An­drea Perez-Sobers

Se­nior Re­porter

an­drea.perez-sobers@guardian.co.tt

The clo­sure of bars and restau­rants over the past few months has sharp­ened con­cerns about the di­rec­tion of the econ­o­my, bring­ing in­to fo­cus slow­er ac­tiv­i­ty in the ser­vices sec­tor and re­newed anx­i­ety about em­ploy­ment, pub­lic fi­nances, and so­cial sta­bil­i­ty.

Econ­o­mist Dr Ralph Hen­ry warn the coun­try no longer has the re­sources to “keep the econ­o­my tick­ing over in the way it might have done be­fore,” as low­er en­er­gy prices and de­clin­ing pro­duc­tion tight­en the State’s fis­cal space.

“The point about it is that the econ­o­my has shrunk and there aren’t the re­sources to keep it tick­ing over in the way it might have done be­fore,” Hen­ry said. He point­ed to the cen­tral role of Gov­ern­ment ex­pen­di­ture in sup­port­ing pub­lic ser­vices and a wide range of eco­nom­ic ac­tiv­i­ty. When those re­sources are con­strained, the ef­fects rip­ple through com­mu­ni­ties.

“If the Gov­ern­ment doesn’t have the re­sources, we will see here and there things slow­ing and clos­ing, and that’s the re­al­i­ty we face,” said Hen­ry.

He told Sun­day Busi­ness Guardian the coun­try must pre­pare it­self for a ma­te­r­i­al ad­just­ment.

“The coun­try as a whole needs to set­tle to the idea that there could be a 20 per cent re­duc­tion in the econ­o­my,” he said, fram­ing the is­sue with­in a glob­al con­text of eco­nom­ic stress. De­vel­op­ments in the Unit­ed States, Cana­da, and else­where, he not­ed, are pro­duc­ing knock-on ef­fects across the glob­al econ­o­my, with T&T not in­su­lat­ed from the fall­out.

Low­er-than-pro­ject­ed en­er­gy prices have com­pound­ed the prob­lem. Bud­get as­sump­tions on oil and gas prices have not held, di­rect­ly af­fect­ing Gov­ern­ment rev­enue and un­der­min­ing planned ex­pen­di­ture. As a re­sult, in­fra­struc­ture main­te­nance, pub­lic pro­grammes and State-sup­port­ed em­ploy­ment ini­tia­tives are un­der strain, with clo­sures and re­struc­tur­ing al­ready un­der way.

State-sup­port­ed work and ris­ing un­em­ploy­ment

For decades, the State has played a cen­tral role in ab­sorb­ing un­em­ploy­ment through tem­po­rary and se­mi-per­ma­nent pro­grammes. From ear­ly ini­tia­tives such as the Press Ar­eas Project to lat­er it­er­a­tions in­clud­ing Spe­cial Works, LIDP, CPEPP and URP, these schemes were de­signed to pro­vide light in­fra­struc­ture work while main­tain­ing so­cial sta­bil­i­ty.

Hen­ry traced this ap­proach back through suc­ces­sive ad­min­is­tra­tions.

“The econ­o­my has been run in a cer­tain way with the Gov­ern­ment be­ing a very im­por­tant play­er and mop­ping up the un­em­ployed, or some­times even the un­em­ploy­able, through these pro­grammes,” he high­light­ed. While tem­po­rary em­ploy­ment re­mains im­por­tant, he cau­tioned that it can­not sub­sti­tute for struc­tur­al trans­for­ma­tion.

The re­cent an­nounce­ment that about 1,000 work­ers would be em­ployed to clean up af­ter Car­ni­val il­lus­trates the point, Hen­ry cit­ing that such ini­tia­tives pro­vide short-term re­lief, but they do not ad­dress the deep­er is­sue of job cre­ation in a chang­ing econ­o­my.

