Towards a Sustainable and Efficient State The Development ...

Towards a Sustainableand Efficient StateThe Development Agenda of BelizeDougal Martin | Osmel ManzanoEditorsInter-American Development Bank

Part IV. SOCIAL DEVELOPMENT ................................................ 189ConTENTS11. Protecting the Poor and Vulnerable in a Tight Fiscal Environment . . . . . . . . . . . . . . . . . . . . . 19112. A Health Sector in Transition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20113. Education Sector: Analysis and Options for a Policy Agenda . . . . . . . . . . . . . . . . . . . . . . . . . . 22114. Indigenous Peoples: Cross-Cutting Concerns and Needs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23515. The Growing Threat to Citizen Security .......................................... 255iv

AcknowledgmentsTowards a Sustainable and Efficient State: The Development Agenda of Belize is a production of the Inter-American Development Bank’s Country Department of Central America, Mexico, Panama, and theDominican Republic, led by General Manager Gina Montiel and Regional Economic Advisor ErnestoStein, with the participation of all Bank sectoral departments. The volume was edited by Dougal Martinand Osmel Manzano, who were also responsible for the general coordination of the production.We give special thanks to Caroline Clarke, IDB Representative in Belize, for her support of the project.We also want to acknowledge Isabel Nieves, Michele Lemay, Nathalie Alvarado, and Beatriz AbizandaMiro, IDB sectoral specialists, for their peer review of the health, social protection, environment, andcitizen security chapters. Finally, we want to acknowledge Gina Montiel, General Manager, the maindriving force behind this project, who gave us all her support and allowed us to carry it forward in aclimate of trust and freedom.Michael Harrup edited the entire volume, Gerardo Giannoni of the Office of External Relations collaboratedon the production of the book, and Melina Campos Ortiz helped with the graphics and providedresearch assistance in various chapters. Miki Fernandez of ULTRAdesigns designed the layout ofthe book.The chapter authors were:●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●Chapter 1: Ricardo Hausmann and Bailey Klinger, with updating provided by Dougal MartinChapter 2: Dougal Martin and Gangadhar ShuklaChapter 3: Dougal MartinChapter 4: Matthew Shearer, based on a paper by Samantha Chaitram, Cristina Dengel, TimothyMills, Jesse Mora, Matthew Shearer, and Kati SuominenChapter 5: Laura AlonsoChapter 6: Michele Lemay, based on a paper by Michele Lemay, Harold Arzu, Dougal Martin, andLaura AlonsoChapter 7: John Horton and Roger NortonChapter 8: Osmel ManzanoChapter 9: Cassandra Rogers, based on a paper by Cassandra Rogers, Edward Anderson, LilianaMartha Carreño, Harold Arzu, and Dougal MartinChapter 10: Melina Campos OrtizChapter 11: Michelle Perez Maillard and Daniela PhilippChapter 12: Daniela Philipp and Michelle Perez MaillardChapter 13: Emma Naslund-HadleyChapter 14: Kristyna Bishop and Ellen-Rose KambelChapter 15: Mariko Russellv

ForewordTowards a Sustainable and Efficient State: The Development Agenda of Belize represents a tangible expressionof the Inter-American Development Bank’s commitment to generating knowledge as part of itsassistance to its borrowing member countries and illustrates the Bank’s willingness to accompany Belizein its efforts to overcome its development challenges. This intellectual contribution to some of the mostimportant issues regarding Belize’s economic and social development is directed primarily at two audiences.First, it is directed at Belizean policymakers, offering a technical and internationally comparativeperspective. Second, it is aimed at the wider public who are interested in Belize’s economic and socialdevelopment but who find little material available on the subject.Based on its record over the last half-century, Belize could be considered a relative development success.In 1960, it was the second-poorest country in Central America; now it is among the “top-tier” countries,with a gross domestic product per capita behind only that of Costa Rica and Panama. However,economic growth and social progress have slowed over the last 10 years. Regaining earlier dynamism,improving social conditions, and reducing poverty, and at the same time preserving its rich but fragileenvironmental endowment, therefore constitute important development challenges for Belize.The job of policymakers in grappling simultaneously with an array of complex challenges is never easy.And it is not made any easier when policy advisors proffer long, unprioritized laundry lists of policyreforms that a government should undertake. This book strives to err in the opposite direction and offerpolicymakers an intellectual framework, called the “Growth Diagnostics Methodology,” 1 for thinkingabout how to prioritize development challenges.While necessarily selective, this book therefore covers a number of development topics of interest andrelevance to Belize. Although many of the topics are seemingly disparate, the book strives for consistencyand coherence in order to enhance its value to policymakers. Above all, it seeks to contribute toand stimulate a dialogue on Belize’s development challenges, in the hope that Towards a Sustainable andEfficient State: The Development Agenda of Belize will become a cornerstone in increased interest andresearch on policy options for Belize.— Gina MontielGeneral ManagerCountry Department of Central America, Mexico, Panama and the Dominican Republic1R. Hausmann, D. Rodrik, and A. Velasco, “Growth Diagnostics” (Center for International Development, Harvard University, Cambridge,Massachusetts, 2004, unpublished).vii

Part IBindingConstraints onGrowth1

Diagnosing the Binding Constraints on Economic Growthchapter 12

Diagnosing the Binding Constraintson Economic Growth11.1 IntroductionBelize’s long-term growth performance has been comparatively good. 1 It is not clear what comparatorgroup is relevant, given Belize’s status as both a Caribbean and a Central American country. Comparedwith its Central American counterparts, Belize has been a growth star. In 1960, it was the secondpoorestcountry in the region; now it is among the “top tier” countries, with gross domestic product(GDP) per capita (Figure 1.1) near that of Costa Rica and Panama. Moreover, much of this growth wasachieved after independence. Among its Caribbean peers, however, Belize’s performance has been average,and it has not been able to close the gap with the better-performing economies in the region. Andsince 2004, economic growth has been sluggish, barely above the rate of population growth, implyingthat reactivating economic growth is a central development challenge for the country.Figure 1.1. GDP per Capita(logs, 2000 US$)98.587.576.565.551110.5109.598.587.576.56196019631966196919721975197819811984198719901993199619992002200519601962196419661968197019721974197619781980198219841986198819901992199419961998200020022004BLZNICCRIPANGTMSLVHNDBLZATGBHSBRBDMAVCTGRDDOMLCAJAMSource: World Bank, World Development Indicators.Note: ATG = Antigua and Barbuda, BEL = Belize, BHS = The Bahamas, BRB = Barbados, CRI = Costa Rica, DMA = Dominica,DOM = Dominican Republic, GRD = Grenada, GTM = Guatemala, HND = Honduras, JAM = Jamaica, LCA = St. Lucia, NIC =Nicaragua, PAN = Panama, SLV = El Salvador, VCT = St. Vincent and the Grenadines.1The authors would like to thank the staff of the Belize Country Office for their assistance in the fact-finding mission to Belize onSeptember 24–26, 2007, as well as all the government and private sector officials who were kind enough to share their time and offertheir insights during that mission. They also thank Dougal Martin and Matthew Shearer for their participation in the mission, andRodrigo Wagner for assistance in data collection and analysis.3

chapter 1Diagnosing the Binding Constraints on Economic Growth1.2 The Growth DiagnosticsMethodologyThe Growth Diagnostics Methodology (GDM)offers policymakers a guide to policymaking thatdiffers from traditional approaches to economicgrowth. Traditional approaches, characterized as“kitchen sink” or “laundry list” approaches, suggestan indiscriminate, across-the-board effort toreform policy. However, given that governmentshave limited political capital and administrativecapacity, long lists of reforms and needed actionsare not helpful. Moreover, attempting to solve allproblems simultaneously may cause governmentsto dissipate their efforts resolving problems thatactually turn out to have little impact on growth.The GDM argues that it makes sense to firstidentify the factor or factors that are most restrictiveto economic growth and then concentratepublic policy efforts on resolving that restriction,providing policymakers with the “biggest bangfor the buck.”A second characteristic of the GDM is that it providescountry-specific diagnoses. In contrast to thetraditional approach of basing recommendationson policies that have been found to be conducive togrowth in “the average country,” the GDM positsthat the binding constraint on growth varies fromcountry to country and over time.Figure 1.2 illustrates in a very intuitive way oneof the fundamental ideas behind the GDM:factors that may contribute to the growth of aneconomy are not necessarily perfect substitutes.Panel A of the figure presents a world in whichgrowth-supporting factors (represented by thehorizontal planks in the barrel) are perfect substitutes.Which of all these factors that contributeto growth should be the focus of public policies?If the world is like the barrel in panel A, the questionis irrelevant. The capacity of the barrel (oreconomic growth) is simply the sum of the heightof all the horizontal planks and will increase nomatter which of the planks of public policy areimproved. Policy improvements in any of theareas—or all of them at the same time—willbring similar results in terms of economic growth.However, in the real world, the different elementsthat contribute to growth are not perfect substitutes.If the growth of a plant is constrained by alack of nutrients, adding more sun or more waterwill not compensate for the lack of nutrients andboost its growth. Consequently, it is important tobe able to identify which constraints on growthare most binding.The barrel in panel B of the figure presents a differentworld. In this case, how much the barrelwill hold is determined by the shortest plank (inthe example of this figure, the shortest plank isFigure 1.2. A Comparison of Conceptual Approaches to Economic GrowthA. The kitchen sink approachB. The growth constraints approachFinanceLow TaxesHuman CapitalInfrastructureMacro StabilityLow Social ConflictMacro StabilityInfrastructureHuman CapitalLow TaxesFinanceLow Social ConflictSource: Hausmann, Klinger, and Wagner (2008). © Rodrigo Wagner, 2006.4

infrastructure). Although there is no doubt thatthe level of human capital could improve, in thisexample improving the level of human capital isuseless, unless infrastructure is developed first.The true constraint that is holding back growth(or the capacity of the barrel) is infrastructure,and that should be the focus of public policy inthe short term. The real world may lie betweenthe two extremes represented by the barrels inpanels A and B, and there may be more than oneconstraint that restricts growth at the same time.In order to assist the analytical process and identificationof the binding constraints on growth,Hausmann, Rodrik, and Velasco (2004) use a decisiontree (Figure 1.3) that explores all the factorsthat could potentially cause low levels of investmentand, hence, weak economic growth. It ispossible that weak growth is caused by inefficientinvestment rather than low levels of investment(Agosin, Fernández-Arias, and Jaramillo 2009;Felipe and Usui 2008). However, in the case ofBelize weak growth is clearly associated with alow investment rate.The decision tree first divides into two generalcategories: does the country face low returns todomestic private investment (the left-hand side),or does it suffer from a high cost of finance (righthandside)? This division is based on the conditionthat for an investment to take place, the rateof return must be higher than the rate of interest.If investment is low, this could be due eitherto low returns on private investment or to a highcost of finance.If it is determined that the constraint is low returnsto private investment, the left-hand branchof the tree explores various possible causes of lowreturns. The next decision point asks whetherprivate returns are low because social returns arelow, or whether social returns are high but privateinvestors, for various reasons, are unable to appropriatethem. If social returns are low, this couldbe due to an insufficiently trained labor force orto poor-quality infrastructure. If social returnsare respectable, but private investors are unableto appropriate them, the problem may be due togovernment failures such as macroeconomic instability,insecure property rights, excessive taxation,or corruption, or the problem could stemfrom market failures related to different types ofexternalities or coordination failures.On the other hand, if it is determined that the primaryconstraint is high-cost domestic finance ora lack of financing, the right-hand branch of thetree then explores whether the financing problemoriginates from inadequate external finance orproblems related to domestic financing.chapter 1Diagnosing the Binding Constraints on Economic GrowthFigure 1.3. Growth Diagnostic Decision TreeProblem: Low levels of private investment and entrepreneurshipLow return to economic activityHigh cost of financeLow social returnsLow appropriabilityLow domesticsavings + badinternationalfinanceBadlocalfinanceLowhuman capitalBad infrastructureGovernmentfailuresMarketfailuresLowcompetitionHigh riskHigh costMicro risks: propertyrights, corruption,taxesMacro risks: financial,monetary, fiscalinstabilityInformation externalities:“selfdiscovery”Coordination externalities5

chapter 1Diagnosing the Binding Constraints on Economic GrowthAnalysis of the different branches of the decisiontree leads to several questions: How to identifythe relevant branch? How to identify if a factor isone of the most binding constraints on growth?To make an accurate diagnosis, all available informationshould be considered so that nonbindingfactors can be systematically discarded. A goodstarting point to determine whether a factor is abinding constraint is to investigate the “quantities”of certain factors, such as education coverageor credit to the private sector as a share of GDP. Ifthe country compares favorably with other countriesin a particular area, that area is probably nota binding constraint. By contrast, if the countrycompares unfavorably in an area, that is a signalthat the area requires deeper examination.If a factor is a binding constraint, the scarcity ofthat factor should also be reflected in “prices.” Forexample, if access to finance is a problem, thatshould be reflected in high interest rates. Similarly,if low education coverage is a binding constraint,the returns to investment in education (the valuethat the labor market places on an additional yearof education) should be high, suggesting that themarket is demanding a factor that is scarce.If a constraint is binding, changes in the supplyor availability of that factor should be reflectedin significant changes in the rate of economicgrowth. If this is not the case, then the factor isnot binding.The behavior of agents in the economy can be anotherindication of whether a factor is binding. Ifa factor is scarce and a binding constraint, the privatesector should be attempting to overcome orbypass that constraint. For example, in countrieswith an unreliable supply of electricity, companiesand households often invest heavily in self-generation,even though this is more expensive thanreliable electricity sector provision. Similarly, onewould expect that industries that use a particularfactor intensively would be absent or only poorlydeveloped where that factor is scarce. To illustratethis point, Hausmann, Klinger, and Wagner(2008) use the metaphor of animals thriving inthe Sahara Desert. In the Sahara, one can observemany camels but very few hippopotamuses. Thisobservation about the relative balance betweencamels and hippopotamuses, combined with thefact that camels can thrive with little water whilehippopotamuses are intensive in water, suggeststhat the binding constraint on the presence andsurvival of animals in the Sahara is the availabilityof water.In sum, the GDM involves testing and rejectinghypotheses rather than a search for rigorous“proof.” In this sense, a growth diagnostic ismore like a civil suit than a criminal case, becauseit relies on “the preponderance of the evidence”rather than the criterion of “beyond all reasonabledoubt.”To apply the GDM to the specific case of Belize,it is important to start with a good description ofthe country’s growth process that not only providesa long-term view, but also highlights thefluctuations, since the fluctuations may be indicativeof movements in the binding constraint.1.3 Long-Term Growth Dynamicsin BelizeThe dynamics of output per capita in Belize sinceindependence show marked periods of growthacceleration and recession (Figure 1.4). Duringthe recession that lasted from independence until1985, the growth rate averaged −2.2 percentper year. The country entered relatively sustainedgrowth acceleration. From 1986 to 1993, outputper capita increased by 7 percent per year on average.This acceleration was followed by a four-yeareconomic contraction, from 1994 to 1998, withan average annual growth rate of −1.1 percent.The country entered a second growth accelerationin 1999, but it was weaker (average annualgrowth of 5 percent) and shorter than the first.By the end of 2003, output per capita had begunto fall, and during 2004–2008 the economy stagnated,with output growth barely keeping up withpopulation growth. Output per capita declinedby more than 4 percent in 2009 as a result of theglobal recession, and in the short term, returningto the average growth experienced in 2004–2008would likely be considered a success.The timing of these periods of boom and declineare very important for the country’s growth diagnostic.By definition, if a constraint is binding,then changes in the constraint should have somegrowth consequences. Conversely, it is difficult to6

argue that a constraint is binding if it has changedmarkedly in the recent past with no growth effect.We therefore use the periods outlined in theprevious paragraph to identify the binding constraintson Belize’s growth.121086420-21981198219831984What were the general events surrounding theseperiods of accelerated growth and decline? Therecession at the time of independence was precededby an unprecedented export boom thatcollapsed at the same time that independencewas achieved. Figure 1.5 shows that in 1975 and1980, merchandise exports per capita peaked atalmost triple their current levels. Today, exportsper capita are at a level similar to that in 1960.The booms and collapses in Belize’s exports duringthe 1970s and early 1980s were concentratedFigure 1.4. Growth Rate of GDP per Capita(Including Post–Hurricane Dean Projection and Period Averages)19851986198719881989199019911982199319941985199619971998199920002001200220032004200520062007chapter 1Diagnosing the Binding Constraints on Economic Growth-4-6Sources: For 1981–2005, World Bank, World Development Indicators; for 2006, data from the government of Belize; for 2007,estimate from the government of Belize; and for 2007 incorporating the effects of Hurricane Dean (red), IDB (2007a).Figure 1.5. Exports and GDP per Capita over TimeExports and GDP, Belize (WDI)GDP per capita (constant US$ 2000) – WDI (2005)10002000300040005001000 1500 2000Merchandise exports per capita (constant US$)Source: World Bank, World Development Indicators.7

chapter 1Diagnosing the Binding Constraints on Economic Growthin the sugar market and mainly due to fluctuationsin international prices. The first recessioncan therefore be traced to the sugar collapse.Figure 1.6 shows that the nonsugar merchandiseexport basket has expanded since independence,although only to a small degree.Figure 1.6. Real Exports per Capita, IncludingNonsugarThousands of 2000 US$21.81.61.41.210/80.60.40.2019701972197419761978Real exports per capitaReal exports per capita (non-sugar)19801982198419861988199019921994199619982000Source: Authors’ calculations using Feenstra et al. (2005).The first growth acceleration, from 1986 to 1993,has been attributed in part to the “discovery” ofthe tourism sector. Prior to this period, the tourismsector was virtually nonexistent in Belize. Ithas since become one of the economy’s largestsectors, representing approximately 20 percentof GDP and 25 percent of employment. 2 Therewas also an investment boom associated with theshort-lived “economic citizenship” program. 3 Investmentduring this period was more than 25percent of GDP, as illustrated in Figure 1.7. Someof this investment was due to a boom in foreigndirect investment (FDI), but the majority was domesticallyfinanced.After 1990, however, the trend that ignited thisgrowth acceleration reversed. FDI net inflowsfell from a peak of 5.15 percent of GDP in 1989to 1.6 percent of GDP in 1993 (World Bank,World Development Indicators), and the governmentincreased investment to fill the gap. Capitalexpenditures as a percentage of GDP rose fromFigure 1.7. Gross Fixed Investment(percent of GDP)Percent of GDP323028262422201816141210864201980198319861989199219951998Source: IDB based on Statistical Institute of Belize.12.6 percent of GDP in 1990 to almost 19 percentby 1992. Government consumption alsoincreased slightly, from 20.4 percent of GDP in1990 to 21.8 percent in 1992, and governmentrevenues fell from 31.2 percent of GDP in 1990to 29 percent of GDP in 1992 (Central Bank ofBelize 2007). As a result of ballooning current andcapital expenditure along with falling revenues,the government quickly went from having a smalloverall budget surplus in 1990 to running a deficitof almost 8 percent of GDP by 1993. At the sametime, exports fell from 38 to 35 percent of GDP,while imports grew from 56 to 62 percent of GDP,worsening the trade balance. The current accountdeteriorated from a surplus of 7 percent in 1990 toa deficit of 11 percent in 1993, leading to expandingdebt and falling international reserves.Although the private investment boom in 1986and 1987 had slowed by 1990, growth continuedon the back of expansions of government investment.But by 1993 this public spending bingecould not be sustained, and the government instituteda home-grown adjustment program, cuttingpublic investment significantly, from a peak ofnearly 19 percent of GDP in 1992 to only 6 percentof GDP by 1996, at which point the overallbudget returned to near balance. Reserve requirementswere increased, which raised interest ratesand tightened credit. After 1993, the fiscal, trade,20012004200723Meeting with Rosella Zabaneh (President) and Andrew Godoy (Executive Director), Belize Trade Industry Association. Belize City,September 26, 2007.Meeting with Joseph Waight, Financial Secretary, Ministry of Finance, Belmopan, September 24, 2007.8

and current account deficits all began to close, andoutput per capita fell by an average of 1.1 percentfor the following five years.In many ways, the subsequent decade was déjàvu all over again: growth acceleration fueled by apublic investment binge that was unsustainable,subsequently requiring adjustment and leading toa recession. In 1999, public investment jumped by5 percent of GDP, and by 2000 it was well overdouble its 1998 level. In 2000, the current accountdeficit doubled, and the budget deficit tripled.Money was loose and trade deficit was expanding.By 2004, the government again had to institutea home-grown adjustment program, which initiatedthe current phase of economic stagnation.However, there were also some important differencesbetween the two accelerations. Gross nationalsaving collapsed in the 1990s (see Figure1.8). It had been approximately 28 percent ofGDP since 1986, but between 1990 and 1999, itfell by two-thirds. This principally involved a collapsein private saving, which went from 15 percentof GDP in 1994 to 5 percent by 1998.Figure 1.8. Gross National Saving(percent of GDP)Percent of GDP323028262422201816141210864201984198619881990199219941996199820002002200420062008Source: IDB based on Statistical Institute of Belize.The second boom in investment during the secondgrowth acceleration was in the context of lownational saving, making the resulting current accountdeficits much larger than those during thefirst boom. Government deficits were not domesticallyfinanced, unlike in the first investmentboom, as shown by the ratio of national savingsto investment (see Figure 1.9). Savings were 102percent of investment during the first growth acceleration,but fell below 30 percent during thesecond growth acceleration.Figure 1.9. Gross National Savings as a Percentageof InvestmentPercent of GDP180160140120100806040200198519871989199119931995Source: IDB based on Statistical Institute of Belize.The 1999–2003 growth acceleration was drivenby external borrowing. Public sector externaldebt tripled, from US$300 million in 1999 tomore than US$900 million in 2003. Taxes werelowered, public investment increased, and stateownedenterprises provided inexpensive credit. Atthe same time, money was loosened, which furtherincreased private sector credit (Central Bankof Belize 2007).Much of the spending during this boom was notproductive investment that would generate immediateaccelerated growth that could maintainthe acceleration. The Development Finance Corporation(DFC), a publicly owned finance institution,was a significant source of new investment(see Figure 1.10). The majority of its new lendingwas in building and construction, much of whichwas residential construction, along with someconstruction of schools. 4A significant proportion of these loans subsequentlywent into default (for example, 92 percent of theDFC’s real estate lending; Nogales 2006) and had tobe assumed by the government.199719992001200320052007chapter 1Diagnosing the Binding Constraints on Economic Growth4Ibid.9

chapter 1Figure 1.10. Development Finance Corporation Loan Portfolio, 1977–2006(BZ$ thousands)140.00120.000100.000Diagnosing the Binding Constraints on Economic Growth80.00060.00040.00020.0000Source: Nogales (2006).19781979198019811982198319841985198619871988198919901991199219931994There were important and costly cases of corruptionas well (IMF 2006), and as a consequence theDFC was put into liquidation.The current period of stagnation, from 2004 tothe present, has occurred in the context of significantfiscal adjustment. Between 1999 and 2005,interest payments on external debt rose from 2 to7.5 percent of GDP. To maintain the same overallbudget deficit of −5.5 percent of GDP, the governmenthad to slash public investment from 12.9to 4.1 percent of GDP, a reduction of 8.8 percent. 5As detailed in IMF (2006) and IDB (2007a), thisadjustment program has basically required a moratoriumon public investment and infrastructuremaintenance, as well as new hires and public sectorwage increases. Public investment averaged 4.2percent of GDP between 2005 and 2009, and theoverall fiscal deficit was held to only 2.3 percent ofGDP. The current account deficit narrowed sharplyin 2006 and 2007, expanding only temporarilyin 2008 as the result of a surge of foreign directinvestment in tourism. Growth from 2004 to 2008averaged only 3.5 percent, of which about 1 percentagepoint was attributable to the rapid growthof petroleum production following the discoveryof commercial deposits in 2006. In 2009, GDP isestimated to have contracted by approximately 1percent in the context of the global recession.This synopsis of Belize’s growth dynamics overthe past two decades reveals that periods of19951996199719981999200020012002200320042005growth acceleration and collapse were tightlylinked with booms in public spending, credit tothe private sector, and deterioration in the currentaccount. This signals that the binding constrainton growth is likely on the finance side ofthe Hausmann, Rodrik, and Velasco (2004) decisiontree. In the remainder of the chapter, we firstmove down the decision tree, showing that problemsof access to finance do indeed constitute theprincipal constraints on Belize’s growth. We thenprovide evidence that other potential constraintsare not binding and conclude with policy recommendationsin light of the diagnostic.1.4 Growth DiagnosticsThe growth diagnostics framework asks the question:Why is investment in Belize not higher? Theframework begins by considering whether investmentis low because of the high cost of finance orbecause of low appropriable returns. Low appropriablereturns could in turn be due to appropriabilityproblems, lack of complementary inputs, or coordinationfailure in the emergence of new activities.1.4.1 Is It Bad Finance?Building & ConstructionTransportProfessional ServicesTourismAgricultureStudent LoansGovernment ServicesThe interest rates charged on loans in Belize arequite high. Figure 1.11 shows that the rates areamong the highest in the country’s income group,even though Belize’s currency has been pegged tothe U.S. dollar at the same rate for more than 305Of this reduction, 1 percent was a reclassification of current expenditure that was previously classified as investment.10

Figure 1.11. Real Lending Rates in Belize’sIncome Band, 2005.1.08Figure 1.13. Real Deposit Rates in Belize’sIncome Band, 2005.15chapter 1Density.06.04.020Belize0 20 40 60Real lendingSource: Economist Intelligence Unit.Note: The real lending rate is calculated using the change inconsumer prices. The histogram shows all countries with logper capita (purchasing power parity) equal to that of Belize ±1.years, meaning there should be little exchange raterisk. The leading local bank reports that even itsbest corporate customers are charged 12 percenton loans, although inflation has not surpassed 4percent in more than a decade. Belize is clearly ahigh-cost-of-finance country.Lending rates could be high either because ofpoor financial intermediation or because of lowsavings. One way to distinguish between the twopossibilities is through interest rate spreads: poorlocal financial intermediation would manifestitself in high operating costs in banks and correspondinglyhigh spreads. If the problem is sav-Figure 1.12. Interest Rate Spreads in Belize’sIncome Band, 2005.15Density.1.050Belize-20 -10 010 20Real depositSource: Economist Intelligence Unit.Note: The real deposit rate is calculated using the change inconsumer prices. The histogram shows all countries with logGDP per capita (purchasing power parity) equal to that ofBelize ±1.ings rather than intermediation, the deposit rateshould be high and the spread low.Both spreads and deposit rates are high in Belize,as shown in Figures 1.12 and 1.13. However, onthe margin it seems that although spreads could beconsidered high but reasonable, the deposit rate isclearly very high, despite the fact that Belize has asubstantial tax on financial intermediation throughreserve requirements, which according to our estimate(see below) contributes a substantial portionto the spread. It is important to note, however, thatInternational Monetary Fund (IMF) estimatessuggest a lower contribution of reserve requirements,making poor financial intermediation moreof a worry. On balance, although financial intermediationin Belize may be a constraint on growth,the principal source of the country’s high cost offinance seems to be low savings.Diagnosing the Binding Constraints on Economic GrowthDensity1.050Belize0 10 2030 40SpreadSource: Economist Intelligence Unit.Note: The histogram shows all countries with log GDPper capita (purchasing power parity) equal to that of Belize ±1.As discussed above, aggregate national savingssuffered a significant collapse in the early 1990sand have not recovered. Private savings were themain source of that collapse, going from 15 percentof GDP in 1994 to 5 percent in 1998 and−6.5 percent in 2002 (IMF 2006). They havesince rebounded, and in 2005 reached 10 percentof GDP. Unfortunately, however, at the same timepublic savings have been wiped out by ballooningdebt service payments, keeping aggregate savingslow. Gross domestic savings in Belize (as a percentageof GDP) remain among the lowest in itsincome group (see Figure 1.14).11

chapter 1Diagnosing the Binding Constraints on Economic GrowthFigure 1.14. Gross Domestic Savings versus GDPper Capita, 2005(logs)Gross domestic savings (% of GDP), (WDI) 2007.806040200-20Belize6 7 89 10 11IngdppcSource: World Bank, World Development Indicators.Access to external finance has become a majorproblem since the accumulation of public debt inthe late 1990s. Belize had to renegotiate its debtin 2007 to avoid default. Debt sustainability analysisconducted prior to the renegotiation showedthe level to be unsustainable (IMF 2006), but therenegotiation reduced the net present value of thedebt by approximately 20 percent and changedthe time profile with a step-up interest rate. Thedebt level is now considered sustainable, as longas the country maintains a prudent fiscal stance(IDB 2007a). Not surprisingly, the government isnow virtually shut out of international financialmarkets and will be for the foreseeable future.As discussed in the growth dynamics section,Belize’s growth history has been one of Keynesiangrowth closely linked to fiscal spending andthe country’s external position. The current accountconsistently moves into deficit during periodsof accelerated growth and then recoversduring recessionary periods. The first growthacceleration from 1986 to 1993 was driven byFDI and private investment until there was aboom in public investment in the early 1990s.There was then a period of adjustment duringthe 1994–1998 recession when the publicbudget and current account returned to balance.Beginning in 1999, there was another public investmentboom, and in the context of low savingsand a lower tax take, an explosion in publicdebt. As discussed above and shown in Figure1.15, it is clear that Belize suffers from lack offiscal discipline.The country’s fiscal problems seem to be principallyon the expenditure side, though there arealso problems on the revenue side. The tax takeis currently more than 23 percent of GDP, makingBelize’s tax system one of the most effectivein Central America and the Caribbean ( Jenkinsand Kuo 2006). However, this is down from morethan 30 percent in 1990 (Central Bank of Belize2007). Tax revenues as a percentage of GDP fellsignificantly between 1990 and 1994, and theyhave remained at the same lower level ever since,exacerbating the budget deficit problem duringthe second spending boom.Figure 1.15. Growth Rate of GDP per Capita, Budget Balance, and the Current Account151050198119821983198419851986198719881989199019911992199319941995199619971998199920002001200220032004200520062007-5Projection afterHurricane Dean-10Growth Rate ofGDP per capita-15Average Growth Rate-20Current AccountBalanceBudget Balance-25Sources: For 1981–2005, World Bank, World Development Indicators; for 2006, data from the government of Belize; for 2007, estimatefrom the government of Belize; and for 2007 incorporating the effects of Hurricane Dean (red), IDB (2007a).12

Figure 1.16. Growth Rate of GDP per Capita and Political Cycles15105chapter 10-5-10-15-20-2519811982198319841985198619871988Sources: For 1981–2005, World Bank, World Development Indicators; for 2006, data from the government of Belize; for 2007, estimatefrom the government of Belize; and for 2007 incorporating the effects of Hurricane Dean (red), IDB (2007a).Note: Dotted lines indicate general election years.There are also signals that the country’s lack offiscal discipline could be linked to political cycles(see Figure 1.16). Both growth accelerations werefueled and extended by unsustainable public investment.Interestingly, the final years of the twogrowth accelerations also happened to be electionyears. In fact, the three years when the government’sbudget balance reached a low point beforereverting toward balance (1984, 1993, and 2003)were election years. Although public institutionsare not found to be a constraint on growth interms of reducing appropriability, public institutionsgoverning public spending seem to be affectinggrowth through their impact on spendingand debt accumulation.In addition to low savings and poor fiscal discipline,the constraint on access to finance in Belizehas another, related driver. Government borrowingmay have damaged the private sector’s access to externalfinance, but it has not crowded out domesticborrowing directly, because it is from abroad.However, government spending harms domesticfinance through monetary policy. Belize has a fixedexchange rate regime. Besides capital controls, thecountry’s only monetary policy tool is reserve requirements,which are dedicated to maintaining theexchange rate. Reserves accumulated to meet these1989199019911992199319941995199619971998199920002001200220032004200520062007Projection afterHurricane DeanGrowth Rate ofGDP per capitaAverage Growth RateCurrent AccountBalanceBudget Balancerequirements are unremunerated and therefore area direct and significant tax on financial intermediation,which exacerbates the cost-of-finance problemin a country with already high spreads andseemingly inefficient and uncompetitive financialintermediation. We estimate that just under half ofthe interest rate spread observed in Belize in 2006was due to reserve requirements, 6 although otherestimates suggest a smaller contribution. Moreover,reserve requirements are lowered during periods ofeconomic expansion and raised during contractionto relieve pressure on the exchange rate, makingthis tax strongly procyclical.It is interesting to note that although reserve requirementsare a significant and procyclical tax onintermediation, over the past seven years, whilereserve requirements were rising, spreads were actuallyfalling (see Table 1.1). The fact that financialinstitutions were able to absorb these increasesin requirements and still reduce spreads suggeststhat they began from a position of quite low efficiency,although it also suggests that efficiency inthe country’s financial system has improved.The binding constraint on growth in Belize is thehigh cost of finance, behind which are primarilypoor budgeting institutions, causing a lack of fis-Diagnosing the Binding Constraints on Economic Growth6This estimate has been made using the zero-profit condition for banks, which implies that the lending rate minus the deposit rate isequal to operating costs plus the product of the reserve ratio and the deposit rate, all divided by one minus the reserve ratio. Solvingthis equality for operating costs allows us to measure the contribution to the spread of operating costs versus the reserve ratio.13

Table 1.1. Changes in Reserve Requirements and Evolution of Bank Spreadchapter 1Diagnosing the Binding Constraints on Economic GrowthDateCash reserveratio(percent)cal discipline, low savings (in part due to the debtoverhang), and taxation on financial intermediation,as well as inefficient and uncompetitive domesticfinancial intermediation. The appropriate policiesto relax these constraints are to maintain fiscal sustainabilityand reverse the downward trend in thetax take to reduce incrementally the debt overhang,while creating budgeting institutions that are moreinsulated from the political cycle and do not allowunsustainable spending booms in the future. Otherinitiatives to improve efficiency in domestic financialintermediation and increase domestic savingsshould also be pursued. Although this would incrementallydraw down the cost of capital, in themeantime the focus would have to be on investorsthat do not face the domestic interest rate, which requiresdifferent priorities in the country’s industrialstrategy, as well as creative ways to finance neededpublic goods. Before discussing these policy implications,however, we provide evidence that the otherpotential constraints on growth are not binding.1.4.2 Is It Low Appropriability?Liquid assetratio(percent)Investment could be restricted in Belize becauseinvestors do not expect to appropriate the highsocial returns that their investments generate.This could happen through a number of channels,such as direct taxes, indirect taxes through excessiveregulation, price or exchange rate instability,or crime and corruption.It is difficult to say that Belize is restricting investmentsthrough excessive direct taxation. Table1.2 shows that Belize has one of the lower tax environmentsin the region.Deposit(percent)Lending(percent)Spread(percent)April 2000 3 24 5.4 16.2 10.8September 2002 5 24 4.4 14.5 10.1November 2002 6 24 4.6 14.4 9.8April 2004 6 19(classificationchange)5.0 13.8 8.8December 2004 7 20 5.2 14.0 8.8May 2005 8 21 5.4 14.3 8.9January 2006 9 22 5.8 14.3 8.5September 2006 10 23 8.1 14.2 6.1Source: Central Bank of Belize (2007).In addition, Belize enjoys price stability and hasfor some time, thanks to the exchange rate peg.Inflation has not exceeded 7 percent for morethan 20 years, and there are no inflation crisesmatching up with the growth dynamics (Figure1.17).Belize’s currency has been pegged to the U.S.dollar at the same rate for more than 30 years.There is no evidence that the currency is overvalued,as can be seen in Figure 1.18, which showsthe purchasing power parity adjustment. This assessmentis shared by the IMF (2006). There wassome fear that the exchange rate would have todepreciate after the country’s debt accumulation,but this threat has been eliminated by the recentdebt restructuring, at least for the near future(IMF 2006). Given that international reserves areat very low levels, there may be some continuedworry about the long-term viability of the peg.Yet depreciation would only help investment intourism and the agriculture export sector, whichare key destinations for investment. Therefore, itis difficult to argue that the level or volatility ofthe exchange rate is restricting investment.The regulatory environment does not seem to beharming appropriability in Belize, as the countrydoes quite well in cross-country ratings. TheWorld Bank’s Doing Business, which collects actualdata on times and costs rather than relyingon opinion surveys, finds that Belize comparesfavorably to its neighbors in ease of doing business(Table 1.3). In addition, the World BankGovernance Indicators (Kaufmann, Kraay, andMastruzzi 2005) do not suggest crime or expro-14

Profit tax(%)Table 1.2. Corporate Taxes(percent)Labor tax andcontributions (%)Other taxes(%)Total tax rate(% profit)Costa Rica 10 30.1 42.8 83Colombia 25.2 31.7 25.9 82.8Dominican Republic 48 16.4 3.5 67.9Nicaragua 27 19.7 19.7 66.4Panama 18.2 21.5 12.6 52.4Honduras 17.7 11 22.7 51.4Seychelles 22.9 25.4 0.5 48.8Antigua and Barbuda 31.1 9.8 7.6 48.5Grnada 24.6 5.8 12.4 42.8Guatemala 2.7 14.7 23.4 40.9Mexico 5.3 30.2 1.6 37.1Dominica 26.4 8.1 0.3 34.8St. Vincent and the26.1 4.1 3.5 33.6GrenadinesBelize 22 6.8 3 31.7St. Lucia 24.1 5.8 1.6 31.5El Salvador 15 11.6 0.9 27.4Source: World Bank (2006).Figure 1.17. Inflation12Figure 1.18. Purchasing Power Parity Adjustmentversus GDP per Capita, 2004chapter 1Diagnosing the Binding Constraints on Economic GrowthAnnual average % change in the consumer price index10864201981 1984 1987 1990 1993 1996 1999 2002 2005 2008-2Source: Statistical Institute of Belize and International MonetaryFund, International Financial Statistics.21.51LPPPADJ.50-.52.5 3 3.5 4 4.5 6GDP per capitaSource: World Bank, World Development Indicators.Note: Belize is shown in red.priation (Figure 1.19). Yet crime is a potentialarea for future concern. Violent crime has surgedin Belize City, which the tourism industry citesas a long-term concern. 7 But on balance the evidencesuggests that concerns over appropriabilityare not restricting growth in Belize.1.4.3 Is It Missing ComplementaryFactors of Production?Another possibility is that low expected appropriablereturns could be constraining investment inBelize not because of low appropriability, but in-7Meeting with Rosella Zabaneh (President) and Andrew Godoy (Executive Director), Belize Trade Industry Association. Belize City,September 26, 2007.15

Table 1.3. Ease of Doing Business Rankings, 2010chapter 1Diagnosing the Binding Constraints on Economic GrowthLatin American comparatorsSmall state comparatorsColombia 37 St. Lucia 36Mexico 51 Antigua and Barbuda 50Panama 77 The Bahamas 68Belize 80 St. Vincent and the Grenadines 70El Salvador 84 Jamaica 75Dominican Republic 86 Belize 80Guatemala 110 Dominica 83Nicaragua 117 Grenada 91Costa Rica 121 Seychelles 111Honduras 141Source: World Bank (2010).Figure 1.19. World Bank Governance Indicators, 2008Rule of Law (Kaufman)Regulatory quality (Kaufman)Est. Rule of Law3.02.01.00.0–1.0–2.0NZL NORLUXGBRUSAJPNCHL ESPSAMVCTCRISYCGHA BLZCHN BRA PANRWA STP MNGSLVDOM COLMOZMEXNICPERBDIPAKLBRBOL PRY RUSHTIECUGNQZARVENAFGEst. Regulatory Quality3.02.0CHLNZLGBR USALUX1.0ESP JPN NORPANSLV COLCRIMEXGHABRA0.0BLZMNG CHNNICDOMRWA PAKSAMRUSSTPSYCHTI–1.0BDIBOLECUZARLBRGNQAFGVEN–2.0ERITKM–3.05 6 7 8 9 10 11 12log (GDP per capita PPP)–3.05 6 7 8 9 10 11 12log (GDP per capita PPP)Corruption Control2.01.00.0–1.0Political Stability (Kaufman)LUXNORSAMNZLSYC JPNBLZ CHL GBRUSASTP MNG TKMSLVGHADOMPANRWABRA ESP GNQNIC CHNMEX RUSERIECULBRBOLVENBDI HTI–2.0ZARAFG PAK–3.05 6 7 8 9 10 11 12log (GDP per capita PPP)Est. Corruption of Control3.02.01.0Corruption Control (Kaufman)CHLNZLLUXGBRNORUSAESP JPNSAMSYC0.0RWAGHA SLVBLZ BRAPANMEXERI STP BOLCHNLBRMNG DOMNIC ECUBDIPAK–1.0RUSZARHTIVENTKMAFGGNQ–2.05 6 7 8 9 10 11 12log (GDP per capita PPP)Source: World Bank.16

Figure 1.20. Global Competitiveness Report, 2006InnovationsInstitutionsInfrastructurechapter 1Business sophisticationTechnological readynessMarket efficiencyHigher education and trainingMacroeconomyHealth and primary educationDiagnosing the Binding Constraints on Economic GrowthBelize Efficiency-driven economies SurinameLatin America & CaribbeanSource: Lopez-Claros et al. (2006).stead because of low social returns to investmentdue to missing complementary factors of production,particularly infrastructure and education.Infrastructure provision is inherently problematicin a tropical country with a very low populationdensity, making Belize a structurally high-costcountry for infrastructure and utilities. 8 However,notwithstanding these difficulties, Belize ratesquite high in the infrastructure category of theGlobal Competitiveness Report (Lopez-Claros et al.2006). In fact, this is the only category in whichBelize surpasses the average for Latin Americaand the Caribbean (see Figure 1.20).According to comparative data in the World DevelopmentIndicators, telephone and road coveragein Belize is lower than in its neighbors, but thisis to be expected given the country’s low populationdensity (Figure 1.21). There are few, if any,reports by the private sector of congestion atshipping ports or road quality hampering output(IDB 2007b). In regard to information technologyinfrastructure, the country rates quite well. Anew fiber-optic connection was brought online in2001, 9 and there has been recent growth in callcenters. Ready Call, an international call center,opened in June 2005 in Belize City and has approximately700 employees. 10 There are also informationtechnology firms (principally in theonline gaming industry) in a techno park not farfrom Belize City.Given that there is growing investment in infrastructure-intensiveindustries, few reports of congestion,good international rankings, and a lackof infrastructure shocks coinciding with growthdynamics, it is difficult to argue that infrastruc-8910Meeting with Roberto Young and Anna Rossington, Public Utilities Commission, Belize City, September 25, 2007.Ibid.“Ready Call Moves to Much Improved Offices,” News 5 Belize, December 20, 2006.17

Figure 1.21. World Bank Infrastructure Indicatorschapter 1807060Roads Paved (% of total)12001000Mobile Phone Subscribers (per 1000 people)50800Diagnosing the Binding Constraints on Economic Growth4030201006005004003002001000BLZHNDHNDTelephone Mainlines (per 100 people)GTMCRIDOMMEXBLZGTMJAMDOMVCTCYPMEXVCTCRIJAMCYPInternational Internet Bandwidth (bits per person)Source: World Bank, World Development Indicators (2005, except for data on paved roads, which are from 1999, the most recent year forwhich data are available).Note: According to the Public Utilities Commission, mobile phone penetration in urban areas is 700 per thousand and will increasemarkedly in urban areas now that Code Division Multiple Access service has been introduced (meeting with Roberto Young and AnnaRossington, Public Utilities Commission, Belize City, Belize, September 25, 2007).60040020007006005004003002001000HNDCRICRIBLZCTMDOMBLZMEXVCTCYPCYPJAMture is the binding constraint on Belize’s growth.However, there are some concerns for the future.The fiscal adjustment required by ballooning interestpayments on government debt has led thegovernment to cut public investment by morethan 7 percent of GDP. According to the Ministryof Finance, this was accomplished in partwith a virtual suspension of road maintenance—a cause for concern given Belize’s geography andweather conditions. The country’s road networkcould quickly deteriorate and become a constrainton investment (IDB 2007b), particularly in agriculture,which is intensive in rural areas.In addition, there are complaints about sanitationin Belize City, as well as rural airport infrastructure,which may negatively affect the tourismsector. Tourism in Belize is marketed as “MotherNature’s best kept secret.” Therefore, sanitationproblems could harm the country’s image, particularlyin the cruise sector, as cruises to the countrydock in Belize City. Moreover, the rural airportnetwork is important for transporting internationalarrivals in Belize City to their ultimate destination,often in the cayes. Currently, the ruralairports lack lighting that would allow for nightflights, meaning that any international touristswho arrive in Belize City late in the day have toovernight there before getting to their ultimatedestination, which hurts the country’s competitivenessin tourism. Infrastructure problems thusmay become a drag on future growth, largely as aresult of the lack of funds for public investment.Returns to investment can also be low as a result ofinsufficient provision of education to a country’sworkforce. However, on the whole it is difficultto make this argument in regard to Belize. Thecountry enjoys relatively high enrollment rates inbasic education (primary and secondary) (Figure1.22). In addition, the stock of tertiary educationin the labor force compares well with that inneighboring countries. As of 2004, 8.9 percent ofBelize’s labor force had completed tertiary edu-18

Figure 1.22. Enrollment Rates for Primary and Secondary SchoolSchool enrollment, primary (% net) - WDI (2005)1004 6 8 10 12 4681012Source: World Bank, World Development Indicators.Average Years of Schooling8060401211109876GTMBLZBRBDOM MLT JAMCYPIngdppcCRIFigure 1.23. Average Years of Schooling by Birth CohortSchool enrollment, secondary (% net) - WDI (2005)100806040200JAMBLZDOMIngdppcCYPBRBMLTCRIBelizeMexicoPeruColombiaParaguaychapter 1Diagnosing the Binding Constraints on Economic Growth541940 1945 1950 1955 1960 1965 1970 1975 1980Source: Authors’ calculations using household surveys.Note: Cohorts are defined as those born in the year indicated or the four years prior.cation (authors’ calculations), compared with 7.6percent in Brazil, 8.6 percent in Chile, 11.6 percentin Colombia, 7.2 percent in Costa Rica, 7.0percent in El Salvador, and 4.1 percent in Nicaragua(Auerbach, Genoni, and Pages 2007).This relatively favorable situation with respectto education enrollment and the stock of tertiaryeducation graduates is despite the fact that Belizehas not been accumulating education at the samerate as other Latin American countries, as considerationof the average years of schooling by yearof-birthcohort reveals (Figure 1.23). Amongthose born in the 1940s, and therefore educatedin the 1950s, average years of education werehigher in Belize than in Peru, Colombia, Mexico,and Paraguay. But by the 1990s, Peru, Mexico,and Paraguay had overtaken Belize on this indicator,with Colombia close behind.The most telling indicator of insufficient education’sconstraining a country’s economic growth isin the economic returns to education. If a country’slabor force is demanding more education than thestate is supplying, the price of educated workerswill be high and rising. As Figure 1.24 shows, however,returns to education in Belize among urbanmales have been rising slightly, but they remain less19

