‘We were voices crying in the wilderness, deemed heretics to the religion of free trade fundamentalism’ — Belize Prime Minister Said Musa

 ‘Specifically, special and differential treatment provisions must be crafted to facilitate structural adjustment and promotion of the development of small, developing economies, in particular, the small island developing states’ — Jamaica Prime Minister  PJ Patterson
 
For small island developing states, the World Trade Organisation  (WTO) Ministerial  Conference in Cancun, Mexico, being held in September could be  watershed on how they go forward on trade and a litmus test on their economic prospects and survival. For small states such as those in the Caribbean, globalisation – a world without barriers and preferential access – seems bleak and gloomy. Already many of their economies, with perhaps the single exception of energy-based Trinidad and Tobago, are wobbly and their short to medium term economic viability, very uncertain. Caribbean islands, traditionally mono-crop economies either in banana or sugar cane production have relied heavily on preferential trade arrangements for their exports.
But the phasing out of preferential trade arrangements as a result of WTO rulings have left the banana-growing islands in particular, with major economic upheavals.The filing of WTO complaints by Australia and Brazil in respect of the EU sugar protocol which provides guaranteed access to markets, threaten similar damage. Export earnings for the Eastern Caribbean islands have dropped substantially and in the first quarter of this year earnings were put at US$8.48 million down from US$12 million in the comparative quarter in 2002. Economic growth in the eastern Caribbean has been on a downward path over the last decade. In 1999-2000, growth averaged 2.4 percent with further declines registered in 2001 and 2002.

In the 1990s, annual growth averaged about 3.2 percent, compared to 5.5 percent in the 1980s. Strong growth in the eighties was mainly due to a favorable external environment, when preferential market access and strong prices resulted in a twofold increase in banana export earnings; increases in foreign investment fuelled an expansion in the tourism sector and large flows of concessional aid financed investments in infrastructure. But in the 1990s, there was a major reversal of fortunes with the rapid decline of concessional aid flows and the erosion of preferential access for bananas to the important European market. President of the Caribbean Development Bank (CDB), Professor Compton Bourne notes that small states now find themselves in a world very different from what most would have anticipated even in the gloomy 1970s and 1980s with the crippling energy crises, foreign debt crises and structural adjustments. “ Economic and political power has shifted remarkably. New institutional structures are in place. Global governance, global markets, global communications and even global culture are vogue terms,” he said in a recent paper. Dominica’s Prime Minister and Minister of Finance and Economic Planning, Pierre Charles said the region finds itself in the most negotiation-intensive period ever faced. Apart from the WTO, negotiations are also taking place on the Free Trade Area of the Americas (FTAA) and the ACP-EU Cotonou negotiations. “ This poses severe challenges for our countries, which are financially, institutionally and humanly constrained in terms of capacity. It is extremely difficult to follow all the issues in all three arenas fully as we must, hence we must continue to pull our resources together,” said Charles whose island’s economy, one of the hardest hit in the Caribbean is being bailed out by regional countries, including Trinidad and Tobago.

About the up-coming WTO Ministerial meeting, Charles said the region will be pressured to launch negotiations in new areas, but that member Caribbean Community (CARICOM) countries must however be prepared to demonstrate a level of resolve and determination to secure their key interest at the multilateral level. “ We need to secure the maintenance of the preferential margins we enjoy in the developed country markets for our key export. We need to obtain the necessary special and differential treatment that our small, vulnerable developing economies need in all areas. We need the type of policy space to enable us to pursue our development objectives. After all, the impact of our trade at the global level is very, very minimal,” Charles told Caribbean leaders earlier this month at their Summit in Jamaica. Jamaica’s Prime Minister PJ Patterson said in all the negotiating arenas, the region is confronted with the erosion of preferential trade arrangements which encompass a significant share of their exports. He noted that there is relentless pressure from more developed countries to move rapidly to reciprocal trade rules and which is compounded by the attempts to extend the purview and rules of the multilateral trade system and by extension regional agreements which must be compatible with the WTO provisions. This, he said, poses difficult challenges in three related aspects; negotiations, implementation and adjustment, with considerable strain on the human, financial, institutional and political resources of the member states.

