THE ECONOMY OF BELIZE HOLDS STEADY IN 2009

THE ECONOMY OF BELIZE HOLDS STEADY IN 2009

By Ray Auxillou

The economic outlook for Belize and the past year of 2008 continues firm. While tourism from the USA and Canada has dropped drastically, the losses have been replaced by oil exports. BNE the only oil company pumping oil, has increased output from three wells to seven wells. About 4500 barrels a day. The whole country now has oil exploration blocks sold out. So far, oil is mostly found in smaller pools, not in large scale lakes of oil. BNE introduced new technology to find oil and struck oil on their first drilling. The drop in world oil prices caused a slump, which was replaced by more output.
Construction is up, new homes and businesses are up. Standard of living is rising rapidly and becoming more diversified to a constantly expanding middle class. Government tax revenues from the General Sales Tax are up, showing increased economic activity from $244 million in 2007, to $251 million for 2008. There is a steady trickle of immigrants coming into Belize, mostly from the USA, as they flee that debt ridden, bureaucratic ridden country. Many are coming also for better medical services at lower costs in Belize, than available in the USA and the more desirable tropical climate.
Unemployment went down just slightly in 2008, but still is around 8%, plus a small percentage. Unemployment in Belize is a strange number in Belize, because a large part of the people are self employed, and grow their own subsistence food. Experiments over the past years, have confirmed that the two rainy season, seasonal fruits and native crops can now be supplemented by temperate zone type vegetables and grown on a bi-monthly basis, provided one irrigates with water, and selects varieties of seeds for winter crops and summer type seeds for the hot season. The ability to grow food has thus increased by 34% and perhaps higher. Hydroponic commercial greenhouse growing has shown promise and has now been practiced for five years successfully.
The overall debt of Belize inherited from the past government mistakes is now 78% of GDP. This is very large and an uncomfortable figure. Efforts are being made to reduce this debt. In the meantime, the interest payments are consuming a significant portion of annual government revenues. The foreign debt alone is 71.3% of GDP. Most of this is in the Belize Bonds. The interest rates on these bonds will increase in 2010 and again in 2012. Consuming about $100 million of a current $713 million annual revenue flow. Economic growth, or expansion is not expected to do much until the cycle swings upward again, probably in 2011. Restricting the size and cost of government has reduced services and many government departments are not doing well for public service. This is a necessary penalty to pay, in order to reduce the national debt. Should tourism resume as the North Americans sort out their own economy and settle down from their current bad news and panic ridden government, the Belize economy will continue expanding, which in turn means that the interest cost of the debt can be absorbed, probably over the next ten years. The only economic effect from the world financial panic has been a drop in our major source of overnight USA tourism, the Europeans are still traveling here.
GRANT AID from donor organizations and countries, have enabled Belize to maintain growth. The biggest donors and friends of Belize have been Venezuela and Taiwan. Lesser GRANT amounts have come for specific small projects from the U.K., the European Union, some other places and the USA.
In the past, the Belize economy had averaged a 10% rate of increase. For the past year of 2008, this figure shrank to 3.8%, in a short term, down cycle phase, but the economy of Belize is still humming along, like a well oiled machine. The economy is expected to rebound more robustly in the winter of 2010-11 when USA tourism should recover. Most of this success is due to the previous PUP government, that went on a severe austerity spending squeeze, for six long years. This cost them the election among other things. The new UDP government is now tackling re-building of infra-structure, that had been ignored for those six years.
The new UDP government is re-starting the foreign loan borrowing and has increased the seeking of needed GRANT aid, to pay for infra-structure repair and keep the economy running. The numbers for government tax revenues have risen, in comparison to population growth, to reach what we call the brink of economic and fiscal self sufficiency. As a small country with a small population, it has been difficult to grow enough to pay the necessary costs of government. This point of fiscal self sufficiency, should be reached in about five or six years, when no more foreign loans will be needed, if the current foreign loan borrowing is strictly curtailed. The challenge facing this new UDP government is to continue infra-structure building and repairs, while attempting to reduce the national debt on a slightly less than available annual government tax revenues. More GRANTS for infra-structure have to be the method of freeing tax revenues for growth. Total DEBT PAYMENT COSTS for the coming fiscal year total $170 million, versus an expected income of $717 million tax revenues. Government size and costs are being maintained with difficulty at slightly less than $500 million.
The country is getting big enough in population, to switch to an increased technical savvy, better educated, more cosmopolitan, newer generations of young people, from being an agrarian orientated society for exports, to step over into newer realms of light manufacturing. The government and the newer youth generation are seeking to understand and get immigrants and businesses started, for some sort of incubator type export orientated light manufacturing endeavors. Lacking are skills and ideas. Diversification is believed to be the key to economic stability for the future. So far, the government is busy dealing with recurring political problems and has had no time to set any policy to encourage the growth of incoming immigrant investors with light manufacturing ideas. Incentives are lacking in this field, or too cumbersome as they now operate.
Education has improved tremendously under the past PUP administration. Foremost was a switch from exporting the brain drain educated type academic students, through Commonwealth and British orientated education systems, to a newer USA style, fledgling community college type DEMAND system of educational training via short courses. This is working out very well. In fact, many of the newer generations of youth are more savvy than their USA counterparts as skilled small entrepreneurs, being self employed. They certainly are superior to the systems of education in Europe and the U.K., showing their adaptability to newer technologies and business ideas. We no longer lose our youth to an export brain drain educational system effect. They are staying in Belize and building the country and very well too, for the population size, which is around 300,000 people. Belize is a great place to live and the people are very proud of our growing success.
The public debate, the media openness, the robust and wild and wooly talk shows, newer methods of communication are more free in Belize than industrialized countries. Things you can say in Belize in open debate, or for your opinion, would put you instantly on TERRORIST, POLITICAL, or DANGEROUS FBI watch lists in the USA, or the equivalent in European countries. In many countries, you would get shot or jailed, for the free debates enjoyed by Belizean society. Belize is a far more democratic society than the industrialized countries of the world. Your opinions do not brand you, or put you in some bureaucratic pigeon hole, watch list slot, like more industrialized countries. There is a sense of freedom here in Belize, that has not been experienced in the USA, or the UK, or Germany and Israel, or the Muslim countries, for a hundred years in those foreign parts. It is great to be part of building a new nation. These are heady times in Belize for sure.
There has been tremendous growth in culture and sports on a competitive and national sports basis. There are National Band Competitions, Chess Olympiads, Math Olympiads, art shows, soccer eliminations, bicycle races, long and short distance canoe racing, horse racing, sailboat racing, wind surf racing, spear fishing competition, trophy fish competitions, mountain climbing expeditions, karate, ballet and judo competitions. The youth of today in Belize are living a FULL life to maximum potentials. Many of these things are carried into the International level. Most Belize middle class people in their 20’s and 30’s have been to foreign countries. Places like China, Europe, Africa, and the local USA, which is more or less considered a suburb of Belize and is a frequent shopping place for hard to find items for our small market. Things like cement mixers, newest computers, bed sheets of 200 count, nylon hammock making string, artist supplies and specialized machinery, both second hand used and new. The Central and South Americas are getting more Belizean tourist visits. Our newer middle class generation are young and cosmopolitan, and very well traveled. They bring back new ideas to try out in our environment.