Belize: A Business Haven In The Caribbean

Belize is an upper-middle-income country in Central America with a small, mostly private enterprise economy. The country has close sociopolitical and economic ties to the Caribbean, benefiting from trade agreements within the region. Belize's economy is based primarily on the export of petroleum and crude oil, agriculture, agro-based industry, and merchandising, with tourism and construction also playing a significant role.

The country has a small population of around 350,000-405,000 people and a laid-back culture. The main language is English/Kriol, although most locals also speak Spanish. Belize has a unique cultural heritage and is the only English-speaking country in Central America.

There are several advantages and disadvantages to doing business in Belize. On the one hand, the country offers many unexplored opportunities, particularly in the agricultural and tourism sectors. Additionally, the Belize government provides incentives such as tax holidays and import/export duty exemptions to businesses contributing to the economy and providing jobs. However, on the other hand, Belize is a poor country, and investors may encounter challenges such as high telephone and internet access fees, erratic electricity supply, and a tedious process for acquiring land.

Belize's small, private enterprise economy

Belize has a small, mostly private enterprise economy. The country is an upper-middle-income country with a population of 405,000, a gross domestic product (GDP) of $2.5 billion, and a per capita GDP of $6049. Belize has close sociopolitical and economic ties to the Caribbean as a CARICOM member and benefits from access to members' markets and trade agreements.

Belize's economy is export-oriented, and it benefits from its proximity to large markets such as the United States and Mexico. The country's unique cultural heritage also makes it the only English-speaking country in Central America.

The two largest industries in Belize are tourism and agriculture, with the latter contributing to nearly 20% of the country's GDP. Sugar, a colonial legacy, remains the chief crop, accounting for nearly half of exports, while the banana industry is the largest employer. The country is also a producer of industrial minerals and has an emerging call centre and entertainment industry.

Belize offers multiple incentive programs to promote investment, including the Fiscal Incentives Act, the International Business and Public Companies Act, the Export Processing Zone Act, and the Commercial Free Zone Act. The government provides incentives such as tax holidays and import/export duty exemptions to businesses that contribute to the economy and provide jobs for Belizeans.

However, doing business in Belize comes with challenges. The country is relatively poor, which is reflected in high access fees for telephone and internet services, an erratic and expensive electricity supply, and a tedious process for acquiring land. Additionally, Belize's small domestic market, inefficient distribution and marketing systems, and heavy government red tape can make it difficult for entrepreneurs to achieve significant success.

Despite these challenges, Belize presents opportunities for investors and entrepreneurs, particularly in industries such as agriculture, tourism, manufacturing, and consultancy services.

The country's export of petroleum and crude oil

Belize's export of petroleum and crude oil is a developing industry in the country. Exploration for oil in Belize began in the 1930s, with oil exploration licenses granted to large companies such as Shell, Esso, and Texaco, as well as smaller companies and independent oil companies. Many seismic surveys were conducted, and the first exploration well was drilled by Gulf Oil in 1956 in the Cayo District. Despite these efforts, no commercial discovery of oil was made until 2005, when Belize Natural Energy Ltd. (BNE) struck oil in Spanish Lookout. This discovery led to the development of the Spanish Lookout Oilfield, which currently produces an average of 900 barrels of oil per day. BNE made another commercial discovery in 2008 in the Never Delay area, which is now the Never Delay Oilfield, producing an average of 25 barrels of oil per day. BNE is the only producer of crude oil in Belize and sells its oil to Shell Trading.

The discovery of oil in Belize has sparked interest from other companies, and currently, there are 18 companies with petroleum contracts in the country. These companies have exploration rights for both onshore and offshore areas. However, there is growing public disaffection in Belize over oil drilling, particularly in environmentally sensitive areas such as the Barrier Reef World Heritage Site. In 2013, the Supreme Court of Belize declared all offshore oil exploration contracts issued by the government null and void.

Belize's petroleum industry is governed by the Petroleum Act and Regulations, with the Geology and Petroleum Department regulating and monitoring all exploration and production operations. The country's income from petroleum exports is significant, with Belize exporting $1.19 million worth of crude petroleum in 2022, making it the 103rd largest exporter of crude petroleum in the world. The main destination for Belize's crude petroleum exports is Guatemala, with a growing market for Belize's petroleum products.

The role of tourism and construction

Belize's tourism industry has grown significantly in recent years, and it is now the second-largest industry in the country. In 2012, Belize welcomed almost one million tourists in a calendar year for the first time in its history. The Belize Barrier Reef, over 450 offshore islands, excellent fishing, safe waters for windsurfing, and numerous rivers for rafting are among the attractions that support the thriving tourism industry.

