THE MAIN INFLUENCES on the economy of Belize have been the country's small size and its long history as a colony. As occurred elsewhere in the Caribbean, over the centuries the colony's administrators precariously based its economy on a succession of single raw commodities--logwood in the 1600s and 1700s, mahogany in the 1800s, and then sugar in the mid-1900s. During the 1980s, the dangers of a single-crop economy became brutal realities for the many Caribbean countries that had grown heavily dependent on sugar exports. Sugar prices collapsed, and protectionist trade practices by industrialized countries exacerbated the producers' problem. Belize's experience was no exception. However, the commodity crisis of the 1980s led to economic reform in Belize aimed at diversification and taking the economy definitively beyond the colonial period.
Small economies, such as Belize's, tend to be less diverse and more dependent on exports than larger economies, a situation that makes them volatile and highly vulnerable to outside forces. A small work force and limited capital, dependence on foreign markets and investment funds, and high overhead costs are all factors that have hindered Belize's economic growth. Despite these problems, the economy has steadily improved since independence was achieved in 1981. The British legacy of stable representative government, respect for education, a relatively even distribution of income, and a comparatively high standard of living has attracted increasing amounts of foreign investment. In 1991 the economy was more diverse than ever, the export sector was strong, a growing tourism industry promised increased revenues, and the government had avoided dangerous levels of foreign debt. The outlook for Belize's economy for the remainder of the 1990s seemed bright.
Showing posts with label The Economy. Show all posts
Showing posts with label The Economy. Show all posts
Saturday, January 12, 2008
GROWTH AND STRUCTURE OF THE ECONOMY
The Colonial Economy
British Honduras officially became a British colony in 1862, after more than two centuries of vague status. Early Spanish settlers based the colonial economy entirely on the export of logwood. British buccaneers first settled in the early 1600s. Giving up their practice of capturing Spanish cargo ships laden with logwood, the erstwhile pirates began to cut the timber themselves. Logwood, a source of black dye, was in great demand in Europe at the time. However, by the end of the eighteenth century, dyes derived from logwood had been largely replaced by synthetic dyes. The decline of the logwood industry during the 1760s and the 1770s was accompanied by fruitless efforts to compensate for lost value by increasing the rate of production and hence the rate of exports. Once they realized the inevitability of failure, the settlers began exploiting other forest products, mainly chicle and mahogany. The latter wood became the mainstay of the economy for most of the next two centuries.
Although the logging of mahogany greatly enriched the colonial economy, particularly during the 1800s, it also seriously disrupted the indigenous Mayan culture. As the British pushed into the interior of the country, there were numerous violent confrontations with the Maya.
In the absence of a forestry policy, the country's mahogany reserves gradually ran low. This depletion, among other factors, led to the decline of the industry in the 1950s. By 1991 forestry accounted for less than 3 percent of gross domestic product, and mahogany trees were so rare in Belize that one of them, in the center of Belize City, was labeled as if it were a museum piece.
Sugar succeeded logwood and mahogany as the third main staple of the colonial economy. The Maya had cultivated sugar since the mid-1800s, but the modern history of British Honduran sugar production did not begin until 1937, when a small factory was opened at Pembroke Hall (later known as Libertad) in northern Belize.
In 1964 the small mill at Libertad was bought by the large British sugar conglomerate of Tate and Lyle. This event accompanied the beginning of nearly twenty years of great profit. Foreign investment, boosted production and productivity, and record prices fueled the growth of the sugar agro-industry. Sugar production increased from 17,000 tons in 1959 to 40,000 tons in 1963, to 70,170 tons in 1973, and to 114,000 tons in 1983. Production decreased rapidly thereafter to 81,700 tons in 1988 and underwent a mild recovery in 1990, when it reached 100,000 tons. The result of drought, smut diseases, froghopper (spittlebug) infestation, occasional labor shortages, and fluctuating demands and prices, the swings in sugar production created severe dislocations in the Belizean economy.
Belize's status as a former British colony has provided benefits that have translated directly or indirectly into economic advantages. As in many of its former colonies, Britain left behind a well-established two-party political system based on the British model. Belize's democratic tradition made postcolonial stability more likely and appealed to many foreign investors.
The British also left behind a network of education institutions that formed the basis for the country's 93-percent nominal literacy rate and high level of enrollment in secondary schools. As the 1990s began, most of the schools at the primary level were church-administered. Education was compulsory until age fourteen. Health care, too, was better than what was available most in other Central American countries. Belize had a higher daily calorie intake per capita, longer life expectancy, and higher literacy rates than El Salvador, Honduras, or Nicaragua, with quality-of-life statistics comparable to those of Costa Rica, Central America's most prosperous state, or the Bahamas, whose gross national product per capita was seven times larger. Another regionally distinctive feature of Belize was its relatively even distribution of income. All these factors have contributed significantly to social stability and economic productivity.
British Honduras officially became a British colony in 1862, after more than two centuries of vague status. Early Spanish settlers based the colonial economy entirely on the export of logwood. British buccaneers first settled in the early 1600s. Giving up their practice of capturing Spanish cargo ships laden with logwood, the erstwhile pirates began to cut the timber themselves. Logwood, a source of black dye, was in great demand in Europe at the time. However, by the end of the eighteenth century, dyes derived from logwood had been largely replaced by synthetic dyes. The decline of the logwood industry during the 1760s and the 1770s was accompanied by fruitless efforts to compensate for lost value by increasing the rate of production and hence the rate of exports. Once they realized the inevitability of failure, the settlers began exploiting other forest products, mainly chicle and mahogany. The latter wood became the mainstay of the economy for most of the next two centuries.
Although the logging of mahogany greatly enriched the colonial economy, particularly during the 1800s, it also seriously disrupted the indigenous Mayan culture. As the British pushed into the interior of the country, there were numerous violent confrontations with the Maya.
In the absence of a forestry policy, the country's mahogany reserves gradually ran low. This depletion, among other factors, led to the decline of the industry in the 1950s. By 1991 forestry accounted for less than 3 percent of gross domestic product, and mahogany trees were so rare in Belize that one of them, in the center of Belize City, was labeled as if it were a museum piece.
Sugar succeeded logwood and mahogany as the third main staple of the colonial economy. The Maya had cultivated sugar since the mid-1800s, but the modern history of British Honduran sugar production did not begin until 1937, when a small factory was opened at Pembroke Hall (later known as Libertad) in northern Belize.
