PRIVATE SECTOR SEMINAR OF FOREX

[00:00:01] Speaker A: The best insight, instant feedback, accountability the. [00:00:04] Speaker B: All new Talk Radio Freedom 106.5. [00:00:09] Speaker A: This time ladies and gentlemen, we get into a pretty interesting discussion. Anytime you speak foreign exchange, a lot of people pay attention for the obvious reason. And there's an event that will be taking place on the 17th of February. It's a private sector seminar on foreign exchange titled Forex Matters. And we have some individuals joining us this morning to tell us a lot more about it to discuss some of the matters related to Forex. Let's welcome to our program here this morning. CEO of Maritime Capital, that's Mr. Varun Maharaj. Good morning to you. [00:00:53] Speaker C: Good morning. [00:00:54] Speaker A: And we have as well with us, he's been with us on numerous occasions. Dr. Valmiki Arjun. Good morning to you. [00:01:03] Speaker B: Hello. Good morning Citation. Good morning Trent on Tobago. [00:01:06] Speaker A: And we have in a different capacity this morning, event coordinator Maritime Capital, TT Chamberlains, Rudolph Honamji. Good morning to you as well. [00:01:16] Speaker D: Good morning Satish. And to my fellow colleagues and Trinidad. [00:01:19] Speaker A: And nice to have all three of you with us here this morning. This is a discussion that for whatever reason we can't get enough of and that's related to our foreign exchange situation and some of the problems that confront us. Let's begin by getting setting the foundation for persons to understand what's going to happen with this private sector seminar on foreign exchange and what is the objective of having this event? [00:01:54] Speaker C: Satish? Probably I need to lay the groundwork as to really what Maritime Capital is about. Maritime Capital has seen since its inception in 2014 significant and robust growth in terms of it's a whole practice of wealth creation. And you know, we see our motto, our, if I would say tagline as investing is our craft and the way we really do that is through empowering our clients through education and transparency. And we see that we have a responsibility as a thought leader in the Trinidad and Tobago financial services ecosystem to encourage really a solution to this crisis, this foreign exchange crisis which exists in our country. Right. It significantly impacts the creation of wealth whether for the country, for individuals, for businesses. So that's irrelevant death of putting this conference together. [00:03:17] Speaker A: It's definitely timely given the conversations that are taking place. Some of the challenges that people, businesses are confronted with. Dr. Arjun, let's get you into the conversation and I know that we've discussed this before with you. Now may be a good time for us to get an update on what are some of the matters that need to be discussed related to our foreign exchange situation at this point in time. [00:03:47] Speaker B: So good morning. Once Again, satish, so far I think there's a lot of. Well, for years, as a matter of fact, there's a lot of discussion surrounding this issue of forex. Naturally, because of how critical it's been for the functioning, for the functioning of our economy. As you very well can appreciate, the bulk of what we utilize and consume on a daily basis are important because we don't have the production capacity or the production structure to produce these items and manufacture these items locally. Now the conversations in my view, they've been all over the place, right? And we really have to ask ourselves what's the objective? What's the motivation behind this foreign exchange? What are we trying to solve? Are we simply just looking at a short term measure where we cut the demand for foreign exchange and we say okay, we've nipped the problem in the bud or are we looking for a more sustainable long term solution where we diversify our production structure, we diversify our export capacity and therein making the non energy sectors much more sustainable? Much more energy sectors are much more self sufficient in order to stop relying so much on imports, but being able to export more and thereby earn more foreign exchange for the economy. I would think that that is where the conversation needs to go. How do we come up with a more sustainable medium to long term solution that is going to make sure the and we are not in this problem? Again, as opposed to simply just thinking, look, how are we going to cut the excess demand for foreign exchange by floating the dollar or making the exchange rate more flexible? Instead, I think we need several solutions. We need a cocktail of solutions put together, not simply just one or two here and there to try to come up with a short term kind of quick thing. Now don't get me wrong, we do need short term solutions and there are short term solutions that we will be proposing perhaps in this very program and also certainly in the seminar put forth by maritime short term solutions like the issue of transfer pricing, making sure that we've covered that properly at least because that's a problem we've been seeing for decades. Issues where there's capital flight and so forth. Plugging the leakages of foreign exchange is what we need to focus more on, at least