The forex spent on cars

Asha Javeed

Lead Ed­i­tor In­ves­ti­ga­tions

[email protected]

T&T has been ex­pe­ri­enc­ing forex chal­lenges for the past 15 years and the is­sue usu­al­ly rais­es its head an­nu­al­ly around Christ­mas time when im­porters, es­pe­cial­ly small busi­ness­es re­liant on com­mer­cial banks, strug­gle to get an ad­e­quate amount to meet their needs.

This year, the is­sue was fur­ther ex­ac­er­bat­ed by banks slash­ing the amount of forex avail­able for con­sumers for cred­it card pur­chas­es in the space of one month.

How­ev­er, one con­sis­tent forex spend for the past 20 years has been on new and used ve­hi­cles.

This week, Guardian Me­dia In­ves­ti­ga­tions Desk looks at how much of the forex pie that com­mer­cial car deal­er­ships have been able to ac­cess over the years.

In 2023, T&T spent about US$331 mil­lion on the pur­chase of new ve­hi­cles. That works out to 1.5 per cent of the coun­try’s Gross Do­mes­tic Prod­uct (GDP) and about four per cent of T&T’s an­nu­al bud­get in 2023. In 2023, the to­tal for­eign ex­change sold by au­tho­rised deal­ers was US$6.445 bil­lion, which means for­eign ex­change sales, spent for the im­por­ta­tion of new car sales, ac­count­ed for 5.13 per cent of to­tal sales of for­eign ex­change.

Ac­cord­ing to da­ta pro­vid­ed to Guardian Me­dia by the Min­istry of Trade and In­dus­tries (MTI), the sum spent on ve­hi­cle im­ports was $2,247,641,002—$1,562,406,913 on cars and $685,234,089 clas­si­fied un­der diesel goods ve­hi­cles. Ac­cord­ing to da­ta from the Cen­tral Bank, in the last 20 years (2003 to 2023) 285,066 new ve­hi­cles were sold.

How­ev­er, there is no mon­e­tary val­ue at­tached to the num­ber of cars sold.

In terms of reg­is­tra­tion, the Cen­tral Bank (CBTT) on­ly has da­ta pub­licly avail­able from 2013 to 2023 -which shows that 119,990 ve­hi­cles were reg­is­tered. Of that sum, 89,886 were pri­vate ve­hi­cles.

But to put some val­ue to the num­bers, Guardian Me­dia cal­cu­lat­ed that us­ing an av­er­age price of TT$250,000 (giv­en that some ve­hi­cles range from the low­er cost roll on/roll off to the lux­u­ry cost which can go up to one mil­lion de­pend­ing on cus­tomi­sa­tion) that for 285,066 cars, the av­er­age amount spend would be over $71 bil­lion—$71,266,500,000. Giv­en that T&T im­ports all cars through new and used car deal­er­ships, and us­ing a rate of TT$6.75 to US$1, that sum would con­ser­v­a­tive­ly work out to over US$10 bil­lion—US$10,558,000,000 of the forex pie on ve­hi­cles alone.

That cost would be ex­clu­sive of parts and ac­ces­sories over the years. In many in­stances, Guardian Me­dia un­der­stands that cred­it cards are used to pur­chase main­te­nance parts.

On­ly the coun­try’s car deal­er­ships (there are sev­en new car deal­er­ships and dozens of used car deal­er­ships), the banks, and the Cen­tral Bank would have the ex­act forex quan­ti­ty spent on im­port­ing cars in­to the coun­try. But giv­en the vol­ume of forex need­ed for ve­hi­cle pur­chas­es and bank­ing is­sues of the source of funds re­quired for in­ter­na­tion­al bank­ing, Guardian Me­dia un­der­stands the forex is ex­pend­ed from the Bank’s al­lo­ca­tion.

“Giv­en the amount of forex be­ing sold by the CBTT month­ly, and the num­ber of ve­hi­cles be­ing reg­is­tered, it log­i­cal to as­sume that some of that is be­ing spent on ve­hi­cles,” one banker ex­plained to Guardian Me­dia.

Ac­cord­ing to the Ob­ser­va­to­ry of Eco­nom­ic Com­plex­i­ty, an in­ter­na­tion­al da­ta vi­su­al­i­sa­tion web­site that com­piles 50 years of in­ter­na­tion­al trade da­ta in­clud­ing sub­na­tion­al lev­el da­ta, Trinidad and To­ba­go im­port­ed more than US$174 mil­lion worth of cars in 2021. It found that most of the cars were im­port­ed from Japan, fol­lowed by Thai­land, South Ko­rea, In­dia and Ger­many.

Guardian Me­dia un­der­stands that in­stead of get­ting forex at the banks, used car deal­ers were us­ing their cred­it cards to pur­chase for­eign used cars.

Cars good for

bank’s busi­ness

Ve­hi­cles re­main good busi­ness for banks—the on­ly in­di­ca­tion of what it costs con­sumers is the loan port­fo­lio amounts reg­is­tered by the com­mer­cial banks for mo­tor ve­hi­cle sales.

