Who’s Next? Belizean Businesses in trouble

There is a worrying trend beginning to emerge in the business sector and this trend is the closing down of businesses which once thrived only a few years ago in what was once a growing economy.

Since Dean Barrow announced the recession in April 2009, Belizeans have been surprised almost weekly as businesses once fixtures on the Belize’s business scene have been quietly closing their doors and pulling down the shutters.

Last week the local business universe shifted on its axis when it was reported that two businesses within the Mena Group of Companies, Fresh Catch Belize Limited and The Wood Depot had been forced into receivership by First Caribbean Bank, and that the Belize Bank had appointed accountant Stanley Ermeav as their receiver for Belize Aggregates Limited.

Fresh Catch Belize has been exporting thousands of pounds of their product to Guatemala, Mexico and the United States since 2002. It is a multi-million dollar investment that employed 90 Belizeans. It is a pioneer and mainstay in the farm fish business, and other jobs will be lost in the ancillary and support industries such as transportation, and so on.


The bank has already reduced operations, drastically cut back on the work force, and is expected to try and maintain minimal operations while it seeks a buyer.

The Wood Depot and Belize Aggregates are both victims of the massive slowdown in the construction industry. The simple fact is that construction in Belize has been simply grinding to a halt. Equipment and construction suppliers have been going out of business “hand over fist” the past two years. They join the likes of Maestre’s windows business, and will probably be joined by Fabro’s Glass Shop.

Figures from the Statistical Institute of Belize show that importations into the Corozal Free Zone have fallen by nearly a half over the past two years, and that reflects the closure of many operations there, and the consequential loss of hundreds of job.

The ripple effect of those closures are being felt throughout the local district economy and analyses are concluding that unemployment in our northernmost district, as the sugar crop grinds to a halt, could be as high as 60%.

Reports are that this year’s sugar crop will be one of the worst ever. Severe processing problems at the start and the early onset of the rainy season coupled with a high TCTS (Tons Cane to Tons Sugar) ratio have all but doomed any chance of reaching earlier production targets. Cane farmers will be further outraged when they receive second payments next month that will be a third of the prices they received last year.

The Belize Tourism Board will soon report a huge downturn in overnight arrivals of a promising start that showed signs of recovery. This year’s tourism slow season has all but ground to a halt.

There are persistent reports that several large and veteran businesses are also teetering on the edge of receivership or outright foreclosure. The list is said to include to of Belize’s largest retailers and a standout restaurant, marina, tourism center.

Even bus lines owned and operated by politically connected cronies of the Barrow administration and who were brought in to take the place of what were thriving lines are now threatening to throw in the towel.

Not even the heretofore fast growing call center services industry has been affected by what will soon be Belize’s deepest and longest recession. Pinnacle became the first of these companies to shut up shop in Belize and that is now going to be joined by a recently opened telemarketing centre, Clear Call Center, who just this week suspended their operations indefinitely in Belize. The business located on Pickstock Street on the second floor of the old DFC building, is an outbound calling center specializing in telemarketing sales to mostly clients in the United States. It is believed that the firm was forced to suspend its operations after unresolved issues with its partners in the United States. The shut down means that 40 more Belizeans are out of a job.

The Barrow administration seems neither to have a clue as to what is happening nor what to do about it. Barrow’s famed “stimulus package” was announced well over a year ago, and instead of perking up economic activity is nose-diving. Economists, entrepreneurs and investors meanwhile are all mystified as the Government of Belize continues to pursue an aggressive tax collection policy to go with the recent 25% increase in the General Sales Tax.

If only they were as aggressive in trying to attract new investments to Belize one observer opined. If only they were as determined to support local businesses and help them find away to survive what is fast becoming an economic meltdown.

http://www.belizetimes.bz/2010/07/30/who%E2%80%99s-next-belizean-businesses-in-trouble/

What is Barrow’s Economic Policy?

Contributed

The news of the Mena Group of Companies going into receivership last week reverberated around the business community like aftershocks from a massive earthquake. Many were left wondering how businesses owned by this very savvy entrepreneurial family could fold, and who would be next! This is a bad sign for many reasons, but the really scary thing is that there are a lot of other large and medium-sized businesses that are on the verge of going into receivership or closing their doors. I guess the so-called stimulus package the Prime Minister trumpeted last year provided some boost, but for only a select few, like that architecture firm hogging up all the business.

I maintain my position that the only way we will get out of this economic crisis that we are faced with today is if this government fosters an environment whereby the private sector has the confidence to invest and grow their business. For some reason this is not the way it is in Belize these days! In his budget speech for 2010/2011 the Prime Minister stated – “We have long since considered so-called big government a moral and practical imperative in aid of the poor.” What the Prime Minister was trying to say is that the government should be the focal point of development in the country, not the private sector.

It is sad to say, but the reality is that government’s interference in the economy has only caused the situation to deteriorate in Belize. So I ask: how much involvement should this government have in rebuilding our once vibrant and diverse economy, seeing that they have neither the skills nor the experience to develop a plan that can take us forward? Before you answer this question, I will outline the different kinds of economic theories to see if the policies of this government are in line with any of them.

Types of Economic Theories
There are four main theories as regards the role of the government in the economy, including: Laissez-Faire Economics, Keynesian Economics, Supply-Side Economics, and Monetarism.

People who believe in Laissez-Faire Economics believe that the government should not get involved with anything that can affect an economy. The system includes the idea that the government should not regulate the marketplace, workforce, environment, etc., and allow the economy to move and evolve naturally.

Keynesian economics is at the other end of the spectrum and challenges Laissez-Faire Economics. Based on the ideas of John Maynard Keynes, this economic theory hinges on the belief that if people do not consume or invest enough into the marketplace, the government should step in and regulate the economy using fiscal policy. Fiscal policy involves either tax cuts or increased spending to combat recession. According to Keynes, if a government has to spend money to combat recession, the resulting deficit would not be bad because it was necessary.