In 1964 the small mill at Libertad was bought by the large British sugar conglomerate of Tate and Lyle. This event accompanied the beginning of nearly twenty years of great profit. Foreign investment, boosted production and productivity, and record prices fueled the growth of the sugar agro-industry. Sugar production increased from 17,000 tons in 1959 to 40,000 tons in 1963, to 70,170 tons in 1973, and to 114,000 tons in 1983. Production decreased rapidly thereafter to 81,700 tons in 1988 and underwent a mild recovery in 1990, when it reached 100,000 tons. The result of drought, smut diseases, froghopper (spittlebug) infestation, occasional labor shortages, and fluctuating demands and prices, the swings in sugar production created severe dislocations in the Belizean economy.
Belize's status as a former British colony has provided benefits that have translated directly or indirectly into economic advantages. As in many of its former colonies, Britain left behind a well-established two-party political system based on the British model. Belize's democratic tradition made postcolonial stability more likely and appealed to many foreign investors.
The British also left behind a network of education institutions that formed the basis for the country's 93-percent nominal literacy rate and high level of enrollment in secondary schools. As the 1990s began, most of the schools at the primary level were church-administered. Education was compulsory until age fourteen. Health care, too, was better than what was available most in other Central American countries. Belize had a higher daily calorie intake per capita, longer life expectancy, and higher literacy rates than El Salvador, Honduras, or Nicaragua, with quality-of-life statistics comparable to those of Costa Rica, Central America's most prosperous state, or the Bahamas, whose gross national product per capita was seven times larger. Another regionally distinctive feature of Belize was its relatively even distribution of income. All these factors have contributed significantly to social stability and economic productivity.
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.
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.
Economic History
Culturally and economically Belize is more closely linked to the Caribbean than to its Central American neighbors. However, Belize's participation in Caribbean economic integration has not come about easily.
During the 1950s, British Honduras rejected repeated attempts by Britain to incorporate the colony into the proposed West Indies Federation. There were several reasons behind this resistance. One was the fear of being locked into a Caribbean arrangement at the expense of ties with the rest of Central America. Moreover, because wages in British Honduras were higher than in most other British Caribbean territories, the British Hondurans feared that participation in the West Indies Federation might trigger an influx of immigrants from other member states. Indeed, Britain was planning on such on influx.
In 1968, British Honduras began to see the merits of integration with the British Caribbean when the country's ongoing territorial dispute with Guatemala led to rejection of its application to join the Central American Common Market. In 1971 British Honduras joined the Caribbean Free Trade Association (Carifta), which in 1973 became the Caribbean Community and Common Market.
During the Great Depression of the 1930s, British grants were necessary to keep British Honduras economically viable. However, economic ties with Britain gradually were replaced by a growing trade relationship with the United States. This economic link to the United States was seriously weakened by the devaluation of the British pound sterling in September 1949. Respecting the wishes of the middle class, labor, and the colonial legislature, the governor at first refused to devalue the British Honduras dollar and instead kept it at par with the United States dollar. However, three months later, bowing to pressure from Britain and powerful economic interests in British Honduras, the governor overrode the Legislative Council and devalued the colony's currency (see The Genesis of Modern Politics, 1931-54. Imports from the United States then decreased sharply, and imports from Britain rose until they amounted to 35 percent of the total during 1952-54, exceeding the country's imports from the United States. Living costs increased dramatically as a result of the devaluation, and the colony was thrown into turmoil. Anti-British sentiment was widespread and fueled resistance to the British-sponsored West Indies Federation. Imports from the United States did not recover until the late 1950s.
During the 1960s and 1970s, the colony's economy grew rapidly, thanks in large part to the extraordinary success of the sugar sector. During the 1970s, sugar accounted for almost 70 percent of all export revenues. As a result of this high level of dependency, the Belizean economy, although prosperous, entered the 1980s insufficiently diversified and highly susceptible to external shocks.
During the 1950s, British Honduras rejected repeated attempts by Britain to incorporate the colony into the proposed West Indies Federation. There were several reasons behind this resistance. One was the fear of being locked into a Caribbean arrangement at the expense of ties with the rest of Central America. Moreover, because wages in British Honduras were higher than in most other British Caribbean territories, the British Hondurans feared that participation in the West Indies Federation might trigger an influx of immigrants from other member states. Indeed, Britain was planning on such on influx.
In 1968, British Honduras began to see the merits of integration with the British Caribbean when the country's ongoing territorial dispute with Guatemala led to rejection of its application to join the Central American Common Market. In 1971 British Honduras joined the Caribbean Free Trade Association (Carifta), which in 1973 became the Caribbean Community and Common Market.
During the Great Depression of the 1930s, British grants were necessary to keep British Honduras economically viable. However, economic ties with Britain gradually were replaced by a growing trade relationship with the United States. This economic link to the United States was seriously weakened by the devaluation of the British pound sterling in September 1949. Respecting the wishes of the middle class, labor, and the colonial legislature, the governor at first refused to devalue the British Honduras dollar and instead kept it at par with the United States dollar. However, three months later, bowing to pressure from Britain and powerful economic interests in British Honduras, the governor overrode the Legislative Council and devalued the colony's currency (see The Genesis of Modern Politics, 1931-54. Imports from the United States then decreased sharply, and imports from Britain rose until they amounted to 35 percent of the total during 1952-54, exceeding the country's imports from the United States. Living costs increased dramatically as a result of the devaluation, and the colony was thrown into turmoil. Anti-British sentiment was widespread and fueled resistance to the British-sponsored West Indies Federation. Imports from the United States did not recover until the late 1950s.
During the 1960s and 1970s, the colony's economy grew rapidly, thanks in large part to the extraordinary success of the sugar sector. During the 1970s, sugar accounted for almost 70 percent of all export revenues. As a result of this high level of dependency, the Belizean economy, although prosperous, entered the 1980s insufficiently diversified and highly susceptible to external shocks.
Growth during 1980-85
In 1980 the average world price of raw sugar had been US$0.13 per kilogram. By 1984, that price had fallen to US$0.02. As sugar prices collapsed, Belize's terms of trade deteriorated, and from 1980 to 1985 GDP grew an average of only 1.2 percent per year. The crisis was compounded in 1982 when, for the first time since 1974, the United States government implemented a sugar quota system. The result was a reduction in total sugar exports from about 5 million tons in 1980-81 to about 1 million tons by 1987.
Also contributing to the worsening of Belize's balance of payments was the sudden collapse of the country's reexport business. As a reexporter, Belize imports goods and then resells them in neighboring countries (primarily Mexico), or merely transports them, collecting fees for port and road facilities. The arrangement is attractive because of Belize's relatively low shipping costs. However, Mexico's economic payment crisis of 1982, which reduced Mexican imports, put a dent in Belize's foreignexchange earnings as well. Reexports had amounted to 37 percent of export earnings in 1981 but fell to 16 percent in 1983, contributing to a 35-percent drop in total export earnings during that period.
