Trinidad and Tobago Economy - Paterns of Development
Sources: The Library of Congress Country Studies
World War II profoundly transformed the economy and society of Trinidad and Tobago. As in World War I, World War II produced an oil boom as the nation fueled the Allied forces' war efforts, causing oil to replace sugar as the most important sector in the economy. A more profound social and economic transformation, however, resulted from the new military presence of the United States in Chaguaramas, Trinidad, as an outcome of the 1941 LendLease Agreement between the United States and Britain (see The Road to Independence, this ch.; Historical Background, ch. 7). The building of a United States base in Trinidad created a strong upswing in construction activity, directly employing approximately 30,000 workers, or between 15 and 20 percent of the labor force. The United States presence had many spin-offs, both economic and social. The Americans, having no colonial relationship with the Trinidadians, generally saw them as their equal and were willing to pay them relatively high wages. Real wages rose, employment improved, ports were upgraded, and the economy was stimulated by greater consumption from high wages. Higher urban wages, however, accelerated rural-urban migration, causing a shortage of agricultural labor as sugar employment dropped from 30,000 in 1939 to 18,000 in 1943. The Americans' fewer class prejudices also helped dispel myths of white supremacy as they, too, performed manual labor and consumed their earnings alongside Trinidadians. The United States presence also caused a greater penetration of American culture and consumption habits, which unrealistically increased the economic expectations of many Trinidadians.
The diminished world trade resulting from the war changed the production patterns in Trinidad and Tobago. Decreased markets for traditional agricultural exports and declining food imports caused total land under food production to more than double during the war. Although high urban wages resulting from the United States presence were a drain on the rural labor supply, food production actually increased as output shifted from export agriculture to domestic agriculture. Domestic agriculture was also bolstered by guaranteed prices for farmers, price controls, and government "back to the land" slogans. The fall in imports had a similar effect on Trinidad's small manufacturing sector, which previously was limited to the processing of export crops. Shortages in consumer goods during the war stimulated the import substitution of those products most easily produced domestically, such as edible oils, fats, matches, some textiles, and other consumer necessities.
In the 1950s, the economy of Trinidad and Tobago experienced a postwar boom unprecedented on both islands. Real GDP increased an average of 8.5 percent annually from 1951 to 1961; in the second half of the period, from 1956 to 1961, growth averaged 10 percent annually. In spite of rapid population growth during this period, real per capita income increased 15 percent. The evolving structure of the economy was characterized by the rise of industry and services and the decline of agriculture. Oil, construction, and manufacturing emerged as dominant industrial sectors. In 1956 a United States oil company, Texaco, entered Trinidad and Tobago and consolidated several holdings of other companies. Oil production jumped from under 60,000 barrels per day (bpd) prior to 1950 to 80,000 bpd toward the end of the decade. In addition, the price of oil continued to rise, allowing for increased oil earnings and growing government revenues. Early self-government in the 1950s launched extensive infrastructure projects, causing construction to more than double in over ten years. Manufacturing's output, encouraged by generous fiscal incentives since 1950, also increased rapidly, although its share of GDP rose only slightly from 11 to 13 percent. In terms of services, the banking industry enjoyed the fastest growth in the whole economy, and tourism was stimulated by new fiscal incentives as well. Agriculture, by contrast, decreased as public finance favored industry. During the 1950s, agriculture's share of total output dropped from 17 to 12 percent. Domestic agriculture, emphasized during World War II, shrank after the war and was the main reason for the sector's decline. Export agriculture, although faced with serious challenges, such as continued cacao diseases and changes in British agreements on sugar, was generally able to maintain production levels.
In the early 1960s, Trinidad and Tobago's tremendous growth spurt slowed, and the economy entered a ten-year period of sluggish growth. By the 1960s, the islands' labor force was highly unionized and urbanized, many belonging to the middle class, a situation unknown in most developing countries. As economic growth slowed, increased demands were voiced for adequate housing, better labor rights, more jobs, improved living and working conditions, more equitable distribution of wealth, and national ownership of resources. Despite these demands, the socioeconomic problems present in Trinidad and Tobago were hardly as acute as in other Caribbean countries; nonetheless, such issues as negative attitudes toward foreign ownership tended to dominate. The key sectors of the economy--oil, sugar, and banking--were dominated by multinational corporations. Growing resentment over foreign control of national resources intensified as the economy deteriorated in the late 1960s. The high unemployment rate of 15 percent tended to increase the number of industrial disputes and fortify union militancy. These events, culminating in the Black Power movement of 1970, set the stage for increased nationalization of resources during the 1970s.
In late 1973 world oil prices quadrupled and rescued Trinidad and Tobago from the decaying economic and political trend of the late 1960s and early 1970s. During the rest of the decade, the economy experienced rapid growth and was drastically transformed. In the 1970s, the country enjoyed its second major economic boom in only thirty years. At a time when many of the world's economies entered a deep recession, Trinidad and Tobago's economy experienced real annual growth of 9.6 percent from 1974 to 1979. Unemployment declined to a low of 8 percent by 1980. Government revenues from oil increased from a level equal to 20 percent of GDP in the early 1970s to 41 percent by 1980, fueling 65 percent of government revenues by the end of the decade. Escalating government revenues heartened Prime Minister Williams to remark that "money is no problem," epitomizing the nation's feel of instant wealth. Money was indeed no problem; the government spent more than US$120 million to purchase shares of over fifty major companies in the country, including majority or minority ownership in oil, gas, aviation, agriculture, utilities, and banking. Major new government investments, such as the multibillion-dollar industrial park at Point Lisas, low-cost housing projects, and expanded utility services, caused the construction industry to soar. Free-flowing petrodollars spawned strong consumption that, in turn, stimulated local manufacturing to grow at an annual pace of 9 percent. In contrast, agriculture was severely neglected and shrank by 25 percent during the oil boom. The decline in agriculture was symbolized by the 1984 sugar harvest, the country's worst in fortyfive years. Increased consumption and declining agricultural production made the economy much more import intensive as higher oil prices temporarily footed the import bill.
The sharp fallout in oil prices in the early 1980s forced Prime Minister George Chambers in 1983 to state bluntly that "the fête is over." From 1983 to 1986, the economy experienced strong negative growth: negative 2.6 percent in 1983, negative 10.8 percent in 1984, negative 6.5 percent in 1985, and negative 5.1 percent in 1986; continued negative growth was estimated in 1987. The islands' international reserves, which soared from a low US$34 million in 1973 to US$3.3 billion in 1981, had declined to under US$500 million by 1985. As a result of deteriorating economic conditions, the Trinidad and Tobago dollar was devalued by 50 percent in December 1985. Worth double the United States dollar in the 1970s, the Trinidad and Tobago dollar was valued at less than a third of the United States dollar by the mid-1980s. The unemployment rate crept as high as 17 percent by 1987. As the economy continued in a deep recession in the late 1980s, there was growing evidence of increased underground economic activity linked to cocaine trafficking (see National Security, this ch.).
Data as of November 1987
NOTE: The information regarding Trinidad and Tobago on this page is re-published from The Library of Congress Country Studies and the CIA World Factbook. No claims are made regarding the accuracy of Trinidad and Tobago Section information contained here. All suggestions for corrections of any errors about Trinidad and Tobago Section should be addressed to the Library of Congress and the CIA.