January 12, 2007
Belize Cruise Tourism’s Catch 22
Godfrey Smith
Belize City Hope

The title of Joseph Heller’s novel Catch 22 refers to a situation that presents a double bind. The duplicated digit also refers to the number of déjà vu-like events occurring in the book. Belize’s cruise tourism catch 22 has been quietly evolving for several months and can stymie, or worse, destabilize the industry if the bind is not somehow broken.

In the absence of factories in the urban crucible of Belize City, cruise tourism plays a critical role in creating employment and economic activity. Other than the nascent call center industry that is capable of employing a few hundred young Belizeans at a time, cruise tourism is the only real game in Belize City.

Cruise tourism exploded into being, as it were, ex nihilo. Belize recorded hyper-growth of over 5000% within a span of about six years. Over a four-year period, from 2000 to 2004, we had the fastest growth in cruise tourist arrivals in the region. Belizean entrepreneurs and investors, to their credit, rapidly invested and built up the assets of attractions to meet the surge in arrivals.

But the industry is now contracting. From a high of 850,000 arrivals we are now around 650,000. This contraction is attributable to the redeployment of ships back to Europe and the Mediterranean from whence they had been pulled after 9/11, the disorganized nature of Belize City and, importantly, the lack of a docking facility. A port where cruise ships can come in and dock is critical if Belize is to remain competitive. The future docking port is at the heart of the catch-22.

The Port project
The joint venture between Carnival Corporation (Carnival) and Belize Ports Limited (BPL) for the development and operation of a cruise ship port in south-side Port Loyola (the port project) is not working out as planned. The joint venture partners are in disagreement. The schism appears to be irreconcilable.

BPL wants to soldier on. It holds the position that it can procure the financing and do the project without Carnival as a partner, provided that Carnival commits to guaranteeing that its ships will use the facility for a definite period of time. Without commitment agreements from the cruise lines to use the cruise port, it becomes more difficult – not necessarily impossible - to access financing. Carnival says it has no difficulty with the new arrangement. But, perhaps unreasonably, it still has signed no commitment agreement. Under the present state-of-play, Carnival, the giant international corporation, is holding out on Belize. First bind.

The Catch 22
In the meantime, Stake Bank has emerged as an alternative to the Belize port project. Stake Bank’s plans involve transforming the 15-acre island located about two miles due east of Belize City into a cruise ship docking facility with duty free stores and other entertainment and connected to the mainland by a 4.5 mile elevated causeway.

Royal Caribbean International has expressed its preference for the Stake Bank option and, importantly, its expectation of being able to support that project financially. For Stake Bank to be feasible it must be designated as a port to be able to collect taxes to repay its loan. PBL’s position is that as a government we are legally bound to not issue any other commercial port licenses in Belize without giving PBL the right of first refusal, in order to get the port project going. Double bind.

Doing nothing is not an option
This stalemate is bad for the country and the industry. It is bad because the livelihoods of many hardworking men and women depend on a cruise industry that survives and remains viable. Millions of dollars of investment have been pumped into the industry in the expectation of growth. If the industry substantially contracts there can also be social implications in the city. Around us, Guatemala, Honduras, Cayman Islands and Mexico prepare to build competing ports. Belize can easily be bypassed. So, doing nothing is not an option

Competing merits
The arguments in favor of the port project are as follows. It will be based in the depressed south side of Belize City and therefore there will be spill-off economic benefits for the people as compared to Stake Bank on a private offshore island. The transportation costs are cheaper as compared to Stake Bank where tour operators will have to factor in 9 miles of causeway. The trickle down of the cruise dollars in mainland Belize City are more compared to a Stake Bank where the visitors may just stay or take tours directly from there.

The arguments in favor of Stake Bank are as follows. Stake Bank’s clear water and white sand will make it more appealing to cruise visitors when compared to the port project located near a swamp and in the low-income part of town. The visitors will come off the causeway nearest to the most attractive part of Belize City. Visitors taking water-based tours directly from Stake Bank will ease much of the chaos and congestion currently in Belize City.

Damn the torpedoes, full steam ahead?
For policymakers, the best interest of the cruise industry is the foremost consideration. Belize must have a docking facility. As policymakers we can take the “Damn the torpedoes, full steam ahead” approach. Under this approach, we take the view that the port project is unreasonably and unacceptably delayed because of Carnival’s holdout and therefore move to facilitate the Stake Bank project with the inevitable consequence that BPL and its backers launch multi-country litigation. There are lessons learnt with this approach. It can be very debilitating for the industry and country. A second approach involves trying to hammer out a joint venture between PBL and Stake Bank.

Limited negotiation
But perhaps the better approach lies in the government, since it has already expended much political capital, weathered litigation, signed agreements and enacted legislation for the port project, engaging Carnival, at the highest levels, to find out what, if anything, can be done to salvage the project. This negotiation should be of a fixed duration, say one month. If the result of this negotiation produces a “no chance of salvage” result, the government will be obliged to consider other options.

- Godfrey Smith