Belize's Economy: Small But Diversifying

Belize has a small, developing, free-market economy that is primarily based on tourism, agriculture, and services. In 2022, the country's GDP was US$2.95 billion, with a per capita GDP of US$6049. Belize's economy is vulnerable to external shocks, such as the COVID-19 pandemic, and environmental disasters like hurricanes and droughts. The country's primary exports are agricultural products, including citrus fruits, sugar, bananas, and seafood. International tourism is a major source of foreign exchange, contributing significantly to the country's GDP and employment. However, Belize faces economic challenges such as a growing trade deficit, high public debt, and a lack of infrastructure.

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

Belize has a small, developing, free-market economy that is based primarily on agriculture, tourism, and services.

Agriculture

Belize's economy depended on forestry until well into the 20th century. Logwood, used to make dye, was Belize's initial main export. However, loggers later turned to mahogany, which grew abundantly in the country's forests and was prized for use in cabinets, ships, and railroad carriers. When the supply of accessible timber dwindled in the 20th century, the country's economy shifted to new sectors.

Today, Belize's primary exports are citrus fruits, sugar, and bananas. Sugarcane is grown around the towns of Corozal and Orange Walk, and sugar is exported to the United States and the European Union (EU). Some sugar is converted into molasses for rum distillation. Citrus crops (oranges and grapefruit) and bananas are grown mainly in the Stann Creek and Cayo areas, south and west of Belize City. Rice is cultivated on large mechanized farms in the Belize River valley, while corn, roots, tubers, red kidney beans, and vegetables are raised throughout the country, mostly on smaller plots.

Tourism

Belize is the only English-speaking country in Central America, and it has extensive natural capital along its coast, including the largest coral reef in the Americas and an extensive mangrove ecosystem. These factors, along with its climate, excellent fishing, safe waters for boating, scuba diving, abundant jungle flora and fauna, and numerous Mayan ruins, support the thriving tourism and ecotourism industry.

Tourism is the most important source of foreign exchange in Belize, and it has been designated as the government's second development priority after agriculture. In 2011, tourist arrivals totalled 888,191 (mostly from the U.S.), and tourist receipts amounted to $260 million. The travel and tourism industry in 2011 directly contributed 350.6 million BZD (176 million USD) to Belize's GDP (12.0% of GDP).

Services

The service sector of the economy has accounted for the largest share of the GNP since the early 1980s, when it surpassed the agriculture, forestry, and fishing sectors. Nearly one-half of the labour force and the GNP are sustained by services.

Belize's economy is considered a tax haven, and it has a stable currency, with the Belize dollar pegged to the U.S. dollar since 1976. The Central Bank of Belize oversees the country's banks and issues the country's currency.

The country's main exports are seafood, sugar, citrus products, bananas, and clothing

Belize has a developing free-market economy. The country's main exports are seafood, sugar, citrus products, bananas, and clothing.

Seafood

Belize's exports of seafood are substantial, with fishing cooperatives exporting lobster, shrimp, scale fish, conch, and sea turtles, mainly to the United States. Aquaculture, especially shrimp farming, is also significant.

Sugar

Sugar is one of Belize's primary exports and makes up about two-thirds of total exports. Sugarcane is grown around the towns of Corozal and Orange Walk, and sugar is exported to the United States and the European Union. In the latter part of the 20th century, sugar production increased tenfold. However, in the 21st century, sugar production decreased due to the destruction of sugarcane fields in a hurricane in 2000. Belize's sugar industry faces challenges due to price fluctuations and the need to remain competitive in the global market.

Citrus Products

Citrus fruits, including oranges and grapefruit, are Belize's second most important agricultural crop and one of its primary exports. Citrus crops are mainly grown in the Stann Creek and Cayo areas, south and west of Belize City. However, citrus exports have seen a decline in recent years due to world price fluctuations.

Bananas

Banana production is a significant part of Belize's economy, accounting for 16% of total exports in 1999. Banana exports have experienced fluctuations, with a significant upturn in recent years. Banana production in Belize is targeted primarily at the European market, with Britain being the almost exclusive importer of Belizean bananas.

Clothing

Garment factories in Belize utilise imported fabric to produce clothing for the export market. The apparel industry has expanded significantly due to U.S. trade preferences allowing for duty-free re-import of finished apparel cut from U.S. textiles.