The economic crisis of the early 1980s brought with it escalating trade deficits. In 1981 Belize's net international reserves had stood at US$1.1 million. By the end of 1984, the country had a trade deficit of US$13.6 million.
The economic crisis was a factor in the defeat of the People's United Party government in 1984; it also led to implementation of a standby arrangement with the International Monetary Fund in December of that year. The IMF agreement marked the beginning of the country's adjustment process. The agreement provided access to 7.1 million units of special drawing rights over a sixteen-month period and called for a reduction of the publicsector deficit and a tightening of the country's credit policy by means of higher reserve requirements and higher interest rates. Credit had expanded at an annual rate of 15 percent from 1981 to 1984 because of escalating government debt.
A small open economy is dependent on developments in external markets and generally experiences few domestically generated inflationary pressures. Belize's currency, the Belizean dollar, had been pegged to the United States dollar at a rate of US$1=Bz$2 since 1976. Belize's rate of inflation, therefore, was likewise pegged to that of its major trading partner. Between 1980 and 1983, consumer prices increased by 25 percent in Belize. During the same period, they went up 21 percent in the United States. This modest inflation contrasted sharply with the hyperinflation that pushed prices up by more than 1,000 percent per year in many other countries in the region. Yet, the 4-percent difference between United States and Belizean inflation during those years resulted in a real effective exchange-rate appreciation and, consequently, a worsening of Belize's relative position in the export sector. This trend was later reversed when the Belizean inflation rate fell slightly below that of the United States.
Also contributing to the worsening of Belize's balance of payments was the sudden collapse of the country's reexport business. As a reexporter, Belize imports goods and then resells them in neighboring countries (primarily Mexico), or merely transports them, collecting fees for port and road facilities. The arrangement is attractive because of Belize's relatively low shipping costs. However, Mexico's economic payment crisis of 1982, which reduced Mexican imports, put a dent in Belize's foreignexchange earnings as well. Reexports had amounted to 37 percent of export earnings in 1981 but fell to 16 percent in 1983, contributing to a 35-percent drop in total export earnings during that period.
The economic crisis of the early 1980s brought with it escalating trade deficits. In 1981 Belize's net international reserves had stood at US$1.1 million. By the end of 1984, the country had a trade deficit of US$13.6 million.
The economic crisis was a factor in the defeat of the People's United Party government in 1984; it also led to implementation of a standby arrangement with the International Monetary Fund in December of that year. The IMF agreement marked the beginning of the country's adjustment process. The agreement provided access to 7.1 million units of special drawing rights over a sixteen-month period and called for a reduction of the publicsector deficit and a tightening of the country's credit policy by means of higher reserve requirements and higher interest rates. Credit had expanded at an annual rate of 15 percent from 1981 to 1984 because of escalating government debt.
A small open economy is dependent on developments in external markets and generally experiences few domestically generated inflationary pressures. Belize's currency, the Belizean dollar, had been pegged to the United States dollar at a rate of US$1=Bz$2 since 1976. Belize's rate of inflation, therefore, was likewise pegged to that of its major trading partner. Between 1980 and 1983, consumer prices increased by 25 percent in Belize. During the same period, they went up 21 percent in the United States. This modest inflation contrasted sharply with the hyperinflation that pushed prices up by more than 1,000 percent per year in many other countries in the region. Yet, the 4-percent difference between United States and Belizean inflation during those years resulted in a real effective exchange-rate appreciation and, consequently, a worsening of Belize's relative position in the export sector. This trend was later reversed when the Belizean inflation rate fell slightly below that of the United States.
Economic Growth after 1985
After 1986 the Belizean economy improved dramatically, in part because of the adjustment program implemented by the government. These adjustments cut public expenditures and created incentives for diversification of the economy. The country's foreign-exchange receipts from banana and citrus exports multiplied, and tourism became a major contributor to growth. Internal reform coincided with the recovery of the world economy, in particular the revival of the sugar market. Between 1986 and 1990, the Belizean economy grew at an average annual rate of more than 10 percent.
Inflation remained low from 1986 to 1990, averaging 2.8 percent and allowing for an effective depreciation of the Belizean dollar relative to the United States dollar. The positive effect of low inflation on Belize's exports was enhanced by the depreciation of the United States dollar during the second half of the 1980s. The more favorable exchange rate enjoyed by the Belizean dollar was central to the vigorous growth the country experienced during the period.
In 1991 estimates showed growth slowing to an annual rate of less than 5 percent. This deceleration was the result of significant shortfalls in banana production following an outbreak of black sigatoka disease and a reduction in citrus production resulting from bad weather. As in most of the Caribbean, tourism was also affected by the recession in the United States and Britain.
Inflation remained low from 1986 to 1990, averaging 2.8 percent and allowing for an effective depreciation of the Belizean dollar relative to the United States dollar. The positive effect of low inflation on Belize's exports was enhanced by the depreciation of the United States dollar during the second half of the 1980s. The more favorable exchange rate enjoyed by the Belizean dollar was central to the vigorous growth the country experienced during the period.
In 1991 estimates showed growth slowing to an annual rate of less than 5 percent. This deceleration was the result of significant shortfalls in banana production following an outbreak of black sigatoka disease and a reduction in citrus production resulting from bad weather. As in most of the Caribbean, tourism was also affected by the recession in the United States and Britain.
Peripheral Factors
Two small but significant factors must be mentioned in any discussion of Belize's economy: the role of British troops and the illegal drug trade. At independence, Belize and Britain agreed that the latter would maintain a garrison of 2,000 soldiers in Belize to deter possible aggression by Guatemala. As of 1991, Guatemala had established diplomatic relations with Belize but continued to claim an undefined part of its territory. The economic impact of the British garrison, than numbering about 1,500 troops, was substantial in the early 1990s. Because of their relatively high incomes and the support services they required, the troops have had a significant impact on the level of employment and the Belizean economy in general. Some analysts have estimated that the British garrison directly or indirectly generated about 15 percent of Belize's GDP.
The drug trade was not factored into the country's GDP statistics, and the impact of this illegal activity on the economy was difficult to measure. Belize played three roles in the drug trade in the early 1990s; the country served as a marijuana producer, as a transshipment route for other drugs, and as a moneylaundering center. In the early 1980s, the United States Drug Enforcement Agency placed Belize on its list of leading marijuana producers. Aerial spraying of pesticides was begun in 1984, but was ended that same year because of Belizean concerns about the safety of spraying on legal crops and on the population. The United States government estimated that annual marijuana production in Belize subsequently rose from 35 tons to 850 tons, with an approximate street value of US$120 million. Spraying was resumed in 1985 with different chemicals, and marijuana production declined substantially thereafter.
