Part IV 

Assuming you have ascertained what type of investor you are and have done your homework, you should know the following about yourself:
* What your true investment time frame is
* How the class of investments you are investing in have performed over similar market conditions or past time periods.
* What your worst-case scenario is.
* What your expected returns both positive and negative are.

An investor should always perform a fire drill in regard to his or her portfolio. Use a historical perspective to see what the worst years in the stock market would have done to your portfolio.

Key questions that should come to mind include:
* During protracted negative markets, how long would your stocks have stayed down?
* How would a diversified portfolio of stocks invested among various size categories and investment strategies have fared?
* Is there anything you could have done to decrease these losses or to mitigate the length of any downturns in the market?
* Are you comfortable with the answers you have come up with?
* Can you create a portfolio you can live with under the most trying of circumstances?

With bonds, you should be asking yourself the following questions:
* Have you selected the highest quality bond?
* Is there something substantial backing the issuer of your bonds?
* Have you selected the proper maturity of bonds to meet your needs?

When looking at risk factors, you would be wise to seek ways of reducing or transferring as much risk as you can to others. For instance, stock investors can reduce financial risk by placing stop loss orders on various individual stocks within a brokerage account. These stop loss instructions will help ensure that your stock positions are sold out during the start of a major market downturn.

Typically, investors place stop losses on an individual stock to be executed if the stock issue were to decrease by more than 10 percent. This can help to prevent even larger losses that can affect individual issues at times, regardless of what the broader stock market is doing in general. If you are holding stocks that continue to increase in value, perhaps you will want to move your stop loss instructions up with the rising stock price. Failure to have stop loss instructions on major stock holdings is a common mistake among novice investors. Make sure you cancel your stop loss instructions on stocks that you have sold. Otherwise you could be placed in a position of having to deliver stocks you no longer own. A competent stockbroker can explain these techniques and others such as hedging. In addition to using package products such as mutual funds, you may wish to consider using vehicles such as index annuities. They allow you to participate in the appreciations of various stock indexes without taking on the downside risks. These investment vehicles are backed by the financial condition of the insurance company issuing them.

Consider variable annuities if tax benefits or death benefits are a factor. Many variable annuities offer a death benefit, which basically states that your beneficiaries will receive your original investment back, plus a set amount of growth such as 3 percent or 5 percent per year as well, regardless of your account’s actual performance. Of course, if your actual account value has grown by more than the guaranteed death benefit amount, then your beneficiaries would get this higher amount. This may be another way to further reduce financial and market risk. Fixed annuities are excellent substitutes for individual bonds or bond funds. You obtain high yields in most cases without taking on financial risk. This, or course, assumes that you have selected a financially strong company with a competitive product. All of these various strategies can give you tremendous staying power. Another product worth considering is that of a managed account which provides ease of entry and exit from markets; and it is tailored to you individual needs and your tolerance for risk.

Nearly two years on, the spectacular collapses at Enron and WorldCom are still causing the international business community to engage in a mixture of incredulity, hand wringing and buck passing.

While this goes on, banks still need to assess companies for their suitability for lending purposes; investors and institutional funds need to decide where to put their money; and brokers need to make their recommendations to clients. In other words, ordinary business professionals need to reassure themselves as to the soundness of businesses large or small, international or local. If your starting point for looking into a company’s performance is its published accounts, you need to begin with a health warning. Auditors sign off on accounts and reports which give a “true and fair view” of  companies’ financial positions. If managers have engaged in creative accounting — successfully manipulating financial reporting procedures so that debts or liabilities are disguised or transferred or earnings overstated — you won’t easily find evidence of that in the published accounts. Remember too that big financial meltdowns like Enron and WorldCom have been met with disbelief precisely because the accounts and reports looked whiter than white and the companies looked like strong performers.

While there are risk factors to look for in accounts, some warning signals will not be there. You may need to look beyond the numbers at issues such as leadership culture, motives for fraud and company structure. So what kind of indicators can you look at within company accounts? If in doubt, it is hard to beat the old fashioned approach of crunching the numbers. Calculating the return on total capital employed gives a profit picture before tax, interest and dividend payments (which an analyst might well consider to be a reflection of the business climate and so beyond the control of companies’ managers). Total capital includes debt, as well as shareholdings, and it is this calculation which gives an indication as to the soundness of companies’ capital foundations. As with any performance indicator, the return on capital employed should be compared with an equivalent figure in the previous year’s accounts and/or against an industry benchmark. It is only by looking at companies in context that we can reach an assessment as to whether an exceptional performance is realistic or not. If it looks too good to be true, it probably is.

