Af­ter 60 years, Trinidad and To­ba­go’s econ­o­my has seen many up and downs, but ac­cord­ing to lo­cal econ­o­mists the coun­try has not max­imised its po­ten­tial.

“The Trinidad and To­ba­go econ­o­my has achieved a lot but has not re­alised its full po­ten­tial,” said en­er­gy econ­o­mist, Gre­go­ry McGuire, who not­ed that the coun­try had gone through two pe­ri­ods of rev­o­lu­tion and two en­er­gy booms.

Both, he said, made tremen­dous im­pact to us and our econ­o­my.

Dr Lester Hen­ry, who wrote a re­view of the T&T econ­o­my in the book Hand­book of Caribbean Economies, ex­plained that the coun­try had ben­e­fit­ed due to the ear­ly dis­cov­ery of oil. As a re­sult, he ex­plained, Trinidad and To­ba­go de­vel­oped dif­fer­ent­ly to the rest of the Caribbean re­gion as its econ­o­my has been dri­ven by en­er­gy ex­ports.

Hen­ry not­ed: “For this rea­son, it has been main­ly clas­si­fied as a mid­dle-in­come de­vel­op­ing coun­try since its in­de­pen­dence from the Unit­ed King­dom in 1962. For ex­am­ple, in 2012 ‘its gross na­tion­al per capi­ta in­come of al­most US$22,000 (pur­chas­ing pow­er par­i­ty) was more than twice the av­er­age for Latin Amer­i­ca and the Caribbean as a whole’. Hence in re­cent years Trinidad and To­ba­go has grad­u­at­ed to a high-in­come coun­try.”

In the first decade of in­de­pen­dence, both econ­o­mists not­ed the gov­ern­ment had stuck to a se­ries of de­vel­op­ment plans.

“We start­ed up very nice­ly with de­vel­op­ment plan­ning. The first five-year de­vel­op­ment plan and then the sec­ond five year plan,” said McGuire, “We start­ed a cam­paign called buy lo­cal in the late ‘60s, it is sig­nif­i­cant that start­ed then be­cause it is a thread that comes through the whole eco­nom­ic his­to­ry.”

Dr Hen­ry not­ed while the coun­try gained its in­de­pen­dence in 1962, there had been in­ter­nal self-gov­ern­ment since 1956. The gov­ern­ment is­sued a se­ries of five-year plans start­ing with the First De­vel­op­ment Plan (1958–62) which was de­signed to ad­dress the prob­lem of “back­ward­ness”, over­com­ing re­liance on pri­ma­ry com­mod­i­ty ex­ports, oil and sug­ar.

This was fol­lowed by the Sec­ond De­vel­op­ment Plan (1964–68) which iden­ti­fied un­em­ploy­ment and de­pen­den­cy as two key is­sues fac­ing the coun­try. The Third De­vel­op­ment Plan (1969–73) Dr Hen­ry stat­ed recog­nised the need for greater di­ver­si­fi­ca­tion with­in the econ­o­my to over­come struc­tur­al prob­lems such as per­sis­tent un­em­ploy­ment and the de­pen­dence on ex­ter­nal par­ties for de­vel­op­ment.

How­ev­er, by the 1970s the de­vel­op­ment plans were dis­card­ed as the coun­try ex­pe­ri­enced the first oil boom.

McGuire ex­plained it was the oil boom as well as the Black Pow­er rev­o­lu­tion that shook the gov­ern­ment’s ap­proach.

“Those events in 1970 re­al­ly changed a lot of think­ing, it changed a lot in terms of the di­rec­tion of the econ­o­my and it changed a lot in terms of the choic­es that gov­ern­ment made,” he said. “Er­ic Williams recog­nised there were things that were con­cerns that need­ed to be ad­dressed such as build­ing lo­cal ca­pac­i­ty.”

But with the mon­ey flow­ing from the en­er­gy sec­tor, the pri­ma­ry fo­cus stood there.

“The ini­tial oil boom for us in Trinidad, it was for­tu­itous in a dou­ble way, be­cause with prices in­creas­ing and pro­duc­tion in­creas­ing, be­cause of the new­ly found oil off the east coast, with that dou­ble wind­fall, every­thing changed. Plan­ning went out the win­dow be­cause we went from project to project,” McGuire ex­plained.

