Drowning in petrodollars
John and Penny Hubley
'Money is not the problem' Trinidad and Tobago's austere Prime Minister Dr. Eric Williams once remarked in an unguarded moment he would probably rather forget. Certainly lack of ready cash is not the problem it is for Jamaica, Guyana, or other Caribbean states without oil. But too much money can also be a problem. In 1970, Trinidad and Tobago earned only $29.5 million from oilexports. By 1979, the income had ballooned to $920.8 million. For a country of barely 1.2 million people, that is a lot of money to spend without drastically imbalancing the economy.
Sitting on the South American continental shelf next to the vast resources of Venezuela's Orinoco Delta, Trinidad and Tobago is the Caribbean's only net energy exporter. Its oil industry has expanded steadily in the last decade from 51 million barrels of crude in 1970 to 83.7 million in 1978. Oil provides Trinidad and Tobago with almost two-thirds of its income. It has pushed per capita GNP up to $3,167, somewhere between Portugal and Greece. Foreign reserves now total slightly over $2 billion.
But the petrodollar flood has come more from hefty taxation and productionsharing contracts than from direct ownership of the industry. The government took over 50.1 per cent of British Petroleum in 1968 and Shell in 1974. But the giants in the field remain foreign-owned. Amoco, the biggest producer, exports its low sulphur crude to the US for refining. Texaco imports crude from Saudi Arabia and Indonesia to top up local production for its huge 360,000 barrel-per-day refinery in south Trinidad.
Oil revenue is also disguising a dangerous import boom. In 1979, petroleum accounted for over 90 per cent of all exports, and there was a healthy visible trade surplus of 421 million. But take oil away from both sides of the account and the result is a horrifying deficit. Imports run at a level almost seven times the country's exports. Trinidad is a massive food importer, while agricultural production for local food and exports is in steady decline.
So is production of vital materials like cement and bricks. Even the assembly industries that still form the backbone of the manufacturing sector, from cars to appliances, are flagging badly.
The idea has been and still is to use oil wealth to finance swift industrialisation along familiar Third World lines, to expand manufacturing and eliminate dependency on a single export like oil.
As part of that plan $4.2 billion was earmarked for a huge industrial estate now taking shape at Point Lisas, on Trinidad's west coast. Fuelled by offshore natural gas the estate includes an 855 megawatt power station, two ammonia plants, and an iron and steel plant which came on stream this year. It will almost certainly include an aluminium smelter, a liquified natural gas operation (exporting to the US) and methanol and urea production. This grandiose development is Dr. William's showpiece. So far $383 million has been spent. Point Lisas is supposed to generate a surge of downstream industries and become the long-term productive legacy of the oil boom - the backbone of national development. Ministers brush aside objections that huge capital-intensive development can do little to meet the growing demand for jobs. They are also vague about critical points like where they are going to sell Trinidadian iron and steel when countries like the US and Japan are having a hard time giving the stuff away.
Williams' major strategy in controlling inflation and the glut of money has been to set up dozens of long-term `development funds'. These are to finance a whole range of projects from schools and parks to horse racing and the recruitment of overseas nationals.
According to the government, by last May $2.6 billion had been siphoned off into these funds and $1.45 billion spent elsewhere - mainly on petroleum development, education, roads, water, housing and air transport (the state-owned airline is buying Lockheed 1011-500 jumbos). However, the precise use of government oil revenues is not publicly accountable.
The remarkable thing is that the bulk of the spending has gone into hiring more government employees rather than production. Last year's wage bill for a swollen public sector was $360 million and is expected to rise to $769.6 million by 1983. There is a growing suspicion that much of the money spent creating new government jobs is pure political patronage.
Still, the oil money has soaked through the economy raising the standard of living even at the bottom. But it has also widened the gap sharply. What hard indications there are on income distribution suggest that ten per cent of households at the top still receive about a third of the national wealth, while the 40 per cent at the bottom get about a tenth. That's roughly the position before OPEC was even heard of and the national cake was seven times smaller.
Nor has the massive spending actually produced the visible progress that people were led to expect. In spite of $750 million supposedly spent on `infrastructure' Trinidad and Tobago is still some way from acquiring reliable power and telephone systems, a constant nationwide water supply, or a road system capable of handling massive congestion. Cars have multiplied 65 per cent in six years.
Barely enough new jobs are being created to keep ahead of the increase in the labour force, let alone tackle the backlog of unemployed and underemployed - officially 14 per cent but actually much higher.
Only a fraction of the annual demand for 10,000 new homes is being met. That's lead to a vicious spiral in real estate prices and rents, with new homes now beyond all but the very rich. It's only in the wake of massive spending that the government is finally recognizing there are too few skilled managerial and technical people to make the investment pay off.
With elections due in 1981 (when Williams celebrates 25 years of power) the pressure is now on for results. But the long-term development problems remain. The country's proven oil reserves of 750 million barrels will last just over ten years at the present rate of extraction barring new finds.
Popular expectations, piqued by easy money during the 70s, are quickly going sour at the slowness of progress. Point Lisas's energy is assured from the island's plentiful supply of natural gas. But the dream of becoming a Caribbean Singapore is not working. The failure to secure efficient services, to revive agriculture, to diversify manufacturing and control imports, the growth of dependence and the shortage of skills, suggest a less euphoric dream for the turn of the century.
Jeremy Taylor is a free-lance journalist based in Port of Spain, Trinidad.