Belize's Economy: A Tropical Paradise's Financial Prospects

Belize's economy is a small, developing, free-market economy, based primarily on agriculture, tourism, and services. The country has a population of around 440,000 people and a land area of about 8,867 square miles. In 2022, its GDP was US$2.95 billion, a 12.1% increase from the previous year. Belize has the third-highest per capita income in Central America, but this figure masks a huge income disparity between rich and poor. The country's economy has traditionally relied on logging and agriculture, but tourism has become the primary source of income in recent years.

Belize's economy is susceptible to external market changes

Belize's susceptibility to external market changes is further exacerbated by its heavy reliance on foreign trade, particularly with the United States, which is both its largest export destination and its lead trading partner. In 2000, the US accounted for 48.5% of Belize's total exports and provided 49.7% of its imports. This trade relationship has continued to be significant, with the US remaining Belize's lead trading partner in 2022, accounting for 20% of exports and 42% of imports.

Belize's economy is also affected by its dependence on energy imports, making it vulnerable to energy price shocks. Additionally, the country has faced challenges due to its high-cost labour and energy, small domestic market, and lack of infrastructure investments. The manufacturing industry, for example, has been in decline due to increasing utility costs.

Belize's economic stability is further threatened by a growing trade deficit and heavy foreign debt burden. The country has a history of running trade deficits, with total imports exceeding total exports. This deficit has been attributed partly to low export prices for sugar and bananas, two of Belize's primary exports. Moreover, the country's debt-to-GDP ratio has been a concern, although it improved in 2022 due to international debt-relief programs and tighter control of public funds.

To stimulate economic growth, the Belizean government has implemented expansionary monetary and fiscal policies and sought to attract foreign investment, particularly in the tourism, energy, telecommunications, and agricultural sectors. However, despite these efforts, Belize's economy remains susceptible to external market changes due to its small size, limited domestic market, and dependence on a few key industries and trading partners.

The country has the most expensive electricity in the region

Belize has a developing, free-market economy that is primarily based on agriculture, tourism, and services. However, it faces challenges due to its small size, high-cost labour and energy, and a limited domestic market. Notably, Belize has the most expensive electricity in the region.

The high cost of electricity in Belize is a significant issue for both residents and businesses. As of September 2023, the price of electricity for households was BZD 0.437 per kWh or USD 0.217 per kWh, which is significantly higher than the world average of USD 0.155 per kWh. Similarly, businesses in Belize pay BZD 0.349 kWh or USD 0.173 per kWh for electricity, compared to the global average of USD 0.151 per kWh. These rates are set by the Public Utilities Commission (PUC) and include all components of the electricity bill, such as power costs, distribution, and taxes.

The high electricity rates in Belize can be attributed to the country's reliance on imported fossil fuels and mineral fuels. While Belize does generate some of its electricity domestically through the use of fuel wood, firewood, and other biomass products, it is still heavily dependent on foreign sources for its energy needs. This reliance on imports, coupled with the small size of the market, likely contributes to the high cost of electricity in the country.

To address this issue, the Belizean government has undertaken several initiatives. One notable project is a $15 million rural electrification program, jointly implemented by the government and Belize Electricity Limited (BEL). This program aims to improve access to electricity in rural areas, which may help reduce the overall cost burden on consumers.

The high cost of electricity in Belize has significant implications for both residents and the economy. For households, especially those with air conditioning, electricity can be a substantial expense, impacting their overall cost of living. For businesses, high utility costs have weighed down value-added gains in the manufacturing industry, contributing to its decline in recent years.

Belize's economy is based on tourism, agriculture, and services

Belize has a developing free-market economy. The country's economy is largely based on tourism, agriculture, and services.

Tourism

Belize's tourism industry has been a major source of foreign income since the 1990s. The industry has expanded rapidly, with the number of visitors increasing fivefold from the late 1990s to the mid-2000s. Popular tourist activities include fishing, boating, swimming, and diving along the Belize Barrier Reef, as well as exploring the country's Mayan ruins, such as Caracol, Xunantunich, El Pilar, and Cahal Pech. Ecotourism in the interior of the country has also grown in popularity.

