The Small Economy

Belize is roughly the same size as New Hampshire. Its population was about 191,000 in 1990. Some 25 percent of the population lived in Belize City and the surrounding area. Almost 25 percent lived in incorporated towns, among them the nation's capital, Belmopan, which had a population of about 4,000. The remaining half of the population was rural. Most rural residents lived in large villages in the north. Except for several towns, the central and southern parts of the country were sparsely inhabited. Among the 185 countries and territories of the World Bank World Atlas, only fifteen countries had smaller GNPs than that of Belize.

Small developing economies have certain characteristics that restrict their ability to achieve balanced, sustained economic growth. These constraints include limited supplies of land, labor, and domestic capital; high dependence on foreign capital; limited domestic markets; high unit costs of production for domestic markets; limited bargaining power; relatively high wages driven by preferential trade agreements; and high overhead costs of government services and administration. As a result of these constraints, economic growth in small countries is tied closely to the rate of export growth. Moreover, the open, export-oriented economies of small states tend to be less diverse than those of larger countries. The scarcity of labor and capital demands careful targeting of investments. Finally, limited domestic markets mean less potential for import-substitution industrialization. Hence, the economies of small countries are disproportionately exposed to external shocks that increase import costs or depress export prices for their primary commodities.

The general limitations placed on small economies characterize the situation in Belize, with one exception: Belize is endowed with abundant arable land. Its population density of 8.5 persons per square kilometer in 1991 was one of the lowest in the world. Indeed, Belize depends on immigrant labor to sustain agricultural production, in part because many Belizeans are reluctant to work for the low wages offered in the agricultural sector.