in the very short term because we lose a lot of money being invested abroad, being funneled abroad every single year. That's foreign exchange that could be put to much more productive and better use by the local private sector. [00:06:29] Speaker A: Mr. Aharonamji as coordinator, tell us a bit about the actual event, target audience and so on. [00:06:37] Speaker D: Tatish, thank you again for the opportunity. As Varun alluded to, the focus here is really to bring the right people together in the room that have the necessary scope and influence and the capacity to define, as Valmiki also alluded, what are the phases in which we must approach this problem? Because as you said, there's been so much talk around the issue and we need to see more implementation. So at the first tier level, the partnership has been to bring some of the leaders of the other chambers of commerce together. So we will have the San Fernando Greater Chamber of Commerce, the Chaguanas Chamber of Commerce, and we have another of Valmiki's worthy colleagues from the university, Dr. Conrad. He's the head of economics at the University of the West Indies, where maritime is bringing these people together to provide the leaders of industry, the business community who are most impacted by the crisis, guide them through the current state analysis, present the short medium term solutions and get their feedback, their input so that coming out of the event we can actually produce a thought leadership paper that provides a very clear roadmap which the private sector can get behind and work with the public sector in implementing. Because this is of course not a private sector solution alone. The private sector can do its own part in mobilizing capital and investing monies into growing operations, exporting, etc. But, but at the end of the day, and Valmiki of course would be the best person to speak to this, this is a matter for the regulator and then lower down the monetary and fiscal policies that the government puts into place. So we're bringing the leaders of the private sector together to build consensus with these groups that represent the business community. But at the end of the day, it's meant to provide a roadmap that the public sector would, we would like to see followed by the public sector. [00:09:04] Speaker A: Well, you kind of took the wind out of my sails because that was exactly where I wanted to carry the conversation. Or at least that's what my question was going to be. Because we have no shortage of ideas, we have no shortage of suggestions as to how to treat the thing by people who have the relevant industry expertise. But are the people who need to make the decisions listening? And I mean it's not a facetious question or anything like that to take away from the event, but it's a realistic position that we need to confront. We've had crime is another one. We have no shortage of suggestions as to how to treat this crime. But the people who are the decision makers don't seem, I don't want to Say they don't seem to care, but they're not bothered enough to take the action or to heed the advice or suggestions that are coming from the private sector. The document that you're talking about is interesting. And has the time come for the private sector to exert more pressure to force the public sector, which is the state, to get off its behind and do some of the things that probably need to be done in with the clarity that is required at this point in time. What's the view? [00:10:24] Speaker C: Well, Satish, I think it's appropriate to put the context of the foreign exchange situation at the fore. And if we looked at we had almost $10 billion in reserves today, it's a little more than $5 billion. So it's gone down by almost 49%. That's a crisis situation. Yes, we have had solutions spoken about in the newspaper and other places. But we want to bring this to the fore and for the country to realize we need to grapple with this and come to terms with it immediately. If not, we are going down the wrong road. [00:11:05] Speaker A: Yeah. Dr. Arjun, would you like to add. [00:11:08] Speaker D: Yeah. [00:11:08] Speaker B: Just to add to what Varun has said. It's not just that the reserves have gone down, it's also for the fact that we have been propping up the reserves. Yeah. In a manner which involves a lot of foreign debt, taking on additional foreign debt. Because as I would have explained in this very program some time ago that when you borrow from abroad, we borrow via issuing bonds. When we issue a bond abroad or we get that funds in US Dollars, it goes into the foreign reserve account. We don't use US Dollars officially in Trinidad and Tobago. So the central bank will convert that US into tt so that US that we raise via debt via borrowing from abroad, it then artificially raises the value in the foreign reserve account or same thing for when we tap into the heritage and stabilization fund that's in US dollars, that money goes into the foreign reserve account which again artificially props it up. You see now the problem there, and this is something that we could ventilate a lot more in the seminar, is that yes, we are propping it up, but there's another challenge in that when we borrow, we borrow using long term debt which is at a high interest rate. So