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non forex earners
This is an open letter to Minister of Finance
Colm Imbert, TTMA chamber president Chris-
topher Alcazar and others who have promoted
I am aware there is a shortage and this must
be dealt with. But we must understand that
the manufacturing and other foreign exchange
earners cannot stand alone without major in-
put from non-foreign exchange earners.
The number one forex earners in this coun-
try are in the energy sector. That sector cannot
exist without the massive input from the oil
services industry. These services players have
to import massive amounts of equipment to
keep energy going while not directly earning
The multiple plants at Point Lisas are gen-
erally forex earners. But there is also a massive
industry of service providers to keep them
The providers of construction and oth-
er industrial equipment and services to the
manufacturing sector are themselves not forex
earners but, without whom, that sector will
grind to a halt.
The construction industry, while not an fo-
rex earner, is the largest employer of labour in
this country. Nothing can be constructed or
built without the supply of massive amounts
of equipment on rental or outright sale to this
This brings me to our young and vibrant
TTMA president who has brought this issue
to the front burner; bravo!
Vemco Ltd, of which he is a senior execu-
tive, is a manufacturer and also an importer of
various food items, wines etc. His allocations
may very well go in to raw material and wines.
His company also owns a variety of foreign
fast-food franchises. There are vast monthly
franchise fees to be submitted to the US in
US$. This is a complex system to manage. Both
Chavez and Maduro have destroyed Venezuela
trying to implement same. The president of
the largest furniture retailers in this country
also complained about a shortage of forex.
This and the other large foreign warehouse
distributor use huge amounts of forex in a
Imbert, you have a tough call to manage.
Note: we cannot go back to the future.
ease the pain
Our Minister of Finance, Colm Imbert, has recently
announced that he is looking for ways to ensure that
the manufacturing sector has access to sufficient hard
currency to pay for their raw material supplies.
This has resulted in the T&T Chamber and DOMA
issuing releases, condemning such a move and call-
ing for the Finance Minister to truly float the dollar
instead, and let the laws of demand and supply de-
termine the true exchange rate, and therefore let the
exchange rate determine the demand.
I would like to completely agree with the Chamber
and DOMA, in that the correct move would be to let
the dollar truly find its own level.
Politicians however, sometimes have differing
concepts, and attempt to restrict inflation and the
resultant hardship on the venerable in society by ar-
tificial economic means. If therefore, the Govern-
ment continues to support the dollar, then they are
interfering with the laws of demand and supply, and
the result is increased demand due to an artificially
low exchange cost.
Local manufacturers continue to generate employ-
ment in this fragile economy. Local manufacturers
generate export earnings that are vital for the econ-
omy. Even the manufacturers who only manufacture
for local consumption positively affect the balance
of payments by reducing the import bill. One of the
pillars of diversification is local manufacturing. When
manufacturers---especially small---have to compete
in a (supposedly) open market, against the countries
credit card bill and the big boys---the Massy's, McAL's,
Bryden's, PriceSmart's--- for forex the result is obvi-
ous; the small manufacturer suffers.
When the manufacturer cannot access forex to
settle his suppliers, he closes down. Simple.
If the Minister of Finance does not intend to fully
float the dollar, then he has a responsibility to the
Manufacturing sector, to ensure that Manufacturers
are able to pay for their Bona Fide raw materials.
Like the chamber and DOMA, I understand that this
can result in mismanagement, however, the Govern-
ment has two state companies---namely Eximbank
ExporTT is currently vested in the task of certi-
fying that local manufactured goods meet the local
content for Caricom.
ExporTT can be vested with the task of certifying
manufacturers bona fide suppliers. This certificate,
along with the manufacturers C-82 when the raw
materials are imported, can be presented to Eximbank.
Let Eximbank then settle the invoice out of the forex
intended for manufacturers.
is the solution
According to the newspapers, the current
Minister of Finance, Colm Imbert and Dr
Surujrattan Rambachan, a minister in the
previous government, seem to agree there is
a foreign exchange crunch. They also sug-
gest that the primary way to deal with it is
by rationing the scarce resource rather by
allowing the exchange rate to depreciate
If I am correct then I suggest there is an
alternative way that can be more effective
in achieving a number of goals all at the
The fact that the demand for foreign
exchange is outstripping the supply---and
that this is likely to continue for several
years---indicates that the current exchange
rate regime is inappropriate. Central Bank
policy then must seek to adjust the rate in
order to bring about certain changes in
behaviour by individuals and companies
which will curb import demand and pro-
mote exports. This can be done through a
change in relative prices ie by making the
price of imports more expensive through a
depreciation of the exchange rate.
An appropriately depreciated exchange
(i) discourage imports
(ii) help to stimulate domestic substitutes
(think local farmers and manufacturers etc)
and(iii) encourage exports.
In the process, the consumer will choose
to buy less of the now higher priced imports
and new and existing exporters would be
incentivised to promote exports. While
this is a simplified explanation of what I
am contending, it addresses the main ar-
The path of rationing forex as the main
instrument of control which both gentle-
men seem to prefer is one that is fraught
with major challenges including bureau-
cratic headaches and even corruption. It
was tried in the 1980s only to be eventually
surrendered in 1993 in favour of a largely
successful managed float.
Further, rationing might necessitate
additional tariffs on imported goods and
services so as to curb imports while export-
ers may also wish additional tax and other
incentives. The bureaucracy to monitoring
these is costly, complicated and hardly ever
work to accomplish the desired goals.
One well understands that prices can rise
in the short run but that needs to happen
if both gentlemen want to encourage less
expenditure on imports and to give farmers,
manufacturers, traders, and service pro-
viders a better chance against imported
goods and services and to begin exporting
more. To be sure, either route, rationing or
depreciating the TT dollar would neces-
sitate other appropriate policy positions
along with a marked reduction in the cost
of doing business.
Diversification into additional sources of
foreign exchange must be the ultimate goal.
The vulnerable certainly needs some
cushion from rising prices. This can, and
should be done, through targeted social
measures, some of which already exist.
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