Belize remained an important transshipment site for drugs other than marijuana in the early 1990s. For instance, in September 1990 Mexican federal judicial police seized approximately 457 kilograms of cocaine, which they suspected had been smuggled into Mexico through the border area between Belize's Hondo River and Santa Teresa, Mexico. The shipment apparently was destined for the United States.
Finally, concerns existed that Belize served as a center for money-laundering. The Central Bank of Belize had the authority to trace large transactions, as well as all foreign-currency transactions. However, the nation's investment law allowed offshore banking in Belize and specifically exempted such activity from the regulatory oversight of the Central Bank.
The drug trade was not factored into the country's GDP statistics, and the impact of this illegal activity on the economy was difficult to measure. Belize played three roles in the drug trade in the early 1990s; the country served as a marijuana producer, as a transshipment route for other drugs, and as a moneylaundering center. In the early 1980s, the United States Drug Enforcement Agency placed Belize on its list of leading marijuana producers. Aerial spraying of pesticides was begun in 1984, but was ended that same year because of Belizean concerns about the safety of spraying on legal crops and on the population. The United States government estimated that annual marijuana production in Belize subsequently rose from 35 tons to 850 tons, with an approximate street value of US$120 million. Spraying was resumed in 1985 with different chemicals, and marijuana production declined substantially thereafter.
Belize remained an important transshipment site for drugs other than marijuana in the early 1990s. For instance, in September 1990 Mexican federal judicial police seized approximately 457 kilograms of cocaine, which they suspected had been smuggled into Mexico through the border area between Belize's Hondo River and Santa Teresa, Mexico. The shipment apparently was destined for the United States.
Finally, concerns existed that Belize served as a center for money-laundering. The Central Bank of Belize had the authority to trace large transactions, as well as all foreign-currency transactions. However, the nation's investment law allowed offshore banking in Belize and specifically exempted such activity from the regulatory oversight of the Central Bank.
GOVERNMENT POLICY
Economic Diversification
The narrow base of the national economy was recognized as a problem by the Belizean government after the sluggish growth of the early 1980s. In response, the government started a comprehensive program during the second half of the decade focused primarily on eliminating export biases and creating a favorable environment for investment, both foreign and domestic, especially in the nontraditional export sector. The creation of a favorable environment for investment meant eliminating internal and external imbalances and upgrading infrastructures. This process was facilitated by external incentives such as the United States Caribbean Basin Initiative. The private sector reacted positively to these changes, and economic growth took off.
The Belizean economy was still insufficiently diversified at the beginning of the 1990s, but major changes in the composition of GDP and exports had provided a basis for sustained growth. The two major changes in the GDP took place in agriculture and tourism. Agriculture declined from a 20 percent share of GDP in 1980 to a 15 percent share in 1990, whereas tourism expenditures increased from a 4 percent share to a 9 percent share.
The percentage share of each crop within the agricultural sector gave further evidence of how the composition of GDP was changing. Sugar-export receipts had lost half their share of exports by 1990, whereas tourism had tripled its portion, to the point where it nearly equaled receipts from sugar exports. Citrus products also had made remarkable progress, almost doubling their share of exports by 1990. The share of GDP provided by bananas increased, although less steadily.
The narrow base of the national economy was recognized as a problem by the Belizean government after the sluggish growth of the early 1980s. In response, the government started a comprehensive program during the second half of the decade focused primarily on eliminating export biases and creating a favorable environment for investment, both foreign and domestic, especially in the nontraditional export sector. The creation of a favorable environment for investment meant eliminating internal and external imbalances and upgrading infrastructures. This process was facilitated by external incentives such as the United States Caribbean Basin Initiative. The private sector reacted positively to these changes, and economic growth took off.
The Belizean economy was still insufficiently diversified at the beginning of the 1990s, but major changes in the composition of GDP and exports had provided a basis for sustained growth. The two major changes in the GDP took place in agriculture and tourism. Agriculture declined from a 20 percent share of GDP in 1980 to a 15 percent share in 1990, whereas tourism expenditures increased from a 4 percent share to a 9 percent share.
The percentage share of each crop within the agricultural sector gave further evidence of how the composition of GDP was changing. Sugar-export receipts had lost half their share of exports by 1990, whereas tourism had tripled its portion, to the point where it nearly equaled receipts from sugar exports. Citrus products also had made remarkable progress, almost doubling their share of exports by 1990. The share of GDP provided by bananas increased, although less steadily.
Balance of Payments
Balance of payments figures also improved in the mid-1980s. From 1980 to 1984, Belize incurred a balance of payments deficit. Effects of the government austerity plan coupled with a rise in exports produced a balance of payments surplus from 1985-90. Between 1988 and 1990, the deficit between exports and imports of goods and services widened again. However, this time the gap was caused by large increases in private-investment expenditures. At the same time, the public sector was accruing surpluses so the overall balance of payment still showed a surplus.
Investments
The heavy investment in Belize from 1988 to 1990 funded both private-sector and public-sector activity. Public-sector capital investments that were domestically financed, for example, increased from US$3.4 million in 1986-87 to a planned US$38.8 million in 1991-92. Although the domestically funded portion of capital expenditures was budgeted to decrease in 1992, an expected increase in funding from external sources was projected to cause a net gain in new capital expenditures.
Private-sector investment increased from approximately US$17.7 million in 1985 to US$63.7 in 1989 then declined in 1990. Helping make a high level of private-sector investment possible was the increased availability of domestic credit. Analysts estimate that net domestic credit extended to the private sector increased 15.3 percent in 1989, and 17.8 percent in 1990.
The improved health and apparent stability of the Belizean economy also encouraged a surge in foreign direct investment. In 1984 Belize had suffered an outflow of foreign direct investment in equity capital of US$7 million. During the period 1988-90, annual foreign direct investments averaged US$17 million. Contributing to this development was the government's decision to eliminate export biases through various legislative measures. The 1990 Fiscal Incentives Act provided tax holidays and duty exemptions for investments that would benefit the economy. The 1990 Income Tax Act granted tax relief to nontraditional exporters. The legislature in 1990 also approved the Export- Processing Zones Act, which exempted eligible firms from requirements concerning import licenses, quotas, import and export taxes, export licenses, price controls, and other regulatory mechanisms. The first export-processing zones (EPZs) were scheduled to become established in 1993. The concept required designation or development of a physical facility (the zone) similar to an industrial park. As part of the effort to provide a more favorable environment for investment, Prime Minister George Cadle Price also introduced legislation that would lower corporate taxes from 45 percent to 35 percent in fiscal year 1992.
