Trinidad and Tobago's natural gas and oil resources have enabled it to become the Caribbean's most industrialised nation. While oil production and refining continue to be important, petro-chemicals, and to a lesser extent steel have assumed greater importance. More recently, LNG has also assumed the role of a major export product. Trinidad and Tobago is the world's leading exporter of ammonia and the second largest exporter of methanol. The country's fiscal, regulatory and legal environment facilitates and supports foreign investments.In its September 2015 Monetary Policy Announcement, the Central Bank indicated that Trinidad and Tobago’s domestic economic outlook has deteriorated. Provisional estimates indicated that the domestic economy contracted by close to 2 percent in the first half of 2015. The energy sector declined by an estimated 3.5 per cent in the first six months of 2015 following continued shortfalls in natural gas production, and the non-energy sector (which provided support to the overall economy for the past few years) lost momentum, declining by around 1 percent in the first half of 2015. Growth in the non-energy sector was driven mainly by the transport, storage and communication, finance and distribution sub-sectors, but a slowdown in construction, distribution and manufacturing were the main contributors to the decline. The final quarter of 2015 is expected to show continued sluggish economic performance.
The highly anticipated IPO of Phoenix Park Gas Processors Limited (PPGPL), one of the largest gas processing facilities in the Americas, was launched during the third quarter of 2015 through Trinidad and Tobago NGL Limited (NGL), a subsidiary of National Gas Company Ltd (NGC). The IPO was described as a success, having been oversubscribed by 1.77 times and was considered to be the largest in the country’s history.
In this Chapter, Nicole Ferreira-Aaron, Managing Partner; and M. Glenn Hamel-Smith, Partner in Hamel-Smith’s Transactional Department, provide investors with a bird’s-eye view of the investment climate in Trinidad and Tobago.
Trinidad & Tobago At A Glance
Size: The Republic of Trinidad & Tobago comprises two islands. Trinidad, the larger, has an area of approximately 4827 square km (1886 square miles). This makes it roughly the size of the State of Delaware. Tobago is smaller, with an area of about 300 square km (117 square miles).
Location: Trinidad & Tobago is strategically located at the southern end of the chain of Caribbean islands and just off the north-eastern shoulder of South America. Trinidad is only 11 km (6.8 miles) off the eastern coast of Venezuela. Tobago is 32.2 km (20 miles) to the north-east of Trinidad.
Trinidad & Tobago is approximately:
613 km (381 miles) from Caracas - flying time: 1.2 hours
2598 km (1614 miles) from Miami - flying time: 3.75 hours
3200 km (1988 miles) from New York - flying time: 4.8 hours
4000 km (2486 miles) from Toronto - flying time: 5.5 hours
6400 km (3977 miles) from London - flying time: 8.7 hours
Communications: Air, sea and land transportation links are excellent. Both the international airport in Trinidad (Piarco) and that in Tobago (Crown Point) are served by several European and North American carriers, and by the country's own Caribbean Airlines. Direct air links with South and Central America are via Brazil, Panama and Venezuela. The two main international sea ports are at Port of Spain and Point Lisas, the most important industrial center and the heartland of the energy sector.
Telecommunications services are reliable and up-to-date, with state-of-the-art fibre optic trunk lines and cellular services. The country is linked to a dedicated digital line, positioning it on the network of global digital highways. The recent upgrading of the telecommunications facilities and the introduction of other service providers in this area has positioned Trinidad as an ideal location for development of a Remote Services Cluster.
Climate: Located just over 10 degrees north of the equator and in the path of the Northeast trade winds, Trinidad & Tobago enjoys a tropical climate with very little change in temperature during the year. The annual temperatures range between about 21oC and 32oC.
The average annual rainfall is about 200 cm. There is a dry season, January to May, and a rainy season from June to December. Unlike the rest of the Caribbean, Trinidad & Tobago is fortunate to be south of the hurricane belt.
Time Zone: Trinidad & Tobago is on Greenwich Mean Time minus four hours. In Winter it is on US Eastern Standard Time plus one hour and in Summer it is on US Eastern Standard Time.