“ Our mission must aim to ensure that the rules and the pace of implementation in multilateral, hemispheric and inter-regional trade agreements take full account of the goals and disabilities peculiar to small, developing economies. Specifically, special and differential treatment provisions must be crafted to facilitate structural adjustment and promotion of the development of small, developing economies, in particular, the small island developing states,” said Patterson. Belize Prime Minister Said Musa said for over a decade, the Caribbean has been promoting concepts related to the need to create a human-oriented trade regime that took account of the special circumstances of small and disadvantaged states and which put people first.
“ We were voices crying in the wilderness, deemed heretics to the religion of free trade fundamentalism,” he said. Referring to a UNDP study, “ Making Global Trade Work for People,” he said it provides ample justification of the Caribbean’s position. The study argues for special and differential treatment for developing countries going beyond traditional trade issues to embrace education, health, gender equality, environmental protection, respect for cultural diversity and other human development matters. It urges that WTO rules be made more flexible and development-oriented and should provide the parameters for regional negotiations. He gave an example of the agricultural sector, an economic mainstay that provides a livelihood for some 70 per cent of the regional population.

“ It is beyond irony that in the name of free trade, this livelihood is threatened even as the rich and powerful countries provide agricultural subsidies to their farmers to the tune of over one billion dollars a day. “ This is not a dying phenomenon; indeed, since 1997, such subsidies have increased by over 25 per cent.” Asking where do small states fit in the world of dramatically increasing asymmetries of economic and military resources, power and influence and what role they can play, Professor Bourne said unfortunately small states cannot make international rules of the game. “ This should be evident from the agricultural protectionism of developed countries built into the WTO provisions despite the desire of developing countries to have them dismantled.” He said while small states do not have a voice in some international rule-making forums within the financial world or within the UN system, they have a lobbying role. In other words, for small states to stand a chance of being taken seriously, they will have to speak with one voice and act in concert. Professor Bourne said it is easy to become pessimistic about the future of small states in a world that is tending so dramatically towards agglomeration and concentration of wealth and power. “ However, those of us who inhabit small states and intend to continue doing so, have little alternative to accepting the challenge, however daunting, of finding new ways to resuscitate and accelerate Caribbean economic growth and to arrest the social disintegration of our countries.”

Anthony Fifi, Managing Director, HCL Group of Companies, believes that the private sector can build government’s proposed low cost homes, efficiently and cheaply. “I still believe that the private sector could build a lot more efficiently and cheaper than government. I see government as being there to provide the subsidies, policies and controls and I see the private sector as being the body to implement those programmes,” he said in a recent interview at HCL’s Trincity offices. His rationale is that the private sector is much more efficient in terms of its ability to implement than government, noting that the unit cost of production will be much less. Over 10,000 families are expected to benefit from an aggressive programme of government assistance for low income earners to build and improve their homes as well as to regulate squatter settlements. Government has already signed a loan agreement with the Inter-American Development Bank (IDB) for the first tranche of an IDB loan aimed at supporting a US $100 million housing programme. HCL is one the largest developers of homes and communities in TT. It also does work for countries like St Lucia, Dominica, Anguilla, Grand Cayman and Florida. Fifi, who has been selected by government to head its 2020 vision housing thrust, said HCL is willing to help construct some low income homes for young people and those who really cannot afford to buy a home at this time, But to do so, Government, he said, must provide the private sector with subsidies.