Supply-side economics is an economic theory that is geared towards controlling the potentially deleterious effects of runaway inflation. It calls for tax and spending cuts, which would in turn give people the incentive to produce and increase the supply of goods available. The tax reductions would leave more money for the building of new factories and job growth, allowing, in theory, for the benefits to flow to the public.

Monetarism is the idea that the quantity of money in circulation is an important factor in how the government can regulate the economy. People who support this theory believe that the government needs to be able to ensure that the money supply grows in parallel with the economy at a constant rate, while at the same time controlling interest rates and other factors that would affect the economy.

What is GOB’s Role in the Economy?
The government’s main responsibility is to guide the overall pace of economic activity, in an attempt to maintain steady growth, high levels of employment and price stability. By adjusting spending and tax rates (fiscal policy) or managing the money supply and controlling the use of credit (monetary policy) it can slow down or speed up the economy’s rate of growth — in the process, affecting the level of prices and employment. Taxes, inflation, and interest rates are also controlled by government decisions and actions, and play a substantial role in Belizeans’ ability to live a decent and respectable lifestyle.

When in opposition, the UDP constantly criticized the economic policies of the then government. At least the PUP government had an economic policy and it showed with the expansion of all the major sectors of the economy from 1998 to 2008. Looking back at the last two years, one would find it very difficult to explain the economic policy of the present government. Truth be told, this UDP government does not have a clear and focused plan that will improve the lives of the Belizean people. I am proud to say that one of the greatest accomplishments of the last PUP administration was the tremendous diversification of the economy. In fact, Dr. Carla Barnett in one of her speeches, I think it was for Tourism Week at the Princess Hotel, trumpeted this great achievement by the then PUP government.

The Future Looks Real Bleak
In his book, “How Capitalism Will Save Us”, Steve Forbes states that “bad economic policy can cause economic upheaval far more brutal than any disruption caused by the normal operation of markets.” I agree with Mr. Forbes’ statement! However, I would also like to add that government’s interference in an economy without a clear and focused economic policy can be worse than a bad policy. This is what we are faced with today, a government that is on the deck of a rudderless ship and heading for a massive iceberg. I hope the Prime Minister’s economic advisors are preparing for the next major dip in the US economy. I beg of you, decision makers in the government, for the people’s sake, especially the poor and indigent, please get your sh_t together and please do not say that we are immune from the exogenous shocks, like the great recession! Two and a half years have passed and it is high time you provide some solutions, Mr. Prime Minister. The clock is ticking.

http://www.belizetimes.bz/2010/08/06/what-is-barrow%E2%80%99s-economic-policy/

For those readers who are not familiar with the role certain publications play - please note that the above cited publication is the voice of the PUP, currently the opposition party.
The job of opposition (regardless of which party it is) when not in office is to make the other guy look bad & stir trouble. Sometimes stirring trouble can be done by focusing on real problems, other times by inventing them or greatly slanting the truth.

I seems like in a lot of countries (Belize included) the government is held interchangeably by one of the two majority political parties. One of them claims to represent "the people" when working in the interest of the wealthy oligarchy while the other claims to represent "the people" when working in the interest of the wealthy oligarchy.

Moby - methinks you've got it right.

And a variation on the theme is in the single-party countries where party officials are the oligarchy but claim to be the people.

Exactly right Diane. Sadly they hurt everyone Belizean with the muck slinging.

Under our system of government the "loyal opposition" is supposed to act as watch dog as we are short on checks and balances. Unfortunately, on a national scale, they bark at everything so it is difficult to be know when they should be taken seriously in their legitimate watch dog role. Unfortunately, here in San Pedro, the opposition does not even whimper even though the fox is in the hen house. Kindergarten art contest will get headlines while meaningful issues are barely addressed.

The article is indeed from the PUP-newspaper, the Belize Times, but the problem is real IMO - Mike, this is no kindergarten art contest but a meaningful issue! I don't see a clear plan in progress from our Government and who has noticed the benefits from our PM's stimulus package? A good plan, that is noticeable for us Belizeans to address the economic downturn would not be a bad idea, considering all the companies that are going into receivership - and more than half of them don't even reach the news!

On the other hand, I do think that the BTB is slowly improving under the UDP Government, they only have not realized yet that their Marketing company BVK is terribly expensive and does not perform, but they will get there - I am starting to get confidence in them.

On a different note, on this message board we do also quote the UDP newspaper the Guardian - for instance in the thread about the Belize Bank issue. Just anything that makes interesting discussion!

I read all your posts and am happy to get the info. This is a very real issue and everything you have posted has been only concerning real issues. My jab was at our local papers who do not report what is going on in the country and everyone here needs know. I did not intend to belittle this important topic or the BT for that matter. I must get all my info online and do appreciate your efforts and hope you continue.
I will say that the party newspapers detract from their messages by all the political slavering they do and obstruct the truth by tainting it with slurs. It is an inflammatory type of politics that discourages healthy dialog and promotes name calling and hard feelings and the resultant retributions and ultimately bad government.
The Gladden Plan is the only thing I have seen that even resembles a national plan and it is a good one. The industrial development implications will be discussed live in more detail on Spotlight on Belize (PlusTV) 2-4pm Saturday, thats in Belmopan, a week latter in San Pedro.. The Gladden Plan is a private sector initiative at this point.

I agree when you talk about the local newspapers. As to the party newspapers, many see through their slander; I can't imagine that people are not getting sick and tired from that. I am looking forward on seeing the discussion on //ambergriscaye.com/forum/ubbthreads.php/topics/385235/.