One of Trinidad and Tobago’s most eye-catching statistics is its gross domestic product (GDP) per capita. Averaging more than $20,000 per person, it is the highest in the whole of Latin America and the Caribbean. Estimates by the Economist Intelligence Unit and local data place Trinidad and Tobago well above Uruguay and Chile, which rank second and third in terms of GDP per capita. Trinidad and Tobago’s GDP per capita is twice as high as Brazil’s and Mexico’s.
This performance can be explained mainly by the way in which the country’s oil and gas resources have fuelled its economy for years. What the government wants to do now is reduce its dependence on these natural resources and grow other sectors of the economy. Plans to develop an international financial centre (IFC) are part of this initiative.
Financial sector impetus
“Oil and gas account for 43% of our GDP, the financial sector accounts for [about] 14%, but it is also the fastest growing sector in the economy besides oil and gas,” says Franco Siu Chong, chairman of Trinidad and Tobago International Financial Centre, the government agency that has been tasked with the growth of the hub.
Why should a financial services company look at Port of Spain, the capital of Trinidad and Tobago, in preference to the many financial centres in the region?
On its side, the country has an investment-grade rating by both Moody’s and Standard & Poor’s; it has grown into a market open to foreign investment – particularly in oil and gas; its banking system is strong and profitable; and its public finances are helped by a heritage and stabilisation fund that accumulates excess oil revenues (as of the end of 2013 it had stored the equivalent of 20% of the country’s GDP).
Geologically blessed
While geologically blessed, Trinidad and Tobago is certainly not immune to economic challenges. The country’s GDP has suffered negative or flat growth since 2009 when the economic cycle turned in the region, although the impact has not been as dramatic as for the rest of the Caribbean. Conditions are now changing again – GDP growth of 1.5% in 2013 is estimated to reach 2.5% at the end of this year, according to the country’s central bank.
This is, again, mostly explained by the energy sector – the growth of which was recently impaired by maintenance works. In the long run, however, expected growth in manufacturing, business services and the financial sector will also play a role in the country’s growth.
Trinidad and Tobago is determined to base its IFC onshore to generate local jobs, and the country’s authorities are creating a legislative framework to encourage this. But to establish itself as a credible and relevant hub, as well as distance itself from the image problems of the offshore world, Trinidad and Tobago first needs to address concerns of money laundering and drug trafficking, which were most recently voiced in US Congress reports issued in March. It also needs to convince observers of the reliability of its Central Statistical Office, a point the International Monetary Fund reiterated in its Article IV report this April.
Working in favour of Trinidad and Tobago is the fact that its public officials do not shy away from such difficult conversations. Some efforts to remedy the country’s statistical reporting have been noted, says Moody’s analyst Jaime Reusche. The Banker’s investment guide on Trinidad and Tobago will look at what the country has achieved so far, its plans for the future, and the key challenges it must overcome to attract investment and build its reputation as a well-regulated, modern IFC.
Source link : https://www.thebanker.com/Trinidad-and-Tobago-looks-beyond-oil-and-gas-1404201878
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Publish date : 2023-08-23 00:29:56
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