Along with other profitability and liquidity tests this kind of calculation will not necessarily point to any specific creative accounting ruses, but it will provide a means of comparing one company with others in the same industry or of similar sizes and structures. Furthermore, such ready reckoners will only prove reliable if the figures entered in company reports can themselves be trusted. And, as we have seen, trust has become a rather old-fashioned virtue. These days, the numbers in published accounts are being approached with caution. What is more, the size and sheer complexity of the modern conglomerate provides managers and executive teams with plenty of places to hide. Enron’s fault lines eventually showed up through complex energy trades and the — now notorious — special purpose entities (SPEs). Any indication, found within the notes to the accounts or via the business media, that these kind of complex trades and vehicles have been employed should sound warning bells and prompt closer scrutiny.

Former US Securities and Exchange Commission chairman, Arthur Levitt, identified five specific areas of concern: acquisition accounting, big bath charges, aggressive revenue recognition, “cookie jar” reserves and materiality.
*Acquisition accounting has long been regarded as a potential context for creative accounting. If a company has made an acquisition and its figures show a large write-down of assets as an exceptional item — beware. This may be a way of showing increased non-exceptional profits in later periods. The earlier overstatement makes the later profits look artificially strong by comparison.
Acquisition accounting also has the potential for distortion due to differences in accounting standards. The international standard allows an acquiring company to take control of the shares of the company it is buying as a subsidiary at the time the deal is announced. The length of time between the announcement and the deal’s completion can cause a bigger write-down than under UK rules, for instance, where share ownership is only transferred once the deal is complete. In a falling stock market, the price of those shares could go down considerably and the write-off required will be even greater under the international standard.
*“Big bath” charges are generally employed at times of company restructuring. The accounts will overstate the charges associated with closing down or consolidating parts of the company’s operation, for instance, while saying that the charges are “conservatively estimated.” The charges are subsequently used to bolster shortfalls in future earnings.
*The practice of aggressive revenue recognition — booking income before a sale is completed — has proved fatal to some companies. The earnings look real but, in fact, payment has not yet been made. According to the SEC, nearly one third of the 51 forced financial restatements between 1992 and 1998 were the result of improper revenue recognition.
*“Cookie jar” reserves occur when companies over-estimate liabilities for things like sales returns and expenses to do with warranties as well other ad hoc losses. This practice creates a stash which can be raided in leaner times.
*In the context of creative accounting, materiality is the process of rounding errors up within a percentage ceiling. Managers will often justify this on that basis that the difference is too small to make an impact on the overall profit.

These five areas are by no means the only causes for concern. The running mate of creative accounting is, of course, “off balance sheet” debt; the trouble with this kind of liability is precisely that you will not find it listed in company accounts. Many commentators blame investment analysts for the drive to transfer debt from the balance sheet and into leases or the SPEs mentioned earlier. According to this interpretation, markets can be over-concerned with gearing ratios, which are improved if debt is removed from the balance sheet. Of course, the motive to remove liabilities from the balance sheet might come from within the company. If its financial position is poor, and/or if it has reached its borrowing limits, directors might be tempted to move liabilities into leases or into SPEs, joint ventures or other entities. The Association of Chartered Certified Accountants (ACCA) is the largest professional accountancy body operating on an international basis, with over 300,000 members and students in 160 countries.
www.accaglobal.com or email emile.valere@accaglobal.com

An article appeared in the Sunday edition of Newsday with the headline — “Motor injury claims open for abuse — Dr Toby” and it was reported that these sentiments were expressed at a recent workshop dealing with claims management with particular reference to motor accidents. Firstly, since I was not present I could only assume that Dr Toby was correctly quoted.  Nonetheless, one could hardly fault his views as reported.

He acknowledged that there was a lot of room for abuse and that there was a need for standards in the insurance industry. With more effective investigations, there would be a reduced incidence of fraudulent claims and that would lead to speedier payment of legitimate claims. There was a recommendation that claims handlers should be better trained and exposed to medical terms and jargon and that would improve their case management strategy which would ultimately redound to the benefit of the public. The insurance industry would do well to take the recommendations to heart and to seek out ways to improve their service. However, the whole issue of claims settlement in particular for third party personal injury is very complex. The legal system and the administration of justice serve to delay, frustrate and enrich lawyers and the “ambulance chasers” rather than to compensate and provide relief to those who should genuinely benefit from an unfortunate accident. 

The first issue following an accident is the determination of who is right and who is wrong. This will depend on the facts and whether there are independent witnesses to corroborate evidence. In our society, there are many instances where some people want to be wrong and strong and to even assert that they are right when all the evidence is against them. These are the ones that often prove very difficult to reason with and they would continue to maintain their position. Most accidents are not clear-cut and there is usually a degree of contributory negligence and, while there are many instances when insurers of the parties involved in the accident will agree between themselves the apportionment of blame, there are often times when no consensus can be reached and the matter has to be resolved in the Courts. This is where the difficulty lies!

