Arnhim Eustace is still wrong about the NIS

Tue, Feb 21, 2012

Editor: The Honourable Arnhim Eustace said on Monday, February 13, 2012 – during NDP’s New Times programme on Nice Radio – that I have no clue about the operation of the NIS and its financial position.{{more}} He repeatedly said that I didn’t understand what I was talking about and he arrogantly referred to my article which appeared in local newspapers on Friday, February 10, 2012 as “nonsense” and “foolishness” time and time again.

Mr Eustace attempted to dismiss my argument wholesale, without addressing the points that were raised and it is regrettable that Arnhim Eustace seems to believe that only he is qualified to speak about the NIS and the economy. I have actually spent a lot of time studying social security issues and I am currently working as an Economist for the Ministry of Finance on pension reform. Furthermore, nothing that Mr Eustace said brought any of my statements into question.

The good thing is that no kind of reactionary outburst could help Mr Eustace get around the facts. The fact is that he deliberately said – in an effort to undermine public confidence in the NIS – at the NDP press conference held on January 24, 2012, that the latest actuarial review showed that “unless changes are made in the 8% contribution rate to the service, the NIS would not have sufficient funds to cover its expenses after the year 2016.” This cannot be true, when the IMF – in the very Staff Report for the 2011 Article IV Consultation to which Mr Eustace always refers – said that “the NIS has been running cash-flow surpluses and accumulated reserve levels sufficient to pay out 10 years of current expenses, in the absence of contributions” as at the end of 2010. The trouble is that Mr Eustace apparently believes that saying “the NIS would not have sufficient funds to cover its expenses after the year 2016” is the same thing as saying that the NIS would have to supplement contribution income with investment income to cover its expenses after 2016, while its reserves remain untouched. That’s the real folly.

Mr Eustace may have discovered by now from his “NIS insider” that the value of the institution’s investment in CLICO-BAICO is $53.9 million and not $62 million, as he claimed. He should tell the public what his research, if any, has revealed. I’m happy that Mr Eustace acknowledged that it was inappropriate to describe NIS’s net income as profit and we seem to agree that NIS net income declined in 2010 because accounting provisions were made for potential losses on the CLICO-BAICO investment. I’ve already made that point in my initial article, but also went on to say that the provision was made for losses that have not materialised and the NIS is therefore in an even better position than the 2010 financial statements suggested. The NIS, as confirmed by Winston Dookeran (the Minister of Finance in Trinidad and Tobago), has already recovered 100% of the book value of its investment in CLICO (Trinidad). There is no long wait either for the NIS or for other policyholders as Mr Eustace implied. So, all this talk about people getting back their money after “they dead” is total garbage. Not to mention the fact that my last article only addressed a recovery of CLICO investment in relation to the NIS.

Mr Arnhim Eustace wants to be wrong and strong! He said that without reform “the NIS would not have sufficient funds to cover its expenses after the year 2016” and he was wrong. He, nonetheless, tried to use his radio programme to justify his nonsense and bully me into submission. Mr Eustace was also wrong about the value of the NIS investment in CLICO-BAICO, and appears to have no clue about the recovery arrangements, but still wants to project the image of an impregnable authority. Arnhim Eustace, jump high or jump low, is still wrong.

R. T. Luke V. Browne
Economist