Joshua Seemu­n­gal

The six-month ex­port ban on the lo­cal scrap iron in­dus­try has stymied a lu­cra­tive for­eign ex­change black mar­ket that some small and medi­um-sized busi­ness­es re­lied heav­i­ly on to sus­tain their op­er­a­tions.

Sources close to the trade re­vealed to the Sun­day Guardian that the lo­cal com­mer­cial banks' in­abil­i­ty to sup­ply suf­fi­cient forex to these busi­ness­es seek­ing US dol­lars spurred the black mar­ket trade among the scrap iron deal­ers.

In many cas­es where busi­ness­es ob­tain forex, it is in much small­er quan­ti­ties than they need, and they are forced to wait sev­er­al weeks be­fore they can ac­cess the funds. Larg­er busi­ness­es, in most cas­es, are giv­en pref­er­ence by the banks.

For­mer Cen­tral Bank gov­er­nor Jwala Ram­bar­ran dur­ing a 2015 speech at the Cen­tral Bank of Trinidad and To­ba­go's Mon­e­tary Pol­i­cy Fo­rum named the top five lo­cal users of for­eign ex­change. They were main­ly large con­glom­er­ates.

Ac­cord­ing to econ­o­mist and Uni­ver­si­ty of the West In­dies Fi­nance Lec­tur­er Dr Vaalmik­ki Ar­joon, al­though he had no in­for­ma­tion on the deal­ers and the US black mar­ket trade, da­ta shows that the in­dus­try is a con­trib­u­tor to for­eign ex­change through the of­fi­cial chan­nels.

He said the to­tal ex­ports by scrap iron deal­ers over the last six years amount­ed to US$205.7 mil­lion, of which US$43 mil­lion was ex­port­ed in 2021, a fig­ure that is 65 per cent high­er than 2015.

As­sum­ing they main­tained their 2021 lev­els, "their val­ue of ex­ports will amount to al­most half a bil­lion worth of forex in ten years", he said.

Ac­cord­ing to sources, for years the scrap iron in­dus­try helped fill the gap on the black mar­ket with the high de­mand for for­eign ex­change among lo­cal im­porters of food items, gro­cery items, cig­a­rettes, tyres, and bat­ter­ies.

"The scrap iron yards are buy­ing ma­te­r­i­al from the van men for Trinidad and To­ba­go dol­lars. They pack it in­to con­tain­ers and sell it to the end buy­er abroad for Unit­ed States dol­lars, so the scrap yard man now has the US. He is now go­ing to sell this for­eign ex­change to these small­er lo­cal stores.

"How are all these goods com­ing in­to the coun­try and the Gov­ern­ment and banks don’t have all that US to sell? The scrap iron was the an­swer," an in­dus­try source said.

"Even big con­glom­er­ates buy­ing the US–mega com­pa­nies–You don’t want to call their names."

 Ac­cord­ing to the source, a few scrap yards had is­sues with the bank re­gard­ing the num­ber of trans­fers. "They were ask­ing the yards, if you sell­ing scrap, how come you trans­fer­ring mon­ey to a gro­cery store? One of the biggest laun­der­ing busi­ness­es you would have seen was scrap."

On Thurs­day, Se­nior Su­per­in­ten­dent of the Trinidad and To­ba­go Po­lice Ser­vice’s South­ern Di­vi­sion Richard Smith re­vealed that a scrap iron deal­er was ar­rest­ed as part of the TTPS’ in­ves­ti­ga­tions in­to a protest that blocked the high­way in Clax­ton Bay in Au­gust.

He said the scrap iron deal­er was found with a firearm, am­mu­ni­tion, as well as $100,000 (TT) and US$3,000 in cash. The cash was seized by the Fi­nan­cial In­ves­ti­ga­tion Bu­reau and he was charged for the firearm and am­mu­ni­tion, Se­nior Su­per­in­ten­dent Smith said at a TTPS Me­dia Brief­ing.

In­dus­try sources said that when some scrap yard deal­ers ob­tained US dol­lars from the sale of scrap iron con­tain­ers to for­eign clients, they would ne­go­ti­ate with lo­cal im­porters to ei­ther pur­chase items on their be­half or to sell the US to them di­rect­ly.

The sources said the lo­cal im­porters and scrap iron deal­ers cap­i­talised on the lack of reg­u­la­tion in the in­dus­try to solve their long-stand­ing is­sues of get­ting ad­e­quate ac­cess to for­eign ex­change via the banks and oth­er le­gal means.

Back­lash…the price of US on the black mar­ket could go to $10

The is­sues with lo­cal busi­ness­es get­ting ac­cess to for­eign ex­change are well-doc­u­ment­ed.

Ac­cord­ing to a Mar­ket Chal­lenges Up­date on Trinidad and To­ba­go from the Unit­ed States of Amer­i­ca De­part­ment of Com­merce, is­sued in Au­gust, ac­cess to for­eign ex­change re­mains the biggest chal­lenge to bi­lat­er­al trade with T&T.