Private-sector investment increased from approximately US$17.7 million in 1985 to US$63.7 in 1989 then declined in 1990. Helping make a high level of private-sector investment possible was the increased availability of domestic credit. Analysts estimate that net domestic credit extended to the private sector increased 15.3 percent in 1989, and 17.8 percent in 1990.
The improved health and apparent stability of the Belizean economy also encouraged a surge in foreign direct investment. In 1984 Belize had suffered an outflow of foreign direct investment in equity capital of US$7 million. During the period 1988-90, annual foreign direct investments averaged US$17 million. Contributing to this development was the government's decision to eliminate export biases through various legislative measures. The 1990 Fiscal Incentives Act provided tax holidays and duty exemptions for investments that would benefit the economy. The 1990 Income Tax Act granted tax relief to nontraditional exporters. The legislature in 1990 also approved the Export- Processing Zones Act, which exempted eligible firms from requirements concerning import licenses, quotas, import and export taxes, export licenses, price controls, and other regulatory mechanisms. The first export-processing zones (EPZs) were scheduled to become established in 1993. The concept required designation or development of a physical facility (the zone) similar to an industrial park. As part of the effort to provide a more favorable environment for investment, Prime Minister George Cadle Price also introduced legislation that would lower corporate taxes from 45 percent to 35 percent in fiscal year 1992.
Fiscal Performance
The consolidation of government finances was a crucial factor in the economic growth of the late 1980s. The first step was the reduction of total expenditures. Between 1981 and 1985, total government expenditures had stood at 34 percent of GDP. Between 1986 and 1990, this proportion was reduced to 31 percent. More significant, however, was the decline of current expenditures as a portion of GDP, from 25 percent to 21 percent. This decline indicated that cuts in government spending were not being made at the expense of development expenditures. Development expenditures as a percentage of GDP actually increased from 7.4 percent between 1981 and 1985 to 8.7 percent between 1986 and 1990.
Statistics for the period 1986-90 also showed an increase in government revenues over 1981-85. These revenues, which had amounted to 24 percent of GDP over the 1981-85 period, increased to 30 percent of GDP in 1986-90. Some of this increase was accounted for by the sale of government assets, which increased capital revenues. The remainder came mainly from higher tax revenues, which rose from 21 percent to 24 percent of GDP.
Lower current expenditures and increased current revenues permitted the Belizean government to experience several years of high surpluses on its current account. In 1990 this surplus on the government's current account was 11 percent. This fiscal consolidation reduced government competition with the private sector in the domestic credit market. Consequently, increased lending to the private sector accelerated growth without increasing the money supply and therefore without threatening currency stability.
Statistics for the period 1986-90 also showed an increase in government revenues over 1981-85. These revenues, which had amounted to 24 percent of GDP over the 1981-85 period, increased to 30 percent of GDP in 1986-90. Some of this increase was accounted for by the sale of government assets, which increased capital revenues. The remainder came mainly from higher tax revenues, which rose from 21 percent to 24 percent of GDP.
Lower current expenditures and increased current revenues permitted the Belizean government to experience several years of high surpluses on its current account. In 1990 this surplus on the government's current account was 11 percent. This fiscal consolidation reduced government competition with the private sector in the domestic credit market. Consequently, increased lending to the private sector accelerated growth without increasing the money supply and therefore without threatening currency stability.
External Debt
Improvements in the current and capital accounts facilitated an increase in the country's international reserves from US$5 million in 1984 to US$130 million in 1990. Belize's total external debt more than doubled from US$62.9 million in 1980 to US$158 million in 1990. Despite its relatively low debt burden, Belize formally requested consideration by the United States government for debt reduction and payment of interest into a local environmental fund under the Enterprise for the Americas Initiative.
Belize has been quite successful in attracting foreign aid. In 1983, two years after the nation became independent, the United States Agency for International Development opened an office in Belize. Between 1983 and 1989, Belize received US$94 million in development assistance. On a per capita basis, in 1991 Belize ranked among the top recipients of United States aid, a position that underscored the close relationship between the two countries. Britain remained Belize's other major benefactor. In 1991 Belize sought membership in the Inter-American Development Bank to assure the continued flow of concessional loans.
Belize has been quite successful in attracting foreign aid. In 1983, two years after the nation became independent, the United States Agency for International Development opened an office in Belize. Between 1983 and 1989, Belize received US$94 million in development assistance. On a per capita basis, in 1991 Belize ranked among the top recipients of United States aid, a position that underscored the close relationship between the two countries. Britain remained Belize's other major benefactor. In 1991 Belize sought membership in the Inter-American Development Bank to assure the continued flow of concessional loans.
LABOR
In 1946 the Belizean labor force numbered approximately 20,100 economically active individuals. This pool expanded to 27,000 in 1960, to 33,000 in 1970, and to 46,000 in 1980. By 1990 the active labor force had increased to more than 60,000. Most startling was the increase in female participation. Although women made up only 18 percent of the labor force in 1960, they accounted for one-third in 1991, when 44.5 percent of working-age women were actually economically active, as opposed to only 20.6 percent in 1960. The reason for this relatively high level of female participation was most likely the acute shortage of labor in a country where some 50 percent of the population was aged fifteen and under and also that young women typically are employed in the new low-wage sectors, such as the garment assembly industry.
The labor shortage was eased by the employment of large numbers of migrant workers from Central America. However, relatively high wage rates have been necessary to attract these workers, which, in turn, make Belize a high-cost producer by developing countries' standards. The influx of large numbers of immigrants per year, which has changed the ethnic composition of the population, has also been a source of social tension.
Although Belize has experienced labor shortages, it has also reported relatively high levels of unemployment--around 15 percent in the early 1990s. However, these figures were less a manifestation of job shortages than an indication of labor immobility. Also, many Belizeans chose to be unemployed, because they received remittance payments from family abroad. For instance, between 30,000 and 100,000 Belizeans were estimated to reside in the United States.
The members of five major unions accounted for about 15 percent of the labor force. In 1991 more than 1,000 teachers belonged to the Belize National Teachers' Union; the Public Service Union consisted of about the same number of public workers. The largest union outside the public sector was the Christian Workers' Union, with more than 2,000 members. The General Workers' Union was broadbased and affiliated with the International Confederation of Free Trade Unions. The Democratic Independent Union counted more than 1,200 members in 1991. The National Trades Union Congress of Belize served as an umbrella group for all unions. None of the unions was associated with a political party.
The labor shortage was eased by the employment of large numbers of migrant workers from Central America. However, relatively high wage rates have been necessary to attract these workers, which, in turn, make Belize a high-cost producer by developing countries' standards. The influx of large numbers of immigrants per year, which has changed the ethnic composition of the population, has also been a source of social tension.