Population: The population in Trinidad & Tobago is estimated at 1.224 million (July 2014). It comprises a mix of persons from just about every ethnic background, living in harmony. Religious tolerance allows for active observance of many faiths including, Christian, Hindu and Islam.
Language: The official language is English. Facilities exist for foreign language dealings and translations, as may be required.
Urban Centres: Port of Spain is the largest city and administrative capital of the Republic. San Fernando is the second city and industrial capital. The most important industrial centre is located at the port of Point Lisas in Central Trinidad. Scarborough is the administrative capital of Tobago.
Currency: The currency unit is the Trinidad and Tobago dollar (TT$). A managed floating exchange rate is in effect, with some degree of monitoring and control exerted through the Central Bank. The TT$ is pegged to the US$, and has slowly depreciated against the US dollar falling from TT$6.273 = US$1.00 in 2002 to TT$6.409 in 2014. In recent months, businesses have experienced significant difficulties in obtaining foreign exchange, particularly US$, to meet their trade needs. As a result, the Central Bank has made several large injections throughout the year 2015 through sales of US$ to the commercial banks designated specifically for trade purposes.
Business Hours: Normal business hours are 8.00 am to 4.00 p.m. with banks closing at 2.00 p.m Monday through Thursday, and at 1.00 p.m. on Friday, reopening from 3.00 p.m. to 5.00 p.m. Banks located in shopping malls are open from 11.00 a.m. to 6.00 p.m. Monday through Friday. Technology allows for 24/7 banking transactions, and E-banking is offered by commercial banks.
Education: Trinidad & Tobago has a well-educated population with high levels of literacy. The education system is modeled on the English system. Government schools and Denominational schools (owned and managed by various religious bodies) provide free education at the primary and secondary levels (i.e. up to Form 5 or Grade 12). The Caribbean Advanced Proficiency Examination (CAPE) is offered for post-secondary candidates who require certification and advanced standing. Regional Universities and tertiary institutions in the U.K. and the U.S.A. accept CAPE certification for matriculation and entry level programmes, based on the institution's requirements for a particular course of study.
Private, fee-paying schools exist at both primary and secondary levels. Two of the private international schools are based on the American and Canadian systems.
Tertiary education at the University of the West Indies (UWI) is available at heavily subsidised rates and one of the campuses is in Trinidad. The others are located in Jamaica and Barbados. Other institutions of further education include the University of Trinidad and Tobago, the Teaching and Medical Science facility at Mount Hope in Trinidad, and the Arthur Lok Jack Graduate School of Business.
Culture, Sport and Social Life: Trinidad & Tobago’s reputation as the Land of Steelband, Calypso and the Limbo is well-established. Added to and sometimes blended with this are the haunting rhythms of the East as developed by the local Indian population. These are expressions of a vibrant, cosmopolitan people whose ancestors came from every corner of the world. The multi-cultural lifestyle is also reflected in a host of festivals. The annual Carnival is one of the world’s biggest street festivals, and an experience never to be forgotten, with the rhythms of calypso music and the magnificent costumes of the masqueraders.
The tropical climate encourages outdoor activities including yachting, sports-fishing, windsurfing, scuba diving and golf. Excellent sport and recreational facilities are available and affordable. The cultural diversity is further reflected in the wide range of food choices, including international cuisine and popular North American fast foods.
Several art galleries feature the works of both local and foreign artists. The friendly attitude of the population encourages an amicable atmosphere for business discussions. Trinbagonians like to socialise and foreign visitors are warmly received. At the same time there is a serious-minded, professional approach to international business dealings.
The Business Environment
The Political System: Trinidad & Tobago is a stable democratic nation. General elections are held at least every 5 years. All changes of Government have occurred through free and fair elections, with orderly and peaceful transitions of power.