The Court system is clogged with so many cases involving the determination of liability and the matter then becomes a lottery. There are certain insurance companies that clearly understand the system and although their insured is wrong they are able to come out victorious because witnesses do not turn up as they cannot be bothered or, the plaintiff does not appear and it is the wrong party that wins. That is the reality in Trinidad and Tobago. Many a time there is no such thing as justice but only a chance at justice which then makes people cynical about the entire legal system. In personal injury claims, it is true that there is far too much delay in the injured party receiving a fair settlement. This is where the “ambulance chasers” come in and virtually take over matters promising the injured person settlement that many a time is far too optimistic or exaggerated, and therefore expectations of a windfall rises and a reasonable negotiated settlement becomes elusive. The insurance company is then forced to defend the matter and incurs costs that could be mitigated or avoided.  Within recent times, the international insurance and reinsurance markets have been expressing concerns over  settlements and, the high legal costs and the consequences of these combined will ultimately be reflected in higher insurance premiums and greater scrutiny of claims documents. Unlike the United States, there are no jury awards. Damages must be assessed and there are decided cases and legal precedents and, monetary figures are then placed to these assessments.

In the first instance, medical practitioners determine the extent of disability. Some may say that the assessment is subjective and again this is subject to challenge. In other developed societies, experts are introduced in Court and findings and, or assessments of the degree of disability can be challenged but this rarely happens in Trinidad and Tobago, and this is where exemplars must emerge so their findings can be beyond reproach. When legal opinions are sought on any given matter, the public might be surprised to learn of  the great disparity in the quantification of the claim from respected attorneys. In view of the adversarial legal system, the public is left to wonder who is right and who is wrong, since usually there is no middle ground by the parties. In the final analysis, the insurance company has to make a decision on the degree of liability and weigh up the options in terms of whether it makes economic sense to resist a claim, and the demand of an inordinately high settlement and the costs involved.

A number of insurance companies might take the view that it is cheaper to settle out of Court even if the claim is exaggerated and fraudulent, than to defend the matter in Court when there is very little sympathy. As a result the insurance company is seen worldwide as having a “deep-pocket”. We live in a society in which the incidence of fraudulent claims is high. The public at large sees nothing wrong in defrauding the insurance company. In the UK for instance, fraud accounts for at least 7% of all claims payout but it is likely to be considerably higher here in Trinidad and Tobago because of our “culture”. Think about the PH driver with the unauthorized use of the motor vehicle who gets into an accident, and all the passengers are his friends!; the repairer who thinks nothing of padding and inflating the estimate because the insurance company is paying; the attorney who encourages the injured person to press for an unreasonable settlement in order to earn fees; the medical practitioner who assesses a higher degree of disability than is warranted; the insurance company that has no valid reason for not paying a legitimate claim but delays hoping that it will go away. That is the system under which we operate and that is the reality.
We could only work to improve the system and, the exhortation of Dr Toby is timely and well founded. e-mail: daquing@cablenett.net

The small gain the DJIA (Dow Jones Industrial Average)  achieved last week Friday, was given up early this week, following on a lackluster trading in stocks as investors elected to wait on earnings reports to get some vision of the future. Most of the global indexes were flat for the week as investors paused, despite the rather positive and well received comments from Allan Greenspan, the US Federal Reserve Chairman.

In his semi-annual monetary policy report to the US Congress, Allan Greenspan stated that the US economy is poised to accelerate and further mentioned that he expected interest rates to stay low in the near term. The over night rate is currently 1.0%, its lowest rate since 1954. Greenspan even hinted that the US FED still had room to lower rates further if it was required. US treasury yields rose markedly after his speech as a result. It is early in the earning season and it may be prudent to remind ourselves that it is typical for bad news to come out first with good news to follow. At this point, the number of companies reporting disappointing numbers to those meeting or exceeding their targets is running at about 1.7 to 1. To many this may seem to be disappointing or bad but in fact, the number at this point would typically be more like 2.6 negative earnings reports for every positive one reported, hence it is good. Even though the second quarter is typically the weakest quarter, it may well be that we are looking at a very positive earnings season leading to a summer rally. Also typical though would be the sell on news theory so it remains unclear as to how the markets will really move over the short term.

In the United States, IBM announced second quarter earnings rose to 1.7 billion USD from 56 million for the same quarter last year against the background of only a ten percent rise in revenue to USD 21.6 billion. Clearly the mean and lean system is working for IBM. Intel also announced a large growth in earnings, doubling second quarter profits from USD 446 million to 896 million year over year. Another tech reported positive, Microsoft released quarterly net income figures up 26 percent to 1.92 billion USD from 1.53 billion a year earlier and raised its sales forecast for the remainder of the year. Financial stocks also did well with CitiBank, Bank of America, Merrill Lynch and JP Morgan all announcing a rise in earnings. In the UK, stocks were mixed even though jobless claims came in less than expected, keeping the UK with one of the lowest unemployment figures of the major economies. Claims increased by only 1,700 rather than the 9,200 forecast, leaving the employment rate at 3.1 percent for the 17th month in a row. The housing market continued on its strong footing with net lending rising by GBP 5.31 billion in June, up from GBP 4.62 billion in May. UK inflation slowed unexpectedly in June, the RPIX was 2.8 percent as compared to 2.9 percent in May. The result is demonstrated in the UK business executive confidence figure which rose to its highest level in a year to 23, it was only six in March.