Figure 1.24. Returns to Education, Urban MalesFigure 1.25. Terms of Tradechapter 1Diagnosing the Binding Constraints on Economic Growth1816141210020002001 2002 2003 2004YearBelize Mexico Colombia Paraguay PeruSource: Authors’ calculations using national household surveys.than 10 percent per year. This is much lower thanMexico’s 16 percent, Colombia’s 13.5 percent, andParaguay’s 11.5 percent.The slow accumulation of education in Belize maybe a long-term growth concern for the country aswell as an immediate social concern. Moreover,behind the aggregate tertiary education numbers,it is possible that some sectors are suffering ashortage of specific skills that they must import,partly as a result of specific vocational gaps in theprovision of tertiary education. However, on balancethe evidence shows that the provision of educationis not currently a significant drag on thecountry’s growth.1.4.4 Is It Too Little Self-Discovery?2005We have discarded low returns due to appropriabilityproblems, as well as lack of complementaryinvestments, as constraints on Belize’sgrowth. However, another potential constraint islow social returns resulting from market failuresin the discovery of new productive activities. It ispossible that even in the presence of good infrastructure,education, and investment conditions,growth is constrained simply because of a lack ofproductive investment ideas and market failuresthat prevent their emergence.One indicator of this constraint can be found in theterms of trade (Figure 1.25). If a country’s growthdynamics are driven by price changes in primaryexport goods, then the lack of movement to newsectors when existing sectors face headwinds canbe a signal of a lack of self-discovery (Hausmann,Rodriguez, and Wagner 2006). But in the case ofBelize, there is no indication that this is takingIndex 2000 = 100Terms of trade (left hand axis)1201008060402001980198319861989199219851988200120042007Source: IMF Belize Country Desk.Real GDP growth (right hand axis)place, as the terms of trade have been only weaklycorrelated with changes in the growth rate. Theterms of trade deteriorated sharply during the firstgrowth acceleration after 1987, and then strengthenedwhen the economy went from growth accelerationto recession in the mid-1990s.The sophistication of a country’s export basket isanother signal that has important growth consequences(Hausmann, Hwang, and Rodrik 2007). Ifa country is suffering from a lack of growth due toinsufficient new activities entering the export basket,this indicator should be low for the country’slevel of development. By contrast, if the countryalready has a stock of high-value export activitiesrelative to its income level, it is difficult to arguethat a lack of discovery is holding back growth.In the case of Belize (shown in red in Figure 1.26),the export package has a low EXPY (see Haus-Figure 1.26. Export Sophistication versus GDP perCapita, 200610Export Sophistication (EXPY), log PPP8.5 9 9.586 7 8 9 10 11GDP per capita, log PPPSource: Authors’ calculations.14121086420-2-4Percentage change20

mann and Klinger, 2007), meaning the countryexports goods typical of countries poorer thanitself. However, this metric considers only merchandiseexports and therefore is typically lowerfor countries that rely heavily on tourism, as isthe case in Belize. Moreover, it is typically lowerfor smaller countries, meaning Belize should be16000140001200010000800060004000200001975198019851986198719881989Figure 1.27. Export Sophistication (EXPY) over Time19901991199219931994199519961997compared with other small states intensive intourism. But even compared with other CentralAmerican and Caribbean countries, Belize continuesto have a low level of export sophistication,in part because it has not kept pace with othercountries in upgrading its export basket (see Figure1.27).19981999200020012002200320042005BLZCRIGTMDMALCAVCTchapter 1Diagnosing the Binding Constraints on Economic GrowthSource: Authors’ calculations.Although a high EXPY is a strong signal that lackof self-discovery is not the problem, the oppositeis not necessarily true: a low EXPY does not necessarilyimply that market failures are hinderinggrowth. In the case of Belize, there appears tobe significant potential for expanded investmentin tourism and agriculture. These sectors are alreadythe most important in Belize’s productivestructure, and therefore expansion of investmentin them should not require significant coordinationcompared with what would be necessary incountries in which completely new activities haveto be discovered.In the case of tourism, there is much room to grow,in spite in the impressive growth in the number ofvisitors and tourism expenditures in the last twodecades or so. Overnight visitors per capita and asa percentage of overall arrivals in Belize are amongthe lowest in the Caribbean (see Figures 1.28 and1.29). As a consequence, tourism expenditure percapita in Belize is very low (see Figure 1.30), andthere remains tremendous room for the countryto grow in the area of overnight tourism.Figure 1.28. Arrivals per Capita in 2008 and (Log)PopulationArrivals per capita141210BGVSXM8ABWBON6AYA4CYM VIRBMUATGBHS2SKNMSRSLU BRBDMA CRDBLZMTQVCT0SUR GUY TTO JAM PRI DOM CUB0.00 1.00 2.00 3.00 4.00 5.00Log (population)Source: Caribbean Tourism Organization(http://www.onecaribbean.org/).In agriculture, there is also significant room fornew investment and growth. Existing fruit productioncould be expanded, and there is muchtalk of other nontraditional products, such asblack-eyed peas and kidney beans, as well as livestockproduction. Foreign buyers complain ofsupply constraints from Belize in nontraditional21

Figure 1.29. Overnights as a Percentage of Arrivals in 2008chapter 1Diagnosing the Binding Constraints on Economic GrowthGuyanaSt. Kitts and NevisSurinameAnguillaSabaSt. EustatiusMontserratTrinidad and TobagoDominican RepublicMartiniqueCuracaoJamaicaArubaBarbadosPuerto RicoBermudaSt. Vincent and the GrenadinesBritish Virgin IslandsThe BahamasSt. LuciaAntigua and BarbudaBonaireGrenadaBelizeU.S. Virgin IslandsSt. MaartenDominicaCayman IslandsSource: IDB based on Caribbean Tourism Organization (http://www.onecaribbean.org/).British Virgin IslandsSt. MaartenU.S. Virgin IslandsTurks and CaicosCayman IslandsBermudaArubaAnguillaBonaireThe BahamasAntigua and BarbudaBarbadosSt. Kitts and NevisCuracaoMontserratSt. Vincent and the GrenadinesGrenadaDominicaBelizePuerto RicoMartiniqueGuadeloupeJamaicaDominican RepublicCubaTrinidad and TobagoGuyanaSuriname0 20 40 60 80 100 120Figure 1.30. Tourism Expenditure per Capita, 2007(US$)02000 4000 6000 8000 10000 12000 14000 16000 18000Source: IDB based on Caribbean Tourism Organization (http://www.onecaribbean.org/).agricultural products, and domestic producerscomplain about the cost of credit rather than alack of opportunities. 11 The country has an amplesupply of unused land that is well-suited to agriculture.For example, the area devoted to sugarcaneproduction accounts for less than 10 percentof high-suitability land and less than 5 percent ofhigh- and medium-suitability land (authors’ calculations),the rest of which is not used for anycrops. The Ministry of Agriculture reports thatthere are no limits on the country’s agriculturalfrontier.There seems to be no confusion in regard to whatthe high-potential sectors are for Belize. The 2001“Belize Investment Guide” lists agriculture and11Meeting with Messrs. J. Castellanos, Policy Analyst; Tait, Economist; and Garcia, Advisor, Export Strategy, Ministry of Agriculture,Belmopan, September 24, 2007.22

agro-processing, tourism, mariculture, forestrybasedindustries, and tourism as high-potentialsectors for investment (Chamber of Commerceand Industry 2001). In 2004, a commissionedstudy again identified agriculture, tourism, andfurniture as high-potential sectors, along withfinancial services and information and communicationtechnology (ICT) industries. Beltraide(Belize Trade and Investment DevelopmentService) (2006) has released an export strategyidentifying agriculture and agro-processing, environmentalgoods and services, tourism, ICT, andfisheries and aquaculture as high-potential sectors.Finally, the product space analysis includedin the Appendix of Hausmann and Klinger (2007)identifies agriculture and agro-processing as wellas aquaculture as both similar to the country’scurrent structure of production (and hence easierindustries for Belize to develop successfully) andof high value.The problem does not seem to be identifying thehigh-potential sectors or coordinating their emergence,as there are already first movers in theseindustries. It is clear that Belize needs to upgradeits export basket, particularly in regard to nontraditionalagriculture for export, given the low levelof EXPY and eroding preferences for banana andsugar exports. But it seems that something otherthan coordination failure is preventing investmentin the country. Anecdotal evidence reinforcesthis conclusion: Mennonite communitiesin Belize—which use the same infrastructure andworkforce as the rest of the economy and operateunder the same property rights, but have theirown access to finance from abroad—have beeninvesting heavily and expanding significantly inagriculture (Nogales 2006). Upgrading the exportbasket and achieving higher growth will dependon overcoming the financial constraints hinderinginvestment. In the meantime, this will requirefinding sources of public and private investmentthat are not subject to the financing constraints ofthe government and the domestic private sector.This is taken up in the following section.1.5 Conclusions and PolicyRecommendationsThe growth “syndrome” in Belize is that of a highlyindebted state with a crippling debt overhang,arising from periodic public spending binges. Thelack of fiscal discipline this evidences (whose timingcoincides with political cycles) has created theexpected symptoms: repeated episodes of growthon the back of fiscal expansion with ballooningcurrent account, budget, and trade deficits, whicheventually require harsh adjustment and recession.The debt overhang has led to the virtual eliminationof public investment, although investmentsin road maintenance, sanitation, crime reduction,and rural airport upgrading are key for achievingfuture investment growth. Deficit spending hasalso led to increases in reserve requirements andtherefore greater taxation on financial intermediation.This, combined with very low aggregatesavings and inefficiency in the financial system,has resulted in an extremely high cost of capitalin Belize. Although high-potential sectors forinvestment exist and have been clearly identified,high interest rates on lending and insufficient accessto international financial markets have preventedgreater investment.The short-term tactical plan to emerge from thisdebt overhang is a form of home-grown adjustmentprogram. Additional recommendations forslowly decreasing the country’s debt burden andrecovering macroeconomic stability have also beenlaid out in IMF (2006) and IDB (2007a). It isimportant to stress that what is needed is not justshort-term tactics to escape the debt overhang,but also a longer-term strategy to end the country’scontinuous cycles of public spending binges.It is critical to institutionalize fiscal discipline andbetter insulate it from political cycles. The timingof ballooning budget deficits and general electionsis not likely to be a coincidence. There may be apolitical economy story wherein the beneficiariesof the public-investment-led Keynesian growthstrategy followed over the past two decades aredifferent from those who would benefit from amore sustainable, export-led growth pattern. Thepolitical economy of these two growth strategiesin Belize deserves further study.In addition to the need to follow the short-termadjustment program that has been established andinstitutionalize budgeting institutions, two interrelatedissues deserve special mention: implicit taxexpenditures and the declining tax take. As mentionedpreviously, the tax revenue–to–GDP ratiois lower today than it was in the early 1990s, andchapter 1Diagnosing the Binding Constraints on Economic Growth23

chapter 1Diagnosing the Binding Constraints on Economic Growththe government has to reverse this trend. Jenkinsand Kuo (2006) suggest some reforms to increaserevenues. However, investment incentive schemescurrently offered by the government pose a riskto future revenues. Anecdotal evidence suggeststhat the list of firms designated as export-processingzones, which are exempt from corporateincome tax for 10 years, is rapidly growing. Forexample, Belize’s shrimp industry was recentlygranted a highly attractive exemption from corporateincome tax. Export-processing zones arealso exempt from import duties, which are aprimary source of government revenue. WorldTrade Organization rules will eventually requirethese firms to be taxed ( Jenkins and Kuo 2006).Moreover, exempting the high-growth sector ofthe economy (new export-oriented productionand tourism) from income tax is a surefire wayto damage future government revenues. The governmentis attempting to tax the existing capitalbase but not new capital; at the same time, thereis a lack of funds for maintenance and investmentin complementary infrastructure, which isimportant to keep private returns high. This is ashort-run scheme that is not sustainable. A betterapproach would be more uniform corporate taxtreatment and investment promotion by ensuringhigh private returns to such investment, throughthe provision of the right complementary publicgoods and an attractive investment climate.Moreover, the lack of government revenue is leadingto continuous increases in reserve requirementsto maintain the exchange rate while financinggovernment deficits. This is increasing the cost offinance in an already financially constrained economy.The use of reserve requirements as a blunt andcostly tool to maintain the exchange rate has fewalternatives, and there is no appetite in the countryfor abandoning the currency peg. One alternativewould be to remunerate banks for the money tiedup by reserve requirements, but this is inconsistentwith the overriding need for fiscal space. Instead,given the signals that poor financial intermediationis also a significant contributor to the high cost offinance, a key focus of policy should be to improveefficiency in the financial system.capital and pull Belize away from its “stop-andgo”Keynesian growth path. In the meantime, thegovernment must also pursue a strategy of investmentattraction and promotion targeting investorsthat are not subject to the high domestic interestrates. The current strategy focuses on promotinglocal investment through tax incentives: it is focusedon the wrong investors and is using toolsthat only increase the cost of finance. Beltraide isgearing its efforts first toward promoting small andmedium-sized enterprises, second toward promotingexports, and third toward encouraging foreigndirect investment. As this strategy is inconsistentwith the constraints facing the country, Beltraideshould reorient its priorities and modest resourcesfirst and foremost toward attracting foreign directinvestment.However, with a staff of 15 (including administrators),Beltraide is short on resources. Giventhe country’s fiscal constraints, any new resourceswould have to come from savings in other areas.The current system of investment promotion requiresthat every single investment in an outwardorientedindustry be examined and approvedby the cabinet (in the case of Beltraide’s importduty exemptions) and a private sector board (inthe case of export-processing zone status). Thishighly discretionary system has high transactioncosts and leaves the door open to corruption andpolitically based spending. Instead, a uniformand stable business taxation system consistentlyapplied without exceptions would free up the resourcescurrently dedicated to this complex andad hoc system, rebalance the uneven playing fieldfor incumbents, and help reverse the downwardtrend in the tax take. Movements toward a unifiedtariff regime with a focus on excise taxes wouldalso reduce the need for outward-oriented industriesto seek ad hoc exemptions from import duties.These changes to the tax system are detailedin Jenkins and Kuo (2006), which addresses theirrevenue impact in detail. The point is that in additionto their positive fiscal benefit, the reductionin transaction costs generated by these changeswill allow resources (mainly personnel) to be refocusedon attracting new investment from abroad.These actions to reduce the debt overhang, institutionalizefiscal discipline, increase efficiencyin financial intermediation, and reduce the costof finance will gradually draw down the cost ofFinally, the need for public investment in roadmaintenance, rural airport infrastructure, crimereduction, sanitation, and so on, combined withthe need to maintain fiscal discipline to lower the24

cost of finance, suggests that alternative sourcesof funds for productive public investment mightbe considered. Ports and airports already benefitfrom private sector investment (IDB 2007b), andthis could be extended to the road network. Revenuebonds, used by municipalities in the UnitedStates for infrastructure investments, are anotheroption through which funds can be raised fromabroad with direct claims to future flows frominfrastructure. Low-cost multilateral finance andgrants might be available. The key considerationwhen seeking finance for such investments is thatthey have little to no impact on publicly guaranteeddebt, either directly or by creating contingentliabilities that the government might eventuallyhave to assume. As discussed previously, improvingthe fiscal situation is paramount.Future work is needed to better define the driversof fiscal imprudence and the policy optionsfor bypassing the constraint such imprudenceimposes in the short term and relieving it in thelong term. However, the diagnostic presented inthis chapter clearly shows that this is the bindingconstraint on growth in Belize, and therefore itshould be the focus of future public policy.chapter 1Diagnosing the Binding Constraints on Economic Growth25

chapter 1Diagnosing the Binding Constraints on Economic GrowthReferencesAgosin, M., E. Fernández-Arias, and F. Jaramillo.2009. Growing Pains: Binding Constraintsto Productive Investment in Latin America.Washington, D.C.: Inter-American DevelopmentBank.Auerbach, P., M. Genoni, and C. Pages. 2007.“Social Security Coverage and the LaborMarket in Developing Countries.” DiscussionPaper no. 2979. Institute for the Studyof Labor (IZA), Bonn.Beltraide (Belize Trade and Investment DevelopmentService). 2006. “National Export Strategy,Belize, 2007–2011.” Belmopan.Central Bank of Belize. 2007. Statistical Digest2007. Belize City.Chamber of Commerce and Industry. 2001. “BelizeInvestment Guide.” Belize City.Feenstra, R., R. Lipsey, H. Deng, A. Ma, and H.Mo. 2005. “World Trade Flows: 1962–2000.”Working Paper no. 11040. Cambridge, Massachusetts:National Bureau of EconomicResearch.Felipe, J., and N. Usui. 2008. “Rethinking theGrowth Diagnostics Approach: Questionsfrom the Practitioners.” Economics WorkingPaper Series no. 132. Asian DevelopmentBank, Manila. Available at http://www.adb.org/ Documents/Papers/Growth-Diagnostics/growth-diagnostics.pdf.Hausmann, R., J. Hwang, and D. Rodrik. 2007.“What You Export Matters.” Journal of EconomicGrowth 12, no. 1: 1–25.Hausmann, R., and B. Klinger. 2007. “The Structureof the Product Space and the Evolutionof Comparative Advantage.” Working Paperno. 146. Center for International Development,Harvard University, Cambridge, Massachusetts.Hausmann, R., B. Klinger, and R. Wagner. 2008.“Doing Growth Diagnostics in Practice: A‘Mindbook.’” Working Paper no. 177, Centerfor International Development, HarvardUniversity, Cambridge, Massachusetts.Hausmann, R., F. Rodriguez, and R. Wagner.2006. “Growth Collapses.” Working Paperno. 136. Center for International Development,Harvard University, Cambridge, Massachusetts.Hausmann, R., D. Rodrik, and A. Velasco. 2004.“Growth Diagnostics.” Center for InternationalDevelopment, Harvard University,Cambridge, Massachusetts. Unpublished.IDB (Inter-American Development Bank).2007a. “Belize: Independent MacroeconomicAssessment.” Washington, D.C. Unpublished.———. 2007b. “Belize: Transport Sector Study.”Washington, D.C. Unpublished.IMF (International Monetary Fund). 2006.“Belize: Selected Issues and Statistical Appendix.”Country Report no. 06/370. Washington,D.C.Jenkins, G. P., and C.-Y. Kuo. 2006. Fiscal Adjustmentfor Sustainable Growth in Belize.Economic and Sector Studies Series, RE2-06-020. Washington, D.C.: Inter-AmericanDevelopment Bank.Kaufmann, D., A. Kraay, and M. Mastruzzi.2005. “Governance Matters IV: GovernanceIndicators for 1996–2004.” Policy ResearchWorking Paper no. 3630. World Bank, Washington,D.C.Lopez-Claros, A., M. E. Porter, X. Sala-i-Martin,and K. Schwab (eds.). 2006. Global CompetitivenessReport 2006–2007. Geneva: WorldEconomic Forum.Nogales, X. 2006. “Belize: Unattended LoanDemand and Proposed Remedial Action.”Inter-American Development Bank, Washington,D.C. Unpublished.World Bank. 2006. Doing Business in 2006: CreatingJobs. Washington, D.C.———. 2010. Doing Business in 2010. Washington,D.C.———. Various years. World Development Indicators.Washington, D.C.26

Anchoring Fiscal Policy for Growth22.1 IntroductionChapter 1 noted that economic growth in Belize over the last two decades has been highly cyclical anddriven primarily by alternating periods of highly expansionary fiscal policies and abrupt adjustments.The resulting overhang of public debt is a primary factor in depressing national saving and raising localinterest rates. The central recommendation of Chapter 1 is sustained fiscal consolidation through institutionalizingfiscal discipline and halting the erosion of the country’s tax base, in order to reduce thecost of finance over time and thereby facilitate a faster rate of economic growth. This chapter furtherexplores the fiscal challenges facing Belize, outlines measures the government has taken so far to addressthose challenges, analyzes possible policy options, and makes a number of recommendations.2.2 Fiscal Challenges in Belize2.2.1 Overview of Aggregate Fiscal PerformanceAggregate fiscal outcomes in Belize have been highly variable and, as noted in Chapter 1, have followeda cyclical pattern whereby several years of large deficits have been followed by periods of near budget balanceor surpluses. In the roughly three decades since its independence, Belize has passed through threecomplete cycles of fiscal expansion and adjustment. Large deficits have been associated with fluctuationsin the rate of public investment—high capital expenditureshave caused large fiscal deficits. Indeed,public investment as a percentage of gross domesticproduct (GDP) has been almost the mirror im-20Figure 2.1. Public Investment and Overall BalancePublic investmentage of the fiscal deficit (Figure 2.1).15The latest expansionary phase, from 1999 to 2003,was particularly extreme and damaging. Public investmentin Belize rose from around 6 percent ofGDP to an average of 12.3 percent over those fiveyears. As a result, the country’s fiscal deficit averaged6.6 percent of GDP throughout the period.A huge expansion of the assets of the state-ownedDevelopment Finance Corporation (DFC) between1999 and 2003 subsequently contributed to% of GDP1050–5–10–15198119831985198719891991199319951997Overall balance199920012003200520072009fSources: Central Bank of Belize, Statistical Institute of Belize,and IDB projection.27

chapter 2Anchoring Fiscal Policy for Growthenormous losses at the institution. By 2004, theBelizean government had to step in and assumedirectly US$210 million (more than 20 percentof the GDP at the time) in guaranteed externalloans (IMF 2006). Government guarantees havealso been called in problematic privatizations ofstate companies.Large fiscal deficits from 1999 to 2004, as well asthe assumption of DFC losses, led to a rapid accumulationof external public and total public debt(Figure 2.2). The public debt–to–GDP ratio peakedat 102.3 percent of GDP in 2003. It declined significantlyfrom 2004 to 2008 as a result of fiscaladjustment, economic growth, and inflation, butincreased to a projected 85.8 percent of GDP bythe end of 2009 because of negative GDP growth,negative inflation, and a widening deficit in 2009associated with the global economic recession. 1Belize’s public debt is now one of the largest, relativeto the size of its economy, in the Caribbeanand Central America (Figure 2.3). Moreover, externaldebt accounts for an unusually high share(91 percent) of the country’s total public debt. Asa result, Belize’s external debt–to–GDP ratio isthe second highest in that region, after Grenada.Figure 2.2. Public and Publicly Guaranteed Debt% of GDP120100806040200199519961997199819992000200120022003200420052006200720082009pSources: IMF Article IV Consultation Reports, Central Bank ofBelize, and IDB projection.From 2004 to 2008 Belize’s government engineeredthe country’s third period of fiscal adjustmentsince independence, converting a fiscaldeficit of 10.8 percent of GDP in 2003 to a surplusof 1.1 percent in 2008. The scale of adjustmentwas large compared to international experience(Martin and Presciuttini 2007). But Belize hasachieved impressive stabilizations twice before.The country’s central fiscal challenge is to institutionalizefiscal discipline in order to prevent anotherdamaging “go-stop” cycle and to reduce thedebt overhang.Figure 2.3. Public Debt in the Caribbean and Central America (December 31, 2008)GuatemalaHondurasTrinidad and TobagoHaitiDominican RepublicThe BahamasPanamaEl SalvadorCosta RicaSt. Vincent & the Gren.St. LuciaNicaraguaBelizeDominicaGuyanaBarbadosGrenadaAntigua and BarbudaJamaicaSt. Kitts and NevisExternal DebtDomestic Debt0 50 100 150% of GDPSource: IMF Article IV Consultation Reports.1In early 2007 the government of Belize successfully concluded a debt exchange with its external private creditors. This comprehensiverestructuring avoided a debt default and smoothed the debt-servicing profile, but it did not reduce the principal, and external commercialdebt remained the same in nominal U.S.-dollar terms.28

It is going to get tougher, however, for Belize tomaintain a roughly balanced overall fiscal position—whichis necessary for debt sustainabilityreasons. Interest rates on the country’s restructured“superbond” will rise from the current ( January2010) 4.25 percent to 6 percent from August2010 until February 2012 and then to 8.5 percentfrom 2012 onwards. Other things equal, this willrequire higher primary surpluses just to maintainthe same overall balance and level of public debt.Moreover, the substantial scale of adjustmentnoted in the previous paragraph was enhanced byrevenue factors that may prove to be temporary.Foreign government grants averaged 2.3 percentof GDP in 2007 and 2008, compared with just 1percent between 2000 and 2006. If grants returnto the historical average, Belize will need to makean additional fiscal adjustment of 1.3 percent ofGDP to maintain the same overall balance. Similarly,petroleum revenues amounted to 0.9 percentof GDP in 2007 and 2 percent in 2008. If newcommercial petroleum discoveries are made (seeChapter 8), this revenue contribution could continueor increase. However, if new oil deposits arenot found, production and government revenuesare expected to taper off and then disappear byaround 2019 (IMF 2008).The combination of temporarily lower interestrates, temporarily higher grants, and the emergenceof petroleum revenues appears to have lessenedthe impetus in the country towards fiscalpolicy reform (Shukla 2009). However, as thesefactors diminish, the need for fiscal policy reformwill once again come into focus.2.2.2 Challenges Related to PublicExpendituresThe aforementioned aggregate fiscal outcomesreflect deeper challenges. In particular, institutionalconstraints on expansionary policies areclearly insufficient, and to date politicians havenot faced sufficiently strong incentives in favorof fiscal discipline. This section analyzes some ofthe underlying problems related to Belize’s fiscaloutcomes.along with other Caribbean countries, gained betteraccess to international financial markets in thelate 1990s. Sahay (2005) argues that at that time,Caribbean countries were able to place greatervolumes of debt in international markets as a resultof the growing popularity of emerging marketsin general, as well as global investors’ effortsto rebalance their portfolios in the aftermath offinancial crises in 1997 (Asia) and 1998 (Russia).Consequently, Belize was not alone, at least in themost recent period of fiscal expansion. Across theCaribbean there was a trend toward higher levelsof government expenditures, larger fiscal deficits,and a rapid increase in public debt. During1998–2003, the average public debt–to–GDP ratioin six Caribbean countries included in Sahay’s(2005) analysis rose by 8.5 percent of GDP peryear. Belize thus took advantage of a structuralchange in international finance and a relaxationof external financing constraints because domesticinstitutions were not strong enough to ensureself-discipline and hold it back.Weak Budgetary “Institutions”?The literature has shown that the political andinstitutional framework for fiscal policymakinghas an important impact on fiscal policy and fiscaloutcomes (see, e.g., Artana and Naranjo 2003).One strand of the literature has investigated theimpact of the form of government, whereas a secondstrand has focused on the institutions governingbudget procedures. In the first strand, variousstudies (e.g., Schick 1998) have found a strongcorrelation between the stability and cohesivenessof the government, on the one hand, and fiscaldeficits and debt-to-GDP ratios, on the other.Fragmented and unstable governments (such asmultiparty coalitions) appear to have more difficultyin assembling and maintaining support forthe tough measures involved in fiscal discipline.But this does not seem to have been a factor inBelize, which has a Westminster political systemwith two dominant political parties that havegoverned more often than not as single-partygovernments, often with large majorities, sinceindependence.chapter 2Anchoring Fiscal Policy for GrowthInternational Financial Market DevelopmentPart of the explanation for the country’s huge risein external debt from 1999 to 2003 is that Belize,The second strand of the literature has found that“hierarchical” rules and more-centralized decisionmaking governing the formulation and review ofthe budget, along with appropriation of funds29

chapter 2Anchoring Fiscal Policy for Growthby the legislature, lead to more fiscal disciplinethan decentralized, collegial forms of decisionmaking (e.g., Alesina et al. 1996; Schick 1998).Centralized decision making helps to correct thebias towards spending and deficits that emergeswhen decision making is decentralized to lineministries that do not fully internalize the costsof additional spending. Belize’s fiscal institutionsappear to score well on several criteria in this areabut poorly on most. The authority of the Ministerof Finance relative to spending ministers is high,especially on occasions when the Prime Ministerholds the post of Minister of Finance. The BelizeanParliament makes only minor modificationsto the executive’s budget proposal (Sitja 2009).Government borrowing authority is limited inthe sense that all loans larger than BZ$10 million(US$5 million) have to be approved by Parliament.However, neither the Constitution norlesser legislation constrains the country’s fiscaldeficit; a macroeconomic program is not a prerequisitefor submission of a budget to Parliament;the approved budget is undermined by significantsupplementary budgeting throughout its execution;the government frequently assumes debtoriginally incurred by other public entities; andsome public enterprises, notably the DFC, havein the past had significant borrowing authority.Application of the Alesina et al. (1996) methodologyto Belize gives the country a score of 44.49out of a maximum of 100, the third weakest outof Latin American and Caribbean countries examined(Figure 2.4)Poor Information and TransparencyPoor information and transparency has been amajor weakness in Belize’s public financial management.Information on the country’s fiscal positionand fiscal policies has been weakened by alack of budget comprehensiveness, and by its poorlevels of accuracy and lack of timeliness.Belize’s budget lacks comprehensiveness. Somecentral government operations take place outsideof the fiscal policy framework and are notincluded in standard budgetary management andreporting procedures (Sitja 2009). Transactionson both the revenue and expenditure sides takeplace outside of the consolidated fund, from bankaccounts outside the treasury system managed byline ministries (Symansky 2009). More broadly,information on autonomous government institutionsand statutory bodies is weak.Within the Ministry of Finance, delays in postingexpenditures and revenue to the accounts weakenthe accuracy and timeliness of budget report preparation(Barnett 2009). Commitments are not reportedon and in some cases not even recorded(Symansky 2009). Public access to information isalso deficient. Information is not presented in away that is easily understood and relevant, nor isit done in a timely manner (Symansky 2009).Macroeconomic arrangements can affect thetimeliness of information to citizens regarding aFigure 2.4. Index of Budget Institutions, Selected Latin American and Caribbean Countries (1980–1992)JamaicaMexicoChileColombiaPanamaUruguayParaguayCosta RicaVenezuelaEcuadorBrazilBahamasGuatemalaHondurasTrinidad and TobagoArgentinaEl SalvadorDominican RepublicBelizeBoliviaPeru0 10 20 30 40 50 60 70 80Sources: Alesina et al. (1996) and author calculations for Belize.30

government’s fiscal stance. The conventional wisdomuntil around 2000 was that fiscal disciplineis greater under fixed exchange rate regimes thanunder flexible exchange rate regimes. The argumentwas that expansionary fiscal policies can beaccommodated through depreciation under a flexibleexchange rate regime, whereas fiscal expansionsunder a pegged exchange rate regime willlead to a loss of reserves and eventually jeopardizethe exchange rate peg. Since exchange rate devaluationunder a pegged exchange rate is invariablyunpopular, governments will strive to ensure thatthis does not happen. However, Tornell and Velasco(2000) turned the conventional wisdom onits head and argued that in fact floating exchangerate regimes provide greater fiscal discipline. In afloating exchange rate regime, according to theseauthors, fiscal expansions are transmitted almostinstantaneously into depreciation of the nominalexchange rate—an economic indicator that ishighly visible to the whole population. By contrast,fiscal expansions under a fixed exchange rateregime can be hidden from the general public forseveral years through a running down of internationalreserves and an accumulation of externaldebt.In general, external oversight of the Belizeangovernment’s finance is weak (Symansky 2009).The Office of the Auditor General suffers from asevere lack of resources and has had virtually noincrease in its staff increase in the past 20 years.As a result, there are departments and ministriesin Belize that have not been audited even once inthe past 25 years (Shukla 2009). Currently, the office’sstaff is trained only to do compliance auditing,checking whether financial regulations andprocurement procedures have been followed. Theoffice was recently computerized, but the auditstaff has yet to be fully trained to function in thenew environment and cope with the burden ofclearing the backlog of work (Shukla 2009). TheAuditor General did not submit audit reports tothe National Assembly between 1988/89 and November2007. The Public Accounts Committeeof the National Assembly rarely meets (Symansky2009), and the National Assembly did not conductany hearings on the findings that emergedfrom the 2006/07 audit and took no action withrespect to the November 2007 report (Sumar andShepherd 2009).Short-Termismchapter 2Anchoring Fiscal Policy for GrowthTornell and Velasco’s hypothesis has been borneout by Caribbean experience. Average fiscal outcomesin countries with fixed exchange rate regimeswere slightly worse than those in countrieswith flexible exchange rate regimes between 1998and 2003, and public debt in Caribbean countrieswith fixed exchange rate regimes rose from justover 50 percent of GDP in the 1990–97 periodto nearly 90 percent of GDP in the 1998–2003period (Sahay 2005).Weak Internal and External ControlMost aspects of internal financial control in Belizeare weak (Wiggins 2009). Commitment controlsare mostly lacking, unplanned expenditures areregularized ex post, transactions are incompletelyrecorded, and controls are breached as a result ofineffective budgetary accountability mechanisms(Sumar and Shepherd 2009). The country’s ministriesdo not have internal audit offices monitoringcompliance with accounting and financialinternal controls (Sumar and Shepherd 2009),and there is no functioning internal audit processwithin the Ministry of Finance (Barnett 2009).Fiscal policy in Belize is conducted with an emphasison the upcoming year and lacks a mediumandlong-term perspective. Annual budgets aredeveloped without the benefit of a medium-termmacroeconomic or fiscal framework. Policy statementslack a medium-term perspective and do notcommit the government to measurable mediumtermgoals. One effect of this excessive discountingof the future has been a strong bias towards spendingand borrowing in the current period, while ignoringthe costs of debt servicing in the future.Inadequate Control of Key Expenditure ItemsThe Belizean government has had difficultymaintaining control of two key expenditure items:wages and utility expenses. The government’swage bill is high by international standards andhas been a recurring structural problem. Over thelast two decades it has fluctuated between 11.0percent of GDP in the mid-1990s and 9.0 percentin 2006 and 2007; in 2008, it amounted to9.1 percent of GDP. Employee compensation averaged56 percent of central government expendituresduring 1990–2003, which was the highest31

chapter 2Anchoring Fiscal Policy for Growthproportion out of 52 countries considered byGlenday and Shukla (2006).Generous wage and salary awards have also contributedto higher expenditure levels and largerfiscal deficits. Government employees are an importantpolitical constituency, and generous wageawards, even during adverse macroeconomicconditions, have resulted from political decisionsoriented towards the short term (Shukla 2009;IMF 1998, 2006). Fiscal adjustment measuresduring 1993–1996 included freezing civil servicewages and reducing the number of civil servantsby close to 9 percent in December 1995, resultingin an estimated savings of 0.9 percent of GDPfor 1996/97 (IMF 1998). However, this progresswas subsequently undone by a significant wageincrease in November 1996 that was estimatedto cost 1.75 percent of GDP. Wage increases of5–8 percent per year during 2003–2005 pushedthe fiscal deficit to 10.8 percent of GDP in 2003and initially hampered the fiscal stabilization effortthat started in 2004 (IMF 2005).Expenditures on public utilities are the third-biggestitem of government spending and typicallyaccount for about 8 percent of total governmentexpenditures. Although responsibility for telephonepayments has been decentralized, in linewith the recommendation of Glenday and Shukla(2006), the Ministry of Finance still pays otherutility bills—electricity, water, street lighting—formost line ministries directly. This practice robsthe ministries of any incentive to limit or controltheir consumption of utilities and consequentlyleads to overexpenditure in this area, particularlyin light of the country’s high electricity rates.Potential Liabilities from the Pension SystemUnless reformed, Belize’s two public pensionschemes—the general Social Security System andthe Pension Plan for Public Officers—will significantlyundermine aggregate fiscal outcomes overthe medium and long term.The Social Security System is a contributory, partiallyfunded, defined-benefit scheme in whichcontributions are adjusted over time to ensure—intheory—that expected premium and investmentincome do not fall short of the cost of benefitsand administration. The Social Security Board’sexcess of income over expenditure is decliningrapidly, however, falling from 1.1 percent ofGDP in 2004 to only 0.6 percent in 2008. Contributionsand other system parameters, such asincome ceilings and possibly the retirement age,will need to be adjusted over time, if the system’sfinancial equilibrium is to be maintained (TapiaTroncoso 2009).The Pension Plan for Public Officers is also adefined-benefit scheme, but unlike the Social SecuritySystem, it is unfunded and noncontributory.It provides retirement pensions from age 55for public officers with at least 10 years of serviceup to a maximum of 67 percent of the averageearnings in the last three years of service (TapiaTroncoso 2009).Urgent reforms are needed to limit the accrual ofadditional government liabilities from the plan.Because of its noncontributory nature, all of theplan’s expenses are covered from the central governmentbudget, and those expenses have beengrowing steadily over the last few years, reaching1.6 percent of GDP at the end of 2007. The mostrecent actuarial evaluation estimated the plan’sprojected total benefit obligations, which includefuture obligations for the currently active staff,at 33 percent of GDP as of December 31, 2007(Tapia Troncoso 2009).Lack of Allocative Efficiency and EffectivenessWeak allocative efficiency and expenditure effectivenesshave lowered the benefits of publicspending in Belize and necessitated higher levelsof expenditure to achieve given economicand social policy objectives. Arguably the mostinefficient area of public expenditure has beencapital expenditures. Belize has no requirementfor a cost-benefit analysis or rigorous project appraisalbefore a capital expenditure is sanctioned.There is hardly any capacity to conduct appraisalof projects and programs in any major spendingdepartment or the Ministries of EconomicDevelopment and Finance (Shukla 2009). TheDepartment of Public Works performs somecost-benefit analysis, but it is rudimentary in nature.The prevailing practice for making decisionsin regard to new capital expenditures is simply totake proposals to cabinet and decide by consensus.Unsurprisingly, the Prime Minister noted in32

his presentation of the country’s 2008/09 budgetthat “[v]ery large sums of money have been spentwithout much visible result in terms of developingthe country” (Barrow 2008). Furthermore, thecapital expenditure portion of the country’s budgetis prepared separately from the current sideby the Ministry of Economic Development andis therefore only weakly integrated with it. Thishinders consideration and incorporation of thefuture recurrent expenditures implied by capitalexpenditures.Deficient budgeting procedures and the lack ofprogram budgeting also hamper allocative efficiencyin the country. There is little dialogue betweenmost ministries and the Ministry of Financein the preparation of budgets (Barnett 2009). Thebudget circular requesting ministries’ initial submissionsinto the budget preparation process doesnot include spending ceilings to guide ministriesin the preparation of their budgets. Budgeting isinput based, whereas best practice is to provideoutput, program, and performance measures (Symansky2009).Efficiency is also weakened through poor cashflow management. Budget allocations for currentexpenditures are released in monthly installmentsequal to one-twelfth of the annual appropriation.This practice creates rigidities for spending ministriesand incentives to circumvent the rigiditythrough payment delays or overdraft facilities atthe central bank (Wiggins 2009).2.2.3 Challenges Related toRevenuesBelize’s revenue performance has generally beenrespectable in aggregate terms. Reviews of thecountry’s tax performance in 2002 and 2006 concludedthat the tax system had been performingwell and that there were no major gaps in the taxbase at those points in time ( Jenkins and Kuo 2002,2006). The tax system also has a number of positivefeatures, such as the simple but very progressivepersonal income tax arrangements. However,the reviews also suggested that tax-policy-inducedeconomic distortions needed to be reduced andthat the tax system could be made more robust asan instrument of revenue collection. Structurally,the tax system is still overly reliant on trade taxes,which have a complicated structure. The thresh-old for income subject to the aforementioned personalincome tax is very high in relation to incomecompared to international practice, and there aresome inconsistencies in the rates of business taxesapplied to different economic activities. At 17–20percent of GDP, tax revenue is slightly below whatone would expect for a country of Belize’s percapita income (Figure 2.5), and tax incentives areeroding the country’s tax base (Shukla 2009).Outdated Taxation StructureBelize’s taxation structure is outdated and overlydependent on trade taxes, which need reformingboth to minimize economic distortions and tocomply with its international trade policy commitments( Jenkins and Kuo 2006; see also Chapter4). Some restructuring of the country’s taxrevenues has already occurred. Taxes on internationaltrade were the largest source of governmentrevenues until 2005, bringing in an average of 41percent of tax revenues and equivalent to 7.7 percentof GDP between 2000 and 2005. However,trade taxes were overtaken in importance by taxeson goods and services in 2005 and by income taxesin 2008 (largely as a result of growing petroleumrevenues). Between 2006 and 2009, trade taxesbrought in an average of 29.5 percent of tax revenuesand were equivalent to 6.6 percent of GDP.The tariff rate structure in Belize and its traderelatedlevies are somewhat complicated by internationalstandards ( Jenkins and Kuo 2006). Belizeapplies the Caribbean Community (CARICOM)common external tariff to imports from non-CARICOM countries (accounting for more than98 percent of the country’s imports), which is anFigure 2.5. Tax Revenue, 2008Revenue, excluding grants (% of GDP)70605040302010BOLHNDNICGTMCOLPER BLZSLV DOMCRIURY00 2000 4000 6000 8000 10000 12000 14000 16000CHLGDP per capita (US$, current prices)Sources: World Bank (2009) and IMF (2009b).chapter 2Anchoring Fiscal Policy for Growth33

chapter 2Anchoring Fiscal Policy for Growthaverage of 11.3 percent with a standard deviationof 11.3 (Chapter 4). In addition to the regular tradetariffs, Belize applies a revenue replacement dutyand an “environmental tax.” The revenue replacementduty is applied on certain goods at rates varyingfrom 2 to 30 percent on the import price plusthe import duty (Shukla 2009). These are mostlygoods that are normally subject to excises, andclearly the revenue replacement duty is an importduty under a different name. Similarly, a 3 percentenvironmental tax is imposed on all imports exceptthose of basic foods (and the import of vehiclesover four cylinders carries a rate of 5 percent).Twenty-eight categories of goods require licensesfor importation. Quantitative barriers have beenshown to be more distorting to trade than equivalentimport tariffs, and governments lose potentialrevenue through this type of licensing scheme,because the rents deriving from protection accrueto the fortunate recipients of the import licensesrather than to the treasury.High trade taxes and nontariff barriers create anantiexport bias in a country by raising the cost ofinputs for domestic production (including touristconsumption) and by increasing the returns toinvestment in the protected import substitutionactivities. This is contrary to what Belize, as acountry highly dependent on export performance,needs. In addition, high trade taxes create strongincentives for input-dependent businesses to getaround them through obtaining exemptions.Consequently, they generate a strong demand forthe Belizean government’s incentive schemes, especiallyexport-processing zone status.Excessive Use of Fiscal Incentives to PromoteEconomic GrowthSince 2000 Belize has made excessive use of fiscalincentives to promote economic growth. Jenkinsand Kuo (2006) and Chapter 1 point to the impactof these incentives in eroding the country’stax base. There are at least seven main acts orprograms involving fiscal incentives; three of themost important are the Fiscal Incentives Act, theExport Processing Zone Act, and the CommercialFree Zone Act (of 1994).Belize’s Fiscal Incentives Act was introduced in2000 and was subsequently amended in 2003.The main provisions of this law include a taxholiday for 5–25 years; tax exemption for anydividends or profits accruing to shareholders ofcompanies or enterprises enjoying tax holidays;and an import duty exemption for a period ofup to 15 years, extendable for another 10 years(Shukla 2009).Export-processing zones (EPZs) are free tradezones established primarily for attracting investmentand producing goods and services forexport purposes, as well as for creating employment.There are 64 EPZs in Belize, of which 13are under review for revocation of EPZ statusbecause they have not been functioning (Shukla2009). Forty-five of the EPZs are already exporting;the rest are in the planning and constructionstages. The majority of the EPZs are eitherforeign investments or foreign-funded enterprises.Only processing units are allowed underEPZ status, and therefore the primary sector(agriculture) is virtually excluded. Informationtechnology companies are greatly attracted tothe country’s EPZs. Two casinos in Belize haveEPZ status, as they attract visitors from acrossthe Mexican border.No import duties are imposed on inputs or capitalequipment imported into the zones, and thegoods and services produced in the zones are freefrom indirect taxes. EPZ businesses are also exemptfrom business tax, income tax, withholdingtax, capital gains tax, or any corporate tax for aminimum of the first 20 years of operation, includingany dividends paid to shareholders. Althoughexemption from indirect taxes in EPZs isappropriate because the final products are meantfor export, the highly favorable treatment of incomeand other direct taxes—such as the 20-yearincome tax holiday—should be withdrawn.Commercial free zones (CFZs) provide servicesto goods in transit through Belize, in the sameway a bonded warehouse would. The goods aresimply imported and then exported; there is novalue added within Belize. There is only one CFZin the country, located on the border with Mexico,and it is primarily oriented toward offeringduty-free shopping to Mexicans. There are 490registered companies in the zone; 247 are Belizeanand 243 foreign. About 290 of these companiesare active; the rest are closed or dormant. The34

