The Discomfort of Doing Business Forex and Port Challenges

COMPANIES that import the most basic food products (onions, garlic, potatoes, grains), which make up the bulk of the food basket for lower to middle income earners, are seriously threatened by the ongoing shortage of foreign exchange (foreign exchange).

These items (which we do not or cannot produce on a large scale and at a reasonable price) should be classified as essential, with a special US dollar facility made available along the lines of the EXIM Bank initiative for exporting companies. Clear accountability must of course be the cornerstone.

T&T is not an island in itself. We need forex to access what we cannot produce but still need. It is therefore essential to prioritize the allocation of this scarce resource. Basic import needs and forex earning programs should be at the top of the list.

The government has tried to address the earning problem by offering a forex line accessible through the EXIM Bank, but only for exporting companies.

A report on the performance of this fund would be nice. Alas, wishful hope.

Otherwise, it is left to the banking industry to decide who receives the limited forex.

However, it is clear that the banks’ allocation process is not exactly fair, with individuals being last in line. The distribution conglomerates appear isolated, as their shelves are well stocked with non-essential items such as luxury furniture, appliances and Halloween pumpkins.

Furthermore, the franchises continue to proliferate, importing most of the items, making no forex, repatriating based on sales (not profits), and making no complaints about the scarcity of forex.

I have been baffled for some time as to why the black market rate for forex is not higher than TT$8 to US$1. All signs indicate that this should happen.

Demand continues to grow even as the government has imposed a tax on online purchases in US dollars and banks have continually reduced the US dollar spending limit per cycle on credit cards.

Our high propensity to consume imported goods and services continues unabated.

This is reflected, for example, in a food import bill that has grown annually in recent years from approximately $750 million to more than $1 billion.

Besides the fact that trade and repair is the country’s fastest growing economic sector – with retail being the main driving force – the reality is that the country’s main currency earner (energy) is rapidly deteriorating. In addition, there is the peak period for Christmas shopping, but the price on the black market is not rising.

I have been told that this situation is due to the narcotics industry laundering US dollars through legitimate businesses.

And while many companies won’t succumb, others are in a do-or-die trap. Anecdotally, this suggests that T&T is host to a very sizable underground economy, which essentially oils the import engine of this economy. We’re in a scary place.

Covid-19 and the war between Ukraine and Russia left leaks in the pockets of the average Trinbagon resident, with shortages of basic food coupled with uncontrolled inflation. How many lower to middle income households would even think about buying a Halloween pumpkin?

How many people can afford processed foods since Covid-19? But onions, garlic, potatoes and grains are staples, without which many families would starve.

The majority cannot afford meat at every meal, or cereal or bagels with cream cheese.

The bottom line is that staple foods that form the basis of the average meal face a litany of challenges in reaching our kitchens regularly and affordably.

According to the largest importers of these basic food products, and contrary to the official inflation rate of 0.04%, basic food prices have started to rise and will continue to do so in the coming months. Scarce currency means a constraint on supply, and if demand remains the same, it translates into higher prices.

But that’s not all. These companies not only have access to black market forex, but are also helpless victims of port inefficiencies. Because we cannot resolve the workers’ strikes at the port, shipping companies are bypassing Trinidad and unloading containers in other countries – yes, including those destined for T&T. These containers then have to wait for feeder boats to send them back to T&T. And then it is the luck of the draw that determines which containers end up on the boats.

There are two negative consequences here. First, the shelf life of perishable goods is shortened, sometimes compromised by the time it takes to arrive in T&T. Second, planned imports based on knowledge of country demand are negatively affected, as containers targeted at different arrival dates may eventually agglomerate. The result is oversaturation and deficiencies.

This has already resulted in a 12% increase in the sales prices of these items, worsening expectations.

Add to this the fact that freight costs have started to rise and are expected to continue to rise in 2025 due to capacity shortages, diversion costs due to geopolitical risks and high demand for services on certain routes; the picture is clear.

Companies are calling for the port to be considered an essential service, just like healthcare and security services. While there may be benefits, this is not common. Perhaps instead it is time to privatize port services and let competitiveness be the guiding operating principle.