Ac­cord­ing to CBTT’s Ju­ly 2024 re­port, the val­ue of com­mer­cial loans to con­sumers was $41.730 bil­lion. From that sum, $4.7 bil­lion are loans on mo­tor ve­hi­cles.

In 2022, loans on mo­tor ve­hi­cles av­er­aged about $3.7 bil­lion but in­creased in 2023 to end the year at $4,356.8 bil­lion. In March 2024, mo­tor ve­hi­cle loans in­creased to $4.356 bil­lion and in June 2024 was $4,740 bil­lion.

The da­ta for Sep­tem­ber 2024 has not yet been reg­is­tered to the CBTT.

In the last ten years, the car se­ries moved from PDC to PEH, with each se­ries reg­is­ter­ing 9,999 cars ex­cept for three let­ters—i,q and v in the al­pha­bet.

The coun­try now has more than 1.1 mil­lion reg­is­tered cars on the road—while the present sys­tem reg­is­ters new cars, it does not de-reg­is­ter old cars so that they are all reg­is­tered in the sys­tem. There is a quo­ta of 15,000 for­eign used cars which can be im­port­ed in­to the coun­try an­nu­al­ly.

“New ve­hi­cles are a huge drain on our forex and the car loans keep the banks in busi­ness. What is worse is that we have new ve­hi­cles com­ing in con­gest­ing the roads and there is no pol­i­cy in place to de-reg­is­ter old­er ve­hi­cles. So, from a ra­tio per­spec­tive, it’s al­most 1:1, one car per cit­i­zen. There should be pol­i­cy is­sues to ad­dress this, even a mora­to­ri­um on new cars for the next four years. That would ease the forex go­ing to ve­hi­cles. And in the mean­time, we can ad­dress our con­ges­tion is­sues” one busi­ness­man told Guardian Me­dia.

Ac­cord­ing to da­ta from the Cen­tral Sta­tis­ti­cal Of­fice (CSO):

1. In 2016, T&T spent $3,483,968,102 on road ve­hi­cles,

2. $3,214,269,416 in 2017,

3. $2,753,099,076 in 2018 and

4. $2,376,773,602 in 2019 for the pe­ri­od Jan­u­ary-Sep­tem­ber.

5. In 2016, 16,203 new cars were sold, in 2017, it re­duced to 14,153, in 2018 it was 13,815, and in 2019, 13,420.

6. Dur­ing the pan­dem­ic years, few­er cars were reg­is­tered. In 2020, 9,756 cars were reg­is­tered, in 2021, 8,934 cars were reg­is­tered and in 2022, 9,737 cars were reg­is­tered. It then spiked in 2023 to 11,463.

Be­tween 2020 and 2022; 9,047 ve­hi­cles were sold com­mer­cial­ly, while 18,850 were sold pri­vate­ly.

7. Ac­cord­ing to the CSO, be­tween 2020 and 2022, the coun­try spent more than TT$113 bil­lion (US$16.7 bil­lion) in im­ports. Of that fig­ure, ap­prox­i­mate­ly 5.4 per cent, TT$6.2 bil­lion (US$920 mil­lion), was spent on ve­hi­cles and ve­hic­u­lar parts. 

Forex, the avail­abil­i­ty and de­pend­abil­i­ty of it, has been a thorny is­sue for busi­ness­es over the years.

To this end, the Cen­tral Bank in­ter­venes and sells about US$100 mil­lion “at min­i­mum” a month to com­mer­cial banks.

Last week, Cen­tral Bank Gov­er­nor Dr Alvin Hi­laire said the im­bal­ance in this coun­try’s for­eign ex­change mar­ket, is nei­ther new nor has it been ex­ac­er­bat­ed.

“What we have been do­ing to keep calm in the mar­ket is to sell ap­prox­i­mate­ly about US$50 mil­lion every two weeks which is not triv­ial. This year, we sold over US$1 bil­lion on the mar­ket. We al­so sup­ple­ment that by pro­vid­ing a liq­uid­i­ty guar­an­tee fa­cil­i­ty to the com­mer­cial banks. So, in oth­er words, when the banks are ex­tend­ing them­selves a lot in trad­ing, they can get a spe­cial amount, with­in the lim­its of the Cen­tral Bank. Last year, it was about US$92 mil­lion that banks got ex­tra in­ter­ven­tion from the Cen­tral Bank and this year, so far, it is about US$75 mil­lion,” the gov­er­nor said.

In the Ju­ly 2024 Eco­nom­ic Bul­letin, CBTT said that the Bank’s sales of for­eign ex­change to au­tho­rised deal­ers in­di­rect­ly re­moved $5,017.7 mil­lion from the sys­tem, $85.0 mil­lion high­er when com­pared to the year-ear­li­er pe­ri­od.

