As a small twin-island nation, foreign trade is an important part of Trinidad and Tobago’s economy. In 2014 merchandise exports and merchandise imports amounted to $11.81bn and $8.39bn, respectively, according to the central bank’s “2014 Annual Economic Survey”, with total GDP that year reaching around $28bn. Some 85% of exports are accounted for by the energy sector, which includes oil, gas and petrochemicals. The remaining 15% of exports mostly include manufactured items and agricultural products.
Exports & Imports
Dhanraj Harrypersad, manager of the Export Market Research Centre at ExporTT, the government agency that provides assistance to exporters, told OBG that CARICOM countries absorb around 80% of T&T’s non-energy exports. These include food and beverages, construction materials (cables, windows and doors) and chemicals. Conversely, major economies such as the US account for most of the country’s energy exports.
Lower sales of energy products caused exports to fall by 13% in 2012 and by 1.6% in 2013. This represented a sharp contrast to the eight years prior to 2012, during which exports rose by an average rate of 12.6% per year. Imports slipped by 4.7% in 2012 and by 2.1% in 2013. However, they had been rising by an average annual rate of 16.5% in the eight years prior to 2012.
T&T’s imports are dominated by manufactured goods, which accounted for just over half of the total in 2013. The US, which accounted for an estimated 29.7% of exports in 2013, according to the UN Conference on Trade and Development, supplied 28% of imports. Fuels are the second-largest import category, representing 37% of the total, with much of this destined for Petrotrin’s refinery at Pointe-à-Pierre. The EU was the second-largest source of imports in 2013, with 10.4%. Other major sources of imports included Russia (9.3%), Brazil (5.9%) and Colombia (5.5%). Agricultural products (mainly food) represented 12.8% of imports in 2013.
Shyamal Chandradathsingh, vice-president of investor sourcing at InvesTT, the agency which promotes inward foreign direct investment (FDI), told OBG that there are a number of opportunities for new export businesses in areas where T&T has a competitive advantage.
“In terms of high-value-added specialty agricultural products, the country is already a leading producer of fine or flavoured cocoa for boutique chocolate companies. Most beans are currently exported in the primary form, but there is an opportunity to expand the production of butter, powder and liquor. T&T also provides six of the top 20 hottest peppers in the world, including the Trinidad moruga scorpion, the hottest pepper in the world,” Chandradathsingh told OBG. He noted that another area of opportunity is float glass, thanks to low domestic energy costs and access to silica sand and dolomite in the CARICOM countries.
This will likely be a part of a solar industrial park, which will also include silicon and photovoltaic manufacturers. Ship repair has potential as well, given the need for graving docks for post-Panamax vessels and the large number of oil service engineers in T&T, who would not need much retraining to work on ships.
Meanwhile, another agency, the T&T International Finance Centre (TTIFC), has been successful in promoting the establishment of back-office processing facilities by major financial institutions. Both RBC Royal Bank and Scotiabank have set up regional shared services centres in Trinidad. The TTIFC signed a memorandum of understanding with Indian business process outsourcing (BPO) group Quatrro, in relation to a pilot project to serve clients in the Caribbean and Latin America regions, in December 2013, with the initial facility launching in mid-2014.
Recognising the challenges in starting up small and micro-sized enterprises (those with an annual turnover of TT$5m, $771,000, or less), the government set up the National Entrepreneurship Development Company (NEDCO) in 2002, under the Ministry of Labour and Small and Micro Enterprise Development. NEDCO recognises that funding of new and innovative businesses can be too risky for most commercial lenders and thus access to start-up funding is limited.
“Compared to the other Caribbean islands with tourism-dependent economies, T&T’s small and medium-sized enterprises (SMEs) are generally less service-oriented but more focused and aggressive in market development.” Julian Henry, CEO of NEDCO, told OBG. “Local SMEs have therefore generally been successful in the region; however, the system is lacking support at the start-up stage.” To help remedy this situation, NEDCO has recently launched the National Integrated Business Incubator System (IBIS), an incubator for entrepreneurs, and this is in collaboration with other initiatives to promote new and small business development.
To help support more developed businesses, ExporTT – which evolved from the Business Development Corporation of T&T – undertakes market research, assists with promotion of products through trade fairs and other events, and certifies products for duty-free access under CARICOM’s arrangements with the Dominican Republic and Cuba. Harrypersad told OBG that recent breakthroughs included sales by T&T fashion companies in the French Caribbean and sales by alcohol producer Angostura and Sacha Cosmetics into Cuba. He noted that T&T’s exporters are working to overcome the challenges associated with expanding into Latin America, such as differing tastes and perceptions of value. Other structural challenges include the difficulty in moving goods from Colombian ports to Bogotá and Medellín, while in Brazil, competition comes from other multinationals that want to produce in that country in order to meet local content rules.
Recognising the need to diversify export markets and products, the government is in the process of negotiating trade agreements with its counterparts in Canada and several Latin American countries. Negotiations between CARICOM and Canada in relation to a trade and development agreement were incomplete by the June 2014 deadline; however, the government of T&T has indicated that it may pursue a bilateral trading agreement with Canada. The government has also concluded a number of partial scope trade agreements in recent years, including with Panama, in October 2013; El Salvador, in October 2014; and Guatemala, in February 2015.
Over the past four years, a major trend has been a reduction in energy exports, which have fallen from $12.71bn in 2011 to $10.03bn in 2014. In spite of the challenges facing the rest of CARICOM, non-energy exports have held up better, falling from $2.23bn to $1.77bn in the same period. The net effect is that the merchandise trade surplus has fallen from $5.43bn to $3.42bn, with the result that the current account surplus has contracted from $2.90bn to $1.64bn.
Thanks to the capital-intensive nature of the energy sector, net FDI has generally held up well in recent years, rising from $549m in 2010 to $771m and $772m in 2011 and 2012, respectively, according to the UN Economic Commission for Latin America and the Caribbean. Net FDI subsequently slipped to a deficit of $66m in the following year and recovered to a positive flow of $339m for 2014.
This variation in net FDI flows has largely been due to more significant shifts in FDI outflows, which rose from $1.68bn in 2012 to $2.06bn the following year, before slipping to $1.06bn in 2014. Over the same three-year period, FDI inflows dropped from $2.45bn in 2012 to $2bn in 2013 and $1.39bn in 2013.
According to the Central Bank of T&T, much of the FDI inflows are accounted for by earnings reinvestment in the energy sector. Reinvested earnings reached $1.99bn in the year to September 2012, before slipping to $885m and $827m in the subsequent two years. Total FDI flows to the broadly defined energy sector slipped from $2.4bn in the year to September 2012 to $1.4bn and $961m for the same period in 2013 and 2014, respectively. Meanwhile, FDI flows to service contractors, chemicals companies, distributors, and food, drink and tobacco producers have consistently run at around $100m annually, while flows to all other sectors were also significant, at $209m, $154m and $304m, respectively, in the three years to September 2014.
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