Belize's Strategic Global Market Engagement

Belize is a small, developing, free-market economy that is primarily based on agriculture, tourism, and services. The country has a population of around 400,000 and is the least populated and least densely populated country in Central America. Belize's economy is highly susceptible to external market changes and is vulnerable to fluctuations in world commodity prices and the continuation of preferential trading agreements.

Belize's primary exports are citrus fruits, sugar, and bananas, and the country has a trade deficit that has been growing due to low export prices for sugar and bananas. The country's economy is also affected by its high inflation rate, which rose to 6.3% in 2022 due to the Russia-Ukraine war and lingering COVID-19-related imbalances.

Belize faces challenges such as a small domestic market, high input costs, and a lack of infrastructure investments. The country has the most expensive electricity in the region, and its reliance on imports at short-term market prices creates uncertainty and lowers investor confidence.

Despite these challenges, Belize remains attractive to investors due to its natural resources, proximity to the United States, and the cultural diversity of its people. The country has a stable democratic government and a history of peaceful elections and smooth transitions of power.

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

Belize has a developing free-market economy, which is primarily based on tourism, agriculture, and services. In 2022, the country's gross domestic product (GDP) grew to US$2.95 billion, a 12.1% increase from the year before.

Tourism

International tourism accounts for approximately 40% of Belize's economy. In 2022, tourism revenues surpassed 2019 levels, with annual cruise and overnight arrivals nearing 1 million visitors. The majority of these tourists were from the United States, making up more than three-quarters of all international visitors. The tourism industry in Belize has been expanding rapidly since the 1990s, with a fivefold increase in the number of visitors 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.

Agriculture

Belize has a long history of commercial logging and timber exports, but by 1960, the combined value of sugar and citrus exports had surpassed that of timber. Today, only a small proportion of Belize's land is actively used for agriculture, with most farms being smaller than 100 acres (40 hectares). Sugarcane, citrus fruits, and bananas are the main crops grown for export. Rice, corn, roots and tubers, red kidney beans, and vegetables are also raised throughout the country, mostly on smaller plots. Large-scale chicken farming was introduced by the Mennonite community and is now an important part of the country's agriculture sector.

Services

The service sector has been the largest contributor to Belize's gross national product (GNP) since the early 1980s, surpassing the agriculture, forestry, and fishing sectors. Nearly half of the country's labour force and GNP are sustained by services. The Central Bank of Belize oversees the country's banks and issues the Belize dollar, the country's currency.

Belize's primary exports are citrus, sugar and bananas

Belize's primary exports are citrus fruits, sugar, and bananas. Citrus is the country's second most important agricultural crop, with oranges being the most commonly exported citrus fruit. In 2018, Belize produced 100,000 tons of oranges, contributing to the country's overall production of 1.7 million tons of sugarcane and 80,000 tons of bananas.

Sugarcane is grown in the towns of Corozal and Orange Walk and is exported to the United States and the European Union. Some sugar is also converted into molasses for rum distillation. Sugar is Belize's chief crop and accounts for nearly half of the country's exports. In 2022, raw sugar was Belize's top export, valued at $81.2 million.

Banana production is another key component of Belize's economy, accounting for 16% of total exports in 1999. In 2022, bananas were the second-largest export, valued at $41.7 million. Bananas are grown mainly in the Stann Creek and Cayo areas, south and west of Belize City.

Belize's economy is largely based on agriculture, tourism, and services. The country has a small, developing free-market economy and is the smallest economy in Central America. While Belize has a diverse range of exports, citrus fruits, sugar, and bananas remain the primary drivers of the country's participation in the global market.

Belize is considered a tax haven

• Belize's tax code defines offshore income as dividends, capital gains, earned interest, and revenues, all of which are tax-exempt.
• Dividends paid by offshore companies incorporated in Belize to non-citizens are also tax-free.
• The country has no capital gains taxes, providing a significant financial advantage over countries like the United States, where capital gains tax is around 15%.
• Belize's International Business Companies Act, Trusts Act, and Offshore Banking Act make it simple to incorporate offshore companies, establish international trusts, and engage in offshore banking.
• Belize does not share information with international taxing authorities, providing corporations and individuals with confidentiality.
• Belize's banking regulations ensure financial privacy by allowing the disclosure of account information only after the submission of documentation related to criminal investigations, followed by a court order.
• There are no restrictions on currency movements in and out of the country, allowing offshore businesses to transfer funds without reporting requirements.
• Belize has few tax treaties with other governments, maintaining financial privacy protections.
• Belize offers affordable banking fees due to its lower cost of living compared to other banking destinations.
• The country provides political and banking stability, with a history of a stable democratic government.
• English is the official language, making it accessible to many international investors.