The up­date said, "Due to an over­val­ued cur­ren­cy and ex­cess de­mand for for­eign ex­change, small­er lo­cal com­pa­nies and those that do not gen­er­ate their own US dol­lars through ex­ports of­ten face lengthy de­lays in ac­quir­ing for­eign ex­change to pay US sup­pli­ers. Red tape with­in the reg­u­la­to­ry frame­work can be a chal­lenge."

Be­tween Jan­u­ary and Oc­to­ber 2021, the Cen­tral Bank in­ject­ed more than US$1 bil­lion in­to the for­eign ex­change mar­ket. How­ev­er, ac­cess to ad­e­quate for­eign ex­change re­mains an is­sue for many busi­ness­es.

And, now, with the six-month scrap iron ban, the sources said, many im­porters will have to find al­ter­na­tive means of ob­tain­ing forex, like­ly in­creas­ing the black mar­ket ex­change rate. This, they be­lieved, will al­so like­ly in­crease the price of goods the im­porters pro­vide in the com­ing weeks.

The sources said while the scrap iron deal­ers and im­porters ben­e­fit­ed from the black mar­ket trade of forex, the Gov­ern­ment was los­ing out through the preva­lence of mon­ey laun­der­ing, the loss of po­ten­tial tax earn­ings, and the leak­age of for­eign ex­change.

"Let’s say a con­tain­er of scrap iron is worth $60,000 (TT), with 400 of those con­tain­ers gone, that’s $24 mil­lion (TT). That’s around US$3.54 mil­lion.

"So these scrap iron men–the peo­ple who are buy­ing, the big traders, will now sell back the US to gro­cery stores, hard­ware stores, and im­porters of gen­er­al items," a source said.

"They send their work­ers to these gro­cery stores and pick up cash in T&T and then pay the scrap yard for the goods, so the mon­ey has no pa­per trail."

The source, who is afraid of be­ing iden­ti­fied, said, "It’s a big thing. I know the mar­ket. The mo­ment my name comes out, it has death in it. That’s death.

"Check things like cop­per, alu­mini­um, and brass. Those peo­ple who sell used parts, do you think the bank giv­ing these peo­ple enough mon­ey to bring in used parts?

"The bank doesn’t have the US to suf­fice these busi­ness­es. I am telling you this is go­ing to have one of the biggest back­lash­es you will see…the price of US on the black mar­ket is usu­al­ly $7.50, it could go to $10."

The sources be­lieved the Gov­ern­ment turned a blind eye to the in­dus­try for too long, say­ing that it should have been reg­u­larised years ago.

Dr Daurius Figueira

 Figueira: There will al­ways be peo­ple who de­pend on the black mar­ket

Ac­cord­ing to crim­i­nol­o­gist Dr Dau­rius Figueira, he is not yet in­formed about the im­pact of the scrap iron ex­port ban on the for­eign ex­change black mar­ket.

How­ev­er, he said for many years, im­port­ing busi­ness­es have re­lied on the black mar­ket for suf­fi­cient ac­cess to for­eign ex­change to pur­chase prod­ucts.

"There is a whole slew of peo­ple, in or­der for them to keep their busi­ness­es afloat, they have been go­ing to the black mar­ket for years now. So what is go­ing on with them is that in the tra­di­tion­al bank­ing sys­tem they are last in line be­cause what is hap­pen­ing is that the big play­ers and big busi­ness­es are al­ways the first in line," he said.

"There will al­ways have peo­ple who will de­pend on them fel­las (ex­porters) who when they sell, they get paid in forex and they pass the forex on­to those peo­ple. What is go­ing on is those peo­ple are look­ing to pick up for­eign ex­change any­where they can get it, so they will es­tab­lish a re­la­tion­ship with busi­ness­es who earn in forex be­cause, re­mem­ber, they ex­port."

Figueira said there are var­i­ous sources of funds that flow in­to the lo­cal for­eign ex­change black mar­ket and many of these sources, which are crim­i­nal–drugs etc–con­tin­ue to pro­vide for­eign ex­change for cer­tain in­di­vid­u­als and busi­ness­es in large amounts.

Economist Dr Vaalmikki Arjoon

Econ­o­mist: Mis­take to shut down scrap in­dus­try, it brings in forex through of­fi­cial chan­nels

Mean­while, Dr Vaalmik­ki Ar­joon be­lieves that giv­en its con­tri­bu­tion bring­ing in forex through of­fi­cial chan­nels, it was a mis­take by the Gov­ern­ment to shut down the scrap iron ex­port in­dus­try un­til Feb­ru­ary 2023.

The so­lu­tion lies in con­sul­ta­tion and reg­u­la­tion, Ar­joon said.

