Fact and fiction

In July, Mr Valley said that crime had caused Trinidad and Tobago to drop in the Global Competitiveness Index, but by August he was claiming that crime had not affected foreign direct investment. This latter position was the one adopted by a research analyst from the US investment firm Bear Stearns last week. Speaking at a luncheon hosted by Caribbean Money Market Brokers (CMMB), Dr Carl Ross said that crime was "below the radar screens" of US and European investors. However, CMMB’s Wayne Dass, who heads the organisation’s group investment management unit, asserted that crime is eating away at investor confidence.

Common sense suggests that Dr Ross’s statement is somewhat disingenuous. It may be that foreign investors aren’t concerned about crime affecting their investment, but they would be very bad investors if they were actually unaware of what the crime situation in the country is. Indeed, we are sure Dr Ross would find himself in a difficult spot were he not to supply his bosses with some measures of violent and white-collar crime in any country they would be recommending to potential clients.

Now investors, especially in the energy sector, may rationally ignore crimes like murder, assault and robbery. After all, such investors do not view crime statistics in the way ordinary citizens do. A high murder rate is of less interest to them than where such murders are happening. If most killings take place in a specific geographical region, or among a specific socio-economic group, then murders are irrelevant to their investment. This is partly why politicians readily accede to the notion of ‘‘collateral damage,’’ since a high murder rate, if confined, may be calculated as having a politically negligible cost — unless, that is, citizens make murders a political issue.

Mr Dass, however, suggested that crime has mainly affected business in the non-energy sector of the economy. This is entirely possible. Violent crime does not directly affect explorations for natural gas, but it can affect a fast-food franchise which depends on an active night life. High crime also affects domestic investment, since local business people may prefer to squirrel their money in foreign bank accounts or even migrate. Indeed, the recent pressures on Trinidad and Tobago’s foreign exchange may mean that some such trend has begun to take place. At the same time, available statistics on visible trade and foreign exchange reserves reflect a general increase over the past few years, but with fluctuations that also show our economy’s vulnerability to external factors.

However, since the crime rate only began to rise in 2000, it is unlikely that any economic effects would show up in the fiscal statistics just yet. But this is exactly why it is important for the Government to carry out research on this issue now. An economy is not affected only by financial factors, but by psychological ones as well.

Confidence, or a lack thereof, can cause markets to fluctuate just as much as trade deals, wars, new technology, or natural disasters. So a survey of foreign investors and local business persons, aimed at discovering their opinion on the economy, may provide information that the government could use to offset possible financial shocks in the near future.