Business

Growing Belize’s exports of services and goods

Belize’s exports have traditionally been raw materials from agriculture, forest and fisheries, but with tourism now its fastest growing service sector, the quest to expand Belize’s export of services has become a team effort. To this end, representatives of the Customs, Fisheries, Transport and Civil Aviation joined participants from BELTRAIDE and Small Business Development Center (SBDC) in the first of a series of consultations hosted by the Directorate General for Foreign Trade at the Belize Best Western Biltmore Plaza Hotel in Belize City on Tuesday and Wednesday, March 14-15.

The United States has become Belize’s largest trading partner, but Belize is now looking to grow its trade with its next door neighbors: Mexico – population: 122.3 Million and Guatemala – population: 15.9 Million; and has targeted Mexico as its first priority, explained the Directorate’s acting director Andy Sutherland. The directorate also looked to borrow the strategies that have helped other countries in the region to expand their trade and so looked to Costa Rica, which grew by promoting sectors which capitalized on the duty-free access the U.S. provided under its Caribbean Basin Initiative. Costa Rica established Export Processing Zones, which could import all materials and equipment tax free, but these were primarily for textile and footwear industries, explained John Rivero of the Trade ministry.

Belize has followed this model establishing six free zones, of which only the Corozal Free zone and the Benque Free Zone are operational, but also granting EPZ status to all the aquaculture enterprises and shrimp farms, and the business process out-sourcing centers such as Ready Call and Transparent BPO, explained Lincoln Blake of the Ministry of Trade’s Investment Policy and Compliance Unit. Top priority areas for expansion include business process out-sourcing, processed meats such as sausages, agro-processing products like dehydrated fruits, plantain chips, peanuts, value-added products like bottled juices, wines, jams and jellies, and from fisheries: pre-fried breaded fillets, pre-cooked shrimp, conch, lobster and shrimp cocktail mixes, and fish roes.

The Fiscal Incentives Act grants EPZ companies all sorts of exemptions, including duty-free fuel; but Blake noted that the down-side is that exports from these companies may then come under scrutiny from the World Trade Organization for unfair subsidies, which could result in WTO sanctions and other penalties. Blake said both the Financial Incentives Act and the EPZ Act need to be reviewed and amended to become WTO compliant.
Belizean exports enjoy duty and tax exemptions under the CARICOM Single Market Economy (CSME), but Belize’s national priority sectors differ somewhat from CARICOM which has prioritized financial services and Information and Communications Technology (ICT), in comparison, Belize has prioritized fisheries and marine products, agriculture, agro-processing, tourism and professional services ahead of ICT and energy.

Tricia Gideon of the Directorate again compared Belize’s situation to the Costa Rica model, noting that Costa Rica’s exports of services grew from US5.5 Billion in 21011 to US$7.7 Billion in 2015. Costa Rica was able in 2008 to attract multi-nationals like Intel to set a design development and testing center for semi-conductors, the materials from which computer chips are made. Other ICT companies like Hewlett Packard, Microsoft, Oracle and Avionics followed suite, setting up research and development centers. Much as Belize might like to follow this example, Belize is critically short of people with ICT skills, to meet the demand of the communications companies like BTL and SMART, and the Central Information Technology Office (CITO), not to mention any new foreign investors. Already business processes out-sourcing companies like Transparent BPO have taken advantage of Belize’s more skilled workers who are high school graduates, fluent in English and computer literate. The University of Belize is producing ICT graduates, but not enough to meet demand; as many skilled ICT professionals are lured abroad by better salaries. The Costa Rican experience also showed that when the multi-nationals moved in, salaries went up and local companies found it hard to compete to get the best-qualified staff, since the foreign companies offered better salaries and benefits.

One of the drawbacks to attracting more Foreign Direct Investment is Belize’s antiquated bureaucracy for establishing a business, explains Patricia Rodriguez of the Belize Companies Registry. There are taxes and license fees to be collected and the process of obtaining all necessary documentation to set up a business can take days or weeks! The Registry is in the process of updating this by creating an e-government portal, an automated registry online where all the registration and payments will be done online; and hopefully this system will become operational before the end of the year.

Belize is a net importer of electrical energy from Mexico, but the energy sector hopes to eventually become a net exporter of electricity through linkages to the Central American grid, and the Public Utilities Commission is working with the utility companies to overcome the hurdles to make this happen
A review of Belize’s traditional agricultural exports: sugar, citrus, bananas, lumber showed each of these industries faces new challenges. Belize’s protected markets for sugar in Europe come to an end this year; so even as the sector welcomes the entry of a new company Santander to expand total production; under WTO rules, Belize’s sugar will no longer enjoy preferential quotas after 2017. World citrus prices are up, but the local industry is not able to take full advantage, as it is fighting the citrus greening disease. Aqua-culture products, such as farmed shrimp, which have been exported to the U.S., can fetch almost double the price on the European Union markets, but the product must meet more stringent health quality standards; and the industry must gear up accordingly, as some farms already have.

The Directorate will hold other consultations with the private sector and other stakeholders continuing into April, and will pool the input of all these consultations to draft the first comprehensive National Trade Policy, the end objective of the Trade Policy Framework, which the Directorate launched last July.

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