Lead Editor Investigations
asha.javeed@guardian.co.tt
T&T has been experiencing forex challenges for the past 15 years and the issue usually raises its head annually around Christmas time when importers, especially small businesses reliant on commercial banks, struggle to get an adequate amount to meet their needs.
This year, the issue was further exacerbated by banks slashing the amount of forex available for consumers for credit card purchases in the space of one month.
However, one consistent forex spend for the past 20 years has been on new and used vehicles.
This week, Guardian Media Investigations Desk looks at how much of the forex pie that commercial car dealerships have been able to access over the years.
In 2023, T&T spent about US$331 million on the purchase of new vehicles. That works out to 1.5 per cent of the country’s Gross Domestic Product (GDP) and about four per cent of T&T’s annual budget in 2023. In 2023, the total foreign exchange sold by authorised dealers was US$6.445 billion, which means foreign exchange sales, spent for the importation of new car sales, accounted for 5.13 per cent of total sales of foreign exchange.
According to data provided to Guardian Media by the Ministry of Trade and Industries (MTI), the sum spent on vehicle imports was $2,247,641,002—$1,562,406,913 on cars and $685,234,089 classified under diesel goods vehicles. According to data from the Central Bank, in the last 20 years (2003 to 2023) 285,066 new vehicles were sold.
However, there is no monetary value attached to the number of cars sold.
In terms of registration, the Central Bank (CBTT) only has data publicly available from 2013 to 2023 -which shows that 119,990 vehicles were registered. Of that sum, 89,886 were private vehicles.
But to put some value to the numbers, Guardian Media calculated that using an average price of TT$250,000 (given that some vehicles range from the lower cost roll on/roll off to the luxury cost which can go up to one million depending on customisation) that for 285,066 cars, the average amount spend would be over $71 billion—$71,266,500,000. Given that T&T imports all cars through new and used car dealerships, and using a rate of TT$6.75 to US$1, that sum would conservatively work out to over US$10 billion—US$10,558,000,000 of the forex pie on vehicles alone.
That cost would be exclusive of parts and accessories over the years. In many instances, Guardian Media understands that credit cards are used to purchase maintenance parts.
Only the country’s car dealerships (there are seven new car dealerships and dozens of used car dealerships), the banks, and the Central Bank would have the exact forex quantity spent on importing cars into the country. But given the volume of forex needed for vehicle purchases and banking issues of the source of funds required for international banking, Guardian Media understands the forex is expended from the Bank’s allocation.
“Given the amount of forex being sold by the CBTT monthly, and the number of vehicles being registered, it logical to assume that some of that is being spent on vehicles,” one banker explained to Guardian Media.
According to the Observatory of Economic Complexity, an international data visualisation website that compiles 50 years of international trade data including subnational level data, Trinidad and Tobago imported more than US$174 million worth of cars in 2021. It found that most of the cars were imported from Japan, followed by Thailand, South Korea, India and Germany.
Guardian Media understands that instead of getting forex at the banks, used car dealers were using their credit cards to purchase foreign used cars.
Cars good for
bank’s business
Vehicles remain good business for banks—the only indication of what it costs consumers is the loan portfolio amounts registered by the commercial banks for motor vehicle sales.
According to CBTT’s July 2024 report, the value of commercial loans to consumers was $41.730 billion. From that sum, $4.7 billion are loans on motor vehicles.
In 2022, loans on motor vehicles averaged about $3.7 billion but increased in 2023 to end the year at $4,356.8 billion. In March 2024, motor vehicle loans increased to $4.356 billion and in June 2024 was $4,740 billion.
The data for September 2024 has not yet been registered to the CBTT.
In the last ten years, the car series moved from PDC to PEH, with each series registering 9,999 cars except for three letters—i,q and v in the alphabet.
The country now has more than 1.1 million registered cars on the road—while the present system registers new cars, it does not de-register old cars so that they are all registered in the system. There is a quota of 15,000 foreign used cars which can be imported into the country annually.
“New vehicles are a huge drain on our forex and the car loans keep the banks in business. What is worse is that we have new vehicles coming in congesting the roads and there is no policy in place to de-register older vehicles. So, from a ratio perspective, it’s almost 1:1, one car per citizen. There should be policy issues to address this, even a moratorium on new cars for the next four years. That would ease the forex going to vehicles. And in the meantime, we can address our congestion issues” one businessman told Guardian Media.
According to data from the Central Statistical Office (CSO):
1. In 2016, T&T spent $3,483,968,102 on road vehicles,
2. $3,214,269,416 in 2017,
3. $2,753,099,076 in 2018 and
4. $2,376,773,602 in 2019 for the period January-September.
