The challenges facing the Belize economy may be common to many small countries, but there is a promise of change, innovation and growth
Considering the location and human potential of this relatively resource rich chunk of Central America, most observers are convinced that Belize’s best is still to come as it strives to creatively expand its economy from its inherited and narrow base of agriculture and tourism. But in common with some small island states of the Caribbean, with which mainland Belize shares many attributes, it has suffered both the backwash and the undertow of the financial crisis over the past two years.
Belize’s current economic outlook, as viewed by the International Monetary Fund (IMF), seems more promising than in 2009 when the economic growth rate stood stubbornly at zero. The projections are for growth of a little over 2 percent for both 2010 and 2011. But IMF directors recently said the economy “remains vulnerable to shocks, with weak public finances, limited external financing and risks in the banking system” and they urged the rebuilding of “macroeconomic and financial buffers, strengthening the banking system and promoting an environment conducive to private sector-led growth”.
Seen from the private sector perspective, there is indeed a lot to be done to get through the setbacks of the last couple of years. The high cost of financing for both existing and new business is a major concern, with interest rates above 12 percent. Belize Chamber of Commerce and Industry (BCCI) president, Kay Menzies, told Global: “We’re sort of reflecting the rest of the world right now, with investors saying: ‘I’m not sure I’m ready to invest because I’m not sure what’s next.’”
A huge challenge for the government of Prime Minister Dean Barrow has been its recent attempts to sell a 45 percent stake in Belize Telemedia (BTL), which it nationalized in August 2009. The previous owner of BTL, the Michael Ashcroft group of companies, had sought to obtain an injunction against the government’s sale but this was refused by an appeal court in November 2010. However, legal issues may still delay a sale. Lord Michael Ashcroft, a board member of the Conservative Party in the UK, has long been a significant investor in Belize.
Barrow recently revealed that discussions were underway on the sale of BTL stock with both Cable & Wireless of the UK and a Taiwanese company. Belize’s own Social Security Board has also been in the process of concluding a purchase agreement for some of the available shares. According to its latest annual report, BTL has assets of $158.5 million and employs 450 people. It has 175,000 mobile telephone subscribers and 30,000 fixed lines.
The long-running BTL saga has dragged on much longer than the government might have wished and the business community in Belize is concerned that it has damaged the image of Belize as a country that still welcomes foreign investment. As one leading business person put it: “It’s generally accepted in the country that there was no other way to deal with the situation that prevailed at the time but there is concern from all of us that it should not negatively affect the image of Belize. One foreign investor does not represent all foreign investors. This was a very unique situation. I’m not sure the end is quite in sight but it’s closer than it’s been in a long time.”
For the moment, the traditional sectors of agriculture and tourism are at least managing to keep the economy moving, even if they have encountered some difficulties. Citrus farming has been doing relatively well but was hit by Hurricane Richard in October 2010. Sugar production also continues, although the government recently had to help bail out the largest producer, Belize Sugar Industries, to help it pay its cane growers. Tourism, which is primarily geared to serve the US market, is recovering from the collapse of visitor numbers from America in 2009 and into 2010. “The folks in that trade are not quite rocking along as they would wish to,” said the BCCI’s Menzies. The sector may not yet be out of the woods, but it is at least gradually recovering in confidence.
The best prospects for more rapid development in Belize going forward are probably in the non-traditional sectors – especially call centres, IT and offshore financial services – all of them activities to which much of the best young talent is drawn. “A demographic change is taking place,” says one such investor. “We used to suffer from a brain drain, but now we have people coming in and we have the bonus of linguistic diversity, although the English language is common to all.”
Belize is one of a number of small states that provides offshore financial services and, by implementing the OECD’s internationally agreed tax standards, one that has been successful in overcoming the negative connotations implied by the term ‘tax haven’. A recent survey showed that Belize has 66 agents to handle some 86,000 registered international business companies, as well as a substantial number of other offshore service providers of different kinds. The measurable direct income of this activity for the Belize economy was estimated in 2009 at $14 million.
“We are similar to the British Virgin Islands, Bahamas and Bermuda, in that we offer international financial services to non-residents,” explained Rishi Mungal of the Panama-based Morgan & Morgan financial group. The offshore sector draws in investment and is itself a source of tax revenue to the public sector in Belize. “The benefits for the country are not insignificant,” Mungal added. “The offshore sector introduces new money and employs people, especially graduates.” Another active branch of the offshore industry is the ship registration business, which has certification from the US Coastguard. With legislation based on that of Panama, some 500 ships are registered under the Belize flag.
“Belizeans are very progressive without even knowing it”
Offshore activities apart, a successful agricultural niche opportunity exists in growing and packaging fair trade and organic products. One leading investor in this field is the UK company Green and Black’s. Productive land is available and there is a 300- day growing season. The Belize Organic Producers’ Association has prioritised mangoes, cashews and papaya as crops with the greatest potential for organic cultivation.
In the short term, dedicated work will be needed to get Belize’s economy out of the doldrums. Tourism, which represents around 22 percent of GDP and employs large numbers of Belizeans, is being reassessed. “It’s a time to revisit our tourism strategies,” said Menzies. “Most of the growth has been in cruise tourism, which does not earn us much, and so we are having to look at the overnight sector which has been neglected. The tourism board has retooled its strategy. There’s a sign of life where things were a bit dormant for a while, but it’s still very much in a state of flux.” Ambitious long-term plans include the development of Belize City as the main destination and better management of the country’s greatest natural and cultural attractions. But perhaps the main challenge is to market the country more effectively both to visitors and to the airlines that can bring them.
Belize may not yet be out of the woods, but those with business in the country say there is much to look forward to. According to one investor, a key asset is the warmth and openness of the people. “Unlike in many small countries, the people are not xenophobic. Belizeans are very progressive without even knowing it,” he said, while adding that the country badly needs new forms of technology and development. “We are not on that road right now but things can change and it must turn around. Things may be of a small size, but they can grow.”