zone employs 2,200 people (about 2 percent ofthe country’s formal workforce), making the CFZscheme attractive to the government.For most goods passing through the CFZ, thegovernment of Belize receives only a servicecharge of 1.5 percent on the import value (6percent on liquor and cigarettes, and 10 percenton fuel). Between 2002 and 2008, total revenuesto the government from the CFZ were aboutBZ$22 million. No taxes are applied for the first10 years, after which a 2 percent business tax isimposed. No company is currently paying this2 percent tax, however, because no active companyhas crossed the 10-year period; a few thatdid are no longer active. The CFZ has proposedto the government that the 10-year period beextended by another 5 years. Just as in case ofthe country’s EPZs, companies in Belize’s CFZshould not be exempt from business income tax.At a minimum, all new firms entering the CFZshould be subjected to business tax or businessincome tax.2.2.4 Staffing and OrganizationalChallenges in the Ministry ofFinanceSome of the aforementioned problems are exacerbatedby staffing and organizational deficiencies inBelize’s Ministry of Finance. The general administrationof the ministry is seriously understaffed,and a disproportionate number of its staff areemployed in clerical positions (Sumar and Shepherd2009). High turnover among the ministry’semployees has also been a problem. The country’scivil service training program was discontinued bythe previous government, and there are few trainingor career development opportunities for staff(Wiggins 2009). A large number of ministry staffdo not have job descriptions, there is no workprogram planning, and there is an uneven workburden, with some staff (including professionalstaff ) estimating that they use only 50 percent oftheir time (Barnett 2009). The ministry lacks aclear organizational structure and should be organizedmore transparently around well-definedfunctions (Sumar and Shepherd 2009; Barnett2009). Although this is mainly an issue on theexpenditure side, the fragmentation of the ministry’srevenue administration into three separateagencies—Customs, Income Tax, and GeneralSales Tax Departments—has long been viewedas hampering coordination and consolidation offunctions like inspection and auditing.2.3 Government Policy ReformEfforts2.3.1 Revenue MeasuresIn its policy reform efforts the Belizean governmentinitially assigned greater attention to therevenue side. Probably the most significant reformwas the replacement in July 2006 of a salestax that suffered from a narrow tax base, multiplerates, and a cascading effect with a general salestax (GST). The general sales tax has all the featuresof a value-added tax and has a standard rateof 10 percent as well as a zero rate; certain services,notably financial services, hotels and guest houses,and medical services, are exempt. The GST hasbeen a great success, and its revenue performancein 2006–2009 was significantly better than that ofthe sales tax previously in force.Belize’s government has also worked on improvingthe coordination between the different revenueagencies and in 2009 introduced a single taxidentification number for all taxpayers. In 2008and 2009 the government revamped managementinformation systems by introducing automatedcomputerized systems: the Standard IntegratedGovernment Tax Administration System (SIG-TAS, for business tax and GST) and AutomatedSystem for Customs Data (ASYCUDA, for customs)(Wiggins 2009). The Customs and ExciseDepartment estimates that revenues will increaseabout 30 percent as a result of upgrading to ASY-CUDA.In line with the recommendations of Jenkins andKuo (2006), the revenue replacement duty forfuels (gasoline and diesel), alcohol, and beverages,which accounted for about 80 percent of therevenue from the duty, was eliminated in 2008.However, the duty on fuels was reintroduced inthe country’s 2009/10 budget.Belize’s government has amended the legislationregarding goods exempted from import duty toremove the duty for some specific end-use organizations.chapter 2Anchoring Fiscal Policy for Growth35

chapter 2Anchoring Fiscal Policy for Growth2.3.2 Expenditure MeasuresReforms on the expenditure side largely took a backseat to revenue reforms until 2008 and especially2009, when the emphasis shifted from the latterto the former. Two early expenditure reforms werethe aforementioned decentralization to ministriesof payments for telephone service and progressivemoves to improve classification of expendituresand make them conform better to internationalstandards, such as the International MonetaryFund’s Government Finance Statistics Manual(1986). Notably, expenditures that had previouslybeen classified as domestically financed capital expenditureshave been now reclassified as currentexpenditures. This issue had been flagged as a majorconcern in Glenday and Shukla (2006).More recently, the Ministry of Economic Development,following a detailed review, has proposeda phased withdrawal of import licenses (Shukla2009). With funding from the Taiwan InternationalCooperation and Development Fund, theMinistry of Economic Development is also computerizingthe licensing process to increase transparency.The Belizean government has also made efforts tostrengthen key areas of the Ministry of Finance.The Auditor General’s Office has been computerized,although staff lack the training to fully exploitthis investment. A debt management unithas been established, and staff have been trainedin the Commonwealth Secretariat’s Debt Recordingand Management System (DRMS). In 2008two senior and experienced personnel were contractedto bolster the ministry’s senior management.During 2009 efforts were made to developand monitor quarterly fiscal targets, although thishas been hampered by delays and deficiencies inreceiving fiscal data (Barnett 2009).In 2009, the government received significant technicalassistance for strengthening fiscal and publicfinancial management. Consultants financed bythe Caribbean Development Bank (CDB) reviewedthe country’s arrangements for macroeconomicmanagement, as well as the finance ordersand stores orders, and made recommendationsfor their modernization. Consultants financed bythe IDB assisted in institutional strengthening ofthe Ministry of Finance and the preparation of afiscal transparency and responsibility framework,a medium-term fiscal framework, and an actionplan to strengthen public financial management.A technical assistance operation currently in executionunder the IDB’s Program to Implementthe External Pillar of the Medium Term ActionPlan for Development Effectiveness (PRODEV)includes activities to conduct a legal review andanalysis of the legislative framework governingthe Auditor General, propose amendments to thelaw, and provide training in value for money auditingfor Auditor General’s Office staff and thePublic Accounts Committee.2.4 Policy OptionsAlthough the solutions for many of the fiscalissues outlined in the diagnosis section of thischapter are clear cut, in other cases, there are a varietyof policy options that the government couldconsider. This section outlines policy options andinternational experience in five key areas wherethe ideal policy direction is less clear cut: threein the broad area of improving expenditure disciplineand two in regard to strengthening revenuemobilization.2.4.1 Improve Expenditure DisciplineIntroduce Fiscal RulesSince the 1990s, growing numbers of countrieshave introduced fiscal policy rules to curtail excessivefiscal discretion and compensate for thebias of short-sighted governments toward accumulatingpublic debt at the expense of futuregenerations. By early 2009, 80 countries had inplace national or supranational fiscal rules (IMF2009a). Fiscal responsibility laws include laws,regulations, or procedures aimed at improvingfiscal discipline by requiring governments todeclare and commit to monitorable fiscal objectivesand strategies (Symansky 2009). They varywith respect to legal authority, jurisdiction, thepresence of escape clauses, and—perhaps mostimportantly—whether they are primarily proceduralor numerical. Some countries focus exclusivelyon enhancing transparency and providingthe legislature and the public with a monitorablemultiyear fiscal strategy and the publication of36

outcomes. This approach is typical of Commonwealthcountries (Australia, New Zealand, theUnited Kingdom). Other countries focus moreon rules with numerical targets for budgetary aggregates(Symansky 2009).According to the most recent evaluation of the impactof fiscal rules, empirical analysis suggests thatnational fiscal rules have generally been associatedwith improved fiscal performance and identifiedas a success factor for fiscal consolidation (IMF2009a). On average during large adjustments, fiscalrules were associated with larger reductionsin a country’s public debt ratio and over a longeruninterrupted period than occurred in countrieswithout fiscal rules; moreover, the tightening ofthe fiscal stance was found to be more front-loaded(IMF 2009a). Nevertheless, the same study andSymansky (2009) note that the evidence that fiscalrules per se lead to better fiscal outcomes is notclear cut. Often fiscal rules are introduced duringor after a major fiscal adjustment; consequently,both the improved fiscal performance and introductionof fiscal rules reflect a government’s preferencefor fiscal discipline.The most successful fiscal rules have been implementedin countries where there was a strongsocietal consensus and political commitment tofiscal discipline and where a strong public financialmanagement system underpinned transparency(Symansky 2009). Ideally fiscal responsibilityrules should cover as much of the public sector aspossible and have sanctions for noncompliance(Symansky 2009). Combining budgetary balanceand expenditure rules has proven particularly effective(IMF 2009a). Fiscal responsibility rulesshould be designed as permanent institutionalconstraints rather than temporary mechanisms.Two important dangers have emerged in regard tofiscal rules. First, fiscal rules can actually generateperverse incentives; instead of encouraging fiscaldiscipline, they have led some governments to engagein creative accounting to give the impressionof compliance with a rule. Second, rules need toincorporate sufficient flexibility to cope with exogenousshocks; otherwise they can either hampercountercyclical policies or break down under pressure.This is particularly relevant for small, opendeveloping countries like Belize, where exogenousshocks lead to great variability in fiscal and macro-economic outcomes. These considerations, as wellas Belize’s Commonwealth legal and proceduraltraditions and weak public financial managementsystem, suggest that, at least initially, the safest optionfor Belize would be fiscal responsibility ruleswith an emphasis on procedures and transparencyrather than hard numerical targets.Introduce a Medium-Term Fiscal FrameworkThe classical response to short-sighted fiscalpolicymaking has been to introduce a mediumtermfiscal framework (MTFF) or mediumtermexpenditure framework (MTEF). MTFFsor MTEFs have been introduced in nearly 100countries (Schiavo-Campo 2008).An MTFF imposes a discipline on the annualbudget process by forcing technicians and policymakersto consider the medium term and to considerthe medium-term implications of measuresor policies introduced in the current year. Sincemost policies cannot be implemented in a singleyear or have multiyear implications, some sort ofmedium-term forecast of revenues and expendituresis essential to provide a frame for the annualbudget process.Criticism of MTFFs has questioned their benefits,underscored the heavy strain they place onlimited budgeting capacity, and regarded themas a distraction from fixing the basic plumbingof a country’s expenditure management system(Schiavo-Campo 2008). Schiavo-Campo (2008)views MTFFs or MTEFs as having worked wellin several member countries of the Organisationfor Economic Co-operation and Development(OECD), notably Australia, but with decidedlymixed results in developing countries. He citesBrumby’s (2008) review of experience in Africancountries, which concludes that (1) MTEFshave not led to improvements in annual budgetpreparation; (2) budget behavior has not actuallychanged; (3) there is virtually no evidence of improvedmacroeconomic balance; and (4) there isno evidence of a link to greater budget predictability.In a similar vein, Schick (2004) is skepticalthat MTEFs can change budget behavior whenopportunistic politicians are in control.Nevertheless, Schiavo-Campo’s (2008) review ofexperience with MTEFs concludes that the les-chapter 2Anchoring Fiscal Policy for Growth37

chapter 2Anchoring Fiscal Policy for Growthson from “experience so far is certainly not toforget the need for a medium-term perspectivefor the annual budget, but to re-size, redefineand reformulate the MTEF approach in a mannersuitable for the possibilities and constraints ofthe different countries.” An MTEF can improveexpenditure control, allocative efficiency, and useefficiency of a government’s financial resources ifit is designed in the context of the country’s actualconditions, with the right sequencing and ina realistic manner. A multiyear fiscal forecast toframe annual budget preparation is essential forinjecting into a country’s budgeting system anawareness of the future.The lesson for Belize appears to be that an MTFFwould be desirable for framing the annual budgetprocess. However, great care should be taken toavoid overwhelming the country’s limited fiscalmanagement capabilities. This suggests thatthe MTFF should be introduced slowly, with aninitial step being just the estimation and publicationin annual budgets of the aggregate revenue,expenditure, and budgetary outturns expected forthe subsequent three years. Over time, as capacityallows, projections of medium-term expendituresby ministry could be developed.fiscal reforms in the short term in a context ofvery scarce capacity, and hence it is important toprioritize those measures that are most importantand/or administratively easier.Two options have been suggested for a gradualmove in the direction of program budgeting inBelize. Symansky (2009) suggests that the countryshould develop a functional/sector presentation,while working to develop performance budgetingprograms on a pilot basis. 2 Glenday and Shukla(2006) and Shukla (2009) propose working onprogram budgeting on a pilot basis with selectedstrategic and appropriate ministries. They notethat performance budgeting is most suited to programswith quantifiable targets, such as health,education, utility, construction, and transport services.It is less well suited to administration, policy,planning and coordination functions. In addition,they note that some of the country’s ministries,such as the Ministry of Health and the Ministryof Public Works, have already introduced someelements of unit costing and performance budgetinginto their budgeting processes.2.4.2 Strengthen RevenueMobilizationIntroduce Program BudgetingA standard response to expenditure allocationproblems is to introduce “program budgeting,”which aggregates expenditures by program evenif they cut across multiple cost centers, rather thanfollowing line-item budgeting by cost center. Bestpractice in this area is to link funding to outputor performance measures, and budgeting by programcan help in the prioritization and allocationof expenditures. Although it is clearly desirablefor Belize to move towards performance or programbudgeting over the long term, two factorscall into question the advisability of a big pushin this direction in the short term. First, a moveto this level of sophistication requires that basicbudget preparation and execution functions, likeclassification, recording, and reporting, be welldeveloped, and this is not yet the case in Belize.Second, Belize is contemplating a broad range ofReduce Reliance on Trade TaxesReducing taxes on trade requires options for raisingan equivalent (or greater) amount of revenuefrom other sources in a less economically damagingor administratively complex way. Fortunately,there are a couple of good options for replacingtrade taxes with other indirect taxes in Belize.Jenkins and Kuo (2006) recommended that thecountry introduce a modern excise tax system thatlevies a tax on excisable goods (alcoholic beverages,cigarettes and tobacco products, motor fuels,cosmetics, and motor vehicles). The rate imposedcould be selected in such a way as to bring the totaltax burden up to the current level imposed by therevenue replacement duty, environmental tax, andother import tariffs. In addition, the current GSTrate is quite low by international standards (Figure2.6), and the list of zero-rated and exempt items islong and expanding. Raising the GST rate to 12.52A functional presentation is a presentation of government expenditures according to the classification of government functions (education,health, defense, etc.). Currently Belize presents data mainly by economic classification (wages and salaries, goods and services,interest, etc.), and the functional presentation is underdeveloped (Sitja 2009).38

Figure 2.6. Value-Added Tax Rates in Selected CountriesSwedenNorwayIrelandItalyUnited KingdomDominican RepublicTrinidad and TobagoNicaraguaJamaicaBarbadosEl SalvadorCosta RicaNew ZealandHondurasGuatemalaBelizeAustraliaCanadaPanama0 5 10 15 20 25 30Sources: Barreix, Bés, and Roca (2009), IDB (2004), and World Taxpayers Associations (2004).chapter 2Anchoring Fiscal Policy for Growthor 15 percent and cutting back on the exemptionswould bring Belize into line with its fellow CARI-COM members and Central American neighbors.Scale Back Fiscal IncentivesOutright tax exemptions or tax holidays, suchas those employed in Belize, are in general notcost-effective instruments. They are a blunt andopaque system of taxation in which there is nodirect link between incentive and investment.It is also not unusual for companies to establishbusinesses just to fulfill the conditions for a taxholiday or exemption, then disappear at the endof the holiday or exemption period and reappearagain in the form of a new enterprise to claim atax holiday/exemption afresh.A series of studies have shown that tax incentiveshave no significant impact on the flow of investmentin a country (see, for example, Zee, Stotsky,and Ley 2002; Holland and Vann 1998; Bolnick2004; Gropp and Kostial 2000; Byrne 2006). Internationalexperience suggests, however, thatrather than tax incentives, the following factorsdo play a significant role in attracting investmentto a particular country:1. Economic and political stability2. A well-administered and stable tax systemwith moderate tax rates3. Adequate infrastructure—both physical andsocial4. Untapped but trainable labor force5. Existence of natural resourcesTax incentives and tax holidays, in particular, werequite popular internationally about 10 to 15 yearsago and are still prevalent in the Caribbean. However,tax holidays and tax exemptions have almostcompletely disappeared from developed countriesand are gradually being phased out in developingcountries. OECD countries now tend to use onlyan investment tax credit or accelerated depreciation,both of which are quite well targeted to theamount of investment. Thus, for Belize, it may be abetter option to keep tax incentives low and insteadhave a moderate and stable tax system and use thetax revenues to strengthen the country’s fiscal positionand lower the cost of domestic finance.In any case, the tax incentives under the FiscalIncentives Act in Belize are overly generous in allrespects, extending benefits even to shareholdersin regard to payment of their tax on dividends.Countries that still provide tax holidays generallykeep the holiday period strictly limited to 3 to 5years, whereas in Belize the tax holiday period caneasily be extended to 20 or 25 years. In the eventthat Belize’s tax holidays cannot be eliminated,or possibly as an intermediate step on the way totheir elimination, it would make sense for Belizeto curtail sharply the generosity of its tax holidays,bringing it more in line with the practices of othercountries that have retained tax holidays as part oftheir fiscal incentives package.39

chapter 2Anchoring Fiscal Policy for GrowthMost countries exempt firms operating in EPZsfrom customs duties and domestic indirect taxesbut make them subject to income taxes. It is alsoa World Trade Organization requirement that,beginning in 2009, firms operating in free tradezones be subject to the same income taxes as domesticbusinesses.2.5 Policy RecommendationsReforms of fiscal policy in Belize could lead tobetter fiscal outcomes along three dimensions: alleviationof the binding constraint on economicgrowth in the country, improved aggregate macroeconomicmanagement and fiscal sustainability,and greater efficiency in public spending. A keyelement underlying policy reforms should be toraise the costs and lower the benefits that accruefrom pursuing profligate fiscal policies, therebyimproving incentives for fiscal policymakers toadhere to fiscal discipline.Based on the above diagnosis and an assessmentof various policy options, the policy recommendationsin the following subsections are advancedfor policymakers’ consideration.2.5.1 Expenditure ManagementImprove Fiscal TransparencyImproving fiscal transparency in Belize will bekey to providing the country’s policymakers withbetter information with which to make decisionsand will also allow greater accountabilityfor policy outcomes. The fundamental buildingblock for strengthening fiscal transparency willbe better recording of transactions and betterdata collection and dissemination. Staff trainingwill be needed to ensure greater utilization of thecomputerized information systems at the centerof Belize’s public financial management. It isfundamental that payments and receipts must beaccurately and correctly executed, recorded, andaccounted for (Wiggins 2009). Both cash andcommitments should be recorded to allow monitoringof arrears (Symansky 2009). Transactionsshould be recorded in sufficient detail to makepossible detailed monthly reports on the progressof expenditures against receipts and appropriatelyclassified (Wiggins 2009).In addition, the Belizean government could greatlystrengthen transparency by routinely publishing reportson both its fiscal objectives and actual fiscaloutcomes. It should prepare an annual fiscal strategystatement that sets out its fiscal strategy andallows the public to evaluate the country’s fiscal policy.The statement should include the government’sbroad medium- and long-term policy objectives;fiscal objectives and targets for key fiscal measuresfor the budget year covered by the statement andthe subsequent two years; details regarding any newfiscal measures to be implemented during the year;and the impact that the government expects its fiscalpolicies to have on tax revenues, governmentdebt, national saving, and managing fiscal risk (Symansky2009). In addition, the government shouldalso publish an ex post report on fiscal outcomes,which would allow those outcomes to be comparedwith the objectives and expected fiscal outcomes setout in the fiscal strategy statement. Fiscal responsibilitylegislation would likely be useful to guide thecontents and preparation of these documents andwould anchor the requirement to produce themwith the force of law. However, as discussed in Section2.4, it seems preferable for this legislation tofocus on procedural and reporting requirementsrather than quantitative targets. The volatility ofBelize’s economy and fiscal outcomes due to externalshocks—such as changes in international economicconditions or natural disasters—necessitatessubstantial escape clauses and flexibility to avoidviolation and even breakdown of the framework orits constant alteration. Moreover, hard quantitativetargets would increase incentives for distortions todata. The primary focus should be on providing adisciplined framework for fiscal policy formulationand increased transparency that would allow greaterinternal and external accountability.Strengthen Internal and ExternalAccountabilityThe incentives for responsible fiscal policy in Belizewould be reinforced by strengthened internaland external accountability. Internal accountabilitycould be bolstered through the creation of aninternal accounting unit within the Ministry ofFinance, with a focus on selective system checkingrather than review of all expenditure transactions.Strengthening external accountability in thecountry will require the dissemination of more40

fiscal information as well as greater capacity tomake use of it. As discussed in the previous subsection,introduction of a fiscal responsibility lawthat establishes and codifies the types of fiscaldisclosure required would help. In addition, improvedcapacity on the part of the Office of theAuditor General would enable it to produce morefrequent and more timely audits for Parliament’sconsideration.Introduce a Medium-Term Fiscal FrameworkThe introduction of an MTFF would be essentialfor framing annual budget decisions in a medium-termframework. In order not to burden theMinistry of Finance, initially an MTFF shouldbe prepared and published in a simple aggregatemanner, focusing on broad fiscal aggregatessuch as revenues and expenditures according tothe economic (Government Finance Statistics)classification at one digit. The government ofThe Bahamas introduced such a framework inits 2005/06 budget, with the simple addition ofone page to the budget annex (Pratt 2005). Theinstitutional and time requirements to producean annex of this size would not be high and arecompletely achievable for Belize. Such an annexwould make a useful start toward framing decisionmaking in a medium-term perspective andwould also be a necessary complement to the introductionof the fiscal responsibility frameworkrecommended in Section 2.4.1.Strengthen the Budget Development ProcessBudget development in Belize can be strengthenedby improving the budget circular. In particular,the budget circular should include aggregatespending limits to guide ministries in the preparationof their budgets. These limits should beconsistent with the medium-term fiscal frameworkand aggregate budget constraint.Broaden Budget Comprehensiveness and AvoidContingent LiabilitiesBelize’s government should endeavor to improvethe comprehensiveness of the country’s budgetby terminating the practice of off-budget transactionsand progressively incorporating autonomousgovernment agencies and statutory bodies.It should move to close private bank accounts ofline ministries and ensure that all payments fromgovernment agencies pass through the country’sconsolidated revenue fund. The government hasimposed strict controls on the Development FinanceCorporation to prevent an accumulation ofcontingent liabilities. Nevertheless, the governmentshould be vigilant in ensuring that its fiscalplanning accounts for and includes its contingentliabilities.Improve the Incentive Framework forEconomical Use of UtilitiesBelize’s Ministry of Finance should create an incentivefor ministries to economize on their use ofutilities by decentralizing to them the responsibilityfor paying electricity, water, and street lightingbills, along with the necessary budget (Shukla2009). Ministries should be required to managetheir expenditures within the limits prescribed bythe budget and not be provided with additionalfunds to cover expenditures without adequate justification.Enhance Investment Project SelectionThe process for selection of investment projectsin Belize’s government agencies needs to be professionalizedand institutionalized. The Belizeangovernment should introduce an institutionalframework for subjecting project proposals tostandard cost-benefit analysis and selecting theprojects with the highest economic rates of returnand net present value. Given the small size of thecountry’s government, it makes sense to start witha core group in the Ministry of Economic Developmentand appraisal units in the most importantspending ministries, such as the Ministry ofWorks. Staff in government agencies need to betrained in cost-benefit analysis.Introduce Performance or ProgramBudgeting—GraduallyIntroducing performance or program budgetingcould help improve the efficiency and effectivenessof government expenditures in Belize, as wellas ensure that expenditures follow governmentpriorities. However, given the variety of fiscal reformscompeting for the government’s attention,this is a reform that could wait and should beintroduced only gradually, in a range of selectedchapter 2Anchoring Fiscal Policy for Growth41

chapter 2Anchoring Fiscal Policy for Growthprograms and institutions in which its applicationis feasible and likely to be most effective.Defuse the Public Pension Time BombBelize’s government needs to defuse the timebomb represented by the country’s current pensionsystem by carefully considering several policyreform options and then implementing the selectedmeasures promptly. These options shouldinclude modifications to the current system, suchas requiring contributions to the Pension Plan forPublic Officers or adjusting income ceilings andpossibly the retirement age in the Social SecuritySystem. Alternatively, it might be appropriate toestablish a new national pension system, using apay-as-you-go mechanism, or a capitalization orcontractual savings system. The attractiveness ofthe last of these options is enhanced by the country’sneed to raise the level of national saving tofoster faster economic growth (Chapter 1).2.5.2 Revenue ManagementSimplify and Lower Trade TaxesBelize’s tariff structure should be simplified andthe tariffs consolidated to reduce economic distortions,simplify administration, and better alignBelize with the direction of its international tradepolicy commitments. The most important andurgent reforms in this regard are the eliminationof all of the existing revenue replacement dutiesand the environmental tax. Continued implementationof Phase 4 of CARICOM trade liberalizationshould lower the average tariff underthe common external tariff and further reduce itsdispersion. The revenues lost as a result of thesemeasures should be replaced through the introductionof excise duties on excisable products( Jenkins and Kuo 2006; Shukla 2009) and reformof the GST (see below).Convert Import Licenses into TariffsBelize’s government should eliminate the licensingrequirements for all categories of goodsimports currently subject to such requirements.Goods in these categories should then be subjectto import tariffs, which would be less damagingto trade patterns and contribute less to antiexportbias. In addition, tariffication would shift therents accruing to recipients of import licenses intogovernment revenue. Such a reform would contributeto the country’s compliance with WorldTrade Organization norms.Reform the GSTBelize’s current General Sales Tax rate of 10 percentshould be increased to 15 percent (or at least12.5 percent in the first round, with an increase to15 percent later). Furthermore, the expansion ofthe list of zero-rated and exempt items under theGST should be halted, and the items currentlyzero-rated should be scrutinized with a view tomoving some items from the zero-rated list to theexempt list or the taxed list in order to avoid cascadingeffects at different stages of the productionor sales process.Phase Out Fiscal Incentive SchemesThe Belizean government should circumscribefiscal incentive schemes and phase them out. Althoughit would be difficult to revoke incentivesalready awarded, the government can institute reformsthat work on the margin and halt the erosionof the tax base that results from the use ofthese incentives. The country’s Fiscal IncentivesAct should be amended to eliminate holidaysfrom the business tax, and already awarded incentivesshould be allowed to lapse as they reach theirexpiration dates. The country’s existing businesstax should be imposed on new entrants to theEPZs and the CFZ.Impose Consistency on Business Tax RatesBelize’s government should rationalize the country’sbusiness tax rates to enhance consistency andmake the system simpler ( Jenkins and Kuo 2006).The business tax rate on the receipts of self-employedprofessionals should be increased from 6 to15 percent to bring it more into line with personalincome taxes levied on salaried professionals. Thetax rate on public investment companies shouldbe raised from 8 to 15 percent to make it equalto the rate applied to financial institutions (withwhom these compete and share the same definitionof their tax base). The 0.75 percent businesstax rate paid by certain service sectors should beraised to 1.75 percent to bring it into line withthat paid by other sectors.42

Hold the Line on the Personal Income TaxThresholdThe Belizean government should resist any pressureto raise the threshold for income subject tothe personal income tax, which, at three timesper capita income, is already very high by internationalstandards. It should allow inflation andeconomic growth gradually to bring more taxpayersinto the tax net and widen the tax base.2.5.3 Strengthening Organizationand Staffing at the Ministry ofFinanceIn order to underpin the aforementioned substantivereforms, Belize’s Ministry of Finance shouldconsider introducing a modernized organizationalstructure, built around well-defined functions,perhaps with a Deputy Financial Secretary headingeach of three major units: revenue collection,expenditure management, and administrative. Amoderate number of staff should be hired to fillcritical gaps, such as those in the Budget Departmentand the Office of the Accountant General.Higher productivity from existing staff can beobtained by reallocating work responsibilitiesand stepping up training of existing staff to allowthem to fulfill higher-level functions and adapt totechnological improvements.As Chapter 1 indicated, the central recommendationfor Belize to raise its rate of economicgrowth is sustained fiscal consolidation throughinstitutionalizing fiscal discipline and halting theerosion of the country’s tax base. This chapterhas outlined a number of options and recommendationsfor doing so. In 2004 Belize beganits most recent phase of fiscal adjustment and atthe same time started a process of revenue andexpenditure reforms. The reform process receiveda major boost in early 2008 from the election of agovernment that had transparency and improvedpublic financial management as a major plank ofits electoral manifesto. The economic recession of2009 and the substantial reduction of temporaryprops to the fiscal accounts (low interest rates onthe “superbond,” grants from bilateral donors, andperhaps petroleum revenues) now puts the urgencyand importance of deepening the fiscal reformand consolidation process into a sharper focus.The next few years are likely to represent the bestchance for substantial fiscal policy in Belize overthe last decade.chapter 2Anchoring Fiscal Policy for Growth43

chapter 2Anchoring Fiscal Policy for GrowthReferencesAlesina, A., R. Hausmann, R. Hommes, and E.Stein. 1996. “Budget Institutions and FiscalPerformance in Latin America.” Working Paperno. 5586. National Bureau of EconomicResearch, Cambridge, Massachusetts.Artana, D., and F. Naranjo. 2003. Fiscal Policy Issuesin Jamaica: Budgetary Institutions, the TaxSystem and Public Debt Management. Region3 Economic and Sector Study Series (RE3-03-001). Washington, D.C.: Inter-AmericanDevelopment Bank.Barnett, C. 2009. “Report on an OrganisationalReview of the Ministry of Finance.” Draftpresented to Executive Management of Ministryof Finance, Belmopan.Barreix, A., M. Bés, and J. Roca. 2009. Equidadfiscal en Centroamérica, Panamá y RepúblicaDominicana. Washington, D.C.: Inter-American Development Bank.Barrow, D. (Hon.). 2008. “Realizing the Possibilities.”Budget presentation for Fiscal Year2008/2009, Government of Belize, Belmopan.Bolnick, B. 2004. Effectiveness and Economic Impactof Tax Incentives in the SADC Region. TechnicalReport Submitted to SADC Tax Subcommittee,SADC Trade, Industry, Finance,and Investment Directorate, U.S. Agency forInternational Development Regional Centerfor South Africa, Gaborone, Botswana.Byrne, P. 2006. “Tax Incentives for FDI in SevenLatin American Countries.” Inter-AmericanDevelopment Bank, Washington, D.C. Unpublished.Glenday, G., and G. P. Shukla. 2006. Belize: AReview of Public Expenditures. Region 2Economic and Sector Study Series (RE2-06-018). Washington, D.C.: Inter-AmericanDevelopment Bank.Gropp, R., and K. Kostial. 2000. “The DisappearingTax Base: Is Foreign Direct Investment(FDI) Eroding Corporate Income Taxes?”Working Paper WP/00/173, InternationalMonetary Fund, Washington, D.C.Holland, D., and R. J. Vann. 1998. “Income TaxIncentives for Investment.” In Tax Law Designand Drafting, Vol. 2. Washington, D.C.:International Monetary Fund.IDB (Inter-American Development Bank). 2004.“Fiscal Impact of Trade Liberalization in theAmericas.” Periodic Paper, Integration andRegional Programs Department, Washington,D.C.IMF (International Monetary Fund). 1986. GovernmentFinance Statistics Manual. Washington,D.C.———. 1998. Belize: Recent Economic Developments.Country Report no. 98/109. Washington,D.C.———. 2005. Belize: Staff Report for the 2005Article IV Consultation. Country Report no.05/352. Washington, D.C.———. 2006. Belize: Staff Report for the 2006Article IV Consultation. Country Report no.06/369. Washington, D.C.———. 2008. Belize: Staff Report for the 2008Article IV Consultation. Country Report no.08/88. Washington, D.C.———. 2009a. “Fiscal Rules—Anchoring Expectationsfor Sustainable Public Finance.” FiscalAffairs Department, Washington, D.C.Available at http://www.imf.org/external/np/pp/eng/2009/121609.pdf.———. 2009b. World Economic Outlook, October.Washington, D.C.Jenkins, G. P., and C.-Y. Kuo. 2002. “Belize FiscalStudy.” Report prepared for the Inter-AmericanDevelopment Bank, Washington, D.C.———. 2006. Fiscal Adjustment for SustainableGrowth in Belize. Economic and Sector StudiesSeries (RE2-06-020). Washington, D.C.:Inter-American Development Bank.Martin, D., and G. Presciuttini. 2007. “IndependentMacroeconomic Assessment: Belize.”Inter-American Development Bank, Washington,D.C. Unpublished.Pratt, C. A. (Hon.). 2005. “2005/2006 BudgetCommunication.” Presentation to the Houseof Assembly, Commonwealth of the Bahamas,May 25.Sahay, R. 2005. “Stabilization, Debt, and FiscalPolicy in the Caribbean.” Working PaperWP/05/26. International Monetary Fund,Washington, D.C.Schiavo-Campo, S. 2008. “Of Mountains andMolehills: ‘The’ Medium-Term ExpenditureFramework.” Paper presented at theEast-West Center and Korea DevelopmentInstitute conference “Sustainability and Efficiencyin Managing Public Expenditures,”,Honolulu, Hawaii, July.Schick, Allen. 1998. “Aggregate Fiscal Discipline.”Chapter 3 in A Contemporary Approach44

to Public Expenditure Management. Washington,D.C.: World Bank Institute. Availableat http://www1.worldbank.org/publicsector/pe/PEM_book.pdf.———. 2004. “Fiscal Institutions versus PoliticalWill.” In G. Kopits (ed.), Rules-Based FiscalPolicy in Emerging Markets. London: PalgraveMacmillan.Shukla, G. P. 2009. “Belize: Fiscal Policy Review.”Inter-American Development Bank, Washington,D.C. Unpublished.Sitja, S. 2009. “Belize: Public Financial ManagementSector Note.” Inter-American DevelopmentBank, Washington, D.C. Unpublished.Sumar, E., and J. Shepherd. 2009. “Belize PublicExpenditure and Financial Accountability(PEFA) Assessment.” Report by Asesoresde Comercio Exterior, S.L. to EuropeanDevelopment Fund under Contract no.2008/157190, EuropeAid Co-operation Office,European Commission, Brussels.Symansky, S. 2009. “Belize: Is It Time for a Codeof Fiscal Responsibility?” Report preparedunder the technical cooperation project“Strengthening Belize’s Fiscal Transparencyand Responsibility” (BL-T1034), Governmentof Belize, Belmopan.Tapia Troncoso, W. A. 2009. “Concept Note: Institutionaland Financial Assessment of CurrentPension System, and Identification andEvaluation of Pension Reform Alternatives.”Internal Report, Inter-American DevelopmentBank, Washington, D.C.Tornell, A., and A. Velasco. 2000. “Fixed versusFlexible Exchange Rates: Which ProvidesMore Fiscal Discipline?” Journal of MonetaryEconomics 45, no. 2: 399–436.Wiggins, J. 2009. “Belize: Preparation of an ActionPlan for Public Financial ManagementReform.” Report prepared under the technicalcooperation project “StrengtheningResults-Based Management in the PublicSector” (BL-T1005), Government of Belize,Belmopan.World Bank. 2009. World Development Indicators.Washington, D.C.World Taxpayers Associations. 2004. “Value-Added Tax Rates in Select Countries.”Stockholm. Available at http://www.worldtaxpayers.org/stat_vat.htm.Zee, H. H., J. G. Stotsky, and E. Ley. 2002. “TaxIncentives for Business Investment: A Primerfor Policy Makers in Developing Countries.”World Development 30, no. 9: 1497–1516.chapter 2Anchoring Fiscal Policy for Growth45

Challenges in the Financial Sector33.1 IntroductionChapter 1 diagnosed the binding constraint on economic growth in Belize as the high cost of finance.Fiscal indiscipline and low national saving were identified as the root causes of high domestic interestrates, and Chapter 2 explored further the fiscal challenges facing Belize and made a number of recommendationsto address those challenges. This chapter further explores the challenges in Belize’s financialsector, analyzes possible policy reform options, and makes a number of recommendations.3.2 Challenges in Belize’s Financial SectorThis section outlines the structure of Belize’s financial system and then analyzes what is constrainingaccess to credit and why the cost of finance in Belize is so high. In particular, it examines whether highcosts are due to inefficiencies in the financial sector itself or to broader macroeconomic factors, such aslow domestic saving. Key to this analysis is the finding that what distinguishes Belize from other small,open Caribbean economies with similar monetary and exchange rate arrangements is the high interestrates paid on deposits. By contrast, interest spreads, although high, are broadly in line with countrycomparators.3.2.1 Structure of the Financial SystemBelize’s financial sector comprises private commercial banks, credit unions, the Development FinanceCorporation (DFC), the Small Farmers and Business Bank, pawn shops, and moneylenders. Commercialbanks account for about 80 percent of the formal credit market, and credit unions account forslightly less than 20 percent of this market.Commercial BanksFive domestic commercial banks and six international (offshore) banks operate in Belize. The domesticbanks are governed by the Banking and Financial Institutions Act and authorized to transact businesswith residents in both domestic and foreign currency. The international banks are governed by the InternationalBanking Act and authorized to deal with nonresidents, exclusively in foreign currency, and withfirms operating in export-processing zones and commercial free zones (IMF 2006). The two acts empowerthe Central Bank of Belize to regulate and supervise both the domestic and international banks.47

chapter 3Challenges in the Financial SectorThe domestic banking system is highly concentrated,with the three largest banks accounting formore than 80 percent of deposits and more than80 percent of total loans. The largest bank aloneaccounts for approximately two-fifths of loansand deposits.Credit UnionsThere are 14 registered credit unions in Belizethat engage in deposit taking and lending activities(IMF 2006). Credit unions serve a large segmentof the population. According to the Leagueof Credit Unions, there are about 25,000 memberloan accounts, a large number in a country witha total population of about 333,000 and an employedlabor force of 129,000.The two largest credit unions account for about 85percent of total credit union assets, with the largestcredit union—the Holy Redeemer Credit Union—accounting for about two-thirds of the total assetsof all credit unions operating in Belize. The largestcredit union is highly profitable and well-managedand reached a return on equity of about 30 percentin the fiscal year that ended on March 31, 2008. 1 Itis sizable enough to be counted among the largestfinancial institutions in Belize. Its financial statementsindicate that a substantial share of its assetsis invested in commercial bank certificates of deposit(Holy Redeemer Credit Union 2008). At theend of fiscal year 2007, it had about 39,000 members.It made about 16,000 loans totaling BZ$57million in the year that ended on March 31, 2008,with an average loan value of about BZ$3,500,or slightly below one-half of the per capita grossdomestic product (GDP). Belize’s credit unionsare governed by the country’s Credit Unions Act,which assigns supervisory authority to the Governorof the Central Bank.The Development Finance CorporationThe DFC is a state-owned lending organizationfounded to provide funding on an economicallysustainable basis to borrowers who would nototherwise be able to fund their requirements fromother sources on reasonable terms and conditions.Established in 1963, the DFC lent to three publicpriority sectors—housing, education, and smalland medium-sized enterprises. Large losses followinga rapid expansion of assets and liabilitiesled the government to decide to liquidate theDFC in 2006. As a result, the DFC’s outstandingloan portfolio and liabilities were reduced sharplybetween 2006 and 2008. However, in 2009 thegovernment introduced the Development FinanceCorporation Act to revitalize the DFC andto put in place a governance structure and regulationsdesigned to ensure the sound managementof the corporation and prevent an accumulationof large losses in the future.Pawn Shops and MoneylendersPawn shops and moneylenders in Belize conductshort-term lending and charge the highest interestrates on it, estimated at about 1 percent perweek. (Interest rates on consumption and retailloans and credit cards also carry higher rates whenextended by banks.) Repayments on consumptionand retail loans are usually made on a weekly basis;the item sold serves as collateral, and the interestrates charged are substantially higher thanthe rates charged by banks.3.2.2 Financial Depth and Access toFinanceBelize’s economy has a financial depth that isconsistent with its level of development. In 2008domestic credit to Belize’s private sector wasequivalent to 63 percent of GDP. This is in linewith the level in middle-income countries andother small Caribbean countries (Figure 3.1). Itsfinancial depth is greater than that of Jamaica,which has had a history of financial crises andinflation, but less than that of the most stableand highest-income Caribbean countries, such asBarbados and The Bahamas. This picture is reinforcedby the middling rating Belize receivedin the World Bank’s Doing Business 2010, whichrated Belize at 87th out of 183 economies for easeof getting credit in the country.1Credit unions can reduce lending rates to borrowers and/or increase deposit interest rates to savers, as both are “members” of the creditunion, instead of operating with larger margins that lead to higher profits. Hence, comparisons of the profitability of for-profit banksand credit unions, as well as comparisons of the profitability of various credit unions, should take into account this potential differencein determining “actual” profitability.48

Figure 3.1. Domestic Credit to the Private Sectorin Selected Countries, 2000–2008(percentage of GDP)Percent of GDP180160140120100806040200High income countries averageMiddle income countriesLow income countries averageDominicaBarbadosThe BahamasBelizeSt. Vincent &the GrenadinesJamaica2000 2001 2002 2003 2004 2005 2006 2007 2008Source: World Bank, World Development Indicators.Over the past 30 years, the outstanding loanportfolio (OLP) of Belize’s commercial bankshas grown at roughly three times the growth rateof GDP in the same period (an average annualgrowth of about 12 percent compared with an averageannual GDP growth of about 4 percent),although since 2000 growth has slowed.The lion’s share of commercial banks’ lending financesreal estate and construction, which accountsfor about one-third of OLP, with personal loansand loans for wholesale and retail distribution accountingfor about 20 percent. The latter may wellalso include loans that finance small businesses,particularly with respect to working capital.of scale in transaction costs. The bias in favor ofwell-established, large borrowers is usually intensifiedafter a financial crisis.Creditor RightsIn terms of the legal framework for credit access,Belize rates extremely well. According to theLegal Rights Index published in Doing Business,which measures the degree to which countries’collateral and bankruptcy laws protect the rightsof borrowers and lenders and thus facilitate lending,the laws regulating access to credit in Belizeare better designed in this respect than averagefor the region as well as the average for membercountries of the Organisation for EconomicCo-operation and Development (OECD) (Table3.1).Asymmetric InformationBy contrast, information asymmetries betweenborrowers and lenders clearly play an importantrole in the context of the financial sector in Belize.Microbusinesses and small and medium-sizedenterprises often do not possess accounting datathat are needed to evaluate their creditworthiness.They often lack a track record of debt repayment,and the time and cost associated with evaluatingtheir creditworthiness measured against the valueof their potential borrowing are much higher. In-chapter 3Challenges in the Financial SectorThe majority of the credit extended by Belize’scommercial banks goes to large and medium-sizedbusinesses. It is estimated that as of the end of 2006,7 percent of commercial banks’ total credit reachedsmall borrowers (i.e., those with assets up to BZ$0.5million), 43 percent went to medium-sized borrowers(assets between BZ$0.5 million and BZ$2.0million) and 50 percent served large borrowers (assetsover BZ$2 million) (Nogales 2006).This bias of commercial bank lending towardslarge and medium-sized businesses is typical indeveloping countries and reflects creditors’ preferencefor borrowers that have effective collateral,an established proven track record of loan repayments,and relevant financial information that canbe verified in audited financial statements. Thispreference typically has its roots in three issues:weak creditor rights in such countries, differencesin information about borrowers, and economiesTable 3.1. Doing Business Ratings on Access toCreditIndicator Belize Region OECDLegal Rights8 5.5 6.8IndexCredit Information 0 3.3 4.9IndexPublic registry 0 10.0 8.8coverage(% of adults)Private bureaucoverage(% of adults)0 33.2 59.6Source: World Bank (2010).Note: The Legal Rights Index ranges from 0 to 10, with higherscores indicating laws that are better designed to expand accessto credit. The Credit Information Index measures the scope,access, and quality of credit information available through publicregistries or private bureaus. It ranges from 0 to 6, with highervalues indicating greater amounts of credit information available.49

chapter 3Challenges in the Financial Sectordividual borrowers and microenterprises also sufferbecause Belize currently has no credit bureausproviding information to lenders about a potentialborrower’s creditworthiness and repayment history,partly because the market is very small and existinglegislation is insufficient to make effective creditbureaus possible. Additional legislation would berequired to enable credit bureaus and commercialbanks issuing credit cards to share their clients’credit history with other qualified institutionswhile preserving the confidentiality of their clients’data. The nonexistence of a credit registry in Belizeresulted in Belize’s receiving zero ratings withrespect to sharing of credit information on theWorld Bank’s Doing Business Indicators. 2For-profit financial institutions in Belize typicallyprefer lending to what they perceive as secureborrowers, for which the issue of asymmetricinformation is mitigated by adequate collateral, awell-known track record of prior debt servicing,and updated financial reporting through auditedfinancial statements (Yaron 2008). This oftenleads to the extension of overcollateralized loansthat reflect creditors’ risk aversion. The relativelyeasy and quick process for foreclosing on effectivecollateral associated with defaulted loans, particularlyin respect to urban property, in Belize mayalso explain the preference granted to this type ofclientele by for-profit banks.Transaction CostsThe relatively low transaction cost per dollar ofOLP of high-value loans compared with the relativelyhigh transaction cost per dollar of OLP oflow-value loans in Belize also contributes to thepreference given to large borrowers. This situationis typical of financial markets in general and iseven more prevalent in developing countries. Thetransaction costs associated with making a loanof BZ$1,000 might not be significantly differentfrom those for extending a loan of BZ$100,000,although the return on these two loans is significantlyin favor of the larger loan. Thus lenders havesubstantial incentives for favoring larger borrowersover smaller ones in their lending activities.Credit Unions’ Contribution to Financial AccessIn contrast to commercial banks, credit unions inBelize are overwhelmingly focused on small borrowers,and lending to microenterprises constitutesan integral part of credit union operations. However,credit union members can borrow only up tothree times the value of their savings and shares,and credit unions are forbidden by law to borrowmore than 20 percent of their lending resourcesfrom external sources. This raises the question ofwhether many small borrowers or potential borrowersin Belize are actually credit constrained,in light of unmet potential demand caused by theceilings imposed on borrowing through the sourcesavailable to them. The extent to which creditunion members are actually credit constrained andwhether they are borrowing simultaneously fromother financial institutions, pawn shops, or informalcreditors is not known and deserves furtheranalysis. Judging by the average size of a creditunion’s loans in Belize, it is clear that the segmentof the market that is serviced in other countriesby microfinance institutions is addressed, at leastpartially, by credit unions in Belize.3.2.3 Cost of CreditAn even more important issue, though connectedwith credit access, is the cost of credit in Belize,which is extremely high (see Chapter 1). Theweighted-average nominal lending interest ratein Belize has been approximately 14 percent forthe last five years, in spite of Belize’s long trackrecord of low inflation. This rate is far above theprime lending rate in the United States, to whosecurrency Belize’s currency is pegged (Figure 3.2).More tellingly, it is four to five percentage pointsabove that in other small, open Caribbean countriesthat have similar monetary and exchangerate policy frameworks (long-standing exchangerate pegs to the U.S. dollar combined with somedegree of capital controls).In part, Belize’s high interest rates are related tolarge spreads between deposit and lending interestrates. Though these spreads declined from2There are three such indicators measuring sharing of credit information: (1) the depth of credit information index, which measures theextent to which the rules of a credit information system facilitate lending based on the scope of information distributed and the easeof access to and quality of information; (2) public registry coverage, which reports the number of individuals and firms covered by apublic credit registry as a percentage of the adult population; and (3) private bureau coverage, which reports the number of individualsand firms covered by a private credit bureau as a percentage of the adult population.50

