The suitcase invasion

For years, the intrusion of foreign entities into the local market has been a thorn in the side of local financial service providers. Briefcase in hand, these “suitcase traders” as they are not so fondly called, have the concept of globalisation on their side.  Free markets mean free movement of goods and services, they say. According to one analyst, this practice is not new and poses some trouble for Trinidad which, being the largest economy in the Caribbean region, is a target for a high network of individuals and businesses looking for cheaper prices. Bernard Aquing, chartered insurance consultant with the Association of TT Insurance Companies (ATTIC), noted that it was very easy for foreign insurance companies to come into Trinidad, research the name of “wealthy” persons and call them up to do business.

However, he explained, these foreign service providers enter the local market sans licence and without establishing a physical presence. He said, “Suitcase trading is simply an acronym for people who enter the market unregistered and who do not comply with local laws. “These foreigners come here, are introduced to people by their friends who may even be persons involved in the financial services sector and they target people who have disposable incomes. “Right now,” he continued, “there are a lot of foreigners hovering around selling their products without having a licence and no one can do them anything because we do not have the proper regulatory framework to deal with this issue.”

Kelvin Sergeant, director of Research at the TT Securities and Exchange Commission (SEC) expressed his belief that impending trade blocs, specifically the Free Trade Area of the Americas (FTAA) and the Caribbean Single Market and Economy (CSME), would now pave the way for the conduct of business across borders. The FTAA, he said, was centred around four major modes of delivery, which included commercial presence and consumption abroad, which allowed business to be handled via the Internet. This may constitute, he continued, the purchase of stocks and mutual funds among other things. “Anyone can do business based on these modes of delivery,” he said. “The suitcase trade revolved around the free movement of services. “A concern going forward in the future given these trading blocs is that this trade has the potential to grow,” he added. The big issue, Sergeant explained, was the impact this practice could have on a developing economy such as Trinidad and Tobago. It would pose a very serious challenge for local providers, he said, since the entrance of these foreign bodies into the local market would mean the presence of additional competition.

“These competitors,” he continued, “would be operating alongside local firms and providers of financial services. Consequently this would mean an outflow of capital from the country into large, developed countries. “If the local firms are not competitive and are not offering quality products at competitive prices, this can present a great problem for them,” Sergeant maintained. Reiterating Aquing’s criticism of the lack of proper regulatory laws to prevent this scenario which Sergeant described as a major weakness in the system, he went on to stress the need for the kind of regulations that would ensure the protection of depositors and investors who may be targetted by these “suitcase traders.” He said, “One thing that is important is investor education and this is where the SEC comes in. It has a critical role to play in this. “We want investors to be aware of what is happening out there,” Sergeant continued. “They must be aware of what is happening out there. They must be aware of their rights as investors and if something happens, they must also know where to go to get redress.”

He called for the modernisation of existing laws to deal with the issues of E-trade, E-banking and E-commerce among others. He also stressed the need for these intermediaries to be aware of the ongoing FTAA negotiations. “We need to ensure,” he said, “that just as it is possible for these providers to come here and offer services to our people, our people have to be able to go out there and offer their services, without any rules or barriers.” Aquing sees the FTAA as the USA’s way of “cherry picking” risks in the Caribbean region instead of actually setting up a physical presence. “US companies,” he maintained, “will be able to have market access without complying with local laws.” He said, “the US is pushing the FTAA and have put in requests to the TT Government to expand its economy even more. On the other hand, entry barriers in the US are so high that this region can’t meet them. “How do we pick our way through this mine field?” he asked. “We can’t put up barriers since we want market access as well. There are huge risks involved here.”

Aquing stressed the need to tighten our regulations, following in the footsteps of the US, which he said, was not actually the free market people thought it was. “There are a lot of rules there,” he maintained, “and people play by them. Here no one plays by the rules. It is like the ‘Wild West.’ If our regulatory standards are more stringent, this will breed confidence.” “There is a need for regulations and law,” Aquing continued, “but we as a people will always find a way to get around these rules.” According to Sergeant, the “suitcase trade” was not something to be feared or stopped. “Instead,” he said, “it was inevitable and the best option would be to regulate the practice, ensuring that at the end of the day, depositors are protected.”