VZCZCXRO1259
PP RUEHGR
DE RUEHSP #0808/01 1871327
ZNR UUUUU ZZH
P 061327Z JUL 06
FM AMEMBASSY PORT OF SPAIN
TO RUEHC/SECSTATE WASHDC PRIORITY 7073
INFO RUCNCOM/EC CARICOM COLLECTIVE
RUEATRS/DEPT OF TREASURY WASHDC

UNCLAS SECTION 01 OF 02 PORT OF SPAIN 000808 
 
SIPDIS 
 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: EINV EFIN ELTN KFLU TD
SUBJECT: TRINIDAD ECONOMIC HIGHLIGHTS - JUNE 
 
 
The following were notable economic issues in T&T 
during the month of June: 
 
(1) Desalcott chairman charged with fraud 
(2) T&T Government confronts inflation 
(3) Central Bank raises "Repo" rate yet again 
(4) Rapid rail bidding process begins 
(5) Avian flu drug for Trinidad 
(6) Post-World Cup trade mission to Europe 
(7) Tobago TT$2.7B budget passed 
 
---------------------------------------- 
¶1. Desalcott chairman charged with fraud 
---------------------------------------- 
After four years of investigations into alleged 
corruption in the US$120 million Trinidad desalination 
plant, Desalcott executive chairman Hafeez Karamath has 
been arrested on fraud charges.  In January 2005, 
investigators raided Karamath's home and office in 
search of documents.  The state charges that Karamath 
defrauded Trinidad and Tobago by dishonestly arranging 
for a water supply contract to be awarded to 
Desalination Company of Trinidad and Tobago 
(Desalcott), a joint venture between Hafeez Karamath 
Engineering Services Limited and U.S. company Ionics. 
Karamath is being charged jointly with two Israeli 
nationals.  Karamath owns sixty percent of the issued 
shares of Desalcott, in partnership with Ionics, an 
American firm that specializes in the building and 
operation of desalination plants.  Ionics is now part 
of General Electric.  It has not been the subject of 
any charges in this case. 
 
--------------------------------------- 
¶2. T&T Government confronting inflation 
--------------------------------------- 
Finance Minister Conrad Enill says the growing rate of 
inflation is a concern.  In recent comments on the 
state of the T&T economy, Enill said the T&T government 
has been taking several steps to ensure that the 
situation does not continue unchecked.  In order to 
curb inflation, Enill said the Government first 
intended to dampen demand through tighter monetary 
policy, of which a consequence would be higher interest 
rates to cut consumption and increase saving. 
Secondly, the Government will attempt to scale down 
construction. Thirdly, the Government is taking steps 
to stimulate agriculture.  Enill says the causes of 
inflation in T&T are an increase in demand, agriculture 
supply bottlenecks, and markups by wholesalers and 
retailers.  Enill suggests that this is the result of 
increased spending in the public and private sector, 
and also sluggish agricultural output because of 
flooding and job competition.  According to the 
minister, 1,000 jobs were lost last year in the 
agricultural sector alone.  Notwithstanding, he said 
the overall unemployment rate fell in 2005 from 8.4 pct 
to 8.0 pct, as a result of growth in both the 
construction and manufacturing sectors. 
 
---------------------------------- 
¶3. Central Bank raises "Repo" rate yet again 
---------------------------------- 
In light of rising inflationary pressures, strong 
growth in consumer credit and the potential for further 
narrowing of the differential between T&T and US short- 
term interest rates, the Bank is taking intensified 
action on two fronts with a view to reducing liquidity 
and dampening demand.  The actions included increasing 
the "Repo" rate by 25 base points from 7.0 percent to 
7.25 percent as of June 23. Additionally, they include 
withdrawing TT$500 million from the banking system 
through a special interest bearing deposit that is to 
be lodged at the Central Bank for a minimum period of 
one year.  Recent statistical data shows that headline 
inflation climbed 7.97 per cent on a year-on-year 
basis, compared to 6.90 at the end of the previous 
month. 
 