Agriculture

Belize's agricultural sector employs about one-fifth of the population, although only a small proportion of the land is actively used for this purpose. Most farms are smaller than 100 acres (40 hectares) and many are milpas, or temporary forest clearings. Traditional shifting cultivation is practised on most farms due to the nutrient-poor soils of the lowlands. The main crops grown for export include sugarcane, citrus fruits, and bananas. Sugarcane is grown around the towns of Corozal and Orange Walk, with some sugar being converted into molasses for rum distillation. In addition to these crops, Belize also produces rice, corn, roots and tubers, red kidney beans, and vegetables. Large-scale chicken farming was introduced by the Mennonite community, and the country also raises beef cattle and pigs.

Services

The service sector of the economy has accounted for the largest share of the GNP since the early 1980s, surpassing the agriculture, forestry, and fishing sectors. Nearly half of the labour force and the GNP are sustained by services. The Central Bank of Belize oversees the country's banks and issues the Belize dollar.

The country's economic growth is vulnerable to world commodity price fluctuations

Belize's economy is susceptible to external market changes, and its economic growth is vulnerable to world commodity price fluctuations. The country's economic performance is closely tied to the prices of its primary exports, such as sugar, bananas, citrus fruits, and marine products.

Belize's economy is heavily dependent on its export earnings from these commodities, and any fluctuations in their prices on the world market can have a significant impact on the country's economic growth. For example, the country's trade deficit has been growing due to low export prices for sugar and bananas. Sugarcane production, in particular, experienced a decline in the 21st century due to the destruction of sugarcane fields in a hurricane, which further exacerbated the vulnerability of Belize's economy to price fluctuations.

In addition, Belize's economy is also vulnerable to changes in preferential trading agreements with its major trading partners, such as the United States for cane sugar and the United Kingdom for bananas. Any disruptions or changes in these agreements could have a significant impact on the country's economic growth.

The impact of world commodity price fluctuations on Belize's economy is further compounded by the country's heavy reliance on foreign trade, particularly with the United States, which has been its number one trading partner. In 2000, the US accounted for 48.5% of Belize's total exports and provided 49.7% of its imports. This heavy dependence on a single trading partner increases the country's vulnerability to price fluctuations in the international market.

To mitigate the risks associated with price fluctuations, Belize has been working to diversify its economy and expand its trading partnerships. The country has established preferential trade agreements with other countries, such as Guatemala, and is a beneficiary of the Caribbean Basin Initiative (CBI), which provides duty-free access to the US market for most Caribbean products. Significant US private investments in citrus and shrimp farms under the CBI have helped to stimulate the growth of commercial agriculture in Belize.

However, despite these efforts, Belize's economic growth remains vulnerable to world commodity price fluctuations due to its reliance on a few primary exports and its heavy dependence on foreign trade with a limited number of major trading partners.

Belize's economy is small and developing

Belize's small economy has a limited domestic market and a small population of around 441,471 people as of July 2022. The country's labour force is estimated to be around 120,500 people, with about one-fifth of the population employed in agriculture. Most farms in Belize are smaller than 100 acres (40 hectares) and many of them are milpas (temporary forest clearings). The country has about 8,090 square kilometres of arable land, but only a small fraction of this is under cultivation.

Belize's economy has traditionally relied heavily on logging and the export of timber. However, by 1960 the combined value of sugar and citrus exports had exceeded that of timber. As such, the country began to shift its focus to new sectors, with cane sugar becoming the principal export. More recently, Belize has expanded the production of citrus fruits, bananas, seafood, and apparel.

While Belize's economy is small and developing, it has seen some positive growth in recent years. In 2022, the country's gross domestic product (GDP) grew to US$2.95 billion, a 12.1% increase from the previous year. International tourism, which accounts for approximately 40% of the country's economy, has also surged back after a steep COVID-related decline, with 2022 revenues surpassing 2019 levels. In addition, agriculture and seafood exports increased by 10.7% in 2022 due to the removal of trade barriers and regional partnerships, most notably with Mexico.

However, Belize continues to face challenges such as high unemployment, a growing trade deficit, and a heavy foreign debt burden. The country is also susceptible to energy price shocks due to its dependence on energy imports. Nonetheless, with its diverse economic activities and efforts to expand the economy, Belize is working towards strengthening its small and developing economy.

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