DaviesAl Edwards, Business Co-ordinator
TRINIDAD'S leading commercial banks have been cautioned about their lending of US dollars to CARICOM governments largely because of their susceptibility to default.
Trumpeting this sentiment is University of the West Indies (UWI) lecturer, economist Dr. Dhanayshar Mahabir.
In an article that appeared last week in Trinidad's Sunday Express, he said that he has been concerned about the number of regional governments that had turned to Trinidadian banks to finance their requirements and that the lending of US dollars carried with it a huge risk of exposure as a result of these fragile economies. He noted that Trinidadian banks were less stringent than their First World counterparts and that should not be taken advantage of, rather CARICOM governments should turn to other investments like Eurobonds.
In the article Dr. Dhanayshar is reported as saying: "The Caribbean is an emerging market and I would think that the banks would be careful about lending to Caribbean governments in any significant fashion because of the risks.
" I know they are our trading partners and part of CARICOM but we have also seen what happened to some large US banks who found themselves in trouble by lending to Argentina and then that country having to reschedule debts."
Minister of Finance and Planning, Dr. Omar Davies, has repeatedly said that he will need to borrow from abroad to balance the budget and put less stress on local financing. Earlier this year he raised US$200 million from a Eurobond and has already borrowed some US$50 million from RBTT.
NEGOTIATIONS CONCLUDED
Last week RBTT Bank Jamaica Limited announced that it had concluded negotiations with Inter-American Investment Corporation (IIC) for a US$10 million long-term credit facility. The loan proceeds will be used to provide medium to long-term financing to small and medium-size private enterprises in Jamaica seeking to purchase fixed assets and modernise or expand their operations.
Terms of up to eight years will be made available to qualifying entities engaged in business activities that contribute to the creation of foreign exchange earnings, or operate in the industrial, manufacturing, tourism, construction or other productive sectors of the Jamaican economy.
MEETING CUSTOMERS' NEEDS
"This facility will assist in meeting the needs of RBTT customers for US Dollar denominated medium-term financing," said Joe daSilva, deputy managing director of RBTT Bank, "enabling them to plan more confidently for future growth and expansion".
The facility will be available through RBTT's Corporate Banking Centre on Dominica Drive.
The Inter-American Investment Corporation is a Washington based multilateral financial institution that is part of the Inter-American Development Bank Group.
Over the last 8 months, the Jamaican Government has borrowed US$120 million from the Trinidadian banking system. Earlier this month a US$50 million private placing was arranged by RBTT.
Trinidad & Tobago has significant foreign exchange reserves which it can lend to Caribbean countries at higher interest rates.
Dr. Dhanayshar Mahabir said: "There is no doubt that these loans to Caribbean Governments allow commercial banks to get higher interest rates and maintain the guarantee rates it gives to depositors but in so doing, it takes greater risks and can leave depositors exposed."