Figure 3.2. Weighted Lending Interest Rates inSelected CountriesPercent26242220181614 St. Vincent &JamaicaBelize1210the GrenadinesBarbados The Bahamas8Dominica64US prime lending rate202000 2001 2002 2003 2004 2005 2006 2007 2008 2009Sources: World Bank, World Development Indicators, and IMF,International Financial Statistics.11 percentage points in 2001 to approximately 8percentage points in 2009, this level is still highcompared to spreads in high-income countriesand even compared with the average for middleincomecountries. However, it is not significantlydifferent from those in other small Caribbeancountries with monetary and exchange rate arrangementsand economic and legal characteristicssimilar to those of Belize (Figure 3.3).The high spread between deposit and lendinginterest rates in Belize is indicative of high operatingcosts or inefficiencies in financial intermediation.Reserve requirements are the CentralBank of Belize’s primary tool of monetary managementand are adjusted to restrict the growth ofcredit to a level that is consistent with maintainingan adequate level of international reserves andthe pegged exchange rate. Commercial banks areFigure 3.3. Interest Rate Spreads in SelectedCountriesPercent1412108642Middle income countriesSt. Vincent & the GrenadinesLow income countries averageHigh income countriesaverageThe BahamasBarbadosJamaicaBelizeDominica02000 2001 2002 2003 2004 2005 2006 2007 2008 2009Sources: World Bank, World Development Indicators, and the centralbanks of The Bahamas, Barbados, and Belize.required to hold a cash reserve of 10 percent ofdeposit liabilities (up from 3 percent in 2003) andliquid assets of 23 percent. As assets held to meetcash reserve requirements are unremunerated (thebank must forfeit the interest it could be earning ifit could instead lend the assets) and assets held tomeet liquid asset requirements often earn belowmarketrates (because they are held in governmentsecurities, which generally pay lower-than-marketinterest rates), both requirements constitute animplicit tax on the financial sector (IMF 2008).The high levels required in Belize mean this implicittax is also high. The cost of reserve and liquidityrequirements in Belize was found to behigher than comparable countries even as early asthe late 1990s, when Belize’s reserve requirementswere lower (IMF 1998). If Belize’s governmentwere to remunerate commercial banks for theirreserves at market interest rates, lending rateson credit to the private sector could fall, with nochange to banks’ level of profitability. However,government interest payments would rise, requiringan offsetting fiscal adjustment (higher taxes orlower noninterest expenditures). Chapter 1 estimatedthat Belize’s reserve requirements contributeto just under half its interest rate spread, whilethe International Monetary Fund (IMF) (2008)estimated that up to one-fifth of the spread couldbe attributed to the reserve requirements.Randall (1998) investigated high interest ratespreads in the eastern Caribbean, which are probablythe closest comparators to Belize and whichhave spreads very similar to that of Belize (Figure3.3). She concluded that slightly over half of theamount of the spreads was attributable to highoperating costs. The remainder was accountedfor by reserve requirements and an implicit returnon equity (which was in line with internationalnorms). High operating costs were believed to belargely attributable to the limited market size facingthe average bank and consequently a lack ofeconomies of scale.Although the interest rate spread in Belize is similarto that in other Caribbean countries, there isa striking difference with respect to deposit interestrates. Whereas other low-inflation Caribbeancountries have weighted-average deposit interestrates below 4 percent, Belize’s weighted-averagedeposit interest rate is over 6 percent (i.e., 2 to3 percentage points higher) (Figure 3.4). Sincechapter 3Challenges in the Financial Sector51

chapter 3Challenges in the Financial SectorFigure 3.4. Deposit Interest Rates in SelectedCountriesPercent1412108642JamaicaDominicaall of these economies, except Jamaica, have hadaverage inflation rates of 2 to 4 percent per annumover the last decade, this implies that the realdeposit interest rate (i.e., the weighted-averagedeposit interest rate minus the inflation rate) inBelize has been around 3 to 4 percent, whereasthat in Caribbean comparators has been between0 and 1 percent. Commercial banks in Belize arecompeting for a limited supply of national savingby raising their deposit interest rates, which inturn generate higher interest rates on credit.Interest rates charged by credit unions on theirlending are generally 2 to 5 percentage pointslower than rates charged by commercial banks,reflecting, among other things, the less costly requirementsrelated to credit unions’ safe investmentscompared with the high cost of reserverequirements that are imposed on commercialbanks and the lower deposit interest rates paid tocredit union members.3.3 Policy OptionsThe BahamasSt. Vincent &the GrenadinesBelizeBarbados02000 2001 2002 2003 2004 2005 2006 2007 2008 2009Sources: World Bank, World Development Indicators; and the centralbanks of The Bahamas, Barbados, and Belize.3.3.1 Administered Interest Rates/Financial RestrictionAn obvious possible solution to high market interestrates is for the government to require commercialbanks to lower their interest rates throughlegislation, regulation, and moral suasion. Onemajor drawback of this option is that it treats thesymptoms but not the disease—it does nothingto increase the supply of national saving. On thecontrary, it may actually lower saving, althoughmost empirical evidence suggests that smallchanges in interest rates have only a minimal impacton saving unless the deposit interest rate isheld below the rate of inflation (see Dornbuschand Reynoso 1993). A lower lending interest ratemay indeed increase the demand for credit, butsince the supply of saving has not changed (or haseven diminished slightly), the quantity of creditextended does not increase. Instead, the samequantity of credit has to be rationed in a differentmanner, and the allocation of credit changes.Once started down this slippery slope, typicallythe government gets sucked into ever deeper interventionsand ends up directing credit, which isusually suboptimal from an allocative efficiencypoint of view and brings a host of problems relatedto favoritism and even corruption. Adverseselection problems may occur too as banks steercredit to safer projects with lower rates of returnbecause interest caps prevent them from financingriskier projects with higher rates of return. Asecond major drawback of an approach involvinggovernment-mandated interest rates is that itmay encourage disintermediation, as funds leavethe formal, regulated financial system and enterinformal, unregulated nonbank intermediaries. Athird potential problem is that the governmentmay end up having to cover losses incurred bybanks due to below-market interest rates and/or credit directed to projects that represent poorcredit risks.The diagnosis section of this chapter concludedthat the principal challenges in Belize’s financialsector are high lending interest rates (caused primarilyby high deposit interest rates and to a lesserextent by a large interest rate spread) and weakaccess to credit for smaller borrowers. This sectionoutlines policy options and international experiencein five key areas that are commonly consideredsolutions to the aforementioned challenges.3.3.2 Bypassing the Private FinancialSector through a State-OwnedEntityAnother option for addressing a lack of credit accessand high interest rates is to bypass the privatefinancial sector by creating a state-owned bank orfinancial institution. Indeed, reliance on state developmentfinance institutions (SDFIs) to ensure52

that priority sectors and underprivileged clienteleare provided with financial services, particularlycredit, was the dominant practice in the developingworld until the start of 1990s (Yaron 2004).SDFIs were considered imperative for financingeconomically warranted operations that were notfinancially attractive to private, for-profit financialinstitutions, because of their actual or perceivedpoor financial outcomes and high-riskoperations.However, international experience with SDFIs ledto a reevaluation of their costs and benefits duringthe 1990s. First, the establishment of an SDFI,like government-dictated lowering of interestrates, does not resolve the fundamental problemsthat cause high interest rates and a lack of accessto finance. It does not increase national saving (itmay increase external saving if the SDFI receivesfunding from external donors/creditors thatwould not otherwise have been channeled to thecountry), and it rarely resolves risk or informationproblems. Second, there is an intrinsic contradictionbetween the mandate of an SDFI and its financialhealth. If the SDFI lends to high-qualityborrowers, it can protect its financial health, butthen it will not fulfill its mandate of extendingcredit to previously unserviced sectors. However,if the SDFI lends to clients shunned by commercialbanks, it is very likely to lose money and gobankrupt, because its portfolio is concentrated onhigh-risk projects/borrowers. If, as is customary,the SDFI’s mandate forces it to focus on a limitednumber of sectors or categories of borrowers, thisconcentration will compound its lending risks bypreventing the spreading of risk over dispersed(relatively uncorrelated) borrowers. Third, giventheir ownership and lines of accountability, it isdifficult (as demonstrated by the evidence frompre-1990s SDFIs in the developing world) to insulatethe SDFI from political pressures to lendto well-connected borrowers or to ensure thatclients are selected according to technical ratherthan political criteria. Fourth, the SDFI may facerepayment problems, because clients do not considerit necessary to repay a government-ownedbank. Fifth, state ownership and the SDFI’s notfor-profitmandate may instill a relaxed mindsetabout financial discipline and efficiency in itsmanagement. And finally, the allocation of creditusing nonmarket criteria may lead to a decrease ininvestment efficiency.The above factors led to a generally poor internationalexperience with SDFIs in the developingworld. Micco, Panizza, and Yañez (2004) foundthat state-owned banks located in developingcountries have performed worse than their privatecounterparts in terms of profitability, levelsof nonperforming loans, and overhead costs.Although it is reasonable that SDFIs have lowerprofitability if they are fulfilling a social mandateand this represents a trade-off, as mentionedabove, the lower profitability of the developingworldSDFIs appears largely to have been due toinefficiency and higher operating costs. Internationalexperience has also borne out the fear thatpolitical allegiance plays a significant role in creditallocation in state-owned banks (Levy Yeyati,Micco, and Panizza 2005). In many countries,SDFIs went bankrupt, necessitating expensivegovernment bailouts, or at a minimum requiredperiodic government infusions. Because the frequentbailouts did not occur routinely every year,the average annual costs of maintaining the SD-FIs remained mostly unknown and did not provokea public debate on the social desirability ofsupporting the SDFIs (Yaron 2008). There havebeen a few cases in which an SDFI has managedto avoid financial losses, and Yaron (2008) notesthe existence of rigorous econometric studiesthat indicate that in a few cases, the social gainsof well-performing SDFIs exceeded the costs ofthe subsidies to them. However, Belize’s historicalexperience with the DFC has been in line withthe general international experience. The DFCrequired periodic infusions of capital, and then inthe early 2000s, it incurred sizable financial lossesthat adversely contributed to Belize’s economicdevelopment by causing a massive misallocationof scarce public resources and contributing to thehigh level of public debt.In terms of the macroeconomic consequences ofSDFIs, a review of the literature and cross-countryexperience with state-owned banks found noevidence that the presence of state-owned bankspromotes economic growth or financial development(Levy Yeyati, Micco, and Panizza 2005).However, the review also found that the depressionof financial sector development and growthcited in previous studies was largely due to stateownedcommercial banks and that there was insufficientcross-country evidence to conclude thatthe presence of state-owned development bankschapter 3Challenges in the Financial Sector53

chapter 3Challenges in the Financial Sectornegatively affects financial sector developmentand growth.If there is to be an SDFI in a country, three factorsappear to be important for its success: thenature of the institution’s objective and mission,clear accounting regarding the subsidy componentand constant evaluation of the institution’smission, and a governance structure entailing (1)operational independence, in order to enable theSDFI to achieve government-determined objectives;(2) long appointments for managers that arenot tied to the political cycle, in order to strengthenthe SDFI’s independence from direct politicalinterference; and (3) a board of directors thatrepresents a wide cross-section of society, in orderto strengthen checks and balances and limit theamount of political lending (Levy Yeyati, Micco,and Panizza 2005).The Belizean government has taken steps regardingthe DFC’s governance to ensure that the revitalizedDFC does not incur massive losses in thefuture. Insisting that the DFC’s performance ismeaningfully and routinely evaluated could alsoimprove performance and ensure progress towardmeeting the goals established. This approachwould eschew an overreliance on traditionalfinancial ratios in evaluating the DFC’s performanceand rather rely on a performance evaluationframework that uses the assessment criteriaof outreach to the target clientele and the institution’sself-sustainability (Yaron 2008). EnhancedDFC efficiency could also have been achieved byconfining or concentrating its operations in second-tieractivities (i.e., limiting DFC lending tofor-profit financial institutions and prohibiting itfrom lending directly to ultimate, retail-level targetborrowers). Ensuring transparency related toits costs and subsidies, well-defined products, andefficient servicing of its target clientele is essentialfor achieving improved DFC performance.3.3.3 Increasing National SavingThe fundamental solution to high lending interestrates is increased national saving. That is easiersaid than done, and policymakers’ ability to influenceprivate saving, in particular, is weak. However,policymakers can directly affect the level ofpublic saving through government revenue andexpenditure policies, and sometimes in a relativelyshort period of time. South Korea increased thenational saving rate from 4.9 percent of GDP in1960–64 to 12.9 percent in 1965–69. Dornbuschand Reynoso (1993) attribute this rise in nationalsaving primarily to a fiscal correction and a realdepreciation that accelerated export growth. Theincreased national saving allowed a sharp (almostdoubling) increase in the rate of gross fixed investmentin the country, and annual GDP growthaccelerated from 5.5 percent in 1960–64 to 10.0percent in 1965–69, setting off the South Korean“miracle.” In Chile, which doubled national savingfrom 13.4 percent of GDP in 1982–89 to 26.8percent in 1990–95, the principal agents of savingwere private enterprises and the general government.Both theory and evidence suggest that increasedpublic saving is likely to be partially offsetby a reduction in private saving. Most empiricalestimates of the offset (see Gavin, Hausmann, andTalvi 1997) suggest that it is about 50 percent, thatis, that the government needs to increase publicsaving by two dollars to raise national saving byone dollar. Notwithstanding this offset, increasedpublic saving is the surest way to raise nationalsaving. In the case of Chile, government reformof the social security system also contributed toincreased national saving, albeit after a lag. Forcedhousehold saving through individual pension accountsintroduced in 1981 generated additionalsaving at a rate of 3.7 percent of GDP by 1994(Agosin, Crespi, and Letelier 1997).However, targeting private saving as a policy variableis difficult. There is substantial evidence thathigh levels of saving are as much a consequenceof fast growth as a cause of it (Gavin, Hausmann,and Talvi 1997). Private saving in Asia, includingSouth Korea, and private enterprise saving inChile increased substantially after several yearsof high growth. This implies that governmentpolicy should be oriented first toward stimulatingfaster growth and then toward ensuring thatfaster growth leads to high levels of saving thatcan sustain that growth (given that high rates ofsaving are highly correlated with high rates ofeconomic growth over the long run). While sucha recommendation may be reasonable in countrieswhere the binding constraint on growth is not lowlevels of domestic saving, it is highly problematicin countries like Belize where the binding constraintis precisely held to be low levels of saving(Chapter 1). Under such circumstances, the best54

option for policymakers appears to be a two-trackapproach of doing as much as possible to directlyraise public saving, on the one hand, while tryingto provoke a growth acceleration, perhaps throughincreased foreign direct investment, on the other.3.3.4 Lowering the Cost of FinancialIntermediationIt is also important to work simultaneously onreducing the cost of financial intermediation inBelize and hence the spread between depositand lending rates. Three potential avenues existfor lowering the cost of financial intermediationin the country. First, fiscal consolidation woulddecrease the government’s demand for domesticcredit, thereby freeing up credit for the privatesector and allowing the central bank to reduce reserverequirements.Second, the central bank has been working withthe IMF to investigate the possibility of shiftingfrom a reliance on reserve requirements to market-basedinstruments of liquidity management.This should allow a reduction of reserve requirementsand hence banks’ costs, allowing them inturn to reduce the interest rate spread.The third potential avenue for lowering the costof financial intermediation in Belize relates to theindustrial structure of the country’s financial sector.High interest rate spreads are often attributedto a lack of competition in the banking sector. Ifthis were the case in Belize, the policy recommendationwould be to encourage new entrants tothe marketplace and foster greater competition.However, Randall (1998) concluded that banks inthe eastern Caribbean have high operating costsprimarily because of the limited market size andtheir inability to benefit from economies of scale.Given this, instead of recommending that governmentsseek to attract new entrants, she recommendedconsolidating the banking sector in orderto increase average efficiency by expanding themarket size of efficient banks. This implies themerger of inefficient banks into viable entitiesand the closure of poorly operated governmentownedbanks. In this light, as well as for reasonsof minimizing government’s contingent liabilities,a candidate for closure or merger into theDFC is the Small Farmers and Business Bank, asmall bank whose nonperforming loans recentlyreached 72 percent of its total OLP value, accordingto its management (Yaron 2008). The banklends at 10 percent but collects much less, givenits extremely high share of nonperforming loans,and it lacks a plan for enhancing recovery in theforeseeable future.3.3.5 Reducing InformationAsymmetries in the FinancialSectorCredit BureauInformation asymmetries in Belize’s financial sectorcan be substantially mitigated by establishinga well-functioning credit bureau and compellingall financial intermediaries to provide positive andnegative information on the loan repayments oftheir borrowers. Credit registries or bureaus—institutionsthat collect and distribute credit informationon borrowers—can greatly expand accessto credit. They gather and supply creditors withvast amounts of personal and financial data aboutindividuals and micro- and small enterprises. Bysharing credit information, they help lenders assessrisk and allocate credit more efficiently, andthey free entrepreneurs from having to rely onpersonal connections alone when trying to obtaincredit. They are considered one of the most importantsources of information about the payinghabits of consumers and play a central role in thedevelopment of financial markets. Creating aneffective credit bureau in Belize would decreasethe transaction costs of financial institutions andclients, mitigate financial indiscipline, and reduceloan arrears and the rescheduling of loans. Itwould eventually help to accelerate and increaseaccess to credit for the targeted sector, part ofwhich is now considered not creditworthy by forprofitbanks.Scoring ModelsThe use of credit-scoring models for borrowerscould further reduce transaction costs and facilitateexpanded access to credit for the underprivileged.Scoring models use statistical analysisto project the repayment likelihood of potentialborrowers based on related data on their age, experience,gender, type of business, and the like.Applying scoring models for lending to clients—chapter 3Challenges in the Financial Sector55

chapter 3Challenges in the Financial Sectorparticularly to those that cannot offer effectivecollateral—has the potential to reduce loanlosses and the transaction costs associated withchoosing creditworthy clients. For-profit financialinstitutions and microfinance institutionsare increasingly using these models in pursuitof greater loan recovery, lower transaction costs,higher profitability, and outreach to clients thatare or can become creditworthy. A pilot projectto develop credit scoring for micro-, small, andmedium-sized enterprises was carried out in Jamaicain 2008 (Scott Dunkerly 2009). Althoughit was too early to draw firm conclusions aboutenhanced access to credit by the time the projectended and was evaluated, indications are that enterprisesrated highly would have a better chanceof accessing finance. One of the biggest benefits ofthe project was that in the process of developingthe information necessary for obtaining a creditrating, firms generated the information to satisfylender requirements. In addition, banks appearedto take micro-, small, and medium-sized enterprisesmore seriously and treat them with greaterrespect than hitherto. However, early indicationsalso suggest that credit scoring has not resultedin lower collateral requirements in the country todate.lending interest rates) is to boost national savingthrough a sustained fiscal consolidation. Chapter2 delineated recommendations for such a fiscalconsolidation, which will not be repeated here.However, it is worth noting that two additionalfinancial sector issues underscore the necessityfor fiscal consolidation. First, the implicit taxon the financial sector through unremuneratedreserve requirements imposed on commercialbanks disguises an element of fiscal weakness inthe country that could be remedied through fiscalconsolidation. Shifting monetary policy managementaway from unremunerated reserve requirementsto government securities remunerated on amarket basis (see below) would lower the costs tocommercial banks (and thereby hopefully reduceinterest spreads), but it would increase interestcosts for the government, which in turn wouldneed to be offset through fiscal adjustment. Second,Belize’s Social Security Board is one of thebiggest depositors in the country’s financial system,and currently its solvency depends on receivinghigh (around 8 to 9 percent) returns on itsdeposits. Therefore, success in reducing interestrates would imply higher contributions or parameterchanges to ensure the social security system’sfuture solvency.3.4 Policy RecommendationsExpanding on Chapter 1, this chapter has analyzedthe principal financial challenges in Belize,which relate to lowering lending interest rates andbroadening access to credit. Chapter 1 identifiedthe high cost of domestic finance as the bindingconstraint on domestic investment and economicgrowth. Consequently, lowering the cost of domesticfinance has a transcendental importancein terms of stimulating private sector developmentand economic growth. Broadening accessto credit is probably less important in terms ofstimulating economic growth but has significantsocial implications. The aforementioned diagnosisand assessment of various policy options leadto a number of policy reform recommendations,outlined in the following subsections.3.4.1 Sustained Fiscal ConsolidationAs diagnosed in Chapter 1, the fundamentalway to reduce deposit interest rates (and hence3.4.2 Decrease Dependence onReserve RequirementsBelize’s central bank should continue its work toshift from a reliance on reserve requirements tomarket-based instruments of liquidity management.This should allow a reduction of reserverequirements and hence the cost of financialmobilization relative to the gains from lending,thereby allowing commercial banks to reduce theinterest rate spread.3.4.3 Foster Increased Private SavingAlthough government has much less influenceover private saving than public saving, it couldnevertheless be useful to explore avenues forstimulating increased private saving in Belize. Itmay be possible to strengthen the incentive tosave, particular for sizable and foreseeable purchases,like housing and education (Yaron 2008).Provision of basic financial education in Belize’sschools might help to foster a culture of saving inthe country.56

3.4.4 Financial Sector ConsolidationRandall’s (1998) analysis of the eastern Caribbeansuggests that economies of scale may lead to reductionsin average unit cost if the market size ofefficient banks increases. Although the scope forconsolidation in Belize’s already small financial sectoris limited, possibilities may exist on the margin.The Small Farmers and Business Bank is a primecandidate for closure or merger with the DFC.3.4.5 Establish a Credit BureauThe establishment of a well-functioning credit bureauin Belize could substantially mitigate problemsrelated to asymmetric information in the country’sfinancial sector and reduce creditors’ overrelianceon collateral. It would be worthwhile to enact appropriatelegislation so that the legal preconditionsfor a credit bureau to operate can be met. Creditbureau legislation would have a twofold purpose:●●●●To facilitate national credit bureau creation inorder to make more information about potentialdebtors available to creditors from a trustedthird party.To regulate, but not overregulate, the creditbureau so the public’s legitimate rights areprotected in the information-gathering and -storing process. Credit bureau legislationwould allow creditors to use more relevantcriteria in deciding who obtains credit, offerlower interest rates, and make larger loans andfor longer periods.3.4.6 Improve Information for Smalland Medium-Sized EnterprisesThe introduction and use of credit-scoring models—particularlyfor those that cannot offer effectivecollateral—has the potential to help banksidentify creditworthy clients, reduce transactioncosts, and broaden access to credit.chapter 3Challenges in the Financial Sector57

chapter 3Challenges in the Financial SectorReferencesAgosin, M., G. Crespi, and L. Letelier. 1997.“Análisis sobre el aumento del ahorro enChile.” Working Paper no. R-309. Office ofthe Chief Economist, Inter-American DevelopmentBank, Washington, D.C.Dornbusch, R., and A. Reynoso. 1993. “FinancialFactors in Economic Development.” InR. Dornbusch (ed.), Policymaking in the OpenEconomy: Concepts and Case Studies in EconomicPerformance, 64–90. New York: OxfordUniversity Press for the World Bank.Gavin, M., R. Hausmann, and E. Talvi. 1997.“Saving Behavior in Latin America: Overviewand Policy Issues.” Working Paper no.346. Office of the Chief Economist, Inter-American Development Bank, Washington,D.C.Holy Redeemer Credit Union. 2008. 2008 AnnualReport. Belize City. Available at http://hrcubelize.org/images/publication/hrcuagm2008.pdf.IMF (International Monetary Fund). 1998. Belize:Recent Economic Developments. CountryReport no. 98/109. Washington, D.C.———. 2006. Belize: Selected Issues and StatisticalAppendix. Country Report no. 06/370.Washington, D.C.———. 2008. Belize: Staff Report for the 2008Article IV Consultation. Country Report no.08/88. Washington, D.C.———. Various years. International FinancialStatistics. Washington, D.C.Levy Yeyati, E., A. Micco, and U. Panizza. 2005.“State-Owned Banks: Do They Promote orDepress Financial Development and EconomicGrowth?” Background paper for“Public Banks in Latin America: Myths andReality,” Inter-American Development Bank,Washington, D.C., February 25. Available athttp://www.iadb.org/res/publications/pubfiles/pubS-491.pdfMicco A., U. Panizza, and M. Yañez. 2004. “BankOwnership and Performance.” Working Paperno. 518. Research Department, Inter-American Development Bank, Washington,D.C.Nogales, J. 2006. Belize: Unattended Loan Demandand Proposed Remedial Action. Report preparedfor the Inter-American DevelopmentBank, Washington, D.C.Randall, R. 1998. “Interest Rate Spreads in theEastern Caribbean.” Working Paper no.WP/98/59. International Monetary Fund,Washington, D.C.Scott Dunkerly, C. (2009). Final Evaluation Report:Enterprise Risk Management & FinancingProgramme for Micro, Small and MediumEnterprises (MSMEs). ATN/ME-10862-JA.Inter-American Development Bank, JamaicaCountry Office, Kingston.World Bank. 2010. Doing Business 2010: Reformingthrough Difficult Times. Washington, D.C.Available at http://www.doingbusiness.org/features/Highlights2010.aspx.———. Various years. World Development Indicators.Washington, D.C.Yaron, J. 2004. “State-Owned Development FinanceInstitutions (SDFI): Background,Political Economy and Performance Assessment.”Background paper for “Public Banksin Latin America: Myths and Reality,” Inter-American Development Bank, Washington,D.C., February 25. Available at http://www.iadb.org/res/publications/pubfiles/pubS-492.pdf.———. 2008. “The Demand and Supply ofCredit to Targeted Sectors in Belize.” Inter-American Development Bank, Washington,D.C. Unpublished.58

Part IIChallenges andOpportunities inthe ProductiveSectors59

Trade Sector: Exporting for Growth44.1 IntroductionBelize’s location at the geographic crossroads of Central America and the Caribbean has economic, cultural,and historical analogues. Although it is located in Central America, Belize has sought to establishcloser political and economic ties with the English-speaking Caribbean countries. Indeed, Belize joinedthe Caribbean Community (CARICOM) in 1974, well before gaining full independence in 1981. Historically,Belize’s economy has been dependent on a few agricultural products and travel services. Morerecently, the country has been attempting to increase trade relations with its Central American neighbors;Belize is a member of the Central American Integration System (SICA) as well as other CentralAmerican organizations. 1Belize has enjoyed high growth in recent years, driven primarily by expansionary government fiscalpolicies. These policies were not sustainable in the long run, and the government’s subsequent austeritymeasures partly explain the recent decrease in gross domestic product (GDP) growth. Export-ledgrowth is generally advisable for small economies, and as the government’s ability to stimulate growthvia expansionary fiscal policy becomes more constrained, the export sector will be increasingly importantas an alternative engine of growth, and foreign direct investment as a source of finance, for Belize duringthis period of fiscal austerity.However, Belize’s size, geographical location, and concentration in agricultural products make both itsexport sector and its economy as a whole vulnerable to both internal and external shocks, which maytake the form of hurricanes and other natural disasters, price fluctuations, and viruses and pests. In addition,the competitiveness of many Belizean exports is dependent on trade preferences, particularly theEuropean Union’s banana and sugar programs. Belize has diversified into additional products in recentyears as well as services, led by tourism. Continued export diversification will reduce these risks, providedthis process takes place in accordance with the country’s comparative advantage.Although Belize is well positioned to further its exports in several agricultural and services products, itfaces four main constraints on growing through exports: institutional capacity for trade policymakingand implementation, trade-related infrastructure, access to capital, and export promotion.The chapter’s next section examines Belize’s trade patterns and analyzes the country’s trade performance,including the performance of strategic product and services sectors. The third section exploresBelize’s trade policy framework, including trade relations with CARICOM, Latin American, and majorinternational trading partners and potential trading partners such as Mexico and countries in CentralAmerica. The fourth section analyzes and proposes policy recommendations regarding key constraints1These include bodies such as the Central American Commission on Development and the Environment, the Council of Ministersof Tourism, and the Central American Civil Aviation Agency. Belize is not, however, a member of the Central American EconomicIntegration System (SIECA).61

chapter 4Trade Sector: Exporting for Growthon trade performance, including trade-relatedinstitutions, trade finance, trade facilitation, andexport promotion. The final section concludes.4.2 Assessing Belize’s TradePerformance4.2.1 Overview of Belize’sMerchandise Trade PatternsExternal trade has always been an importantdriver in the Belizean economy. Trade accountedfor 108 percent of GDP in 2009 (see Figure 4.1).During 1995–2008, annual growth in exportsof goods and services averaged 7.2 percent, andimports grew 8.4 percent annually. Merchandiseexports and imports increased at respective annualizedrates of 5.7 and 9.5 percent. Since 1984, theearliest year for which data are available, Belizehas not had a positive external goods balance; in2008, the merchandise trade deficit was US$316million. By contrast, services, led by the tourismsector, have produced strong surpluses, at US$217million in 2008. The overall current account defi-cit, after shrinking from 13.6 percent of GDP in2005 to 2.1 percent of GDP in 2006, deterioratedto 10.2 percent of GDP in 2008. 2Although Belize’s merchandise export growthwas stagnant at the beginning of the decade, itsperformance has accelerated in the past few years,and goods exports grew an average of 6.0 percentannually in 2000–2008. 3Around three-quarters of Belize’s goods exportsare destined for the United States, the EuropeanUnion, or CARICOM. A substantial part of thisexport activity takes place in the context of preferentialagreements. The dependence of certainexport sectors on preferences in these marketsmight be cause for concern, as the preferences arelikely to erode in the future.The United States is Belize’s most important exportmarket, and its share of Belizean merchandiseexports was 45 percent in 2008. Whereas theEuropean Union’s share has steadily declined, itnevertheless accounted for more than 27 percentof Belize’s exports in 2008. 4 Its exports to theFigure 4.1. Trade Openness in Latin America and the Caribbean, 2009GuyanaNicaraguaBarbadosBelizeSurinameHondurasJamaicaBahamas, TheCosta RicaTrinidad &TobagoPanamaEl SalvadorMexicoGuatemalaUruguayDominican RepublicPeruArgentinaColombiaBrazil0 50 100 150 200Source: IDB (2009).Note: Figure shows total trade in goods and services (imports and exports) as a percentage of GDP.Calculations are based on data from the World Bank’s World Development Indicators.234The following data sources are used in this paragraph: the United Nations Commodity Trade Statistics database (UN Comtrade) ofthe United Nations Statistics Division (UNSD) of the Department of Economic and Social Affairs (DESA) (merchandise trade data);International Monetary Fund, Balance of Payments Statistics (December 2009) (services data); International Monetary Fund, WorldEconomic Outlook database (October 2009) (current account as percentage of GDP).Calculations based on UN Comtrade database.IDB Integration and Trade Sector calculations based on UN Comtrade database.62

European Union consist mainly of bananas andsugar, and the recent decline in the share of exportsdestined for Europe reflects the decliningrelative importance of the sugar industry. Exportsto CARICOM stood at 5 percent in 2008. Tradewith CARICOM is relatively concentrated on afew countries and a few products: in 2008, Jamaicaand Trinidad and Tobago accounted for almost80 percent of Belize’s intraregional exports. 5The share of Belize’s exports destined for LatinAmerica grew from 1 percent in 1995 to nearly21 percent in 2008. Exports to Central Americagrew faster than those to any other region during2000–2008, largely a result of petroleum exportsto the region. Exports to Mexico also grew overthe same period, averaging 16 percent growthper year, driven overwhelmingly by crustaceanexports. Exports to Guatemala are still small yetdynamic, led by petroleum and cross-border tradein agricultural products. Although Belize haslarge trade deficits with both Mexico and CentralAmerica, exports to these regions are generallygrowing much faster than imports.With its low population density, Belize is relativelyland abundant compared with most of its Caribbeanand Central American peers, which lendsitself to Belize’s serving as a regional breadbasket.However, the country’s relatively sparse population(322,000, with one of the lowest populationdensities in the world) also contributes to hightransport costs, while its remoteness in shippinglines complicates efforts to expand agriculturalexports to the Caribbean. Nevertheless, this problemis less relevant in regard to its neighbors inCentral America and Mexico because they share aland border. Thus, structural scheduling delays donot play a role in exports to these countries, andtrade with them can be expanded so long as themajor highways are accessible year round.Belize’s merchandise exports are highly weightedtoward primary products. Between 2000 and2008, food (mostly sugar, bananas, citrus concentrate,and shrimp) made up 78 percent of thecountry’s total goods exported. Fuels, the second-Figure 4.2. Herfindahl-Hirschmann Index andPopulation, 2006HHI0.70.60.50.40.30.20.1JamaicaSurinameTrinidad and TobagoBelizePanamaGuyanaBarbadosCosta RicaParaguayHondurasBoliviaGuatemala00 2,000 4,000 6,000 8,000 10,000 12,000 14,000Population (Thousands)Sources: Normalized Herfindahl-Hirschmann Index fromUNCTAD (2008); population data from the World Bank’sWorld Development Indicators.largest export product sector, made up 12 percentof merchandise trade, while manufactures accountedfor another 7 percent. Agricultural rawmaterials and ores and metals together made upless than 1 percent of merchandise trade. 6 Belize’srelative export concentration is shown in Figure4.2, which plots the Herfindahl-Hirschmann Index(vertical axis) and the population (horizontalaxis) of various countries. Countries with trademore highly concentrated in a smaller numberof products have higher values on this index. Thefigure shows that although Belize’s trade is highlyconcentrated, it is not exceptionally so whenpopulation is controlled for; as such, its challengeswith diversification are not uncommon amongsmaller countries. Furthermore, these calculationsinclude only goods exports, and tourism servicesdiversify the country’s exports further, althoughthe country’s services exports are similarly quiteconcentrated in this single sector.Belize’s exports can basically be categorized intothree broad sectors: sugar, other traditional exports(citrus juice, bananas, and apparel), andnontraditional exports (crustaceans, papayas, andother products). Over time, sugar has becomeless prominent relative to citrus juice and bananas;more recently, nontraditional exports haveincreased their profile (see Figure 4.3) (Devotochapter 4Trade Sector: Exporting for Growth56Likewise, sugar, fruits, and vegetables alone accounted for more than 80 percent of exports to these two countries.Following the United Nations Conference on Trade and Development (UNCTAD) Handbook of Statistics (http://www.unctad.org/statistics/handbook), merchandise trade is categorized according to six broad categories. Similarly, when analyzed in terms of thetechnology content aggregates developed by Lall (2000), Belize’s goods exports are dominated by lower-technology products. In 2006,exports of primary products and resource-based manufacturing represented 50 and 42 percent of total goods trade, respectively.63

chapter 4Trade Sector: Exporting for GrowthFigure 4.3. Product Composition of BelizeanExportsPercent4540353025201510501992 1995 2000 2008YearSugar & Molasses Orange & Grapefruit Juice OuterwearBananas Crustaceans & Molluscs PapayasPetroleumOther ProductsSource: IDB Integration and Trade Sector calculations basedon the United Nations Commodity Trade Statistics database(Comtrade) of the United Nations Statistics Division (UNSD)of the Department of Economic and Social Affairs (DESA) .2006). In 2008, six product groups accounted forsome 95 percent of merchandise exports: petroleum(40 percent), orange and grapefruit juice (19percent), crustaceans and mollusks (7 percent),sugar and molasses (13 percent), bananas (11 percent),and papayas (4 percent). 74.2.2 Developments in SelectedProduct SectorsSugar, including sugar-based manufactures, such asmolasses, has lost some of its importance in Belize’sexports. Nonetheless, sugarcane productionaccounts for about half of the arable land in Belize(Economist Intelligence Unit 2006). In 1995, sugarwas the country’s top export revenue earner, but ithas recently fallen behind citrus, crustaceans, andpetroleum. Its importance decreased from 35 percentof merchandise trade in 1995 to 13 percent in2008. 8 The decline may be attributable to decreasingprices, natural disasters, and limited improvementsin Belize’s competitiveness in the industry.The European Union is Belize’s most importantmarket for sugar—the United Kingdom aloneimported more than 50 percent of Belize’s totalsugar exports to the world during 2004–2008.In the past, these exports entered the EuropeanUnion primarily under the African, Caribbeanand Pacific (ACP)/European Union Sugar Protocol,which included a guaranteed minimumprice for sugar within a specified quota, and secondarilyunder the Special Preferential Sugarprogram, which allowed additional sugar to enterthe European Union within smaller quotas andsomewhat reduced minimum prices. 9 The EuropeanUnion began implementing reforms to theSugar Protocol in 2006 in the form of a series ofprice reductions designed to result in a cumulative36 percent decrease by 2010. The EconomicPartnership Agreement between the CaribbeanForum of African, Caribbean, and Pacific States(CARIFORUM) and the European Community,which took effect January 1, 2008, provides forduty-free and quota-free access for sugar aftertwo years. This is problematic for Belize in thatindividual countries no longer receive dedicatedquotas but rather share market access, and thuscompete, with other, lower-cost African, Caribbean,and Pacific exporters.Although Belize is one of the most competitivesugar-producing countries in CARICOM, sugarproduction in the country is hindered by the lackof scale economies. Inefficiencies in sugar productionin Belize stem more from productivity issuesthan from the land constraints affecting otherproducers in the region. Small-scale farms (thoseoccupying less than 25 acres of land) account foran overwhelming majority of the country’s sugarexports (WTO 2004).Figure 4.4 shows a cost curve in which countriesare situated in ascending order of productioncosts. The length of the line associated with aparticular country represents its average productionover five years. This is generally based onthe method used in a study conducted by LMCInternational and Oxford Policy Management,789IDB Integration and Trade Sector calculations based on UN Comtrade database. It should be noted that varying levels of product aggregationhave been used in order to present products in a more intuitive manner. The products are defined according to the StandardInternational Trade Classification (SITC), Rev. 2, as follows: petroleum (333 + 334), orange and grapefruit juice (05851 + 05852),crustaceans and mollusks (036), sugar and molasses (0611, 0612, 0615), bananas (0573), outerwear (842, 843, 845), and papayas(Harmonized System code 080720).IDB Integration and Trade Sector calculations based on UN Comtrade database.African, Caribbean and Pacific Sugar Group website: http://www.acpsugar.org/SPS.html.64

Figure 4.4. Cumulative Cost Curve of ACP SugarProducers605040302010ZambiaMalawiZimbabweSwazilandBelizeCote d'IvoireTanzaniaCongo, Rep. ofGuyana00 5 10 15 20 25 30 35 40Avg. Production 99-04 (Mt)although that study uses an index of productioncosts, while here an absolute level of productioncosts is used. 10 Using either measure, however, itscost structure is quite high when compared withthose of major world exporters with which Belizemust now compete for access to the EuropeanUnion market. It should be noted that this assessmentis based on the current cost structureand that, unlike the sugar industries of some otherCaribbean countries, Belize’s sugar industrymay be restructured to improve its competitiveness.Some natural consolidation of the industryis also expected as some smaller and less efficientproducers exit. There is also some potential forcrop rotations between sugar and other products.Meanwhile, sales to the United States have stagnatedsince 2000, although the United States increasedBelize’s sugar quota in 2006 because ofshortages resulting from Katrina-related damage.Belize has had more recent success in exportingsugar within the CARICOM region, including toJamaica and Trinidad and Tobago.The performance of other Belizean food andagricultural exports has been mixed. Banana exports(nearly all of which are destined for theFijiMauritiusKenyaJamaicaSt. Kitts &NevisTrinidad & TobagoUgandaBarbadosSource: Authors’ calculations based on production cost data fromGarside et al. (2005) and production data from the StatisticalDatabase of the UN Food and Agriculture Organization(FAOSTAT) (http://faostat.fao.org/). The methodology wasadapted from LMC International and Oxford Policy Management(2003).European Union) grew at an average annualrate of 7 percent during 2000–2008 and makeup 11 percent of the country’s goods exports tothe world. As with the case of sugar, Belize is nolonger allocated a dedicated quota following theEconomic Partnership Agreement, but rather accessesthe European market alongside lower-costACP banana exporters, such as Cameroon andCôte d’Ivoire; however, the duty-free, quota-freeframework for bananas took effect immediately,without the two-year delay incorporated into thesugar agreement. Belize will face still more competitivepressures in the European market followingthe conclusion of an agreement that wouldreduce EU duties on Latin American bananas(European Commission Directorate-General forTrade 2009).The country’s citrus exports have fared better inlight of favorable prices. Citrus production in Belizeis made up mainly of oranges (81 percent)and grapefruit (19 percent), most of which areprocessed into concentrate. Although severelydamaged by Hurricane Iris in 2001, the industryhas grown rapidly since, and total exports oforange and grapefruit juice to the world stood atUS$57 million in 2008. 11Belize’s exports of other traditional products havebeen more stagnant. Apparel exports are negligiblefollowing the 2008 shutdown of WilliamsonIndustries, the main garment producer in Belize(Economist Intelligence Unit 2008a, 2008b;Ramos 2008). Although Belize has a history oftimber production, wood exports have remainedrelatively flat, and Belize’s forestry resources arenow viewed as having more economic potentialvis-à-vis ecotourism, as a result of the naturalbeauty of many Belizean forests (Economist IntelligenceUnit 2006).Nontraditional agricultural and marine productshave played an increasingly important role inBelize’s exports in recent years; seafood and fish,papayas, beans, hot sauce, toilet paper, and liveanimals are among the most successful of these.After experiencing strong growth in sales from themid-1990s through the early part of this decade,chapter 4Trade Sector: Exporting for Growth10The ordering of countries is somewhat different as well: although Belize is found with the majority of its ACP peer group in thecentral flat area of costs in both cases, it is at the far right part of this zone in the LMC-Oxford analysis, right before the curve startsrising sharply for additional marginal producers.11IDB Integration and Trade Sector calculations based on UN Comtrade database.65

chapter 4Trade Sector: Exporting for Growthshrimp exports have fallen off recently as a result ofincreased international competition. Most of Belize’scrustacean exports are to the United States.Previously rapid growth in crustacean exportsdestined for Mexico has reversed amid complicationsin exporting shrimp on ice to Mexico and adecline in the volume of shrimp production arisingfrom financial troubles at the largest shrimpproducer in Belize (Chamber of Commerce andIndustry 2007; Musa 2007; Ramos 2007; ShrimpNews International 2007). Fish, including tilapia,are primarily exported to the United States, withmuch of the remainder going to Mexico. Belizealso exports smaller amounts of other crustaceansand mollusks such as lobsters and conch.Papayas are one of the main export success storiesfor Belize over the past decade and continue tobe a crop of increasing importance. Exports rosefrom around US$0.5 million in 1995 to morethan US$15 million in 2006, but the industry hassubsequently suffered in the wake of HurricaneDean, with crop losses estimated at US$11.25million (Ramos 200a). Nevertheless, Belize continuesto be the second-largest supplier of papayasto the United States, after Mexico.Belize 2007). Petroleum exports rose to nearly 1.2million barrels in 2008 (Central Bank of Belize2009). 12 Although Belize’s petroleum exports aresmall compared with those of Mexico or evenGuatemala, the revenues may have a significantimpact on the Belizean economy, given the size ofthe economy and population.The renewable fuels industry in the country alsohas potential, due largely to market opportunitiesfor ethanol in the United States and preferentialstatus for Belize’s exports in this area; an internationalagricultural company, Blue DiamondVentures, plans to build a 3.5 million gallon peryear ethanol plant and a 5 million gallon per yearbio-diesel facility in Belize (GRAINNET 2006;Blue Diamond Ventures 2006). Regardless of thelevel of industry growth that materializes, any potentialethanol exports to the United States reston somewhat unstable ground: greater protectionistpressures from U.S. producers could riskthe loss of existing preferences extended underthe Caribbean Basin Initiative, while a more liberalizedU.S. ethanol policy could mean greatercompetition from highly efficient countries, suchas Brazil.Belize also exports beans, mainly black-eyed peasand red kidney beans, with the noteworthy developmentof new markets such as the United ArabEmirates and Saudi Arabia. These exports haverecovered following a decline in production in2006 resulting from adverse weather conditionsand excess supply from previous years (CentralBank of Belize 2007, 2008, 2009). Some soybeanproduction is also taking place, particularly in thenorth of the country. The hot sauce industry, ledby export sales from Marie Sharp’s Limited andAgro World Limited, has also been successful(Beltraide 2004). The industry has benefited froman increase in the world price of pepper sauces;the great majority of the country’s condiment exportswere to the United States and Japan.Perhaps the development with the largest potentialimpact on Belize’s trade is the 2005 discoveryof petroleum in the Spanish Lookout area of theCayo District, which has proven reserves of approximately10 million barrels (Central Bank of4.2.3 Competitiveness of GoodsSector in World and MajorMarkets, Including MarketSharesBelize’s fertile land provides it with a broad comparativeadvantage in agriculture and agriculturalindustry and an opportunity in some cases to groworganic products at costs comparable to those oftheir nonorganic counterparts. Belize is thus wellpositioned to compete in niche markets in whichconsumers are developing more-sophisticatedtastes and a preference for goods such as organicproduce (e.g., Belize’s certified organic oranges,cocoa, and rice) and fair trade products. Pursuingthis avenue would help Belize escape the trap thatoften plagues primary goods producers by allowingthe country to “brand” its exports, in a sensedifferentiating its products from similar goods,and thus insulating these producers somewhatfrom the lowest-cost competition that characterizescommodities markets.12According to calculations based on data from the U.S. International Trade Commission Interactive Tariff and Trade DataWeb (US-ITC DATAWEB) (http://dataweb.usitc.gov/), 2008 petroleum exports to the United States reached US$91 million, accounting formore than half of Belizean exports to that country.66

