Belize: Developing Challenges And Opportunities

Belize is a developing country with a small, private enterprise economy based on agriculture, tourism, and services. The country has the smallest economy in Central America, with a gross domestic product (GDP) of US$1.3 billion in 2021. Belize's economy is vulnerable to external market changes and is susceptible to the impacts of climate change, including hurricanes and droughts. The country faces challenges such as a high cost of doing business, public debt, bureaucratic delays, insufficient infrastructure, and corruption. However, Belize has a stable currency, a growing tourism industry, and natural resources such as agriculture and forestry that contribute to its economic development.

Belize's economy is small and private enterprise-based, relying on agriculture, tourism, and services

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

Agriculture

Belize's agricultural sector employs about one-fifth of the population. The country's farms are mostly small, with most being smaller than 100 acres (40 hectares). Traditional shifting cultivation is practised on many of these farms, largely due to the nutrient-poor soils of the lowlands. The remaining larger farms are devoted to the production of export crops such as sugarcane, citrus fruits, bananas, corn, kidney beans, rice, and vegetables. Belize also has a significant livestock sector, with large-scale chicken farming, beef cattle, and pig farming practised in many parts of the country.

Tourism

Tourism is a major source of foreign income for Belize, with the industry expanding rapidly in the 1990s. The country's attractions include the Belize Barrier Reef, ecotourism in the interior, and numerous Mayan ruins. The number of visitors to Belize increased fivefold from the late 1990s to the mid-2000s, with many arriving on cruise ships.

Services

The service sector has been the largest contributor to Belize's gross national product (GNP) since the early 1980s. Services sustain nearly half of the country's labour force and GNP. The Central Bank of Belize oversees the country's banks and issues the Belize dollar. Belize's chief trading partners include the United States, the United Kingdom, China, Mexico, Curaçao, Panama, and members of the Caribbean Community and Common Market (Caricom).

Belize has the smallest economy in Central America, with a GDP of US$1.3 billion in 2021

Belize is considered a developing country due to its small, private enterprise economy that is largely based on agriculture, tourism, and services. In 2021, Belize had the smallest economy in Central America, with a gross domestic product (GDP) of US$1.3 billion. This marked a 12.5% expansion from the previous year.

Belize's economy is heavily dependent on foreign trade, with the United States as its primary trading partner. The country has a trade deficit, largely due to low export prices for sugar and bananas, which are among its primary exports, along with citrus fruits. Belize's economy is susceptible to external market changes, and while moderate growth has been achieved in recent years, it remains vulnerable to fluctuations in world commodity prices and preferential trading agreements.

The country's small population, high cost of doing business, high public debt, bureaucratic delays, insufficient infrastructure, and corruption pose challenges to economic growth and foreign investment. However, the government is actively seeking foreign direct investment (FDI) to diversify and expand its economy.

Belize's economic prospects are closely tied to maintaining environmental preservation and building economic resilience. The country is ecologically diverse, with extensive natural capital, including the largest coral reef in the Americas and a vast mangrove ecosystem. These natural resources play a crucial role in protecting Belize's low-lying coastline from adverse climate events, preventing loss of life, property damage, and coastal erosion.

Belize's GDP per capita was US$6,345 in 2022, with a population of 405,272 people. The country experienced a sound economic rebound, driven by increased tourism and tourism-related construction, with real GDP per capita surpassing pre-pandemic levels in 2022. Despite an external debt restructuring in 2021 and high public debt, Belize's economy is expected to grow at a rate of 2-3% in the medium term.

Belize's economy is vulnerable to external shocks, such as a weakened US growth and depressed market environments

Belize has the smallest economy in Central America, with a GDP of US$1.3 billion in 2021, and its economy is primarily based on agriculture, tourism, and services. The country's economic outlook is vulnerable to external market changes, particularly fluctuations in world commodity prices and preferential trading agreements. Belize's primary exports, citrus, sugar, and bananas, are susceptible to changes in global demand and preferential market access policies in the region.

The COVID-19 pandemic significantly impacted Belize's agricultural and tourism sectors, highlighting the country's vulnerability to external shocks. The pandemic disrupted agricultural supply chains, limited the mobility of agricultural workers, decreased farmers' revenues, and restricted access to commodities crucial for food security. Additionally, Belize's proximity to North America has led to a dependence on tourism as the primary economic sector, making the country vulnerable to depressed market environments in its source markets, such as the US.

Belize is also exposed to environmental disasters, such as droughts, hurricanes, and climate-related effects, which can have significant economic impacts. The country's infrastructure is susceptible to climate change, and disasters such as hurricanes can cause damage to transportation, agriculture, and tourism sectors.

To mitigate these vulnerabilities, Belize has taken steps to diversify its economy and attract foreign direct investment (FDI). The government has implemented measures to improve tax collection and reduce public spending. Additionally, Belize has established itself as a tax haven and is working to improve its infrastructure. The country has also invested in climate resilience projects, such as the Belize Climate Resilient Infrastructure Project, to enhance the resilience of road infrastructure against the impacts of climate change.

Belize's financial system is stable but fragile, with high costs of finance and lending rates constraining economic growth

Belize's financial system is small, with little to no foreign portfolio investment transactions. It has no stock exchange, and capital market operations are rudimentary. The country's economy is based primarily on agriculture, tourism, and services. The financial system can be characterised as stable but fragile, with the high cost of finance and relatively high lending rates constraining economic growth.

Belize's banking sector is stable but fragile. The country has five domestic banks, three international banks, and ten credit unions. Since 2020, two banks have lost correspondent banking relationships, a significant loss to the sector. The high cost of finance and lending rates are due to previously high default rates. Domestic banks now accept only a low level of risk in business loans. The high costs of finance are also a result of the loss of correspondent banking relationships, which has resulted in fewer banking services at increased costs.

The Belize Development Finance Corporation (DFC), a state-owned development bank, offers loan financing services in various sectors. However, to qualify for a loan from DFC, an individual must be a Belizean resident or citizen, and a company must be majority Belizean-owned. The National Bank of Belize is also state-owned and provides concessionary credit primarily to public officers, teachers, and low-income Belizeans.

The financial system is also constrained by relatively high-cost labour and energy, and a small domestic market. The country has the most expensive electricity in the region. Belize's economy is susceptible to external market changes, and the small, tourism- and export-dependent economy is vulnerable to exogenous shocks.

Belize's government encourages Foreign Direct Investment (FDI) to relieve fiscal pressure and diversify the economy

Belize's economy is primarily based on agriculture, tourism, and services. The country has traditionally relied heavily on tourism, which suffered a significant blow due to the COVID-19 pandemic. Agriculture, the second most important sector, is vulnerable to environmental disasters and preferential market access policies in the region. The financial system is stable but fragile, with high financing and lending rates constraining economic growth.

The government has implemented various measures to attract FDI, including:

• Trade missions to the United States to promote Belize as an investment destination.
• Hosting its first national Investment Summit in November 2021 under the theme "Belize: Open for Business."
• Encouraging the Belize diaspora to invest in the country.
• Implementing tax and regulatory reforms to streamline business applications and processes.
• Offering various investment incentives through the Belize Trade and Investment Development Service (BELTRAIDE).
• Providing support for businesses affected by the COVID-19 pandemic through the Emergency Business Support Program (EBSP).

While Belize actively seeks FDI, there are also challenges that potential investors should be aware of. These include a small population, a high cost of doing business, high public debt, bureaucratic delays, insufficient infrastructure, and corruption. Additionally, foreign investors must adhere to regulations set by the Central Bank of Belize, particularly regarding the inflow and outflow of investments.

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