"They ought to meet with the deal­ers and ar­tic­u­late the con­cerns of the State and lis­ten to the con­cerns of the deal­ers them­selves, while at the same time de­vel­op a bet­ter un­der­stand­ing of how the in­dus­try works as it seems to me that the au­thor­i­ties do not have a prop­er ap­pre­ci­a­tion for how the in­dus­try works.

"The key here is al­lo­cat­ing more re­sources for bet­ter reg­u­la­tion and su­per­vi­sion in the in­dus­try," he said, but this can be cost­ly. "So one way the State can get the funds to do this is to at­tach it to the li­cence fee for deal­ing in scrap iron. This fee could con­tain the cost for su­per­vi­sion as well, and the big­ger the deal­er/ex­porter, then the more su­per­vi­sion you may re­quire so the high­er the fee, keep­ing it at a rea­son­able lev­el."

State’s util­i­ty com­pa­nies van­dalised

In the last two years, but es­pe­cial­ly with­in the last ten months, the in­fra­struc­ture of the state’s util­i­ty com­pa­nies has been van­dalised by cop­per and met­al thieves.

Ac­cord­ing to Pub­lic Util­i­ties Min­is­ter Mar­vin Gon­za­les, the il­le­gal trade cost the state’s util­i­ty com­pa­nies ap­prox­i­mate­ly $25 mil­lion in the last two years. In Au­gust, Gon­za­les said that in the past year the trade cost TSTT alone $15 mil­lion.

Al­so in Au­gust, Min­is­ter of Na­tion­al Se­cu­ri­ty Fitzger­ald Hinds said that there were 218 ar­rests by the Trinidad and To­ba­go Po­lice Ser­vice in con­nec­tion to the theft of cop­per and oth­er met­als since 2020. He es­ti­mat­ed that cop­per sells for as much as $15,000 per tonne.

In June, thieves broke in­to a Na­tion­al Gas Com­pa­ny fa­cil­i­ty in Moru­ga, steal­ing bat­ter­ies, a dig­i­tal video recorder sys­tem, and cop­per fit­tings. Loss­es were es­ti­mat­ed to be $115,000. In Ju­ly, thou­sands of TSTT cus­tomers ex­pe­ri­enced tech­ni­cal is­sues af­ter thieves stole 500 me­ters of cop­per ca­bles in San Fer­nan­do.

Ac­cord­ing to Na­tion­al Se­cu­ri­ty Min­is­ter Fitzger­ald Hinds, loss­es were close to $ 1 mil­lion.

In Au­gust, po­lice re­cov­ered steel poles and I-Beams, from a scrap iron yard near the Munroe Road Over­pass, that were stolen from the Min­istry of Works and Trans­port’s Ca­roni of­fice.

Po­lice ar­rest­ed two men.

Al­so in Au­gust, thieves stole elec­tri­cal ca­bles, equip­ment, and met­al sheets from WASA’s Cal­i­for­nia Boost­er Sta­tion in Point Lisas.

Since the scrap iron ban be­gan in Au­gust, there have been sev­er­al protests across the coun­try.

 Chair­man of the Trinidad and To­ba­go Scrap Iron Deal­ers As­so­ci­a­tion Al­lan Fer­gu­son said that the ban un­fair­ly pun­ish­es law-abid­ing scrap iron deal­ers for the wrong­do­ings of a few in the in­dus­try. He said the ban has re­sult­ed in thou­sands of peo­ple los­ing their jobs.

Ques­tions sent to the Fi­nance Min­istry

On Fri­day, Sun­day Guardian sent ques­tions to the Cor­po­rate Com­mu­ni­ca­tions Unit of the Min­istry of Fi­nance about the claims made by in­dus­try sources.

1)First­ly, scrap iron in­dus­try sources and im­port busi­ness sources claimed that the scrap iron in­dus­try has been pro­vid­ing for­eign ex­change to the forex black mar­ket for a num­ber of years, is the Fi­nance Min­istry aware of such claims? Have the claims been in­ves­ti­gat­ed?

 2)The sources al­so claimed that the scrap iron in­dus­try, and its con­tri­bu­tion to the for­eign ex­change black mar­ket, has been a source of pos­si­ble mon­ey laun­der­ing, for­eign ex­change leak­age and loss­es in po­ten­tial tax earn­ings. Is there any truth to these claims as far as the min­istry is aware?

3)How much of a con­cern is the forex black mar­ket to the min­istry? What sort of risks and con­se­quences could arise from a forex black mar­ket?

4)The in­dus­try sources com­plained about the dif­fi­cul­ty in ac­cess­ing forex through of­fi­cial, le­gal means like the bank­ing sys­tem. What steps have been tak­en and will be tak­en to im­prove the func­tion­al­i­ty of the sys­tem?

 Up to late yes­ter­day, no re­spons­es were re­ceived.