This post is dedicated to Bernard Guerrero. And Carlos's aunt.
Trinidad is the sort of place when you ask somebody to show you the sights, they go out of their way to show you the industrial park. "Point Lisas, mon. Gotta see Point Lisas." So we saw Point Lisas.
It is quite impressive. The place employs more than 11,000 people (about one out of every 50 working Trinidadians, not including ancilliary operations in the surrounding area) in a urea manufacturer, a chlorine producer, a lube-oil blending installation, a natural gas fractionation facility, 4 methanol factories, 10 ammonia plants, and one giant honking steel mill.
The Point Lisas Industrial Estate (related to, but not quite the same as the eponymous port) started under the administration of Eric Williams, Trinidad’s first prime minister. It could have been a poster child for the failure of 20th-century socialism. The place took two decades to get running, and once it did its heavy industries managed to lose money at such a prodigious rate that the industrial park managed to play a large role in Trinidad’s debt-led economic collapse in the 1980s.
Past failure is not what makes Point Lisas interesting; certainly less interesting than its equivalents in (to pick two countries completely at random) Romania or Armenia. What makes Point Lisas interesting is the place's present success, and what that says about Trinidad's economic and political future.
More below the fold.
It is not at all clear that Point Lisas would exist at all if not for that first, badly-planned instance of state intervention. In other words, if the government hadn't blown a fortune on a failed intervention during the last petroboom, it would have been far harder to capitalize on the current one.
In fact, the government still owns half of Plipdeco, which runs the park, and new investments are centrally planned, a la another former British colony: Singapore. The National Gas Company buys gas from Amoco (and other producers) and resells it to the industrial operations in Point Lisas at differential prices intended to maximize the total value-added in Trinidad, rather than the revenues of the NGC or Amoco.
I’ve got three worries.
The first is that "maximizing the total value-added" is more art than science. Have the bureaucrats in Port-of-Spain really identified increasing returns? Even if they have, how can they be sure that the best pricing strategy is, for example, to sell gas to steel plants at cost but link the gas prices faced by methanol producers to the price of their product?
The second is the WTO. The E.U., for example, screamed bloody murder over Saudi Arabia’s attempt to sell gas more cheaply at home than abroad—Saudi either had to stop exporting natural gas or abandon all hope of exporting its industrial products. (It stopped exporting natural gas.) Then again, the WTO makes no pretense at creating a single body of law under which every nation is held to the same standard. Luckily for Trinidad’s development strategy, the British Empire grandfathered them into GATT and the WTO as a founding state. So there is no reason to believe that WTO rules can be used against Trinidad — for the time being. If Trinidad ever really started to threaten Germany's petrochemical industry, the game could change.
The last is the environment. The next step in Trinidad's industrialization program is an aluminum smelter. It’s more expensive to export natural gas than to import bauxite, burn gas at home, and export aluminum instead—aluminum is often called "solid electricity." Aluminum smelters, however, aren’t exactly clean. There are a lot of complaints that the 800 permanent jobs that it will provide just aren’t worth the cost—a complaint also levelled at the existing jobs at Point Lisas.
Still, Trinidadians are proud of their country’s industrial prowess. Nucor is setting up shop, and Essar Group PLC and Alcoa also have plans. So while the smelter has only 17 percent support in local polls, my money is on its construction. In fact, my money is on the construction of several smelters, which will marry Jamaican, Guyanese and Surinamese bauxite to Trinidadian natural gas and technical expertise.
In short, energy-intensive industrialization is the cornerstone of the government’s plan to develop Trinidad by 2020. So what about after that? What’s the answer to President Museveni’s question?
No one says it explicitly, but the idea isn’t to wean the economy from its dependence on energy. Rather, the idea is to wean the economy from its dependence on Trinidadian energy.
Whether it is wise to pursue a development plan that will eventually lock your country into the same relationship with the Bolivarian Republic that Belarus currently "enjoys" with the Russian Federation is a whole ‘nother question, of course. (Amusingly, Venezuela lent Belarus the money it needed to pay its debts to Russia. We’ll see how that works out.)
Currently, Trini-Venezuelan relations are good. Trinidadian diplomats have been brilliant at exploiting Hugo Chávez’s charm offensive. As a result, the Venezuelan navy has been shooting fewer Trinidadian fisherman than usual, and Trinidad managed to secure a 27% share of the production from a recently discovered cross-border gas field, even though most independent observers believe that much more of the gas lies on the Venezuelan side. Both countries are in talks over other gas and heavy oil fields. They are also seriously discussing a pipeline that would take Venezuela gas to Trinidadian factories, a pipeline which Chávez hopes to eventually extend to Cuba and Puerto Rico, and from there, perhaps, to Florida.
Trinidad doesn’t currently need Venezuela. That, however, won't be true whenever the day comes that the gas runs out. Perhaps the Bolivarians are cleverly cultivating a future market that they’ll eventually be able to suck dry, or otherwise push around. After all, Trinidad was part of Venezuela before 1797 ...
That issue, though, is decades away, and it’s not like I have a better idea. Do any of you?
Better off doing it earlier rather than later, I'd think. Currently Venezuela wouldn't be in a monopoly position vis-a-vis industrial users in Trinidad proper (who, if I gathered correctly, the government subsidizes already with cheap Trini gas.) That isn't the case with Russia vis-a-vis industrial users in either Belarus or Ukraine. If the Russians cut the tap, the Ukrainians suffer a great deal. If Chavez cuts the tap in a few years, Trinidad sees a bump up in its cost structure.
Besides, that whole situation looks dependent on perpetually high oil prices and Venezuela's own production not falling apart. Might not be a bad bet to figure that the pipeline will be under new management by the time it opens for business.
Posted by: Bernard Guerrero | August 31, 2007 at 08:42 PM
Hey I am from Trinidad and I must commend you on a brillant assessment of our economy. Just for general information purposes the citizens of Trinidad are asking the same questions you are asking.. as we would say "what would happen when the oil done?"
The government is making little to no effort at all to develop a budding manufacturing sector and thus it remains in infancy. Their focus is only on the present and not the future and something needs to change soon or our beloved country will just fall flat on its face.
Posted by: Shanta | November 27, 2007 at 09:42 PM