Because Belize has a very small percentage ofworld market share, it is difficult to analyze thecountry’s export competitiveness, and difficultiesobtaining robust statistics further complicateperforming some traditional measures. Asidefrom Trinidad and Tobago’s exceptional fueldrivenexport growth, Belize has generally outperformedits CARICOM peers, largely becauseBelize’s factor endowments differ from those ofCARICOM as a whole, in that Belize is landabundant.However, Belize’s Central Americanlocation limits the usefulness of comparisonssolely with CARICOM. In particular, Belizehas high labor costs compared with its CentralAmerican neighbors.Belize not only has integrated with CARICOMmembers, but has also made efforts to integratewith its Spanish-speaking neighbors by becominga member of SICA, the regional integrationmovement of Central America, in 2002. At thesame time, improvements in transportation linksbetween Belize and its neighbors should helpboost intraregional trade. It currently has a partial-scopeagreement with Guatemala; any futureexpansions of the agreement could lead to additionalreductions in barriers to trade. The negotiationof comprehensive bilateral agreements withMexico and other Central American countriesmight further benefit Belize.4.2.4 Trade in Services: GeneralPerformanceBelize’s net external services balance is stronglypositive and has been since the early 1990s, allowingthe country to run a regular merchandisedeficit. Belize’s services exports, led by tourism,grew at an annual rate of 12.3 percent during2000–2008, reaching a value of US$386 million.The services sector’s share in total employment,which stood at 62 percent in 2005, gives evidenceof the sector’s importance in the country’seconomy. 13 The vibrancy of the sector has beena contributing factor in reducing the country’sunemployment rate from in recent years (CentralBank of Belize 2007, 2008, 2009).The travel industry, led by tourism, has accountedfor about 70 percent of Belize’s total servicesexports since the late 1990s. 14 Belizean travelservices exports have more than doubled since2000, reaching a value of US$278 million in2008. 15 Transportation, other business, and governmentservices exports were also important;during 1995–2008, they accounted for 7.7, 9.3,and 8.6 percent of total services exports, respectively.4.2.5 Trade by Major Services SectorsThe importance of tourism in the Belizean economycontinues to grow. Belize has been able tobrand itself as a unique destination with a varietyof activities (Beltraide, n.d.-a), and the performanceof its tourism sector has been strong incomparison with other Caribbean destinations.Its natural beauty, renowned diving areas, and archaeologicalsites help to explain why tourism hasflourished and why 30 percent of tourist arrivalsare by repeat visitors (Beltraide, n.d.-a).The United States is the largest source of travelersto Belize. In 2008, it accounted for almost 60percent of Belize’s stopover arrivals and the vastmajority of its cruise passenger arrivals. Europeprovided 14 percent of Belize’s stopover arrivalsin 2008, Canada just over 7 percent, and othercountries (mainly those of Central America) 19percent. Tourist arrivals from the United States,the European Union, and Canada grew at respectiveannual rates of 4, 3, and 8 percent during2000–2008. 16Belize is a newcomer in the field of internationalfinancial services. The country’s 1990 InternationalBusiness Companies Act offers benefits toproviders of international financial services in theform of tax exemptions (Economist IntelligenceUnit 2006).chapter 4Trade Sector: Exporting for Growth13141516Calculations based on data from the World Bank’s World Development Indicators, the International Monetary Fund’s Balance ofPayments Statistics, and the International Labour Organization’s LABORSTA Internet database (http://laborsta.ilo.org/).According to the World Trade Organization, tourism/travel services consist of services provided by hotels and restaurants, travelagencies, and tour operators, tourist guide services, and other related services.Calculations based on International Monetary Fund, Balance of Payments Statistics (December 2009).IDB Integration and Trade Sector calculations based on Caribbean Tourism Organization data.67

chapter 4Trade Sector: Exporting for GrowthBelize’s incipient information and communicationstechnology (ICT) industry is also growing, notablyin the fields of software development, online gaming,offshore data processing, and call centers (Beltraide2007). The government’s commitment tothe development of the ICT industry is reflected inthe deregulation of the telecommunications marketand in its investment in the DataPro e-BusinessPark in 2000 to make its export services in this areamore attractive (World Bank 2009).4.2.6 Competitiveness of ServicesSector in World and MajorMarketsBelize’s proximity to the United States and itsEnglish-speaking population give the countrya competitive advantage, in terms of its exportableservices, in U.S. markets and those of otherEnglish-speaking countries. Thus, the servicessector offers Belize an opportunity to diversifyaway from its traditional (and more vulnerable)exports. Belize’s business-friendly governmenthas encouraged the growth of services exportsthrough investments and legislation enticinginvestors in these sectors. In addition, the governmenthas restored archeological sites withthe assistance of the IDB, invested in a marketingconsulting company, and expanded itsairport runways to accommodate the landingof larger aircraft, capable of transatlantic flights.All of these have helped to improve the competitivenessof Belize’s services exports in worldmarkets.Table 4.1. CARICOM Common External Tariff and Customs Duties Applied by Belize(simple average, percent)HS SectionSimple Average (%)Description CET Belize01 Live Animals/Products 27.3 27.202 Vegetable Products 19.3 20.103 Animal/Vegetable Fats 26.1 22.804 Processed Foods/Tobacco 16.8 17.905 Mineral Products 4.3 6.606 Chemical/Industrial Products 5.0 6.707 Plastics/Rubber 7.3 7.808 Animal Hides/Skin 9.1 10.209 Wood/Wood Articles 8.4 11.910 Paper/Cellulose Material 6.5 8.211 Textiles 9.7 11.212 Footwear/Misc. Articles 15.8 16.213 Stone/Glassware 8.8 10.714 Precious/Semi-Precious Metals 12.5 28.015 Base Metals 5.5 6.516 Machinery/Electrical Equipment 5.6 7.117 Motor Vehicles/Vessels 4.4 10.618 Precision Instruments 8.1 12.719 Arms/Munitions 18.6 28.520 Misc. Manufactured Articles 14.9 15.921 Art/Antiques 20.0 20.0Average Tariff (%) 9.6 11.3Standard Deviation 11.0 11.4Source: For common external tariff, IDB Integration and Trade Sector calculations using data from CARICOM’s Office of Trade Negotiations;for Belize’s national applied tariffs, the United Nations Conference on Trade and Development Trade Analysis and InformationSystem (UNCTAD-TRAINS).Note: Data on common external tariffs are aggregates of the version based on the 2002 version of the Harmonized Commodity Descriptionand Coding System (Harmonized System 2002); Belize data are for 2006. CET = common external tariff.68

4.3 Trade Policy Framework4.3.1 Belize’s Treatment of ImportsAs noted earlier in the chapter, Belize becamea member of CARICOM in 1974. The countryis one of the 12 CARICOM member statesthat have enacted into domestic law the RevisedTreaty of Chaguaramas establishing the CARI-COM Single Market and Economy (CSME),which entered into force on January 1, 2006. Thusit has committed itself to a common market andcommon external tariff under the framework ofthe CSME, as well as trade policy coordinationwith its fellow CARICOM member states. Belizeis considered a less-developed country anda disadvantaged country within CARICOM, 17entitling it to exemptions from intraregional liberalizationin regard to selected sensitive products(IDB 2006).Belize is in the process of putting measures inplace to implement the CSME. The country isin the fourth phase in the implementation of thecommon external tariff, has completed action tofacilitate the free movement of persons, has takenaction to remove restrictions on the provision ofservices, and is in the process of removing restrictionson the free movement of capital and theright of establishment. Table 4.1 presents Belize’stariff profile by Harmonized System section.Although the pattern of Belize’s tariffs clearly followsthat of the common external tariff, Belize’sderogations from the common external tariff arealso clear in the section averages. Belize currentlyimposes a revenue replacement duty on certainCommunity-originating products as well as an environmentallevy, and elimination of the discriminatoryapplication of these duties is necessary forBelize to implement fully the free movement ofgoods (CARICOM Secretariat 2007). 18 In additionto removing the barriers to trade and restrictionson goods, services, capital, and labor, Belizewill have to put measures in place in additionalareas to consolidate further the CSME, as the regionplans to complete the transition to a singleeconomy by 2015. 19According to the Customs and Excise Department,Belize also applies nonautomatic licensingon a number of products prior to import: rice;beans; eggs; flour; certain fruits and vegetables;certain meat and poultry products; sugar and molasses;jams, jellies, and pepper sauce; dry pasta;peanuts; aerated beverages; citrus and beveragescontaining citrus; beer; corn; milk; and animalfeed; as well as some industrial goods such aswood products, fuels, and cleaning agents, interalia. There is currently no one-stop principle withregard to import licenses, creating even more ofan obstacle to trade.4.3.2 Treatment of Belize’s Exports inInternational MarketsBelize enjoys generally good access to most of itsmajor export markets, and nearly 85 percent (byvalue) of its exports to these markets enter theirdestinations duty free, as shown in Figure 4.5.However, the unilateral preferential programsbenefiting CARICOM countries are subject topossible withdrawal, and Belize’s trade position inthree of its major markets (CARICOM, the EuropeanUnion, and the United States) is susceptibleto preference erosion as a result of liberalizationvia regional or multilateral trade agreements.Belize receives substantial preferences in theCARICOM market. Competing imports fromoutside the region generally face high tariffs forthe most prominent exports to other CSMEchapter 4Trade Sector: Exporting for Growth171819CARICOM’s more-developed countries are The Bahamas, Barbados, Guyana, Jamaica, Suriname, and Trinidad and Tobago; CARI-COM’s less-developed countries are Antigua and Barbuda, Belize, Dominica, Grenada, Haiti, Montserrat, St. Kitts and Nevis, St.Lucia, and St. Vincent and the Grenadines. CARICOM also classifies some member countries as disadvantaged, for reasons ofeconomic size, structure, and vulnerability. Belize is considered to be both a less-developed and a disadvantaged country, according toCARICOM’s classification system.According to the Customs and Excise Department, under the Revenue Replacement Duty (Consolidated) Order (2005), productssubject to the revenue replacement duty include sugar confectionary not including cocoa; perfumery, cosmetics, and toiletries; automobiles,trucks, and tractors; cameras; watches; certain beverages; cigarettes; fuels; fertilizer; doors, windows, their frames, andhurricane storm shutters; dehydrated coconut products; certain processed meats; jams and jellies; ice cream (from non-CARICOMcountries); peanut butter; building blocks; jewelry and articles of goldsmiths; and arms and ammunition and their parts.See Address by the Rt. Hon. Owen Arthur, Prime Minister of Barbados and Chairman of CARICOM, at the Opening Ceremonyof the 28th CARICOM Heads of Government Conference, Barbados, July 1, 2007.69

chapter 4Trade Sector: Exporting for GrowthFigure 4.5. Treatment of Belize’s Exports in MainMarketsPreferentialReduced Duties1%Duty (Full)15%PreferentialDuty-free69%MFN Duty-free15%Sources: IDB Integration and Trade Sector calculations based ondata from the U.S. International Trade Commission InteractiveTariff and Trade DataWeb (USITC DATAWEB) (http://dataweb.usitc.gov/), Eurostat, the United Nations Conferenceon Trade and Development Trade Analysis and InformationSystem (UNCTAD-TRAINS), and the CARICOM Secretariat.Trade shares are based on data from the United Nations CommodityTrade Statistics database (Comtrade) of the UnitedNations Statistics Division (UNSD) of the Department ofEconomic and Social Affairs (DESA) and the CARICOMSecretariat.Note: The analysis presented in the figure covers merchandiseexports to the three largest export markets in which Belize receivespreferences (CARICOM, the European Union, and theUnited States), which together account for about 77 percent oftotal merchandise exports and are used as a proxy for the latter.MFN = most-favored nation.countries: citrus juice (common external tariff of40 percent), legumes (40 percent on red kidneybeans, 40 percent on fresh black-eyed peas, and15 percent on dried black-eyed peas), toilet paper(15 percent), and crustaceans (40 percent).Whereas application of the common externaltariff on sugar is suspended (i.e., each CARI-COM country can apply its own tariff ), Jamaicaand Trinidad and Tobago, Belize’s main regionalexport destinations, apply national most-favorednation rates of 40 percent on sugar imports originatingfrom outside the CSME. Reductions inthe CARICOM common external tariff in thecourse of free trade agreements or tariff concessionsin multilateral fora could therefore result inpreference erosion for Belize, although exports toCARICOM are smaller than those to the UnitedStates and the European Union.Like the other African, Caribbean, and Pacificstates, Belize traditionally received preferencesfrom the European Union under the CotonouAgreement, a broad economic and developmentpartnership agreement. As a result of the needto replace unilateral preferences with reciprocaltrade agreements compliant with Article XXIVof the General Agreement on Tariffs and Trade(GATT), the Cotonou Agreement was allowedto expire at the end of 2007 and was replaced byEconomic Partnership Agreements between theEuropean Union and ACP regions, which enteredinto force on January 1, 2008 (see Section4.2.2). Belize negotiated the Economic PartnershipAgreement in the CARIFORUM frameworkalong with other CARICOM members andthe Dominican Republic.Belize’s position in the European Union marketbecame more uncertain with the Economic PartnershipAgreement, as its top two European Unionexports, bananas and sugar, traditionally receivedmore favorable benefits under ACP regimes thanthey are afforded under the agreement. The outcomefor the sugar regime in particular has unambiguouslybecome less promising (see Section4.2.2). These two products respectively accountedfor 40 and 33 percent of European Union importsfrom Belize in 2006. Rounding out the top fiveexport goods were shrimp, grapefruit juice, andorange juice, all of which had also entered theEuropean Union duty free under ACP and nowunder the Economic Partnership Agreement,compared with most-favored nation rates of 12percent or so.Belize currently enjoys preferential market accessin the United States and Canada throughunilateral preference programs. Market access tothe United States is provided through the CaribbeanBasin Initiative, which includes the CaribbeanBasin Economic Recovery Act (CBERA)and the more recent Caribbean Basin TradePartnership Act (CBTPA). Canada’s existingpreferential trading regime with the Caribbeanis the Canadian Trade, Investment and IndustrialCooperation Program (CARIBCAN). Asboth of these countries move toward nonreciprocaltrade agreements with major trading partners,however, Belize’s economy, highly dependent onagricultural exports to North America, will haveto make significant adjustments. Canadian PrimeMinister Stephen Harper in July 2007 announcedthe launch of negotiations for a free trade agreementbetween Canada and CARICOM (TrinidadGuardian 2007).70

Many of Belize’s top product exports to the U.S.market enter under preferences, with varying degreesof susceptibility to preference erosion. Crudepetroleum oil has become Belize’s largest export tothe United States, and although this product entersthe United States duty free under the CBTPA, theU.S. most-favored nation tariff is a mere 10.5 centsper barrel. Given the current high cost of crude oil,these most-favored nation duties in ad valoremequivalent terms are practically negligible. Papayas,by contrast, receive a more significant preferenceunder CBERA, as the most-favored nationtariff is 5.4 percent. Sugar exports appear quitesusceptible to erosion in the U.S. market, as sugarreceives a substantial preference margin. However,the U.S. sugar market has been a secondary priorityfor Belize, because the ACP–European Unionpreferential program has provided considerablymore favorable preferences. Garment exports tothe United States also receive meaningful preferencemargins, many of them upward of 10 percentagepoints. Belize’s citrus products enter the UnitedStates duty free under CBERA. Thus, aside frompetroleum, exports of Belize’s major products tothe United States could be jeopardized by futurereductions in tariffs imposed by the United Stateson third parties, as such a reduction would provideincreased market access to Belize’s competitors.This highlights the importance of improving Belize’soverall export competitiveness by addressingthe challenges set forth in the next section.4.4 Challenges and Policy OptionsThis section sets forth constraints on Belize’strade and export competitiveness—limitations intrade policy institutions, limited access to capitaland trade finance, trade facilitation and traderelatedinfrastructure needs, and untapped exportpotential that could be addressed by stronger exportpromotion activities—as well as proposalsfor addressing them.4.4.1 Trade Institutions andPolicymakingA number of agencies and bodies are responsiblefor coordinating and implementing Belize’s tradepolicies. The Directorate of Foreign Trade is responsiblefor trade policy and negotiations andis part of the Ministry of Foreign Affairs andForeign Trade. It is currently quite small, with aminimal number of staff. The Belize Trade andInvestment Development Service (Beltraide)promotes exports and international investment inBelize and oversees Belize’s incentive program forinvestment in the country (ITC 2004; Beltraide2007, n.d.-b). Beltraide currently has a staff of 15and reports to the Ministry of National Development,Investment, and Culture. The Ministry ofAgriculture and Fisheries has a Trade and PolicyUnit, and the Belize Agricultural Health Authority(BAHA) falls under its purview as well.BAHA administers Belize’s food safety certificationprogram, based on the Hazard Analysis andCritical Control Point system, certifying agriculturalproducts for export. BAHA also performsinspections of imported food and is the authorityresponsible for granting import permits for agriculturalproducts. The Customs and Excise Departmentadministers duties. The Belize TourismBoard (BTB) is responsible for implementing thegovernment’s tourism policies.These institutions face a number of constraints,most notably in terms of human resources andfunding. Both Beltraide and the BTB are quiteproactive in promoting Belize’s brand, and theBTB is well-funded, via a 9 percent tax on accommodations.However, although it is part ofthe Caribbean Tourism Organization, Belize’sabsence from the World Tourism Organizationlimits its ability to take advantage of the benefitsoffered by the latter body. 20Beltraide receives government funding for salaries,and its buildings and operational expensesare funded by fees charged for its programs. AlthoughBAHA depends for its funding on userfees, which impose an additional cost on traders, itis generally considered to be effective. Additionalfunding from the government might help reducetrading costs, and the amount of such funding requiredmight be relatively small compared withthat devoted to some of the government’s othertrade-related programs, such as the export-processingzone incentive.chapter 4Trade Sector: Exporting for Growth20In the past, Belize also benefited from regional tourism initiatives, such as the Mundo Maya agreement.71

chapter 4Trade Sector: Exporting for Growth4.4.2 Access to Trade Finance andCapital for Investments in theExport SectorTrade financing is a major constraint on thecompetitiveness of Belize’s exporters. Businessesin Belize face high interest rates and difficultyobtaining long-term capital for investment. Althoughlarger firms with steady export revenuesare able to borrow internationally at lower, U.S.-dollar interest rates, domestic producers mustborrow at the higher local rates. 21 This includesnot only domestic producers who wish to expandproduction for the local market, but also thosewith export potential that, without access tocredit, may not be able to make the investmentsnecessary to bring their products to internationalmarkets. This is in addition to the direct effectof potentially competitive goods’ lacking accessto international markets as a result of difficultiesin obtaining funding for export operations. Thesituation underscores both the importance of theexternal sector as an avenue for future growth,because of the government’s budget limitations,and the consequent need for future fiscal restraint.There exists some access to pooled financing inthe citrus and banana industries. The BananaGrowers Association provides loans, as doesthe Citrus Growers and Workers Credit Union(WTO 2004; Ministry of Agriculture and Fisheries2003). Crop insurance is generally unavailable,except in the banana industry.4.4.3 Trade FacilitationWhen countries already have the advantage offavorable market access conditions, improvingthe efficiency of bringing goods to internationalmarkets becomes increasingly relevant, becausethe major constraint on exports is less likely to bethe ability to access markets, but more likely theability to supply markets. Trade facilitation is thesimplification and harmonization of internationaltrade procedures, including the activities, practices,and formalities involved in collecting, presenting,communicating, and processing data requiredfor the movement of goods in international trade.This definition refers to a broad range of activities,such as import and export procedures (for example,customs or license formalities); formalitiesrelating to transport; and payment, insurance, andother financial requirements.Inadequate trade infrastructure is a major constrainton Belize’s trade competitiveness, raisingthe cost of conducting business. For example, thecost of export (per container) is US$1,710, wellabove the regional average (US$1,244). 22In the next few years, Belize’s Customs and ExciseDepartment will face many new challengesto adherence to international best practices in thearea of trade facilitation and will require a newapproach to customs modernization. The currentfiscal revenue capacity efforts will provide a solidbase for moving forward with the implementationof the World Customs Organization Frameworkof Standards to Secure and Facilitate GlobalTrade (SAFE) and to strengthen logistics, licensing,control mechanisms, and risk management,among other things.Stringent requirements coming from Europe andthe United States for formalization of the electronicmessaging of all trade information willrequire updating of the current system. Origindeterminations will also be necessary to identifygoods qualifying under reciprocal trade agreements,such as the Economic Partnership Agreementwith the European Union.Greater automation, streamlining, and consolidationof procedures would also be helpful (e.g., aone-stop window for import and export procedures).Exporters can now have their documentsprocessed up to seven days ahead of time to expeditetheir shipments. The Customs and ExciseDepartment is currently implementing ASY-CUDA (Automated System for Customs Data)World, which will facilitate more automatedprocedures. Implementation of a single windowin Belize will strengthen its competitiveness in achallenging global market, where marginal reductionsin transaction costs could contribute meaningfullyto promoting trade and internationalinvestment.21The local lending rate averaged 15 percent in 1995–2006, according to calculations based on IMF International Financial Statisticsdata.22World Bank, Doing Business database (http://www.doingbusiness.org/).72

Physical infrastructure limitations, particularlyin rural areas, also place pressure on Belize’scompetitiveness in terms of increased costs, andthe establishment of proper road infrastructurethroughout Belize is an additional component requiredfor improving the access of its products tointernational markets. Furthermore, agriculturalproduction is spread throughout the country, andas such (1) is often distant from ports, as in thecases of sugar and papayas, or (2) involves perishabletropical fruits that are more susceptibleto spoilage, such as papayas and bananas. 23 Thegovernment, assisted by a number of overseas aidsources, has invested heavily in road infrastructure,the result of which has been that most of themajor highways and roads in the major cities andtowns are paved (Barrow and Williams 2003),and the major towns are connected by roads andby regular bus service (Economist IntelligenceUnit 2006).With three major ports (IDB 2007b), Belize hassufficient port facilities to handle trade withoutcongestion, such that when high traffic does occur,it is due to scheduling as opposed to insufficientcapacity. Most shipping services go throughMiami; this places some efficiency limitations onthe potential for regional integration by increasingtransport costs and times to Caribbean ports.The lack of lighted runways at the country’ssmaller airports to accommodate night flights iscited as posing a constraint on tourism. A systemof tour buses to transport visitors around thecountry might also help the industry by allowingsome tourists to see more of the countryside.Although utilities such as electricity, telephone,and water are relatively accessible in Belize, atleast in the more-developed areas, they are expensive.Access is a more significant issue in ruralareas (IDB 2007a) and in areas with rapid tourismdevelopment. In some cases, developers haveto provide their own utilities. Computer and Internetusage, though relatively recent, is growingrapidly. Call center services are one area in whicha sector-specific investment attraction programmight prove beneficial, as such a sector mightprovide a nucleus for future growth in ICT ser-vices with greater value added. General improvementsin ICT availability as part of the country’soverall development policy could provide spilloverbenefits in other services sectors by reducing costsfor services providers and also could contribute togreater efficiencies for merchandise exports. 24In sum, Belize’s transportation-related challengesto export performance are to a substantial degreeexogenous and stem from the country’s geography.Belize’s coast has limited areas that lend themselvesto deep-water ports capable of accommodatingcommercial ships, especially in the north,and so goods such as sugar and papayas need totake a convoluted route to Belize City, and petroleumexports must travel from Spanish Lookoutto Big Creek via Belmopan. Moreover, the prospectsfor major transportation upgrades are limitedby the country’s fiscal constraints. However,given the relatively good market access conditionsavailable to Belize in most of its major tradingpartners, strengthening trade-related infrastructurehas a greater potential for expanding exportsthan improvements to transport infrastructure,through the resulting improvements in the costand efficiency of bringing goods to internationalmarkets.4.4.4 Export PromotionBeltraide’s functions include, among other things,supporting exports, with an emphasis on nontraditionalgoods and markets; promoting internationalinvestment in Belize; and supervising fiscalincentives for investors in Belize (ITC 2004; Beltraide2007, n.d.-b). Beltraide thus plays an importantrole in attracting export-oriented foreigndirect investment into the country. It also assistssmaller companies with technical business supportin areas such as accounting and inventorycontrol and provides advice on product developmentand packaging.Belize offers various concessions to attract investmentto the country. The Belizean governmentinitiated an export-processing zone program in1990 with the goal of creating employment. Export-processingzones are not necessarily physi-chapter 4Trade Sector: Exporting for Growth2324Sugar is also sensitive to internal transport inefficiencies because of its high volume to value.Additional investment in human capital (i.e., education) would be helpful in this area because of the interdependence between thevarious sectors.73

chapter 4Trade Sector: Exporting for Growthcal areas or traditional maquiladora operations,but rather a designation that provides certaintax, duty, and licensing exemptions for companiesproducing for export. Commercial freezones enjoy similar benefits to export-processingzones and are intended to operate in border areasand outside the national customs territory(ITC 2004; Beltraide 2007, n.d.-b). Beltraidealso oversees the country’s fiscal incentive programfor investors, which additionally includesa separate incentive for small and medium-sizedenterprises. However, providing incentives forbusiness development via reducing regulatoryand institutional burdens in general might bea less costly means of attracting investment, interms of forgone revenue, than the country’s currentincentive programs.Niche products are differentiated not only by theirphysical characteristics and inputs, but also by theprocesses by which they and their inputs are created,traded, and marketed. Organic, fair trade, andecological processes contribute to final productimage and cachet and can help distinguish goodsfrom mass-traded commodities. Two well-knownexamples are Marie Sharp’s Limited and MayaGold. Marie Sharp’s, which mainly produces hotpepper sauces, not only has secured arrangementswith major retail chains to distribute its productsin the United States, but has also increased thecultivation of hot peppers in Belize and generateddemand for the other agricultural productsthat form the base of the sauces (Beltraide 2004).Maya Gold, a chocolate bar sold in the UnitedKingdom by Green and Black’s, is made from organicallygrown cacao from the Toledo Districtand bears the Fairtrade Foundation label, a certificationthat makes it more desirable among certainconsumers. Cultivation of cacao is also providingpositive environmental externalities and employmentand income to excluded sectors of Belizeansociety (Guardian Unlimited 2004; Purvis 2006).Honey has been proposed as an industry withpotential for Belize, particularly boutique honeyssuch as citrus honey, which might also serve topollinate citrus crops, and organic honey grownon rainforest preserves, which might additionallybe an environmental public good.Belize could further improve its export performanceby means of supply chain integration, particularlyin agriculture. This involves the strategicmanagement of productive processes from rawinputs through distribution to the consumer. 25Focusing on the growth of the aforementionedsectors presents a significant limitation in thatnontraditional niche exports are by nature small,whereas commodity trade is by nature large. Thus,it would require a number of successful dynamicniche ventures to offset declines in traditionalexport sectors arising from preference erosion orunfavorable price trends. Although a successfulmarketing strategy could help generate demandfor niche goods, the size of the market for themis not infinite, and additional demand will haveto be generated through other venues, such as bydeveloping supply chains both within goods andbetween goods and services.There are also potential linkages between thetourism industry and Belizean goods and services.Supply chain management in the form ofensuring predictability and certification could beexplored, with the ultimate goal of strengtheninglinks between agriculture and tourism. In a sense,Belize’s tourism brand could be leveraged to promoteinterest in Belizean cuisine and thus its agriculturalproducts. Whereas there is a bachelor’sdegree program in tourism management at theUniversity of Belize, there is no certification programfor chefs in Belize. Although whether thereis a critical mass of interest in such certification isopen to question, chefs with knowledge of bothinternational cuisine and tastes and local productsand cooking techniques might help further deepenthe appeal of Belize’s tourism brand internationally.Developing greater linkages between tourismand farming may hold similar potential as Belizeattracts a more experiential tourist clientele.Furthermore, Belize could do more to take advantageof its position at the crossroads of theCaribbean and Central America and find ways toincrease exports to these markets. Although it isstill small, trade with Central America has grownrapidly in recent years and could provide an avenuefor product diversification in addition to25See Wikipedia, “Supply Chain Management,” available at http://en.wikipedia.org/wiki/Supply_chain_management.74

market diversification, particularly if preferenceserode in Belize’s more traditional markets.4.4.5 Policy RecommendationsThe issues presented in the preceding sectionsuggest a number of policy adaptations to increaseBelize’s capacity to grow through trade. The followingdiscussion presents the main policy recommendations.Belize requires improved public sector institutionalcapacities to manage the increasingly complexintraregional and global trade agendas andto facilitate trade. This capacity building shouldreach all trade-related institutions, such as theMinistries of Foreign Affairs and Foreign Trade;Agriculture and Fisheries; Finance; and EconomicDevelopment; and the tourism authorities.Fostering the capacity of the Bureau of Standardsis an acute priority.To propel trade and investment, the country needsto focus on trade-related bottlenecks that stemfrom both institutions and infrastructure and tomake a commitment to investment in these areas.The streamlining and consolidation of exportprocedures—for example, a one-stop window withregard to import and export procedures—wouldbe helpful in this area. A somewhat related optionfor possible consideration is the potential for thetariffication of the current licensing system. Thiswould not only potentially provide revenue, butalso reduce the possibilities for rent seeking thatexist under a licensing regime.Private sector development is key if Belize is to takegreater advantage of the opportunities in the integratedregional market available via its member-ship in CARICOM. This calls for national actionto promote information campaigns, export creditassistance, and foreign direct investment. Supporttargeted at small and medium-sized enterprises inaccessing credit, moving up the value chain, andidentifying export niches is particularly important,as is promoting the development of linkages fordomestic firms that provide inputs to industriesthat export (agricultural supply chain integration).Small and medium-sized enterprises are employmentintensive and, at the same time, face greaterconstraints than larger enterprises in terms of accessto capital and information asymmetries. Sharingor matching grants are one possible approachfor providing support for these enterprises.Investing in export promotion is also importantfor enabling Belize to project a positive countryimage and helping Belizean exporters to makebusiness contacts, analyze markets, and identifyniches in the global markets. It is all the moreimportant in light of the efforts by several otherLatin American and Caribbean countries to transformtheir export promotion agencies. A generaldemand-driven approach may be useful here, toavoid preselecting larger sectors that are alreadyestablished. Small and medium-sized enterprisescould derive particular benefit from initiativesaimed at developing linkages between exportersand major distributors in international markets.Consideration could also be given to developing aregional tourism route in Central America.Belize has seen impressive growth in trade in recentyears. However, despite the potential provided byits comparative advantages, continued export performancerequires that it address the challenges oftrade-related institutions and infrastructure, accessto capital, and market penetration.chapter 4Trade Sector: Exporting for Growth75

Table 4.2. Main Challenges to Trade and Integration and Possible Interventionschapter 4Trade Sector: Exporting for GrowthIssue Constraints Possible interventionsTrade policyinstitutionsTraderelatedinfrastructureAccess tocapitalExportpromotionand privatesectorcompetitivenessLimited capacity to negotiate andimplement trade agreementsLimited capacity to addresstechnical barriers to trade andsanitary and phytosanitarystandardsImport licenses that pose anobstacle to tradeInefficiencies and difficulties inbringing products from point oforigin to international marketsObstacles, arising from the highcost of domestic capital, onenterprises with export potentialin actually bringing their productsor services to internationalmarketsGreat untapped potential in nichemarkets (marketing, packaging,and cachet in addition to productquality)Need for greater supply chainintegration, in particular, furthercultivation of relationships withoverseas distributorsLack of knowledge among thesmallest producers regardingbest practices for agriculture orquality controlSupport, as necessary, to the Ministry of Foreign Affairsand Foreign Trade, Ministry of Agriculture and Fisheries,and other relevant ministries and agenciesDevelopment of a Trade Information CenterInstituting a functioning Bureau of StandardsStrengthening the Belize Agricultural Health Authority asnecessary, including analysis of the existing fee systemSupport for streamlining and consolidation of exportprocedures, for example, a one-stop window for importand export proceduresFostering institutions that provide credit to small andmedium-sized enterprises and microenterprises, keepingin mind the importance of following best practices as wellas the dangers of mission creep and institutional captureHosting or supporting a trade and investment showbringing together Belizean producers and internationalinvestorsSupport for Beltraide in its capacity to conduct productand market studies and to attract foreign directinvestmentHosting or supporting a trade and investment showbringing together Belizean producers and internationaldistributorsPromoting agricultural best practices, preferablydomestically through work attachments (as opposed tohaving to hire international consultants), and potentiallyincluding the sharing of experiences in working to obtainorganic, fair trade, or ecological certifications76

ReferencesBarrow and Williams, Attorneys at Law. 2003.“Guide to Doing Business in Belize.” LexMundi, Houston, Texas. Available at http://www.lexmundi.com/images/lexmundi/PDF/guide_belize.pdf.Beltraide (Belize Trade and Investment DevelopmentService). 2004. “Hot Pepper IndustryMarket Study.” Belmopan.———. 2007. “Belize: The Natural Niche.” Advertisingfeature in Nexos [American Airlines]( June–July).———. n.d.-a. Invest in Belize: The Natural Niche.Available at http://www.belizeinvest.org.bz/PDF/investors%20manual.pdf.———. n.d.-b. “Operational Functions.” Availableat http://www.belizeinvest.org.bz/functions.htmlBlue Diamond Ventures. 2006. “Bio-Fuels.”Available at http://www.bluediamondventures.com/biofuels.php.CARICOM Secretariat. 2007. “Establishment ofthe CARICOM Single Market and Economy:Summary of Status of Key Elements.”Georgetown, Guyana.Central Bank of Belize. 2007. Annual Report2006. Belize City.———. 2008. Annual Report 2007. Belize City.———. 2009. Annual Report 2008. Belize City.Chamber of Commerce and Industry. 2007. Letterto Ms. Lisa Shoman, Minister of ForeignAffairs, June 28. Belize City.Devoto, F. 2006. “Belize: Poverty and EconomicSector Performance.” Economic and SectorStudy Series (RE2-06-0007). Inter-AmericanDevelopment Bank, Washington, D.C.Economist Intelligence Unit. 2006. Country Profile:Belize. London.———. 2008a. Country Report: Belize. London.July.———. 2008b. Country Report: Belize. London.October.European Commission Directorate-General forTrade. 2009. “Ending the Longest Trade Disputein History: EU Initials Deal on Bananaswith Latin American Countries.” Press Release,December 15. Available at http://trade.ec.europa.eu/doclib/press/index.cfm?id=500.Garside, B., T. Hills, J. C. Marques, C. Seeger, andV. Thiel. 2005. Who Gains from Sugar Quotas?ODI-LSE DESTIN DV406 ResearchProject, Overseas Development Institute,London. Available at http://www.odi.org.uk/iedg/projects/EU_banana_sugar_markets/ODI_LSE_SugarProject_2005.pdf.GRAINNET. 2006. “Blue Diamond Ventures,Inc. Building Ethanol and BioDiesel Facilitiesin Belize and the United States.” Online,April 18. Available at www.grainnet.com.Guardian Unlimited. 2004. “Best Organic Producer.”Observer Food Monthly, February 15.Available at http://www.guardian.co.uk/lifeandstyle/2004/feb/15/foodanddrink.features12.IDB (Inter-American Development Bank). 2006.“IDB Regional Strategy for Support to theCaribbean Community 2007–2010.” Washington,D.C.———. 2007a. “Belize: Review of the EnergySector.” Washington, D.C.———. 2007b. “Belize Transport Sector Study.”Washington, D.C.———. 2009. “Belize: A Private Sector Assessment.”Washington, D.C.ITC (International Trade Centre). 2004. “Belize:National Export Strategy: Scope, Focus andProcess.” Paper presented at ITC RegionalExecutive Forum, “Small States in Transition:From Vulnerability to Competitiveness,”Port of Spain, Trinidad and Tobago,January 18–21.Lall, S. 2000. “Export Performance, TechnologicalUpgrading and FDI Strategies in the AsianNewly Industrializing Economies; with SpecialReference to Singapore.” Serie DesarrolloProductivo no. 88. Economic Commissionfor Latin America and the Caribbean, Santiago,Chile.LMC International and Oxford Policy Management.2003. “Addressing the Impact ofPreference Erosion in Sugar on DevelopingCountries.” Report prepared for the Departmentof International Development, London.Ministry of Agriculture and Fisheries. 2003. AgriculturalDevelopment Management andOperational Strategy (ADMOS), TCP/BELIZE/2003A. Belmopan. Available athttp://www.agriculture.gov.bz/PDF/Agricultural_Development_Management_and_Operational_Strategy.pdf.Musa, Hon. S. (Prime Minister and Minister ofFinance and the Public Service). 2007. “Bud-chapter 4Trade Sector: Exporting for Growth77

chapter 4Trade Sector: Exporting for Growthget Presentation for Fiscal Year 2007/2008:Facing, Fixing, Moving Ahead.” Belmopan.Available at http://ambergriscaye.com/pages/town/GOBPressRelease-BudgetSpeech_2007-2008.html.Purvis, A. 2006. “How a £1.50 Chocolate BarSaved a Mayan Community from Destruction.”Observer Food Monthly, May 28.Available at http://www.guardian.co.uk/lifeandstyle/2006/may/28/foodanddrink.features1.Ramos, A. 2007. “Close to 2,000 Homeless—Dean Losses Estimated at $107.95 Million.”Amandala, August 28.———. 2008. “EIU Report on Belize HighlightsEconomic Challenges.” Amandala, December5.Shrimp News International. 2007. “Belize SuspendsOperations.” Shrimp News Internation-al Free News, January 12. Available at http://www.shrimpnews.com/FreeNewsBack-Issues/FreeNewsJan200712.html.Trinidad Guardian. 2007. “Caricom, CanadaTalks to Start by Year-End.” Trinidad Guardian,July 24. Available at http://legacy.guardian.co.tt/archives/2007-07-24/business4.html.UNCTAD (United Nations Conference on Tradeand Development. 2008. Handbook of Statistics2008. Paris.World Bank. 2009. “ICT-at-a-Glance: Belize.”Washington, D.C. Available at http://devdata.worldbank.org/ict/blz_ict.pdf.———. Various years. World Development Indicators.Washington, D.C.WTO (World Trade Organization). 2004. “Belize:Trade Policy Review.” WT/TPR/S/134.Geneva.78

Infrastructure: Current Situationand Challenges55.1 IntroductionBelize’s low population density, together with scattered production areas and low production volumes,makes the provision of infrastructure a challenge, especially in regard to the development of tourism andagriculture, the main productive sectors in the economy. A lack of economies of scale, resulting fromthe factors just identified, makes infrastructure provision in Belize more costly than in larger countries.In addition, factors such as public sector debt, regulation, and vulnerability to natural disasters furthercomplicate the development and maintenance of infrastructure in the country.Notwithstanding these difficulties, Belize has made progress in building an infrastructure network,through a combination of support from the private sector, public investment, and financing from internationalfinancial institutions and bilateral donors. These efforts have resulted in improved access towater services (91 percent coverage, around the average for Latin America and the Caribbean), nearuniversal electrification, and paved highways connecting most major urban settlements and border areas.While at the moment infrastructure is not considered to be the binding constraint on growth (Chapter1), niche investments to remove specific obstacles to growth (through tourism, agriculture, and petroleum)and for maintenance need to be considered. For example, lack of maintenance could lead to adeterioration of the road network and become a constraint on investment, particularly in agriculture,which is intensively dependent on rural roads; in addition, lack of sanitation and deteriorating airportinfrastructure could negatively affect the tourism sector.Infrastructure also has an important role in connecting remote communities and linking them to marketsand jobs and in providing basic needs and thereby improving living conditions. A survey conductedin the context of the preparation of the 2009 Country Poverty Assessment Report revealed that participantsconsidered needs related to infrastructure (particularly water supply and electricity, but also roads andgarbage collection for periurban communities) a priority (Government of Belize 2009).This chapter examines the situation and challenges in Belize’s transport, energy, and water and sanitationsectors, providing policy options and recommendations.5.2 Situation and ChallengesThis section provides a diagnostic of the transport, water and sanitation, and energy sectors, includinginstitutional and regulatory challenges.79

chapter 5Infrastructure: Current Situation and Challenges5.2.1 TransportRoadsOver the past few decades, the road network inBelize has been greatly improved. The country affordsacceptable ground connections within thenorthern and western regions of the country andwith Guatemala and Mexico. This has facilitatedrecent surges in tourism and in agricultural production.Although the current stock of roads inBelize appears to be low relative to its surface area,it is high in proportion to the size of the country’spopulation and level of production (Table 5.1).The country exhibits low road utilization, givenits population density and dispersed economicactivity, although traffic volumes are growing inBelize City. Despite the light volumes of traffic,Belize shows one of the highest rates of roadfatalities in the world (23 per 100,000 people),raising concerns about road safety (InternationalRoad Federation 2009). 1 Lack of traffic signs andpavement markings, limited enforcement of speedlimits, and lack of driver education are consideredto be the main contributing factors (World Bank2008).The country’s total road network consists of 3,281kilometers of roads, the majority of which are rural(Figure 5.1). About 20 percent of the network ispaved. There are four paved highways, connectingmost major urban settlements and border areas.The secondary road system consists almost entirelyof unpaved roads with either gravel or marlsurfaces. These roads usually serve to link smallertowns or areas of agricultural production with themain towns or the primary road system. The con-Figure 5.1. Belize Road Network(kilometers)Primary roads18%Rural roads59% Secondaryroads23%Source: Hidalgo (2007).dition of secondary roads varies depending on theprevailing weather conditions, the volume of traffic,and the maintenance that they receive. Ruralroads were in general originally built for specificpurposes connected with agriculture and agriculturalproducts—sugarcane in Corozal; forestryand general farming in Cayo, Orange Walk, andToledo; rice and general farming in Belize; andcitrus and bananas in Stann Creek—and the conditionof these roads is influenced by the situationof the industry for which they were primarilybuilt; those roads connected with industries thatare prospering tend to be in better shape. Manyfarm access roads need upgrading, and someof them are not usable all year round. Progressin this regard is being made in banana-growingareas under the Banana Support Program, butthe roads need to be upgraded throughout thecountry, preferably paved when possible (Norton2009). Without reliable access, products like milkand perishable fruit and vegetables cannot be produced,and roads in poor condition raise the costof marketing all products (Norton 2009).Table 5.1. Road Transport IndicatorsKilometers of road per Belize Costa RicaDominicanRepublic El Salvador JamaicaThousands of population 10.61 8.09 1.43 1.72 8.21Square kilometers of land area 0.14 0.70 0.26 0.48 2.01Billions of U.S. dollars in GDP 2,428 1,213 284 453 1,572Sources: Economic Commission for Latin America and the Caribbean; World Bank, World Development Indicators; and InternationalMonetary Fund, World Economic Outlook.1The International Road Federation cites Belize as among the top 15 countries according to persons killed in road accidents (Libya isfirst at 35 road fatalities/100,000 inhabitants).80

Already inconsistent and variable, depending onfactors noted in the previous paragraph, the qualityof Belize’s road network is, in addition, deteriorating.The proportion of the road system consideredin poor to bad condition increased from 5 to12 percent of the total between 2004/2005 and2007/2008. This can be attributed to a deficit inresource allocation for maintenance, both at theplanning and execution stages. Historically, therehas been a deficit of 41.6 percent in the financialresources needed for the execution of an adequateroad maintenance program, despite the fact thatmaintenance has a higher economic rate of returnthan new infrastructure investments (Belli 2010).About 65 percent of the maintenance of the roadnetwork is carried out by private sector contractors(Hidalgo 2007).Since the late 1990s, the Ministry of Works hashad a yearly routine and periodic maintenancework program using its maintenance managementsystem. The system establishes the annualroutine maintenance resource scheduling program,generates and justifies requests for budgetallocations, and prioritizes activities based onthe funding received. It can also develop periodicmaintenance schedules, which must be verifiedby on-site inspection. Although the systemis installed and is being used in all maintenancedistricts, because of a lack of logistical equipment,the basic data (road inventory, roughness,deflections, traffic counting, and safety measures)necessary to operate the system have not beenupdated. The system is therefore not working aswell as it should for planning activities and soundaccounting of capital and recurrent expenditures(Hidalgo 2007).Road expenditures in Belize are financed by thenational government through annual budget allocationsto the Ministry of Works and by grantsand loans from bilateral and multilateral sources.Expenditures on roads, particularly capital expenditures,fluctuate from year to year because theyare funded mainly by external financial assistanceand because capital expenditures have tendedto be the predominant variable for fiscal adjustment.Recurrent road-related expenditures fluctuateless, but have tended to decrease more thanthe expected maintenance cost savings obtainedthrough the upgrading of the highway and ruralroad systems (Hidalgo 2007).AirportsBelize’s air transport system consists of an internationalairport and a network of domestic airstrips.The Philip S. W. Goldson InternationalAirport (PGIA), privately managed since 2004by Belize Airport Concession Company Limited,is said to have sufficient capacity for the foreseeablefuture and to generate sufficient revenue tomeet its requirements, including maintenance.Seven main municipal airstrips, all governmentowned,currently serve commercial air transport:Belize City, San Pedro, Dangriga, Caye Caulker,Placencia, Corozal, and Punta Gorda. Domesticair transport plays an important role in touristtraffic. Seventy-three percent of passengers whoenter the country using PGIA (about 180,000 annualpassengers) are overnight tourists, and it isestimated that more than 90 percent use one ormore of the municipal airstrips.No significant improvements have been madeover the last 30 years to Belize’s municipal airstrips,and the condition of many of them is poorand potentially life threatening. In particular,the condition of the Belize and Placencia airstripsis critical. None of the municipal airstripsmeet International Civil Aviation Organizationrequirements for operational safety. The mainconcerns derive from the fact that all airstripsare uncontrolled aerodromes, there are no rescueand firefighting services available, many pilotscontinue to fly in low-visibility conditions (orafter sunset) even though there is no effectiveairstrip lighting, there is no effective perimetersecurity fencing protecting the airfields, andpavement surfaces are often in very bad condition.The potential for private investment in themodernization of the municipal airstrips is limitedby the oligopolistic business structure of thesector, based on two rival companies, both wellestablished in the country, a regulatory environmentthat is extremely uncertain for the investor;and the serious weakness of the organizationalstructure of Belize Airports Authority (BAA),the country’s aeronautical authority (AdvancedLogistics Group 2009).PortsBelize has three major ports, all of which are privatelyowned. The Port of Belize, located in Belizechapter 5Infrastructure: Current Situation and Challenges81

chapter 5Infrastructure: Current Situation and ChallengesCity, is the largest in the country. The cargo handledin the port is mainly manufactured importsand mostly containerized. Belize is also servedby cruise ship service; calls have grown from 39cruise ship calls in 2001 to 278 cruise ship callsin 2007. Commerce Bight Port in Dangriga andBig Creek Port in the Stann Creek District areprimarily used for citrus and banana exports, respectively(Hidalgo 2007).Port facilities are in compliance with InternationalOrganization for Standardization (ISO)standards and are equipped to handle trade withoutcongestion; when high levels of traffic do occur,they are the result of scheduling as opposedto insufficient capacity. Sea transport services areprovided by foreign shipping lines, since Belizedoes not have a nationally owned deep-sea fleet.Most of these lines operate via the United Statesrather than direct from Belize. There are no servicesto Caribbean destinations. This places someefficiency limitations on the potential for regionalintegration by increasing transport costs andtimes to Caribbean ports (Chaitram et al. 2008).The sugar industry is the country’s main user ofdomestic sea transport services.Tourism, Civil Aviation and Culture through theBelize Airports Authority and the Department ofCivil Aviation. The BAA regulates the country’sairports, including the international airport. TheDepartment of Civil Aviation is responsible foraerodrome licensing, operating the municipal airstrips,and staffing the control tower at PGIA. Italso provides aerial navigation services for the immediatearea of the international airport. Regionalaerial navigation and air traffic control services areprovided by the Corporación Centro Americanade Servicios de Navegación Aerea (COCESNA)(Hidalgo 2007).The BAA faces staff limitations and lack of aclear institutional structure of regulation, supervision,and commercial management for themunicipal airstrips. Even if new investmentsraise the standard of infrastructure for the keyairstrips, this will not ensure the ongoing safetyof operations or the commercial viability of thenetwork, unless it is accompanied by institutionalstrengthening to implement a sustainableoperational model, standardized procedures, androbust commercial management (Advanced LogisticsGroup 2009).Institutional and Regulatory AspectsResponsibilities for oversight of the transportsector are dispersed across several Belizean ministries,and coordination among them is almostnonexistent. In general, institutions responsiblefor supervising the three subsectors suffer fromstaff limitations and a lack of investment planningfor the medium to long term.The Ministry of Works is responsible for planning,construction, and maintenance of thecountry’s network of roads and bridges, as wellas maintenance of some drains and roads intowns and waterways and routine and periodicmaintenance of district airfields. The ministryhas good systems for supervision and monitoringof construction firms and good experiencein public tendering processes. However, it has alimited number of technical personnel (Hidalgo2007).Air transport in Belize is administered under theCivil Aviation Act of 2000. Airports and airstripsare under the responsibility of the Ministry ofThe Ministry of Public Utilities, Transport, Communicationsand National Emergency Managementmanages the country’s ports. Within this ministry,the Belize Port Authority (BPA) is responsiblefor channels, lighthouses, and all other navigationaids in the country. It also regulates the majorprivatized port facilities at Port of Belize, CommerceBight, and Big Creek (Hidalgo 2007).ChallengesIn summary, the chief issues facing Belize’s transportsector are as follows:●●●●●●Lack of allocation of resources for maintenanceof the road network could lead to road deteriorationand higher costs for rehabilitation.Dispersion of responsibilities across severalministries with involvement in the transportsystem and lack of coordination means thatthe transport priorities of key sectors of theeconomy are not systematically taken intoconsideration.Regulatory capacity limits the success of privateinvestments.82

