency. This month alone, Suriname’s state oil company—Staatsolie—sold 25% of its shares in an offshore oil block to a local subsidiary of the Spanish energy firm CEPSA. This investment came after Staatsolie signed a production-sharing contract with Apache, a US oil company worth $230 million. Suriname has also gained recent investment opportunities beyond the natural resource sector. On December 13th, the Caribbean Development Bank (CDB) announced that Suriname would join as a full member and that the bank was impressed by Suriname’s sound economy and its tight fiscal budget, as well as the country’s low debt.

Suriname has received significant foreign investment for a country of just 500,000 people. One reason for this is that it has a lot of catching-up to do to: there are opportunities in the services sector and basic infrastructure development (e.g., roads and water distribution systems). The country’s growth and constant increase in capital inflows can also be explained by its valued natural resources, including oil.

However, Suriname’s ex-military and controversial president might pose a threat to continued economic growth if powerful nations such as the Netherlands criticize the regime’s leader for human rights abuse and drug trafficking. Shaming and naming might not always prove to be a successful strategy, but it could be incredibly effective when a leading EU member is the one openly criticizing the legitimacy of the regime. As long as Bouterse is in power, there will be countries such as the Netherlands that believe that the Surinamese economy is run by a crook.

Categories: Latin America, Politics

About Author

Daniel Lemaitre

Daniel is a GRI Senior Analyst. He has worked in policy research centered on the political economy of the Andean region in the public, NGO, and private sectors. Daniel holds an MSc in Comparative Political Economy from the London School of Economics, concentrating on Latin American markets.