Lead Editor–Politics
While the planned US$750 million revival of the former ArcelorMittal steel plant at Point Lisas could provide a much-needed boost to Trinidad and Tobago’s economy, two economists are warning that the potential risks and fine print surrounding the investment cannot be ignored.
Economists Professor Patrick Watson and Dr Jamelia Harris both believe the project could generate foreign exchange, stimulate economic activity and create employment, but say its ultimate benefit to the country will depend heavily on the arrangements underpinning the investment.
Watson, however, is particularly cautious, questioning whether the country has seen enough information to determine if the deal is as beneficial as it appears and warning that multinational corporations ultimately pursue their own interests.
“I don’t know if this is a Trojan horse. I don’t know if these are Greeks bearing gifts,” Watson told Guardian Media.
The warning follows Monday’s announcement that Ibis Steel Company, backed by US-based Pinnacle Steel and Vanadium Corporation, plans to restart the Point Lisas steel plant with a US$750 million investment, creating up to 1,000 jobs. The facility is also expected to process vanadium, which US officials say will help secure critical-mineral supplies outside China.
Watson said that if the venture succeeds, one of its most important contributions could be foreign exchange rather than direct employment.
He explained that steel production would effectively allow T&T to again monetise its natural gas by using it to transform imported raw material into a product for export.
“These highly industrialised, sophisticated complexes, they are not great generators of employment,” Watson said, questioning whether employment expectations could prove exaggerated.
Instead, he said the foreign exchange generated could have a wider multiplier effect across the economy, helping businesses that require foreign currency to import goods and sustain employment.
But Watson stressed that he was waiting to see results before declaring the venture a success.
He noted that steel production had previously failed at Point Lisas, with the ArcelorMittal operation closing in 2016. He said he was not yet aware of what changes in market conditions now make the industry viable.
“I am not going to be happy if when the time comes, we hear excuses about why it doesn’t work and then eventually, somewhere down the road, another decision is taken to shut the plant down,” he said.
Watson also raised concerns about the availability of natural gas, noting that domestic production has declined and questioning where the gas required by the revived facility will come from.
He said additional Venezuelan supplies could potentially help but maintained there remained insufficient publicly available information on the issue.
Watson said he hoped those behind the investment had done the necessary homework and wished the project success.
However, he warned, “If this is something that is hastily done just to gain political points and to score points on promises of greater employment and a greater earning of foreign exchange, that is not something that I am going to applaud at all.”
He speculated that the investment could also reflect T&T’s increasingly close relationship with the administration of US President Donald Trump, although he stressed that this was speculation.
Harris similarly believes the project has significant potential but said much will depend on the agreements negotiated by the Government, particularly regarding local content.
She said strong provisions ensuring that equipment, materials, services and workers, including employees at managerial levels, are sourced locally wherever possible would allow more of the investment to circulate within the domestic economy.
“If the agreement is like that, then there’s a good potential for them to be bringing in foreign exchange in the restarting phase and also in the operational phase,” Harris said.
However, she warned that the opposite could occur if equipment and services are largely imported and senior personnel are brought into T&T on expatriate contracts.
Harris also wants greater clarity on possible tax concessions and other incentives granted to the investor.
She said while an injection of foreign direct investment would produce economic activity and growth, the more important question was how those gains would be distributed.
The country, she said, should therefore look beyond the headline number of jobs and examine the quality and level of employment being created, including whether Trinidad and Tobago nationals will have opportunities to move into senior and managerial positions.
Harris posited that environmental safeguards surrounding steel and vanadium production must also be closely scrutinised.
“I think that there’s a lot of unanswered questions. I think the Government has to provide a bit more information to the country as to how this will actually look,” Harris said.
She added that while T&T is facing difficult economic circumstances and needs investment, the country should not be driven solely by the prospect of immediate gains.
“We need to be mindful that we shouldn’t rush in just for short-term gains. We also need to think about something long-term,” she said.
Harris also cautioned against viewing closer integration into a US-controlled critical-mineral supply chain purely through an economic lens.
She said T&T has traditionally maintained a degree of balance in its foreign policy and remains economically interconnected with countries such as China.
As a small state, Harris said T&T must recognise that geopolitical relationships can change quickly and avoid placing itself in a position where closer alignment with one power impacts important relationships elsewhere.
“We have to be mindful of that in the long term,” Harris said. “We think about maintaining that sort of balance.”
