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Belize - Economy

Belize has the smallest economy in Central America with a total gross domestic product (GDP) of US $1.6 billion. Though geographically located in Central America, the former British Colony has cultural ties to the Caribbean as well. Due to mounting fiscal pressures and a need to diversify and expand its economy, the Government of Belize (GOB) is very open to, and actively seeking, foreign direct investment (FDI). However, the small population of the country (around 350,000 people), high import duties, difficulties in navigating the government bureaucracy and occasional political interference in private disputes constitute investment challenges. Forestry was the only economic activity of any consequence in Belize until well into the 20th century, when the supply of accessible timber began to dwindle. Cane sugar then became the principal export. Exports were augmented by expanded production of citrus, bananas, seafood, and apparel. The agricultural sector suffered from damage caused by hurricanes that struck Belize in late 2007 and late 2010 and heavy flooding in mid-June and October of 2008. The farmed shrimp industry, a chief export earner until 2005, continues to decline.

Belize was adversely impacted by the global downturn in 2009, but the economy recovered modestly in 2010. GDP growth reached 2.0% during 2010, supported by government services and commerce. However, Belize's economic performance is highly susceptible to external market changes. Tourism is Beilze’s number one foreign exchange earner, followed by exports of crude oil, marine products, citrus, sugar, bananas, and garments. Because of the uncertain future of these traditional exports, efforts are being made toward agricultural diversification. Agriculture currently provides some 71% of the country's total foreign exchange earnings and employs approximately 29% of the total labor force.

The small, essentially private enterprise economy is based primarily on agriculture, including agro-based industry (sugar refining and citrus processing), forestry and fishing. Sugar, the chief crop, accounts for nearly half of exports, while the banana industry is the country's largest employer. The production of oranges, which accounts for the largest acreage cultivated, grew strongly in 2007. Tourism, construction and marine products are assuming greater importance and tourism is now the largest foreign currency earner, having overtaken agriculture. Protecting the natural and historical environment will be critical to the sustainability of Belize’s tourism industry. Figures of overnight visitors have risen steadily over the past five years, whilst cruise ship passenger numbers have declined steadily since 2004.

There has been exploration for oil in Belize for over 50 years but it is only now that technology makes its extraction viable, this received a boost with oil discoveries in 2006. A small oil field containing 10 million barrels of sweet crude oil is in production and exploration continues in other areas of the country.

Despite steady GDP growth over the last couple of years the policy environment tightened somewhat in an effort to reduce pressure on the international reserves. This growth has been hindered by the recent economic climate, with real GDP predicted to contract in 2009 before beginning a weak recovery in 2010. Real GDP contracted by 2.2% in the first quarter of 2009 as a result of both domestic and external factors. Growth was led by services with tourism playing a key role in the expansion of distributive trade, transport & communications as well as the continued growth in hotel and restaurant activity.

Activity in fisheries also heightened as a result of developments in shrimp and Tilapia farming. The Government's fiscal and monetary policies have been tightened over the last few years in an attempt to slow consumption and improve the external current account position, which was becoming critical. In July 2006 the government announced that they would not be able to meet debt payments to external creditors and sought to reschedule the countries external debt of nearly US$1 Billion. The negotiation of a new “Superbond” was successfully completed in February 2007 extending the life of the debt by 22 years to 2029 and with easier payment terms in the earlier years.

Although about 1,998,230 acres (or 38% of the total land area) are considered potentially suitable for agricultural use, only approximately 10% to 15% is in use in any one year. About half of this is under pasture, with the remainder in a variety of permanent and annual crops. The traditional system of "milpa" (shifting cultivation) involves the annual clearing of new land for crop production; however, increasing numbers of farmers are making permanent use of cleared land by mechanical means. A tax is levied on the unimproved "value" of the land. To curb land speculation, the government enacted legislation in 1973 that requires non-Belizeans to complete a development plan on land they purchase before obtaining title to plots of more than 10 acres of rural land or more than one-half acre of urban land.

Domestic industry is limited, constrained by relatively high-cost labor and energy and a small domestic market. Some 185 U.S. companies have operations in Belize. Tourism attracts the most foreign direct investment, although U.S. investment also is found in the telecommunications and agricultural sectors.

A combination of natural factors--climate, the longest barrier reef in the Western Hemisphere, numerous islands, excellent fishing, safe waters for boating, jungle wildlife, and Mayan ruins--support the thriving tourist industry. The Government of Belize has designated tourism as one of its major development priorities.

Belize’s banking system reported a surge in nonperforming loans (NPLs) in 2010, equivalent to 16.1% of total loans by the end of 2010, although by mid-2011 the number had declined slightly to 15.2%. While banks comply with current regulations, provisioning remains low by international standards, covering less than 16% of NPLs. The increase in NPLs has been largely concentrated in three banks (two domestic banks and one offshore), which account for over 40% of deposits in the banking system.

A major constraint on the economic development of Belize continues to be the scarcity of infrastructure investments. As part of its financial austerity measures started in late 2004, the government froze expenditures on several capital projects. Although electricity, telephone, and water utilities are all relatively good, Belize has the most expensive electricity in the region. Hydroelectric facilities at Vaca Dam and a bagasse cogeneration plant at a sugar cane processing facility were brought fully online in 2010 in an effort to increase domestic capacity for electricity generation. Large tracts of land, which would be suitable for development, are inaccessible due to lack of roads. Some roads, including sections of major highways, are subject to damage or closure during the rainy season. Ports in Belize City, Dangriga, and Big Creek handle regularly scheduled shipping from the United States and the United Kingdom, although draft is limited to a maximum of 10 feet in Belize City and 15 feet in southern ports. American Airlines, Continental Airlines, U.S. Airways, Delta Airlines, and TACA provide international air service to gateways in Dallas, Houston, Miami, Charlotte, Atlanta, and San Salvador.

Belize continues to rely heavily on foreign trade. World commodity price fluctuations and preferential trading agreements, especially with the United States and the European Union (cane sugar) and the United Kingdom (bananas), have greatly impacted Belize's economic performance. European Union (EU) and U.K. preferences have been vital for the expansion and prosperity of the sugar and banana industries.

According to the World Trade Organization, imports for 2010 were $709 million, while exports were $325 million. The United States continues to be Belize's number-one trading partner. In 2010, the United States provided 47.9% of Belizean imports and accounted for 49.1% of Belize's exports. Other major trading partners include Mexico, the European Union, Central America, Japan, and China. Belize aims to stimulate the growth of commercial agriculture through CARICOM. However, Belizean trade with the rest of the Caribbean is small compared to that with the United States and Europe.

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Page last modified: 31-03-2021 10:58:47 ZULU