4. Foreign Exchange Savings

Conservation of foreign exchange did not figure prominently a s one of the main objectives of the industrialization programme. Firms were expected to gain easy access to external markets and to finance their investment expenditures from external sources. In consequence, no radical changes in the dependent monetary system were envisaged. On the contrary, the effort to entice foreign firms into the country and to maintain their confidence, placed severe limits on any steps forwards monetary independence.

Data do not permit us to view the total picture of the net foreign exchange impact, but sufficient exist for a peep.
Exports represented a modest 17.9 per cent of total manufacturing sales in 1953 . Contrary to expectations, this share has been falling over the period. representing 12.4 per cent in 1962. As a share of the country’s total exports in 1962, it represented 4.2 per cent, and 28.6 per cent if oil exports are included. But oil exports represent about 85 per cent of total exports. Foreign exchange earning of the manufacturing sector have thus so far been insignificant.

Against the earnings however, must still be set the sector’s expenditures of foreign exchange. Data are available for 1961 and l 962. They show that imports as a percentage of total sector purchases showed ., slight decrease in the latter of the two years. Too much should not be made of this however. What appears more important is that both in value and in percentage terms, the manufacturing industries used more foreign exchange in purchase of interĀ­-mediate goods than they earned by their export activities. Moreover there were additional capital imports of $14 million in 1961 and $13.4 million in 1962, although these could have been financed by new capital inflows.
We are not here implying that the sector makes a negative contribution to foreign exchange. To the extent that domestic demand is now satisfied by domestic production rather than by imports, there results a real saving of foreign exchange. The size of these savings however, depends on the degree to which the establishment of the plants in Trinidad is responsible for creating new taste for imported goods.