Although Belize has experienced labor shortages, it has also reported relatively high levels of unemployment--around 15 percent in the early 1990s. However, these figures were less a manifestation of job shortages than an indication of labor immobility. Also, many Belizeans chose to be unemployed, because they received remittance payments from family abroad. For instance, between 30,000 and 100,000 Belizeans were estimated to reside in the United States.
The members of five major unions accounted for about 15 percent of the labor force. In 1991 more than 1,000 teachers belonged to the Belize National Teachers' Union; the Public Service Union consisted of about the same number of public workers. The largest union outside the public sector was the Christian Workers' Union, with more than 2,000 members. The General Workers' Union was broadbased and affiliated with the International Confederation of Free Trade Unions. The Democratic Independent Union counted more than 1,200 members in 1991. The National Trades Union Congress of Belize served as an umbrella group for all unions. None of the unions was associated with a political party.
FOREIGN ECONOMIC RELATIONS
Small, open economies depend heavily on preferential trade agreements. Belize's economy benefited from a range of such agreements: the United States sugar quota; the Lomé Convention of the European Economic Community (EEC--in particular, the Sugar Protocol and the Banana Protocol); the CBI; United States Tariff Schedule 807 program; the Multi-fibre Arrangement; and the EAI.
Preferential trade agreements demonstrate the complexity of international trade relations and their effect on economic progress, especially in developing countries. Preferential trade agreements also provide a reminder that trade liberalization is a double-edged sword for all trade participants, developed and developing alike. For example, there were distinct advantages in the existing quota systems for the Belizean sugar industry in the early 1990s. Quotas guaranteed that Belizean sugar would have access to markets in the EEC and the United States at prices far above world market levels. At the same time, it was also clear that a quota system was a unilateral act, that it limited market access, and that quotas could be changed or eliminated by foreign powers at their will.
Belize was a member of Caricom and benefited from preferential market access to the markets of other member countries. However, Caricom's success at integration was mixed. Between 1984 and 1986, Belize's trade with Caricom members decreased sharply as a result of currency devaluations and a renewal of trade barriers by some member countries. In 1988 Caricom approved a common internal tariff, which was to reinvigorate intraregional trade. However, there were some exceptions to the common internal tariff. Caricom's much-delayed common external tariff was adopted by Belize at the end of 1991. This common tariff changed Belize's duty rates but produced no effect on the budget. High duties on foodstuffs were dropped, and duties on machinery were reduced.
Belizean trade patterns were heavily affected by the country's participation in various bilateral and multilateral trade arrangements. The United States and Britain remained the principal destinations of Belizean exports throughout the 1980s. In the second half of the 1980s, the two accounted for more than 80 percent of total exports in every year. Their respective shares fluctuated from year to year, but their combined total remained practically unchanged. Exports to Caricom countries, which had peaked in 1983 at 14.5 percent of total Belizean exports, plunged to 1.9 percent in 1986, but recovered in 1990 to roughly half their 1983 level.
Preferential trade agreements demonstrate the complexity of international trade relations and their effect on economic progress, especially in developing countries. Preferential trade agreements also provide a reminder that trade liberalization is a double-edged sword for all trade participants, developed and developing alike. For example, there were distinct advantages in the existing quota systems for the Belizean sugar industry in the early 1990s. Quotas guaranteed that Belizean sugar would have access to markets in the EEC and the United States at prices far above world market levels. At the same time, it was also clear that a quota system was a unilateral act, that it limited market access, and that quotas could be changed or eliminated by foreign powers at their will.
Belize was a member of Caricom and benefited from preferential market access to the markets of other member countries. However, Caricom's success at integration was mixed. Between 1984 and 1986, Belize's trade with Caricom members decreased sharply as a result of currency devaluations and a renewal of trade barriers by some member countries. In 1988 Caricom approved a common internal tariff, which was to reinvigorate intraregional trade. However, there were some exceptions to the common internal tariff. Caricom's much-delayed common external tariff was adopted by Belize at the end of 1991. This common tariff changed Belize's duty rates but produced no effect on the budget. High duties on foodstuffs were dropped, and duties on machinery were reduced.
Belizean trade patterns were heavily affected by the country's participation in various bilateral and multilateral trade arrangements. The United States and Britain remained the principal destinations of Belizean exports throughout the 1980s. In the second half of the 1980s, the two accounted for more than 80 percent of total exports in every year. Their respective shares fluctuated from year to year, but their combined total remained practically unchanged. Exports to Caricom countries, which had peaked in 1983 at 14.5 percent of total Belizean exports, plunged to 1.9 percent in 1986, but recovered in 1990 to roughly half their 1983 level.
AGRICULTURE
Sugar
As the 1990s began, sugar was still the Belizean economy's single largest export earner. Sugar production involved a unique hybrid of agricultural and industrial activity. Sugarcane cultivation, on one hand, and the mechanicalchemical transformation of cane into sugar, on the other hand, made for this peculiarity. Both processes needed to be coordinated because of the perishability of the crop.
In Belize small farms in the north produce the bulk of the sugarcane. In the early 1990s, the coordination of the agricultural aspects of sugar production and the organization of cane delivery were the responsibilities of the Cane Farmers' Association. The industrial segment of the sugar-production process was controlled by Belize Sugar Industries Limited (BSIL). Overall coordination of the industry was exercised by the Belize Sugar Board.
Until 1985 Belize had two sugar mills: the Libertad factory in the Corozal District, opened in 1937, and the factory at Tower Hill near Orange Walk Town, opened in 1967. In July 1985, the Libertad factory was closed. By early 1989, Libertad had been reopened and leased to the Jamaican petroleum company Petrojam. Petrojam was to use Libertad for the production of molasses, which was then to be refined in Jamaica into ethanol. Ethanol had duty-free access to the United States market under the CBI arrangement.
The Belizean sugar industry, as elsewhere in the Caribbean, experienced large production and export swings. In 1981 an estimated 30 percent of farmland, formerly used for growing sugarcane, had been abandoned. Yet, at the end of the 1980s, the United States increased its quota for Belize at the expense of Guyana, which was not reaching its allotment, and in early 1990, BSIL reported its largest-ever bulk shipment (17,300 tons of raw sugar) to Canada.
As the 1990s began, sugar was still the Belizean economy's single largest export earner. Sugar production involved a unique hybrid of agricultural and industrial activity. Sugarcane cultivation, on one hand, and the mechanicalchemical transformation of cane into sugar, on the other hand, made for this peculiarity. Both processes needed to be coordinated because of the perishability of the crop.