He em­pha­sised that the un­der­ly­ing chal­lenge is struc­tur­al un­em­ploy­ment, which aris­es as economies trans­form and work­ers are dis­placed or un­able to find jobs un­til new sec­tors emerge.

His­tor­i­cal ex­pe­ri­ence of­fers a stark warn­ing, as­the econ­o­mist in­di­cat­ed that dur­ing the mid-1980s col­lapse in oil prices, un­em­ploy­ment rose to about 20 per cent, a fig­ure that on­ly de­clined as Gov­ern­ment fi­nances grad­u­al­ly im­proved and em­ploy­ment pro­grammes were rein­tro­duced un­der dif­fer­ent names.

While the cur­rent sit­u­a­tion is not as se­vere, Hen­ry stressed that the risks are re­al.

“We are not in the same sit­u­a­tion as the mid-1980s; we are not a failed state and per capi­ta in­come is still high­er than in many oth­er coun­tries,” he said, adding, “But we still have to sur­vive, and that re­quires cru­cial in­vest­ments to trig­ger im­prove­ment in the em­ploy­ment sit­u­a­tion.”

He al­so un­der­scored the so­cial di­men­sion. Per­sis­tent­ly high un­em­ploy­ment in vul­ner­a­ble com­mu­ni­ties can gen­er­ate hard­ship and desta­bil­is­ing pres­sures. Main­tain­ing a peace­able so­ci­ety re­quires both shared sac­ri­fice and cred­i­ble plans for trans­for­ma­tion, he ar­gued.

Bars, restau­rants, and the ques­tion of da­ta

Con­cerns about clo­sures in the bars and restau­rants sec­tor have added to the sense of un­ease. Econ­o­mist Dr Jamelia Har­ris urged cau­tion, ar­gu­ing that the true eco­nom­ic im­pact can­not be as­sessed with­out prop­er da­ta.

She iden­ti­fied the need to ex­am­ine long-term trends: how many es­tab­lish­ments typ­i­cal­ly open and close each year, how those pat­terns shift­ed af­ter the pan­dem­ic and whether re­cent clo­sures rep­re­sent a de­vi­a­tion from his­tor­i­cal norms.

With­out that con­text, she ar­gued, it is dif­fi­cult to de­ter­mine whether the cur­rent sit­u­a­tion is ex­cep­tion­al or part of an on­go­ing cy­cle. Har­ris al­so high­light­ed the im­por­tance of un­der­stand­ing who is most af­fect­ed. Clo­sures among larg­er es­tab­lish­ments have more sig­nif­i­cant em­ploy­ment ef­fects, while the vul­ner­a­bil­i­ty of small­er op­er­a­tors de­pends heav­i­ly on mar­gins and their abil­i­ty to ab­sorb ris­ing costs.

She point­ed to the in­ter­ac­tion be­tween da­ta and per­cep­tions. Even in the ab­sence of de­fin­i­tive ev­i­dence of a sec­tor-wide cri­sis, wide­spread con­cern can in­flu­ence be­hav­iour. Firms may de­lay in­vest­ment, con­sumers may re­duce spend­ing and con­fi­dence can erode, am­pli­fy­ing eco­nom­ic weak­ness through what econ­o­mists John May­nard Keynes de­scribed as “an­i­mal spir­its”.

The in­dus­try it­self presents a com­plex pic­ture. Sateesh Moonasar, pres­i­dent of the Bar­keep­ers & Op­er­a­tors As­so­ci­a­tion of Trinidad and To­ba­go, re­ject­ed the claim that tax­a­tion alone ex­plains re­cent clo­sures.

“I can­not ver­i­fy the list of 30 bars that has been cir­cu­lat­ing around so­cial me­dia. I know some clo­sures are re­al, but for about 10 of them, the rea­sons have noth­ing to do with tax­es. There are oth­er is­sues.”

He ac­knowl­edged, how­ev­er, that fis­cal mea­sures are ex­ert­ing pres­sure. In­creas­es in al­co­hol tax­es have strained cash flow, but Moonasar iden­ti­fied gam­ing tax­es as the more sig­nif­i­cant shock. While those tax­es were ad­just­ed in 2017, en­force­ment had been lax un­til re­cent­ly.

