Episode Transcript
[00:00:01] Speaker A: The best insight, instant feedback, accountability, the all new Talk Radio Freedom 106.5.
[00:00:20] Speaker B: Welcome back. Well, as I said, joining us now, a pretty interesting discussion session on things related to the economy, the energy sector, where we are and where we need to go. Let's welcome back to our program former Energy Minister Kevin Randall. Good morning to you and it's nice to have you with us here this morning.
[00:00:39] Speaker C: Hi, good morning. Good morning. Are you hearing me?
[00:00:41] Speaker B: Yes, we hear you loud and clear. It's nice to have you with us. It's nice to have you with us.
[00:00:45] Speaker C: Yeah, yeah. It's been a while.
[00:00:46] Speaker B: It has been a while. And definitely this discussion is a pertinent one because we're coming to the end of the year and usually at this point in time, it's a time for reflection and it's a time for many people to basically plan where they want to go and some of the things they want to achieve. And as a nation, it should be no different for us.
We've not spoken for quite some time and there's a lot that has happened in the energy sector and when it comes to our economy and all these kinds of things. Let me allow you the opportunity to give us a basic summary of how you think things have gone.
[00:01:22] Speaker C: Yeah, well, hi and good morning to you, Satish, and good morning to all the listeners.
We are on the eve of 2025 and it's, it's, it's important to try to understand where we are economically and where we are heading in the next couple of years. So both the Prime Minister and the Minister of Finance in different indifferent fora have indicated the minister finance, through an affidavit in the matter of Duray versus the Attorney General, that's the TTRA matter which went all the way to the Privy Council.
And this the Prime Minister about two or two or three months ago at an Atlantic LNG function said that both of them said that the next two years, two to three years, two and a half years, will be a difficult time for Trinidad and Tobago.
I think the Prime Minister, I don't want to quote him wrongly, but he said something to the effect that we would have to hold strain. Is that a correct term?
[00:02:36] Speaker B: Yeah.
[00:02:38] Speaker C: Right. And the Minister of Finance under, you know, in an affidavit in support of the state's case in that matter of the reverse is the Attorney General said the same thing. So this is coming from the government themselves.
I have been saying that same thing and I have evidence of where I said it on social media. I've Been saying that same thing for a couple years now, since, I think, 2022. I went back and I found the AZP news article where I said that back in 2022, that we were heading into a pretty difficult period from, let's say, 2024 to 2025, 2026, 2027. And that all has to do. And that is manifesting itself already in the forex situation, which is one of the burning issues in Trinidad, that forex situation. If you were to ask the public and the business community, do you think it will get better in 2025? The answer is no. It's gotten progressively worse in the last decade. It's not. It's not a new problem, it's a problem that has been with us for a while, but it's gotten progressively worse. And what I find very interesting is the extent to which many of this, many of the public commentators who are, quote, unquote, people who have a background in economics and finance and so on, have failed to make the connection between the decline in the energy sector and the availability of foreign exchange.
So the decline in the energy sector, which is statistically obvious, you have a 35% decline in natural gas production in the last nine years, you have a 35% decline in oil production in the last nine years, would obviously impact the flows of US dollars coming into Trinidad and Tobago. So how does us. How does the US dollar or foreign exchange get into the commercial banks? And it does do. It does. So when government, when government collects, when the central bank sells. Sorry, when the central bank sells US dollars or foreign exchange to the commercial banks, that's one conduit. The second conduit would be when companies or members of the public sell US dollars to the banks. And they do.
And that is actually the larger of the two sources. So the banks would purchase 4 to 5 billion US dollars a year from, quote, unquote, the public.
And who is selling that volume of US dollars to the banks? Well, certainly it's not you and I, and pretty sure it's not people listening to the program who are selling four to US$5 billion a year to the commercial banks. So who has the capacity in Trinidad to be able to sell that kind of us to the banks? And there are only a few suspects. And they're all from the energy sector. Right. In particular, there are five companies in Trinidad, I wouldn't call their names, which dominate those sales to the commercial banks. And then the central bank intervenes in the market by selling foreign exchange to the commercial bank. So there are Two conduits, one central bank selling to the commercial banks and two conversions mainly by energy companies, of US dollars to TT dollars. Why would energy companies need to convert US dollars to TT dollars? Well, some of their contracts are denominated in TT dollars.
Some of, some, some of them have to pay some of their taxes in TT dollars. So that means they have to convert US dollars because they earn US dollars and then they need TT dollars for general running other companies paying salaries, paying contractors, you know, renting equipment and so on. It's all done in Trinidad Tobago dollars. So both those, both those pipelines, those, those conduits of US dollars to the commercial banks have dried up the cup. So and what has happened at the same time is that the demand for US dollars at the doors of the commercial banks, who are the, you know, in the commercial banks, has gone up post Covid. So the commercial banks are now selling about US$6 billion per year to the public, whereas in the COVID years they were selling about 4 billion per year in the same time. Now in these last couple months, probably last 18 months, the level of conversions, that is people selling US dollars to the commercial banks has come down and that's because of lower energy sector activity. So there's less need to convert. And it's also because the government issued a VAT bond last year and most of the people who owed VAT most of the VAT rebates, about 70% of the VAT rebates were owed to guess who, to energy companies. So they were, they, of course they, they took the VAT months, right?