5.2.2 Water and SanitationBelize has plentiful surface and groundwaterresources (18 major watersheds and an undeterminedvolume of groundwater resources) and isunlikely to suffer from water supply shortages inthe foreseeable future. It has one of the highestlevels of per capita availability of freshwater inLatin America and the Caribbean (64,000 cubicmeters per person per year). Water supply coveragein the country (91 percent) is comparable to(or better than) that in other countries in CentralAmerica and the Caribbean (Figure 5.2). However,to meet the Millennium Development Goalsand achieve the government’s objective of universalwater access (100 percent coverage) by 2015,Belize needs to improve its water supply coverage,particularly in rural areas. The Belizean governmentis in the process of drafting a Bill for WaterResource Management that envisages a new WaterResources Management Plan for the countrythat will identify an inventory of current waterresources and their uses, estimate future demand,and set out clear objectives for the country’s waterresources ( Janson 2008).In contrast to the high rate of water supply coverage,sanitation coverage in the country is limitedmostly to urban areas (which, according tothe Ministry of Health, have 85 percent coverageof sewerage services, compared with 32 percentaccess in rural areas). 2 In rural areas, sanitationprimarily involves the use of pit latrines and septictanks. Though the water coverage rate in ruralareas is fairly high, wastewater treatment and collectionin these areas nonetheless needs to be improvedfor health, environmental, and economicreasons. Sewerage is collected in only three municipalareas and is only treated to a basic level. 3Poor sanitation could also have a detrimental effecton tourism, which comprises a significantportion of the country’s economy (21 percent ofGDP in 2008).Belize’s low population and its fragmentation posea challenge for water and sanitation provision inthe country. More than one-third of the populationlives in about 190 villages and communitieseach with less than 4,000 inhabitants. Noneof these villages and communities has networkbasedsanitation services because of the high costsof building and operating such small systems. Thesmall size and number of systems also means thatit is difficult to adequately staff the service providers(village water boards) with the technicaland financial capacity to ensure the sustainabilityof the systems ( Janson 2008).The institutional structure of the sector is discussedfurther in the next section.chapter 5Infrastructure: Current Situation and ChallengesFigure 5.2. Access to Water and Sanitation Services1001009090808070706060505040403030202010100Belize Costa Rica DominicanRepublic0El Salvador Jamaica Belize Costa Rica DominicanRepublicEl SalvadorJamaicaWater coverage (% population)Sanitation coverage (% population)Total Urban RuralSource: Pan American Health Organization (PAHO).23These are 2004 estimates, quoted in Ministry of National Development, Investment, and Culture (2007). Data in Figure 5.2 are fromPAHO, to allow for international comparisons.Sewage treatment lagoons are used in Belize City and San Pedro, while a primary treatment plant is used in Belmopan.83

chapter 5Infrastructure: Current Situation and ChallengesInstitutional and Regulatory AspectsWater services in Belize are provided by BelizeWater Services Limited (BWS) in urban areas(cities, towns, and contiguous villages, comprising55 percent of the total population) and by villagewater boards in rural areas. Thirty percent of ruralareas have no formal providers and rely on householdprovision. Only BWS provides wastewatercollection services. It collects and treats wastewaterin limited areas of Belize City, Belmopan,and San Pedro; as noted previously, treatment isonly to a primary level. In all other areas, as mentioned,households rely on septic tanks or basicsoak-away systems ( Janson 2008).Service Provision in Urban AreasIn 2001 Belize’s government privatized the country’swater and sewer services. BWS is thereforeincorporated as a private company. Following thewithdrawal of BWS’s private majority owner andoperator (Cascal B.V.) in 2005, however, over adispute regarding a substantial increase in fees, thegovernment repurchased approximately 83 percentof BWS’s shares; the Belize Social Security Boardholds an additional 10 percent, and private shareholdersown the remaining 7 percent. Thus, thegovernment is its majority shareholder, effectivelyreversing the 2001 privatization ( Janson 2008).BWS provides water services to approximately43,000 customers in Belize’s urban and surroundingareas through 10 water distribution systems.Between 2002 and 2007, the company increasedits operating efficiency substantially. Over thisperiod, nonrevenue water decreased from 52 percentto 38 percent of total water produced. Thisis an adequate level, but it should be reduced tosomewhere in the 30 percent range. BWS has alsoestablished a high level of collection efficiency;the current collection rate is estimated at between95 and 98 percent. Staff productivity increasedfrom 6.7 to 5.3 employees per thousand connectionsbetween 2002 and 2007, reducing staff costsfrom 47 to 35 percent in the same period. Despitethis improved operating performance, however,BWS’s financial situation is not considered sufficientlystrong for the company to obtain financingon its own to extend its sewerage services beyondthe existing limited service areas or to improve itswater service coverage ( Janson 2008).Service Provision in Rural AreasVillage water boards in Belize report to the RuralDevelopment Department in the Ministry ofLabour, Local Government, and Rural Development,which regulates them and provides technicalsupport. Most water boards operate a singlerudimentary village water distribution system, buta handful oversee systems in two or three villagesor communities ( Janson 2008).According to the Rural Development Department,almost all village water boards cover theiroperating and maintenance costs and are able tofund minor extensions of their systems to servenew customers. However, they are unable to fund,with cash generated from operations, investmentsfor rehabilitating, upgrading, or significantly expandingtheir systems. Most are reliant on governmentfunding for capital investment, which isprimarily channeled through the Social InvestmentFund, and in some areas, private real estatedevelopers contribute. The Ministry of Labourdoes not currently have a long-term plan for ensuringthat water services in rural areas are deliveredin a sustainable way ( Janson 2008).RegulationBelize’s Public Utilities Commission (PUC) (Box5.1), which oversees the country’s water, telecommunications,and electricity sectors, is responsiblefor regulating the tariffs and service standards ofBWS, which is the country’s only licensed waterprovider. Under the country’s Water Industry Act,the PUC can issue a license to other water providers,but thus far it has received no other applications(for example, none of the village waterboards are licensed by the PUC). Though theregulatory framework for the sector is well developed,the reversal of the privatization of BWSeffectively renders it largely irrelevant. As a majoritygovernment-owned utility, BWS does notappear to have the autonomy or financial resourcesnecessary to operate as a commercial serviceprovider that can improve and expand the waterand wastewater services it provides to customerswithin its service area ( Janson 2008).The Water Industry Act also allows the PUCto issue rules and regulations on areas under itsjurisdiction, such as quality of service indicators84

Box 5.1 The Public Utilities CommissionBelize’s Public Utilities Commission was established in 1999 when the Belize legislature enacted the PublicUtilities Commission Act. This act introduced and institutionalized in Belize the first autonomous authority withresponsibility for regulating the electricity, water, and telecommunications sectors.The PUC is defined in the act as an autonomous government body. It is composed of seven members (commissioners)appointed by Belize’s Governor-General, acting on the advice of the Prime Minister, given after consultationwith the leader of the opposition party. The commissioners are appointed in a staggered manner for six-yearterms. Under its mandate, the PUC determines and prescribes both the “standards that must be maintained” andthe “rates which may be charged in respect of utility services.” It also has many other regulatory and supervisorypowers, such as• Securing that all reasonable demands for electricity are satisfied• Securing that license holders are able to finance the activities that their licenses authorize them to carry out• Promoting competition in the generation and supply of electricity• Protecting the interests of consumers with respect to price, quality, and continuity of supply• Promoting efficiency in supply and consumption• Promoting research and public security in matters of the sectorSources: PUC and Pérez Arbeláez (2007).and standards and utility tariff rules, and to monitorand enforce compliance with these rules andregulations. According to the Water and Sewerage(Tariff ) Bylaws (Statutory Instrument No. 67of 2002), BWS’s tariffs may be set at a level thatensures a 12 percent rate of return. BWS mustsubmit its proposed tariffs to the PUC for reviewand approval every five years. The PUC generallycalculates allowed tariffs on a cost-plus basis,but also claims to take customer affordabilityinto consideration. Between review periods, BWSmay also apply annually to the PUC to increase itstariffs in line with inflation and other indexationfactors. The company has not received any tariffincreases since 2005 ( Janson 2008). The next tariffreview is expected in 2010.Village water boards are regulated by the VillageCouncils Act and by accounting regulations issuedby the village councils (in accordance with theirpowers under the act). The act provides for theministry charged with the responsibility for villagecouncils (currently the Ministry of Labour) and thecouncils themselves to establish village water boardsas independent entities responsible for overseeingthe management of a piped water supply in eachvillage. It also provides for village water boards ineach of the six districts to establish a district association.The Rural Development Department currentlyoversees 102 village water boards and cannotmonitor all closely to ensure that service standardsare being met. In the future it would be more efficientto have fewer, larger providers offering bothwater and sanitation services ( Janson 2008).Evaluation of StructureThe structure of Belize’s water sector is likely tochange over time in response to consumer demandand government policy. For example, smaller providers(village water boards in less viable areas)may need to merge, where feasible, into regionalwater boards. However, significant reform doesnot seem necessary—the current division of provisionbetween BWS and village-based providers(village water boards) reflects the country’surban-rural divide and is appropriate given theeconomics involved in serving different populationcenters ( Janson 2008).ChallengesIn summary, the main challenges facing Belize’swater and sanitation sector are as follows:In urban areas, BWS needs to improve operatingefficiency and extend service coverage. At38 percent, nonrevenue water is at an adequatelevel, but this level could and should be reduced tosomewhere in the 30 percent range. BWS needschapter 5Infrastructure: Current Situation and Challenges85

chapter 5Infrastructure: Current Situation and Challengesto invest in water and sewerage system expansionsto make it possible to extend coverage, butwithout substantial tariff increases (which are notrecommended), it will be unable to finance theseinvestments, unless it obtains funding from thegovernment.In rural areas, the key challenges are improvingservice coverage and service planning and financing.Current service funding could be more reliable,transparent, and effective if the governmentadopted a clear policy for funding capital investmentsthough targeted and incentivized grantsand funding operations through a combination ofconsumer tariffs and output-based subsidies.5.2.3 EnergyBelize’s total energy consumption is one of thesmallest in Latin America and the Caribbean.However, it has the second-highest per capitaenergy consumption in Central America, afterPanama, although per capita consumption is notespecially high with respect to some of the countriesin the Caribbean. The country’s primaryenergy consumption 4 in 2005 amounted to 2.75million barrels of oil equivalent, composed of 2.55million barrels of imported oil products and 322gigawatt-hours of primary electric energy (localhydroelectricity and imports).ElectricityThe electricity industry in Belize is currentlyprivately owned and government regulated.Transmission, distribution, and some generationactivities are carried out by a single private company,Belize Electricity Limited (BEL). This affectscompetition for the market in generation, aswell as the transparency of cost determination forall branches of the business. Fortis Inc. is BEL’smajority owner, holding 70 percent interest. Inaddition, Fortis fully owns the Belize ElectricCompany, the major producer of hydroelectricenergy in Belize (Pérez Arbeláez 2007).Currently BEL buys 46 percent of its energyfrom Mexico’s Comisión Federal de Electricidadand around 50 percent from local sources (thebulk of it from the Belize Electric Company);it produces the rest itself, mainly to attend todemand peaks and emergencies. Despite thesubstantial component of the country’s energythat BEL purchases abroad (for cost efficiencyreasons; see below), generation capacity in thecountry far outstrips demand (Figure 5.3); localgeneration capacity is now 117 megawatts, comparedto a customer peak demand of 76 megawatts(BEL 2009). New local generation sourcescame on line in 2009, reducing the reliance onimported electricity and substituting renewableenergy for nonrenewable.Electricity demand in 2010 is forecast to grow at1 to 2 percent as the Belizean economy begins topull out of the recession (BEL 2009). As more localsources begin generating electricity, the economiesof scale available, which are already verylimited because the market in Belize is so small,will become even more limited. One way of remedyingthis would be to fully integrate the systemwith other Central American systems, via theShare100%90%80%70%60%50%40%30%20%10%0%Figure 5.3. Electricity GenerationElectricity Import Substitution Electricity Import Substitution Capacity and Peak DemandImportsNational Production2005 2006 2007 2008 2009 2010 2011Share100%90%80%70%60%50%40%30%20%10%0%Non-renewable energyRenewable energy02005 2006 2007 2008 2009 2010 2011 2005 2006 2007 2008 2009 2010 2011Source: IDB calculations based on BEL data.MW18016014012010080604020Excess capacityPeak demand4Total primary energy consumption includes the consumption of petroleum, dry natural gas, coal, and net nuclear, hydroelectric, andnonhydroelectric renewable electricity.86

Central American Electrical Integration System(SIEPAC). 5 However, in the short to mediumterm, the costs of interconnection with SIEPACmay be too high to be viable, since Belize is farfrom the main SIEPAC transmission line (PérezArbeláez 2007).It is estimated that 91 percent of the populationof Belize has access to electricity, slightly belowthe average for Latin America and the Caribbean(93 percent). While coverage in urban areas isnearly universal, rural coverage stood at 82 percentin 2006. This implies that there are approximately27,000 people without electricity, mostlyin rural areas, where the cost of connection to thegrid and remoteness are factors. Under a programcreated in 1999 and aimed at providing electricityto remote villages and towns throughout thecountry, the Belizean government provides financing(capital contributions) to BEL to carryout electrification projects in these remote villages(Pérez Arbeláez 2007).The two main drivers of this rate are two of thethree components that determine the averageelectricity tariff in the country: 6● ● Cost of power (BZ$0.312 per kilowatt-hour). 7There is potential for reducing the cost ofpower in Belize, although there is a trade-off.Belize’s energy policy favors local productionand aims at reducing energy dependence toensure security of supply. Given the lack ofeconomies of scale, electricity produced locallyis bound to have a higher cost than that producedin bigger neighboring markets. Thus areduction in cost would involve increasing thecountry’s dependence on external sources ofenergy, in contrast to the policy.● ● Value added of delivery (BZ$0.135 per kilowatt-hour).This is the regulated componentof the average price, reflecting the cost of providingtransmission, distribution, and commercializationservice, including an allowedreturn on capital. BEL’s transmission andchapter 5Infrastructure: Current Situation and ChallengesBelize ranks among the countries with lowestelectricity prices in the Caribbean, yet pricesare high compared to those elsewhere in CentralAmerica (Figure 5.4). Several factors may explainwhy Belize’s electricity prices compare favorablyto those in the Caribbean. Diseconomies of scalehave a big impact on the cost of generating powerin small Caribbean islands. Remoteness and lackof indigenous resources are also factors, since thehigh cost of importing fuel adds to the cost ofgenerating electricity (Ehrhardt and Oliver 2007).On the other hand, although the reasons for Belize’shigh electricity prices relative to the rest ofCentral America deserve further study, they maybe partially a consequence of the small size of theBelizean market.Currently the average price for electricity in Belizeis BZ$0.441 (US$0.2205) per kilowatt-hour.Figure 5.4. Electricity Prices in Central Americaand the Caribbean, 2008(average residential cost per kilowatt-hour)Trinidad & TobagoCosta RicaHondurasNicaraguaPanamaBelizeBermudaDominicaBarbados0.050.0970.10.150.210.220.2250.240.25Average Cost/kWhSources: Caribbean Electric Utility Service Corporation (CARI-LEC) and Economic Commission for Latin America and theCaribbean (ECLAC).567The Central American Electrical Interconnection System, best known by its Spanish acronym, SIEPAC, is an electric transmissionline project that, upon final completion, will run from Panama to Guatemala and interconnect the electric systems of all the countriesof Central America. The project will consist of 15 substations and 230-kilovolt high-tension transmission lines that will allow forcapacity of 300 megawatts in both directions at the outset, but will also include tower infrastructure to enable a future second circuit.Of the approximately 1,800-kilometer length of the project, the countries of Central America will have the following respective segmentsof the SIEPAC project: Guatemala: 282 kilometers; El Salvador: 287 kilometers; Honduras: 270 kilometers; Nicaragua: 309kilometers; Costa Rica: 489 kilometers; and Panama: 151 kilometers (Martin 2010).Value added of delivery (a fixed component), cost of power (a variable component that reflects the cost of electricity), and deferredcost of power recovery (or rebate component).This is defined as a pass-through of the price of purchased energy and the cost of energy generated by BEL.87

chapter 5Infrastructure: Current Situation and Challengesdistribution business is incurring high costs,resulting in high costs of electricity (and hightariffs) in Belize as compared to other developmentcountries. 8BEL’s electricity losses (commercial and technical)have recently trended upward and stood at11.7 percent of net generation in 2009 (BEL2009). Belize is still doing better than the averagefor Central America (16 percent), but worse thanthe average for the Caribbean (10 percent). Commerciallosses are already very low, and it will bedifficult to bring them down much further. However,with respect to technical losses, there is aroom for improvement (this is reflected as well inthe recent upward evolution of total losses) (PérezArbeláez 2007).Institutional and Regulatory AspectsResponsibilities for policy and regulation ofthe various energy subsectors in Belize (oil,electricity, and biofuels) are currently distributedamong multiple ministries. The electricitysubsector is under the regulation of the Ministryof Public Utilities, Transport, Communications,and National Emergency Management.Renewables (i.e., biofuels) are governed by theMinistry of Natural Resources and the Environment.Oil exploration is also under the Ministryof Natural Resources and the Environment, butoil products are regulated by the Ministry of Finance.However, there is at present no governmentbody in charge of overall energy policy inthe country, coordinating and consolidating thevarious and related policy and regulatory aspectsof these subsectors. There does not seem to bean integrated and explicit policy and regulatoryframework for biofuels (bioethanol andbiodiesel). The government has, however, takenscattered actions in this field, responding to initiativesbrought so far mainly by private externalactors.The PUC regulates Belize’s electricity sector, as itdoes the country’s water and telecommunicationssectors. It is mandated to determine and prescribeboth the standards for provision of utility servicesand the rates that may be charged for them. ThePUC may grant to “any person or organization”licenses authorizing the generation. transmission,and/or distribution of electricity; Licensees arebound by a provision in their licenses that givesopen access to the transmission system to entitiesspecified in PUC bylaws. Qualified staff workingon the electricity sector in the PUC are scarce.The rates prescribed by the PUC for electricityprovision in the country must be “just” and “reasonable,”and it is also required to carry out itsfunctions in such a way as to secure, among otherthings, satisfactory financing for the service provision;to protect the interests of consumers visà-vistariffs, along with quality and continuity ofservice; and to promote efficiency. The PUC canmake determinations (bylaws) on the process fordetermination of tariffs, quality-of-service standards,and the entities that may be afforded openaccess to the transmission system.There are several issues that affect the capacityof the regulatory system for electricity to workeffectively in Belize. They have to do with alack of specialized personnel in the regulationarea and with the integrated nature of BEL andthe indirect ownership mentioned earlier (Fortisowns both a controlling majority of BELand hydroelectric generation by Belize ElectricCompany).ChallengesIn sum, there are a variety of issues in Belize’selectricity subsector:●●●●●●●●●●●●●●The transition towards local electricity generation.The fact that BEL is a vertically integratedcompany involved in all aspects of the electricitybusiness: transmission, distribution, andgeneration.Ownership of hydroelectric generation, transmission,and distribution by the same parentcompany.Lack of an energy policy.Regulatory capacity of the PUC.BEL’s technical losses of generated electricity.High electricity prices.8In regard to the distribution segment, BEL’s ratios are the fourth highest among 50 utilities in developing countries and near themedian value compared to U.S. utilities.88

5.3 Policy OptionsThe linkages between long-term investment ininfrastructure and growth have been identifiedby several scholars. For example, Calderón andServén (2004) show that a country’s growth ispositively affected by the stock of its infrastructureassets and that income inequality declineswith higher infrastructure quantity and quality.Although infrastructure provision in Belize isinherently difficult because of its low populationdensity, which makes it structurally a high-costcountry for infrastructure and utilities, priorityinvestments and adequate maintenance are necessaryfor the development of the country’s tourism,agriculture, and petroleum sectors, which arethe drivers of economic growth. If left unattended,current infrastructure problems may becomedrags on future growth.In addition to factors related to geography andsize, Jha (2005) argues that in Caribbean countries,institutional factors—regulation, privateor public operation, and the extent of competitionon service provision—also explain some ofthe differences in performance in the provisionof infrastructure services. Improving institutionscan provide a way for governments to increase access,service, and efficiency in the infrastructuresectors.thinking. Alternatives to conventional regulatorybodies include low-discretion rules, “light”national regulatory bodies, and regional regulatorybodies (Ehrhardt and Oliver 2007). Lowdiscretionrules can work well in small countries,since they are inexpensive to apply and reducethe need for regulatory expertise and independence.The caveat is that they are rigid, and effectiveutility regulation requires some discretion.Light national regulatory bodies—with limitedstaff performing limited functions—require lessexpertise and are less costly than traditional regulatorybodies and can be a good option for smalleconomies with limited resources. Small economiescan also contract regulatory expertise whenneeded. In Trinidad and Tobago, for example, theRegulated Industries Commission assists smallerislands on a fee-for-service basis (Ehrhardt andOliver 2007).Reforms in the area of regulation of infrastructureservices have been attempted in the Caribbean,but there are so far no success stories. Jamaica,Barbados, Trinidad and Tobago, and Guyanaare experimenting with independent regulationof state-owned utilities. This may help providetransparency in setting tariffs and stepping uppressure for efficiency, but it is not clear whethersuch regulation can lead to fundamental or lastingimprovements.chapter 5Infrastructure: Current Situation and ChallengesEffective regulation can help address the problemof natural monopolies in provision of infrastructureservices by defining price controls and settingservice standards to create rules and incentives thatwill lead to fair and reasonable prices and services.Effective regulation can also create incentives thatwill lead providers to innovate, developing servicedelivery solutions better suited for small markets(Ehrhardt and Oliver 2007).Conventional regulatory bodies are not suitablefor small island economies, for three main reasonsthat could also be relevant for Belize, whose smallsize results in an economy with many similaritiesto those of small islands: (1) their cost is too high;(2) the specialized skills required for regulationare not readily available; and (3) independence ofthe regulatory body is difficult to achieve, giventhe small population and the fact that the utilityis often the only source of utility skills, andnaturally has a strong influence on governmentOverall, significant improvements in sectorperformance are associated with private sectorparticipation (Andres et al. 2008). Box 5.2 summarizesthe accumulated lessons learned fromprivate participation investments in the past 20years. In Belize, the private sector plays an importantrole in the provision of infrastructure, yetthe costs of infrastructure services are, as noted inthe chapter, generally high. These high costs canpossibly be attributed to a lack of economies ofscale, although improvement in the managementof public utilities could improve performance, asdescribed previously.Belize has undergone several privatizations sincethe early 1990s and created the PUC in 1999 tooversee the water, electricity, and telecommunicationssectors. However, the country’s small sizelends itself to the formation of monopolies and toanticompetitive practices. The government’s necessarilysmall size and limited resources complicate89

chapter 5Infrastructure: Current Situation and ChallengesBox 5.2 Critical Elements for the Success of Private Participation Programs• Improved institutionality. Projects should be selected as a consequence of countries’ strategic plans andobjectives and approved by an interministerial group led by the country’s financial minister. Projects should bedeveloped by an implementing agency, and regulation should be handled by a separate agency.• Improved contract and concession design. Concession contracts should be awarded competitively anddesigned to avoid ambiguities.• Establishment of an appropriate regulatory framework. The framework should be in place before theaward of concessions, with sufficient autonomy and implementation capacity.• Provision of regulatory instruments. Proper regulatory accounting of all assets and liabilities should bein place.• Establishment of a conflict resolution mechanism.• Addressing of social issues (e.g., establishment of mechanisms to compensate affected communities).• Strengthening of transparency to provide a safeguard against corruption and communications to createpopular support.• Evaluation of accomplishments and communication of advances and pitfalls.Source: Andres el al. (2008).the task of regulation and protection of consumers.This has resulted in very high prices for utilities,especially electricity, with Belize exhibiting one ofthe highest electricity rates in Latin America andthe Caribbean, as noted in the chapter’s discussionof that subsector (Rowland 2008).As mentioned earlier in the chapter, Belize’s portand international airport, as well as the electricityand water sectors, have benefited from privatesector participation. Hidalgo (2007) arguesthat opportunities should be explored in the roadsubsector, especially in regard to roads that couldbe linked to the tourism sector or to investmentprojects that benefit the public and private sectors.Hausmann and Klinger (2007) suggest thatrevenue bonds, used by municipalities in theUnited States for infrastructure investments, arean option where funds can be raised from abroadwith direct claims to future flows from the infrastructure.Low-cost multilateral finance and grants areanother option for financing necessary infrastructurespending. The key consideration whenseeking multilateral financing for infrastructureinvestments is that such financing has little to noimpact on a country’s publicly guaranteed debt,either immediately, or eventually, through thecreation of contingent liabilities that the governmentmay eventually have to assume.The sectors and utilities that perform best underprivate provision tend to be those that can chargea cost recovery tariff and can be privately financed.However, some sectors, such as water, traditionallyhave encountered difficulties achievingcost-reflective tariffs and privately financing investments,and in countries with low institutionalcapacity, cost recovery and attracting investmentmay be more difficult. These difficulties seem tosuggest public investment as an alternative, yethigh public debt levels might make governmentborrowing to finance infrastructure difficult ( Jha2005).Belize’s fiscal situation severely limits the government’sability to invest in infrastructure provision.Rowland (2008) argues that it will be importantfor the government to provide selected infrastructure,while not compromising its fiscal goals, andit is particularly important that the government’slimited resources for public investment be spentas efficiently as possible. As Figure 5.5 shows, fiscaladjustment in the country has been accompaniedby sharp reductions in public investmentsince 2004. There has been no systematic trend infinancing for public provision of infrastructure inBelize, and it is important to develop a systematicapproach to capital investments in the economy.This will require a closer review of the institutionalcapacity to evaluate and prioritize publicinvestment, as well as the provision of adequate90

Figure 5.5. Public Investment and Fiscal Balance(percentage of GDP)11.5–2.67.0–2.61989–93 1994–98 1999–03 2004–07Public investment12.3tools and methodologies to carry out this typeof analysis (Glenday and Shukla 2006; Shukla2008).5.4 Conclusions andRecommendations–6.6Fiscal balanceSource: IDB calculations using Ministry of Finance data.Belize has made progress in developing its infrastructure,but there are issues of quantity and qualitythat need to be addressed. Belize’s main productivesectors, tourism and agriculture, are highly dependenton good connectivity and quality services. Inthe case of agriculture, a lack of adequate feederroads could limit the capacity to transport goods tomarket. In addition, sanitation problems, as well asdomestic airport infrastructure below internationalsafety standards, may negatively affect the tourismsector. The adverse effects of lack of maintenanceare cumulative, and the result is that most roads inBelize are deteriorating at a fast pace. If left unchecked,this deterioration will lead to a substantialincrease in the amount of road requiring majorrehabilitation or reconstruction. The country needsto pursue a delicate balance between maintainingfiscal sustainability and providing the necessaryinvestments to promote private-sector-led growth.It needs as well to further develop institutions toplan and organize infrastructure development, toprovide a regulatory framework that encouragesprivate sector participation, and to make priorityinvestments to accompany development of tourismand agriculture.In light of these challenges, recommendationsfor future development of infrastructure in Belizecan be grouped in three areas: sector planning and4.9–4.1organization, regulatory capacity, and priority investmentsand/or improvements.5.4.1 Sector Planning andOrganizationPlanning, organizational structure, and coordinationissues are common to all sectors reviewed inthe chapter. Specific recommendations for eachsubsector include:● ●● ●● ●In the transport sector, a comprehensive reviewof the organization of the institutions responsibleshould be conducted, and the feasibilityof creating an entity that would be responsiblefor the entire transport sector, with planningresponsibilities (such as developing a masterplan for roads and a road safety program),should be assessed (Hidalgo 2007).In the energy sector, Belize needs to formulatea coherent energy policy and analyze the bestway to diminish the present dispersion by reorganizingand consolidating energy functionsin a few coordinated entities (Pérez Arbeláez2007).In water and sanitation, sector planning needsto be improved at two levels. At the providerlevel, village water boards providing service inrural areas need to develop multiyear businessplans and budgets, to increase their ability toexpand services and calculate the full cost ofservice provision. At the government level, objectivesneed to be set for expansion of wastewatercoverage and water quality, and a waterresources management master plan should bedeveloped ( Janson 2008).5.4.2 Regulatory CapacityThe following improvements in regulatory capacitycould contribute to improved services:● ●Strengthening capacity of the PUC. The scarcityof human resources for the work neededin the areas of public utilities regulation couldbe addressed, either by training existing staffor considering options such as outsourcingsome expertise, as has been done in the pastin the case of rate reviews, and learning fromthe experiences in Caribbean countries thatshare similarities with Belize (Pérez Arbeláez2007).chapter 5Infrastructure: Current Situation and Challenges91

chapter 5Infrastructure: Current Situation and Challenges● ●●●● ●Guidelines for water sector regulation. In referencespecifically to the water sector, the governmentand PUC need to develop guidelineson which water and sanitation service providersshould be subject to PUC regulation,as well as appropriate regulatory rules andlicensing conditions for water and sanitationproviders of varying sizes. It is not desirableto have comprehensive regulation for smallwater providers operating rudimentary watersystems (such as the village water boards)—the costs of regulation for such providers oftenoutweigh the benefits. However, in thefuture it will be more efficient for Belize tohave fewer, larger providers offering both waterand sanitation services, and to have thelargest providers all regulated under consistentprinciples. This suggests that the sector wouldbenefit from a clear policy on which water andsanitation service providers will need to applyfor an operating license from and thereby beregulated by the PUC, and under what terms.Service standards and tariff rules may vary indetail and complexity in accordance with thesize and scope of the service provider ( Janson2008).Clarifying objectives for urban water and sanitationprovision. It is essential for the governmentto develop a clear idea of what it expectsfrom BWS (for example, resolving the existingsanitation problems in Belize City) andproviding the company’s management withadequate financial resources (whether in theform of appropriate tariffs or targeted subsidies)to achieve the objectives identified ( Janson2008).Modernization of domestic airstrips. Strengtheningthe role of the BAA will be essentialin accomplishing this. An operational modeland regulatory framework for Belize’s aerodromesshould be developed based on thebest practice of other reference countries andshould include the following key aspects: procedures;services and equipment; informationand communication; control, management,and implementation; and development of anaerodrome manual for each airstrip. In additionto implementing safety regulations andoperational procedures, it is also of key importancethat the commercial management of thenetwork be strengthened to ensure that fundsare well managed, revenues are maximized,and any investments are financially sustainablein the long term. In particular, to avoid havingshort-term expenditures result in long-terminsolvency, it is essential that the BAA followa robust financial discipline (Advanced LogisticsGroup 2009).5.4.3 Priority Investments andImprovements● ●●●● ●●●Road maintenance. The financial resourcesrequired annually for executing yearly routineand periodic maintenance of the entire roadnetwork need to be estimated, assessed, andappropriated, taking into account public debtand fiscal issues.Expansion and improvement of municipalaerodromes. Investment is necessary in orderto bring Belize’s municipal airstrips up to InternationalCivil Aviation Organization standardsand to meet tourism demand. Privatesector participation is a very risky option, as aresult of the oligopolistic business structure ofthe country’s aviation sector and its uncertaininstitutional and regulatory framework. Giventhe limitations on public investment, anyprivate investments should be preceded by theinstitutional reforms mentioned in the previoussubsection (Advanced Logistics Group2009).Improvements in water and sanitation. Thereis a need for investment for expanding wastewaterservices to ensure wastewater collectionin areas where it is economically viable, andfor improving wastewater treatment and watercoverage in rural areas. However, BWSand the government should effectively demonstratethat the company can remain financiallyviable in the face of any proposed projectbefore it is undertaken. Although BWS hasachieved a level of nonrevenue water that isacceptable by international standards, if thelevel is reduced, this could in turn reduce thecompany’s operating costs. Thus BWS shouldimplement a program for reducing the amountof nonrevenue water through a contract with aprivate operator ( Janson 2008).Private sector participation in water and sanitation.There is scope for private sector participationin both BWS and non-BWS serviceareas. In non-BWS service areas that aresmaller and more rural, the Rural Develop-92

ment Department could contract small-scaleprivate providers to run village-based systems(as is being done on a trial basis in Jamaica).However, given that this would be a very newform of provision in Belize, it could be difficultto establish, and generating sector interestmight require some time and effort. Privatesector participation would be more feasiblewithin BWS service areas and some of therapidly growing tourist and commercial areas(such as the Placencia Peninsula and the Corozalcommercial free zone). Such participationcould theoretically range from the provision ofspecific services to full control of BWS operations.As a result of the reversal of water sectorprivatization in 2005, there would likelybe limited interest from the private sector inowning and operating BWS at this point, unlessthe government could commit to a reliableand predictable tariff regulatory regime thatguarantees that BWS will be able to recover itsefficient costs plus a reasonable return. Accordingly,more-limited private sector participationis recommended at this time—specifically, privatesector participation in nonrevenue waterreduction and potentially in development andoperation of specific systems such as in thePlacencia Peninsula ( Janson 2008).●●Increasing the efficiency of the electricity market.The chief means for increasing the efficiencyof the electricity market in Belize wouldbe through a reduction of losses and an identificationof the reasons behind the current highcosts of electricity. Reducing losses effectivelywould require a detailed independent studyon the investments that would be necessary toreduce the level of technical losses. The currentrelatively high technical losses could besubstantially decreased by investments in 34.5kilovolt and above transmission lines, as wellas by upgrades to some existing distributionlevelcircuits that are most heavily loaded, sothat they can operate at higher voltages. Giventhe cost of these investments, a comprehensivecost-benefit analysis would be necessary. Inregard to the high prices of electricity comparedwith developing country benchmarks,there is room for improvement both in thecost of power (generation) and in the valueadded of distribution. However, a final determinationabout the level of costs of deliveringpower (transmission, distribution, and supply)in Belize, and thus how much cost and pricereduction could be attained, would require athorough independent study of costs of service(Pérez Arbeláez 2007).chapter 5Infrastructure: Current Situation and Challenges93

chapter 5Infrastructure: Current Situation and ChallengesReferencesAdvanced Logistics Group. 2009. “MunicipalAirstrip Expansion Program.” Report preparedfor the Inter-American DevelopmentBank, Washington, D.C. Unpublished.Andres, L. A., J. L. Guasch, T. Haven, and V. Foster.2008. The Impact of Private Sector Participationin Infrastructure: Lights, Shadows, andthe Road Ahead. Washington, D.C.: WorldBank.BEL (Belize Electricity Limited). 2009. AnnualReport 2009. Belmopan.Belli, P. 2010. “Formulating an Effective PublicSector Investment Program.” Report preparedfor the Government of Belize, Belmopan.Unpublished.Calderón, C., and L. Servén. 2004. “The Effectsof Infrastructure Development on Growthand Income Distribution.” Working Paperno. 270. Central Bank of Chile, Santiago.Chaitram, S., C. Dengel, T. Mills, J. Mora, M.Shearer, and K. Suominen. 2008. “Belize:Exporting for Growth.” Trade Sector PolicyNote. Inter-American Development Bank,Washington, D.C. Unpublished.Ehrhardt, D., and C. Oliver. 2007. “Big Challenges,Small States: Regulatory Options toOvercome Infrastructure Constraints.” GridlinesNote no. 24. Public-Private InfrastructureAdvisory Facility, Washington, D.C.Glenday, G., and G. P. Shukla. 2006. Belize: AReview of Public Expenditures. Economicand Study Sector Series, RE2-06-018. Inter-American Development Bank, Washington,D.C. Available at http://idbdocs.iadb.org/wsdocs/getdocument.aspx?docnum=831589.Government of Belize. 2009. Country Poverty AssessmentReport. Belize City.Hausmann, R., and B. Klinger. 2007. Growth Diagnostic:Belize. Report prepared for the Inter-American Development Bank, Washington,D.C. Available at http://ambergriscaye.com/pages/town/art/BelizeGrowth.pdf.Hidalgo, L. 2007. “Belize Transport Sector Note.”Inter-American Development Bank, Washington,D.C. Unpublished.International Monetary Fund. Various years.World Economic Outlook. Washington, D.C.International Road Federation. 2009. World RoadStatistics 2009. Geneva.Janson. N. 2008. Belize: Water and Sanitation Sector—StrategicPlan. Report prepared for theInter-American Development Bank, Washington,D.C. Unpublished.Jha, A. K. (ed.). 2005. Institutions, Performance,and the Financing of Infrastructure Services inthe Caribbean. Working Paper no. 58. WorldBank, Washington, D.C.Martin, J. 2010. “Central America Electric Integrationand the SIEPAC Project: From a FragmentedMarket Toward a New Reality.” EnergyCooperation and Security in the HemisphereTask Force, Center for Hemispheric Policy,University of Miami. Available at https://www6.miami.edu/hemispheric-policy/Martin_Central_America_Electric_Int.pdf.Ministry of National Development, Investment,and Culture. 2007. “Profile: The Water andSewerage Subsector” (draft). Belmopan. Unpublished.Norton, R. 2009. “Strategic Investment and PolicyPriorities for a Competitive Agriculture inBelize.” Report prepared for the Inter-AmericanDevelopment Bank, Washington, D.C.Unpublished.Pérez Arbeláez, J. 2007. “Belize: Review of theEnergy Sector.” Inter-American DevelopmentBank, Washington, D.C. Unpublished.Rowland, B. 2008. “Belize: Private Sector DevelopmentStudy.” Inter-American DevelopmentBank, Washington, D.C. Unpublished.Shukla, G. P. 2008. Fiscal Policy Review. DukeCenter for International Development, DukeUniversity, for the Inter-American DevelopmentBank, Washington, D.C. Unpublished.World Bank. 2008. “Belize Roads and MunicipalDrainage: Project Performance AssessmentReport.” Sector Evaluations Division, IndependentEvaluation Group, World Bank,Washington, D.C. Available at http://www-wds.worldbank.org/external/default/WDS-ContentServer/WDSP/IB/2008/07/21/000334955_20080721025859/Rendered/PDF/442490PPAR0P041x327410B01PUBLIC1pdf.pdf.———. Various years. World Development Indicators.Washington, D.C.94

Tourism: Achieving Balancefor Sustainable Growth66.1 IntroductionThe tourism sector in Belize has evolved considerably since the first National Tourism Strategy wasformulated in 1998. The advent of cruise ships has led to almost a fivefold increase in the annual numberof visitors to the country, and a cruise ship port is now under consideration. New products and niches—such as cave tubing and adventure tourism—have diversified the country’s tourism activities. Timesharesand condominiums are being built at several locations along the coast and in the cayes. Underthese circumstances, policy issues facing the sector today are distinct from those that existed a decadeago. This chapter briefly reviews the sector’s performance and discusses several policy issues relevant toachieving economic development through the sector.6.2 Sector PerformanceTourism is one of the main engines of growth in the Belizean economy and the principal source of foreignexchange. The sector generated US$281 million in visitor expenditures in 2008, slightly outstrippingtotal domestic merchandise exports and corresponding to 21 percent of gross domestic product(GDP). 1 As such, tourism is the largest sector of the economy. It is also an important source of employment,with more than 25 percent of the employed labor force estimated to be related to or driven by thesector.Belize’s tourism sector has grown significantly in the past two decades. The total annual number of touristsincreased from 190,200 visitors in 1998 to 842,396 visitors in 2008 (Belize Tourism Board 2009).Belizean travel service exports grew at an average rate of 13.6 percent per year between 1988 and 2008,increasing more than tenfold during this period. The global economic recession in 2009 did bring toa halt the rapid growth of overnight visitor numbers. In the first nine months of 2009, the number ofovernight visitors declined by 10 percent compared with a year earlier. By contrast, cruise ship disembarkationsrose by 11 percent in the first nine months of 2009. According to projections from the WorldTravel and Tourism Council (2007), total demand for the sector in Belize is expected to grow by 3.8percent annually in real terms between 2008 and 2017.Belize’s tourism product is highly dependent on the country’s natural and cultural heritage. In additionto many archaeological sites now recognized internationally through the Mundo Maya initiative,Belize encompasses a network of both terrestrial and marine protected areas offering a range of oppor-1Data are from the Central Bank of Belize.95

chapter 6Tourism: Achieving Balance for Sustainable Growthtunities for diving, wildlife observation, and birdwatching,hiking, and other recreational activities.Based on 2006 data, the most popular attractionsare archaeological sites at Altun Ha and Xunantunich,Hol Chan Marine Reserve, the Belize Zoo,the Mountain Pine Ridge Forest Reserve, andseveral other natural protected areas. In additionto its unique combination of Mayan cultural sites,the world’s second-largest barrier reef (a WorldHeritage Site), and accessible tropical forest reserves,Belize has several competitive advantagesthat contribute to its market share. These includea largely English-speaking population and diverseculture as well as a relatively stable political situation.It is expected that Belize will continue tooffer a competitive product in several segments,including adventure tourism, ecotourism, culturaltourism, and community tourism, as well as toserve the cruise ship segment, thereby taking advantageof the growth expected internationally forthese segments.Belize’s tourism sector caters to two distinct marketsegments: (1) overnight or “stay-over” visitorsand (2) cruise ship passengers. A total of 245,000overnight visitors were recorded in 2008, approximately29 percent of all arrivals. This segment hasshown steady growth, with arrivals almost doublingsince 1995. The United States and Canadaaccounted for 60.7 and 6.6 percent, respectively,of overnighters in 2007, and Europeans represented13.6 percent of the market share (Table6.1). Approximately 75 percent of all overnightvisitors stayed in Belize District; the remainderstayed in South Stann Creek (i.e., Placencia) andCayo Districts.The overnight segment is served by approximately600 hotel and resort facilities offering a total of6,075 rooms. With an average size of 10 roomsper operation (of all the hotels, only 51 have morethan 20 rooms), the sector is characterized bysmaller properties, many (60 percent) Belizeanowned.Occupancy rates in 2007 were on the orderof 43 percent, indicating that the segment facesimportant challenges in offering an “export-ready”product. The highest occupancy rates occur fromJanuary to April, and the lowest rates coincide withthe peak of the hurricane season in September andOctober. Estimates indicate that 20 percent of theroom stock generates 80 percent of the occupancy.In addition to seasonality, low occupancy rates areattributed to problems in meeting product qualitystandards, which, in turn, are associated in partwith high operating costs, supply constraints, andother business climate limitations. According tofigures provided by the Social Security Board,employment in the hotel sector was up by 7 percentbetween 2005 and 2006. Almost all destinationsshowed job increases; Ambergris Caye, CayeCaulker, and Placencia had increases of 10, 17,and 26 percent, respectively.Cruise tourism has been the fastest-growing segmentof the country’s tourism industry. Cruisepassenger arrivals grew from 14,183 in 1998 toTable 6.1. Overnight Tourist Visitors by Market ShareArea 2000 2001 2002 2003 2004 2005 2006 2007 2008PUnited States 53.5 54.2 52.4 57.7 59.5 61.7 61.3 60.7 60.3Canada 4.7 4.8 4.6 4.5 5.2 5.7 6.3 6.6 7.2Europe 14.1 15.2 14.6 15.2 14.2 14.1 13.9 13.6 14.0Latin America 17.6 16.0 19.3 16.1 14.6 12.1 12.1 11.9 11.4Belizeans living 7.2 6.6 6.0 3.5 3.3 3.3 3.4 3.6 3.6abroadCaribbean 0.9 0.9 1.0 0.9 1.0 0.9 0.9 1.0 0.9Asia 1.1 1.2 1.1 1.1 1.2 1.0 1.0 1.3 1.1Oceania 0.6 0.6 0.6 0.6 0.7 0.8 0.9 0.9 1.0Middle East 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2Africa 0.2 0.1 0.2 0.2 0.2 0.1 0.1 0.2 0.2Total 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0Source: Belize Tourism Board (2009).96