The country gained political independence from Britain in 1962. It became a Republic in 1976 and has remained a member of the British Commonwealth. Trinidad & Tobago follows the Westminster model of government, with a bicameral parliamentary system. The Parliament, which exercises legislative power, consists of the House of Representatives with 41 elected members; and the Senate with 31 members appointed by the President: 16 on the advice of the Prime Minister, 6 on the advice of the Leader of the Opposition, and 9 Independents. Executive power lies with the Prime Minister and the Cabinet which is appointed from among members of Parliament. The Judiciary is independent of the other organs of government. Tobago has an elected House of Assembly which controls some of that island’s internal affairs.
The Legal System: The Trinidad & Tobago Constitution provides entrenched protection of fundamental human rights and freedoms. These rights and freedoms are guaranteed to foreign investors in the same manner as they are guaranteed to Trinidad & Tobago nationals. The Constitution also guarantees the independence of the judiciary. Foreigners can expect to have their disputes impartially determined. Delays in the legal system have been problematic, but efforts are being made to tackle the backlog of cases with considerable success to date. The High Court Rules provide for pre-trial applications and meetings with court officials to ensure timely progress of matters.
Unless compromised, almost all commercial disputes are heard and determined by the Supreme Court. There is a three-tier system:
- In the High Court, all civil (non-criminal) trials are determined by a single judge without a jury;
- From the High Court a party can appeal as of right to the Court of Appeal, which sits with three judges;
- Appeals from the Court of Appeal lie to the Judicial Committee of the Privy Council as of right in almost all cases. The Privy Council is based in London, England and comprises essentially the same Judges as sit in the House of Lords to hear United Kingdom Appeals.
The law of Trinidad & Tobago is based upon the common law of England. Decisions of the Privy Council are binding on the lower courts. The principles derived from the decisions of the courts of the United Kingdom and other Commonwealth countries, particularly Australia, New Zealand and Canada, though not strictly binding, are applied. A growing body of local judicial precedent is also evolving.
The Caribbean Court of Justice (CCJ), which was inaugurated in April 2005, is a regional judicial tribunal for the resolution of trade disputes between member countries of the Caribbean Community. Although the CCJ has an appellate jurisdiction as the final Court of Appeal for Guyana and Barbados, the Privy Council remains the final Court of Appeal for Trinidad & Tobago.
The Financial System: The financial system is well-organised and soundly-regulated. The Central Bank of Trinidad & Tobago determines monetary policy and sets discount rates and reserve requirements. It regulates operations of the commercial banks and other financial institutions. There are eight (8) commercial banks with a network of 123 branches.
In addition there are non-bank financial institutions, merchant banks, finance houses, trust companies, mortgage finance institutions, mutual funds including a Unit Trust Corporation, a secondary mortgage company, credit unions, and more than thirty (30) insurance companies. The Deposit Insurance Corporation guarantees deposits up to TT$125,000. There is also the National Insurance System (NIS), the Trinidad & Tobago Stock Exchange (TTSE) and the Central Depository as well as a number of other development finance institutions catering for securities, commercial, agricultural and small business development. The securities industry is governed by the Trinidad and Tobago Securities and Exchange Commission (TTSEC).
Internationally, Trinidad & Tobago is a member of the International Monetary Fund, the World Bank, the Inter-American Development Bank, and subscribes to the General Agreement of Tariffs and Trade. It is active in a number of regional, hemispheric and international organisations and enjoys a high reputation among members of these bodies.
The Economic System: The Trinidad & Tobago economy is the most diversified in the English speaking Caribbean. Nevertheless it remains heavily reliant (accounting for almost 50% of GDP) on the oil, natural gas and petro-chemical industries.
The country’s hydrocarbon resources and, in particular, its natural gas which averages production at 4.052 billion cubic feet per day (February 2015) have enabled it to become the most industrialized Caribbean nation. Oil production averaging 80,000 barrels per day (July 2014) and refining continue to be important, but LNG, petrochemicals and, to a lesser extent, steel have assumed much greater significance. Trinidad & Tobago is the largest exporter of methanol in the Western Hemisphere and the largest source of LNG imports into the United States.
