Every busi­ness re­volves around some key in­sights that give a par­tic­u­lar com­pa­ny and its prod­ucts an edge. For the busi­ness to re­main vi­able and grow, the core op­er­at­ing func­tions must al­so be strong. These func­tions in­clude the pro­duc­tion process, hu­man re­sources, ac­count­ing and in­for­ma­tion sys­tems which are in­flu­enced by avail­able tech­nol­o­gy to give man­age­ment the tools nec­es­sary to en­sure that the best re­sult is achieved. Sales and mar­ket­ing are key as a busi­ness can on­ly sur­vive if it can sell what it pro­duces. This ex­plains why suc­cess­ful sales­men are the best paid in any type of busi­ness. Busi­ness­es must be ver­sa­tile and adapt to make a prof­it.

On Feb­ru­ary 6 Japan Toy­ota raised its fore­cast for its an­nu­al op­er­at­ing prof­it by nine per cent af­ter its third-quar­ter earn­ings raced past an­a­lysts’ es­ti­mates thanks to a weak­er yen and strong sales of high-mar­gin cars and hy­brid ve­hi­cles. The im­proved out­look from the world’s best-sell­ing au­tomak­er con­trasts with a down­beat fore­cast from many in­dus­try ri­vals across the world that have warned of tepid sales growth and an­nounced out­put cuts amid high in­ter­est rates and slow­ing de­mand for elec­tric ve­hi­cles in OECD coun­tries.

The re­sults sug­gest that the Japan­ese au­tomak­er is ex­pect­ed to out­per­form its ri­vals. Its op­er­at­ing per­for­mance was boost­ed by ro­bust de­mand for hy­brid ve­hi­cles, which it pi­o­neered more than a quar­ter cen­tu­ry ago with the Prius mod­el. Com­pa­ny of­fi­cials have said that the com­pa­ny ad­just­ed its pro­duc­tion to bet­ter re­spond to de­mand for pop­u­lar mod­els. This helped the au­tomak­er sell more of its hy­brids (which earn a high­er mar­gin) with­out re­sort­ing to the usu­al dis­counts and in­cen­tives cus­tom­ary in the trade.

Whilst the re­port fo­cused on Toy­ota’s fi­nan­cial per­for­mance, it al­so not­ed that a weak­er yen cur­ren­cy bol­stered the im­pact of Toy­ota’s ro­bust glob­al sales. I used the word de­pre­ci­at­ed to de­scribe the per­for­mance of the Yen/USD ex­change rate. The Reuters re­port used the word “tum­bled”. The re­port did not com­ment that the yen had been de­pre­ci­at­ing against the US dol­lar (USD) for some time. Since 2022 the yen has de­clined by an av­er­age of about 20 per cent against ma­jor cur­ren­cies and about 30 per cent to the USD. It is im­por­tant to note that the word “de­val­u­a­tion” was not used by Reuters or any agency in de­scrib­ing the per­for­mance of the Japan­ese Yen over the last two years.

A float­ing ex­change means that a cur­ren­cy’s ex­change rate can fluc­tu­ate up or down. What mat­ters is the rate of change or how fast that change takes place rel­a­tive to the re­spon­sive­ness of the econ­o­my’s ex­port man­u­fac­tur­ing ca­pac­i­ty. De­lay­ing any mar­ket ad­just­ments in­creas­es the im­pact when it is even­tu­al­ly made. When a cur­ren­cy ex­change rate de­clines sharply it dri­ves up in­fla­tion and the cost of liv­ing which has neg­a­tive so­ciopo­lit­i­cal con­se­quences. If the ex­change rate ad­just­ments are de­layed, the cu­mu­la­tive im­pact is al­so greater. The sharp­er the change the deep­er the im­pact.

Re­cent­ly Dr Ter­rence Far­rell said that T&T has no for­eign ex­change (forex) cri­sis be­cause forex re­serves are cur­rent­ly equal to eight months of im­port cov­er. The fact is that the re­serves are ar­ti­fi­cial­ly high be­cause de­mand has been re­strict­ed. As Dr Far­rell well knows, any form of ra­tioning by banks or oth­er­wise is dys­func­tion­al and un­work­able in the long run, whether prac­tised by the Cen­tral Bank in the form of the ECO and EC1 regimes of the 1980s or the com­mer­cial banks as cur­rent­ly done.

When of­fi­cial Cam­bios can legal­ly sell for­eign ex­change at TT$8 plus to US$1, whilst the com­mer­cial bank rate is $6.8, it makes the point abun­dant­ly clear that we have a dual ex­change rate sys­tem of the 1985 vin­tage.

De fac­to ra­tioning by com­mer­cial banks is un­help­ful as it for­malis­es the ex­ist­ing eco­nom­ic or­der and re­in­forces prej­u­dices against new busi­ness­es. The bank­ing sec­tor may be mar­gin­al­ly bet­ter than the Cen­tral Bank but its in­flu­ence in re­source al­lo­ca­tion is dis­rup­tive. The cur­rent dif­fi­cul­ty in ob­tain­ing forex from “of­fi­cial sources” like banks sim­ply en­fran­chised the on­ly sen­si­ble re­sponse in the face of these “dis­in­cen­tives”; an in­for­mal mar­ket with the Cam­bios giv­ing pric­ing sig­nals.

The ex­is­tence of the Ex­im Bank is help­ful in that it ad­dress­es the forex needs of some lo­cal man­u­fac­tur­ers who can ac­cess its fa­cil­i­ties. How­ev­er, this al­lows Gov­ern­ment to take cred­it for pro­vid­ing a so­lu­tion to a prob­lem it has cre­at­ed.

In the T&T con­text, nat­ur­al gas and petro­chem­i­cals are the suc­cess­ful ex­porters dom­i­nat­ing the gen­er­a­tion of for­eign ex­change. How­ev­er, ex­pe­ri­ence has taught they pro­duce com­modi­ties which are sub­ject to wide fluc­tu­a­tion in prices and gas re­serves are de­clin­ing. More ex­porters are re­quired in oth­er val­ue-adding ar­eas. To do this re­quires a change of ap­proach and pol­i­cy re­spon­sive­ness, in­no­v­a­tive en­tre­pre­neurs and a fa­cil­i­ta­tive en­vi­ron­ment.

Any gov­ern­ment must cre­ate the best con­di­tions for the growth and de­vel­op­ment of its cit­i­zens and the econ­o­my. That re­quires dif­fi­cult de­ci­sions that can­not be out­sourced. In­creas­ing ex­port earn­ings will have no per­ma­nent ef­fect if Gov­ern­ment con­tin­ues to fu­el im­port de­mand through bud­get deficits. Ad­dress­ing eco­nom­ic growth cre­ates a po­lit­i­cal dilem­ma. The eco­nom­ic de­ci­sions to cre­ate sus­tain­able growth will cause short-term dis­rup­tion by in­creas­ing in­fla­tion and re­duc­ing re­al in­comes. How­ev­er, gov­ern­ments are elect­ed to work in the best in­ter­ests of the coun­try. There is no du­ty to be re­elect­ed.

Mar­i­ano Browne is the Chief Ex­ec­u­tive Of­fi­cer of the Arthur Lok Jack Glob­al School of Busi­ness. ALJGSB is a not-for-prof­it cor­po­ra­tion.