Interview: Gervase Warner
In what ways is the drop in oil and gas prices impacting non-energy industries?
GERVASE WARNER: In Trinidad and Tobago the fortunes of oil and gas, government spending and the overall economy are all correlated. Successive governments have so far run significant deficits, financed by borrowing and some state enterprise initial public offering. The energy sector slowdown has still not significantly impacted government spending. The 2016 budget was larger than the 2015 budget, and even the April budget review presented a modest TT$4bn ($616m) contraction, compared to the over 50% drop of energy tax revenue. This fiscal cushion is preventing the non-energy economy from feeling the full effect of the crisis. There is a small decline in car sales and some changes in consumer buying patterns, but the most acute problem the private sector faces is the shortage of US dollars. This directly impacts our purchasing cycles and makes it very difficult to get credit with suppliers, thereby hindering long-term planning.
What can be done to foster private sector growth?
WARNER: Until the real impact of the crisis is felt, it will be difficult for the private sector to plan accordingly. We need to find equilibrium – an ideal place where fiscal spending, interest rates and exchange rates allow for a balance of trade that works. By borrowing to cushion our fiscal position, while keeping the exchange rate excessively high and interest rates low, we are fostering an economy based on consumer spending with negative effects. First, we are delaying a recession, with the risk that it hits us harder when it finally does. Second, civil society has the false impression that the economy is not as bad, thus stifling the creativity that will get T&T out of this recession. If we cannot reach an equilibrium in a managed way, it will eventually and more abruptly prevail. We should also develop a strategy that outlines where we want to go and what will get us there – focusing on improving our institutions, ease of doing business, introducing technology into processes and enhancing efficiency. T&T has always been the business island of the Caribbean; the government has an incredible opportunity to enact some key reforms regarding business start-ups, land approvals, building inspections, Customs and immigration.
What areas present the most attractive opportunities for business expansion?
WARNER: T&T still presents great investment opportunities. Companies are focusing on cost management, but also investing in technology to improve efficiency. A time like this also brings opportunities to increase market share across different lines of business. Presently, agriculture is an obvious opportunity for new investment streams to reduce the food import bill. Through our retail chains, we want to grow the share of local produce, on our own or through joint-venture partnerships with local or international investors. The ICT sector is also poised for growth especially in the back-office processing (BPO) realm. There is room for T&T to establish BPO services for overseas businesses or even our local government.
How do Latin American markets present opportunities for local companies?
WARNER: I would welcome more bilateral trade agreements with Latin America. The language barrier has traditionally prevented local companies exploring opportunities in these territories, but based on our experience of investing in car dealerships and energy services in Colombia, T&T businesses can operate profitably in Latin America. The historical presence of multinational companies in T&T has raised service and efficiency standards among local companies. While this competitive advantage is utilised on a small scale within CARICOM, the skills set the country has developed can be deployed successfully in larger markets.
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