Raphael John-Lall

T&T is not the on­ly Caribbean coun­try where ob­tain­ing for­eign ex­change is a prob­lem, ac­cord­ing to ex­ec­u­tive di­rec­tor, Caribbean Ex­port De­vel­op­ment Agency, Dr Damie Sinanan.

He in­di­cat­ed that this is a shared prob­lem among the small de­vel­op­ing Caribbean coun­tries.

“I think we can all agree that ac­cess to for­eign ex­change is re­al­ly the lifeblood of small, open economies such as those in the Caribbean re­gion. It re­al­ly spurs our eco­nom­ic ac­tiv­i­ty and re­source shar­ing and scarci­ty of for­eign ex­change or in­ef­fi­cient us­age of for­eign ex­change can re­al­ly be detri­men­tal to the eco­nom­ic de­vel­op­ment of the Caribbean re­gion.

“For­eign ex­change is large­ly earned by a num­ber of dif­fer­ent mech­a­nisms de­pend­ing on where we are talk­ing about. Re­mem­ber, we are talk­ing about many dif­fer­ent ter­ri­to­ries with many dif­fer­ent en­gines of growth. T&T and Guyana, for ex­am­ple, earn most of their for­eign ex­change pri­mar­i­ly through the hy­dro­car­bon sec­tor where­as many of the small­er is­lands, their pri­ma­ry source of for­eign ex­change is tourism, vis­i­tor ar­rivals, re­mit­tances and in some for­eign di­rect in­vest­ment,” he said.

Sinanan spoke at a we­bi­nar on Fri­day night host­ed by the Uni­ver­si­ty of the West In­dies’ (UWI) Trade and Eco­nom­ic De­vel­op­ment Unit en­ti­tled “Trade and Forex Flows in the Caribbean.”

He al­so said that over the years, for­eign ex­change earn­ings in the re­gion have been heav­i­ly im­pact­ed by ex­ter­nal shocks.

“We all know that the Caribbean re­gion is ex­treme­ly vul­ner­a­ble to ex­ter­nal shocks and that re­al­ly im­pacts our abil­i­ty to earn for­eign ex­change. The most re­cent be­ing the COVID-19 pan­dem­ic which un­for­tu­nate­ly re­sult­ed in many coun­tries’ eco­nom­ic ac­tiv­i­ty slow­ing down, ex­ports slowed down and a lot of mon­ey was spent on health-re­lat­ed ac­tiv­i­ties and try­ing to keep eco­nom­ic ac­tiv­i­ty go­ing. So that re­al­ly im­pact­ed on for­eign ex­change with­in the Caribbean re­gion. We are al­so im­pact­ed by cli­mate shocks, most re­cent­ly Hur­ri­cane Beryl. It dev­ast­ed many of the small­er is­lands par­tic­u­lar­ly Grena­da, Ja­maica and that re­al­ly im­pact­ed on for­eign ex­change as a lot of mon­ey had to be spent on re­cov­ery ac­tiv­i­ty.”

On a more pos­i­tive note, he said post-pan­dem­ic many Caribbean is­lands saw a re­bound in for­eign ex­change earn­ings.

“That is pro­pelled by strong tourism per­for­mance. We re­al­ly saw a strong bounce back in the tourism sec­tor with some coun­tries see­ing record vis­i­tor ar­rivals. Al­so, we saw sig­nif­i­cant in­flows in some coun­tries in terms of in­vest­ment par­tic­u­lar­ly Cit­i­zen­ship by In­vest­ment pro­grammes. In An­tigua and Bar­bu­da, they saw in 2023 tourism re­ceipts ris­ing by 10 per cent over US$1.5 mil­lion. This is dri­ven by a strong ser­vices sec­tor as well.

“In St. Kitts and Nevis, vis­i­tor spend­ing from tourists in­creased by over 20 per cent. That is one bil­lion East­ern Caribbean (EC) dol­lars. Jam­i­ca al­so saw sig­nif­i­cant for­eign ex­change earn­ings. In March 2023, their cur­rent ac­count was in sur­plus with a record sur­plus of over US$170 mil­lion, which was dri­ven by in­creased tourist ex­pen­di­ture which was stim­u­lat­ed by over 100 per­cent in­crease in ar­rivals.”

He point­ed out that in the Caribbean re­gion, there is a lack of in­vest­ment in­fra­struc­ture to at­tract for­eign di­rect in­vest­ment.

