Traffickers thrown a lifeline with central banks’ agreement
Small traders from St Vincent and the Grenadines who sell agricultural produce in Trinidad and Tobago have been thrown a lifeline just in time for Christmas.
The relief has come in the form of an agreement arrived at between the Eastern Caribbean Central Bank (ECCB) and the Central Bank of Trinidad and Tobago (CBTT) which will make it easier for certified traders to exchange TT dollars for East Caribbean dollars (XCD).
Since January 2016, trade in agricultural produce between the two countries has been reduced to a trickle, because of foreign exchange restrictions on the Trinidad and Tobago dollar (TTD) which made it difficult for Vincentian traders to repatriate their funds.
Governor of the ECCB Timothy N.J. Antoine informed Minister of Finance Camillo Gonsalves of the solution arrived at by the central banks in a letter dated October 31, 2018.
Antoine said the solution is two-pronged and involves the settlement of Trinidad and Tobago currency notes as well as draft / manager’s cheques denominated in TTD.
The solution, which became effective on November 1, 2018 will be piloted with one financial institution, the Bank of St Vincent and the Grenadines (BOSVG) for an initial period of six months, after which, a review will be conducted and changes made if required.
Under the agreement, the ECCB will purchase from the BOSVG, the TTD Notes accepted from
certified traders, on a weekly basis. The amount of TTD notes accepted from certified traders by the BOSVG will be limited to TTD20,000 and the traders will be paid immediately by the BOSVG.
The ECCB will purchase, on a weekly basis, TTD Balances up to the limit of TTD 2.00 million monthly, resulting from the encashment of TTD Bank Drafts from certified traders.
The ECCB said the BOSVG will be responsible for ensuring that only authorized traders are facilitated under this arrangement and that all applicable laws are observed. In addition, the ECCB is expected to ensure AML/CFT compliance by its licensee in the acceptance for negotiation of the managers’ cheques of the traders.
“The benefits to be derived from this solution are two-fold. Firstly, the BOSVG will obtain value for the transactions processed for certified traders on a weekly basis thus reducing their foreign exchange exposure to the TTD. Secondly, given the minimal foreign exchange risk to the solution through the CBTT, BOSVG has agreed that the commission currently charged would be reduced from five per cent (5.0%) to three per cent (3.0%) thus resulting in increased value to the traders for the exchange of TTD. The BOSVG has committed to reviewing this rate after one month to ensure that traders get best value,” Antoine said in his letter to the finance minister.
In March this year, SVG enforced the Exchange Control Act between SVG and TT which meant that persons who wished to pay invoices from TT in US dollars were required to seek permission from the Ministry of Finance and applications were not always approved. The Act was enforced to protest the problem Vincentian traders had been having and the non response from the Government of TT.
But last month, the Ministry of Finance lifted the restriction, saying that the action by SVG got the attention of the CBTT and the ECCB and a meeting was held in Grenada on July 27 to discuss the issue.
The Finance Minister said that the ECCB and the CBTT were exploring options to address the difficulties with foreign exchange being experienced by traders in agricultural produce.
“We got their attention…because of this, they have reached a tentative deal on how we are going to settle this matter without placing the burden of currency control on businesses in St Vincent and the Grenadines,” said Camillo Gonsalves.
Prior to January 2016, to get around the TT foreign exchange controls, after selling their agricultural produce, traders would buy goods with the TT dollars earned and import the goods into SVG to sell them. This method allowed them to recoup EC dollars.
But on January 1, 2016, the Customs Department of SVG implemented Article 164 of the Revised Treaty of Chaguaramas, which places a 70 per cent tariff on wheat or meslin flour, aerated beverages, beers, stouts, aerated waters and other types of waters that originate in More Developed Countries (MDCs) inside CARICOM.
This tariff drove up the cost of imported goods from Trinidad, making it harder for traders to sell these goods on the local market.