Free «Trinidad Investment with the USA» Essay Paper

Introduction

Trinidad and Tobago are islands that make up the Trinidad and Tobago country in Latin America, covering an area of 5,128 square kilometers with a population of an estimated 1.2million. Whereas the country is made of the 2 islands, it is generally referred to as Trinidad since most of the land and population is in the Trinidad Island.

 The country is English-speaking, multicultural and according to the World Bank Trinidad and Tobago Country Brief, the country is “rich in cultural diversity and natural resources that has one of the highest per capita incomes in Latin America and the Caribbean” (World Bank, 2011). Moreover, the brief states that “growth in Trinidad and Tobago has averaged 6 percent per year since 1994, among the highest levels in the Latin America and the Caribbean region” (World Bank, 2011). Additionally, “Trinidad’s economy is largely based on oil and gas, which currently account for 40 percent of GDP and 80 percent of exports, but only 5 percent of employment and the country has become a major financial center in the Caribbean” (World Bank, 2011).

 

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Additionally, the country has a development strategy dubbed Vision 2020 Draft National Strategic Plan that is supposed to make Trinidad a developed country by the year 2020. Latimer (2008), comments that the plan “seeks to strengthen the economy, encourage technological and scholastic advancement and raise environment consciousness of the nation as a whole by the Year 2020”. The key pillars to the achievement of this objective are “developing innovative people, governing effectively, enabling competitive business, nurturing a caring society, and investing in sound infrastructure and environment” (World Bank, 2011). To help achieve this, the World Bank has provided funds in credits and grants to assist in “projects in the areas of education, health, water and sanitation, and public sector” as well as particular attention to the  HIV/AIDS Prevention and Control Program  (World Bank, 2011).

Demographics of Trinidad

As previously stated, Trinidad has an estimated population of 1.2million. The Encyclopedia of the Nations states that the population of Trinidad has been declining due to “emigration and government-sponsored birth control programs,” citing the reason for the emigration as the “search of better work opportunities and higher wage levels than those available at home” (Encyclopedia of the Nations, 2012). Additionally, the Encyclopedia notes that “Trinidad and Tobago has one of the most ethnically diverse populations in the Caribbean” comprising of descendants of East Indians, Africans, Mixed Africans and Indians, Chinese, Portuguese, Middle Eastern and other peoples of European descent (Encyclopedia of the Nations, 2012). The country is multi-religious due to the diversity of the people with Catholics, Anglicans, Muslims, Hindus, Jews, and Afro-Caribbean syncretic groups.

The Industry is dominated by oil and gas. Trinidad has been extracting petroleum since 1950s and has good reserves. It is estimated that there are reserves of “2.6 billion barrels of oil and gas reserves standing at 22.9 billion cubic feet” and that recent research has found that “there may be even greater reserves of gas and oil off the shores of Trinidad” (Encyclopedia of the Nations, 2012). The World Bank notes that “The country’s challenge is to develop a national consensus on how to utilize the abundant revenues from the energy sector to build a solid base for sustainable development” (World Bank, 2011).

The manufacturing sector relies heavily on the natural resources and is comprised of heavy industry in steel, cement and petro-chemicals such as, methanol and ammonia. In the year 2000, Trinidad was the world's largest exporter of methanol and the leading exporter of ammonia. This and other processing industries such as cement, food, drink and glass are made possible by the availability of cheap fuel (Encyclopedia of the Nations, 2012). Moreover, this has made the country a well-known investment site for multinational businesses.

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 There is a thriving tourism sector in Trinidad which did not receive much attention from the government initially. The country’s beaches, people, culture and biodiversity present an opportunity for the country to generate further revenue from its other natural resources, and thus reduce pressure on oil and gas to meet the economic needs of the country. Most tourists are business travelers, but during the annual carnival in February, tourists surge the country to witness the calypso and steel band music. Many of the visitors are from the United States of America (Encyclopedia of the Nations, 2012).

Trade and Investment with the USA

During the 18^th American Chamber of Commerce for Trinidad and Tobago Annual General Meeting in Port of Spain, the Trinidad Minister of Trade attributed the existing trade and investment ties between the two countries to “economic liberalization”. According to the minister’ speech, Trinidad and the USA have “enjoyed robust, dynamic and cordial commercial relations”. Further, the minister noted that “U.S. firms have invested more than a billion dollars in recent years - mostly in the petrochemical, oil/gas, and iron/steel sectors” (Government of the Republic of Trinidad and Tobago, 2011). This could only have been possible due to the existing cordial relations that enabled both partners to benefit from the relationship.