we have, we have to pay them a high in our creditors abroad, a high interest cost on that loan. But our foreign reserves, when you put that money in the foreign reserve account, that money doesn't just sit in a bank account or on the central bank. That money is actually invested in short term securities, short term treasuries, et cetera. So the rate of return on those short term securities are actually very low compared to the interest that we have to pay on the long term bonds, the long term debt, the same debt that we used to prop up that foreign reserve account. So now we've actually gotten to a situation also where not just that the returns we are earning on the reserve account are far less than the debt, the interest that we have to pay on that very debt, but also that the foreign reserve, our foreign reserve account is more or less matching or equivalent to the external debt that we owe. In fact, when you last time I netted off the figure, we just have really and truly a net of about one, just under one week of import cover when we take that into account what we owe to our foreign creditors. So the situation is not a very respectable situation. Yes, the balance compared to our CARICOM counterparts in the foreign reserve account appears to be healthy. But when you take into account our external debt, that it leaves certainly a lot more to be desired. Begs the question, well, what do we do? Do we continue artificially propping up the account? I suspect that in the future the government may very well do that because there are times when they need to raise foreign exchange, need to raise funds quickly. We are still an investment grade economy ranked by standard and pause at the very least, even though we are the lowest notch. So they may want to take advantage of the fact that we could still get a lower interest rate comparable to other Caribbean countries, other Latin American countries, and borrow some more. So they borrow some more until at that point in time where the international credit ratings agency says, okay, well you've been borrowing consistently. Your revenue streams don't match the rate at which you are borrowing. The growth in your revenue streams aren't really matching the rate at which you are borrowing. So you get downgraded again, which now puts us in standard and pause in the speculative or junk grade region, which is where we are at with respect to Moody's ratings agencies. So you can see the ripple effect that these foreign exchange issues tend to have on, on, on other aspects of the economy. Lack of foreign exchange generation equals more borrowing to prop up the foreign reserves, which in turn hampers or harms your, your overall credit rating. [00:15:14] Speaker A: So basically we are snowballing in a direction that we definitely should not be in or heading towards at this point in time. But we are. I mean, we spoke to Mariano Brown just prior to this interview in the 7 o'clock hour and he outlined Some of the challenges to the energy sector that we just can't get away from. And when you marry that conversation with this one, this is not because immediately people start to say you're unpatriotic and you're all that kind of nonsense here. But this is about realistically assessing where the country is financially and how do we get out of some of the pitfalls that we've found ourselves in through bad management, bad fiscal management over the years. We can't get away from it. So let's talk about some of that. [00:16:02] Speaker D: And Satish, if I may jump in and just see that we will also be joined by ramps logistics and Ramps Logistics, like Maritime Capital and even your own media house are examples of local private sector organizations actually doing their part. Because all of you all actually already export your services and are earning foreign exchange. It may not be enough for even your own operations. But there are many examples of the private sector anteing up and doing what they are supposed to be doing. Satish. But at the same time, to your point, there must be an ecosystem. I mean people are tired of hearing the word, the phrase ease of doing business, but there must be an ecosystem that supports private sector organizations like these who are very much interested and very patriotic in what they're doing because they're not taking their business elsewhere. They, they're trying their best to grow and expand from Trinidad and Tobago, generate foreign exchange and provide employment and other tax revenue for the government. So I just wanted to throw that out there that we encouraging people who have that mindset, business organizations and wider civil society members to register for the event. There is no cost. Maritime Capital has chosen to underwrite this as a good corporate citizen. And again it's next week, Monday the 17th, from 10am at the Trinidad and Tobago Chamber headquarters in west moorings. [00:17:41] Speaker A: Yeah. [00:17:42] Speaker C: Ms. Maharaj Satish, if I may jump in. You talked about, you know, when we speak about foreign exchange, sometimes people think we, we are not being patriotic. This is a patriotic event, right? It is. It is because we are concerned about Trinidad and Tobago that we have decided to put this event together to come up with, as Rudy and Valmiki