Home' Trinidad and Tobago Guardian : October 22nd 2015 Contents OCTOBER 22 • 2015 www.guardian.co.tt BUSINESS GUARDIAN
COVER STORY | BG5
Even as Finance Minister Colm Imbert
signalled in his October budget presentation
a return to the 2014 model for distributing
foreign exchange, members of the business
community continue to speak out about the
"challenges," the "crisis" and the "frustra-
tion" concerning the supply of US curren-
cy.President of the Downtown Owners and
Merchants Association (DOMA), Gregory
Aboud, in a telephone interview with the
Business Guardian on Tuesday, said the per-
sistent shortage of US currency is the num-
ber one challenge facing the business com-
munity and that this shortage can result in
the erosion of confidence in T&T s econ-
But during the presentation of the budget,
Minister Imbert had said: "The Central
Bank, in the discharge of its mandate for
the management of the foreign exchange
market, will be requested to re-establish
the foreign exchange distribution system
which existed prior to 2014.
"The Central Bank will also be requested
to clear the backlog of arrears of foreign
exchange demand and ensure that legitimate
demands for foreign exchange are met, as
well as ensure the stability of the exchange
rate. As a government, we are committed
to ensuring an adequate and efficient supply
of foreign exchange to our manufacturers
and importers," Imbert said.
Aboud said there continued to be a lack
of information regarding T&T s true foreign
exchange status and this is resulting in "a
substantial erosion of confidence." He added
that the erosion of confidence doesn t only
affect foreign direct investment, but it makes
any local investment become questionable.
"Foreign exchange can be likened to one
of the key components of any economy
even in cases where other components are
available. The absence of this key component
(foreign exchange) can cause the economic
engine of any country to splutter. If the
cause of our difficulty is the Central Bank s
regime change in distribution that occurred
18 months ago, then we shouldn t see any
difficulty in correcting the situation."
During its October 13, post-budget
forum---held at the Arthur Lok Jack Graduate
School of Business in Mt Hope---Rolph Bal-
gobin, Manufacturers Association president,
had estimated that the "over hang" in
demand for US currency at the local banks
stood at between $200 million and $400
million. Aboud said if the root of the foreign
exchange supply problem is not the Central
Bank s system, there is need to begin the
dialogue about the exchange rate.
"There is no reason for us not to have a
frank and open discusson about our eco-
nomic realities and the options available to
resolve the current predicament. A contin-
uation of the present scarcity is hurting the
economic outlook of our country at a time
when the global economy is in transition
and we should move quickly to bring stability
and certainty back to our economy."
Economist Roger Hosein predicted that
the State may need to turn to the interna-
tional lending agencies if energy prices
remain low and earnings from the energy
sector remain low.
"If energy prices remain low and foreign
exchange earnings from the energy sector
remains depressed amidst buoyant import
demand, the state may need to turn to the
multilateral funding agencies in the future.
All attempts should be made to avoid such
an occurrence, and in this regard we need
to put diversification and extra-regional for-
eign exchange earnings in particular, on the
"frontest of our burners". In this new normal,
it is not, and surely cannot be, business as
A return to the former system for allo-
cating foreign exchange may not entirely
solve the problem especially when it comes
to small exporters, Hosein said.
"Indeed, it is possible that a repeated fail-
ure to meet payments to foreign suppliers
over time may have eroded part of the good-
will-base local entrepreneurs may have gar-
nered, and may also have seen their per unit
costs increase in some cases, as discounts
for payments on time or upfront may have
been eroded. This will take time to repair,
and so we have to observe if a return to the
previous allocation formula by the Central
Bank is sufficient to restore the desired
improvement in the foreign exchange allo-
Overall, he said: "The foreign exchange
problem will not affect foreign direct invest-
ment flows into the T&T economy as much
as the natural gas shortages in this economy
or perhaps the surge in the domestic murder
rate. The inflow of foreign direct investment
is usually from very large foreign firms with
deep pockets earning their revenues outside
"However, a shortage of foreign exchange
may, to some degree, affect investments
abroad by T&T companies. This is a sig-
nificant blow as T&T companies investing
abroad especially in other Caribbean coun-
tries can be an important avenue through
which some of the economic rents made in
T&T can be sowed into these economies,
the profits from which represent direct
investment income inflows for the T&T
The services sector needs to be looked at
to determine whether there was an expan-
sion of it. If there is an expansion of that
sector then, Hosein said, that expansion is,
"associated with an increase in the net
demand for foreign exchange."
