(Trinidad Express) – The collapse of a large financial conglomerate and continued exposure to plunging oil and gas prices make Trinidad and Tobago’s economy vulnerable, a new report from the International Monetary Report has shown.
The Washington, DC-based IMF, in a March 3 Staff Report on Trinidad and Tobago, said the country was “not immune” from the global economic meltdown and there were several areas of particular concern.
It followed an Article IV Consultation and report executed by IMF officials during meetings with Government in Port of Spain last November.
The potential impact of large financial conglomerates was one of the areas the IMF identified as a threat to the financial system in its latest report.
The local financial system is dominated by large conglomerates involved in banking, insurance and investment banking, and an analysis indicated a high level of cross shareholding and related lending at several subsidiaries, as well as considerable leverage at the group level. IMF officials did not identify a specific conglomerate.
Businessman Lawrence Duprey’s CL Financial conglomerate approached Government and the Central Bank on January 30 for financial assistance, after its subsidiaries, Clico and Clico Investment Bank, could not repay depositors funds and monthly pensions.
CL Financial controls more than 60 companies in 32 countries.
The IMF report warned that a financial shock of a conglomerate in one country could be rapidly transmitted across the region.
A further deterioration in energy prices could have “adverse implications” for Trinidad and Tobago, and could affect consumption, investment and asset prices like real estate, the IMF suggested, adding that a local financial crisis could affect income and wealth of citizens.
On the bright side, the IMF observed that the country’s external vulnerability to the economic crisis was low and disruptions in financial markets have been limited.
The IMF noted that the financial sector accounts for 25 per cent of non-GDP earnings and nine per cent of employment in the country.
Trinidad and Tobago is not immune to the contagion of the financial crisis and risks could arise from “exposures of large and complex financial conglomerates that operate across the region and deteriorating balance sheets in the event of a further sharp drop in energy and asset prices”, the IMF stated.
“In light of Trinidad and Tobago’s position as a regional financial centre, its institutions are exposed to potential economic difficulties in neighbouring countries, and problems in Trinidad and Tobago could have important ripple effects through the Caribbean,” the IMF said.