624,000 in 2007, or approximately 71 percentof all tourist arrivals. Belize’s main attraction asa cruise destination resides in its unique combinationof cultural heritage and nature-based andadventure tours. The country’s relatively low headtax compared with other Caribbean destinationsand the shift in cruise line itineraries followingSeptember 11, 2001, contributed to explosivegrowth in the sector. After a marked peak ingrowth in 2004, the cruise ship segment is showingsigns of leveling off, with a total of 278 shipcalls in 2007, a 25 percent decline in calls relativeto 2005 (see Figure 6.1).Cruise ship passengers arriving in Belize aretransported from cruise ships by smaller vesselsto the Ford Street Tourism Village in Belize City,where they are taken by bus to various nearby destinations.The government is currently consideringproposals for the development of a new cruiseship terminal.Belize’s exposure to a range of natural hazards hasdirect implications for the tourism sector. Thecoastal areas and offshore cayes in particular arevulnerable to the effects of hurricanes and flooding.In summary, the tourism sector’s performance hasimproved significantly since 1995, with steady butmoderate growth in the overnight segment andvery rapid growth with recent leveling off in thecruise ship sector. Belize’s market share of internationaltourist arrivals in the Caribbean regionalso grew from 2.8 percent in 1995 to 4.2 percentin 2005. Nonetheless, overnight visitors as aFigure 6.1. Total Cruise Ship Passenger Arrivalsto Belize, 2002–08900,000800,000700,000600,000500,000400,000300,000200,000100,00002000 2002 2004 2005 2006 2007 2008Source: Belize Tourism Board (2009).percentage of overall arrivals in Belize are amongthe lowest in the region, and as a consequence,expenditures by tourists in Belize on a per capitabasis are considered low, with significant room forgrowth in the overnight segment (Chapter 1).6.3 Legal, Institutional, and PolicyFrameworkThere are several laws related to tourism andtourism-related activities in Belize. Those lawsthat speak directly to and provide guidance foractivities in the sector include the following:1.2.3.Belize Tourism Board Act, Chapter 275(S),Subsidiary Laws (revised 2003). This act establishesregulations for tour guides, tour operators,local water passage, and water sportsvessels. It provides for a committee, definesthe powers and functions of the committee,and describes the protocol and requirementsfor licensing and revocation of licenses of tourguides, tour operators, and vessels. Under thetour guide regulations, all tour guides musthave recognized accreditation, be a Belizeancitizen or of permanent residency with tourguiding as their main occupation, and be recommendedby a recognized tour guide organization.Licensed tour operators are requiredto utilize only licensed tour guides, maintainvalid licenses and insured tour safety equipment,possess valid insurance, and take allnecessary steps to safeguard the environmental,moral, historical, and cultural integrity ofBelize.Hotels and Tourist Accommodation Act, Chapter285 (revised May 2003). This act provides fora registrar of hotels and tourist accommodations,whose primary responsibility is to ensurethe licensing of all acceptable hotels andtourist accommodations. The law defines thepower and function of the licensing authorityand stipulates the taxes to be paid on accommodationcharges. It also requires thatminimum standards be observed by hotel andtourist accommodations and stipulates notificationof charges to guests, distribution ofservice charges, registration of guests, and themode and manner of payment by guests.Hotels and Tourist Accommodation Act, Chapter285(S) Subsidiary Laws (revised Octoberchapter 6Tourism: Achieving Balance for Sustainable Growth97

chapter 6Tourism: Achieving Balance for Sustainable Growth2003). This act expands on the minimumstandards to be observed by hotel and touristaccommodations to include specific, measurablerequirements pertaining to registration,licensing, and operating requirements forhotels, resorts, apartments, condominiums,villas, guesthouses and lodges, communitybasedtourist establishments, campsites, liveon-boardvessels, and research facilities.There is no specific tourism investment incentiveregime in Belize and, in that regard, the sectorhas succeeded in competing for investment on alevel playing field with other sectors. Unlike mostother Caribbean countries, where there are investmentincentives specifically for the tourism sector,Belize stands almost alone as one of the fewcountries where such incentives are encompassedas part of the broader incentives regime relatedto all economic sectors. Tourism and tourismrelatedservices are required to comply with theexisting array of legislation enacted by the governmentto encourage private, local, and foreigninvestment: the Fiscal Incentives Act of 1990, theExport Processing Zone Act of 1990, the CommercialFree Zone Act of 1994, and the RetiredPersons (Incentives) Act of 2003.The institutional framework for the sector consistsof the Ministry of Tourism and Civil Aviation,which is responsible for policy; the BelizeTourism Board, which is responsible mainly forimplementing policy; and the Belize NationalTourism Council, a coordinating body. In additionto the minister, the ministry includes a chiefexecutive officer, an advisor, and support staff.Established by law in 2000, the Belize TourismBoard (BTB) is a statutory body within the Ministryof Tourism that represents a strategic partnershipbetween the government and the privatesector. The partnership implements tourism programsaimed at fulfilling the emerging needs oflocal industries and benefiting from the internationaltourism market. The BTB’s responsibilitiesinclude, among other functions, planning, developing,and promoting the tourism industry; promotingprivate investment in tourism; and vettingthe standards of facilities offered by the industry.The BTB works closely with the Ministry ofTourism and Civil Aviation, the National Instituteof Culture and History, the Protected AreasConservation Trust, and other public sector entitiesin the establishment of tourism policies. Italso works with the Belize Tourism Industry Association(BTIA) and other private sector organizations.Its revenues are derived primarily fromaccommodation taxes and the cruise passengerhead tax (70 and 24 percent of total revenues in2006, respectively).Although only recently reactivated, the BelizeNational Tourism Council was created by lawin 2000. Falling under the chairmanship of theMinister of Tourism and Civil Aviation, it bringstogether the relevant actors from the public andprivate sectors. The Council includes among itsobjectives developing, establishing, and monitoringthe plans and policies, procedures and guidelines,legislative measures, and educational andtraining programs necessary for the efficient managementand development of tourism in Belize.Local governments (city, town, and village councils)with jurisdictions in tourist destinations havehad a limited role in the sector to date. However,new initiatives are emerging, such as an innovativeproposal to establish the Belize City Tourism DevelopmentFund, which would derive its revenuesfrom the cruise ship head tax. The fund wouldenable the city to improve maintenance and servicesin downtown tourist areas. In other instances,town and village councils and local boards areresponsible for administering basic services, suchas water supply and solid waste management intourist localities. However, they lack the capacityto provide the coverage and quality required bythe sector. These and other local entities can playan important role in ensuring that future tourismdevelopment is compatible with the land use andsocial conditions of destination areas.Incorporated under the laws of Belize in 1989,the Belize Tourism Industry Association is thecountry’s largest private sector organization. Ithas evolved into an intermediary between thegovernment and the private sector as well as betweenthe private sector and national and internationalorganizations. The BTIA is governedby a 19-member board of directors that includeschairpersons of the different Belizean touristdestinations—Ambergris Caye, Belize, Corozal,Caye Caulker, Cayo, Dangriga, Orange Walk,Placencia, and Toledo—and the Belize Hotel As-98

sociation, Belize National Tour Operators Association,Belize National Tour Guides Association,and Belize Eco-Tourism Association. With 400members, it boasts representation on a numberof government, legislative, advisory, consultative,and licensing committees.6.3.1 Country Strategy for the SectorThe government of Belize officially recognizestourism as a national priority sector in its economicdevelopment agenda and has adopted theprinciple of responsible or sustainable tourism indeveloping the travel and tourism industry. Asestablished in its 2005 Tourism Policy, the government’svision for the sector is to “develop avibrant and progressive tourism industry througha responsible approach which embraces a strong‘eco-ethic’ and effective destination managementthat seeks to improve the quality of life for all Belizeans.”Recognizing the need for balance, thepolicy calls for zoning to help prevent and reducepotential conflicts between cruise ship excursionsand other visitor activities. It also underscores thefact that planning and management of the tourismsector should be based on partnerships andthat communities must play a meaningful rolethat ensures that economic, social, and culturalbenefits accrue to local residents.the government is signatory to a Declaration ofCommitment, in which key industry stakeholders,including the cruise lines, civil society, theprivate sector, and government commit to sustainablecruise tourism practices, such as protectingcoral reefs from anchor damage (ConservationInternational, Belize Ministry of Tourism, BelizeTourism Board, and Oak Foundation 2007).Following the 2008 national elections, the governmentconfirmed the central position of the tourismsector in its economic development strategyand reiterated that the core message for the sectorremains consistent with the 2005 policy. As such,the product focuses on the country’s natural andcultural heritage, an equitable distribution of benefitsthrough promotion of the overnight segment,and the delivery of a world-class visitor experience.The government also seeks to improve itsparticipation in regional networks as part of boththe Central American and Caribbean circuits.6.4 IssuesTo remain competitive and grow, the tourism sectorin Belize needs to address several pressing issuesand challenges. This section discusses a fewof the main issues (Belize Tourism Board 2004).chapter 6Tourism: Achieving Balance for Sustainable GrowthWhile calling for an appropriate balance betweenovernight and cruise ship tourism, currentnational policy recognizes that growth potentialresides with the overnight segment. This is thesegment for which Belize’s tourism product iswell matched with global market trends towardecotourism, adventure, cultural, and communitybasedtourism.The government has also approved a Cruise ShipTourism Policy that aims to support growth inthe cruise ship segment within the framework ofits environmental policy and with a view to increasingthe overall benefits from the industry.The policy establishes guidelines for cruise shipvisitation to ensure that the carrying capacity ofindividual sites is respected. It also requires thatan Environmental Compliance and MonitoringPlan be signed and adhered to by port agents onbehalf of ship owners upon entry of cruise shipsinto Belizean territorial waters and at all timeswhile vessels are in Belizean waters. In addition,6.4.1 Visitor Experience and ResourceSustainability at PopularDestinationsVisitors tend to be concentrated in a few popularsites during the short high season. This raisesconcern about the capacity of existing destinationsfor accommodating demand without damagingthe quality of the visitor experience or the associatednatural and cultural resources. Congestionis reported as a significant problem at times whenovernight and cruise ship passengers converge inlarge groups in protected areas close to Belize City,exceeding capacity for visitor services and, overtime, leading to environmental deterioration of thesites. In addition, some sites—such as Placencia,San Pedro, and Caye Caulker—face severe limitationsin the provision of basic services to the communitiesthat function as staging areas for tourism.Coastal areas and the offshore cayes are particularlyvulnerable to problems of insufficient potable waterduring peak periods, untreated wastewater and99

chapter 6Tourism: Achieving Balance for Sustainable Growthassociated contamination of nearby waters, andlack of alternatives for the disposal of solid waste(IDB 2008). In addition to the need for improvedbasic infrastructure, this raises the need to establish,implement, and monitor acceptable levels ofvisitation at those sites/attractions valuable to theovernight segment, as well as to apply measuresfor restoring and protecting natural and culturalresources, thereby ensuring that visitors receivequality services and attention. Although Belize hasa sound complement of environmental laws, institutionalcapacity for enforcement and incentivesfor compliance must keep pace with expansion ofthe sector, both in the national system of protectedareas and at staging areas.6.4.2 Balancing Overnight and CruiseShip TourismBalancing the cruise ship and overnight marketsegments is one of the main challenges the countryfaces. There is growing recognition of the needto manage destinations for cruise ship excursionswhile ensuring that these do not compromise theovernight segment, particularly in areas where Belizehas comparative advantage. Important differencesbetween cruise ship and overnight visitorshave to be taken into account in future planningfor the sector.Despite their relatively small numbers, overnightvisitors contributed 87.7 percent of total directexpenditures by tourists in 2006, compared with12.3 percent from cruise ship visitors. In addition,the overnight segment has proven less volatile, risingsteadily since the late 1990s. The cruise shipsegment has grown faster but has been more susceptibleto external events, such as natural disasters.The overnight segment also accounts for 90percent of all employment in the industry. Spendingby cruise ship visitors is heavily concentratedin Belize City; spending by overnight tourists isspread more widely across the country.The cruise ship industry is likely to be a permanentsegment of the tourism industry in Belize. Therefore,the country must address several challenges,including specific infrastructure requirements(deepwater port access), the role of governmentin the industry, and how to ensure that a greaternumber of local service providers and communitiesbenefit from the segment.Although significant potential for growth exists inthe overnight segment, the government faces thequestion of how best to achieve that growth andmeet the official target of 5,000 new tourism jobsin five years. Industry representatives have yet toreach consensus on which model of growth bestsuits Belize’s circumstances: (1) steady growthachieved using the model of small “boutique” accommodationunits or (2) a much faster rate ofdevelopment through “flagship” properties.6.4.3 Development of NewDestinations and Products forOvernight VisitorsIncreasing expenditures by the overnight segmentby offering a more diversified yet sustainableproduct is now recognized as a cost-effective wayto ensure that the tourism sector contributes tolocal economic development. Recent experiencewith the popularity of adventure and other specialtytours (e.g., cave tubing) suggests that thereare untapped opportunities that could help diversifythe tourism product, raise occupancy rates,and consolidate the overnight segment withoutjeopardizing the country’s branding. However,the sector must overcome basic constraints, forexample, limited access, signage, and other visitorservices in geographic areas with high potentialdemand. Transport infrastructure (roads, ruralairports and airstrips, and docks) and services, inparticular, need to take into consideration landand marine corridors that link both popular andemerging destinations (IDB 2007).Overcoming these basic constraints is viewed asan important factor given that the competitivenessof Belize’s tourism product depends in largepart on exploration, adventure, and experiencingthe authentic culture and history of the country.Tourism circuits combining recreational activitieswith unique lodging experiences, local gastronomy,and indigenous culture are still incipient andneed to be promoted in partnerships between centraland local governments, businesses, communities,and private investors. If planned correctly,diversification of attractions and the increase ofdestinations consistent with the country’s branding(“Belize, Mother Nature’s Best Kept Secret”)could also contribute to reducing pressure oncongested sites and helping distribute economicdevelopment benefits to new areas.100

Belize’s diverse cultural experience enhances itscompetitiveness as a tourism destination and islikely to play an important role in the developmentof new or emerging destinations. AlthoughBelize’s culture, including the traditions of its twoindigenous peoples (Maya and Garifuna), is oftenfeatured as part of the tourism product, indigenouscommunities themselves have had a limitedrole in the development of the sector. As newdestinations are promoted, particularly in Toledoand Stann Creek Districts, expansion of the sectorneeds to be consistent with the process of “developmentwith identity” and indigenous rights(over both land and resources) (Chapter 1). Alongthe same lines, community involvement in tourismis a fundamental policy issue for the sector.To realize the excellent potential it offers in communitytourism, Belize must develop capacities aswell as market distribution channels that benefitsmaller and grassroots operators.The rapid expansion of residential units as secondhomes (for example, condominiums andtime-shares), such as that taking place in NorthAmbergris Caye, raises the question of how residentialunits compare with hotel accommodationin terms of revenue generation, economic impact,and public infrastructure requirements. Competingdemand for properties with beach access andcoastal land in general calls for accelerated physicalplanning and strengthening of developmentreview processes.6.4.4 Institutional Capacity for SectorCoordination, DestinationPlanning, and ManagementInvestments in tourism in Belize have been largelyad hoc, in part as a result of growth rates thathave far exceeded forecasts. There has been littlecoordination between decisions on public infrastructureand private investments in accommodationsand associated facilities, as evidenced by thesignificant gaps observed between the availabilityof services in popular destinations and demandduring peak periods. Even now, there is no unifiedand systematic way of tracking proposalsfor new resorts and their implications for landuse, pollution control, and other carrying capacityconsiderations. These problems reinforce theneed for more-integrated approaches to destinationplanning that can address needs for physicalinfrastructure in the context of coherent, locallyendorsed plans for zones or regions selected aspriorities for tourism development. Public institutionsacross a number of sectors (tourism,natural resources and environment, coastal zonemanagement, public works, and agriculture) needto work closely with private investors, local governmentsand businesses, communities, and otherstakeholders to achieve a common tourism strategyat each of these destinations in accordancewith their role.Management capacity in regard to the sector alsoencompasses the human and financial resourcesallocated to environmental monitoring and enforcement,either directly by government institutionsor through cooperative arrangements formanaging protected areas. But management capacityhas not kept pace with the expansion of thetourism sector. Problems such as illegal dumpingof waste, coastal discharge, logging, and overfishingpose a direct threat to the scenic quality andrecreational potential of popular sites, adding tothe risk that environmental deterioration at popularsites will contribute to visitor perceptions ofdeclining product quality.6.4.5 Business and InvestmentClimateProduct development and diversification requirea favorable business and investment climate.Utilities such as electricity, telephone, and water,although accessible, are expensive and add significantlyto the operating costs of tourism businesses.Despite the general myth that land is abundantand readily available in Belize, land suitable fordevelopment is actually limited. The country,with the assistance of the Inter-American DevelopmentBank, has undertaken a gradual processof modernizing its land registry as a move towardsecure property rights, which should contribute toa dynamic real estate market. As it addresses landrights in the southern part of the country (Toledoand Stann Creek Districts), the country shouldtake into consideration the legal status of Garifunaand Maya lands.Lenders in Belize carry high interest rates, chieflyas a result of low savings, which presents anobstacle to investment from local sources in thetourism sector (Chapter 1). Future growth ischapter 6Tourism: Achieving Balance for Sustainable Growth101

chapter 6Tourism: Achieving Balance for Sustainable Growthmore likely to result from foreign direct investment,which is not subject to these high domesticinterest rates. Attracting such investment inthe tourism sector will depend on the provisionof complementary public infrastructure and services(road improvements and maintenance, ruralairport infrastructure, water and sanitation, andsolid waste management) that in some instancesmay offer opportunities for private sector investment.6.4.6 Market Readiness and theNeed for International QualityStandardsDeveloping a market-ready tourism product iscrucial for the sector. 2 The BTB estimates thatonly about 105 of the more than 500 tourism accommodationscan truly be characterized as offeringan “international market-ready” product.Although loosely defined, the question of market-readyproduct standards is fundamental tosustained growth in the sector. As a service exportindustry, tourism in Belize must meet internationalmarket requirements.As Belize is an ecodestination, its tourism industryincludes marine (boating, cruising, fishing,scuba, snorkeling, etc.), aquatic (canoeing, rafting,swimming), terrestrial (Mayan sites, hiking, trailing,biking, equestrian, etc.), and subterrestrial(caving, cave tubing, cave diving, etc.) activities.As a traded product, tourism is facing increasingcompetition internationally and regionally. Thus,global competitiveness is critical, and Belize needsto become competitive on delivery and quality, inaddition to price and product diversity. Deliveryand quality are inextricably interwoven with complianceand enforcement of standards. Despitethis, to date standards have been developed onlyfor a select few subsectors of Belize’s tourism industry,and even these standards are fragmentedand enforcement is selective. In addition, althoughexisting legislation does provide for adherence toestablished public health and safety standards,the effect is more to subsume the tourism productwithin the existing regulatory framework ratherthan to develop a framework of standards alignedwith international quality requirements.Given the structure and nature of Belize’s tourismindustry, standards need to be developed ina number of areas in addition to accommodations.In some instances, standards exist, but theyare not specifically aligned with or do not servethe needs of the tourism sector. As a group theseinclude, among others, transportation (by airand over land and water), vending, aquatic andmarine-based tourism, ecotourism products andservices, tourism product labeling and packaging,attractions and events (historical, cultural, andother), travel agencies and tour operators, restaurantsand food catering services, tourism informationservices, tertiary-level tourism education andhospitality management programs, and financialservices infrastructure.6.4.7 Development of HumanResourcesThrough a combination of partnerships with internationalorganizations such as the MultilateralInvestment Fund and private sector initiatives, Belizehas developed a strong set of skills programsand tools for the tourism sector (for example, tourguide certification). Although these programshave had a positive effect on the quality of servicethe sector provides, the broad consensus is thatsignificant work remains. A number of questionspertaining to important policy issues arise fromthe need to meet the sector’s requirements for adiverse, skilled labor force. Are there distinctionsin regional and/or destination demand for trainedpersonnel? What is the best way to provide trainingservices through a combination of public sector/formaleducation programs and private sectorinitiatives such as those successfully implementedby Belize’s high-end ecotourism? What should bethe scope of and priorities for a human resourcesdevelopment strategy? And how can the countrymake its human resources development programfinancially sustainable?6.5 Policy RecommendationsSustainable growth in Belize’s tourism sectordepends on a combination of sound public andprivate investments made within a policy and2Discussion based on Belize Tourism Board (2004).102

egulatory framework in which the “rules of thegame” are transparent and equitable. This callsfor a more-integrated approach to planning forthe sector as well as development planning acrosssectors. This section sets out the main policy recommendationsfor increasing the tourism sector’scontribution to economic development andgrowth.6.5.1 Integrate Responsible Tourism inEconomic Development PlanningTo ensure sustained growth in the sector, theobjectives, targets, and requirements of tourismshould be integrated into the government’sbroader framework for midterm economic developmentplanning. There should be a clear link betweennational and local development objectives,public infrastructure investments, and the nationaltourism policy. The government has taken a firststep in this direction by reactivating the NationalTourism Council as a mechanism for interagencycoordination. This should pave the way to greaterharmonization of tourism policy with policies forother, associated sectors such as agriculture, publicworks (particularly transportation), environmentand coastal zone management, disaster riskmanagement, and education.6.5.2 Develop a National TourismMaster PlanA National Tourism Master Plan for Belize shouldbe developed through a participatory process consistentwith the country’s revised 2005 TourismPolicy. Decisions on the content of the masterplan should result from a prior consultation withstakeholders taking into consideration internationalbest practice. The plan should include somebasic elements: (1) a consolidated vision for thesector and its role in national and local economicdevelopment; (2) measures to promote innovationfor diversifying the tourism product, focusing onthe country’s natural and cultural heritage, adventuredestinations, and hospitality; (3) zoning (atthe scale of districts) and geographic priorities fordestinations with a view to promoting alternativedestinations in order to reduce pressure at popularsites; (4) provision of tools for striking a balanceand managing potential conflicts between overnightand cruise ship tourism, with a view to optimizingthe economic benefits and ensuring theirequitable distribution; (5) establishment of basicrules for emerging segments (e.g., time-shares);(6) priorities for institutional and entrepreneurialstrengthening; (7) priorities for the human resourcesdevelopment strategy; and (8) shared responsibilities(national and local government andprivate sector).6.5.3 Promote Integrated DestinationManagementPublic and private sector investments in tourismin Belize should be made within the context of alocally endorsed and integrated destination managementmodel that should clearly define and differentiateeach destination’s tourism vocation asjustified by the demand and the product. It shouldallow for close coordination among the governmentinstitutions, businesses, and communitiesthat form part of the tourism “cluster.” The modelmust provide for a land use zoning plan (consistentwith the National Tourism Master Planbut more specific), an action plan for enhancingcompetitiveness, environmental sustainability, localeconomic benefits, and other considerations,such as integrated disaster risk management andclimate change adaptation and a portfolio of infrastructureinvestments (public and private).Indicators, including environmental indicators,should be established by consensus and closelymonitored during implementation. Pilot plansshould be developed concurrent with the masterplan process to create in-country capacity for destinationplanning and management.6.5.4 Improve the Business Climateand InfrastructureAttention must be directed at improving theoverall business climate in the country for tourismand associated industries, working toward theremoval of institutional bottlenecks, reduction ofoperating costs (e.g., utilities), and improvementsin basic public infrastructure and associated services.In terms of infrastructure, priority shouldbe given to improving corridors and circuits (road,air, and water), reducing pollution (through sanitationand solid waste management), and enhancingtourism assets (protected areas, urban cores)while giving due consideration to environmentaland social impacts. Partnerships with local governmentsand the private sector should be pro-chapter 6Tourism: Achieving Balance for Sustainable Growth103

chapter 6Tourism: Achieving Balance for Sustainable Growthmoted in providing a competitive and diversifiedtourism product.6.5.5 Provide Private SectorIncentivesBelize’s government should provide incentivesto the private sector for compliance with qualitystandards and technological innovation. Animportant aspect of the sustainability of tourismdestinations depends directly on the managementpractices of the tourism operators. Belize shouldbuild on its successful experience with certificationof segments of the industry to develop qualitystandards for sectors not yet regulated. It shouldalso develop incentives for operators to complywith internationally recognized standards forindustry-related facilities and services. As part ofthese incentives, the government should activelypromote technological innovation in the use ofrenewable energy, environmentally sound methodsand processes for operations, and other innovationsthat protect and restore tourism assets.6.5.6 Build Institutional CapacityBelize should build institutional capacity at thenational and local levels, including the capacity tomanage environmental quality. This will requireenhanced capacity at both of these levels. Keyareas that should be strengthened include tourismmarket analysis, physical planning (includingland use and design standards to prevent lossesfrom natural hazards), development proposaltracking and review, monitoring of compliancewith quality standards (including environmentalmonitoring and enforcement), and operation andmaintenance of basic services (particularly watersupply, wastewater collection and treatment, andsolid waste management).104

ReferencesBelize Tourism Board. 2004. “Belize TourismSector Diagnostic, 1998–2004.” BelizeCity. Available at http://www.belizetourism.org/component/option,com_remository/Itemid,170/func,select/id,86/orderby,2/page,2/.———. 2009. Tourism and Travel Statistics,1998–2008. Belize City.Conservation International, Belize Ministry ofTourism, Belize Tourism Board, and OakFoundation. 2007. Protecting Belize’s NaturalHeritage: An Action Plan for Shared Stewardshipof a Cruise Destination. Arlington, Virginia:Conservation International.IDB (Inter-American Development Bank). 2007.“Belize: Exporting for Growth.” Trade SectorPolicy Note. Washington, D.C. Unpublished.———. 2008. “Water and Sanitation StrategicSector Plan.” Washington, D.C. Unpublished.World Travel and Tourism Council. 2007. “BelizeTravel and Tourism: Navigating the PathAhead.” London.chapter 6Tourism: Achieving Balance for Sustainable Growth105

Agricultural Sector: Assessmentand Priorities for PublicInvestment and Policy77.1 Structure and Performance of Belize’s Agricultural Sector7.1.1 The Natural Resource Endowment and Types of Agricultural ProductionBelize is the smallest and least densely populated country in Central America. It also is the country withthe highest rural share of total population in the region and, atypically, its rural population is still growingfaster than its urban population (IFAD 2007). Belize was first colonized by Europeans for extractingwood from its extensive forests, and even today it remains a relatively forested country, although it is atimber importer. The government has placed about two-fifths of the total country’s land in protectedareas—a high proportion. 1Belize has an excellent climate for agriculture and abundant water resources. As of 2001, the naturalendowment of internally renewable water resources was about 10 times that of Central America andthe Caribbean as a whole, at 67,917 cubic meters per capita, versus an average 6,645 for the region(World Resources Institute 2006). Land, too, is abundant by the standards of the region. Approximately800,000 hectares or 38 percent of Belize’s total land area is considered suitable for farming and raisinglivestock. But currently only 9.7 percent of the land is used for agriculture: about 78,000 hectares(193,000 acres).The low rate of utilization of arable land can be explained mostly by the cost of developing it, includingbuilding access roads, providing potable water and electricity, constructing irrigation facilities, andin some cases clearing the land, without touching protected areas. Lack of secure markets and profitablenew farming options also may be factors contributing to the apparent underutilization of the landresource.As a result of these circumstances, many of the farms in Belize are quite small. Nationally, 24 percentof the farms have less than five acres, a percentage that rises to 35 percent in the Toledo District in thecountry’s extreme south. Based on analysis of Belize’s Farm Registry, 57 percent of farms have less than20 acres. The International Fund for Agricultural Development (IFAD) points out that the distributionof land holding is quite uneven, with the 24 percent of farms that are smallest (those under 5 acres) hold-1By comparison, Costa Rica, which is commonly recognized for its advances in this regard, has 25 percent of its land mass in protectedareas.107

chapter 7Agricultural Sector: Assessment and Priorities for Public Investment and Policying only 1.4 percent of the farmland. This figureis slightly misleading, because 46 percent of theland registered to farms is unutilized, and experiencein other countries shows that essentially noneof the land on the smallest farms goes unutilized,so undoubtedly this idle land belongs to the largerfarms. Taking this factor into account, it may besaid that the smallest 24 percent of farms hold2.6 percent of the utilized (or usable) farmland,a share that is still very small, but not quite asdramatically so.A similar estimate may be made for the two smallestfarm size classes together. It may be assumedconservatively, without introducing much error,that farms with 0 to 20 acres utilize 90 percentof their land. (The precise figure may be somewhathigher.) Applying this assumption, it can besaid that the 57 percent of all Belizean farms thathave 0 to 20 acres are cultivating 18 percent of thecountry’s utilized land.Though there may be some scope for expandingthe cultivated land area, with adequate infrastructure,raising productivity on all classes of farmsis going to be a prerequisite for continued sectorgrowth. In addition to the largest farms, whichhave obvious commercial potential, the 2,641farms (27 percent of the total) that have 21 to 50acres should not be overlooked in strategic planning.The smaller farms can access opportunitiesto participate in high-value agriculture througheffective farmers’ associations or groupings, contractfarming, and other forms of alliances amongproducers and with processing and marketingagents. These issues are discussed later in thechapter.Overall, about 19 percent of the country’s laborforce is classified as agricultural (UNData 2010),although that figure could be considerably higherif informal, part-time employment were fully accountedfor. In addition to the prevalence of smallfarms, about 26 percent of the rural population islandless. Although some of the landless householdsare involved in the service sector, includingsmall tourism-related enterprises, or commute towork in urban areas, undoubtedly many of themearn their living solely by working as hired laboron farms. As a consequence of these factors, theshare of households that are poor is almost twiceas high in Belize’s rural areas as in its urban areas.The share of extremely poor (indigent) householdsis even more tilted toward rural areas: 12.7percent versus 3.3 percent in urban areas (IFAD2007, 16). 2The shares of the population that are poor varyconsiderably by district, with Toledo again standingout in this regard. By district, the percentagesof the population that are classified as poor or extremelypoor are as follows: Corozal, 26.1; OrangeWalk, 34.9; Belize, 28.4; Cayo, 27.4; Stann Creek,34.8; Toledo, 79.0. For the entire country, the percentageis 33.5 (Government of Belize 2002).The dominant products of Belize’s agriculturalsector are sugar, bananas, and citrus. These cropsare the principal sources of agricultural employmentand foreign exchange earnings. The fisheriessector, traditionally based on shrimp, lobster,and conch, is another important foreign exchangeearner, and papaya exports have increased rapidlyto the point that papaya is the fourth-most-importantcrop in export earnings. Belize is now thesecond-largest papaya exporter in the world.As a reflection of the importance of citrus, bananas,and sugar, permanent crops are the dominantform of land use, followed by pasture for livestockand then annual crops. Livestock, vegetables,grains, root crops, and beans are important for thedomestic market and, to a much lesser extent, forexports. The principal types of livestock at presentare beef cattle, dairy cattle, poultry, and pigs,although there is growing interest in sheep. Thereare very few fattening operations for beef cattle,with grass-fed beef being the main product.The principal grains produced are rice, corn, andsorghum. The smallest, poorest farms typicallygrow corn and beans in shifting cultivation practices(milpa) identical to those found in neighboringcountries. On more commercial farms Belizegrows, in addition to the traditional major crops, adiversity of beans, and Mennonite farmers exportfive kinds of beans to as far away as Saudi Arabia.The main root crops are cocoyam and cassava.2The national poverty line is taken to be $1,270 per person.108

A significant amount of hot pepper is grown forprocessing into hot sauces for both the domesticand export markets. Tomatoes, onions, sweet peppers,and other vegetables are important for thedomestic market.As these brief comments suggest, Belizean agriculturetends to be bimodal, divided between acommercial, technologically advanced and oftenexport-oriented agriculture, on the one hand, anda family agriculture on small farms with lowerlevels of technology and producing for subsistenceand for the domestic market, on the other.However, not all small farms fall in the latter category.Many small-scale sugarcane, citrus, andhot pepper farmers, for example, produce harvestsfor export processing and in some instances haveadopted more modern cultivation practices andquality control measures.Table 7.1. Real Sectoral GDP Growth Rates in Belize, 1970–2007(BZ$ millions, at constant 1990 prices)Year GDP at factor cost Agriculture a Manufacturing7.1.2 Agricultural Growth and ExportsAgricultural value added has remained approximatelyone-quarter of total gross domestic product(GDP) for close to 40 years (see Tables 7.1and 7.2). By standards of developing economies,the agricultural sector—remarkably—kept pacewith the rest of the economy, in terms of growthof real output levels, between 1970 and 2007 andfor all subperiods during that time except themost recent one. It is almost a rule that agriculturegrows more slowly than the rest of a country’seconomy, if nothing else because of Engel’s law,which states that the income elasticity of demandfor food is less than unity. Evidently agriculturalexports in Belize have provided an outlet for productionabove and beyond the needs of the domesticmarket and thus have sustained growthand enabled the sector to expand more rapidlyAgriculture GDP aspercentage of totalGDP1970 312 75 46 24.01971 325 80 53 24.61972 349 83 58 23.81973 366 88 66 24.01974 394 96 77 24.41975 394 89 71 22.61976 389 86 66 22.11977 400 99 75 24.81978 429 104 82 24.21979 443 104 74 23.51980 461 105 85 22.81981 470 107 88 22.81982 465 112 87 24.11983 460 106 86 23.01984 470 108 79 23.01985 475 109 80 22.91986 490 104 82 21.21987 545 125 87 22.91988 580 125 87 21.61989 647 132 96 20.41990 710 147 106 20.71991 729 154 106 21.11992 777 172 114 22.1Continued on next pagechapter 7Agricultural Sector: Assessment and Priorities for Public Investment and Policy109

chapter 7Agricultural Sector: Assessment and Priorities for Public Investment and PolicyTable 7.1. Real Sectoral GDP Growth Rates in Belize, 1970–2007(BZ$ millions, at constant 1990 prices)Year GDP at factor cost Agriculture a ManufacturingAgriculture GDP aspercentage of totalGDP1993 803 171 112 21.31994 792 182 124 23.01995 816 192 130 23.51996 838 205 131 24.51997 868 218 136 25.11998 808 223 n.a. 27.61999 975 247 140 25.32000 1,108 276 172 24.92001 1,158 275 171 23.72002 1,223 276 173 22.62003 1,352 384 172 28.42004 1,421 420 194 29.62005 1,480 433 196 29.32006 1,553 409 265 26.32007 1,472 341 288 23.2Growth rates (%)1970–2007 4.28 4.18 5.081980–2007 4.39 4.46 4.621990–2007 4.38 5.07 6.062000–2007 4.14 3.07 7.64Source: Authors’ calculations using data from United Nations Statistics Division.Note: The UN series differs somewhat from those of the Statistical Institute of Belize but is used here because of its greater length. n.a.= not available.a Including hunting, forestry, and fishing.Table 7.2. Sectoral GDP in Belize, 1970–2007(BZ$ millions, at current prices)(Continued)Year GDP at factor cost Agriculture a ManufacturingAgriculture GDPas a percentage oftotal GDP1970 37 9 3 24.31971 45 11 4 24.41972 58 14 5 24.11973 101 24 10 23.81974 141 42 19 29.81975 171 53 23 31.01976 166 39 19 23.51977 193 49 27 25.41978 217 55 30 25.31979 250 59 33 23.61980 352 94 81 26.71981 355 89 69 25.11982 327 71 52 21.71983 345 72 61 20.9Continued on next page110

Table 7.2. Sectoral GDP in Belize, 1970–2007 (Continued)(BZ$ millions, at current prices)Year GDP at factor cost Agriculture a ManufacturingAgriculture GDPas a percentage oftotal GDP1984 384 77 73 20.11985 377 75 61 19.91986 405 82 61 20.21987 494 109 89 22.11988 552 118 98 21.41989 644 132 106 20.51990 710 147 106 20.71991 760 142 112 18.71992 887 160 109 18.01993 925 152 111 16.41994 1,025 183 131 17.91995 1,084 203 136 18.71996 1,129 196 128 17.41997 1,152 196 126 17.01998 1,208 197 129 16.31999 1,315 221 132 16.82000 1,490 244 158 16.42001 1,562 229 155 14.72002 1,675 237 154 14.12003 1,794 284 154 15.82004 1,916 300 165 15.72005 2,032 295 175 14.52006 2,214 294 258 13.32007 2,188 254 290 11.6Source: Authors’ calculations using data from United Nations Statistics Division.Note: The UN series differs somewhat from those of the Statistical Institute of Belize but is used here because of its greater length. n.a.= not available.a Including hunting, forestry, and fishing.chapter 7Agricultural Sector: Assessment and Priorities for Public Investment and Policythan agricultural production for the domesticmarket alone would have.Manufacturing has grown even more rapidly thanprimary agriculture, starting from a small base, andagro-processing constitutes the largest part of themanufacturing sector. In keeping with the similargrowth rates of agriculture and of the entire economy,agriculture accounted for a roughly constantshare of the total economy over 1970–2007, whenmeasured in constant prices. However, a puzzleemerges when these same data are viewed in termsof current prices: the agricultural share of totalGDP is then seen to have diminished by abouthalf between 1970 and 2007, with almost all of thedrop occurring after 1990 (see Table 7.2).The answer to the apparent puzzle is that the intersectoralterms of trade turned against agriculturebetween the early 1990s and the mid-2000s(see Table 7.3). Part of this phenomenon may beexplained by trends in world market prices forBelize’s export crops, but those prices held moreor less steady from 1970 until 1990 and turnedsharply downward subsequently. The parity betweenagriculture GDP and total GDP shown in1970 dropped to 0.5 by 2005. Part of the explanationfor the adverse shift in agriculture’s terms oftrade (i.e., in the purchasing power of agriculturalprices) is found in the policy arena.The continuing importance of agriculture in Belize’sgoods exports in spite of the relative decline111

chapter 7Agricultural Sector: Assessment and Priorities for Public Investment and PolicyTable 7.3. GDP Deflators, Agricultural and Total,1970–2007YearGDP deflatorsTotal Agriculture Agriculture/Total1970 0.12 0.12 1.011971 0.14 0.14 0.991972 0.17 0.17 1.021973 0.28 0.27 0.991974 0.36 0.44 1.221975 0.43 0.60 1.371976 0.43 0.45 1.061977 0.48 0.49 1.031978 0.51 0.53 1.051979 0.56 0.57 1.011980 0.76 0.90 1.171981 0.76 0.83 1.101982 0.70 0.63 0.901983 0.75 0.68 0.911984 0.82 0.71 0.871985 0.79 0.69 0.871986 0.83 0.79 0.951987 0.91 0.87 0.961988 0.95 0.94 0.991989 1.00 1.00 1.001990 1.00 1.00 1.001991 1.04 0.92 0.881992 1.14 0.93 0.811993 1.15 0.89 0.771994 1.29 1.01 0.781995 1.33 1.06 0.801996 1.35 0.96 0.711997 1.33 0.90 0.681998 1.50 0.88 0.591999 1.35 0.89 0.662000 1.34 0.88 0.662001 1.35 0.83 0.622002 1.37 0.86 0.632003 1.33 0.74 0.562004 1.35 0.71 0.532005 1.37 0.68 0.502006 1.43 0.72 0.502007 1.49 0.74 0.50Source: Authors’ calculations based on Tables 7.1 and 7.2.of agricultural prices is evident in the data in Table7.4. For most of the last decade or so, primaryagriculture has been responsible for almost 90percent of the goods exports, and more if agro-processing is taken into account, until petroleumexports began to emerge as a substantial factorin 2006. In the century’s first decade, service exports,mainly tourism and transportation, showeda sharply rising trend until the setback that beganin late 2008.Table 7.5 shows some of the commodity detailbehind Belize’s agricultural exports. Sugar andbananas exports have held up well considering theloss of preferential access to the European marketresulting from EU reforms to the Sugar Protocol(see Chapter 5). Between 2006 and 2010 theEuropean price for Belizean sugar declined by 36percent, and the preferential tariff on non–African,Caribbean, and Pacific banana imports to theEuropean Union has been slashed by about threequarters.Belize’s marine exports have droppedsubstantially in recent years owing to a sharpreduction in farmed white shrimp exports. Newinitiatives in the areas of cobia (a farmed oceanfish) and tilapia (a farmed freshwater fish) havegenerated hopes of a rebound in marine exports,but cobia exporting in particular will not createmuch employment.Belize’s major export destinations, with correspondingshares of Belizean exports, are as follows:United States, 42 percent; United Kingdom,20 percent; other European Union, 14 percent;Caribbean Community (CARICOM), 9 percent;Mexico and Central America, 7 percent. Exportsto CARICOM (mainly to Jamaica and Trinidad& Tobago) and to Central America (mainly ofpetroleum) have increased rapidly in recent yearsfrom a small base. As discussed later in the chapter,there are obvious opportunities in Belize forimportant increases in exports to Mexico andGuatemala provided that sanitary monitoringsystems can be put in place and trade accords canbe reached with the governments of those countries.Overall, the picture of Belize’s agricultural exportsis characterized by (1) a high degree of concentrationin five groups of products (citrus products,bananas, sugar, marine products, and papayas)and (2) a lack of dynamism in these products,with the exception of papaya and possibly newtypes of farmed fish (Roseboom 2009). The citrusindustry, which employs 10,000 people, is developingnew processed products, so it is likely that112