Another business group, the T&T Cham-
ber of Industry and Commerce (TTCIC),
said its members are frustrated with the
problems associated with accessing foreign
exchange to meet their needs. The chamber,
in a statement said relationships that have
taken more than four decades to build have
"International suppliers remain confused
when they hear from their local business
partners that they cannot pay their bills on
time. T&T continues to have a strong inter-
national rating, strong import cover, and
yet businesses cannot get access to the nec-
essary currency to meet their commitments."
What is clear, is that members of the
TTCIC have "lost confidence" in the ability
to gain access to the required currency on
a timely basis.
"The allocation/distribution of US dollar
among the banking sector has largely revert-
ed to what existed prior to April 2014. You
would recall that the system was adjusted
in April 2014, and this change can be con-
sidered a material change which would have
"shocked" the system and caused a signif-
icant strain on the traditional banks in meet-
ing their customer requirements.
"As a result of the impact of these
changes, the system was adjusted again in
July 2014, which as we understand, continues
to remain in place today. The current dis-
tribution has the traditional banks receiving
approximately 95 per cent of the US dollars
(distributed to the system)."
If measures are taken to improve the sup-
ply of US currency then foreign direct invest-
ment would not be interferred with, the
chamber said. The business group admitted
that the "challenge" remained being able
to convert $TT to $US on a timely and pre-
Would shopping for fresh produce in a market
versus shopping in a supermarket make much
of a difference when it comes to prices?
Not many professionals have the time to go
from place to place to shop for produce so they
bite the bullet and pay the supermarket price.
With extra packaging around the fresh produce
and the convenience of a supermarket, the con-
sumer would more than likely have to pay more
for their product.
The taste patterns of consumers for imported
produce versus local produce would be another
factor which would increase any consumer s gro-
cery bill. The greater the demand for imported
produce the higher T&T s overall food import
bill would be. This, in turn, would impact on
other aspects of T&T s economy. One area specif-
ically is foreign exchange.
During its post-budget seminar, the T&T Man-
ufacturers Association addressed the issue of
foreign exchange. Economist Dr Ronald
Ramkissoon indicated that the taste patterns of
consumers was contributing to the gobbling up
of foreign exchange in T&T, as he had urged
consumers to buy local.
Competition is expected to increase in the
local food manufacturing sector as consumers
look for substitutes and try to walk away from
luxury goods, all for a good price.
It s clear that in order to cope with food infla-
tion, consumers may demand substitute products.
Luxury goods would have to be omitted from
the grocery list.
Another aspect of food is take-away or fast
food such as doubles where some vendors have
increased to $5.00 saying that they were justified
in the increase because they would have to pay
increased costs for gas.
In the case of the Sunday morning diet of
doubles and pie, would that routine continue or
would consumers see this as a luxury delicacy?
Would doubles become a single given the price
increase meted out by some vendors?
Only time will tell.
Imbert is scheduled to have a mid-term budget
and perhaps a re-think of spending on a national
level might provoke a re-think of spending by
Then there are the other aspects for consumers,
especially consumers who use public transport.
The maxi-taxi fares for the Arima to Port-of-
Spain route remained at $7 but the Chaguanas
to Curepe has increased to $8. How much the
consumer is willing to bear is likely to impact
how much they are willing to boycott certain
brands and discard certain traits in their taste
Continued from page 4 Forex still No 1 issue for
...Shortage hurting country
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