“This in­cludes un­der­de­vel­oped cap­i­tal mar­kets. As in­vestors, when cap­i­tal comes in­to the re­gion there is not a buoy­ant cap­i­tal mar­ket that can see that sort of re­turn and that sort of in­creased earn­ings for for­eign ex­change. There is al­so a damp­en­ing of in­vestor con­fi­dence. We sell the re­gion as a very in­vestor friend­ly en­vi­ron­ment and that is true as we have a sta­ble po­lit­i­cal en­vi­ron­ment, we do have ed­u­cat­ed work­forces and we do have com­pet­i­tive ad­van­tages when it comes to at­tract­ing for­eign di­rect in­vest­ment but in­vest­ment con­fi­dence is low as we have very risk averse in­vestors in the Caribbean due to ex­ter­nal shocks, due to cli­mate ef­fects and due to weak­ened cap­i­tal mar­kets. Those fac­tors cause in­vestor con­fi­dence to be a bit low.”

He al­so said the re­gion’s im­port bill is very high for items like food and this ab­sorbs a lot of the for­eign ex­change that is gen­er­at­ed.

“We al­so spend a lot of for­eign ex­change im­port­ing en­er­gy and that is a ma­jor source of for­eign ex­change out­flows and we have to look at poli­cies to di­ver­si­fy our economies away from those nar­row prod­ucts and mar­kets.”

He al­so sug­gest­ed the for­ma­tion of a re­gion­al stock ex­change to help al­le­vi­ate some of the eco­nom­ic chal­lenges.

“That is some­thing that we have been de­bat­ing a lit­tle while and it is some­thing that I cer­tain­ly be­lieve in. We have to look at in­cen­tives to get in­vestors in­to the re­gion be­cause we are com­pet­ing with all oth­er ter­ri­to­ries for that in­vest­ment and there are in­vestors from the Mid­dle East, North Amer­i­ca, Eu­rope, the Far East that are will­ing to in­vest in the re­gion but we have to make sure that our re­gion is com­pet­i­tive.”

Gen­er­at­ing for­eign ex­change

A for­mer gov­ern­ment min­is­ter and al­so a for­mer UWI prin­ci­pal, Dr Bhoe Tewarie, who al­so spoke at the we­bi­nar, said that T&T must look at the large Asian mar­kets to help di­ver­si­fy its econ­o­my.

“We could be­gin to strate­gi­cal­ly look at al­so Chi­na. They have a very large mar­ket and if you ex­port a mil­lion of any­thing there, they will not even flinch with that, it is not go­ing to af­fect their mar­ket at all but it will make a big dif­fer­ence to you. The same thing with In­dia, you ex­port a mil­lion of some­thing in there and it does not make any dif­fer­ence to them but it makes a dif­fer­ence to you. I think that we have to be more re­source­ful, more cre­ative, more en­tre­pre­neur­ial, more de­vel­op­men­tal and un­der­stand the con­cept of sus­tain­abil­i­ty and more than that we need to un­der­stand that once you are deal­ing with busi­ness it is about risk and you have to take the risk to do well.”

Tewarie al­so said that the state in T&T is too large and not ef­fi­cient and it must make way for a greater role for the pri­vate sec­tor in the econ­o­my.

“The pri­vate sec­tor here is very tra­di­tion­al, which is why we are where we are. You have to take the pri­vate sec­tor as it is and see how you can evolve that but you al­so have to cre­ate the con­di­tions for dif­fer­ent types of in­vest­ments that will get us to where we need to go in terms of the val­ue chain, in terms of ex­ports and tech­nol­o­gy and that is where the Gov­ern­ment can come in but the en­tre­pre­neur­ship must come from peo­ple whether it is lo­cal or for­eign or joint ven­ture.”

He al­so ad­vised that the busi­ness sec­tor in T&T needs to change its busi­ness mod­el from be­ing for­eign ex­change de­pen­dent to ac­tu­al­ly gen­er­at­ing hard cur­ren­cy.

“There is the struc­ture of the busi­ness econ­o­my which is dif­fer­ent from the macro econ­o­my. Most busi­ness­es out­side of the en­er­gy sec­tor are forex de­pen­dent whether they are con­glom­er­ates like Massy or whether they are small and medi­um busi­ness­es in the re­tail sec­tor like fam­i­ly busi­ness­es. They are forex de­pen­dent. So, our busi­ness­es by and large are con­sumers of forex and it makes sense for them to in­vest in forex earn­ing do­mains. That is why they are go­ing out­side now to in­vest as they can­not get any for­eign ex­change from any­thing they sell here. In T&T, not enough busi­ness­es are earn­ing for­eign ex­change to sup­port those busi­ness­es that do not earn for­eign ex­change.”