REPORT #23 1998

Produced by the Belize Development Trust
Prior to 1994, the world was in a period of boom with the idea of the Global Village, an expanding market and shift of foreign companies to cheap labor countries. Mainly in Asia. Not counting the crookedness of such regimes, similar to Belize, with a one state police system, military arm and centralized political power with ties to the money crowd. But after 1994, overcapacity reared its head and falling demand, made raw commodity prices start falling also. Nowadays, the commodities have reached the lowest prices in some areas, for over a hundred years.

The trouble was, the incoming profits from the boom years was being put into local real estate. This in turn sent prices spiraling upward. More profits for the aristocrats of the military and political systems involved, particularly in Asia. But overcapacity cured that, and real estate prices were the fore warning indicator that the boom was over. Borrowing more foreign exchange money, by those people in power, who were getting a piece of the boom pie to invest in what were boom industries, created the overcapacity. The whole edifice started to crumble when world wide demand was saturated and then overfilled. Loans and banks and governments defaulted. They were producing too much and it had no market.

Hong Kong solved the problem by allowing it's domestic economy to deflate. Prices plummeted until the overcapacity was dumped and the playing field cleared again, for another round. Stuff was auctioned off for next to nothing. Japan for instance has cut interest rates down and down and down, until they are only 1/4 %, trying to get the economy going again. The other alternative is to devalue your currency. This brings economic wreckage to the savings of a population and disaster to huge population segments, mostly because the leaders in centralized political systems were on a wild ride of boom and didn't see the bust to follow!

International market forces recognized that the Asian economies were artificially propped up in an attempt to let deflation take place slowly. It didn't work. Global Speculators saw the discrepancies and went to work and despite Central Banks, politicians protecting themselves from the consequences of poor decision making, market forces made the currencies crash and economies reach a fair market value once again. Banks defaulted, governments passed away and the episode is still rippling around the world. Right now Australia, New Zealand and Canada are feeling the adjustment effects and doing their best to stave off the equalization. The quick spread of devaluation is going around the world. Europe and probably the USA are not too far down the line. Excess capacity is not so acute in the developed world countries. Things like computer production are feeling it, but new technology is smoothing things out. New products. Commodity prices on a REAL basis are the lowest for a whole century. Depending on the commodity, they are down between 30% and 80%. Russia defaulted because of low raw commodity prices and world excess capacity. This is what globalization is bringing. To the benefit of the major consuming countries.

Japan is still a big problem. They have some excellent policies that enforce savings on the population. So they have excess savings and no place to invest it. They gave tax advantages to those that saved, whereas in Belize we tax people who save. Japan's excess savings is being exported to the rest of the world, bringing down prices even more.

If the USA, Japan and Europe do not start to buy the excess devalued production of inventories to clear the decks, so to speak, we are going to see a continuing deflation in the world. Lower interest rates in the USA. Governments around the world are not going to be able to stop a recession unless the major consumers can start reflation. This is going to effect stocks eventually, because right now, stocks are the equity investment of choice. Most of the world's equity is in the stock market.

Belize is in good shape, except for the tendency for the political parties to finance new development and infra structure with increased foreign exchange borrowing. Savings, the cut back in government services by going to six district governments with autonomy in their districts and responsibility for local roads and infra structure in a restructured government system, such as a Federation, will cut the expense of governing and applications, and create a boom in local road and building construction compaines tending to contract bids in their own districts, creating employment and new companies. Self reliance has to become the new watchword of Belize and the districts have to receive parity for limited financial resources from the national coffers, in order to subtly influence the dispersal of population concentrations around the country as a whole. This makes sure the country can also weather another Hurricane strike disaster.

Emphasis on small niche export markets, and processing and packaging technology is the most important item here. We can get this knowledge from Mexico, which is tops in this field. Mostly, we are in the position of catering to the growing immigration of Caribbean and Latin populations in the USA and Canada and their food tastes. These markets are growing exponentially and require tropical fruits and foods. Marketing specialization and seeking out the buyers in these latin and Caribbean populations in North America is probably the name of the game for Belize. That, and stop borrowing foreign exchange, encourage savings, both in government and the population and pay off the national debt. The big target for this, is political restructuring to get better cost efficiencies and management.

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