On the continent, German investor confidence also rose, reaching an 11 month high as Schroeder’s tax cuts and lower interest rates took hold. Nokia, the worlds largest mobile phone manufacturer, did announce that it expected both handset revenue and network business to fall. The stock fell on the news. In comparison, Ericcson, the largest wireless network supplier saw shares rise on news of its cost cutting measures and announcement that it would not loose as much as forecast. It seems that the German economy is improving but inflation remains too low, and the risk of deflation a concern. In Japan, a report from the Japanese Central Bank made positive statements about the economy based mostly in a recovery of exports, share prices and business spending. In closing, we are reminded that the US equity markets still account for approximately half of the world’s capital market value and will continue to influence the other major market behaviors despite their respective economic situation. We remain positive that the 350 billion USD tax incentive package passed by US Congress in early July (the third largest tax cut in history) coupled with the most aggressive cuts in overnight rates in history by the US FOMC (13 cuts since Jan 2001) have provided the framework for a solid economic recovery.
E-mail : darcy@investments-intl.com

As Saddam Hussein’s bronze statue crashed to the ground in Baghdad in late April, crowds of excited Iraqis and millions of television viewers around the world believed it could be a second chance for the country’s impoverished people. After all, Iraq has oil — oil with a capital ‘O’ in fact: 110 billion barrels, the world’s second largest reserves after Saudi Arabia.

UN sanctions that had stifled the country’s economy for 13 years were lifted in May, when the United States and Britain won broad powers to run Iraq and sell its oil until a new government is established. US ambassador to the United Nations John Negroponte declared, “It is time for the Iraqi people to benefit from their natural resources.” In reality, the outlook for Iraq is far from certain. A look at some of the world’s key oil-exporting regions shows that, like the golden touch of the ancient Greek King Midas, the oil gift often comes with costs that can outweigh the benefits. The international image of oil nations is one of stark contrasts. On the one hand, suffering and woes: strikes in Venezuela, starvation in Angola, and violent ethnic clashes in Nigeria. On the other, sumptuous royal palaces in Saudi Arabia. Juan Pablo Perez Alfonso, a former Venezuelan oil minister, was all too aware of the mixed blessing of oil riches, calling oil the “devil’s excrement” in one famous book. “Ten years, 20 years from now you will see,” Perez Alfonso said in the 1970s; “Oil will bring us ruin.”

Right on schedule, Venezuela’s myth of oil prosperity finally burst in the last decade of the 20th century. In Nigeria, per capita income of $270 a year is lower than when oil was found in the 1950s. Since 1999, Nigeria has been trying to recover up to $3 billion that disappeared during the four-and-a-half year rule of former president Sani Abacha. Bloody clashes erupt frequently near the oilfields in the Niger delta as tribes fight over scarce revenue and jobs. As demand for oil grows in the West and reserves dwindle in Europe and the United States, energy companies have gone further afield, looking for oil in developing countries and increasingly under thousands of metres of ocean. They are often welcomed warmly as poor countries lack the capital and technology to develop their own resources. “These countries usually lack the technology, the capital and expertise needed to develop these fields, especially the deepwater projects which are very technologically challenging. Apart from the big international oil companies, there is really no one else who can do it,” said Andy Latham, energy analyst at consultancy Wood Mackenzie in Edinburgh. Iraq’s oil helped Saddam stay in power for more than two decades and many critics of the war think that controlling Iraq’s reserves was a motive for the US-led attack. The top job in Baghdad has the added bonus of control over an estimated $25 billion in annual oil revenues alone, at pre-war production rates. “All the oil companies are dying to get into Iraq,” says Terry Lynn Karl, professor of politics at Stanford University in California. “And every single opposition group in Iraq is dying to get into power so they can get their hands on those resources and decide how to allocate them.” The question now is whether post-Saddam Iraq can escape what Harvard economists Jeffrey Sachs and Andrew Warner call the “curse of easy riches.”

Stanford’s Karl, author of Paradox of Plenty: Oil Booms and Petro-States, is not encouraged. “The warning for the Iraqi people and the United States is this: It is a very dangerous myth that oil will make you rich,” she says. “Oil-exporting nations are some of the most conflict-ridden, economically troubled and authoritarian countries in the world, and this is directly related to their central export. “Because petroleum is so highly capital intensive and so extraordinarily profitable, no other resource tends to concentrate power and money into the hands of the few like oil does.” Countries that have benefitted most from oil have been those with established democracies before the windfall arrived. Norway, which ranks as the third largest oil exporter behind Saudi Arabia and Russia, is probably the best example. The United Nations Development Programme ranks the quality of life there as the best in the world in its annual index. It is also a shining example of probity in government, with more than $100 billion saved in a petroleum fund that could be used in future to fill a fiscal deficit when prices drop or output slides. But in the case of Iraq, experts say the oil money could actually be an obstacle to developing a democratic system. “Oil is a big source of wealth and temptation for the ruling class. It gives them the ability to ignore people’s opinion,” says Raghuram Rajan, professor of finance at the University of Chicago. “Oil doesn’t help if you are trying to get democracy working in a country.”

