Government is watching the oil price drop and other fallout from Thursday’s UK referendum decision to leave the European Union, to see what impact the overall situation could have on T&T.
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Two of three economists interviewed by the T&T Guardian are advising the Government against purchasing the ArcelorMittal steel plant at Point Lisas.
The foreign operators of the plant have shut it down, putting 644 workers on the breadline. Since then, there have been calls for Government to take over the facility and mitigate the impact of job losses.
UWI economist Vaalmikki Arjoon, who supports the purchase of the facility, is recommending that Government invest in the plant through a public-private partnership as an investment which will realise profits in the long-term.
He said local companies which have been doing business with ArcelorMittal that are in danger of suffering losses which may lead to staff cuts.
“We are not only going to have the issue of 700 workers on the breadline, we are also going to have the issue of smaller companies impacted because Arcelor will no longer be operating here.
“There is also the social implication which is much more important to consider, much more important over this $1.3 billion debt in particular,” Arjoon said.
However, that view is not shared by Mariano Browne, managing partner at Browne and Company and former Minister in the Ministry of Finance.
He said it would not be “good business sense” to buy a plant burdened with debt.
Browne said steel magnate Lakshmi Mittal, chairman and CEO of ArcelorMittal, had a long and profitable operation in T&T but never expanded or improved the plant although he had recovered his investment in the facility several times over.
He also recalled that prior to 1986 Government had bought failing companies in an effort to save jobs.
“That policy largely failed, and to do so now would not yield any better result,” he said, adding that it was not about fairness but about proper management.
“Mittal is one of the richest men on the planet. He got there by knowing how to negotiate hard and he has had success, so these recents steps are not about fairness, it is about getting what he wants,” Browne said.
“He has done this before In Europe quite successfully, so this has nothing to do with that respect. In fact it is intentionally disrespectful. The more incensed the other party is, the easier it is to negotiate successfully.”
Economist Dr Roger Hosein said the T&T economy will not be able to afford the purchase of the ArcelorMittal plant, even at the price of US$1, because it is associated with a $1.3 million debt.
“We need to be careful as it is one thing to own these companies which cater to the extra regional market but another to thing to actually find buyers. Our own experience with steel in the 1980s under state ownership was one in which the local company was hit with a voluntary export restraint from the United States and this made it extremely difficult for the domestic firm to subsist,” Hosein said.
Hosein said Government should seek a formal meeting with ArcelorMittal Steel and the union to see if a reasonable intervention can be made that does not demand a lot of the country’s existing resources.
“Whether or not it is fair for the company to close its operations at this point in time is another question that will need detailed probing, simply because we are not sure how the rapid decline in international prices of steel has affected the company’s bottom line. It may well be that at the existing price of steel, in the context of the cost of production in Trinidad and Tobago, has made it overall uneconomical to continue,” he said.
“This, however, is a different matter to the social justice statement raised by some of the trade union leaders and contextually, if there is a basis for the workers to be compensated, it should be done in a fair and reasonable manner.”
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