The state of our foreign exchange reserves is always a big concern for Belize because, primarily, it supports our dollar which, since 1976, has been worth 50 US cents. Most of us know that the value of our dollar has been eroding, because the cost of goods from abroad keeps going up. If our foreign exchange reserves fall too low, our dollar would be directly devalued, and that would mean that our imports would cost even more.
One yardstick we look to, to feel secure in our economic position, is the presence of sufficient foreign exchange reserves to cover our regular imports for three months. According to the website globaleconomy.com, in 2015 our foreign reserves was at its highest ever, at about US$540 million, but in June 2019 our foreign reserves had fallen to US$275 million, and in April 2020, just when we really began feeling the impact of the pandemic, it was at about US$270 million.
We haven’t seen any reports showing where our reserves stood at the end of July 2020, but we really don’t need the figures to tell us that things are tight, because the tone of urgency in the government’s earlier resolve to open the Philip Goldson International Airport to tourists on August 15 was telling. Our authorities were clutching on to the August 15 opening, even though the country that traditionally sends us the most tourists had become riddled with the disease. If more of the foreign exchange our country earned stayed at home, we wouldn’t be so desperate.
The foreign-owned hotels do their bookings abroad, and most of the foreign exchange their businesses earn never comes to our shores. There are foreign-owned businesses in other sectors, some of them with EPZ status, that also repatriate the foreign exchange they earn.
Peter Gibbon, Sam Jones, and Lotte Thomsen, in a 2008 report on companies with Export Processing Zone (EPZ) status that they did for the Royal Danish Ministry of Foreign Affairs, said that one of the objectives of a country that issues EPZ status to companies is to improve hard currency earnings (foreign exchange). The report said, “this can occur principally from increased (net) exports but may also come from the initial FDI (foreign direct investment) injection where this goes to domestic actors (e.g., construction, purchase of equipment).”
The report said that other objectives of EPZs are export diversification to reduce dependency on primary commodities, employment creation, increased technology and skills transfer, and possibly increased use of local supplies to satisfy specific needs of the EPZ.
These foreign-owned businesses do provide benefits to the country, but when it comes to the critical foreign exchange earned from domestic exports and hotel bookings, they are not with us. Our country is struggling, and what a blessing it would have been if the foreigners who own businesses here didn’t keep most of the foreign exchange they earn in our country, outside of our country. We should call for a “division” to find out which companies in Belize help our foreign exchange position the most, so that we could determine which ones deserve our goodwill.
Our governments are too eager to promote foreign-owned businesses. In some cases it is shortsightedness, or lack of belief in our own, or laziness. In some cases it is corruption — the deals they make are about them, not us.
Our governments prefer to give plums to foreign investors, rather than give sufficient support to our own. This is not the right approach to develop our country. Our entrepreneurs would do better if our governments were more energetic about making available the necessary financial resources at rates that allow them to flourish, and went the extra yard to help them to acquire whatever skills they might lack.
Foreigners should be invited to participate in businesses that are high risk, or that call for expertise only they possess. As a number of business experts have advised, most businesses in Belize should be controlled by born or naturalized Belizeans, as sole proprietorships, or in partnerships in which our people hold the majority shares, so that most of the benefits stay here, particularly the highly prized foreign exchange.
There is an increasing foreign exchange crunch in Belize and it will not get better in a hurry. We have to survive and thrive, and if we will we must become a lot more urgent about our local economy.
On Friday last the government presented an Economic Recovery Strategy, and while it has many strong points it could have directed more focus to helping us gain more control of the foreign exchange our country earns. The plan needed more emphasis on the development of locally owned businesses and local production.
Back in March, when no cases of the disease had been recorded in our country, Mr. Bill Lindo, a highly knowledgeable Belizean engineer/economist/entrepreneur, offered advice to the government on the way forward in an essay published in the Amandala. The authorities did not pay enough attention to his advice.
About 2,000 workers had already been laid off, and Mr. Lindo said the government should hire them at $250 per week for 6 months, some to supervise and some to provide physical labor in the construction of two well-equipped hospitals.
Mr. Lindo suggested that we set up small factories that would take four to six months to complete, and that after the factories were established we should employ the thousands of persons who would lose their jobs because of COVID-19 to make real fruit juices, make surgical masks, make electric wire and plastic goods, and produce simple steel for construction.
Mr. Lindo noted that we import “about $ 20 million worth of ‘unhealthy’ cooking oil/fats every year”, which he said could be replaced with healthy local oils, like coconut oil, an effort which he said would not only save us considerable foreign exchange but would also provide employment for our people.
He advised that the devastating COVID-19 would “most likely stay for perhaps a year or more”, and to survive and thrive we need “a new paradigm”, one where our political leaders throw “out the axioms of the neoliberal model with its emphasis on monetarist, i.e. speculators’, profits” and embrace a Belize where we not only produce “what we eat, but what we wear, and how we are housed.”
In these critical times the way forward is clear. We need more Belizean-owned businesses so that we keep more of our foreign exchange earnings at home, and we need to produce more.Amandala