As a former British colony, this twin island country located only 15 km north of Venezuela with a relatively small population of 1.3 million is considered to be one of the richest and strongest economies in the Caribbean primarily due to its lucrative oil & natural gas industry. The economy and currency have performed well with the Trinidad and Tobago dollar ‘TTD’ has traded in a stable range since year 1997 close to the 6.3 TTD to the US-dollar (USD) range. The island of Tobago is a much smaller island when compared to its counterpart Trinidad.
POLITICS: polarized, divided. Prime Minister Patrick Manning of the People’s National Movement (PNM) has the support of the Afro-Trinidadians of whose ancestors were slaves. Politically, Trinidad and Tobago is largely divided among two major ethnic groups. The opposition party is the United National Congress (UNC) which has the support of the Indo-Trinidadians, descendent from Indian indentured servants. Ethnic composition for the country’s 1.1 million citizens includes East Indian 40.3 percent, Black at 39.5 percent, mixed at 18.4 percent. Historically, the blacks have dominated Trinidad and Tobago for decades but now the Indian population is almost equal to the blacks in size. There is a growing call by many citizens who wish to see a change to the all winner take all democracy in preference for a power sharing arrangement by voter representation. Independence was obtained in August 1962 from the United Kingdom.
ECONOMICS: the economy is performing well, large overseas interest in its oil & natural gas industry as Trinidad and Tobago is the Caribbean’s leader in hydrocarbon output. Trinidad and Tobago is the Caribbean’s largest economy. Under the leadership of former Prime Minister Panday who came to power in 1995, his government’s policies certainly helped to spark economic renewal to Trinidad & Tobago. The Panday government (1995-01) administration saw the beginnings of many new successful reforms implemented designed to boost the economy. The overall economy is sound as the country now enjoys a net positive international position. It is now an active destination for FDI in a low inflation environment. The country runs a trade surplus as a result of its growing hydrocarbon economy (ie. gas exports). Major industry components consist of tourism, petroleum & chemicals, agriculture, food processing.
In addition to its much developed and prosperous energy sector, Trinidad & Tobago has acquired a recently announced $1 billion USD investment from global aluminum giant conglomerate, Alcoa to build a plant in Trinidad and Tobago. This aluminum/bauxite operation will produce 250,000 tonnes annually employing 575 full time jobs.
Oil and Natural Gas Industry
Trinidad and Tobago’s energy sector represents 40 percent of GDP. Over the last several years, there has been significant international investment into Trinidad and Tobago’s petroleum industry from global conglomerates such as BP, British Petroleum, Repsol - YPF of Spain, British Gas, etc. Proven reserves for Trinidad & Tobago include 1 billion barrels of oil and 590 billion cu m of natural gas reserves (2004) Year 2003 natural gas production came in at 25 billion cu m with exports at 11.8 billion cu m (2003). The downstream Liquefied Natural Gas (LNG) is an important value added dimension to Trinidad & Tobago’s energy industry. LNG is essentially natural gas that is chilled to minus 260 degrees Fahrenheit enabling it to turn into a liquid state. LNG exports (primarily to the United States) in year 2001-02 were at 14.4 million tonnes making Trinidad & Tobago the world’s fifth largest. LNG investments totaled $4 billion USD (2001). There is further potential for gas discoveries with some analysts suggesting the east coast of Trinidad may yield significant deposits. Year 2001 oil production amounted to 136,200 bpd. Other petrochemical production is in the areas of methanol and ammonia, Trinidad and Tobago is also home to the largest methanol plant in the world.
GDP using PPP is measured at $10.52 billion USD (2003) with corresponding GDP/Capita at $9,500 USD. Real GDP growth for 2004 at 6.2 percent, year 2005 is forecasted at 6.3 percent. Year 2000 GDP growth came in at 7.3 percent, year 2001 at 4.3 percent, year 2003 at an outstanding 13.2 percent. CPI inflation numbers have year 2004 at 4 percent, year 2005 projected at 3 percent. Other inflation figures include year 2003 at 3 percent, year 2000 inflation at 2 percent, year 1996 at 3.4 percent. The nation’s fiscal account is in surplus at 2 percent of GDP. The current account is in surplus with year 2003 at 12.8 percent (reflecting significant increase in oil price), 2002 at 0.9 percent, 2001 at 5 percent. External public debt stands at 15.2 percent of GDP, domestic public sector debt at 56 percent of GDP. Export partners include United States, Jamaica while imports are from United States, Venezuela. Unemployment is at the 10 percent level, much lower than the 1995 rate of 19 percent.
POSITIVE: very high literacy rate. CONCERN: crime - transshipment centre for drugs from South America, poverty remains.
BANKING SYSTEM: international reserves including gold stood at $2.823 billion USD (September 2004).Large capital inflows are helping to increase net international reserve position. Domestic interest rates have the central bank benchmark repo rate at 5 percent. Lower rates maybe required to help offset potential appreciation pressures in the TTD dollar due to large capital inflows. The offshore banking sector is not well developed like other Caribbean jurisdictions, but it is now catching up which is generating extra revenue for Trinidad and Tobago.
REGIONAL ANALYSIS: Caribbean, Venezuela
Some territory offshore water disputes for natural gas claims are still open with Venezuela and Guyana.
KNOWLEDGE: Tourism Industry
They have not really promoted the country’s tourism potential before, perhaps
Trinidad and Tobago was a little arrogant from its oil wealth. Strategically, Trinidad & Tobago is ideally located by being far enough south to avoid the direct paths of hurricanes. Many in the Caribbean have now moved their yachts to Trinidad and Tobago along with the island of Grenada. The weather is perfect. The islands carnival celebration once a year is a very popular tourism event. Major international resort operators have now taken notice with Trinidad and Tobago including Marriott building a new 500 room hotel. Trinidad is now home to a new modern $120 million USD airport.
CURRENCY: ISO Symbol ‘TTD’, Trinidad and Tobago dollar. At time of review on March 15, 2005, the Trinidad & Tobago dollar had an exchange value of 6.28 TTD to the US-dollar (USD). A floating exchange rate regime is in place.
CURRENCY HISTORY: major currency devaluations took place in 1985 and in year 1988 at a time of difficult low petroleum prices. In 1972, the TTD was pegged to the UK pound sterling. May 1976, the TTD was then pegged to the US-dollar at a rate of 2.4 TTD to the USD. By 1985, the authorities implemented at two-tier exchange rate system although it was unified 13 months later at a new exchange rate of 3.6 TTD to the USD. In 1988, the rate was devalued to 4.25 TTD to the USD. As the economy rebounded, the TTD was floated in 1993 providing the foundation for the 1990’s economic boom. Historical exchange quotes include: year 1993 at 5.35 TTD to the USD, 1994 at 5.92, November 1995 at 5.71, year 1996 at 6.00, year 1997 at 6.25, January 1998 at 6.28, January 1999 at 6.26, January 2001 at 6.24, January 2003 at 6.18, January 2005 at 6.22, February 2005 at 6.23.
CURRENCY FORECAST: currency appreciation pressures. Risks to the currency include mostly political.Back in year 1990, a fundamentalist Muslim group attacked Trinidad and Tobago’s parliament in an attempt to overthrow the government, holding the then Prime Minister Arthur Robinson and government ministers hostage for five days. However, and potential political or terror risk is balanced with Trinidad & Tobago’s plentiful hydrocarbon energy reserves which will provide for further generous capital inflows to support the economy.
UPDATED: March 15, 2005