Industry upbeat in Trinidad and Tobago despite fall in oil prices

Despite some near-term challenges, confidence is growing among Trinidad and Tobago’s industrial companies. According to the Business Confidence Report published by the Central Bank of Trinidad and Tobago (CBTT), the country’s “assembly and related industries” are upbeat about the next 6-12 months. Looking to take advantage of the government’s efforts to diversify the economy away from hydrocarbons and broaden export markets, these businesses are poised to expand.

The CBTT publishes a quarterly business confidence indicator (BCI) that ranges from +100 (maximum optimism) to -100 (maximum pessimism). The BCI increased for the business community as a whole during the fourth quarter of 2014 to +42, up from +37 in the preceding quarter, an outlook that the bank characterised as “general optimism”.

Assembly and related industries led the way with a BCI of +74, ahead of construction at +56, hotels and guesthouses at +39, and agriculture at +24. “The general increase in optimism occurred despite the initial fall in the price of oil and the tensions in Europe and the Middle East, possibly in anticipation of the Carnival season, to be followed by general elections later in 2015,” the central bank said.

Hurdles remain

According to the Trinidad and Tobago Manufacturers’ Association (TTMA), the country has one of the largest manufacturing sectors in the Caribbean region with an annual turnover of around TT$7.9bn ($1.3bn), or 8.5% of GDP in 2014. The industry has traditionally been overshadowed by sectors such as oil and gas or financial services, while shortages of skilled labour, the relatively small size of the market and high logistics costs have hampered growth.

However, with the oil and gas sector hard hit by the fall in oil prices, there is renewed interest from industrialists to capitalise on plans to diversify the economy. Ramesh Ramdeen, CEO of the TTMA, noted that the slump in oil prices coincided with the emergence of the manufacturing sector from a downturn dating back to the global economic crisis of 2008. “Every curse has a silver lining,” he told OBG. “In the last crisis we found that the non-oil sector of the economy had to carry us forward, and we are better placed to diversify now. Manufacturing represents 9% of GDP and we could go up to 12-15% in the right environment.”

Industrialists look beyond the Caribbean

Local industrialists can count on a number of strengths, including low energy costs, and although the domestic market is relatively small, they are able to supply products to most of the eastern Caribbean. The country is particularly strong in food, beverages and tobacco, as well as chemicals and non-metallic minerals. Combined, these segments account for two-thirds of the manufacturing sector’s output. T&T also has an advantage in metals as it is home to an iron and steel mill operated by Arcelor Mittal, which supplies steel to the Caribbean region and Central America.  

While there is a degree of uncertainty this year with the prospect of a change of government − general elections must be held by September at the latest − the business community is aggressively pursuing opportunities.

One of its goals is to develop new export markets. The TTMA is involved in an upcoming trade mission to Panama, with companies looking to other parts of Central America and beyond for expansion. Local businesses have even found opportunities in the troubled economy of nearby Venezuela, responding quickly to supply scarce items like toilet paper and tissues.

During his visit to T&T in February, Venezuelan President Nicolás Maduro discussed a possible barter agreement covering crude oil for manufactured products with his host, Prime Minister Kamla Persad-Bissessar. The country already exports petrol, machine parts, air conditioning and refrigerator spare parts, toiletries and cement products to Venezuela.

Pilot plan to ease labour shortages

However, the sector still faces several challenges, including transport inefficiencies and labour shortages. Industrialists say they are facing a lack of skilled and unskilled workers, in part due to generous government work programmes that have kept the local economy at near full-employment levels.

Both the TTMA and the American Chamber of Commerce of Trinidad and Tobago (AmChamTT) have suggested that as part of a pilot, some people on the government-funded Community-based Environmental Protection & Enhancement Programme (CEPEP) be reassigned and retrained to work in the private sector.  

The minister of trade, Vasant Bharath, recently said that the government is considering 600 jobs for the pilot project. “What will happen is that these employees will be taken directly out of CEPEP and they will be given an opportunity to work with these organisation with a training programme in place, with certain minimum wages… which would be significantly higher than what they are currently earning,” he said. Sectors to be targeted in the programmes include manufacturing, textiles and fast food restaurants.

Improving transport efficiency is another long-term project within the country as the government invests in new highways and increased port capacity to facilitate greater links across the islands. It is also hoped that such investments will further boost confidence amongst industrial companies as the government looks to expand non-oil sectors.