Belize’s economy does not appear to be in ‘freefall’ state, and there is no definite indication of gloom and doom in the immediate future, but there are definite suggestions of a wobble that may turn into a topple if what could be a perfect storm continues to build. Like any tropical catastrophe, this storm would flourish in the right economic conditions, with deadly consequences.
Rating agency Standards & Poor’s has sounded a warning – not a blaring foghorn but more of a persistent buzz. Belize’s economic outlook has been reduced from positive to stable. The report uses phrases like ‘fiscal position weaker’ and stronger external vulnerabilities,’ and goes so far as to say that ‘Belize’s fiscal outlook has deteriorated.’ It doesn’t take a rocket scientist or economist to understand the factors which resulted in that downgrade.
At one time no government speech or comment, monologue or dialogue could be contemplated without a glowing reference to Petrocaribe – that Venezuelan treasure chest which was discovered in 2012 by the Barrow administration. Now you would have to go back into the archives to find any reference to Petrocaribe.
In the Reporter’s last interview with Financial Secretary Joseph Waight just pre-election, he told us that $300M in Petrocaribe had been spent or committed between 2012 and 2015. In November, only $40M was left. It is expected that the initiative will taper off sooner rather than later. But even as that money stops coming in, GOB will have to find the money to pay back that loan, because it was and is a loan.
GOB’s position has also weakened significantly because just before elections, it paid US$116.5M for its nationalization of BTL and BEL in 2009 and 2011 respectively. And that situation threatens to get worse. Within two months, an arbitration panel is expected to hand down its decision on the value of shares in BTL – to which GOB has already committed in writing to pay a significant portion immediately and the balance soon after. That balance could be in the region of $200M or even more.
Coupled with those financial and man-made factors, are crises in the making in some of Belize’s premier industries – banana, shrimp and sugar.
The shrimp industry has all but come to a complete stop as a result of a bacteria killing the shrimp, with only one farm open and producing. According to Minister of Agriculture Gaspar Vega, “there are some people who are starting some new ponds. We have a study where the farmers want to try and have both the shrimp with the tilapia because the tilapia faeces create an antibody for the viruses that affect the shrimp. But we have not been able to see the result yet.”
If any result is optimal, farms could resume operation after the first quarter of 2016. In 2014 Belize exported 5.1 million pounds of marine products…in 2015 only 1.8 million pounds. Currently that crisis has cost the nation in the region of $30M. And that does not factor in the cost in human resources, with an estimated layoff of 600 workers from farms.
In the banana industry, exports have taken an 11% cut as a direct result of the closing of the Mayan King farms which account for 20% of total banana production. Unlike the shrimp, this will be a more long-term hit because of the nature of the sanction against the owner and operator of Mayan King, John Zabaneh, which caused banana giant Fyffes to pull out. Close to 1000 labourers were laid off as a result of the closure.
The crisis in sugar is a result of low world market prices which have dictated a record low first payment to farmers in the north. Many farmers have complained that $35.33 per ton as a first payment is not enough, and will not be sufficient for the preparation of the fields. Government can do absolutely nothing to increase that price, but it can, and has, approved an increase in the price per pound of local sugar – a 25 cent increase. That will result in farmers getting an additional $3 on top of the first payment.
While that will to some small degree offset the low payment, it will certainly result in an increase in the cost of local basic commodities which use sugar on a bulk basis.
The prognosis for Belize’s economy is guarded, if not grim at this point.
General government debt is expected to reach 74% of GDP at the close of 2015…and 77% over the next two years. That’s up from 66% in 2014.
In its latest report Standards & Poor’s cites weak government institutions, weak agricultural exports and oil reserves near depletion. The agency warns that if government does not reduce fiscal deficits, there could be a further downgrade in the next 12 months.
Depending on whom you ask – from one side of the political spectrum or the other, Belize is either in the throes of economic glory or is a failed state. In his last interview with the media this past weekend Prime Minister Barrow revealed that the famed and much anticipated Christmas Cheer program would be a lesser version of its glorious self this year because of financial constraints. A doom and gloom situation may be too soon to contemplate, but the economic situation will be something to watch in the months ahead.