Caribbean & Central America - August 2021

The 2021 World Investment Report from the United Nations Conference on Trade and Development (Unctad) makes bleak reading for the Caribbean and most particularly for Trinidad & Tobago.

Overall, foreign direct investment (FDI) flows to Latin America and the Caribbean (LAC) were down 45% in 2020, to US$88bn. No other developing region suffered such a large decline. The decline for the Caribbean was slightly below the overall average, at 36%, bringing the sub-region’s FDI total down to US$2.5bn.

The biggest decline in sub-regional FDI was felt in the Dominican Republic, where FDI contracted by 15%. Haiti was another casualty as civil unrest added to the constraints related to the coronavirus (Covid-19) pandemic. In Trinidad & Tobago, FDI turned negative, to -US$439m, with the severest impact in the energy industry which accounts for around half of the country’s FDI. Another country with negative FDI was Suriname, which saw an outflow of US$27m.

Trinidad & Tobago’s woes were highlighted in late July when BPTT, a local subsidiary of British multinational oil and gas company, told the government to expect a shortfall in natural gas production of 15% in 2021 and over 10% a year until 2024. The confidential forecasts were revealed by locally based, Guardian Media.

On 27 July international credit ratings agency Standard & Poor’s (S&P) changed its outlook for Trinidad & Tobago from ‘stable’ to ‘negative’ while reaffirming its rating at ‘BBB-’. The government tried to put a positive spin on this, with Finance Minister Colm Imbert saying maintaining the rating “validates” the government management of the economy. Imbert said: “[S&P] has kept the view that conservative and competent policy management, including large fiscal buffers, attested to the high shock absorption capacity of the country. The rating agency highlighted that unlike many commodity exporters, during the boom years Trinidad & Tobago saved excess fiscal revenues”.

In its 27 July statement, S&P said: “The negative outlook incorporates the risks that poor economic performance and only modest GDP growth prospects prevent Trinidad & Tobago from recovering the economic resilience lost in recent years, as measured by GDP per capita”.

It went on to say: “The negative outlook reflects our view that there is at least a one-in-three chance we would lower the ratings over the next 12-to-24 months”.

Interestingly, however, given the BPTT report, it added: “We expect the decline in energy production to reverse of the next two years, and the economy to return to growth by next year. This uptick should significantly reduce the government fiscal deficit and eventually stabilise its net debt-to-GDP figures. However, it remains uncertain whether this improvement will be sufficient to bring per capita income back toward earlier levels, following five years of negative real GDP per capita growth, on a sustained basis”.

Asked to comment by Guardian Media on the leaked production forecasts, BPTT said: “We do not comment on long-term forecasts because they include assumptions on exploration and appraisal activity, unsanctioned projects, and volumes from developments operated by others. These all carry a degree of uncertainty and are subject to change. Our goal remains to efficiently find and develop resources to satisfy our contractual obligations”.