TEXT-S&P raises Trinidad & Tobago sovereign ratings

<a href=reuters.com>Reuters Wed April 2, 2003 04:42 PM ET (The following statement was released by the rating agency)

NEW YORK, April 2 - Standard & Poor's Ratings Services said today that it raised its long-term local currency sovereign credit rating on the Republic of Trinidad & Tobago to 'A-' from 'BBB+', and its long-term foreign currency sovereign credit rating to 'BBB' from 'BBB-'. At the same time, Standard & Poor's raised its short-term foreign currency sovereign credit rating on the republic to 'A-2' from 'A-3'; the 'A-2' short-term local currency rating remained unchanged, and the outlook is stable.

According to sovereign analyst Lisa Schineller, the upgrade reflects continued improvement in Trinidad & Tobago's external debt and liquidity indicators and expected implementation of plans to rationalize inefficient public sector entities. "The country's external financial position continues to strengthen, owing to current account surpluses of 6%-10% of current account receipts and significant inflows of foreign direct investment (FDI)," said Ms. Schineller. "The public sector is a net external creditor, with net assets projected to reach 17% of current account receipts in 2003. The gross external financing requirement is projected at only 8% of reserves in 2003," she added.

Standard & Poor's said that the republic enjoys a booming energy economy, supported by significant FDI that has averaged 7% of GDP since 1998. The broad-based energy matrix, coupled with increased trade and financial integration with the U.S. and other Caribbean economies, underpins trend GDP growth of 4.25% and has allowed the country to effectively weather a cyclical downturn in global demand. Trinidad & Tobago is the global leader in exports of ammonia and methanol globally, and will shortly become the fifth-largest exporter of liquefied natural gas. "Geopolitical concerns in the Bolivarian Republic of Venezuela and the Middle East have boosted Trinidad & Tobago's reputation as a secure energy supplier, and has raised its profile in the U.S. as a vital geopolitical interest," noted Ms. Schineller. Ms. Schineller said that, equipped with a solid mandate and congressional majority, Prime Minister Patrick Manning's government has presented an agenda to tackle inefficient public entities and reduce fiscal rigidities. The administration has initiated a politically difficult restructuring of the loss-making, state-owned sugar producer Caroni and plans to rationalize operations at other state entities. "These actions are important to continued credit improvement, as several of the state-owned entities are producing increasingly large deficits," advised Ms. Schineller. "Trinidad & Tobago's interest burden of 16% of general government revenue is currently more than twice that of the 'BBB' median. Encouragingly, the government has begun to exercise call options on its expensive local currency debt and to issue lower-coupon debt via a series of local auctions," she added.

Broad policy continuity underscores the republic's stable macroeconomic environment-despite a political impasse in 2002 that contributed to a slowdown in growth and investment. Notwithstanding the government's inability to advance policy initiatives, the central bank and finance ministry were able to maintain sound economic management. There was neither a notable instance of politically motivated violence nor any attempt to use extra-constitutional means to resolve the conflict, which highlights the strength of Trinidad & Tobago's institutions and the political maturity of its population.

"The stable outlook reflects the expectation of continued, strong economic growth underpinned by the energy sector, and for a healthy and improving external position," said Ms. Schineller. "Balancing these positives are continued challenges posed by high structural unemployment, increasing public security concerns, and pressures on the fiscal accounts stemming from inefficient public entities," she concluded. Complete ratings information is available to subscribers of RatingsDirect, Standard & Poor's Web-based credit analysis system, at www.ratingsdirect.com. All ratings affected by this rating action can be found on Standard & Poor's public Web site at www.standardandpoors.com; under Fixed Income in the left navigation bar, select Credit Ratings Actions.