------------------------------------ 
¶4. Rapid rail bidding process begins 
------------------------------------ 
Works and Transport Minister Colm Imbert has revealed 
that 81 firms (65 foreign and 16 local) are interested 
in designing, building, operating and maintaining the 
proposed rapid rail project.  The minister said that 
this initiative is taking place because Trinidad and 
Tobago finally has the means to implement the 
infrastructure plans.  Minister Imbert noted that 40 
percent of the population currently uses public 
transportation and the volume will increase.  Imbert 
also mentioned that the Government was simultaneously 
 
PORT OF SP 00000808  002 OF 002 
 
 
developing several transportation initiatives including 
toll roads, water taxis, new expressways, arterials, 
and links.  Imbert said the 81 firms are now coalescing 
into consortiums, and the ministry has received 
positive acknowledgement of its qualification forms and 
instruction documents from 34 groups or organizations 
from a wide range of countries.  Those nations include 
Britain, Canada, China, Germany, Japan, Korea, Spain, 
USA, and Venezuela.  The second pre-tender meeting for 
the rapid rail project is scheduled for July 25.  The 
Government anticipates awarding the contract in 
December of this year. 
 
------------------------------ 
¶5. Avian flu drug for Trinidad 
------------------------------ 
Tamiflu, a medication used in the treatment of avian 
influenza (AI), is expected to reach T&T by July, 
according to Health Minister John Rahael.  Trinidad and 
Tobago is the first country in the Caribbean to have 
ordered the medication.  The Government ordered the 
drug last year, but it will not be available to local 
pharmacies.  Consistent with the policies of Roche 
Pharmaceuticals, which manufactures the drug, and the 
World Health Organization (WHO), the Government is 
solely responsible for the distribution of Tamiflu in 
T&T. 
 
----------------------------------------- 
¶6. Post-World Cup trade mission to Europe 
----------------------------------------- 
Edwina Leacock, Trade Ministry permanent secretary, has 
announced that the Ministry is leading a trade mission 
to Europe.  In an official invitation to Amcham to 
participate, she said, "The recent success of the 
national football team in the World Cup Finals 2006 in 
Germany, presents a unique opportunity for showcasing 
Trinidad and Tobago as a premier investment destination 
and a regional leader in export trade.  In this regard, 
the Ministry of Trade and Industry has scheduled a 
Trade and Investment Mission to Europe.  The mission 
will be led by Minister Kenneth Valley, and the 
countries to be visited are France, Spain, Germany, 
Holland, Sweden, and the United Kingdom.  The mission 
seeks to promote Trinidad and Tobago as the 
manufacturing hub and economic center of the region, 
thus making it attractive for potential investment in 
manufacturing from Europe.  Besides ministerial 
meetings, the mission will include a seminar on trade 
and investment opportunities and technical meetings 
with the business community."  Leacock has told Econ 
Chief that the dates, initially proposed for July, are 
likely to be reset for some time in October. 
 
------------------------------- 
¶7. Tobago TT$2.7 billion budget passed 
------------------------------- 
The Tobago House Assembly (THA) passed a TT$2.7 billion 
budget proposed by the ruling government. The fiscal 
package covers the period October 1, 2006, to September 
30, 2007.  In the previous fiscal year, Tobago was due 
to receive TT$2.2 billion, or 6.5 percent of the total 
budget.  This is viewed as a positive change from the 
past, during which Tobagonians, which represent 4.6 
percent of the T&T population, were battling for a fair 
share of the total budget.  The proposed budget calls 
for a recurrent budget of TT$1.4 billion, and the 
allocation of TT$1.2 billion for development, as well 
as additional funds for other investments to stem 
unemployment and enhance conservation efforts.  NOTE: 
The Tobago outlay generally becomes a line item in the 
T&T national budget, which is announced in 
September/October. 
 
SWEENEY