Tag Archives: economy

Trinidad & Tobago

“A View From The Trenches: The Trinidad Economy As Reflected In Visa Applicants”

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The below is a fascinating Wikileaks cable from 2008, sent by the US embassy in POS to the secretary of state in DC and outlining the average economic and educational status of applicants for US visas. I’ve added any bold.

SUBJECT: A VIEW FROM THE TRENCHES: THE TRINIDAD ECONOMY AS REFLECTED IN VISA APPLICANTS REF: PORT OF SPAIN 195 PORT OF SP 00000546 001.2 OF 002 SENSITIVE BUT UNCLASSIFIED; PLEASE PROTECT ACCORDINGLY ¶1.

(SBU) SUMMARY:

While not completely scientific, information provided in visa interviews opens a window on the local economy. Recognizing the limitations of such information, but also its worth, the Embassy conducted a study involving 218 randomly chosen visa applicants. The data revealed income disparities and large informal and state economic sectors.

END SUMMARY

INCOME, INEQUALITY, BENEFITS OF HIGHER EDUCATION

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¶2. (SBU) Survey data was derived from 218 randomly chosen visa applicants. Data collected included gender, monthly income, household income, savings, employer, position, sector, housing status, and education level. The labor sector breakdown of those in the survey (which perhaps not coincidently largely mirrors GOTT Central Statistical Office estimates) was: -Clerical: 11% -Services: 9% -Security: 7% -Financial: 7% -Education: 6% -Energy: 5% -Transport: 5% -Health: 4% -Construction: 4% -Real Estate: 3% -Engineering: 3% -Utilities: 2% -Law: 2% -Self Employed: 14% -Retired: 18% Including companies in which the government invests and controls, either directly or indirectly, 47% of those sampled can be considered to work for the GOTT.

¶3. (U) Median annual income across the sample was $17,988 (all figures in this cable are in USD), broadly consistent with published reports of T&T per capita GDP of around $16,000. Men (43% of survey) earned an average of $23,412, while women (57% of survey) earned only $13,398. Those with a bachelor’s degree or higher comprised 21% of applicants and earned a median wage of $28,850. Seventy-two percent of applicants owned their own home, either via a conventional mortgage or through inheritance. It is worth mentioning that 28% of the sample was denied visas; their median wage was $10,125.

ENERGY SECTOR APPLICANTS GENERALLY WELL OFF

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¶4. (U) Not surprisingly, those in the energy sector enjoyed the highest median salaries. Although only 5% of the population is directly employed in energy, the median income for that group of survey applicants was $25,935, over $8,000 more than the overall sample median. Comments from persons in that sector, though, suggest a looming slowdown that may impact on future salary stability or growth.

EDUCATION; DECLINING US STUDENT VISA NUMBERS

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¶5. (U) The median wage for those with a bachelor’s degree or higher in our study is over $10,000 more than the overall median wage of $17,988. This makes manifest the value of higher education, a point apparently not lost on the GOTT. One recent GOTT effort that is making a quantifiable impact on the society as a whole is the Government Assistance for Tuition Expenses (GATE) program. Designed to provide an outlet to slow intellectual brain drain, GATE provides free tuition to qualified students at a variety of T&T based universities and training centers in exchange for a three year commitment from beneficiaries to work in the country after graduation rather than depart for opportunities abroad.

¶6. (SBU) Though other factors may be involved, including concern over visa rejections, the impact of the program seems to have been immediate — student visa numbers for U.S. study have declined between 5-10% a year over the past 3 years as more and more T&T students and parents choose the substantial financial benefits of free tuition. In addition, as a result of GATE, higher education is now available to lower income families. It should be noted, though, that some GOTT programs do exist to provide funding for education abroad (e.g., 170 students are in the U.S., and 95 in Canada, on government scholarships).

PORT OF SP 00000546 002 OF 002

SELF-MPLOYMENT, THE INFORMAL ECONOMY, TAX COMPLIANCE

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¶7. (SBU) At 14%, the self-employed comprise the largest single segment of our study, with a median wage of $16,661, slightly less than the overall median. The self-employed work in a variety of areas, but the sector is dominated by building contractors, food service vendors/caterers, small shop or market owners and clothing resellers. (NOTE: Self-employed accountants, architects, engineers and doctors, for the purposes of this study, were accounted for in their respective fields of expertise.) While some register their businesses with the GOTT, many seem to not report income accurately. Those whose businesses are not registered or who do not pay taxes are included, by definition, in the informal economy.

¶8. (SBU) In a conversation with an official from the GOTT Board of Inland Revenue (BIR), CONOFF inquired about tax compliance rates for small businesses. The official indicated that tax compliance and accurate income reporting for the self-employed was largely non-existent and unenforceable from a resource perspective, mentioning that the BIR focused on large firms, multi-nationals, and larger family-owned concerns for revenue collection.


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Business & Finance

“Jamaica may already have passed the point of no return”

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Usain Bolt, by Richard Giles, via flickr/tagaroo

Just one month after rating agency Standard & Poor’s released a downbeat assessment of the outlook for Jamaica comes an equally – if not more – negative take from Barclays Capital Research.

