Home' Trinidad and Tobago Guardian : April 6th 2017 Contents APRIL 6 • 2017 guardian.co.tt BUSINESS GUARDIAN
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shipments by 20%
Sincebeingouted in December
2015 by the former governor
of the Central Bank as the
single largest user of foreign
exchange in the country,
PriceSmart's attempts to
access "hard currency" to
keep the shelves of its four
Trinidad membership clubs stocked have been
an uphill battle.
The company, headquartered in San Die-
go, California---and with clubs operating in
13 Caribbean and Central American terri-
tories---noted in its most recent January 5,
2017 "10-Q" (quarterly) US Securities and
Exchange Commission filing that it has been
experiencing particularly rough headwinds in
the T&T market.
"From time to time we have experienced
a lack of availability of US dollars in certain
markets (US dollar illiquidity). This impedes
our ability to convert local currencies obtained
through warehouse sales into US dollars to
settle the US dollar liabilities associated with
our imported products.
"In the second half of fiscal year 2016 and
continuing into fiscal year 2017, we are experi-
encing this situation in Trinidad," PriceSmart
said in the filing.
The filing adds that the company is "lim-
ited" in its ability to convert TT dollars to US
dollars and, as a result, was becoming increas-
ingly more vulnerable to any devaluation risks
associated with the TT dollar.
The filing goes on to cite an IMF report
which noted that the TT dollar was overval-
ued, and how PriceSmart intends to respond
to the foreign exchange availability challenge.
It stated: "The June 2016 International
Monetary Fund country report for T&T sug-
gests that the TT dollar could be overvalued, in
the range of 20 to 50 per cent, compared to the
US dollar. Until such time that the uncertain
state of tradeable currency is resolved, we plan
to take steps to limit our exposure."
Commenting on these steps, PriceSmart
said: "We have reduced new shipments of
merchandise to Trinidad from our distribu-
tion centre in Miami to levels that generally
align with our Trinidad subsidiary's ability
to pay for the merchandise in US dollars...We
have reduced US shipments to Trinidad during
the first three months of fiscal year 2017 by
approximately 20 per cent."
The company added that it anticipated that
the reduction in shipments to T&T by 20 per
cent would continue throughout its following
The filing also stated that the fallout asso-
ciated with the reduction in shipments would
invariably affect PriceSmart's revenue gen-
eration in T&T.
"These actions are likely to result in our
Trinidad subsidiary running out of certain
merchandise, which could negatively impact
sales in Trinidad in the second and third fiscal
quarters by an estimated US$8 to $10 million."
A critical area that stands out in the filing is
the liabilities PriceSmart cites as being associ-
ated with its T&T operations. These liabilities
would ostensibly represent monies owed by
the T&T to the headquarters' operation for,
among other things, merchandise purchases.
The filing states: "As of November 30, 2016,
we have net US dollar denominated liabilities
of approximately US$31.2 million that would
be exposed to a potential devaluation of Trin-
idad dollars. If, for example, a hypothetical 20
per cent devaluation of the TT currency oc-
curred, the net effect on other expense would
be approximately US$6.2 million."
On a conference call with analysts the fol-
lowing day Pricesmart CEO Jose Luis Laparte
and chief financial officer John Heffner spoke
candidly about the challenges facing the T&T
Laparte noted that the challenges facing the
company stemmed from the broader economic
realities confronting T&T.
He said: "The whole Trinidad market has
been a little challenging not only because of
the liquidity issues, but more than anything
the whole economy is having challenges."
Heffner noted that because of the forex is-
sue, the company was forced to become more
creative in how it secured foreign exchange.
"A lot of effort on the part of my team to
source incremental hard currency...is not
just US dollars. We actually go after euros,
Canadian dollars and other things that we can
translate into US," Heffner said.
In response to an analyst's question and
suggestion about reducing their TT-dollar
liabilities through asset acquisition in TT
dollars, Heffner pointed to a development
that can only be seen in light of the shortage
of foreign exchange: an unwillingness by local
landowners to accept TT dollars for property
"The problem with buying land in Trini-
dad is no one will take our TT dollars to buy
the land. They want US dollars for the land,"
According to the CEO on the conference call,
T&T club sales represented about 40 per cent
of total warehouse sales for the Caribbean.
In its quarterly filing, PriceSmart also not-
ed: "The government is aware that having
limited tradeable currency poses challenges
to US companies doing business in Trinidad,
Asked whether PriceSmart, or other Amer-
ican companies operating in T&T, had raised
the US-dollar availability challenges with
their diplomatic representatives in T&T, the
US embassy said:
"In discussions with US firms about the
business climate in T&T, the embassy reg-
ularly hears frustration regarding delays re-
ceiving payment in US dollars. As we would
do with any issue impacting US interests,
the embassy has discussed the delays with a
number of parties, including representatives
from the government of T&T."
Membership club complains about forex availability
A shared plight
A closer look at some of the recent-
ly published financial statements of
a few manufacturing, retail and dis-
tribution companies in T&T mirrors
the challenges faced by PriceSmart.
In commenting on the company's
2016 financial report, National
Flour Mills (NFM) chairman Nigel
Romano noted the impact of the
foreign exchange shortage on the
"Unfortunately, these (the com-
pany's) excellent operating results
were almost totally eroded by addi-
tional finance costs...mainly due to
the depreciating exchange rate and
interest and penalty charges associ-
ated with late payments to foreign
suppliers as a result of delays in ac-
cessing foreign exchange," Romano
said in his chairman's report.
Chairman of Unilever Caribbean Ltd
Pablo Garrido said that his compa-
ny's "difficulties in sourcing foreign
exchanged have been an ongoing
challenge," and highlighted the
impact of this challenge by stat-
ing that the depreciating currency
value had "put additional pressure
on margin delivery."
Additionally, Prestige Holdings
Ltd chairman, Christian Mouttet
attributed part of the 21 per cent
decline in after-tax profits reported
by that company to "higher costs
as a result of the movement of the
On the issue of the foreign ex-
change rate and availability, Mout-
tet said: "To varying degrees, all of
our brands are experiencing the
effects of the difficult economic
environment, the depreciating cur-
rency and the difficulty in obtaining
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