And of course when they took the VAT bonds they had lots of TT dollars, so there was less need for them to convert.
So that vatmond issue coupled with the lower levels of activity meant that energy companies were converting less US dollars to TT dollars, meaning that the commercial banks had less US dollars. At the same time, the capacity of the central bank to intervene in the market has been pretty flat.
So the central bank data shows that the central bank's interventions in the commercial banking sector are around 1.2 to US$1.4 billion a year. So therein lies the issue, the shortage in that environment, the black market is of course going to grow and we have, as I said, that's simply the laws of economics, the laws of supply and demand. Where supply cannot meet demand, demand will go elsewhere and purchase it at a higher price. That's basic supply and demand laws.
So the Forex problem will persist in 2025 mainly because one, the volume of natural gas Production will continue to decline in 2025, despite the fact that we have new projects coming into production in 2025. The natural gas that those projects will add will be outpaced by the declines taking place in mature gas reservoirs, gas fields, gas reservoirs, and so on. Oil production in 2025 will continue to fall. It fell by 7% in 2024. It'll probably fall by another 7% in 2025. That's sort of like the average decline. There is no project on the horizon in the oil industry, not the gas industry, the oil industry that anybody could point to, that will bring significant volumes to change that downward trajectory. So gas production and oil production will continue to fall in 2025. And that impacts, for those listening, that impacts your credit cards, your credit card limit, your credit card, the ability of your. Of your bank to make foreign exchange available to you via your credit card. The amount of US available per cycle, right? And Trinidadians have now discovered what their credit card cycle is because they have to. There are many people who didn't know what a credit card cycle was right now. They know that there's something called there's a replenishment of the amount of US dollars available to you on your credit card. For some banks, it's middle of the month, right? So people now are becoming more conscious of their credit card cycle. So the foreign exchange issue is directly related to the energy sector decline.
I have seen where prominent persons in the media and so on have said, the problem is distribution. The problem is distribution.
Well, if your pond is shrinking, then it doesn't matter how much different hoses you put to drain the pond. You have less water in the pond change. We simply have less foreign exchange flowing into Trinidad. And at the same time, the level of foreign exchange being demanded has increased, driven largely by credit cards, by the way. So a lot of small and medium enterprises in Trinidad depend on their credit cards, whether it's personal credit cards or whether it's business credit cards, to run their business. That's simply how it is. Some SMEs, they have multiple credit cards. One company I was speaking to recently was giving me an example of how this thing has interrupted their lives. They had to send a number of the employees abroad for training. And of course, that meant they had to buy airline tickets and pay for hotels and give them, you know, spending money and all these things. And all that was. All that was. What used to be a simple task became a very complicated and problematic task. So the foreign exchange issue is going to persist in 2025. Gas production is going to continue its decline. It fell by 4% in 2024, probably going to fall by another 4% next year. Oil production, as I said, continues to trend downward.
The economy, the Minister of Finance, of course, says the economy is growing and he's correct. But where is that? When you do a disaggregation of the real GDP numbers, which is where the growth is measured from. That growth is largely coming from something called taxes, less subsidies on products, which is a non productive activity. So the growth is really coming largely from when you consider the application of taxes, which is, as I said, that's not like you're producing more oranges or more avocados or more natural gas or more oil or more methanol or you're opening more radio stations. That is coming not from a productive activity. So the economy is growing not because we are producing more stuff, but because of this little statistical application of the GDP's role, the role of taxes, particularly VAT in the economy.
So that, and then we come to the issue of crime.
Now we are going, we are think, I think we are now at 597, 598 murders. We all know the famous DJ Sheriff who tracks these numbers. Sometimes I know people who, at the University of the West Indies who rely on DJ Sheriff's numbers because he's pretty accurate.
There's a variance of course between his numbers and the official police numbers and that might be for differences of classification and so on of how persons meet their demise. But we are more than likely going to have 2024 being the most murderous year in history of Trinidad.
And that trajectory is not going to change in 2020. It's not going to change suddenly on the 1st of January, 2025 because the variables which have created us that, that that trend are still with us. And there's a relationship between what's happening in the economy and there's, and the crime in Trinidad and Tobago.
Of course, less economic opportunity, less economic activity always lays the groundwork for crime. The other thing. So crime is going to continue and it's pretty much all bad news. And if you have any good news, please, you know, please stop man, to know what you think the good news is.
[00:15:37] Speaker B: Well, when it comes to good to good news, I don't know this.
[00:15:43] Speaker C: The good news is that there's an election next year.
[00:15:46] Speaker B: I don't know this could be considered good news or not, but the population has been fed the, the perspective that things are going to get better around 2027.
And everything that we hear from the The Prime Minister, the Minister of Energy and supporters of the Government of the day and others speak to this timeline.
[00:16:07] Speaker C: Well, you see, this is, this is politics. Politics is about creating hope.