Hen­ry wrote: “The rev­enue wind­fall from the first oil shock of 1974 brought many tan­gi­ble ben­e­fits to the coun­try. For ex­am­ple, gov­ern­ment ex­pen­di­ture rose from TT$448 mil­lion in 1973 to TT$3,337 mil­lion in 1980, more than a sev­en-fold in­crease, while cap­i­tal ex­pen­di­ture in­creased from TT$108 mil­lion to TT$2,418 mil­lion dur­ing the same pe­ri­od. This al­lowed the gov­ern­ment to car­ry out sig­nif­i­cant in­fra­struc­ture projects, in­crease spend­ing on trans­fers and sub­si­dies, and raise salaries in the pub­lic sec­tor. How­ev­er, by the end of this pe­ri­od, the pe­tro­le­um sec­tor was still dom­i­nant, and the prob­lems of in­fla­tion, un­em­ploy­ment and pover­ty still plagued the econ­o­my.”

But while the 1970s pushed growth, the 1980s Dr Hen­ry ex­plained: “Can best be de­scribed as a decade of stagfla­tion.”

He not­ed un­em­ploy­ment and in­fla­tion re­mained high through­out while from 1983–89 there was an av­er­age an­nu­al fis­cal deficit of 4.7 per cent of gross do­mes­tic prod­uct (GDP).

McGuire said the death of Prime Min­is­ter Er­ic Williams, as well as the col­lapse of the en­er­gy sec­tor, pushed the coun­try in­to a pe­ri­od of neg­a­tive growth de­spite at­tempts to in­cen­tivise oth­er sec­tors.

“In­cen­tives giv­en to the man­u­fac­tur­ing sec­tor back in 1983 re­al­ly set a lot of in­vest­ment in man­u­fac­tur­ing and I think the first time the Trinidad and To­ba­go man­u­fac­tur­ing sec­tor showed some sig­nif­i­cant growth, par­tic­u­lar­ly win­ning mar­ket share across the re­gion. That was sig­nif­i­cant be­cause as peo­ple recog­nised that the old prices had fall­en and the econ­o­my had got­ten in­to that rot and was quick­ly nose div­ing, they were mak­ing in­vest­ments and mov­ing things for­ward,” said McGuire, “so dom­i­nant was en­er­gy that notwith­stand­ing that man­u­fac­tur­ing was grow­ing,

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it couldn’t sup­ple­ment the de­cline in en­er­gy and down came the econ­o­my and down came every­thing crash­ing in 86/87.”

Dr Hen­ry point­ed out there was sig­nif­i­cant mi­gra­tion of rel­a­tive­ly skilled labour dur­ing that decade while Re­al Es­tate prices col­lapsed and there was al­so sig­nif­i­cant cap­i­tal flight.

He ex­plained a com­pre­hen­sive ad­just­ment pro­gramme was ini­ti­at­ed in 1986 as the coun­try was forced to re­think its ap­proach.

Dr Hen­ry not­ed, “These pol­i­cy shifts came as a re­sponse to the col­lapse of the oil boom and sev­er­al years of neg­a­tive eco­nom­ic growth. The coun­try’s need to ac­cess re­sources from the In­ter­na­tion­al Mon­e­tary Fund (IMF) would al­so have con­tributed to the ur­gency with which they were im­ple­ment­ed. The gov­ern­ment was al­so re­quired un­der the IMF’s struc­tur­al ad­just­ment pro­gramme to resched­ule its ex­ter­nal debt. This debt peaked at US $2.5 bil­lion at the end of 1990.”

The 1990s, Dr Hen­ry said, “Marked a pe­ri­od of tran­si­tion from neg­a­tive to pos­i­tive eco­nom­ic growth. Fol­low­ing the neg­a­tive growth of the pre­vi­ous decade, a spike in oil prices in the 1990s led to a favourable re­cov­ery of the econ­o­my and a re­duc­tion in the deficits. Growth con­tin­ued to be dri­ven by the oil sec­tor and a re­vi­tal­ized man­u­fac­tur­ing sec­tor.”

McGuire said the float­ing of the dol­lar in 1993 as well as the de­ci­sion to in­vest in LNG were cru­cial to the turn­around.

“What those two things did were one, stim­u­late a whole lot of new in­vest­ment again in man­u­fac­tur­ing and the lo­cal econ­o­my start­ed pick­ing up. Sec­ond­ly, the de­ci­sion to go in­to LNG stim­u­lat­ed an abun­dance of in­vest­ment up­stream,” he said.

This ush­ered Trinidad and To­ba­go in­to a pe­ri­od of un­prece­dent­ed growth in the ear­ly to mid-2000s.

