For 50 years we have put the cart before the horse. We say the objective of the economy is to earn foreign exchange. We desire forex reserves. We target exports. We devalue, so we can earn more. Indeed, we have it backwards. Foreign exchange is not really the objective of any economy. No family wakes up saying : “Our objective is to earn US dollars.”A family wakes up with the objective to feed and house themselves, educate the children and have dignified work. If to do that, they need something from outside, and the need is also for forex to get it, forex is the means.
1.What is the objective, then?
In a Caribbean context, the objective is simple: productive employment for our people, producing what we and our neighbours need, with rising productivity, so we can afford a decent life without borrowing. Forex is the working capital that allows us to start and sustain production.
In any factory, before it produces its first block, first bottle, first uniform, it must buy what it does not have: a mould from Brazil; resin from the US; a dye from India. It cannot buy these with TT dollars. It needs forex. That forex, once spent, is gone as a resource, but its impact reappears as a factory, as a skill, as a job. It has performed its service.
This is fundamentally different from saying forex is there so we can import and consume more. If we use forex to import ketchup that we could make, we have consumed working capital. No job was created; no capacity built. We would have eaten our seed capital. If we use forex to import resin to make board with sargassum, we would have invested working capital. Jobs are created and capacity built.
2. Why the method must differ for resource-rich and resource-poor
A country like Jamaica, Barbados, Dominica earns forex needed the hard way. It must also add local value—labour, sun, soil—and convince someone outside to pay US dollars for it. Its forex was gained from a job. When it spends that hard-earned forex on resin to make board, it is converting one job into another job—labour into labour.
A country like Trinidad and Tobago, Guyana, or Suriname obtains forex differently. It exchanges natural capital—gas, oil, gold—for US dollars. No transformation. No job at that moment is involved. It is not earned. It is a gift from nature, a one-time conversion of stock into capital. It is more like an inheritance than a salary.
However, an inheritance spent on consumption is gone forever. An inheritance invested in a productive company may even outlast the creator. Therefore, the resource-rich country has a special responsibility inside the bloc. Its gift is not only for its own citizens. It is the working capital the bloc does not have.
If that gift is brought to the Caricom bloc—“I will use my gas dollars to buy the machines and resins to make what we all need”—it offers producing countries something they could not get on the world market: a market of 18 million people that allows them to scale.
Scale is necessary: no factory in St Lucia can make yogurt probiotics viable for 180,000 people market. But for 18 million, it is viable; for 18 million plus the diaspora, it is globally competitive.
3. What tells us we are big enough and should do something else?
If we follow this logic, we will not keep scaling one product forever. At some point we must graduate from the current product. There must be a constraint that says: you are big enough in this product; do something else. The IMF will never tell you to stop. The World Bank will never tell you to stop. The market will tell you too late, after you have overinvested.
However, the development of technology and innovation give continuous indications of changes in demand.
There are four internal signals, and when three are met, graduation from that product family is indicated:
—Market ownership: When you supply more than 70% of Caricom demand. Further growth must be at world prices, not Caricom prices.
—Labour exhaustion: In that skill category you can no longer find workers without pulling from other priority foresight areas: the Lewis turning point reached.
—Forex graduation: That family, which once consumed forex to start, now consistently earns more forex globally than it consumes in inputs. It is forex-positive.
—Managerial span: Quality and maintenance slip as you expand the same line, because entrepreneurial capacity is thin.
When a company graduates from what it has been doing the rule is simple: maintain, replace, deepen quality, but do not expand with new working capital. The surplus forex from the previous activity becomes the new working capital for the next foresight recommendation that may have no forex for investment.
4. The netting insight and the endpoint
When we trade among ourselves, if the good meets 40% Regional Value Content, forex will not leave the region as a result of netting over, say, 90 days and payment between central banks. It moves from Grenada to Trinidad and hence is available to farmer and worker. It stays as income. If we net intra-regional trade through CAPSS before touching US dollars, we may not need US dollars at all. If in trade of $100m among ourselves, 70% nets out, we will need only US30m to settle. A Caribbean that makes for itself its food, its light manufactures, its building materials, its packaging, would need foreign exchange only for a short list of machinery and pharmaceuticals. Its import bill would fall by half of what it would spent on imports of more consumption. Its exchange rate would move from being a source of terror to being a minor accounting price for a few things we consciously choose not to make.
5. The fifth constraint: Technology will make your product obsolete while you are still paying for the factory
The four constraints above are internal. There is a fifth that is external and tells you you are finished, whether you are big enough or not, as demand disappears. Technology can replace your product while you are still amortising the mould.
This was always true. Wooden boats were replaced by fibreglass. Concrete block replaced by insulated panel. But AI, synthetic biology, and advanced materials have accelerated this cycle from 20 years to five years. Our sargassum board may be non-compliant if cross-laminated timber with bio-resin changes the fire code in 2030. Our plastic bottle line may be stranded if US and EU mandate compostable packaging by 2028. Our call centre seats, counted as service exports, may lose 60% demand to voice AI by 2029.
So, forex as working capital to build a company is not enough. A company must be built that can learn, or forex has been wasted twice: once to build it, and once to scrap it. Every product family in our foresight must therefore carry a Technology Obsolescence Review every two years:
We need to investigate: Are patent filings for a substitute up 300% in three years? Is price of substitute falling 20% year on year while yours is flat? Have major buyers changed spec to require AI, bio, or circular content you don’t meet? Can your product now be done by software?
If yes, you have 18 months to stop reinvesting forex. Use cash flow to seed a next foresighted company. Sell the moulds. Or move with it. Redefine the product as technology defines. This requires new forex as working capital again—but now for R&D, for computing, for biolab, for design capability, not just resin. Therefore, inside each factory, forex allocation must be: 70% to make current product, 20% to improve current product with technology, and 10% to experiment with what will replace it. The gift logic for a resource-rich country now extends: the gift must buy not only resin and dyes, but also digital and AI training, bio-testing. Because the 18 million Caricom market we are scaling into is itself moving under AI.
Our objective should never be to have big reserves. Our objective should be to be a productive people. Forex was only the working capital to get there. Once factories are built, skills kept, Caricom market scaled, and global market reached, forex will be abundant. Not because it was the objective, but because chasing it was not necessary and because companies were built that learn faster than the world changes.