In Belize small farms in the north produce the bulk of the sugarcane. In the early 1990s, the coordination of the agricultural aspects of sugar production and the organization of cane delivery were the responsibilities of the Cane Farmers' Association. The industrial segment of the sugar-production process was controlled by Belize Sugar Industries Limited (BSIL). Overall coordination of the industry was exercised by the Belize Sugar Board.
Until 1985 Belize had two sugar mills: the Libertad factory in the Corozal District, opened in 1937, and the factory at Tower Hill near Orange Walk Town, opened in 1967. In July 1985, the Libertad factory was closed. By early 1989, Libertad had been reopened and leased to the Jamaican petroleum company Petrojam. Petrojam was to use Libertad for the production of molasses, which was then to be refined in Jamaica into ethanol. Ethanol had duty-free access to the United States market under the CBI arrangement.
The Belizean sugar industry, as elsewhere in the Caribbean, experienced large production and export swings. In 1981 an estimated 30 percent of farmland, formerly used for growing sugarcane, had been abandoned. Yet, at the end of the 1980s, the United States increased its quota for Belize at the expense of Guyana, which was not reaching its allotment, and in early 1990, BSIL reported its largest-ever bulk shipment (17,300 tons of raw sugar) to Canada.
Citrus
Citrus production, mainly oranges and grapefruit, occurs predominantly in Belize's Stann Creek District. The citrus trade began in the 1920s, but became significant only in the 1980s, when Belizean-produced citrus concentrate became exempt from United States tariff duties under the terms of the CBI. Exports of fresh citrus fruit to the United States were restricted because of infestation of the Mediterranean fruit fly. Citrus, much like sugar, underwent sharp price and production fluctuations, although overall export receipts from citrus concentrate markedly increased during the 1980s because of high prices.
In the early 1990s, citrus production was controlled by two processing companies. Founded by a Jamaican family, the Citrus Company of Belize had been controlled since 1984 by the Trinidad Citrus Association. Belize Food Products, the second processor, was owned by Nestlé, the Swiss multinational, until it was sold to a local consortium in 1990. Both processing plants were located near Dangriga on the Caribbean coast.
The future of citrus was uncertain. In 1990 only half of planted citrus hectarage was in production. There were indications that production could double within five years. There were worries, however, about the effect of competition from Mexico or Brazil through preferential access allowed to them via the proposed North American Free Trade Agreement or the EAI.
In the early 1990s, citrus production was controlled by two processing companies. Founded by a Jamaican family, the Citrus Company of Belize had been controlled since 1984 by the Trinidad Citrus Association. Belize Food Products, the second processor, was owned by Nestlé, the Swiss multinational, until it was sold to a local consortium in 1990. Both processing plants were located near Dangriga on the Caribbean coast.
The future of citrus was uncertain. In 1990 only half of planted citrus hectarage was in production. There were indications that production could double within five years. There were worries, however, about the effect of competition from Mexico or Brazil through preferential access allowed to them via the proposed North American Free Trade Agreement or the EAI.
Bananas
Commercial cultivation of bananas began in the late nineteenth century, when United States and British investors first established plantations. Although the banana trade between British Honduras and New Orleans at first seemed promising, commerce was wiped out in the 1920s by an outbreak of the Panama disease. Another attempt to cultivate bananas was begun by the British during the 1960s, but the plantations were destroyed by hurricanes in 1975 and 1978. The subsequent takeover of banana cultivation by the Banana Control Board, a public enterprise, had the effect of further inhibiting production.
By mid-1985, the Banana Control Board had accumulated debts of US$9 million. The government reacted to the plight of the board by selling the 880 hectares under cultivation to the private sector. Five years later, banana production had almost tripled, and the cultivated area had increased to more than 2,400 hectares. The Banana Control Board was reorganized and retained the responsibility for marketing and research. In 1991 responsibility for the board was passed to the Banana Growers' Association.
Britain was the almost exclusive importer of Belizean bananas. Marketing of exports was handled by Fyffes International, a British subsidiary of the United States company, United Fruit. The special provisions of the Lomé Convention's Banana Protocol allowed Britain to guarantee artificially high prices for bananas to the beneficiaries of the protocol. These prices were above prices in the United States and Germany. The purpose of this special provision was to protect the central export crop of some of the islands of the Lesser Antilles, members of the Commonwealth of Nations, from ruinous competition from low-cost producers in Latin America.
The preferential access to EEC markets provided by the Lomé Convention was under advisement in 1991 by the EEC in connection with its single-European-market program. It appeared that Belize would be better prepared for a drop in prices than would the islands of the Lesser Antilles, as Belizean producers received far lower prices through the protocol than did their Caribbean neighbors.
New port facilities at Big Creek in southern Stann Creek District were expected to increase banana exports. Until 1990 Belizean bananas had had to go through Puerto Cortés, Honduras, which added to overhead. Fyffes then financed the construction of Big Creek, Belize's only deep-water port. This port was designed to serve as the main shipment point for Belizean bananas.
Between 1989 and 1991, banana production was hampered by cold weather and black sigatoka disease, but production was expected to double in 1992 because of the new port, better disease control, and improved drainage and irrigation systems. The susceptibility of bananas to disease and possible changes in Belize's preferential access to the British market were factors that could limit growth in this sector, however.
By mid-1985, the Banana Control Board had accumulated debts of US$9 million. The government reacted to the plight of the board by selling the 880 hectares under cultivation to the private sector. Five years later, banana production had almost tripled, and the cultivated area had increased to more than 2,400 hectares. The Banana Control Board was reorganized and retained the responsibility for marketing and research. In 1991 responsibility for the board was passed to the Banana Growers' Association.
Britain was the almost exclusive importer of Belizean bananas. Marketing of exports was handled by Fyffes International, a British subsidiary of the United States company, United Fruit. The special provisions of the Lomé Convention's Banana Protocol allowed Britain to guarantee artificially high prices for bananas to the beneficiaries of the protocol. These prices were above prices in the United States and Germany. The purpose of this special provision was to protect the central export crop of some of the islands of the Lesser Antilles, members of the Commonwealth of Nations, from ruinous competition from low-cost producers in Latin America.
The preferential access to EEC markets provided by the Lomé Convention was under advisement in 1991 by the EEC in connection with its single-European-market program. It appeared that Belize would be better prepared for a drop in prices than would the islands of the Lesser Antilles, as Belizean producers received far lower prices through the protocol than did their Caribbean neighbors.
New port facilities at Big Creek in southern Stann Creek District were expected to increase banana exports. Until 1990 Belizean bananas had had to go through Puerto Cortés, Honduras, which added to overhead. Fyffes then financed the construction of Big Creek, Belize's only deep-water port. This port was designed to serve as the main shipment point for Belizean bananas.