Dr. Hen­ry said, “Ac­cord­ing to the Cen­tral Bank, over the eight-year pe­ri­od from 2001–2008, re­al GDP growth av­er­aged 7.6 per cent a year. While the main dri­ver was the ex­pan­sion of the en­er­gy sec­tor, whose growth av­er­aged 11.2 per cent a year, the non-en­er­gy sec­tor al­so grew at a very healthy 5.4 per cent per year. Dur­ing the pe­ri­od the en­er­gy sec­tor ben­e­fit­ed from the steady in­crease in the num­ber of oil, gas and methanol fa­cil­i­ties. The rapid growth of the non-en­er­gy sec­tor was fu­elled by the in­crease in gov­ern­ment spend­ing, fi­nanced by buoy­ant en­er­gy rev­enues. Per capi­ta in­come al­most tripled and un­em­ploy­ment fell to his­tor­i­cal­ly low lev­els.”

But Trinidad and To­ba­go would then face sev­er­al years of no eco­nom­ic growth fol­low­ing the col­lapse in en­er­gy prices and the glob­al fi­nan­cial cri­sis in 2008 which Hen­ry said “put a halt to al­most 15 years of eco­nom­ic ex­pan­sion. “

He stat­ed,”Since then the Trinidad and To­ba­go econ­o­my has showed lit­tle or no eco­nom­ic growth. With the ex­cep­tion of a brief re­cov­ery be­tween 2011 and 2014, oil and nat­ur­al gas prices have re­mained at fair­ly low lev­els com­pared to the pre-cri­sis pe­ri­od. This has had a strong im­pact on gov­ern­ment rev­enues from the en­er­gy sec­tor. From 2015, there­fore, any in­crease in spend­ing would not have been matched by in­creas­es in rev­enue. This has led to sev­er­al con­sec­u­tive years of bud­get deficits and in­creas­es in the na­tion­al debt.”

McGuire agreed as he said the coun­try had not yet re­cov­ered from the fall­out of 2008.

‘The truth is we nev­er re­cov­ered, we are still re­cov­er­ing,” he said, “Notwith­stand­ing some very sig­nif­i­cant prices in­creas­es in 2012 to 2014. We have been strug­gling for the past 10 years to keep afloat and neg­a­tive growth and re­al­ly strug­gling for the last 10 years.”

McGuire lament­ed that de­spite the ini­tial plans made, there had been very lit­tle struc­tur­al change in the econ­o­my since in­de­pen­dence.

He said while there had been in­vest­ments here and there, there had been lit­tle de­vel­op­ment in oth­er sec­tors such as agri­cul­ture and tourism while the man­u­fac­tur­ing sec­tor in his view had ac­tu­al­ly con­tract­ed in re­cent years.

“Man­u­fac­tur­ing has not ex­pand­ed much from then, if any­thing in the last five years there has been a con­trac­tion as some of the big­ger firms re­think their lo­ca­tion in Trinidad,” he said.

He added, “One rea­son for our less than stel­lar per­for­mance is re­al­ly the fail­ure of the pri­vate sec­tor to in­vest in the pro­duc­tive sec­tor. On­ly Duprey and lat­er McAL ven­tured in­to the en­er­gy sec­tor. For the most part, our pri­vate sec­tor has cho­sen to ex­pand in the dis­trib­u­tive trades which on­ly help to re­in­force for­eign tastes and leak for­eign ex­change. Look­ing for­ward, giv­en gov­ern­ment’s on­go­ing and en­dur­ing fis­cal con­straints, the tasks of trans­for­ma­tion in­vest­ment lie square­ly and main­ly on the shoul­ders of our pri­vate sec­tor.”

While the Trinidad and To­ba­go econ­o­my has shown an over-re­liance on oil and gas, McGuire dis­agreed with the as­ser­tion of Pro­fes­sor Richard Au­ty who la­belled oil a re­source curse.

“I don’t think so at all, I think what we do is we feel too blessed and we wish to bless every­body which is why we do we do the things we do,” he said, “In those pe­ri­ods, that is what be­gan the whole busi­ness and the state trans­fer­ring wealth through the fu­el sub­sidy and a host of sub­si­dies and that was the way we felt of shar­ing the wealth.”

Dr Hen­ry point­ed out that there were signs of the econ­o­my’s re­silience, no­tably in the per­for­mance of its com­mer­cial banks, which he ex­plained had ben­e­fit­ed great­ly from fi­nan­cial lib­er­al­iza­tion of the 1990s.