Oil helped finance Saddam’s gold taps, racehorses and yachts, while most Iraqis lived in squalor. Such dramatic contrasts can be seen in many other oil-rich areas too. The majority of Venezuelans live below the poverty line despite decades of oil wealth. In Kazakhstan, in central Asia, a glittering new capital, Astana, is rising on the desolate steppes thousands of kilometres from anywhere. Astana has the trappings of a cosmopolitan city, from apartments to hotels, which have appeared where nothing existed ten years ago. But critics say it is turning into a white elephant, deserted on weekends as civil servants flee to the bustle of the former capital Almaty. Almost every major oil company is active in Kazakhstan, and together they are believed to have invested more than $15 billion into its oil and gas sector in the past decade. Kazakhstan hopes to become the world’s fifth largest oil exporter by 2025. Now, however, most Kazakhs subsist on about $100 a month and the country’s infrastructure is threadbare at best. “Oil-exporting governments keep themselves in power by doing, essentially, two things. One, they disproportionately funnel benefits to the section of the population that supports them, and two, they build a security and military apparatus to quash dissent from the people who are not seeing any of these benefits,” says Stanford’s Karl.

In Chad, for instance, the government received $25 million for oil drilling rights, and some of this could have made its way into arms purchases to fight rebels. In Sudan, foreign oil investments have been blamed for fuelling the civil war. But Chad could also become an example of how oil companies should do business with Third World governments. ExxonMobil said it would not proceed with investment in the impoverished African country unless the World Bank got involved. In that instance, the American oil giant was considering a $3.5 billion pipeline to ship oil from the landlocked state via Cameroon to the Atlantic. ExxonMobil called in the World Bank to monitor an offshore bank account to ensure the $2.5 billion to be paid to Chad during the lifetime of the project was used for social and environmental programmes in the country. The company also publishes quarterly updates on the project, a rare disclosure for the oil industry. “People have started looking for solutions. The Chad-Cameroon pipeline may prove to be an interesting example. It’s the first time a powerful entity like the World Bank has insisted on measures for more responsible revenue management. But the jury is still out on how effective they will be,” Karl says. The development of oil in countries such as Venezuela and Saudi Arabia propelled them into the modern age and created high aspirations for the peoples there. Both countries were able to set up generous social welfare and benefit systems which rivalled those in developed Western societies.

By the end of this month, Republic Bank Limited (RBL) should have a 57 percent shareholding in Barbados National Bank (BNB).

The signing of the Sale and Purchase Agreement for the acquisition of the majority shareholding of the Barbados bank by the local banking giant took place last Wednesday in Barbados. It signalled that Republic is now one step closer to becoming the majority shareholder of BNB. The process of acquiring the majority shareholding in BNB began in March this year when it was announced that RBL was successful in its bid to buy 57 percent of the shares in BNB from the Barbados govermnent. Barbados’ Prime Minister, Owen Arthur and RBL’s chairman and managing director, Ronald Hafford signed the agreement. The transaction is expected to conclude by the end of July. Harford, in an interview with Business Day, said that the initial down payment of ten percent was paid when the deal was signed. This amounted to just about US $9.5 million.

The entire deal will cost RBL just under US $95 million and the remaining sum is expected to be paid before July 31. When the final amount is paid, 57 percent of BNB’s shares will come under RBL’s control and BNB’s operations will be replaced with Republic’s directors. The remaining shares will be split among the Barbados’ government (20 percent); the National Insurance Board (10 percent) and the remaining 13 percent will be held by institutional and individual shareholders in Barbados. Hafford said in accordance with the Takeover Code, RBL will make an offer to acquire the shareholding of the minority shareholders when the transaction with the Barbados government is concluded. Hafford also explained why Republic Bank chose to do business with BNB. He said it is no secret that Republic has been looking at acquisitions throughout the Caribbean. “However, in the Caribbean what we have found is that there are plenty things to buy, but not enough of the right things to buy,” he said. He said in Republic’s case, the underlying concern has always been the business of sound economies. He noted that there are only about four sound economies in the Caribbean right now — and Barbados is one of them. “We were aware of BNB, but they were under a mandate from their government to sell and they really were the ones that encouraged us to come and have a look at their operations.”

Hafford said they accepted BNB’s invitation and liked what they saw. “So it really was not a hostile deal in any way,” he said. “It was a deal where BNB wanted Republic to be their strategic partner and their was mutual interest in achieving that objective.” He added that the entire negotiations were very smooth and cordial and noted that he has never done a deal as smooth as this one in the past. He explained that before the CIBC/Barclays merger, the Barbados banking market was heavily fragmented. While he could not provide exact figures, Hafford said Barclays had about 19 percent of the market, CIBC — 18 percent, Bank of Nova Scotia and BNB 20 percent each with the other banks holding the remaining market. With the Barclays/CIBC merger, they acquired 37 percent of the market, making BNB one of the second largest banks in Barbados. “BNB has a nice size market share. What is also important is the fact that it is well run and profitable. It produces a return on assets of 2.16,  which is very good. We produce 2.4, but there are not many organisations that can produce that kind of return on assets.”

