Equatorial Guinea - Overview of economy

The economic mismanagement of the rule of Francisco Macias Nguema left the economy of Equatorial Guinea in very sad shape by the 1990s. Commercial cocoa production was essentially destroyed and most families in rural areas survived through subsistence farming and through the relatively high levels of foreign aid. But many charities and international lending agencies

have ceased providing new funds to the country due to the high level of corruption. With little manufacturing, forestry has been one of the few promising industries which thrived in the early and mid-1990s.

The country is rich in natural resources, specifically oil, gold, titanium, iron ore, manganese, and uranium, although the country has been slow to exploit them. Specifically, the country has only just begun to produce and export oil after finding enormous deposits off Bioko Island in 1991. These oil deposits have attracted a number of multinational corporations —the first significant foreign investments into the country.

Although the discovery of oil can be a blessing to a developing country, the government has recognized some of the problems associated with allowing the economy to be based on oil production and hosted a United Nations Conference concerning the proper governance of such an economy. Besides the obvious potential problems of environmental damage and the difficulty of negotiating with powerful multinational corporations, a number of countries in Africa have recognized the political and economic problems associated with natural resource dependent economies. Economically, reliance on oil makes the economy very susceptible to the extremely volatile oil prices and may lead to the lack of incentive to develop other aspects of the economy such as manufacturing and services. Politically, the profits from natural resources can inspire new levels of corruption in the government, both in filling the pockets of politicians and supporters and in helping the ruling elite to maintain power. The issue of corruption is especially striking in Equatorial Guinea. In 1993 the IMF and World Bank suspended a number of loans and grants due to the discovery of high levels of corruption. Although some of these loans have been reinstated in recent years, levels of corruption have not improved dramatically.