(Trinidad Express) PriceSmart, identified in 2015 by former Central Bank governor Jwala Rambarran as the leading user of US dollars in Trinidad and Tobago’s retail and distribution sectors, says that ongoing challenges due to limited US dollar availability in this country have impacted its ability to convert T&T dollars to meet its obligations and support investments.
Despite these constraints, however, PriceSmart was able to reduce its T&T dollar holdings by half a billion dollars (US$82.3 million) in less than three years, according to its annual report.
PriceSmart, headquartered in San Diego, California, owns and operates US-style membership shopping warehouse clubs in Latin America and the Caribbean.
It has four warehouse clubs in Trinidad and Tobago.
“Periodically, we experience a lack of availability of US dollars in certain markets (US dollar illiquidity). This can and has impeded our ability to convert local currencies obtained through merchandise sales into US dollars to settle the US dollar liabilities associated with our imported products and to otherwise redeploy these funds in our company,” it stated.
Pricesmart said this illiquidity also increases our foreign exchange exposure to any devaluation of the local currency relative to the US dollar.
“For instance, during fiscal year 2021, we experienced significant limitations on our ability to convert Trinidad dollars to US dollars or other tradable currencies. Our balance as of August 31, 2023 of Trinidad dollar denominated cash and cash equivalents and short and long-term investments measured in US dollars was $18.2 million, a decrease of $82.3 million from the peak of $100.5 million as of November 30, 2020,” PriceSmart stated.
“However, as the Trinidad Central Bank strictly manages the exchange rate of the Trinidad dollar with the US dollar and affects the level of US dollar liquidity in the market through its interventions, we are subject to continued challenges in converting our Trinidad dollars to US dollars, as well as being exposed to the risk of a potential devaluation of the currency,” it stated.
PriceSmart said since 2017 it has been unable to source a sufficient level of foreign exchange.
It however said it is working with its bankers in Trinidad and Tobago as well as government officials “to convert all of our Trinidad dollars into tradeable currencies.”
“Examples of where we have significant US dollar net asset positions subjecting us to exchange rate losses if the local currency strengthens against the US dollar are our Trinidad, Costa Rica, and Nicaragua subsidiaries, with balances of $35.7 million, $35.5 million, and $30.3 million, respectively, as of August 31, 2023,” it stated.
PriceSmart stated that it is required to maintain a certificate of deposit and/or security deposits of Trinidad dollars, as measured in US dollars, of approximately $6.4 million with a few of its lenders as compensating balances for several US dollar- and euro-denominated loans payable over several years.
PriceSmart also reported a charge of $5.7 million in the fourth quarter of fiscal year 2023.
It said this charge was primarily due to the remeasurement of the assets of its Trinidad sustainable packaging plant, reflecting its estimated fair value following the company’s decision to seek a sale of the plant.
“We planned to use the plant to increase efficiencies by eliminating intermediaries in packaging and labeling and manufacturing some of our packaging materials using compostable or recyclable inputs. However, we found that achieving economic feasibility for this business proved challenging. Therefore, we decided to refocus our efforts on our core competencies as a retailer and redeploy assets we could use in our club business and seek a buyer for the remainder,” it stated.
On January 31 last year PriceSmart inaugurated its first ever environmentally sustainable manufacturing facility at the Point Lisas Business Park, Couva.