LatinFinance - July/August 2014 - 41

particular fiscally," he says.
"We have to consider what happens if,
for example, the reserves that we have don't
continue to grow. That is another area that
we've had to focus on. And that is why we
started to do the things we have done, in
order to develop fiscal space."
Uncertainties also remain over whether
extracting ultra-deep hydrocarbon deposits
would be economically viable, says Howai.
"Part of what we have to do is to look at
alternative technologies," he says.
Rambarran says global energy demand
will outstrip supply, buoying the oil price to
at least current levels for the next three to
five years: "And that means even with what's
happened in energy in the US, Trinidad and
Tobago is likely to continue to see favorable
energy prices."
The country has diversified gas exports
away from the US, and is finding it can
command a higher price in other markets,
he says. Yet the country is awake to the US's
discussions of gas exports.
"We are actually preparing well in
advance for what is likely to come out from
a decision, whether the US will start to
export natural gas. It also means that the
US has to take into account what to do with
their strategic petroleum reserves," says
Rambarran.
"And while that may seem large, we need
to bear in mind the Middle East remains
the largest swing producer and the largest
holder of reserves still in the world. So a lot
depends on what happens in the Middle
East."
Trinidad and Tobago is looking at
diversification opportunities, both in
the oil and gas industry and outside it,
says Howai. He describes the so-called
shale gas revolution as a "positive thing",
because it has pushed the country to look
at other options: "It's caused us to get out
of our comfort zone and start looking at
opportunities in all the other areas that we
could maybe take advantage of," he says.
"Our strategy is really to start looking
at potential partnerships and potential
investments outside of Trinidad and Tobago
in the natural gas industry, including in US
shale gas itself.
"We're talking about diversification in
energy and even in manufacturing that is
based on the output from our energy sector.
Those are some things that we are focusing
on. Things like melamine, things like
derivatives of, for example, the methanol
industry."
Howai also says the expansion of the

Panama Canal will help Trinidad and
Tobago sell oil and gas further afield, by
reducing the cost of cargo.
"Because you can use bigger ships to
go through the Panama Canal than you
used to have when you used to go around
the Cape," says Howai. "There are a lot
of further opportunities for us to expand
in that area, and as for Japan, who knows
where their decisions will be in terms of
nuclear power."
Diversification, planned
Trinidad and Tobago's steps towards
future-proofing the economy go beyond
petrochemicals, though. Shetty points to
the country's Heritage and Stabilization
Fund, which is estimated to total around
$20 billion - roughly 20% of GDP. That is
a buffer against the risks that the energy
sector falls short of expectations over the
long term.
"One of the things that really strikes me
about Trinidad, looking from the outside, is
the way they manage their wealth and their
oil and gas wealth. Not many countries that
we look at seem to have this Heritage Fund,"
she says.
The government has also poured
resources into education, says Varun
Maharaj, chief executive of Trinidad and
Tobago International Financial Centre, an
investment promotion agency.
"What's been created is a knowledge
society. People have free education from
kindergarten, all the way to PhD level. So
there's a significant output of graduates
from tertiary education facilities. In fact,
you have about 86 tertiary education

CAUTIOUS: Central bank governor Jwala
Rambarran says small states are particularly
vulnerable to external shocks

facilities in the country."
Maharaj draws a parallel with the niche
that Luxembourg has created for itself as a
global financial hub. "We'd like Trinidad to
be a center like that in this part of the world,
where you get the best protection possible,"
says Maharaj.
"Trinidad can become a center for
issuing debt to finance Latin American
infrastructure. You have the protection of
the very best laws in the world, and there
can be fast resolution of issues."
Trinidad and Tobago's December bond
sale was among efforts to put the country
on the map as an investment destination.
And while financial intermediaries highlight
the overwhelming liquidity available in
global bond markets from developed world
monetary policy, Howai says it is unlikely
the sovereign will return in the year ahead.
"At this stage, we have no immediate
intention ourselves to go out into the capital
markets," he says. "The only thing would be
whether our state enterprises themselves
may need to go."
Howai cited PetroTrin (Baa2/BBB) and
NGC (Baa1) as local companies that may tap
bond markets. PetroTrin has a 9.75% $850m
August 2019 bond and a 6% $750m May
2022 bond outstanding.
Still, global bond markets have their
limits. Single-B rated Trinidad Cement met
investors in May and issued price thoughts
of 9.5% for a possible seven year non-call
four bond. Ultimately, it did not bring the
deal, and was heard instead to be waiting for
better market conditions.
But if global bond markets are
temperamental, liquidity in the local bond
market is strong. Howai says Trinidad and
Tobago would look locally for funding over
the next 12 months, to soak up some of the
demand.
Fomenting the local capital markets is an
important objective for emerging markets
globally, says Andrew Cross, head of
treasury and client solutions at the IFC.
When Trinidad and Tobago sold its
$500m 10-year bond in December, the
Republic could have financed more cheaply
through sovereign bilateral loans, but
preferred to sell a bond to raise its profile,
Howai says.
"Funding was available from China, at
probably a lower rate," says Howai.
"While we could have raised the funding
that we needed, on a government-togovernment arrangement, we thought it
was important for us to have a presence in
the capital market." LF
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