have suggested, a roadmap that we can use as a blueprint or starting point. Right. To shift some of the operations in Trinidad. [00:18:24] Speaker A: You, you said something that's interesting, that your concern, and it is that concern that prompted this event. What are some of the things that, that that have you concerned? [00:18:44] Speaker C: I will tell you, I mean I, I have practiced in the financial services industry for many years and at One time I held a position where, where I marketed Trinidad. All right. To attract foreign exchange. A lot of those practices have gone by the wayside. There are many things that we need to do in this country to start to generate foreign exchange. The discussion will go into detail on Monday about those avenues that we could enter into. I do not believe that we should continue to be solely dependent on fossil fuels. Fossil fuels, in my view, and Valmiki could correct me, has a best buy date of probably another five to seven years. Right. And if we don't start to shift this economy today. Right. We will be way behind the curve. Right. When that time comes. I'll give you an example. If you look at countries like Malta, what they have done, a small country, they don't have the kind of reserves that we have, but what they have been able to do in terms of services. Right. And, and to get in line with things like AI blockchain and those types of things. There is where it may not mean that we have to replicate what they're doing, but we have to find our space, right. In terms of coming up with innovative solutions for this foreign exchange problem. [00:20:28] Speaker A: Dr. Najan, earlier on you had hinted that there are things we can do and in our conversations before you've, you've suggested some of them. Let's take the conversation in that direction looking at some of the possibilities for us as a nation. [00:20:45] Speaker B: Right. So Varun spoke about the non energy sector. I just want to give a quick comment on the energy aspect of things. Energy accounts for about 30 to 40% of our economy. When the sector does well, it accounts for about 40% of the economy. When the sector does poorly, it's about 30%. Right now, oil and gas production in the last 10 years from 2014 to 2024 has decreased drastically by somewhere around 38%. LNG production in that time decreased by close to 50%. Now these are staggering figures as you can well appreciate, but the fact is that they tend to account for the bulk of our foreign exchange earnings. We live however, in a very different energy based. The energy market then compared to 2014, 2015 is very different in this day and age. Energy companies, for example, when they have to make investments globally, not just in tnt like the BPs and the shells and they go to their bankers. Their bankers prefer to see more investments, not any hydrocarbons, but more so in the renewable and greener sources of energy. So they incur, or they tend to incur higher interest costs when they want to invest in hydrocarbons as opposed to the Renewable sources of energy. So that's one factor that we in turn is an implication for us. So there's a higher, higher financing cost for hydrocarbons. These banks, these global banks have their ESG requirements that they need to fulfill. So they're looking more now down the road towards greener, more renewable sources of energy. They want to invest into those. That is one of the critical areas that we also need to start putting our, our, our direction direction in. So, so that's, that's just one aspect of the energy energy conversation. Now I would say that, that the demand for gas in particular is likely to be there at the very least within the next 10 to 15 years. Given for the mere fact that natural gas is a very clean source of hydrocarbon. It's a very clean source of fuel relative to the other hydrocarbons. But at the end of the day we have to look at issues like not just production, production and TNT is of course quite low as you'd appreciate, but we have to look at the pricing factor as well. The pricing issue has not been in our favor since prices settled after they went up temporarily due to, due to the Russia Ukraine war. Prices have gone back down. They're likely to remain low again next year because of the influx of natural gas production of LNG production provided by Qatar and to a lesser extent by Australia and the United States. When this LNG starts flooding the market, of course supply will increase and then the prices are going to drop even further, which in turn implies more lower revenues for us. Unless of course, God forbid, I mean there's some kind of a geopolitical, another geopolitical issue going on globally which raises the prices will benefit us. But in the grander scheme of things, what are the other implications of that? The government, as you know, in recent years they have implemented a new pricing strategy where the price that we get for our natural gas is a combination of several international benchmarks. It's not just the Henry hub, but they also use the Japan Korea marker, the Dutch pricing and the UK national balancing point price which tend to go on the higher side. But when global prices fall, these prices fall as well. So that's on the energy side of things. I see that they're going to have