HCL currently has a number of ongoing projects in East Trinidad. Some of these projects include the Trincity Millennium Vision which includes  Millennium Lakes, Sunrise Park and the Trincity Business Park. In El Dorado, HCL has already completed Golden View and is currently working on La Couroupita. HCL is also expected to start other projects in Santa Rosa, Santa Cruz, Maraval and Diego Martin. Fifi boasts that HCL does not only build houses, but communities. “We build neighbourhoods and try to attach it to some centre, like the Trincity Millennium Vision. He said right now, even though there has always been demand for  homes, it is greater because there are increases in personal disposable income and a drop in interest rates. “These two factors have really opened up a lot more avenues and opportunities for people to buy homes,” However, he noted that there is still a large sector of the population who are unable to access housing, because of its costs. He said this is where the government will try to help through its low cost housing project. Fifi said he did not want to comment on whether the demand for homes in the east is greater than in the west. “Let us just say that there is demand in the east and demand in the west. You really have to look at the population centre and people normally want to live close to work if that is possible, near to facilities such as schools and shopping centres.” He said it is important for developers to ensure that they provide these different facets of the community, noting though that there is healthy demand in both the east and west of Trinidad.

He acknowledged that there is discernible shift from the west to the east for obvious reasons; the west has literally run out of land and, therefore the price of land and properties are very expensive. This, he said. makes it almost impossible for young home-owners to pay for homes in that area. In the Westmoorings area, Fifi said house hunters cannot get anything for under $2 million, adding that one can still get an HCL house within their  developments in the east for somewhere between $350,000 to $600,000.” Fifi said he does not believe in catering to any one market and therefore HCL caters to a wide reach of the population. “I think you need balance in communities. A healthy community needs to be balanced even in economic terms.”
HCL, he said, tries to attract both low and high income earners to its  communities. Fifi said two years ago, an  HCL home cost about $250,000, now its pegged at $350,000. He explained that inflation, the high cost of production, the cost of land and building materials all have a role to play in the escalating costs. For those in the low income bracket – $3,000-$4,000, Fifi said HCL would have to start building homes that cost about $200,000.” Fifi said this is not impossible and could be done with some sort of government subsidies. The only way to build such a house is through govermnment subsidies, he insisted.

Investing is now no longer about making money. It’s about managing money — in good times and bad. The US stock market crash of 1987 and the late 1990’s showed how quickly the markets can now turn, and why we need to show a new appreciation for risk. So when you invest, you must pay attention to risk. To learn how to do that, keep reading. Never choose investments merely because you think they will be profitable.

Learn What “Risk” Really Means
In the world of investments, there are many types of risk, and although they differ from investment to investment, they all manifest themselves in the same way: Risk causes investment values to fluctuate. Thus, investment risk is best discussed in terms of volatility: If you invest one dollar today, how much might that dollar change in value? Under what circumstances would that change occur? These are the questions that volatility raises. The answers are based on the premise that all investments are volatile; there is no such thing as a risk-free investment. Some investments are more sensitive to certain risks than others, and some risks are more likely or more devastating if incurred than others. Therefore, some investments are more volatile than others. The interesting thing about risk is that it works both ways: Investments that have fallen victim to one or more risks can enjoy substantial upside volatility as they put their problems behind them; that is how investment values are able to increase. Risk, then, is not bad; it merely exists. Without risk, investments could not exist. In many ways, risk is like water to a plant: Too little and they fail to grow, while too much could drown them. To help you put it all in perspective, let’s first examine the major types of risk :