5. In 2016, 16,203 new cars were sold, in 2017, it reduced to 14,153, in 2018 it was 13,815, and in 2019, 13,420.
6. During the pandemic years, fewer cars were registered. In 2020, 9,756 cars were registered, in 2021, 8,934 cars were registered and in 2022, 9,737 cars were registered. It then spiked in 2023 to 11,463.
Between 2020 and 2022; 9,047 vehicles were sold commercially, while 18,850 were sold privately.
7. According to the CSO, between 2020 and 2022, the country spent more than TT$113 billion (US$16.7 billion) in imports. Of that figure, approximately 5.4 per cent, TT$6.2 billion (US$920 million), was spent on vehicles and vehicular parts.
Forex, the availability and dependability of it, has been a thorny issue for businesses over the years.
To this end, the Central Bank intervenes and sells about US$100 million “at minimum” a month to commercial banks.
Last week, Central Bank Governor Dr Alvin Hilaire said the imbalance in this country’s foreign exchange market, is neither new nor has it been exacerbated.
“What we have been doing to keep calm in the market is to sell approximately about US$50 million every two weeks which is not trivial. This year, we sold over US$1 billion on the market. We also supplement that by providing a liquidity guarantee facility to the commercial banks. So, in other words, when the banks are extending themselves a lot in trading, they can get a special amount, within the limits of the Central Bank. Last year, it was about US$92 million that banks got extra intervention from the Central Bank and this year, so far, it is about US$75 million,” the governor said.
In the July 2024 Economic Bulletin, CBTT said that the Bank’s sales of foreign exchange to authorised dealers indirectly removed $5,017.7 million from the system, $85.0 million higher when compared to the year-earlier period.
“Trinidad and Tobago’s gross official reserves declined to US$5,741.6 million (equivalent to 8.1 months of import cover) at the end of July 2024. The change in gross official reserves indicates that the external accounts registered a deficit of US$516.3 million in the first seven months of 2024,” it said.
Cars on economy
The sales of cars and construction are among two indicators that the Central Bank of Trinidad and Tobago uses to gauge the economy.
In December 2015, former Central Bank Governor Jwala Rambarran said the retail and distribution sector consumed US$4.5 billion or one-third of the foreign exchange sold over the past three years.
In a statement, which earned him the ire of the business community for releasing what they identified as commercially sensitive and confidential information, he listed the consumption of forex used over three years by new car dealers—Southern Sales: US$275 million, Massy Motors: US$251 million, Toyota: US$245 million, Diamond Motors: US$59 million and Lifestyle Motors: US$36 million.
In January 2018, Finance Minister Colm Imbert said US$3 billion in foreign exchange was spent on credit card purchases over the last three years with one of the largest consumers of foreign exchange being the importation of motor cars.
In Budget 2021, Imbert in outlining the forex haemorrhage on private motor cars had said that T&T spends $2.5 billion per year or US$400 million per year importing an average of 25,000 motor vehicles.
Public officers benefit from exemptions on luxury vehicles which cost the country more forex.
Four years ago, Prime Minister Dr Keith Rowley said he would have the Cabinet consider putting a cap on the average exemption on motor vehicles for Members of Parliament (MPs) at $350,000.
“In terms of exemptions on motor vehicles, I too am concerned because if those exemptions are being used for the purpose for which they are meant, I have no problem. But if they are being used to facilitate other people in the way that they have been, then they require to be looked at,” Dr Rowley said in October 2020.
During that time, ordinary citizens spent approximately $665 million on motor vehicle taxes and duties—about $234 million in motor vehicle taxes and duties in 2021, about $231 million in 2022 and another $266.6 million (projected) in motor vehicle taxes and duties in 2023, according to 2023 budget documents.
Apart from the cost price of a vehicle, citizens have to pay Value Added Tax (VAT) at 12.5 per cent and motor vehicle tax is charged based on engine capacity—with larger engines attracting a higher tax, while import duty depends on the vehicle’s engine capacity and fuel type.
On July 10, at a COVID-19 press conference, Dr Rowley responded that despite his statement in Parliament to review the matter, he had sought legal advice: “I sought legal advice and the legal advice was, these are people’s terms of engagement and you have no authority to interfere with it.”
In the furore at the time, Rowley admitted that he too purchased a vehicle, but did not disclose the type and the tax exemption, adding that he drives himself around to not to lose the skill.
“I accept the terms of my engagement and if it disturbs some of the people, I am sorry, but I don’t think it is fair for somebody to tell me what to do with what I earn when you have no interest in talking to those who have stolen public money,” he had said.
Rowley noted that the tax exemption is part of the terms of engagement of thousands of different people at different levels.
All Members of Parliament are exempt from paying motor vehicle tax, customs duties and VAT on used or new vehicles imported every two years under the Salaries Review Committee. However, the vehicle is not supposed to be sold during the two years or half of the taxes are due to be repaid.