The Government’s economic policy is directed to the development of a robust and open market-driven economy. Trade liberalisation and public sector rationalisation are being pursued. Private enterprise is being strongly encouraged. While there is State involvement in public utilities and in oil, gas and petrochemicals, the Government is intensifying its efforts at divesting ownership in these key areas. The Government has made a commitment to actively encourage foreign investment in Trinidad & Tobago. Legislation removing restrictions on foreign investment and providing various incentives to investors has been enacted.
Foreign Ownership: The Foreign Investment Act 1990 (FIA) provides for the acquisition by foreign investors of an interest in land or shares in local private or public companies and for the formation of companies by foreign investors. In summary, the FIA makes the following provisions:
- A foreign investor is permitted to own 100% of the share capital in a private company, but prior to the investment the Minister of Finance must be notified.
- Foreign investors are permitted to own up to 30% in total of the share capital of a local public company without a licence.
- A licence is required to permit foreign investors to own more than 30% in total of the share capital of a public company.
- A foreign investor is permitted to own one acre of land for residential purposes and five acres of land for trade or business without having to obtain a licence.
- No one is permitted to hold land in Trinidad & Tobago, or shares in any local company in trust for a foreign investor who requires a licence but who has not obtained same.
Amendments to the Act are being proposed.
Profit Remittance and Capital Repatriation: There are no restrictions on repatriation of capital, profits, dividends, interest, distributions or gains on investment. Repatriation may be effected through the commercial banking sector. There remains the liability to pay withholding tax, where applicable.
Investment Protection Mechanisms: Bilateral Investment Agreements which guarantee foreign investors a level playing field exist between Trinidad & Tobago and the United Kingdom, Ireland and France. A Bilateral Investment Treaty and an Intellectual Property and Rights Agreement have been entered into with the United States. Highlights of the Bilateral Investment Treaty include:
- A requirement that the treatment of foreign investments be no less favourable than that accorded domestic investments (“National Treatment”);
- A prohibition against expropriation of an investment without just compensation calculated as the equivalent to the fair market value of the expropriated investment immediately before expropriatory action;
- A requirement that investments suffering losses from war or similar events be accorded National Treatment;
- A provision to allow financial transfers relating to the investments to be made freely and without delay into and out of each country;
- A provision to ease requirements relating to entry, sojourn and employment of aliens for establishing foreign investment of a substantial capital amount;
- A prohibition against performance requirements as a condition for investment;
- A provision for dispute resolution alternatives, including binding arbitration.
Sensitive Areas: In the past, there has tended to be a bureaucratic approach in the public sector which sees its role as procedural rather than facilitative. A lack of transparency in its operations can sometimes make it difficult to determine the criteria adopted in the decision making process. However the Government is actively seeking to sensitise the public service to the need to be more service-oriented.
Withholding tax is imposed on the profits of branches of non-resident companies (after making deductions for corporation tax) which are not re-invested (other than in replacement of fixed assets) to the satisfaction of the Revenue. Stamp duties on property transfers and charges to secure loans are very substantial.
Company registration is a fairly routine matter for lawyers, and once the corporate name has been approved the process, on average, may take up to 10 working days.
There are requirements for licences to be obtained in order to conduct banking and insurance activities which are strictly regulated. The acquisition by foreign investors of more than 30% of the share capital in a publicly owned company and more than 5 acres of land for trade purposes requires the issue of a licence under the Foreign Investment Act.
There is a strong trade union movement, certain segments of which have expressed their opposition to the government’s policy of divestment of state enterprises, especially in the gas, petroleum and utilities sectors of the economy.
The price of gasoline sold on the domestic market is fixed by the Government. In addition to the common law protections afforded to the consumer, there are a number of statutes which govern consumer protection, but these have largely not been enforced.
Nationals of all countries need a valid passport to enter Trinidad & Tobago. An entry visa is required by nationals of countries that have not signed a Visa Abolition Agreement with Trinidad & Tobago, and this may be obtained from a Trinidad & Tobago Consular Office. No visa is needed by nationals of Austria, Brazil, Canada, Caricom countries, Denmark, Finland, Germany, Ireland, Italy, Norway, Singapore, Sweden, Switzerland, and the United States of America.