Tourism is the number one source of foreign exchange for Belize, contributing 15% of the country's total GDP in 2017. The industry also accounted for 13.4% of total employment, or 21,000 jobs. The total contribution of the travel and tourism industry, including jobs indirectly supported by the sector, accounted for 37.3% of total employment (59,000 jobs) in 2017.

The construction industry in Belize is also linked to the tourism sector. As the number of tourists visiting the country has increased, the hospitality industry has expanded. From 2018 to 2019, the total number of rooms available in the country increased from 8,435 to 8,853, with 70 new hotels added.

The Belize government provides incentives to businesses that contribute to the economy by providing jobs for Belizeans. These incentives include tax holidays and import/export duty exemptions.

The development of the tourism and construction industries in Belize has had a positive impact on other sectors, including agriculture, commerce, and finance.

Belize's agricultural industry

Sugar, citrus fruits, and bananas dominate the sector, with 60% of the country covered in vegetation and 20% of its landmass made up of arable lands suitable for crop plantation. Belize's largest agricultural products by volume are corn, rice, beans, and sorghum, which are primarily consumed domestically. Other crops include cacao, coconut, coffee, and hot peppers, which are produced for the local market and for restaurants catering to tourists. Belize also exports papaya, chocolate, citrus fruits, bananas, and rice.

The agricultural industry in Belize has provided significant employment, with 25% of the country's labour force working in agriculture. The industry is also a major source of foreign exchange for the country, after tourism.

However, farms in Belize often lack irrigation systems and modern agricultural equipment, which has led to a need for value-added agriculture investments to improve efficiency and yield. There are also concerns about disease prevention and natural disaster mitigation, particularly in the citrus and shrimp farming industries, which have been affected by diseases.

The Belizean government provides incentives to businesses that contribute to the economy and provide jobs for Belizeans, including tax holidays and import/export duty exemptions.

The benefits of free zones and offshore locations

Free zones and offshore locations are two business models that offer companies numerous benefits and advantages when operating outside their home country. While both models offer tax benefits, reduced regulatory burdens, and increased flexibility, there are some key differences between the two.

Free Zones

Free zones are designated geographic areas within a country that have been set up to encourage foreign investment and business activity. They offer various incentives to attract investors, such as tax exemptions, simplified regulations, and customs duty exemptions. Here are some of the key benefits of operating within a free zone:

• Tax Exemptions: Free zones typically offer tax exemptions or reduced tax rates, making them attractive for companies seeking to minimise their tax burden.
• Simplified Regulations: Free zones have simplified regulatory frameworks and streamlined processes, making it easier for businesses to set up and operate.
• Access to Foreign Markets: Free zones may offer access to foreign markets through preferential trade agreements or their strategic geographic location.
• Infrastructure and Services: Free zones often provide modern infrastructure and support services such as banking, logistics, and legal services, making it easier for businesses to operate and expand.
• Attracting Foreign Investment: Free zones are designed to attract foreign investment, making them ideal for businesses looking to expand into new markets.

Offshore Locations

Offshore locations, on the other hand, are jurisdictions outside the country where the company's owners reside or where its primary business operations occur. These locations are often chosen for their tax benefits, privacy, and asset protection. Here are some key advantages of setting up in an offshore location:

• Tax Advantages: Offshore companies can offer significant tax benefits, including lower tax rates, tax exemptions, and the ability to defer taxes on certain types of income.
• Asset Protection: Offshore companies can protect assets from legal action by placing them in a jurisdiction with favourable laws.
• Privacy and Confidentiality: Offshore locations offer greater privacy and confidentiality, which is important for businesses looking to protect sensitive information.
• Diversification: Offshore companies provide opportunities for diversification of investments and operations, allowing businesses to spread risk and take advantage of global opportunities.
• International Trade: Offshore locations facilitate international trade by providing access to foreign markets and offering flexibility in cross-border business operations.

Benefits for Manufacturing and Trading Companies

Both free zones and offshore locations offer specific advantages for manufacturing and trading companies. Setting up a production facility or plant within a free zone can be profitable due to lower land and production costs compared to neighbouring countries. Additionally, businesses operating within free zones may not need to obtain import or export licenses, providing greater flexibility in their operations.

Offshore locations, on the other hand, offer a short time span for setting up and building a business, minimising start-up and management costs. They also provide tax benefits, with companies being exempted from duty payments and income taxes.

Frequently asked questions