Island in an Oil Boom

Part 1, 2, 3, 4

Jeffrey Sachs says he's worried about the Joint Authority's lack of openness.

"I'm not at all satisfied," says Sachs. "In fact, I'm on my way to Nigeria. I'm going to be speaking with the president of Nigeria, I'm going to be speaking with the finance minister, because the Nigerians at the senior levels want to crack down on corruption."

After several days of meetings with government officials in Sao Tome, Sachs dines with President de Menezes. The men celebrate their new plan on how to use oil revenue to develop the country. Sachs promises to press the World Bank to boost aid to Sao Tome at least until the oil revenue begins to flow. The country's future looks promising.

But Sachs doesn't forget to give what he calls his tough love speech to the president.

"Let's get to a plan," he says, "and then you're going to have my effort to help get it funded. But when we get the money for it, then you've got to do it. Unfortunately, the first time we ask for something big, the money comes and then it disappears, we're in trouble. So every time that something is promised it has to be fulfilled."

At the end of December, Sao Tome's parliament passed the oil revenue law that Sachs and his team helped write. But already there are signs that development projects are going awry. Heavy rains recently flooded the hotel and much of the capital. Officials suspect that companies hired to repair public drains cut corners.

Back at the Miramar Hotel, owner Manfred Galland remains skeptical. He believes that in spite of all the international attention, or perhaps because of it, Sao Tome's oil story will not end well.

"Unfortunately," says Galland, "I have experience on the African continent with what oil does to a country and I don't think this will be an exception. It will spoil it. I am sure of that."

That fatalism is shared by many international donors. The World Bank has pledged only a small amount of the aid Sachs sought for Sao Tome. And what money it got can only be spent on what the bank euphemistically calls 'capacity building'. That basically means creating checks and balances in the government to try to ensure that when the oil money comes it will not be squandered.

Clearly the Bank and other donors are not yet supporting Sachs' big push plan in Sao Tome as well as elsewhere. The arguments for and against his plan go beyond oil economies. The larger question is whether a massive inflow of cash - from oil or international aid - can transform a poor country or whether the money is more likely to make things worse.

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