How to Stabilize and Grow this Poisoned Economy
The People’s United Party (PUP) government of 1998-2003 went on a spending spree and ran the Belize economic ship into the reef, such that by 2004, internal and external forces pushed them into taking all kinds of austerity measures to take the ship off the reef.
The discovery of crude oil in 2005 was their saving grace….the price of crude was around US$60/barrel and increased subsequently towards US$100/barrel…. by 2007-8 they were able to launch SuperBond I to consolidate and refinance the nation’s expensive commercial debts….which brought some relief; but, by their own admission, the economy would continue to be tight…and a full recovery required much more fixing. They lost power in 2008.
The United Democratic Party (UDP) government of 2008-12 lived cautiously under the austerity inherited from the PUP…twisting and turning, trying to work the economy out of the mess without incurring much more debts….and almost lost government.
This near loss changed the UDP’s mind it seems….and they became reckless and went on a similar spending spree, ramming the Belize economic ship into the reef again. They had successfully renegotiated the SuperBond II and restarted the PetroCaribe agreement with Venezuela….which could have been their saving grace. They squandered it on cosmetics and corruption….but they managed to hold on to an unprecedented third term in government…in one of the most expensive re-election bid Belize has ever seen.
There are two things common about these two government-led initiatives….(1) their spending spree was grossly on things that do not generate an early return on investment, the PUP was sub-standard housing and the UDP was cement streets…both of which depend heavily on imported materials, generating only temporary project employment. None of them invested, in any significant way, in new bonafide industries or improved the laws and policies to facilitate a free and competitive productive sector….which is what pays bills at the end of the day (2) they were both poisoned with massive corruption, with gains for only a few politicians and their cronies.
The so-called growth of the “services sector”…..primarily driven by offshore and real estate services focused on facilitating the movement of very dubious assets and liabilities…is associated with those who are major players in the fragile domestic financial system. It brings very little to no benefits for ordinary Belizeans….but the risks of their activities will be felt and paid for by every single Belizean man, woman and child.
Belize needs a balanced GENUINE economy…..growing its productive sector, while growing the profitability and value of its tourism (not necessarily the volume and turnover, which wears down the properties and natural assets too quickly). Growth of tourism and bonafide services industries need not come at the expense of other productive sectors….there are too many synergies to exploit. We should not be cutting off our nose to spite our face.
The development of Belizeans…their education, health and culture for competitive productive capacity and capability, for continuously improved standard of living…with policies that make them the masters of their destiny in our justly rich and increasingly independent country….should be the supreme ambition that drives decisions and actions of our governments.
With the price of crude closer to US$30/barrel lately….and projected to stagnate or decline further…..not even a major oil find in Belize will save the current situation.
SO….what needs to be done?
I. Government of Belize must sign on to the United Nations Convention Against Corruption and officially request UN assistance with implementation of an International Commission Against Impunity in Belize (ICIB)
II. Belize must fulfill all its obligations under the Caribbean Financial Action Task Force agreements, and move beyond to create an internationally dynamic, diversified, compliant and competitive financial services platform for Belize. We must move from the grey and dark areas of business, into the light.
III. Belize offshore sector must dump all dubious accounts they represent and focus on building a highly credible offshore services sector representing genuine clients. If they cannot compete in this under internationally acceptable laws and standards, then these services should be shut down by Belize law over a reasonable time period. Our hands, hearts and minds must be clean, so we can look into anyone’s eyes and do genuine business with the rest of the legitimate world.
IV. Belize must take immediate action through a moratorium on all foreclosures and receiverships, to stop the dumping of assets, which is flooding the real estate market and destroying hard earned collateral value and potential for reinvestment and reconstruction of Belizean lives. Selling out for cheap to foreign sharks is certainly not in the best interest of Belizean men, women and children. In all cases, where possible, the owners of these distressed assets should be facilitated with refinancing of their debt obligations within reason….this means at interest rates closer to 6.25% and terms of 10 to 25 years, depending on the ability and willingness to pay. This should have been done in reaction to the 2008 world financial crisis, but the hard hearts of our financial gurus and regulators preferred negligence. BUT, it is better late than never….because the continuing of this slaughter of Belizean lives and value is grossly and absurdly unjust.
V. Belize must undertake wholesale fiscal and justice system overhaul to become much more attractive to bonafide domestic and foreign investors across a wide range of productive industry sectors and sub-sectors. Elsewhere I have specified the fiscal formula adjustments that need to be made. All the laws of Belize must be reviewed and revised to ensure they are consistent with the letter and spirit of the Constitution of Belize. We must be a country of just laws, appropriately enforced with reason.
VI. Belize will then be able to go to international markets through multilateral and bilateral channels to negotiate Debt-for-Education and Debt-for-Nature swaps, to drastically move the national debt towards sustainable levels in reasonable time….and to invest heavily in our human and natural resources sustainable development. We must develop Belize in the best interest of ALL Belizeans, first and foremost….the country must be abundantly lean and green.
VII. Domestic investors, no longer bound by discretionary, politically-driven, short-term development concessions and so-called “incentives”, will invest deeper and faster and move much more rapidly towards meeting the needs of domestic, regional and export markets. Many more bonafide international investors will flock to our shores, as long as our macro-economy is stable and our laws are just and fairly dispensed. The risk of non-renewal of discretionary concessions and incentives is actually a disincentive for investors to plan and act for the long term. Free men in Belize must be able to earn a decent standard of living, according to their merit, ability and integrity…as per our National Constitution.