Belize's economy is vulnerable to external shocks, such as a weakened US growth and environmental disasters

Belize's economy is also vulnerable to environmental disasters, such as hurricanes, flooding, and droughts. These natural hazards can cause significant damage to infrastructure, disrupt supply chains, limit worker mobility, decrease agricultural output, and affect food security. For example, in 2000, a hurricane destroyed many sugarcane fields, leading to a decrease in sugar production. Belize is also vulnerable to the impacts of climate change, with rising sea levels and temperatures threatening its extensive natural capital, including the Belize Barrier Reef, the largest coral reef in the Americas, and its mangroves ecosystem. These ecosystems play a crucial role in protecting the country's low-lying coastline from adverse climate events, such as storms and rising sea levels.

Belize's economy is highly dependent on agriculture, tourism, and services, all of which are sensitive to external shocks. A weakened US economy could reduce tourist arrivals, as the US is the main source of tourists to Belize. Additionally, environmental disasters can directly impact the tourism industry, as they can damage tourist attractions and infrastructure, deterring visitors.

To build economic resilience and protect its vulnerable sectors, Belize has implemented various measures. The government has prioritized sustainable growth and environmental preservation, investing in projects aimed at increasing climate resilience, such as the Belize Climate Resilient Infrastructure Project. Additionally, the country has diversified its economy by expanding into non-traditional agricultural products, manufacturing, and the discovery of oil. However, despite these efforts, Belize remains highly vulnerable to external shocks due to its small size, heavy reliance on foreign trade, and exposure to natural disasters.

The financial system in Belize is stable but fragile, with high lending rates and a history of corruption

Belize has a small, developing, free-market economy that is highly dependent on tourism, agriculture, and services. It is the smallest economy in Central America, with a population of around 400,000 people and a GDP of $1.4 billion in 2020, increasing to $2.5 billion in 2022. The country's financial system is stable but fragile, with a history of corruption and high lending rates.

The stability of Belize's financial system has been called into question in recent years, particularly following the abrupt closure of two international banks, Choice Bank and Atlantic International Bank Limited, and accusations of corruption against the Governors of the Central Bank. The European Union and the Organisation for Economic Co-operation and Development (OECD) have blacklisted Belize due to assumed tax evasion practices carried out by offshore businesses. High lending rates and a history of corruption further contribute to the fragile nature of the financial system.

Belize's financial system is characterised by high costs of finance, which, along with relatively high lending rates, act as significant constraints on economic growth. Domestic banks accept only a low level of risk in business loans due to previously high default rates. This has resulted in fewer banking services at increased costs. The high cost of finance is particularly impactful given that Belize has the most expensive electricity in the region, which is a major constraint on a functioning market economy.

Belize's financial system is also vulnerable to external shocks, such as the COVID-19 pandemic, which heavily impacted the country's tourism sector. The country's heavy reliance on foreign trade, particularly with the United States, further exposes it to external market changes.

While the financial system in Belize is stable for now, it faces several challenges and vulnerabilities that could lead to future instability. The country's small population, high cost of doing business, high public debt, bureaucratic delays, insufficient infrastructure, and corruption all constitute significant investment challenges. Additionally, the lack of restrictions on foreign ownership or control of companies, while attractive to foreign investors, may also contribute to the fragile nature of the financial system.

The country's small population, high costs, and insufficient infrastructure pose challenges to economic growth

Belize has the smallest economy in Central America, with a focus on tourism, agriculture, and services. However, the country's small population, high costs, and insufficient infrastructure pose challenges to economic growth.

Belize's population is estimated to be around 400,000 to 440,000 people. This small population size limits the domestic market and can make it challenging for businesses to find enough customers or employees. Additionally, the country has a history of low female labour force participation, which contributes to a tight labour market.

Belize also faces challenges due to high costs. Labour costs are relatively high compared to neighbouring countries, and the country has the most expensive electricity in the region. High lending rates and the high cost of finance further constrain economic growth. The cost of development is also high, especially in the tourism industry, which is a major source of foreign exchange.

Insufficient infrastructure is another hurdle for Belize's economy. While the country has taken steps to improve its infrastructure, such as through the Climate Resilient Infrastructure Project, it continues to face challenges. For example, the port of Belize City lacks modern facilities, and the country's road network is limited, with only a few all-weather roads connecting major towns.

Belize's small population, high costs, and insufficient infrastructure have made it difficult to attract foreign investment and promote economic growth. The country's high public debt and bureaucratic delays have also contributed to these challenges. However, the government is working to address these issues and diversify the economy, with a focus on sectors such as tourism, agriculture, and renewable energy.

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