Effects of the global financial collapse on BelizePosted: 03/10/2008 - 11:47 AM
Author: Bill Lindo
BELIZE CITY, Thurs. Oct. 2nd 2008:— America’s largest thrift bank, Washington Mutual (WaMu), with US $ 182 billion in deposits, and its sixth largest commercial bank, Wachovia, with US $ 451 billion in deposits, collapsed last week, while the largest financial institution in Belgium/Denmark and Luxembourg, Fortis, collapsed. In Germany, its largest mortgage lender, Hypo Real Estate, failed and was taken over by the government. In Britain, Bradford & Bingley, that nation’s largest mortgage lender, collapsed, bringing to three the amount of banks to fail in Britain this year. Next door in Ireland, Glitnir, one of the three largest in Ireland, was seized by the government to prevent total collapse.
This is only the beginning, as many more banks all over the globe will collapse in the coming weeks and months. In the United States, the Fed has publically stated that 200 banks will fail shortly, and another 1,000 to 2,000 are at the edge.
Yesterday, the leading auto makers – Toyota, Ford, Nissan, Honda, Chrysler, all announced a collapse of sales for the month of September of some 30%, or an average of over 64% for the first three quarters of this year, 2008. This is crazy: no company can sustain a drop of 64% in sales and remain viable. This is all the American, European, Japanese, Korean, and Chinese auto companies who are reporting such huge collapses in sales. In all these countries, auto manufacturing has a multiplier effect of six to one. Collapse of auto production affects 20% of their economy.
Construction meanwhile in North America, Europe, and most of Asia, except China, has ground to a complete halt. Wal-Mart, the giant US retail firm, has predicted that its sales for the coming Christmas holidays will be off by some 20% to 35%. The collapse of the IMF/globalization system is now in its death throes.
Now what is the situation in Belize? According to government figures, imports for the first seven months of 2008 were $ 990.3 million, while exports, including crude oil, were $ 367.7 million, leaving a trade deficit of $ 622.6 million. How did we find the extra money to pay for the $ 622.6 million?
Tourists in the year 2007 gave us a gross of $ 290 million, but for the first seven months this is down 12.3%, to $ 252.3 million. Economists, however, expect the total reduction for the year 2008 will be some 18%. Remittances, or the money sent from our relatives abroad, were some $ 154.4 million for the first seven months of 2008. According to the Pew Institute of the United States, remittances to Mexico and Central America fell by 12% in August of this year, and are expected to fall some 21% by December 2008. I believe that these figures also apply to Belize, so that by the end of this year our gifts from relatives will be down to some $ 124.4 million.
Direct investments for agriculture, tourism, and infrastructure were some $ 108.4 million. The out-turn for 2008 will be down to about $ 78.7 million because of the global financial collapse. Loans of $ 107.5 million were obtained to pay for the imports of the first seven months we could not afford. Where will we get the foreign loans to pay for our imports?
Belize has about 113,000 men and women in its labor force. Tourism used to employ about 15,368 workers. The expected total by the end of December, 2008 will be about 9,989, or a loss of 5,379 workers. Construction had about 8,136 workers, but this will fall to about 3,000 workers as this sector has ground to a complete halt. Already the wholesale/retail/real estate sector that used to employ 22,374 workers has shed some 4,350 workers, as business has slowed.
The only bright spots are in agriculture for domestic use, as rice and corn production has dramatically increased; and aquaculture for the export market, where fish-farming of cobia and tilapia has recorded huge increases.
Unless new employments are found swiftly, unemployment will be over 40% (45,200 workers) by the end of December 2008, as construction, tourism, trading, and real estate suffer huge declines.
All bank lending in Europe, America, and Japan has dried up, because banks hoarded cash and refused to lend as they seek to avoid failure. The proposed swindle to create a bankers’ dictatorship (The Bailout Bill) by US Treasury Secretary, Henry Paulson, will only unleash a massive global hyper-inflation like what occurred to Germany in 1922 to 1923 when the rate of exchange went from $192 Reichsbank Marks = US $ 1.00 to 1 trillion Reichsbank Marks = $ 1.00 US dollar in 9 months. Already in Belize bank lending is almost completely at a stand-still, and will soon come to a halt as borrowers find it increasingly difficult to meet payments for automobiles, houses, etc., and banks hoard cash to avoid collapse. None can really conceive the horror when hyper-inflation breaks out in Belize now where employment is grinding to a halt.
The basic problem is our leaders’ mind-set, their defiant attitude, that Belize will be able to muddle through, that our relatives in North America will save us, that nothing will happen because the Bush administration knows what to do to save all of us. Unless we prepare now, regardless if the so called USA Bailout Bill passes or fail, the present financial system is finished – death. Nothing can revive it.
A new financial system will emerge, either based on the will of the people – where the power to create credit, (not a money system) is the exclusive province of the government, or we will have a bankers’ dictatorship (fascism) leading us into a new Dark Age. We, as humans, must and can choose. http://www.amandala.com.bz/index.php?id=7526