“The ma­jor­i­ty of the bar sec­tor has not been pay­ing these gam­ing tax­es since 2017,” he said. “What has changed is en­force­ment. Now the gov­ern­ment is col­lect­ing what is due, and for many op­er­a­tors that comes as a shock.”

An ad­di­tion­al pro­posed in­crease, ex­pect­ed in March, has in­ten­si­fied ne­go­ti­a­tions with the Min­istry of Fi­nance. Moonasar con­firmed on­go­ing dis­cus­sions, not­ing that while le­git­i­mate busi­ness­es must com­ply with tax oblig­a­tions, sud­den en­force­ment com­bined with high­er rates can be desta­bil­is­ing, par­tic­u­lar­ly for op­er­a­tors al­ready weak­ened by the pan­dem­ic.

Im­por­tant­ly, some clo­sures are be­ing fol­lowed by re­open­ings un­der new man­age­ment, sug­gest­ing that parts of the sec­tor re­main com­mer­cial­ly vi­able. That pat­tern com­pli­cates the nar­ra­tive of de­cline and re­in­forces Har­ris’s call for sys­tem­at­ic da­ta col­lec­tion.

En­er­gy lim­its and di­ver­si­fi­ca­tion

At the heart of the cur­rent ad­just­ment lies the en­er­gy sec­tor. Hen­ry de­scribed the down­stream de­vel­op­ment at the Point Lisas In­dus­tri­al Es­tate as a sig­nal suc­cess that gen­er­at­ed for­eign ex­change and Gov­ern­ment rev­enue for half a cen­tu­ry. How­ev­er, de­clin­ing gas and oil avail­abil­i­ty now con­straints out­put, and the coun­try has been un­able to ex­pand that plat­form.

The stalled gas arrange­ments with Venezuela rep­re­sent a ma­jor dis­ap­point­ment. Ex­pec­ta­tions that po­lit­i­cal change there might un­lock ac­cess re­main un­cer­tain. In the mean­time, T&T is de­pen­dent on small­er do­mes­tic finds that can­not de­liv­er a rapid turn­around.

Di­ver­si­fi­ca­tion, there­fore, be­comes un­avoid­able, but Hen­ry warned that it can­not be achieved quick­ly. Agri­cul­ture and food pro­cess­ing of­fer op­por­tu­ni­ties to re­duce the im­port bill and for­eign ex­change de­mand, but suc­cess de­pends on in­vest­ment in hu­man cap­i­tal. He high­light­ed a crit­i­cal con­straint: an es­ti­mat­ed 25 to 30 per cent of the work­force has not com­plet­ed sec­ondary ed­u­ca­tion.

“Knowl­edge is an im­por­tant fac­tor of pro­duc­tion go­ing for­ward,” Hen­ry out­lined, ar­gu­ing that di­ver­si­fi­ca­tion is ul­ti­mate­ly lim­it­ed by what is “in the heads of our peo­ple.” Train­ing, ed­u­ca­tion and up­grad­ing skills must there­fore be cen­tral to any strat­e­gy, even as peo­ple work to sup­port them­selves.

On the ques­tion of the In­ter­na­tion­al Mon­e­tary Fund, Hen­ry be­lieved re­course could be avoid­ed, but on­ly if dif­fi­cult de­ci­sions are tak­en ear­ly. Man­ag­ing ad­just­ment do­mes­ti­cal­ly, he ar­gued, is prefer­able to al­low­ing con­di­tions to de­te­ri­o­rate to the point where ex­ter­nal as­sis­tance be­comes un­avoid­able, par­tic­u­lar­ly giv­en the coun­try’s rel­a­tive­ly high per capi­ta in­come and lim­it­ed ac­cess to con­ces­sion­al fi­nanc­ing.