Default risk
The risk that an investment will become worthless.
UPSIDE:
Investments that have defaulted often recover, as did Chrysler. As the investment recovers, its value returns to previous levels, rewarding those who invested while prices were low. Investors who engage in this type of activity are called “bottom-fishers”.
Credit risk
The risk that an investment’s financial stability might decline; those that suffer credit risk might ultimately default. The stronger an investment’s financial stability, the more valuable it is (an AAA-rated investment is about 25% more valuable than a B-rated investment). However, the stronger an investment’s financial stability, the greater its potential losses from credit risk.
UPSIDE
Low-rated or previously downgraded investments could be upgraded, resulting in an increase in value.
Tax risk
The risk that investment profits will be subject to taxes, such as the income tax, capital gains tax, and/or estate taxes. For an investor in the 28% income tax bracket, for example, an investment whose profits are not subject to income taxes is automatically 28% more valuable than an investment whose profits are subject to that tax.
DOWNSIDE OF TAX-ADVANTAGED INVESTMENTS:
Investments that are free from taxes typically pay proportionately fewer profits than taxable investments. Furthermore, changes in the law could eliminate the tax advantages that investors were promised or are expecting.
UPSIDE:
None
Inflation risk
The risk that an investment’s income and principal, when received in the future, will have a reduced purchasing power due to an increase in the cost of living.
UPSIDE:
Deflation might occur, reducing future prices instead of raising them. Cellular telephones are much less expensive today than 15 years ago, as are VCR’s and many other products.
Interest rate risk
The risk that interest rates will rise. As rates rise, the value of bonds fall. Interest rate risk affects long-term bonds more dramatically than short-term bonds. For example, a 1% increase in interest rates causes a 10% decrease in 30-year bonds, but only a 4% drop for bonds maturing in five years.
UPSIDE
If rates fall, bond values rise. Because interest rates are constantly changing, interest rate risk is one of the most important of all risks, and a leading cause of both speculation and losses.
Currency risk
The risk that foreign currency exchange rates would rise. If that happens, investments you have in companies operating in that country would fall in value. For example, for a Trinidadian who invests in Japanese stocks, a 20% rise in the yen would produce a 20% drop in the value of the investments, in TT dollar terms. Investments that suffer from currency risk usually also face political risk.
Political risk
The risk that a foreign nation might go to war, or socialize private industry. Either could destroy your investments.
UPSIDE:
As with interest rate risk, currency and political risks are double-edged swords: improvements can boost the value of your overseas investments.
Market risk
The most commonly referred to of all risks, market risk is reflected in the daily price changes of stocks and bonds. Thousands of factors cause market risk.
UPSIDE:
Market risks, or rather investor’s changes in perception about market risk, allow investments to rise as well as fall.
Event risk
The risk that something both unexpected and beyond the control of management will cause an investment’s value to decline. Example. The discovery, after decades of use, that asbestos causes cancer. The news led to the failure of Johns-Manville, which manufactured the insulation product.

UPSIDE:
None-not because unexpected good things can’t happen, but because such surprises are, well, unexpected, and therefore unanticipatable. Most good news, such as a drug company’s accidental discovery of a cure for some major illness, certainly would increase the price of the company’s stock, but such a discovery is within the nature of that company’s business and therefore does not meet the definition of event risk. Such events more properly would be considered market risk.
Prepayment risk
The risk that your investment principal will be returned sooner than you anticipated, particularly if the investment was unusually profitable. Investors in Government of Trinidad and Tobago Bonds have been experiencing this within recent times as the Government attempts to refinance its debt at a lower rate, given a downward slide in interest rates.
UPSIDE:
None. Be thankful that you got your money at all.
Extension risk
The opposite of prepayment risk, meaning that your investment principal might not be returned as soon as you expected. Experienced by investors who placed their monies in Finance Companies in the middle 1980’s, at that time they were not under the full supervision of the Central Bank.
UPSIDE:
None.
Opportunity risk
 The risk that, by having your money invested in one place, you missed the opportunity to invest elsewhere for higher returns.
UPSIDE: The investment you have might well be better than the alternatives you missed. (Donald Trump once said, “Some of my best investments are the ones I didn’t make.”)
With this list of risks in mind, let’s explore their relationship to – and impact on – a variety of common investments.

 

DIAGRAM GOES HERE :

Low means the investment’s design severely limits opportunities for profit.
Moderate suggests that the investment generally earns more competitive returns, but upside reward is still somewhat limited.
High indicates that the investment has unlimited profit potential
R denotes major risk          r denotes minor risk

Be aware that merely being able to earn an unlimited return is in no way meant to suggest that a given investment ever has achieved substantial profits, or that it will ever again achieve substantial profits. Many also could argue that grouping so many investments as “High” unfairly – and unrealistically – suggests that they share an equal probability of achieving similar levels of success. That would be an incorrect and unintended conclusion, and such is not the intent of this chart; the “relative Profit Potential” column merely shows what is possible, not what is necessarily likely. Keep this important disclaimer in mind. With this information, choose your investments.