The minister further stated that the U.S is the Trinidad’s largest trading partner, “absorbing 52% of our exports and providing approximately 31% of our import needs” and that products for export to the U.S included “natural gas, methanol, natural gas, methanol, ammonia and urea as well as aromatic iron and steel, sweetened aerated beverages, bitters, fish, cut flowers, beverages, sugar confectionary” while Trinidad imported “machinery and parts, food and beverages” (Government of the Republic of Trinidad and Tobago, 2011). This movement of goods between the two countries enabled Trinidad to pay its debts and thus the country could afford to have surpluses that helped the economy to grow.

However, the ideal location of the country makes it an important site in the transport of narcotics from South America to the U.S. Since the Islands are only a few miles from their neighbors, narcotics are often taken to the islands on boats then flown to the US. The prevalence of drugs in the country has led to increased insecurity in Trinidad, especially in the slum areas, where shootings are becoming common. The U.S has been working with Trinidad to quell the menace by assistance in drug interdiction, especially in financing the war against trafficking through the State Department's Bureau of the International Narcotics and Law Enforcement funds. The challenge of insecurity may hinder investors who would choose a less dangerous place to live and work in; therefore, the country needs to step up efforts in stopping drug traffickers and drugs on transit through her planes and boats.

Future of Trade between U.S and Trinidad

Socially, the country is known to have problems such as, transshipment of narcotics, many violent crimes, money laundering, police corruption and domestic violence. These issues are a major consideration for investors wishing to live and work in the country since they would affect the investors directly or indirectly through staff. Ecologically, the challenges existing in Trinidad are pollution of water sources from agricultural chemicals, sewage and industrial wastes. Moreover, there has been oil pollution of beaches harming the marine ecosystems as well as widespread soil erosion. There has not been much mention of efforts to step up environmental conservation since the government priority is in economic development, but the development needs to be sustainable, in tandem with the Vision 2020.

The U.S. Department of State Background Note on Trinidad and Tobago provides a holistic look at the state of affairs in Trinidad, which can act as a guide on the future of trade between the two countries. It looks at the key issues that can affect an investor’s choice in investing in the country. These issues include political climate, infrastructure, communication, and future opportunities for development.

The primary U.S interest in Trinidad is to “increase investment and trade, and ensuring more stable supplies of energy” (Infoplease.com, 2012) for the industries at home.  Additionally, the U.S helps in “enhancing Trinidad and Tobago's political and social stability and positive regional role through assistance in drug interdiction, health issues, and legal affairs (Infoplease.com, 2012). The importance of this is to engender a peaceful economic climate that does not hinder trade, investment and development of Trinidad.

The Background Note attributes the growth in Trinidad’s GDP to the “economic reforms, tight monetary policy, fiscal responsibility, and high oil prices” praising the government for its “continued, sound macroeconomic policies” (Infoplease.com, 2012). Since the government is a democratic one, the citizens are free to pursue their individual dreams and the net result of each person’s economic activity is national economic growth. Democracy is critical in ensuring that individuals have the freedom to pursue personal dreams and aspirations.

The note further commends Trinidad for its “open investment climate” as the government made it easier to attract foreign investors by eliminating “almost all investment barriers”. Moreover, Trinidad has “a double taxation agreement, a Bilateral Investment Treaty and an Intellectual Property Rights Agreement with the United States” which makes it easier for U.S companies to trade and invest in Trinidad (Infoplease.com, 2012).

Infrastructure is a key consideration for trade and investment in any country. While Trinidad’s road network, power and drainage systems are adequate, they are not sufficient to support the level of development that the country is aiming at. Moreover, “the telephone service is modern and fairly reliable, although significantly more costly to consumers than comparable U.S. service, including for wire line, wireless, and broadband services” (Infoplease.com, 2012).
However, “infrastructure improvement is one of the government's budget priorities, especially rehabilitating rural roads and bridges, rural electrification, flood control, and improved drainage and sewerage” (Infoplease.com, 2012). This is encouraging for foreign investors to know that basic utilities are available so that they are able to get a good return on their investment.

Conclusion

Despite the aforementioned challenges, Trinidad is a success story in comparison to its neighboring countries in the region. According to the U.S. Department of State Background Note on Trinidad and Tobago, “long-term growth looks promising, as Trinidad and Tobago further develops its oil and gas resources and the industries dependent on natural gas, including petrochemicals, fertilizers, iron/steel and aluminum. Additional growth potential also exists in financial services, telecommunications and transport” (Infoplease.com, 2012). Therefore, one can conclude that the continued relations between the U.S and Trinidad will be mutually beneficial for a long time to come.