“Trinidad and To­ba­go’s gross of­fi­cial re­serves de­clined to US$5,741.6 mil­lion (equiv­a­lent to 8.1 months of im­port cov­er) at the end of Ju­ly 2024. The change in gross of­fi­cial re­serves in­di­cates that the ex­ter­nal ac­counts reg­is­tered a deficit of US$516.3 mil­lion in the first sev­en months of 2024,” it said.

Cars on econ­o­my

The sales of cars and con­struc­tion are among two in­di­ca­tors that the Cen­tral Bank of Trinidad and To­ba­go us­es to gauge the econ­o­my.

In De­cem­ber 2015, for­mer Cen­tral Bank Gov­er­nor Jwala Ram­bar­ran said the re­tail and dis­tri­b­u­tion sec­tor con­sumed US$4.5 bil­lion or one-third of the for­eign ex­change sold over the past three years.

In a state­ment, which earned him the ire of the busi­ness com­mu­ni­ty for re­leas­ing what they iden­ti­fied as com­mer­cial­ly sen­si­tive and con­fi­den­tial in­for­ma­tion, he list­ed the con­sump­tion of forex used over three years by new car deal­ers—South­ern Sales: US$275 mil­lion, Massy Mo­tors: US$251 mil­lion, Toy­ota: US$245 mil­lion, Di­a­mond Mo­tors: US$59 mil­lion and Lifestyle Mo­tors: US$36 mil­lion.

In Jan­u­ary 2018, Fi­nance Min­is­ter Colm Im­bert said US$3 bil­lion in for­eign ex­change was spent on cred­it card pur­chas­es over the last three years with one of the largest con­sumers of for­eign ex­change be­ing the im­por­ta­tion of mo­tor cars.

In Bud­get 2021, Im­bert in out­lin­ing the forex haem­or­rhage on pri­vate mo­tor cars had said that T&T spends $2.5 bil­lion per year or US$400 mil­lion per year im­port­ing an av­er­age of 25,000 mo­tor ve­hi­cles.

Pub­lic of­fi­cers ben­e­fit from ex­emp­tions on lux­u­ry ve­hi­cles which cost the coun­try more forex.

Four years ago, Prime Min­is­ter Dr Kei­th Row­ley said he would have the Cab­i­net con­sid­er putting a cap on the av­er­age ex­emp­tion on mo­tor ve­hi­cles for Mem­bers of Par­lia­ment (MPs) at $350,000.

“In terms of ex­emp­tions on mo­tor ve­hi­cles, I too am con­cerned be­cause if those ex­emp­tions are be­ing used for the pur­pose for which they are meant, I have no prob­lem. But if they are be­ing used to fa­cil­i­tate oth­er peo­ple in the way that they have been, then they re­quire to be looked at,” Dr Row­ley said in Oc­to­ber 2020. 

Dur­ing that time, or­di­nary cit­i­zens spent ap­prox­i­mate­ly $665 mil­lion on mo­tor ve­hi­cle tax­es and du­ties—about $234 mil­lion in mo­tor ve­hi­cle tax­es and du­ties in 2021, about $231 mil­lion in 2022 and an­oth­er $266.6 mil­lion (pro­ject­ed) in mo­tor ve­hi­cle tax­es and du­ties in 2023, ac­cord­ing to 2023 bud­get doc­u­ments.

Apart from the cost price of a ve­hi­cle, cit­i­zens have to pay Val­ue Added Tax (VAT) at 12.5 per cent and mo­tor ve­hi­cle tax is charged based on en­gine ca­pac­i­ty—with larg­er en­gines at­tract­ing a high­er tax, while im­port du­ty de­pends on the ve­hi­cle’s en­gine ca­pac­i­ty and fu­el type.

On Ju­ly 10, at a COVID-19 press con­fer­ence, Dr Row­ley re­spond­ed that de­spite his state­ment in Par­lia­ment to re­view the mat­ter, he had sought le­gal ad­vice: “I sought le­gal ad­vice and the le­gal ad­vice was, these are peo­ple’s terms of en­gage­ment and you have no au­thor­i­ty to in­ter­fere with it.”

In the furore at the time, Row­ley ad­mit­ted that he too pur­chased a ve­hi­cle, but did not dis­close the type and the tax ex­emp­tion, adding that he dri­ves him­self around to not to lose the skill.

“I ac­cept the terms of my en­gage­ment and if it dis­turbs some of the peo­ple, I am sor­ry, but I don’t think it is fair for some­body to tell me what to do with what I earn when you have no in­ter­est in talk­ing to those who have stolen pub­lic mon­ey,” he had said.

Row­ley not­ed that the tax ex­emp­tion is part of the terms of en­gage­ment of thou­sands of dif­fer­ent peo­ple at dif­fer­ent lev­els.

All Mem­bers of Par­lia­ment are ex­empt from pay­ing mo­tor ve­hi­cle tax, cus­toms du­ties and VAT on used or new ve­hi­cles im­port­ed every two years un­der the Salaries Re­view Com­mit­tee. How­ev­er, the ve­hi­cle is not sup­posed to be sold dur­ing the two years or half of the tax­es are due to be re­paid.