A decision by four local shipping agents to accept freight payments only in US dollars might evidence a very small rise in cost to local importers/exporters but is not consequential to Trinidad and Tobago's economy, Minister of Trade and Industry Paula Gopee-Scoon said on Tuesday.
She was replying to a motion on the adjournment of the Senate moved by Opposition Senator Wade Mark. who alleged that calls for payments only in US dollars has hit local business activity.
He said a visit to most malls will show the closure of shops and businesses, which now contributes to a crime rise, and to foreclosures on businesses and private properties by banks.
"This is a crisis we have in the country," Mark stormed, asking what measures will combat any increase in freight costs.
Gopee-Scoon said in January four shipping companies had said they would accept payments for freight only in US dollars, the prime currency used in the maritime industry by shipping lines and freight forwarders.
"There is a difference, Senator Mark, in the shipping lines and freight forwarders, and the agent." she explained. "Now the practice of local agents – that is different. (They) accept TT dollars to settle the US dollar-quoted invoices if their customers, that is their exporters and importers, requested that payment option.
"In turn the local agent will then buy the foreign currency from the authorised dealers – our banks – in order to get the foreign exchange to settle the invoices of the foreign shipping line. So in effect local agents provide that service to their customers to obtain the foreign currency to settle the final payment of US dollar invoices to the shipping line.
"This recent decision by some local shipping agents – four of them, as I've said – to accept only US dollars as a payment for freight charges was on account – and we will admit (it)– of the challenges which they encountered when they tried to convert the TT dollar payment, which they collected from clients, into US dollars in order to make the final payment to their foreign shipping lines.
"Some local shipping agents, not all, may have encountered delays in obtaining the US dollars from the authorised dealers– as I've said, the banks.
"It is that some of these shipping agents decided only to accept US-dollar payments to honour the US-dollar-quoted invoices of the shipping lines, or to accept TT dollars to settle the US-dollar-quoted invoices, but at a conversion rate based on the rate they would have paid for the foreign currency."
She cited a US/TT dollar bank conversion rate of 6.8.
"In this context, persons seeking shipping services who do not wish to pay for the service in US dollars are free to seek such services from other providers willing to accept TT dollars at an appropriate rate.
"In other words, it's a customer's choice. and you can choose which shipping agent you wish to deal with. It is four of them that have decided that they will only accept US dollars."
To the extent to which this all represented an additional cost of doing business, she reckoned only a "relatively small" increase would be passed on to customers, given that freight charges were only a small part of total shipping costs.
"So really there appears to be no evidence to date that the cost of shipping has been so impacted so as to soften the demand in relation to the imports or negatively affected the country's economic condition. You've gone too far, Senator Mark."
Gopee-Scoon said the Central Bank and the Shipping Association had discussed the legalities surrounding foreign exchange.
"I wish to say that there is no legal restriction on contracting to make payment in a foreign currency, so they are free to do it.
"Shipping companies are free to include as a term of their contracting that all freight charges paid in Trinidad are to be done in US dollars. So nothing is wrong with what they have demanded, because they certainly will not be offending the Central Bank Act or the principles relating to legal tender. It'll really be a matter of choice for the customers to agree to these new terms."
She said Mark was right to say global shipping costs have risen greatly. She said coming out from the covid19 pandemic, China has been ramping up its economic activity ahead of the rest of the world, which is lagging and is now affected by the likes of rising shipping costs, which have risen phenomenally.
Gopee-Scoon said TT has had challenges with oil and gas global prices and local production levels, so affecting its foreign exchange earnings.
She said the Government. through the EXIM Bank. has stepped in to help support business activities with a foreign-exchange supply, especially for essential imports and inputs into local manufacturing, the latter assistance amounting to US$200 million.
"Ninety six clients from across 17 sectors have benefited from this intervention by the Government."
Gopee-Scoon said another US$200 million was injected to help importers/distributors of food, pharmaceuticals and covid19 essential items.
The Central Bank has been playing its role to stabilise the foreign-exchange market by periodic injection of foreign exchange.
Lamenting that foreign imports fell only marginally from 2019 to 2020, she urged consumers to do their part to adjust their tastes to help reduce TT's import bill and demand for foreign exchange
Gopee-Scoon noted zero per cent core inflation (food and energy) last October, plus a mere 0.78 per cent rise in the cost of a basket of goods from January-December 2020.
Amid 34 million jobs lost in Latin America and the Caribbean owing to the pandemic, she said TT's jobless rate rose from 5.3 per cent last year, saying, "We too would have had some job losses. I can't quantify."
Gopee-Scoon concluded, "The effects of our depressed revenues in terms of our earnings has had an impact, but it will not last forever. The Government is putting into place all the necessary measures in the energy and non-energy sector, and we look forward to an improved economic climate overall in the not-too-distant future."