Home' Trinidad and Tobago Guardian : December 17th 2015 Contents DECEMBER 17 • 2015 www.guardian.co.tt BUSINESS GUARDIAN
NEWS | BG7
Exports from Latin America
and the Caribbean will drop
about 14 per cent in 2015
due to a steep decline in
prices and weak demand for
the region s main exports
from key trading partners, according to a
new report from the Inter-American Devel-
opment Bank (IDB).
The IDB s Latin American and Caribbean
Trade Trend Estimates 2016 annual report
notes that exports dropped for the third
year in a row, with the decline intensifying
and spreading to virtually all nations in the
region. Only two countries posted positive,
albeit moderate growth, while in most of
the economies the drop in overseas ship-
ments exceeded that of the rest of the world.
"This trade contraction, which is the
worst since the 2009 collapse, is a wake-
up call on the need to implement export
diversification policies," said Paolo Giordano,
principal economist of the bank s integration
and trade sector and co-ordinator of the
Oil-exporting countries were affected the
most by the sharp drop in petroleum prices.
Venezuela and Colombia posted the biggest
contraction rates, followed by Bolivia,
Ecuador, and T&T.
El Salvador and Guatemala were the only
two countries where exports rose, due to a
strong increase in their sugar shipments to
The report includes detailed data from
24 countries in the region. For the first time,
it includes data from six Caribbean nations:
T&T, Barbados, Belize, Guyana, Jamaica and
The region s trade performance reflects
a sharp drop in the prices of major com-
modities. Prices of basic products such as
soybeans, sugar and coffee declined between
20-25 per cent in 2015. Prices of energy
goods such as oil, and minerals and metals,
including iron ore, fell by about 50 per cent.
The trade decline also stems from a weak-
ening in demand from the region s main
For the region as a whole, the worst
declines occurred in trade with Asia (exclud-
ing China), which fell 19 per cent, with the
European Union (-18 per cent), and in
intraregional flows (-19 per cent).
Exports to China plunged 14 per cent,
while expectations of a rebound of exports
to the United States were neutralized mostly
by a drop in the value of oil, which resulted
in sales to that country shrinking by seven
The report notes that economies of the
Caribbean and South America were the
most affected over the course of the year,
with declines in exports to virtually all their
main destinations, while Mexico and Central
America were mostly hit from a drop in
sales to the US market.
The growth perspectives of regional
exports in 2016 feature some risks: there
are no signs of change in price trends for
commodities markets, and a slowdown in
economic activity is expected to continue
in China and in Latin America.
Stronger demand from the United States,
however, could lend dynamism to exports,
particularly those of Mexico and Central
IDB urges region to step up
trade as exports decline
in TT$ real value
In an overview of the current economic climate,
chief editor, business at the T&T Guardian, Anthony
Wilson, said in the last year the country has expe-
rienced a revenue shock as a result of the collapse
of export prices and this has caused a sharp decline
in foreign exchange earnings.
He said, despite the decline of tax revenue and
foreign exchange earnings, the demand for foreign
exchange has remained at a high level.
"The Central Bank is using the interest rates
mechanism as a means of dealing with this demand
and, operationally, it is opting to ration the availability
of this precious resource by making interventions
in the market that are unpredictable," he said in his
contribution to an armchair discussion.
Senior economist and co-ordinator of the TEDU,
Dr Roger Hosein, former senior economist at Repub-
lic Bank Dr Ronald Ramkissoon and former finance
minister Larry Howai were also on the panel, which
was chaired by Prof Patrick Watson, director of
Wilson cited two main challenges for the T&T
economy: high demand for foreign exchange and
a contracting economy.
"So, the real issue is how do we treat with these
two issues at the same time? Is there a policy that
can impact the demand for foreign exchange, while
treating with a contracting economy?
"In my view, one of the few policy options that
can do this quickly and equitably is if the TT dollar
were to find its true level, which is not where it is
He said despite the disagreement between Central
Bank Governor Jwala Rambarran and Minister of
Finance Colm Imbert, one of the things they seemed
to agree on is the need for exchange rate stability.
However, he said, this is only achievable in a perfect
"But we do not live in a perfect world nor do we
live in a stable world. We live in a volatile world
where many countries have chosen exchange rate
flexibility as one form of adjustment to the external
environment," Wilson said.
Parliamentary approval to spend $63 billion for
the 2016 fiscal year is a signal by Finance Minister
Colm Imbert that he wants to spend enough money
to prevent the contraction of the economy from
lasting too long and having too much of a negative
impact on the economy.
On the flip side, although the Central Bank wants
exchange rate stability, it also wants to increase
interest rates and reduce the demand for foreign
"If the government were to spend $63 billion,
the demand will continue at its current pace, which
will lead to a decline in foreign reserves. It strikes
me that the interest rates mechanism is not having
an impact," Wilson said.
• In 2015, the macroeconomic indicators were far
better than the economy PP inherited in 2010;
• T&T s economic fundamentals were stronger;
• Unemployment remained historically low at 3.6
• End of December 2014, foreign reserves stood
at US$11.3 billion (TT$73 billion);
• Import cover climbed from 10.4 months in 2012
to approximately 12.7 months in 2014;
• The HSF increased by over US$2 billion since
2010 to US$5.5 billion;
• New investment in the energy sector projected
in 2015 to be well over US$2 billion (TT$13 billion);
• Inflation remained in single digits down from
double digits in 2010;
• Debt remained comparatively low with public
sector debt to GDP at approximately 40.6 per cent.
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