Caribbean Impact

• Author: Wendell Mottley
• Profession: New York-based Investment Banker having previously served as executive director of the company which eventually became the pivot of Trinidad and Tobago s natural gas-led industrialization and as Minister of Finance, credited with playing a decisive role in setting Trinidad and Tobago on a sustained path of growth from 1994 onwards
• Pages: 144-167

144

TRINIDAD AND TOBAGO INDUSTRIAL POLICY 1959–2008

CARIBBEAN

IMPACT

Generalizations about Caribbean economies are usually hedged

by the statement, ‘with the exception of Trinidad and Tobago.’ This

exceptionalism in the Caribbean is largely based on the Trinidad

and Tobago possession and carefully-managed development of its

petroleum resources.

Other Caribbean countries also possess mineral resources,

notably bauxite in Jamaica and Guyana. But especially since the

1970s, world terms of trade have favoured petroleum exporters over

other commodity exporters. Table 8.1 below demonstrates

petroleum’s favourable relationship compared with aluminum and

therefore its derivatives, bauxite and alumina. Oil and gas prices

far outperform, aluminum from base year to the present.

Table 8.1

Oil, Gas, Aluminum, Alumina, Bauxite —

Base Price Movements

Source: IMF, International Financial Statistics Yearbook Vol. LIII, 2000; Metal

News, Aug.2006; Bloomberg, CRU Group, Global Insight, E IA

1. As of Aug. 2006

2. Henry Hub futures began trading in 1994. 1965 price assumes average U.S. Natural

Gas Wellhead price of US$0.16 per kcf converted to US$ per MMBTU.

Chapter Eight

Commodity Units 1965 2003

2006

YTD1

Aluminum (wholesale price) Per lb 0.23 0.65 1.14

Bauxite (Metallurgical grad e) Per tonne N.A 27.60 3 4.00

Alumina (Metallurgical Grad e) Per tonne N.A 271.05 562.03

Henry Hub Natural gas2 Per MMBTU 0.16 5.49h 6.99

WTI Cushing Crude Oil Per Barrel 2.92 31.06 68.19

Aluminum Base 100 283 496

Henry Hub Natural Gas Bas e 100 3431 4368

WTI Cushing Crude Oil Base 10 0 1064 2335

145

CARIBBEAN IMPACT

Within the Caribbean, Trinidad and Tobago exceptionalism has

been manifested in its comparative wealth; migration from the

southern Caribbean into Trinidad and Tobago; a long history of

exports of fuels; and, more recently, manufactures to the rest of the

Caribbean. This history has resulted in consistent Trinidad and

Tobago trade surpluses within the region, a comparatively

undeveloped tourism sector in Trinidad (as distinct from Tobago)

and the export of capital and professional services from Trinidad

and Tobago to the Caribbean.

Trinidad and Tobago’s petroleum exports to the region comprise

fuel oil, gasoline, diesel, jet fuel and kerosene, LPG cooking gas,

asphalt, lubricants and, more recently, LNG to Puerto Rico and,

the Dominican Republic. Since petroleum products consume up to

75 per cent of the foreign exchange earnings of some small

Caribbean countries, the trade impact of Trinidad and Tobago’s

energy-sector on the rest of the Caribbean cannot be underestimated.

The resulting regional trade imbalances have consistently posed a

challenge in equity to regional development and integration

projects.

Table 8.2 measures the weight of Trinidad and Tobago’s energy-

sector exports to its CARICOM (Caribbean) neighbours.

Table 8.2

Trinidad and Tobago/ CARICOM Trade

Jan-Dec 2005/2006 TT$ Million

Source: Central Bank of Trinidad and Tobago: Statistical Digest December 2007

& The Balance of Payments of Trinidad and Tobago 2005

These energy exports dwarf the counter flows, mainly from

Barbados, Guyana, Bahamas and Jamaica. As a result, Trinidad and

Tobago had a positive trade balance with CARICOM of

approximately US$2,326.8 million in 2006.

IMPORTS EXPORTS BALANCE

2006: TOTAL 611.9 15,223.9 14,612.0

2005: TOTAL 700.2 12,807.5 12,107.3

Minerals, fuels, lubricants 106.6 9,832.6 9,726.0

Other 593.6 2,974.9 2,381.3