Latin Finance - May/June 2010 - 50

Caribbean outlook

gas, according to the Economic Commission for Latin America and the Caribbean (Eclac). Oil and natural gas represent more than 85% of exports, it adds. “Trinidad is pretty healthy because of oil revenue,” says Ross. “Unlike Jamaica, say, the country has the luxury of a relative abundance of money to spend on economic stimulus,” he adds. The economy emerged unscathed by the CL Financial bailout last year, estimated by S&P to have cost about 9 billion Trinidadian dollars, or about 6% of 2009 GDP. “The government has been able to absorb this fairly easily and will probably dispose of the company’s assets over the next few years, gradually recouping some of the cost of the bailout,” says Ross. T&T is rated A, making it the highest grade sovereign in the Electricity Challenge Caribbean, says S&P. Last year’s GDP was $25 billion. Carl Ross, managing director of investments at Oppenheimer & The finance ministry of Trinidad & Tobago is evaluating Co, who believes the country’s economy could grow 3%-4% in issuing a 15-year $350 million dollar-denominated bond 2010, says weak recovery in the US and Europe will be a drag. paying 5.5%-6.0%. It is also considering a 1 billion Trinidadian “[The tourism industry and remittances] are important sources dollar 10-year bond paying around 5.8%, says Janette Cupidof foreign exchange earnings and dollar liquidity for the local St. Hilaire, director of public sector finance. She adds that economy. If they are slow to recover, an official decision on the matter then so will the economy be,” he is expected in the third quarter. GDP Growth Forecasts explains. Proceeds will be used to cover this DR in front Ross adds that the electricity sector year’s fiscal deficit, which is expected 2009 2010 also poses a challenge to growth in the to be 4% of GDP. Dominican Republic. “Inefficiencies Hydrocarbons company Petrotrin, Dominican Republic 3.50% 4.50% in the system, most notably the which issued $850 million in 2009, is Jamaica -3.50% -1.00% failure to collect payments, result in not expected to issue this year, says underinvestment in the sector over Neeraj Arora, an analyst at JPMorgan. Trinidad & Tobago -4.00% 3.00% time. Eventually, this could pose Barbados -5.30% -0.50% serious supply-side constraints on Barbados Set to Issue Source: JPMorgan economic growth,” he adds. Like Jamaica, Barbados’ GDP is also Subsidies are not helping. “On the contracting. Uccelli believes the fiscal side, subsidies to the electric sector feed into the fiscal economy will shrink 0.5%, following a 5.3% loss in 2009. Not deficit,” Uccelli explains. He adds that the government has only did the tourism-dependent economy get hammered by the budgeted $350 million for this year, down from $569 million in global financial crisis, it also has a hefty fiscal deficit. 2009 and $1.2 billion in 2008. “In 2010 the government forecasts that the fiscal deficit will Despite problems the Dominican Republic faces in the reach 7.4% of GDP. In 2009 it was 8.4% of GDP,” Uccelli says. energy sector, investment is happening in tourism and He adds that Barbados’ GDP is only $3.7 billion. mining. In Juan Dolio, local developer Group Metro recently Last year, Barbados issued a $120 million bond in Trinidad & inaugurated Marbella, a $30 million beachfront building Tobago to cover the fiscal deficit. Ross believes the country may with residential and hotel units. CEO Luis José Asilis tells have to tap again to cover a $100 million maturity in June. “It is LatinFinance that the company is in talks to raise $25 million in an investment grade country and is trading at attractive levels,” local dollar denominated bonds and an additional $25 million Ross says. internationally to fund additional developments. He expects to S&P has a BBB rating with negative outlook for Barbados. spend $1 billion over 10 years. However, it says its debt is likely to decline in 2011. It notes In mining, Canada’s Barrick Gold has a pre-production that there is support across the political spectrum, private budget of $2.7 billion to develop its Pueblo Viejo gold mine. sector, and unions for fiscal tightening and that the government After the mine starts up, the company expects to invest an is preparing a medium-term framework to address the additional $300 million. situation. “The strength of the country’s institutional and social arrangements, political stability, and its well-funded social Abundant T&T Funds security scheme continue to support the ratings,” it says. Trinidad & Tobago is expected to grow 3.0% in 2010, after “Conversely, rapid consolidation of public finances, most contracting an estimated 4.0% in 2009, Uccelli forecasts. The probably accompanied by a return of foreign investment, would turnaround, he says, will come mainly from a rise in energy restore strength to Barbados’ balance sheet and support the prices, which JPMorgan forecasts at 35% this year. stable outlook,” S&P adds. FDI is expected to flow into tourism, More than 45% of Trinidad’s GDP comes from oil and natural which is Barbados’ main source of revenue. LF Fabricio Gómez. The Dominican Republic, which has a GDP of about $46 billion, is rated B with stable outlook by S&P. The Dominican Republic’s government has approved a $1 billion bond to be placed this year in international markets. Officially, the government has said the bond will have a tenor longer than five years. Barclays and Citi are running the deal. Locally, this year the government is in the process of issuing 21 billion pesos in bonds. It has already placed via auctions 4 billion pesos in 2013, 2015 and 2017 local bonds each, for a total of 12 billion pesos. The 2013s pay 12%, the 2015s pay 14% and the 2017s pay 16%, according to the public credit unit of the Dominican Republic’s finance ministry.

50 LatinFinance

May/June 2010

Latin Finance - May/June 2010

Table of Contents for the Digital Edition of Latin Finance - May/June 2010