BNB has an asset base of US $626 million and recorded an after tax profit of US $13.1 million in 2002. Its subsidiaries include the Barbados Mortgage Finance Company Limited and the BNB Finance and Trust Company Limited. The bank has a complement of 363 employees and six branches across Barbados. RBL is one of the Caribbean’s largest and longest standing institutions, with subsidiaries in Grenada, Guyana, and off-shore banks in the Cayman Islands and Barbados. For the half year ended March 31, 2003, RBL reported profit attributable to shares of $246. 9 million, representing an increase of 27.4 percent over the corresponding period last year. During the first half of the year, RBL had some windfall gains in a special dividend of $48 million from its investment in CIBC and deferred tax adjustment of $36 million following the reduction of corporation tax by five percent to 30 percent.
“The overall excellent performance will challenge us during the second half to equate or exceed,” he said

Hafford said while BNB has a nice market share and a bright future in a solid economy, he believes that Republic Bank can add value to its operations because of its expertise in merchant banking, credit cards, mortgage banking and small business. He added that BNB is not going to take Republic’s name. “Republic Bank will add value in all these different areas and will also train BNB’s staff and give them the opportunity to develop.” Apart from BNB, Hafford said Republic is always looking for lucrative opportunities within the Caribbean. “It is interesting to know that we did a calculation recently which revealed that over the last couple of years we have looked at over 20 different transactions and for one reason or the other, either the price was too high or when we thought the offer was good the partner did not want to sell so those deals did not come through.” Additionally, he said Republic Bank is very selective about their business and take their time before entering different countries and starting new projects.

It is not enough to give small states preferential trade treatment unless it promotes growth and development, according to Deryck Brown, Director of Technical Cooperation, Caribbean Negotia-ting Machinery (CSM). He knows what he’s talking about. In a World Trade Organisation (WTO) text there are 155 references to special and preferential treatment. There are, too, 147 provisions which address the concerns of small states.

Small states, he said, hold special characteristics in common: a high degree of openness, imperfect markets, and dependence on trade taxes and import duties.  At a seminar-workshop organised by the Association of Caribbean States (ACS) and held at the ACS headquarters in Port-of-Spain, several speakers, including Brown explored issues under the title, “The Greater Caribbean In International Trade Negotiations.” Brown noted that for small states, there may also be a concentration on two primary commodities for export and dependence on few markets. Additionally, firms in these countries are of such a small size that they can neither attract investors nor allocate substantial amounts of expenditure to marketing, he said. Indeed, small states possess limited institutional capacity and limited human resource, he noted, adding that their share of GDP is often exceeded by the sales of multinational corporations. Further, small states are very vulnerable to the impact of natural disaster: the damage wrought by Hurricane Hugo on Montserrat amounted to 500% of the island’s GDP. In Nevis one hotel accounts for 75% of total employment. Lack of market-driven competition in small states leads to high cost and failure to innovate, he said, adding that sectors are undiversified with a lack of international competitiveness because of failure to achieve economies of scale. Special and differential treatment should take the particulars of small states into account, suggested Brown, and should not be confined to measures that merely prevent developing countries from being put at a disadvantage.

Differential treatment should also include proactive, meaningful and enforceable measures to promote growth and development, he said. There should be flexibility, access to mediation, technical assistance, and training of technicians. There is a need, too, for development financing and incentives, which create a commitment to follow through on resolutions. Policies, which promote development, should be included since baseline agreements like the forgoing of obligations does not necessarily promote growth. In fact, he argued that an adjustment period which is too long can be just as detrimental as one which is too short. Fay Housty, Director of Foreign Policy and External Economic Relations of the Caribbean Community (Caricom) said it is paramount that the countries of this region commit to forging alliances against the backdrop of an uncertain economic climate. Housty emphasised that our industries must be competitive in the international market. This is an international market in which global trade has grown considerably in the last four decades, according to Carlos Isidro Echeverria, Ambassador of the Republic of Costa Rica in TT. Growth in international trade was at a rate of 6.7% in the 1970s, 4.1% in the 1980s and 7.3% in the 1990s, he said. This expansion, according to Daniel Blanchard, Director of ECLAC Subregional Headquarters for the Caribbean. was due to bilateral agreements, income growth, technological change and cheaper transport costs. Still, many factors hinder the success of developing states, said Kenneth Valley, TT’s Trade Minister. These include lack of adequate financial resources, proliferation of non-tariff barriers, erosion of preferential market access and reduction of foreign aid. What is required, he proposed, are longer time frames, technical assistance, and an adjustment fund. “We need for our firms in TT to manage the paradigm shift from preferential treatment to trade reciprocity,” he stressed.