These factors contribute to Belize's reputation as a tax haven, attracting investors and corporations seeking to legally reduce their tax liabilities.

Belize's economy is susceptible to external market changes

Belize has a small, developing, free-market economy that is susceptible to external market changes. The country's economy is primarily based on agriculture, tourism, and services.

Belize's economic performance is highly susceptible to fluctuations in world commodity prices and the continuation of preferential trading agreements, especially with the US and the UK. The country's primary exports are citrus fruits, sugar, and bananas, and its trade deficit has been growing due to low export prices for sugar and bananas. While the removal of trade barriers and regional partnerships, notably with Mexico, have driven agricultural growth, Belize's manufacturing industry has continued to decline.

Belize's economy is vulnerable to external market changes due to its reliance on foreign trade, particularly with the US, which remains its lead trading partner. In 2000, the US accounted for 48.5% of Belize's total exports and provided 49.7% of its imports. The country's small domestic market, high-cost labour, and energy costs further contribute to its susceptibility to external market changes.

Belize's inflation rate rose from 0.1% in 2020 to 6.3% in 2022, largely due to global inflationary trends, higher prices on imported goods, supply chain costs, and the impact of the Russia-Ukraine conflict. The country's high inflation rate and increasing national debt-to-GDP ratio highlight the vulnerability of its economy to external factors.

The impact of external market changes on Belize's economy is further exacerbated by its limited domestic industry and infrastructure investments. The country has the most expensive electricity in the region, and its reliance on imports at short-term market prices creates uncertainty, lowering investor confidence and limiting firm profitability.

Belize's economy is also susceptible to external market changes due to its small size and high cost of doing business. As one of the smallest consumer markets in Central America and the Caribbean, with a GDP only 3% the size of neighbouring Guatemala, Belize faces challenges in competing with larger economies. The high cost of inputs, such as utilities and fuel, drives up the cost of goods, impacting the market value and pricing of domestic products.

Additionally, lengthy bureaucratic delays, corruption, and the uneven application of the law deter foreign investments, particularly in the infrastructure and agriculture sectors. The combination of these factors makes Belize's economy vulnerable to external market changes and dependent on foreign trade and investment.

Belize's government faces challenges to economic stability

Belize's government faces important challenges to economic stability. The country has a small, private enterprise economy based primarily on agriculture, tourism, and services. While the country has a history of stable democratic government, it faces several economic hurdles.

Firstly, Belize has a high cost of doing business due to expensive inputs like utilities and fuel. The high cost of electricity, in particular, drives up input costs across all industries. The country also relies on imports at short-term market prices, creating uncertainty and lowering investor confidence. This dynamic limits the profitability of firms, preventing them from expanding and providing additional employment.

Secondly, inflation in Belize has been rising, propelled in part by global events such as Russia's invasion of Ukraine and lingering COVID-19-related imbalances. This has contributed to a growing trade deficit. Additionally, imported products are subject to a multitude of duties and tariffs, further increasing costs for some product categories. Belize also has a General Sales Tax of 12.5% for most retail goods, higher than almost all U.S. states and localities.

Thirdly, lengthy bureaucratic delays and corruption disincentivize foreign investment. Corruption is endemic within politics and government institutions, and the uneven application of the law deters investments, especially in the infrastructure and agriculture sectors. U.S. firms, in particular, have faced challenges in competing against well-connected domestic companies in areas related to bidding, procurement, and dispute settlement processes. While the courts are independent and impartial, legal proceedings are often delayed due to significant case backlogs.

Finally, Belize has a small domestic market and a scarcity of infrastructure investments. While electricity, telephone, and water utilities are relatively good, Belize has the most expensive electricity in the region. This has impacted the manufacturing industry, which has been in decline in recent years.

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