And so, so the Prime Minister said whole strain until the second quarter of 2027. The Minister of Finance said something similar in his affidavit. You know that there is, you know, something coming that, that's, that's a Manatee project. That's his Shell Manatee project which starts production. Prime Minister said mid-2027. My understanding he is entitled to his. He has his information, which I think he gets from good sources, but I also have my information is that it's more likely to be the third quarter of 2027. And if you think about it, natural gas, natural gas projects don't come on like a snap of a switch. They take months to ramp up. So the full impact of Manatee won't be felt until 2028. And when, when it does come, Satish, yes, our gas production would have fallen so badly that Manatees, Manatee's addition, but it adds to natural gas production, only takes us back to our 2022 level of production. Well, so it is, it is important, but it is not going to be, it is not going to precipitate what I heard one minister referring to as a boom.
There is no boom coming for Trinidad Tobago. Right. If a boom has to come, you will have to get deep water gas to be produced concurrently with gas from Manatee and Dragon. And all these things would have to come in around the same time. I don't see that happening. So they are fighting. We are chugging along to 2028. And when 2028 comes, we will have some improvement. But it's not going to be anything which is going to wow us.
Before I forget this very important point, forgive me for digressing a bit. Another issue is the stagnation of wages in Trinidad and Tobago. And many people listening will appreciate what I'm. Of course, wages have not stagnated in the parliament and in other places because we all read that parliamentarians and other public officials and so on have gotten or will get a wage increase based on the recommendations of the SRC.
But we have public servants now working on 2013 wages, 2013 salaries in the year 2024. So in that period of time, there would of course been an erosion of the purchasing power of the Trinidad Tobago dollar.
One economist at the university has put it at about 25% erosion in purchasing power. So it means that, you know, and that was over a 10 year period. So it means that if you could go in a grocery with $100 and buy 100 items costing a dollar each in 2014, today that $100 will buy 75 of those $1 items. All right, so I mean to use a simple analogy, if 10 years ago you could have walked into a grocery and bought 100 dinnerments with a hundred dollars, now that hundred dollars buys 75 dinnerments. To use a very simple analogy. So the purchasing power of the Trinidad and Tobago dollar is, has been eroded. Wages are stagnant.
And it's the same thing actually, which, you know, has happened in England, it has happened in the United States, it is happening in, I think in a worse manner in Canada. Canada is pretty much in economic doldrums.
And this is a lot of this has to do with what happened during COVID During COVID you had a lot of dislocation of production in places like the United States and in places like Western Europe and so on where you had those lockdowns. And Trinidad, of course, had one of the most severe lockdowns in the world. We closed schools for how long? About 18 months.
And schools themselves are generators of economic activity. You would agree that when school is open, the retail sector has more sale because parents have to buy stuff for children, children, people traveling and so on. And then we had the lockdown of the borders in this country for about 16 months and so on. So the COVID period, we are paying a price for how deep those lockdowns went in Trinidad. Australia might be the only country in the that had a harsher lockdown than Trinidad.
So that dislocated a lot of the SME sector and I think it reduced the productive. Trinidad's economy has not. I do have the numbers here right now, but our real GDP has not returned to its pre Covid level. Whereas for every Caricom country the reverse is true. They have recovered to their pre passed. They have gone past what their pre Covid real GDP was.
So the exception of Trinidad. So that is where we are. It is definitely. I agree with the Prime Minister and the Minister of finances assessment that 25, 26, 27, although the Prime Minister said we decided to come out of it by 2027, I don't think we're going to see any significant material relief until 2028.
[00:22:07] Speaker B: Yeah.
[00:22:09] Speaker C: And in those. And in those years, and that's a three year run where how are we going to generate the revenues that are required to run this place?
[00:22:22] Speaker B: Yeah.
[00:22:23] Speaker C: To pay salaries and. And it's going to come from borrowing.
[00:22:27] Speaker B: Well, I know that.
[00:22:28] Speaker C: And what does that. And when you borrow money, what is a natural consequence of borrowing money? You have to pay back.
[00:22:35] Speaker B: Yeah, that's, that's this, this is where we're gonna have to leave it because we are also A couple messages to take us up to the top. But you've put so much on the plate when it comes to, when it comes to where this country is going to be financially until 2028 or whenever it is, we were expecting this, these, these developments to kick in and help us one way or the other. We're definitely going to need to have some more conversations on this because we've only just scratched the surface. Can we survive?
[00:23:05] Speaker C: And when we speak again, we will speak to what are the solutions because it is not an intractable position that we are in and we could bounce back from this, but it's going to take probably about three years to fully bounce back from this. And it requires a greater appreciation for the role that the private sector could play in resuscitating this economy.
[00:23:29] Speaker B: Definitely the platform for our second discussion on this topic. I want to thank you for being with us here this morning and putting all of these matters for us to discuss and probably evaluate as we move forward. Once again, thank you for being with us here this morning.
[00:23:40] Speaker A: The best insight, instant feedback, accountability the all new Talk Radio Freedom 106.5.