On the Growth Competitiveness Index, TT is the fourth in the Western Hemisphere behind USA, Canada, and Chile and was overall ranked 37th out of 80 countries globally. Antonio Romero, Coordinator of International Trade Negotiations, Permanent Secretariat of the Latin American Economic System (SELA), pointed out that within trade negotiations, differences in economic development, economic structures as well as economic dimensions were pertinent factors. Global indicators of economic dimensions, for example, take into consideration characteristics such as size, populaton, workforce, area and GNP. Regarding this region, “the differences in size or economic dimensions are scandalous.” he said. Countries range from massive Brazil, Mexico and Argentina, to medium-sized economies like Columbia, Peru, Venezuela and Chile, to all the other Latin American countries which comprise the relatively small economies. Small economies, Romeros said, are more vulnerable to issues that are not immediately trade issues, like health and ecucation. There are also challenges in attempting to gain special and differential treatment in trade negotiations, he said, noting that this included lack of consensus regarding the definition of a small economy, dealing witn non-trade issues, and the idea that free trade is not sufficient to guarantee levels of development.

The UWI Institute of Business and Technology will be conducting a two-day workshop on the topic, “High Leverage Branding.” The workshop will take place from August 18-19, with an additional closed door session on the 20th.

The workshop will focus on brand management as a strategic function and will be conducted by Dr VH Manek Kirpalani. Kirpalani is a professor at the Concordia University, Canada. The workshop will examine how brands create mind share and emotive appeal, which, in turn leads to greater market share. Kirpalani will be discussing the development of brand strategies, doing a brand audit, brand positioning and Internet branding. The entire workshop has been structured as an interactive working session. The content has been designed to include case studies, lectures and testimonials from participants.

Kirpalani is one of the leading authorities on International Business and Marketing. Prior to joining academia he was the managing director of an Electrolux AB subsidiary and manager of a trading company. He was educated at Oxford University and in North America. He was a director on the board of  the American Marketing Association for four years and VP of their global marketing division.

Gyan Maharaj, Director of DS Maharaj, believes that with proper planning and preparation “a house a day” is not an unrealistic goal and is of the view that it can work.

At the company’s housing symposium, held at their warehouse at Point Lisas recently, Maharaj allowed foreign housing firms to show just how it can be done. Forsa, for example, represented by Miguel Dominguez, is a Columbian company, that  manufactures aluminium, that threatens to make bricks obsolete. Attached to each another and erected in the shape of the desired structure, these aluminium panels form a mould which allows poured cement to create one solid earthquake-resistant unit.The cement is reinforced by wire mesh. Forsa is currently using this process to complete a variety of projects in fourteen Caribbean states. The technology has been around for over thirty years and is responsible for the creation of houses which are virtually fire-proof and hurricane-proof, Dominguez said. The result is that less time is spent putting up the structure and  direct and indirect costs are reduced. The bottom line, the Forsa official said, is that a relatively simple house can be constructed in just one day. The hand-crafted panels are themselves quite manageable and economical, the company said. One panel is light enough to be carried by one person, rendering cranes and heavy duty equipment redundant. If cared for properly  they can be re-used over 1,200 times. In fact, for a house between 30 and 70 square metres only fourteen workers are needed on site to manage the system.

The average cost for such a venture is approximately $130 per square foot. Also, cost per unit dwindles as usage increases. Financing can be accessed through Colombian Export Bank and financing costs are also diminished by roughly 10%. Cabillas Del Caroni, a rebar fabricator based in Venezuela and another contributor to the symposium, was represented by Jose Muxi. Muxi indicated that Cabillas Del Caroni has fabricated over 40,000 tons of rebar in the past 30 months. They offer clients the security of a fixed cost, charging only for what they prepare and ship. The benefit of using them to supply rebar is that one eliminates redundant personnel and so reduces cost. Additionally, storage cost, wastage, inaccuracies and theft is minimized, Muxi said. They can guarantee speed and reduces the waste of material, he said, noting that in Venezuela, for example, the company had only had 2% waste.This factor is contingent upon design, however, and varies according to the specifics of each structure. Muxi promises, too, that their machines can adjust to accommodate any standard.Caribbean Steel Mills (CSM) representative Anthony Licorish, explained the advantages of his company’s All Steel Roofing Solution (ASRS). Ease of installation, requiring only small tools like drills and no heavy lifters is a key benefit. Significant, too, is the fact that only one skilled worker and three labourers are needed. Another benefit is speed of installation – only five days are needed for a 1,500 square foot roof. As a result, there is also less bulk for transporting. This roofing solution being offered by CSM  is compatible with the Forsa mould in that the roof can be attached while the mould is being set, or it can be attached after.

When Safiya Burton, Marketing Manager of Grace Kennedy Capital Services Limited, was called upon by her CEO, Douglas Orane, to give an overview of the Grace Caribbean Fixed Income Fund at the Trinidad Hilton recently, she did not disappoint.