another 20, 25 bid rounds. I'm hoping for the sake of our, our national development prospects on our boosting then the prospects of boost our natural gas production that this bid rounds is more successful compared to the success that we've had in the more recent deepwater bid rounds. So that's on the energy side of things. Varun also spoke about himself as someone who would have traveled extensively and tried to market TNT from as a financial hub, the standpoint of a financial hub. Did you know that since 2019, according to the Central bank data, between 2019 and 2023, our investment in international assets, or net investment in international assets increased by a whopping US$7 billion. So from 23 billion to 30 billion US 2019 to 2024. And that is monies that we know about, investments that we know about. You'd appreciate that we have a figure. Mala Duke, one of my colleagues, she spoke about it a lot. The errors and omissions and the balance of payments, that is where. That is where things that are not accounted for are categoried into that Internet errors and omissions. That 7 billion I'm talking about is what we know of. There are other investments that are made that are unaccounted for that will be captured by that net errors and omissions. So tn. So, so, so, so just to make a long story short, we are investing our local private sector investors from Trinidad and Tobago are investing quite a lot in the international markets, in assets in the international markets. And the question is why? That is a substantial leakage of foreign exchange from the economy. And the reason is quite simple. One, the confidence is solely lacking in our economy. There are many, many individuals who may have access to foreign exchange. They simply don't feel that they can get a healthy return on that foreign exchange, a healthy return by extension on their financial capital in our local markets. So what do they do? They turn to the foreign markets where they can get a healthier rate of return and also where they deem it to be less risky. I mean, when you look at, just a quick example, when you look at the United States fixed deposit, there you can earn about a 4% on a fixed deposit here in Trinidad and Tobago. What are you earning? If you're earning 1%, that's plenty. So naturally, those who have the wherewithal to do it, those who have the US the foreign currency, could be net exporters who earn foreign exchange. They may choose very well, choose not to remit all that money back to the local banking sector to take a portion of that and invest it abroad, that is monies that can be used urgently in Trinidad and Tobago. So one quick solution that we need in the short term, we have to find ways to diversify our financial market in Trinidad and Tobago to make it not just less risky, but to provide healthier returns and more options for Investors in TNT and by extension from foreign investors abroad to bring their monies into Trinidad and Tobago. [00:27:56] Speaker A: Really interesting discussion about some of the possibilities and some of the actual things that are taking place and how they're impacting on the economy. The next question, it's not meant to take the discussion to a political level, but politics impacts on everything that we do. And just as we had the conversation with Marianne O. Brown prior, we have a general election due this year and whoever wins the general election is going to be in charge of the country to navigate us through some very, very trying times. The energy sector on its own has its challenges, the economy directly related to what happens in the energy sector and so on. This administration, and this is not about whether you like the administration or you do like them, they have a problem taking advice and it's clear they set up their own committees, Energy and Economic Advisory and Roadmap and everything else, and didn't listen to their own committees. Do we need. You could tell me. Yes, you could tell me. No, you could tell me you really don't want to answer the question. Do we need somebody else who will take the advice of industry experts to guide us through the next five years, or do you all have the confidence that if enough voices are raised, whoever it is, if it's the same administration for 15 straight years or whatever, they're going to take heed? No. It could be an uncomfortable question and I don't want to take you all into the realm of politics per se, but it's something we need to consider. We have to weigh this element of the discussion. If for 10 years you have people who not listening or don't seem to be taking all the suggestions and the advice that put forward by everybody, not everybody could be UNC and against the government when they're making their point. That's a fact. Do we need a change or can we get these things done if we keep the status quo? [00:30:08] Speaker C: I think we need a change of our approaches to dealing with problems. [00:30:13] Speaker A: Okay, Right, right. [00:30:14] Speaker C: And we have to look at some of the mechanisms that exist outside of Trinidad and Tobago that have addressed similar situations. [00:30:22] Speaker A: Okay. [00:30:22] Speaker C: Right. Some countries that come to mind are countries like Mauritius, Malaysia. For some time they had set up certain