Between 1989 and 1991, banana production was hampered by cold weather and black sigatoka disease, but production was expected to double in 1992 because of the new port, better disease control, and improved drainage and irrigation systems. The susceptibility of bananas to disease and possible changes in Belize's preferential access to the British market were factors that could limit growth in this sector, however.
Other Crops
Crops other than sugar, citrus, and bananas played a very minor role in the Belizean economy in the early 1990s. Cultivation of nontraditional export crops were encouraged by the CBI as a way of lessening dependence on sugar and banana exports. Trade incentives were offered for nontraditional products, such as tropical fruits or winter fruits and vegetables. This strategy was only moderately successful, however.
Examples of failed attempts at agricultural diversification included AID's sponsorship of the Belize Agri-Business Company, whose purpose was to decrease the dependency of northern farmers on sugarcane by replacing it with cucumbers, okra, and bell peppers for winter export to the United States. The effort failed because of the farmers' reluctance to change and because of poor marketing. In 1987 the failure of Caribe Farm Industries, the most prominent nontraditional agricultural exporter in the country producing a variety of vegetables, added to the growing frustration with the diversification efforts. Difficulties were also experienced with tropical fruits. The Danish-owned Tropical Produce Company (TPC) had a 570-hectare mango farm in the Monkey River area of the Toledo District. Its produce was grown for the United States market, as well as for European importers, with whom TPC held a ten-year contract. But shipments were erratic because of Mediterranean fruit fly quarantines. For instance, from 1987 to 1990, there were no mango exports from the TPC farm to the United States.
Most production of import-substitution crops resulted from the efforts of two groups, the Maya and the Mennonites. Small farmers, primarily of Mayan descent, grew corn and beans in sparsely populated areas for their own consumption. The immigrant Mennonite community bought 40,000 hectares of forested land along the Hondo River in 1959, constructed a road to Orange Walk, and soon created a thriving business based on dairy products, vegetables, beans, and poultry. Yet, overall production swung widely over the years, closely following price subsidies. The Belize Marketing Board, which supervised production of import-substitution crops, was scheduled to function exclusively as a price stabilization agency by the end of 1992.
Examples of failed attempts at agricultural diversification included AID's sponsorship of the Belize Agri-Business Company, whose purpose was to decrease the dependency of northern farmers on sugarcane by replacing it with cucumbers, okra, and bell peppers for winter export to the United States. The effort failed because of the farmers' reluctance to change and because of poor marketing. In 1987 the failure of Caribe Farm Industries, the most prominent nontraditional agricultural exporter in the country producing a variety of vegetables, added to the growing frustration with the diversification efforts. Difficulties were also experienced with tropical fruits. The Danish-owned Tropical Produce Company (TPC) had a 570-hectare mango farm in the Monkey River area of the Toledo District. Its produce was grown for the United States market, as well as for European importers, with whom TPC held a ten-year contract. But shipments were erratic because of Mediterranean fruit fly quarantines. For instance, from 1987 to 1990, there were no mango exports from the TPC farm to the United States.
Most production of import-substitution crops resulted from the efforts of two groups, the Maya and the Mennonites. Small farmers, primarily of Mayan descent, grew corn and beans in sparsely populated areas for their own consumption. The immigrant Mennonite community bought 40,000 hectares of forested land along the Hondo River in 1959, constructed a road to Orange Walk, and soon created a thriving business based on dairy products, vegetables, beans, and poultry. Yet, overall production swung widely over the years, closely following price subsidies. The Belize Marketing Board, which supervised production of import-substitution crops, was scheduled to function exclusively as a price stabilization agency by the end of 1992.
FISHING AND FORESTRY
Four fishing cooperatives--Caribeña, the Northern, the National, and Placencia--dominated the fishing industry, which began to flourish in the 1960s. In 1990 fishing accounted for about 2 percent of GDP; 30 percent of the sector's output was for domestic consumption and the remainder was exported. The primary catches were lobster, shrimp, conch, red snapper, and other fin fish. Overfishing and out-of-season fishing were problems. Shrimp farming, begun with little initial success in the late 1970s, has recently contributed to a boost in shrimp exports (up 43 percent in 1989).
Forestry lost its role as the biggest sector of the Belizean economy decades ago. Its contribution to GDP averaged 2.3 percent during 1980-90. Production rose from 1987 to 1990 because of a high domestic demand for construction materials. Exports consisted primarily of sawn cedar wood. In 1990 volume dropped by 40 percent.
Forestry lost its role as the biggest sector of the Belizean economy decades ago. Its contribution to GDP averaged 2.3 percent during 1980-90. Production rose from 1987 to 1990 because of a high domestic demand for construction materials. Exports consisted primarily of sawn cedar wood. In 1990 volume dropped by 40 percent.
INDUSTRY
Mining and Energy
Belize has negligible known mineral deposits, although hopes persisted that large reserves of oil would be found. Extensive drilling, which began in 1981, primarily in the Corozal Basin, has been unsuccessful. Some of the nation's oil has been supplied at concessionary terms because Belize was a signatory in 1988 to the San José Pact with Mexico and Venezuela. This treaty obligated Mexico and Venezuela to offer concessionary credit for at least 20- 25 percent of the purchase price of their oil exports to Central American beneficiaries. In August 1991, Venezuela and Mexico increased the oil supplies offered under this agreement.
In the early 1990s, Belize had a limited capacity to generate electricity. Several small diesel generators, mostly powered by oil imported from Mexico, had a total capacity of 34.7 megawatts. In 1990 these plants produced 90 gigawatt-hours of electricity. Mexico agreed in 1990 to supply electricity to the Belize Electricity Board, but electricity remained costly and in short supply.
Belize has negligible known mineral deposits, although hopes persisted that large reserves of oil would be found. Extensive drilling, which began in 1981, primarily in the Corozal Basin, has been unsuccessful. Some of the nation's oil has been supplied at concessionary terms because Belize was a signatory in 1988 to the San José Pact with Mexico and Venezuela. This treaty obligated Mexico and Venezuela to offer concessionary credit for at least 20- 25 percent of the purchase price of their oil exports to Central American beneficiaries. In August 1991, Venezuela and Mexico increased the oil supplies offered under this agreement.
In the early 1990s, Belize had a limited capacity to generate electricity. Several small diesel generators, mostly powered by oil imported from Mexico, had a total capacity of 34.7 megawatts. In 1990 these plants produced 90 gigawatt-hours of electricity. Mexico agreed in 1990 to supply electricity to the Belize Electricity Board, but electricity remained costly and in short supply.
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