When the 26 year-old took the floor, she was articulate and spoke as though she was a veteran of the Jamaican-based company that has spread its tentacles throughout the region. Her analysis and presentation were flawless. “I have surrounded myself with people who are as good as me or even better,” Orane said, when asked about his young recruits at the launch of the fund. The fund was launched last October in the Cayman Island and TT is Grace’s second market for the fund. Burton said Grace was looking at putting the fund in other markets, including Belize, Bahamas and Turks and Caicos. She explained that Grace chose TT as its second market for the fund because it is one of the bigger economies in the Caribbean. “Its one of the economies that Jamaica has always had a close relationship,” she said, adding, our Trinidadian partners told us that even though there is a plethora of funds and unit trusts available locally, there is a need to diversify.” Additionally, she said, people want higher yielding instruments, and that investors put their money in companies that they trust and have an established track record. Although a novice in the financial sector — this is already her third job — Burton brings to her position a wealth of international experience. She started off her career as a broker with Merril Lynch Investment Managers in Miami. She was later transferred to the cmpany’s Los Angeles office, where she worked on the company’s portfolio management team for their domestic fixed income and international equities portfolio and mutual funds.

Having worked there for two and a half years, Burton decided to move to Mellon Financial, which is the parent company of Dreyfus Funds where she spent another two and a half years.
Even though she was born in Alabama, she was raised in Jamaica and studied at Florida International University and the Association for Investment Management and Res-earch. Having the opportunity to work with two prestigious international investment organisations, she decided to return to Jamaica and pursue a career in the Caribbean. “I was doing very well in my other jobs. I got promotions and responsibilities, but there was always something that was missing,” she said. “ I guess that there was some kind of magnet pulling me back to the Caribbean.” Burton said she always wanted to return to Jamaica, but noted that the timing had to be right. “I had reached a point in my career where I was at a crossroad and I had to make a decision whether to stay in the United States or return to my homeland. I decided to go home and so far it has been quite good and I get the best of both worlds.” With her diverese financial background, Burton was able to fit in at Grace Kennedy’s Financial Division with ease.

She was no stranger to the company and its policies. Her father served the company for 33 years in the Food Trading Division. Burton said she always had the opportunity to intern with Grace during her time away from school. “I have been exposed to Grace Kennedy from a very young age and I believe that their cultural values are more in line with what I was looking for,” she said in an interview at Hilton later. She notes that while the compensation packages and benefits are great at other companies, “there is a certain level of trust and integrity at Grace, which attracted me.” Burton’s role at Grace is really to bring the company’s first US dollar denominated mutual fund — Caribbean Fixed Income, to the people of the Caribbean. She noted that the fund is a fixed income fund and so primarily their core investments are sovereign debts issued by Caribbean governments and rated by international rating agencies. Grace currently invest in bonds issued by Grenada, Barbados, Trinidad, Belize and the Dominican Republic.

Burton said the fund has been performing well and above expectations. She said their target yield is 7.5 to eight percent. “Even though the fund is just a few months old, we have managed to achieve an annualised yield of 7.2 percent as of June 30, 2003.” The fund started with a net asset value of US $10 and now stands at US $10.42. Burton said the only market they have been in so far is the Cayman Islands. There, they have managed to draw interest of US $7 million. She hopes that TT will significantly add to that figure even though she is aware that this country is a magnet for regional investors. She says she has been doing significant research on the funds available in TT, especially the US dollar denominated ones. Her research revealed that Grace funds actually yield more that those being offered in TT. She boasted that their yields are actually about 100 or 200 basis points higher than those being offered on the TT market. “Investors want higher yielding instruments, so this is an excellent option for them,” she said in a refined Jamaican lilt. Burton dismissed the notion that Grace Kennedy is just a food and beverage company and has a diverse portfolio. The company, she said, actually has five different divisions which have been around for quite a number of years.

Grace Kennedy now comprises a Maritime Division, Food Trading, Financial Services, Information Services and Retail Trading. In the food division, the company had 50 new products alone. “One of our goals at Grace Kennedy is to take the hassle out of the lives of the Caribbean people and all our services are in response to customers needs,” Burton says. The jewel of the company is its financial services division. Burton said she has never considered her age to be a factor in anything she does. “I consider myself to have fresh ideas and I think that my international exposure helps to bring this fund into focus. I do not think about my age, even though I have lots of responsibilities.” In fact, as the fund and the assets under management increases, Burton said she would like to take on some more under her belt. “Where that is going to lead to I am not certain, but I am interested in contributing in whatever way I can to the region.” “I am trying in my own way to make a difference and at the same time I am also very fulfilled because it is much different from working in the US. The quality of life in the Caribbean is much higher.” She was quick to point out that she was not referring to the money and material things. “I am talking about the culture, art and music among other things, that makes a lot of difference for me and the people here are just really good. You can be yourself here.”