committees where we had representatives from private sector government and the public service. And one that comes to mind is a whole committee dealing with ease of doing business. Right. We have to look at the tri sector approach for some of these problems so people believe that they're involved and they have ownership. [00:30:58] Speaker A: Yeah. You know. [00:31:00] Speaker C: Right. We cannot leave Some of these problems solely to the government. [00:31:08] Speaker A: Okay. [00:31:10] Speaker C: Because then it gets lost in politics. [00:31:12] Speaker A: Yeah, I understand. [00:31:14] Speaker D: Satish, you would hear number of private sector interest groups talk about victimization and if there is power in numbers, regardless of which administration, administration takes governance in a few months time. The fact is on Monday you have some of the most powerful private sector organizations coming together I want to say for the first time in a long time and really committing to pushing this agenda forward. So you may actually see a different response from the administration present or new if such takes effect. So just bear that in mind. But we do call upon other private sector interest groups and civil society to join us because you really have to lobby effectively. And as I said, there's power in numbers. [00:32:05] Speaker A: I looked at the information sent about the forum and some of the players, the persons expected to speak and so on. It really is a high caliber event. I've often said. I mean I could say it, you all don't need to be able to say it. I could say, because I've often said that if the business community makes together the administration uncomfortable and I mean talking protests and that kind of thing. But there are ways, diplomatic ways in which things can get done. If there is enough driving force behind it, maybe we can see some of the changes that people are suggesting we need to make. Dr. Arjun spoke about all the different ways that we can get this thing going. And I remember a case with, I think it's Costa Rica or some one of these Latin American countries where they invested heavily in farming and in investing in the farming they didn't just change the economy, they changed the lives of the people. And to the point where they're producing so much they could export. And there was another one, I think it was Mexico and subject to correction where they used so much corn, I think it was 98% of the corn that they were using they were importing from the US and they banned the importation of corn from the US forcing local production to the point where now they export in they have so much. And it just goes to show that if there is a will, you're definitely going to find a way. The question is, do we have the will at the level that we need that will? Conversations like these, events like these go a long way in shaping the discussion, in putting all the points together in a manner that can be collectively put forward. And whenever there is a collective voice, strength in numbers and just from the conversation that we've had this morning, anybody listening in would be anxious to be a part of or to view to listen this conference that's going to take place next week simply because of the viewpoints that are being put forward. Nothing that we spoke about this morning I consider to be political in nature or nobody in vexed with the government, nobody like them or it's not about that. And far too often when we have conversations like these people want, some people want to take it down that road to nullify what is being said simply because they don't like how they feel it will make somebody look we need to mature up for sure. The conversation this morning tells me that the conference that's going to take place next Monday is definitely a step in the right direction. So as we're almost out of time, let me just allow you to give us the details of the conference once more. And if people want to get involved, how they can do so. [00:34:52] Speaker D: Certainly it's very easy. There is an email address registrationarytime financial. You can look for our social media handles on LinkedIn and Instagram and the information is really very easy to access by Googling the Chamber February 17:10am to 12:30pm As I said, there's no cost reach out to us to register. There are a few spots still available and as you said, it definitely is going to be a worthwhile discussion. You want to be part of it because. Because the attendees are going to help inform the roadmap and you want to be able to say that you did your part to really solve this crisis. [00:35:35] Speaker A: Gentlemen, I want to thank you, all three of you, for being with us here this morning and giving us a lot more to think about. Because as a nation, sometimes I don't think that we have the right conversations shouldn't say the right conversations, but the the depth of thought in many of the conversations that we need because of the challenges that confront us as a nation. I want to thank all three of you for being with us here this morning and all the best on your conference next Monday as well. And ladies and gentlemen, this is where we drop the kitchens. The best insight, Instant feedback Accountability the. [00:36:12] Speaker B: All new Talk Radio Freedom 106.5.