The research note issued today by a New York-based BarCap analyst is unequivocal:

we believe that Jamaica is approaching the point of no return and that it will take more than fiscal adjustments to regain sustainability for the long term. For 2009, we expect interest payments to be 16.0pts of GDP, or more than 60% of revenues. Fiscal sustainability in Jamaica has been under pressure for the past ten years, but we believe that at this time, the IMF is more willing to help Jamaica restructure its debt than to prolong its agony.

Elsewhere in the note, which also examined El Salvador, Panama, Costa Rica, the Dominican Republic and Guatemala, the analyst is even less sanguine about Jamaica’s financial prospects:

Of particular concern, Jamaica’s fiscal deficit could reach around 20% of GDP (with more than 15% of GDP in interest payments). We think it is extremely unlikely that any reform program will be able to put the country on a sustainable medium- to longer-term fiscal path and believe that the IMF is weighing whether it would be costlier to allow (and maybe help) the country to restructure its debt or to give the Jamaican government the USD1.2bn that is soliciting in order to postpone its agony.

Unfortunately, we believe that Jamaica may have already passed the point of no return and that for the IMF, as well as for the country in the long term, it would be more convenient to assist in a restructuring of debt.

As the three tables below – also from the note – illustrate, Jamaica is in dire straits both in absolute terms and as compared with other countries in Central America and the Caribbean:

BarCap
BarCap

Reduction in current acount deficits (historic and projected)External public debt (historical and projected)


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Business & Finance, Trinidad & Tobago

Some good-ish macroeconomic news for T&T

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My day job has kept me so busy I haven’t yet had time to read beyond the headlines of the latest budget, but it seems that whatever Karen Nunez-Tesheira put together pleased Standard & Poor’s. Although the devil, as ever, is in the details.

The rating agency issued the following statement on Monday (any emphasis mine, as are the bracketed comments):

Republic of Trinidad and Tobago Ratings Taken Off CreditWatch And Affirmed; Outlook Stable

(CreditWatch negative is ratings agency speak for “we’re concerned about this country, and we may lower our rating on it in the not-too-distant future, unless its economics improves)

–Although Trinidad and Tobago’s bailout of the CL Financial Group could cost up to 6% of expected 2009 GDP, its solid fiscal and external position support its policy flexibility.

–In addition, the government’s debt profile and burden limit external vulnerabilities.

–As a result, we have taken the ratings off CreditWatch negative, affirmed them, and assigned a stable outlook.

NEW YORK, Sept. 14, 2009–Standard & Poor’s Ratings Services said today that it affirmed its ‘A/A-1’ foreign-currency and ‘A+/A-1’ local-currency sovereign credit ratings on the Republic of Trinidad and Tobago. Standard & Poor’s also said that it removed these ratings from CreditWatch, where they were placed on Feb. 3, 2009, with negative implications.

The outlook is stable.

In addition, Standard & Poor’s affirmed its ‘AA’ transfer and convertibility risk assessment on the republic.

“We removed these ratings from CreditWatch after evaluating the possible consequences and the cost associated with the government bailout of one of Trinidad’s largest financial conglomerate: the CL Financial Group,” explained Standard & Poor’s credit analyst Roberto Sifon-Arevalo. “Assuming no recovery from any asset sales, we estimate a potential gross loss for the government of about TT$9 billion, which is 6% of expected 2009 GDP.” At the same time, Trinidad and Tobago’s solid fiscal profile, which has resulted from several years of high-energy prices, gives the government the fiscal and external flexibility needed to manage this potential debt burden as well as the current international financial crisis without materially weakening public finances.

The government is responding to these shocks through countercyclical fiscal measures. In this context, Standard & Poor’s expects the general government will have a deficit of 4.5% of GDP in 2009, down from a surplus of 6.3% of GDP in 2008. In 2010, we expect the deficit to be at about 3.5% of GDP as the government continues with its public infrastructure program aimed to mitigate the impact of the world economic crisis in Trinidad.

Standard & Poor’s does not expect the government to contribute nor tap into the Heritage and Stabilization Fund (HSF) to finance the expected deficit in 2009 or in 2010, keeping the fund’s balance at about 11% of 2009 GDP. We believe that the government will finance the deficit with debt, mostly domestic. As a result, we also expect net general government debt to reach 7% of GDP in 2009 and 12% in 2010, which compares favorably with 28% and 31% for the medians of ‘A’ rated peers in the same respective periods.

“Improvements in transparency, governance, and regulation in the financial industry–and among public-sector enterprises, in particular–could further strengthen Trinidad and Tobago’s creditworthiness over the medium term,” Mr. Sifon-Arevalo added. “Conversely, a higher-than-expected fiscal deterioration because of higher-than-forecasted costs associated with the government bailout of CLFG as well as slippages in the pace of restructuring government-owned entities could lead to an unfavorable rating action.”

Are you listening, Mr Manning?


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