Part I by Richard Harrison
Belize is 31 years into Political Independence. It finds itself in a position where unemployment is over 18%, with an even higher unemployment among the young population. Poverty is over 40%, as more and more the middle-class is being wiped out. GDP growth is below the Latin American average of 3-4% per annum. The weekly newspapers' largest earnings from adverts come from notices selling off people's hard-earned assets. Many of the largest investors have gone into receivership, have closed down operations, or have been sold off at cents on the dollar to local and foreign sharks. A large percentage of working Belizeans are living from paycheck to paycheck, taking short-term loans at scalping interest rates from the many loan-shark services that have sprung up all over Belize. The municipal and central governments have taken draconian measures to collect their tax revenues, including threat of jail time for hard working citizens. The Government of Belize can't find the money to pay its debts and running all over the place to beg our foreign friends for debt forgiveness, lower interest rates and extended terms of payment; its budget hinges on life-support from Taiwan. The monopoly electricity distribution company has to resort to large debenture issues at relatively high interest rates to keep its operations going, while raising rates by almost 20% to pay for the expensive debenture credit. The PM is running with palms open to beg Mexico for concessionary rates for its supply of electricity. Families take home less and less groceries every week, as the prices of basic goods have been rising at an unprecedented pace, while real-income falls. The country broke its all-time record for violent crime in 2012, and the beginning of 2013 looks like it will be worse.
The bright spots in the economy are in primary commercial agriculture, tourism and crude petroleum exports. Indeed, had crude petroleum not been found in 2005, Belize would have already defaulted with all the consequences that come along with that. Crude petroleum by 2010 accounted for over 30% of Belize's export earnings�.non-petroleum exports fell below their 2000 level.
EXPLAINING THE BRIGHT SPOTS
The crude petroleum industry, although it has been seeing a decline in production for the past two years, has been the life saver for the Belize macro-economy since 2006. This stroke of luck is a gift from the Almighty, which we are squandering with a formula for profit sharing that is lop-sided in the interest of the concession holders, and against the people of Belize, including the land owners. The only investors in this sector who have had luck so far have paid for their investments many times over. With a favorable profit-sharing formula, supported by relatively high international market prices for crude�.of course these investments will float high.
The tourism industry already accounts for over 30% of the Belize economy�.they have enjoyed relative success�.because our country has taken on tourism development loans in the hundreds of millions to develop infrastructure specifically for the tourism product. These loans are being shouldered by the general population. At the same time they negotiated that their principal tax, the Hotel Tax, is funneled directly back into their industry via the BTB, to invest in marketing their product, to train and develop their employees, to administer their lobby and industry advocates. When you don't have to develop your own infrastructure, most of your marketing is covered by getting back your taxes�your human resource development is largely subsidized�..of course you will float high.
The commercial agriculture primary sector includes the citrus, banana, sugar, rice, corn, beans, poultry, beef, farmed-shrimps and papaya investments. Most of the inputs for these industries are exempt from taxes�.and most of the outputs from these industries are exempt or excepted from paying the GST consumption tax. At the same time, most of these industries enjoy monopoly status on the domestic market, which allows them to price very profitably. If you don't pay taxes, neither on inputs nor on outputs, as does the other sectors of the economy�.of course you will float high.
These three sectors are doing relatively well, because of their favorable arrangements in the economy. They carry less than their fair share of the burden, while the sectors that are not doing so well are the Quasimotos. The sharing of burden needs to be balanced, to be fair to all.
THE JOBS SCENARIO
Belize has an estimated 160,000 employable work force. With over 18% unemployment, Belize needs to create around 15,000 new jobs to ease unemployment to around 10%, over the next four years.
Crude petroleum, with all its export earnings, only provide for around 300 direct jobs�.other transient jobs are provided in surveying, road building, water hauling, etc�..however the full time jobs created are minimal. If we were to get another stroke of luck in this sector, with new finds, we cannot realistically expect another 300 direct jobs over the next four years.
Tourism investments are operating at under 50% capacity��hence they can double their business without another dollar invested�.with very minimal new jobs created in the aggregate. If they grow at 6% per annum, they will take another 5 years to fill the current carrying capacity. As tourism in Belize is still very seasonal, many of the available jobs are part-time, with many workers floating all over the country and paying rents, rather than settling in one place and investing in families and homes. Cruise tourism, which already accounts for a major and growing portion of tourism receipts, is very fragile�.and can be acutely affected by crime, natural disasters and other risks that can create acute shocks on our economy and jobs. We cannot realistically expect this sector to yield more than 2,000 new jobs over the next four years.
Commercial agriculture investments in the traditional sector of sugar, citrus and banana are trying to stay afloat�.even with new investments in sugar, this sector cannot be expected to deliver more than 300 new direct jobs over the next four years. Investments in rice, corn, beans and beef are mostly mechanized with very low labor requirements, and cannot be expected to yield another 500 new direct jobs over the next four years, even if they grow at 10% per annum. The labor intensive papaya and shrimp industries are not expected to ramp up investments in Belize, mostly due to the poor investment climate, and cannot be expected to yield another 300 direct new jobs over the next four years.
The financial services sector in banking, credit unions and insurance can be expected to consolidate for greater efficiency over the next four years, and should not be expected to yield any new jobs over the next four years.
If the history of ICT in Belize can be used to predict what will happen over the next four years, even if miracles happen, that sector should not be expected to yield more than 2000 direct new jobs over the next four years.
Hence the best performers in Belize, given the current formula for the economy, can at maximum provide only around 5,000 of the 15,000 new jobs required.
This article was written by Richard Harrison, who holds a Masters in Business Administration degree from Lancaster University, United Kingdom. This article has been widely circulated among public media and public and private sectors in Belize. Next week, we'll publish the second part.