Table 7.4. Belizean Goods Exports, 1995–2006(US$ millions, except as noted)YearFoodAgriculturalraw materials Fuels a ManufacturingMiscellaneousgoodsTotalgoodsexportsAgriculturalexport share(percent)1995 124 2 0 17 n.a. 143 86.71996 122 2 0 20 10 154 79.21997 136 3 0 20 0 159 85.51998 123 3 0 21 0 146 84.21999 136 2 0 20 0 159 85.52000 162 3 0 21 0 186 87.12001 144 1 0 16 0 161 89.42002 140 2 0 16 0 158 88.62003 171 2 0 17 0 191 89.52004 180 2 0 23 0 205 87.82005 176 1 0 24 n.a. 202 87.12006 198 1 44 7 18 268 73.9Source: Authors’ calculations based on Statistical Appendix of IDB (2008).Note: n.a. = not available.a The first fuel exports did not occur until 2006, after the discovery of the country’s petroleum reserves.Table 7.5. Major Exports and Other Agricultural and Forestry Exports, 2000–2008(BZ$ millions)2000 2001 2002 2003 2004 2005 2006 2007 2008Marine products 70.44 66.42 70.36 110.13 107.57 98.12 86.02 42.18 44.28Sugar 74.39 59.37 65.98 71.23 81.53 69.90 100.07 88.14 71.38Orange95.25 68.85 53.49 65.54 56.13 87.81 86.18 101.17 99.93concentrateGrapefruit 13.41 15.70 13.95 12.52 24.49 19.34 22.81 16.27 12.67concentrateBananas 65.82 42.80 33.50 52.58 52.37 48.86 50.59 41.58 65.65Papayas 11.45 10.26 15.51 16.75 22.82 26.86 31.01 26.07 22.44Garments 39.58 31.01 30.44 30.91 36.81 34.56 36.59 18.79 0.32Petroleum — — — — — — 88.54 142.62 230.93Pepper sauce 0.67 0.40 0.41 0.61 1.12 1.32 1.61 1.69 1.63Orange squash 19.79 4.65 3.09 1.48 1.49 0.54 0.11 0.09 0.58Grapefruit 8.09 1.95 7.08 0.38 1.79 0.30 0.03 0.01 0.26squashOranges 1.89 2.03 3.64 2.41 2.76 3.46 2.88 2.68 1.69Orange oil 0.24 0.39 0.81 0.57 1.96 2.79 2.81 2.21 3.01Grapefruit oil 0.23 0.10 0.31 0.02 1.57 6.08 2.85 0.68 0.75Red kidney 2.43 3.28 2.44 1.66 2.38 5.22 1.91 2.88 3.45beansBlack-eyed peas 3.00 2.87 2.46 3.41 2.38 3.71 3.37 3.60 4.05Cocoa beans — — 0.03 0.09 0.07 0.07 — 0 0Molasses 0.27 1.65 2.68 2.47 1.77 2.82 4.20 5.50 2.82Veneer/plywood 0.01 0.12 0.42 0.29 0.07 2.30 1.86 0.58 0Sawn wood 4.63 2.69 2.56 3.56 2.98 2.63 1.25 1.91 2.21chapter 7Agricultural Sector: Assessment and Priorities for Public Investment and PolicySource: Statistical Institute of Belize.113

chapter 7Agricultural Sector: Assessment and Priorities for Public Investment and PolicyAs discussed in Chapter 1, the binding constrainton growth in Belize is the high cost of finance.Interest rates are high in Belize in comparisonwith those in most countries in Central America,which puts its agricultural sector at a disadvantagecompared to those of its neighbors, particuthissubsector will continue to register increases inexports, although they may not be large. Clearlythe agricultural sector needs new export successstories in the mold of papayas, or a larger arrayof more modest gainers. Other needed developmentsin the agro-export sector are (1) products,technologies of production, and marketing arrangementsthat can bring small- and mediumscaleproducers into the circle of competitivenessand generate more income per acre for them;(2) greater development of food processing andother additions to value; and (3) products whoseexport success does not depend on preferentialtrade agreements.In this regard, the Belize Trade and InvestmentService’s (Beltraide’s) National Export Strategynotes that a significant percentage of Belize’sexports are carried out under preferential agreements;for example, 50.3 percent of Belize’s exportsto the United States, including fruit juices,sugar, and melons. This combination of exports ofprimary, mainly agricultural, products and tradeunder preferential agreements has served as a majordisincentive to export diversification in Belize,and the country’s exports therefore remain relegated,for the most part, to the lower end of globalvalue chains for different export sectors (i.e., fishand shrimp, bananas, papayas, and beans are allexported in their primary form) (NES Belize DesignCore Team and Beltraide 2006, 23). 37.1.3 External Cooperation in BelizeanAgricultureBelizean agriculture receives support from theEuropean Union and some other external sources,and in fact that support represents the largestshare of public capital spending in the sector.Heading the list is the European Union’s commitmentof 48 million euros for the AccompanyingMeasures for Sugar project, which is aimedat both improving productivity in Belize’s sugarsector and diversifying part of the country’s sugarlands to production of other crops. In a similarvein, the Banana Support Project of the EuropeanUnion and United Nations DevelopmentProgramme has committed 27.7 million eurosto Belize. The Belize Rural Development Pro-gramme, also supported by the European Union,has a budget of 7.2 million euros. It carries outdiverse investments and training on small farms.The Agriculture Enterprise Development Project,another undertaking supported by the EuropeanUnion, has a budget of 1.3 million euros, and theFood and Agriculture Organization is supportinga number of smaller undertakings. The CaribbeanDevelopment Bank has supported Belize’s SocialInvestment Fund, which has activities in rural areas.IDB support was instrumental in the creationof the Belize Agricultural Health Authority. Butafter the termination of the Accompanying Measuresfor Sugar (in 2013) and the Banana SupportProject (in 2012), the prospect is for externalsupport to the sector to fall considerably, andconsequently for capital spending in the sector todecline, unless the government increases its fiscalallocations to the sector.7.2 The Macroeconomic and SectorPolicy FrameworkIn all countries macroeconomic and sector policieshave a considerable influence on agriculturaldevelopment, principally through their effects onincentives for resource allocation within the sectorand between sectors. They also can directlyaffect real incomes of rural households througheffects on intersectoral relative prices. Five policyareas in Belize have a particularly important impacton the agriculture sector: financial, exchangerate, trade, pricing, and fiscal policy. In contrast tothe usual case, in Belize all five policies work in anadverse direction from the viewpoint of economicincentives for agriculture—although they wereobviously not designed with that aim—offsettingto a degree Belize’s natural advantages for agriculture.7.2.1 Financial Policy3This is not the case for citrus exports, most of which are in processed form, or for sugar, but the general point is valid.114

larly in regard to livestock producers, producers ofperennial crops, entrepreneurs in food processing,and farmers who wish to install irrigation systems,covered structures, and other types of infrastructure.Although public sector programs andinternational programs can provide opportunitiesand some funding for Belizean farmers, in mostcases they will need to respond with their own investments,as described subsequently for concretecases, but with borrowing rates running from 15percent to 20 percent or more, including fees, it isnot a profitable proposition to use bank financefor investment purposes in agriculture.As noted in a recent IFAD study, Belize’s privatesector commercial banks (even those with an excessof liquidity) are not interested in the agriculturalsector or in very costly small rural clients.The interest rate for production loans varies between19 and 21 percent. The country’s commercialbanks are concentrated in cities and periurbanareas and have no interest in expanding towardsrural sectors. They allocated an average of only9 percent of the loans they made (approximatelyUS$50 million per annum) to the agriculturalsector between 2004 and 2008. About 50 percentof total agricultural credit has been allocated tothe banana sector (three large plantations), 25percent to large citrus growers, 20 percent to bigsugarcane growers, and the remaining 5 percentto agricultural firms in the poultry sector (IFAD2008, 8).Credit unions and, to a lesser extent, growers’associations represent a more rapidly evolvingsource of finance for agriculture, although theamounts lent are still relatively small. Accordingto the IFAD study, a number of the country’scredit unions have demonstrated the capacity toincrease their lending to agriculture, includingToledo Teachers, St. John’s, St. Martin’s, La Inmaculada,Blue Creek, and St. Francis Xavier. Inthe longer run, reinforcing institutions like thesewill ensure a sustainable mechanism for agriculturalfinance.Another critical need is for trade finance (exportcredit). This kind of finance is less risky than productionfinance, because importers have signedcontracts to buy the shipments whose export isfinanced by the loan obtained, and it is also shortterm, so it would appear to be attractive to banks,but to date Belize’s banks have elected not to extendtrade finance.The possibility of providing a kind of disaster insuranceis being investigated. The risk mitigationprovided by a disaster insurance program couldhelp encourage further private lending in agriculture,but as farmers are unlikely to be able to paymarket premiums for such insurance, the ratesmight have to be subsidized.7.2.2 Exchange Rate PolicyThe exchange rate for the Belize dollar has beenfixed with respect to the U.S. dollar for more than30 years, thereby providing an anchor for inflationand stability. However, the World EconomicForum (cited in NES Belize Design Core Teamand Beltraide 2006, 32) concluded, in its 2005review of Belize’s international competitiveness,that there are some indications that the exchangerate is overvalued. Similarly, in 2005, the InternationalMonetary Fund (cited in NES BelizeDesign Core Team and Beltraide 2006, 31) foundindications of a loss of Belizean competitivenessvis-à-vis important trading partners or competitorssuch as Brazil, Colombia, Indonesia, Thailand,and the Philippines.An appreciated real exchange rate causes agriculturalprices to decline in relation to other pricesin an economy, especially service sector prices,because agriculture is typically the most tradablesector in the economy, and hence when costs inthe sector increase, it cannot raise prices in lightof competition from imports and in export markets.Therefore it is possible that the strong exchangerate is one of the causes of the previouslynoted decline in real agricultural prices in Belizesince 1990.7.2.3 Trade PolicyMany exports and imports in Belize require licenses.In the case of a food export, the Ministryof Agriculture and Fisheries must determinethat the domestic market demand for the goodto be exported is satisfied before it will issue therequired license. This procedure, which differsfrom that followed in the vast majority of LatinAmerican countries, has a clearly negative effecton exports, because it constrains the abilitychapter 7Agricultural Sector: Assessment and Priorities for Public Investment and Policy115

chapter 7Agricultural Sector: Assessment and Priorities for Public Investment and Policyof exporters of some products to enter into contractswith buyers in other countries, out of uncertaintyas to whether they will be permitted tofulfill those contracts. In addition, obliging producersor exporters to forgo exports in order tosell on the domestic market may reduce the pricethey obtain, further undercutting incentives toproduce for export. For the most efficient allocationof productive resources, the domestic marketprice for a product should equal the export price(adjusting for differential transport costs and anyquality differences).Clearly the need to obtain export licenses is nota concern for exporters of products like sugar, bananas,and orange concentrate, but it can inhibitexports of products like grains, beans, mutton,and vegetables as new opportunities emerge inthose areas. Overall, this export control may beanother factor that helps explain the decline inreal agricultural prices in Belize since 1990.On the side of imports, the list of products forwhich licenses are required is quite long. 4 Onsome of these products and others a “revenue replacementduty” is levied in addition to the tariffimposed by CARICOM’s common external tariffregime, and in some cases an environmental dutyis also imposed. Belize’s import-licensing systemcreates additional levels of protection at the borderbeyond that provided by the common externaltariff that are unpredictable and also provideincentives for possible corruption. Shipments ofperishables have been known to deteriorate in theheat on the Mexican border for days while trivialand unanticipated paperwork requirements for animport license were being fulfilled.ly demonstrated that greater border protection reducesthe competitiveness of a country’s exports.Since most of Belize’s exports are agricultural, theimport-licensing regime is also contrary to thecountry’s interests, even though it may protect producersagainst some of the international competition.Worldwide the trend has been to eliminateexport- and import-licensing regimes because ofthe economic inefficiencies they generate. Whenmore protection is sought, the transparent andeconomically most efficient option is to increasetariffs. Though Belize’s tariffs are substantial, inmost cases they remain below the maxima (bindings)provided by the common external tariff, sothere would be scope for increases if desired.Finally, it must be observed that the trade-licensingsystem contravenes Belize’s World TradeOrganization (WTO) commitments. As notedin a CARICOM review of Belizean agriculturalpolicies, as a signatory to the WTO Agreementon Agriculture, Belize is required to dismantle itssystem of licenses with respect to both importsand exports as well as gradually to reduce tariffs.Even with due recognition of the current positionto protect domestic producers from beingcrowded out and the importance of doing so, inthe new trade policy environment (WTO, FreeTrade Area of the Americas, CARICOM SingleMarket and Economy, etc.), a signatory cannotindefinitely pursue nontariff barrier policies thatrestrict trade. Thus, the more quickly Belize’smarket is opened up, the better prepared will beits entrepreneurial class to compete in the market(Singh, Seepersad, and Rankine 2006).7.2.4 Pricing PolicyIt is not obvious that the additional protectionprovided by these measures is needed, unless thestrong exchange rate is perceived as affording anadvantage to imported products. The classic studyof Jorge García García (1981) for Colombia clear-Price controls are in effect in Belize for sugar, rice,flour, bread, red kidney beans, and a few nonfoodproducts, including beer. As the experience ofother countries demonstrates, price controls almostalways operate in the direction of favoring4The control exerted by such licensing is quite pervasive; an abbreviated list of items requiring import licenses includes the following:rice, beans, eggs, flour, fruits, potatoes, vegetables (including tomatoes, cauliflower, cabbage, lettuce, carrots, cucumbers, shelled or unshelledstring beans, eggplant, sweet peppers, and zucchini), manioc (cassava), Jerusalem artichokes, sweet potatoes and similar rootsand tubers, coconuts, bananas, plantains, pineapples, avocados, guava, mangos, mangosteens, watermelons, cantaloupes, muskmelons,other melons, papayas, sapodillas, golden apples, passion fruit, soursop, breadfruit, carambolas (star fruit), christophene (chayote),pineapples, lumber and lumber products, furniture, beef and beef products, pork and pork products, chicken sausages, poultry excludingbaby chicks, sugar and molasses, jams, jellies, pepper sauce, flour, dry pasta, peanuts, aerated (carbonated) beverages, citrus andbeverages containing citrus, beer, corn, milk, animal feed, brooms, toilet paper, fuels, butane, bleach, soaps, matches, t-shirts, andfiberglass outboard motorboats.116

consumers and penalizing producers. An alternativeto price controls would be a more open importregime so that traders could respond when shortagesoccur, thus damping down price increases.The Belize Marketing and Development Corporation(BMDC), under pressure from various localproducer groups, currently imports some basicfood products, ostensibly to guard against shortages,but generally the private sector has a greatercapacity to bring in imports in a timely fashion;however, the BMDC’s actions in the marketplacediscourage the development of the needed privatetrading capacity. Furthermore, price controls areyet another instrument that probably has contributedto some extent to the observed decline in realagricultural prices in the country.7.2.5 Fiscal PolicyBelize’s unintended policy biases against agriculturecould be offset by greater public investmentin the sector, but on the expenditure side, thecountry’s fiscal policy assigns a very low priorityto agriculture. Although the sector contains mostof the country’s poverty (the incidence of whichis greater in rural areas) and at least a fifth of itslabor force and generates the bulk of the country’sgoods exports, it receives only a little over 1percent of Belize’s total fiscal expenditures. In thecritical area of capital expenditures from the budget,agriculture receives about 2 percent of publicoutlays (1.80 percent according to the 2007/2008projected outturn). Funding from developmentpartners partly compensates for this lack of fiscalexpenditure, but the magnitude of that supportmay be transitory, and total public capital spendingin the sector still is quite low in relation to itsimportance in the economy.These are straitened times for the governmentbudget in Belize, as they are everywhere in theworld, but as conditions permit implementationof a longer-term perspective, it would be worthwhilefor the country to reconsider the priorityassigned to agriculture. The stock of infrastructurein the sector is a bottleneck to its growth, andthe low level of fiscal support distorts operationsof entities such as the Belize Agricultural HealthAuthority (see Section 7.4).7.3 Products and MarketsOverall, Beltraide’s National Export Strategyfinds a low level of competitiveness in Belize andencourages greater product diversification (NESBelize Design Core Team and BELTRAIDE2006, 33). The European Union’s Belize MarketingStudy (SCANAGRI Denmark Consortium2007, 28–31) looks into the issues surrounding afew promising products. However, as markets determinethe products that can be competitive, it isdifficult to specify them in advance in a strategy,although some possibilities that are worth tryingout at the field level may be mentioned. Nevertheless,interest has arisen in Belize in a numberof products that are new or have so far been producedin relatively small quantities. These productshold out the promise of greater diversificationof the country’s export basket and of raising farmincomes, in some cases significantly.Trials are underway on pitahaya, a fruit that hasexport potential, especially in the European market.It is used as an ingredient for flavoring andcoloring prepared foods and in fresh form is indemand as a decorative item. Guava (guayaba)is another fruit that has attracted attention andcommentary; its main use would be for processinginto paste for export, though there is demand forit in fresh form as well. Both pitahaya and freshguava would require sanitary control and monitoringregimes in order to be exported. Pitahayais plagued by a fly—different than the Mediterraneanfruit fly, which is already being controlledfor the papaya subsector—so new sanitary measureswould be required for it.Citrus, bananas, papayas, and guava illustrate Belize’sapparent comparative advantage in tropicaltree crops. Another tree crop that has had commercialsuccess and is being exported on a smallscale is cashew. 5 It grows well in the less humidparts of the country, from Cayo District northward,and the world demand is substantial andexpanding. In addition to being grown on plantations,cashews can be collected from scatteredtrees on smaller farms, but the latter operationrequires investment in small-scale structures forcontrolling humidity. The seeds (nuts) can be keptchapter 7Agricultural Sector: Assessment and Priorities for Public Investment and Policy5Cashew is mentioned as a crop with potential in Beltraide’s National Export Strategy (NES Belize Design Core Team and BEL-TRAIDE 2006, 42).117

chapter 7Agricultural Sector: Assessment and Priorities for Public Investment and Policyunder low-humidity conditions for many monthsin order to spread out the processing over a longerperiod of time. The juice of cashew’s false fruit isconsumed locally in Central America, but its potentialfor export is limited by its short shelf life.Belize’s citrus subsector has the potential to increaseits exports of orange juice, and the Belize CitrusGrowers Association is working on new processingmethods for that purpose. Contraband export of orangesto Guatemala is fairly extensive, but sanitaryand phytosanitary issues prevent the formalizationof that trade. Likewise there would be a significantmarket for limes in Mexico, but again sanitary andphytosanitary issues pose a barrier, especially becausemany Belizean citrus plantations are infestedwith the tristeza virus, which can be transmittedvia fruits from infected trees. In light of this problem,hot water treatment or waxing of the citruswould be a requirement for export to Mexico. Cuba(which has a management program for tristeza inplace and does not protect against entry of citrusfrom areas with tristeza) is interested in limes fromBelize, but transport is the obstacle.Beans grown in Belize—including black-eyed peas,light red kidney beans, black beans, small red beans,and cranberry beans—are currently being exportedto the CARICOM countries, the Middle East,North America, Australia, Europe, and South andCentral America, in spite of port limitations thatnecessitate having bean shipments go out on smallerboats to Jamaica initially, where they are transferredto larger vessels. Interest has been expressed in increasingbean exports to other countries in CentralAmerica substantially, but market conditions makethis a remote possibility. Although Central Americaimports significant amounts of beans in someyears, its import requirements depend heavily onthe weather that affects bean harvests in CentralAmerican countries, and in other years imports areminimal. Hence Belizean growers cannot predictthe magnitude of that market with any confidencein advance of planting decisions, making it unlikelythat Central America will increase in importanceas a destination for Belizean beans. However, prospectsare encouraging for increasing those exportsto other parts of the world.The farmers and managers of the BEL-CARcooperative have largely generated the country’sexport success in beans so far. Some obstacles willhave to be overcome to replicate their experiencewith other farmers. The Belize Marketing Studycomments that “key limiting factors on the productionside which have been identified are theweb blight disease, lack of adequate storage spaceand inadequate drying facilities. Availability ofsuitable land for farmers to expand production isbecoming a constraint as well. Limited access tofeeder roads has negative impact on cost structureand therefore it is difficult to remain competitive.. . . [There is an] absence of local standards forbeans in Belize” (SCANAGRI Denmark Consortium2007, 29). It may be added that the beanvarieties grown in Belize could be improved withresearch, but Belize’s Central Farm is not yet providingassistance in this.Perhaps surprisingly, corn has potential in Belize,especially for export to elsewhere in CentralAmerica. Although U.S. yellow corn is availablemuch more cheaply, its quality also is lower, sinceit is destined for feed concentrates and what isavailable tends to be older grain that has beenstored for a while. For human consumption, especiallyin fresh form, Belize appears to be ableto produce corn at an acceptable price for nearbymarkets and in fact has recently produced asurplus, but marketing arrangements and tradeagreements are not yet in place that would allowit to be exported.Corn also lends itself to processing. The Caribbeanconsumes a great deal of cracked corn, anda feasibility study on the equipment required toprocess Belizean corn for this market would beworthwhile, as would such a study in regard tocorn meal.Another tree crop, plantain, has not been exportedin recent years, but potential markets exist forplantain chips in Mexico (particularly Chetumal),the United States, and Jamaica, and in the Miamiarea for fresh plantains (SCANAGRI DenmarkConsortium 2007, 29). For these markets to beexploited, obstacles involving lack of consistentquantity and quality need to be overcome. Additionally,growers are not linked with processorsand marketing agents, so the supply chain needsto be developed.Belize produces honey of high quality, and bothEurope and the United States offer strong markets118

for good organic honey. Inconsistency of supply, inlarge part from the lack of producer organization,is the chief source of the country’s problems inregard to exporting honey. Many hives are widelyscattered, and theft of honeycombs is a major issue.Realizing the market potential for honeywould require work in organizing both producersand communities and also in developing appropriatelabeling and obtaining organic certification.Some observers feel the introduction of themore aggressive Africanized bees via Brazil alsohas affected the country’s honey supply, and thisfactor would have to be evaluated.Sauces, jams, and jellies also hold promise forfuture increases in exports. Currently Belize exportsa significant amount of hot sauces and othersauces, with Japan the main market, although theU.S. market has been penetrated as well. For theseproducts, forging links with long-term buyers, institutingquality control measures, and introducinggood labeling are some of the keys to success.Lack of compliance with regulations regardinglabels has been an important reason for rejectionof Belizean exports upon arrival in the UnitedStates.Both the National Export Strategy and the BelizeMarketing Study point to the potential in yet anothertree crop, cacao, especially in organic form.Belizean organic cacao is of high quality andalso is fair trade certified. It is grown mostly bysmall farmers in Toledo District. All organic cacaoexports currently go to the United Kingdom,through Green & Black’s, and some organic cacaois processed locally. The main issues to be resolvedin regard to cacao exports are low productivity onfarms and inadequate crop management practicesfor control of Monilia disease. Proposals have beenmade to introduce higher-yielding cacao varieties,but their flavor and aroma characteristics may differfrom those of the existing variety, potentiallymaking them less viable commercially.In the livestock subsector, both beef and muttonhave considerable potential for export expansionprovided that (1) genetic herd improvementprograms can be implemented on a wider scale,(2) surveillance programs for brucellosis and tuberculosiscan be put in place with the aim ofeventually obtaining certification that Belize isfree of those diseases, (3) a capacity for testingfor residues (heavy nickel) and antibiotics in thesemeat products can be developed, (4) livestockfarmers can gain access to credit on more reasonableterms for pasture improvement, fencing, andother investments, and (5) adequate programs forlivestock traceability can be established. Traceabilityis in place for a limited number of cattleranchers who sell their animals to the only HazardAnalysis and Critical Control Points–certifiedslaughterhouse in the country, but it needs to beextended to other farmers who wish to producefor export, and it needs to be established for sheep.Cattle crosses between the native Brahman breedand Hereford and Brown Swiss have proven to bevery productive (in terms of increasing yields) inBelize. The Ministry of Agriculture and Fisherieshas brought in about a dozen breeding bulls, butabout 15 times that number would be needed toensure a breeding stock that could satisfy the nationaldemand. Equally, crossing Blackbelly sheepwith the Darfur breed has provided good resultsin regard to yields, adaptability to local conditions,and consumer response, but so far that typeof crossing has been undertaken only on a privatefarm on a limited scale.Live animals are exported extensively to Guatemala,informally, and some of the exported animalsgo on immediately to Mexico. However, aformal trade accord on livestock with Guatemalais still pending. If such an accord were in place,exports of cattle in simple processed form (carcasses)could be made. Cattle also cross the borderinto Mexico informally. An accord with Mexicowould open the door to livestock exports of bothbeef and mutton. In addition to the certificationsregarding brucellosis and tuberculosis mentionedabove, another sanitary requirement for the Mexicanmarket would be for Belize to declare itselffree of mad cow disease, which would requireimplementation of a monitoring system to certifythat the disease does not exist in the country.Mexico has a potentially large mutton market,from Belize’s perspective. Domestic demand formutton in Belize is also currently outpacing supplyincreases, and this is a product in which smallfarmers can readily participate.One of the potential advantages of Belizean beefin the marketplace is that it is grass fed, whichboth makes it cheaper to produce than grain-fedbeef and increases its marketability (through itschapter 7Agricultural Sector: Assessment and Priorities for Public Investment and Policy119

chapter 7Agricultural Sector: Assessment and Priorities for Public Investment and Policysuitability for the lucrative market for grass-fedbeef ). Livestock producers express concern aboutthe high cost of supplementary feeds in the dryseason. However, at least one successful produceris basing his feed mixes on molasses, which isreadily available from Belize’s sugar industry andis very cheap, reducing dependence on expensiveimported feeds. Stronger extension efforts in thearea of research and development in supplementalfeed production and feeding strategies and strongerveterinary services are needed for small- andmedium-scale livestock producers, who are generallynot as familiar with these approaches thatcan make them more competitive, and it wouldbe worthwhile to strengthen the Belize LivestockProducers Association for that purpose.Following new trends in extension services, theassociation could select and hire its own extensionagents, and the public treasury could supportthe association on the cost side. With appropriatetraining and technical support, the associationmight also acquire the capability to extend creditlines to producers as a financial intermediary.In the area of fisheries, new investments in oceanfarming of cobia hold promise for creating a significantnew export industry, albeit one that isnot intensive in regard to employment. Greateramounts of employment are being created in theemerging tilapia industry, which also should beable to add significantly to the country’s exportearnings. One urgent need of tilapia producers,which are often small in scale, is a better coldchain from ponds to processing plants. Another isa system of sanitary monitoring and controls fortilapia, above all to ensure that the fish arrive atthe processing plant in sanitary condition.More than two dozen species of wood are currentlyharvested from Belize’s forests. Pine is the mainspecies in volume, and the three main hardwoodsare mahogany, Santa Maria, and yemeri. Woodproducts are exported from Belize only on a verysmall scale, however. Currently Belize exports onlysawn lumber, but the country’s substantial forestendowment and the potential for cultivating fastgrowinghardwood species such as Spanish cedarwould appear to indicate a potential for more valueadded in the wood products industry. Beltraide(2004, 1) has noted that “growth in demand forwood products has been substantial over the past30 years. As the number of countries that importand export forest products grow, forestry is becomingincreasingly global. A large contributor to thisgrowth is in the secondary processed products,such as moldings, doors, furniture, etc., and thoseof non-wood forest products, such as rattan.”Timber management in Belize is largely sustainable,but controls in this regard would have to bereinforced to ensure rigorous sustainability andensure the possibility of sustainability certification,and planting of suitable species, such as theaforementioned Spanish cedar, on a reasonablescale could be one part of the country’s forestproducts strategy. Developing the potential formore value added in the forest products industryand fostering export earnings from wood productswould require sustained technical assistance,particularly in regard to cutting the wood and finishingthe products. Design is important as well.For these purposes, an alliance could be forgedwith a North American company. A group of Nicaraguanfurniture makers entered into such analliance with the Berkeley Mills in California, forthe purpose of receiving technical assistance withdesigns and with production practices.In sum, there exist real possibilities for diversifyingexports in Belize. What is needed is a concertedexport development program. Some of the crosscuttingobstacles that would have to be overcomeare described in the following sections.7.4 Sanitary and PhytosanitarySystemBelize’s sanitary and phytosanitary system has asound technical base in the Belize AgriculturalHealth Authority (BAHA), which was establishedpursuant to legislation approved in 2000.The IDB provided key support for BAHA’s establishment,and the regional sanitary and phytosanitaryentity Regional Organization for Plantand Animal Health (OIRSA) has provided continuingsupport to its operations.BAHA operates the country’s quarantine facilities.It has modern capabilities in the Central InvestigationLaboratory, although it does not yet haveInternational Organization for Standardization(ISO) 17025 certification (the main internationalstandard for testing and certification laboratories),120

and it monitors food safety issues as well as sanitaryand phytosanitary concerns. Its staff makesfield visits to agro-processors and producers andmonitors their practices closely. BAHA also carriesout pest risk analyses and issues export certifications.It has special surveillance programs forthe Mediterranean fruit fly and the pink hibiscusmealybug. In the area of animal health, BAHAprovides veterinary diagnostic services and conductsepidemiological risk analyses. It monitorsrabies cases and levels in the country and providesvaccinations against the disease.In regard to food safety, BAHA, among otherthings, verifies the application of Hazard Analysisand Critical Control Points (HACCP) proceduresand the associated Good AgriculturalPractices, Good Manufacturing Practices, andStandard Sanitary Operating Procedures. It hasa nascent capability for investigating outbreaksof food-borne diseases. Its HACCP certificationand monitoring was instrumental in facilitatingfish products exports to the European Union andUnited States, but it needs to develop a capacityin aquatic health analysis to support the expansionof effective risk management for a competitiveaquaculture sector.BAHA faces a number of issues, largely fallinginto three main categories: (1) its physical and humancapacity needs to be enhanced in some criticalareas, (2) it receives inadequate funding fromthe government and hence is overly dependent onthe fees it charges for its services, and (3) its operatingprocedures need to be reviewed and revisedfrom the viewpoint of good governance.7.4.1 Increasing Physical and HumanCapacityThe entire staff needs training in statistical samplingprocedures, since they are the basis for thekinds of monitoring and surveillance acceptableunder World Organisation for Animal Health(OIE) standards, and they are also required inquarantine work. The existing capacity in aquatichealth analyses would benefit from a sanitary andphytosanitary project in aquaculture.As mentioned, a traceability system needs to beimplemented in Belize, starting with livestock.The basis for such a system is a unique identificationnumber for each farm in the country, analphanumeric identifier that includes symbols fordistricts. This would have to be provided by theRegistrar of Lands or the Ministry of Agricultureand Fisheries, as the point of departure for traceabilitysystems, and then BAHA would need stafftrained to oversee the implementation. Such anidentification number would also assist efforts tocollate the beneficiaries of government and internationalprograms.BAHA’s most urgent priority in regard to physicalcapital is to relocate the Central InvestigationLaboratory from Belize City, where it is in a vulnerablearea and has suffered hurricane damage,to Belmopan. Other needs include more vehiclesfor surveillance, monitoring and traceability work;an information system that includes computerswith geographic information system capabilities,an X-ray machine (which could be shared withother agencies) and incinerators with high capacity,a holding facility for live animals that includesa sanitary dip, quarantine facilities for pet birds,a cold facility in quarantine stations, and an expandedbuilding on the Central Farm premises(BAHA currently makes outlays for rental of facilitiesfor meetings and conferences).chapter 7Agricultural Sector: Assessment and Priorities for Public Investment and PolicyBAHA has well-trained staff, but it needs more ofthem in order to be able to carry out the kinds oflivestock health surveillance that are prerequisitesfor exporting meat, and it needs more veterinarians.The existing preslaughter inspections of livestockin informal slaughterhouses (“slaughteringunder the mango tree”) are insufficient from thestandpoint of hygiene and health control. BAHAalso needs more staff trained in plant health, asthe specialists currently on staff have to work intoo many different areas to enable BAHA to offereffective coverage of veterinary control services.7.4.2 Addressing InadequateGovernment SupportServices in support of an agricultural sanitarysystem are partly public goods, and thereforethe current level of government budget supportto BAHA (only BZ$1.2 million in fiscal 2008–2009) is far too low. The low level of governmentsupport forces BAHA to rely excessively on fees,which are therefore high and charged for toomany activities. These fees have become a burdenon producers, especially but not exclusively121

chapter 7Agricultural Sector: Assessment and Priorities for Public Investment and Policythose who wish to export. To increase funding forBAHA, a 2007 study by the Animal and PlantHealth Inspection Service of the U.S Departmentof Agriculture (USDA-APHIS) recommendsnew or increased fees for other activities, such ascharges on tourist arrivals and for the ProtectedAreas Conservation Trust (PACT).7.4.3 Resolving Governance IssuesBAHA’s governance issues arise in part from itsexcessive dependence on fees. In addition, BAHAstaff members tend to visit processing facilitiesmore often and for longer durations than requiredunder international inspections standards.In the field they insist on payment on site whenservices are delivered. These modes of operationprovide obvious incentives for corruption, andthey increase production and processing costs inan environment in which Belize is struggling tobe competitive. In the latter regard, the excessiveburden they impose has made them an obstaclefor progressive farmers. Hence an overall reviewof BAHA’s operations and governance would bein order, as part of an integrated program to enhanceits capacity. For that purpose, comparisonscan be made with how sanitary and phytosanitaryentities in other countries operate.7.5 Infrastructure IssuesA review of infrastructure for Belize’s agriculturesector reveals a number of investment priorities.First and foremost, it is estimated that only about2 percent of Belize’s cultivated land is irrigated.Even though annual precipitation is moderate toheavy in Belize, from 40 inches in the north to200 inches in the far south, irrigation is importantto ensure adequacy of the water supply for cropsin the dry season and during dry spells in therainy season. It is a vital factor both for increasingyields and for improving product quality. Sofar the little irrigation that is available is mostlydirected to traditional plantation crops such assugarcane and citrus.Recognizing this gap, the Ministry of Agricultureand Fisheries funded 35 small-scale irrigationprojects in fiscal 2007–2008, mostly through theBelize Rural Development Programme. However,these projects represent only the beginning ofmaking investment a priority for the agriculturesector.One of the first steps toward a priority investmentplan would be the formulation of a medium-termirrigation strategy and training ministry staff inirrigation management. The experiences of theBelize Rural Development Programme wouldprovide useful inputs into such a strategy. In thesouthern part of the country, drainage is neededas much as or more than irrigation, but adequatedrainage systems should in any case be a partof all irrigation projects. In the north, wells aregenerally feasible and require depths of as littleas 10–20 meters to ensure a year-round supply ofwater. However, attention should be paid to thepumping costs associated with wells, given thecountry’s high electricity prices. Also, althoughgroundwater may be abundant for the country asa whole, that is not necessarily the case in eachunderground basin. As no national groundwatersurvey exists, at present well-digging permits arebeing issued with no idea of the extent of aquiferresources available in the area where the well is tobe located.River intakes and catchment dams are also feasiblein many parts of the country, and in someparticular cases short interbasin water transfersmay reasonably be considered. Above all, a strategyfor organization of producers into water usersassociations and training them in irrigationmanagement will be important. Legislation willbe required to define water use rights and theownership of irrigation systems, along with responsibilitiesfor system maintenance and, whennecessary, rehabilitation. Rules must be in place todefine where the state’s responsibility for gravityfedsystems ends and that of the users begins, thatis, should the state deliver water to the head gatesof the main canals and leave to users the waterdistribution in secondary and tertiary canals, orshould some other system be devised? Clarity willbe needed on this topic and others related to it.Along with irrigation, greenhouses or simple coveredstructures are effective ways to increase yields.Typically covered structures increase yields several-fold;trials in hot pepper fields have shown thatyields increase to 2.5 times their previous levels.Panama has established, under an IDB project, amechanism (ProCompetitividad) through which122

farmers and entrepreneurs may apply for nonreimbursablesupport under a number of headings,including adopting new technologies, exploringmarkets, improving enterprise management, andobtaining certifications. The applicant must putup a share of the costs, but the program providesmost of the funding. Groupings of farmers alsomay apply for support from the program. A similarkind of mechanism might be worth exploringin regard to financing both greenhouses and smallirrigation systems in Belize.Belize is well endowed with highways that are ingood condition. However, many farm access roadsneed upgrading, and some are not usable year round.Progress in this regard is being made in bananagrowingareas under the Banana Support Program,but access roads need to be upgraded throughoutBelize, and preferably paved when possible. Withoutreliable access roads, products like milk andperishable fruit and vegetables cannot successfullybe produced for export, as the unreliability of accessmakes it difficult to preserve the cold chain fordairy products and increases spoilage and postharvestdamage in the case of perishable horticulture.Furthermore, roads in poor condition raise thecosts of marketing all products.Adequate crop storage and drying facilities aregenerally in short supply in Belize, more so inthe north and the south than in the center ofthe country. Such facilities help ensure a higherqualityproduct and reduce postharvest losses.Consideration should be given to relatively inexpensivehermetic storage facilities for grains andbeans that have been used to good effect in somecountries in Africa and elsewhere, substantiallyreducing postharvest losses due to insects.Cold chain facilities are needed for aquacultureproducts and fruit and vegetables, including coldstorage at the Philip Goldson International Airportoutside Belize City. The latter can be simple,such as one or more reefer containers connectedto power sources, but it is important to have it.Facilities of this kind can be made availablethrough a public-private partnership or providedon a fee basis by a private enterprise or organizationof producers.Development of a new deepwater port could beimportant for the promotion of Belizean agri-cultural exports. The main seaport at Belize Citycharges very high fees for handling cargo, up tothree times the fees of the most efficient ports inCentral America. Also, it has only one crane and nobulk loading facility. The new port being exploredin the vicinity of Dangriga, mainly by private sectorgroups, appears feasible and would be considerablyless expensive for users than the port in Belize City.Potentially it would also have the bulk loading capacitythat the Belize City facility lacks.7.6 Issues Concerning InstitutionalCapitalApart from the question of reviewing the operatingmodalities of BAHA, the main institutional issuesin the sector concern the cooperatives and the marketingboard (Belize Marketing and DevelopmentCorporation). Cooperatives can play a useful rolein organizing farmers for the purpose of developingalliances with other segments of the agriculturevalue chain, and in some countries, such as Denmarkand the United States, they have a distinguishedhistory, especially for milk marketing andprocessing. The top brand of ultra-high-temperaturemilk for all of Central America is producedby a cooperative in Costa Rica. However, less than20 percent of the agricultural cooperatives in Belizeare functioning entities, a level typical of mostdeveloping countries. Because the country’s cooperativesare evidently not playing the role typicallyexpected of them, legislation governing cooperativesis currently undergoing review and revision.In regard to the BMDC, the Belize MarketingStudy (SCANAGRI Denmark Consortium 2007)observed that significant human and financial capacityconstraints prevent the institution fromcarrying out its mandate. The study cites lack offocus and the absence of a proper managementsystem (including a monitoring and evaluationsystem), as well as a need to enhance managementskills among the institution’s top management.Of the issues the study cited, the institution’s lackof focus is perhaps the greatest concern, becausethe other constraints can be ameliorated throughfunding and training. The institution’s objectivesare unclear: does it aim to make food more affordablefor consumers, or does it aim to offer higherprices to farmers for their harvests? The two aimschapter 7Agricultural Sector: Assessment and Priorities for Public Investment and Policy123

chapter 7Agricultural Sector: Assessment and Priorities for Public Investment and Policyare incompatible unless the institution receives alarge fiscal subsidy, and that does not appear to bethe case. Throughout the region, agricultural marketingboards like the BMDC have been foundto be inefficient in their operations and to distortmarket incentives and have therefore been closed.The institution’s interventions to purchase foodimports are equally questionable. If the governmentwere to send clear, unambiguous signalsto the private sector that it would not intervenein domestic or international commerce in foodproducts, then the private sector would respondto temporary food shortages through imports.Often when parastatals try to play that role, asa result of bureaucratic inefficiency they end upreceiving food imports after the shortages havepassed, exacerbating the downturn in farm gateprices that always occurs at harvest time. A moreappropriate role for the institution, as discussedlater in the chapter, might be to manage a fundto contract with private marketing experts whocan advise farmers’ groups and agro-processorsand put them into direct contact with markets.Equally appropriately, it could construct infrastructuresuch as the necessary facilities for coldchains mentioned previously and lease them on along-term basis to the private sector.7.7 Agricultural Services7.7.1 Research and ExtensionIn light of concerns raised in regard to Belize’s agriculturalsector and to enable it to reach its identifiedpotential in any substantial degree, appliedresearch has to have a priority, particularly varietaladaptation trials for nontraditional crops. Plantbreedingefforts may be needed in regard to beansand rice, although it would be important to adaptresults from elsewhere for those crops as well.For fruits and vegetables, strengthened researchin pest control is urgently needed, in particularfor citrus crops, hot peppers, and tomatoes. Researchersshould also address questions of cultivationunder irrigation and covered structures andpostharvest management issues.The Caribbean Agricultural Research and DevelopmentInstitute continues to have a crucialrole in agricultural research in Belize, and by thesame token, the national research capacity shouldbe strengthened. Collaboration with the privatesector will be the key to successful research, asbudget constraints limit severely the scope of researchissues that the public sector can address,and consideration should be given to a competitivemechanism for allocating research funds ona project-by-project basis. Under such a mechanism,private enterprises, farmers’ associations,and the national research service all would applyfor funding on an equal footing. The private sector’ssuccess in research for papaya (varietal trials)and citrus (including development of new formulasfor animal feed based on citrus by-products)provides ample evidence of private entities’ abilityto utilize public research resources effectively.Extension services in Belize have been providedthrough projects, by agro-processors and exporters,and by the Ministry of Agriculture andFisheries. The commitment of the country’s extensionagents is impressive, but funding shortagesweaken their ability to get into the field asoften as farmers need them. In light of recentinternational trends, it would be worthwhile toexplore a model of more systematic extension offeredthrough multiple providers. In some countries,for example, farmers’ associations select andhire extension agents, and the cost is partially orfully reimbursed from the government budget.For export crops highly specialized technical assistanceis required, and under the Panamanianprogram ProCompetitividad, mentioned in Section7.5, a special fund defrays part of the costs tofarmers’ groups and entrepreneurs of hiring suchassistance. In these cases, the important principleis that the extension agents are chosen and contractedby the clients, rather than by a public sector agency.This approach provides institutional incentivesfor extension workers to respond to clients’ prioritiesand satisfy their concerns, rather than aimingto satisfy superiors in a governmental hierarchy.Where the public sector still provides extensionservices directly to farmers, as in the case of scatteredsmallholders who are not well organized,an important principle is to make the extensionas participatory as possible, so that extensionagents become facilitators rather than channelsfor delivering technical messages in a top-downform. In addition to farmer field schools, used toaid cocoa farmers in improving their productivity124

and fighting Monilia, another successful exampleof this approach has been the Comités Localesde Investigación Agrícola (CIAL) pioneered bythe International Center for Tropical Agriculture(CIAT) and now adopted in at least eightcountries in Latin America. Enhanced farmerparticipation can go hand in hand with the farmingsystems approach developed in the 1970s,working with groups of farmers. In addition, itis important that extension, research, and marketdevelopment be coordinated more closely. In theCIAL model, researchers join farmers on farmers’experimental plots, and the role of extensionagents is that of facilitating the search for newfindings and knowledge, including about marketsand input supplies.One area in which it is especially urgent tostrengthen Belize’s extension services is veterinarymedicine. Cattle and poultry diseases existthat need to be eradicated, and nationally the rateof vaccinations of animals still is quite low.7.7.2 Seeds and BreedsBelize still has a low rate of use of certified seeds,as do many developing countries. The country’sseed system needs strengthening, which involves anumber of elements: (1) contracting arrangementswith farmers for seed multiplication, includingproviding them with the necessary equipment(such as dryers) for proper seed management; (2)development of a private network for seed distribution;(3) a supervisory role for the governmentregarding the quality of multiplied seed and labelingrequirements for seed distribution; (4) a longtermeducational campaign for farmers regardingthe value of certified seeds; and (5) local demonstrationplots, operated jointly with farmers, totest new seeds against traditional varieties andexplore appropriate fertilization formulas.Development of a private seed distribution networkwill require that programs designed to distributeseeds free or at subsidized prices should bediscontinued. In addition to discouraging the developmentof viable private distribution networks,such programs are not sustainable, because theydepend on international or government funding.Improving cattle and sheep breeds and strengtheningveterinary care are among the highest pri-orities for the agriculture sector. Belize’s Ministryof Agriculture and Fisheries is giving priorityto breed improvement, starting with beef cattle.However, as mentioned in Section 7.3, to dateonly about a dozen breeding bulls have been imported,and the country needs closer to 200 bullsto meet the national demand. As noted previously,crosses have been shown to perform very well inBelize, and in combination with the tradition ofraising cattle on grass rather than in feedlots, betterbreeds can lay the foundation for a successfulexport industry in beef cattle.Equal priority should be given to developing crossbreedsof sheep, especially the Darfur-Blackbellycross. Again, the relevant experience has been accumulatedin Belize, and it is a question of disseminatingthat experience more widely.7.7.3 Export Development ServicesAgriculture increasingly is becoming a knowledge-intensivesector, and nowhere is this moreevident than in the export subsector. Belize’s experienceswith exports of citrus, beans, and papayaillustrate the importance of acquiring up-to-datetechnical knowledge and developing mechanismsto ensure that it is applied at the farm and postharvestlevels. Given the highly technical natureof managing many nontraditional crops, evenfarmers with export experience frequently employspecialized advisors to review their field operations.This is not the kind of service that is easyfor the public sector to supply, so the normal procedureis to make use of private advisors. For thispurpose it can be valuable to set up a fund that reviewsfarmers’ proposals and business plans (andthose of farmers’ groups and processors) and onthat basis provides matching funding for the hiringof specialist advisors in crop cultivation andpostharvest management, for exploring externalmarkets and bringing in marketing advisors orbuyers as needed, and for obtaining the certificationsnecessary to realize the great potential foradded market value (and in some cases even toenter the market). An investment in this kind offacility can be a key element in the promotion ofa more diversified array of agricultural exportsfrom Belize. The natural conditions for such diversificationexist, and what needs to be added, atleast in some cases, is human capital in the formof specialized knowledge.chapter 7Agricultural Sector: Assessment and Priorities for Public Investment and Policy125

chapter 7Agricultural Sector: Assessment and Priorities for Public Investment and Policy7.8 Strategic IssuesBelizean agriculture has significant strengths ina number of areas, and over the decades it hasbeen able to expand apace with the rest of Belize’seconomy in spite of facing disadvantages in thepolicy arena. This chapter has outlined a numberof issues that are central to the sector’s furtherdevelopment and to unleashing its considerablepotential in new areas.One of the general strategic issues in regard to developingthe sector is how to initiate value chainsfor new export products. Clearly, farmers shouldnot start planting a crop, or raising a livestock species,unless a market for the crop or livestock isassured. But do farmers start with an idea abouta product and then seek markets? Or does an exporter,processor, or investor identify a market andthen seek out farmers to produce for it? There canbe various starting points for value chains, and fourkey items facilitate the emergence of such chains:(1) a supportive policy environment for the sectorthat does not distort or suppress markets, (2) physicalinfrastructure adequate to underpin a competitivesystem, (3) availability of funding for obtainingspecialized technical expertise and knowledge ofand market linkage, and (4) availability of creditfor covering production and processing costs.In the case of Belize, one avenue for developinga value chain relating to a new export product, orstrengthening an existing one, could be to targetthe export to the tourist trade, while applying internationalquality standards to the export, thenexpand sales of the product to the near abroad—the tourist trade in Quintana Roo and Yucatán aswell as the Guatemalan market—and then finallyexport the product to the rest of the world. Themost appropriate path will depend on the product.A critical aspect of the development of a valuechain for any new export product would be carryingout varietal trials on Belizean farms, in coordinationwith private sector experts who know thedemands of international markets. For a productalready produced for the domestic market, productionissues may be simpler, but often qualityconcerns will have to be addressed before successfulentry can be made into export markets.Another strategic issue for the sector is determininghow wide a range of products Belize shouldaspire to produce for export. Should it concentrateon only one or two new products, or shouldthe aim be to develop several more export successstories?To the extent that private technical assistance isemployed for both quality control and improvingproductivity at the farm level, as well as for forginglinks to external markets, it is not unrealisticto expect development of several new Belizeanexport products, even with the country’s smallsize. Cobia and tilapia, for example, are alreadywell along that path, the former with the impetusof a single private investor. Section 7.3 mentionsa number of other possibilities for a strongermenu of export products. Peru has developed along list of nontraditional agricultural exports inthe last 20 years, headed by asparagus, and CostaRica’s agro-export bundle is quite diverse. In Africa,Kenya is another example of a country withseveral different horticulture export products, andUganda and Ethiopia are advancing in the samedirection. If the four conditions mentioned earlierin the section for emergence of value chains aresatisfied, then it is not unreasonable to expect thatBelize could develop at least four or five significantnew export products, if not more, from the croppingand livestock subsectors over the next five toseven years, starting with beef, small ruminants,and new processed forms of citrus, and perhapsincluding one or more crops like pitahaya, guava,or cashew. The prospects for success of this kindwill depend to a large extent on how well someof the policy issues reviewed in the next sectionare addressed and the extent to which key investmentsin infrastructure can be realized. EventuallyBelize’s territorial extent will limit the diversityof its agro-export bundle, as compared with largercountries, but at this stage it is important to supportvarious initiatives, given the impossibility ofpredicting with assurance which will turn out tobe viable over the longer run.7.9 Policy RecommendationsA variety of potential policy interventions in Belize’sagriculture sector could increase the competitivenessof Belizean agriculture and prepareit to respond rapidly and efficiently to new opportunitiesfor generating increased employment,income, and foreign exchange earnings. New126

sources of rapid growth in the sector are mainlyto be found in export-oriented production areas.As discussed in Chapter 1, the major constraint onproductive development in Belize, including in agriculture,is the scarcity of affordable credit for privateinvestment. A key public policy priority willtherefore be sustained fiscal discipline to addressthe underlying causes of the high cost of domesticfinance. This rules out significant fiscal stimulus,either directly or through tax concessions for theagricultural sector. Fortunately a range of policyreforms could improve the incentive frameworkfor agriculture at little or no fiscal cost.However, there are also a number of strategic interventionsthat could pay off fairly substantiallyin terms of agricultural growth but would requirefiscal support. Although fiscal constraints will circumscribethe extent to which fiscal support canbe provided to the sector, there are strong publicpolicy rationales, in terms of high benefit/costratios and public good/positive externalities, forlimited public expenditure interventions. Theseinterventions are included in the policy recommendationspresented in the following subsectionsand have been ranked on the basis of (1) themagnitude of the potential payoff from additionaldollars of investment and (2) the degree to whichthe underlying problem or issue that the interventionwould address is a limiting factor for thesector’s development.7.9.1 Improve the Functioning of theAgricultural Credit SystemThere is a consensus that improving the functioningof Belize’s agricultural credit system, toincrease the volume of credit available and makeit more affordable on a sustainable basis, is oneof the more urgent priorities for the agriculturesector. The government is already taking steps toaddress this concern. However, there are multiplekinds of credit needs in the sector, and credit linesonly for producers will not be sufficient to addressthe problem. Some additional priority needs inthe financial area are the following:1. Trade credit. This is an urgent requirementand could be addressed by, for example, offeringthrough the central bank a rediscountline 6 for this purpose. In the current worldfinancial circumstances, importers in industrializedcountries are less willing than beforeto offer short-term finance to exportersin developing countries, and so the lack of atrade credit facility can seriously impair Belize’sexport development.2. Legislation and regulations to establish thebasis for using stored commodities (throughwarehouse receipts or crop liens), processinginventories, and invoices as collateral. Havingthese options for collateral encourages inputsuppliers, product buyers, and processors toextend credit to producers, indeed, to activatefinancing throughout the value chain. Hencethis is a key element for financing agriculturaldevelopment. 73. Risk management instruments, such as disasterrisk insurance, whose potential is currentlybeing investigated. It should be noted,however, that it is unlikely that small-scaleproducers would be able to pay full marketpremiums for this kind of insurance, so someelement of subsidy probably would be required.In some cases, experiments are beingdeveloped with loan guarantee programs forbanks that lend in agriculture, though careneeds to be taken to avoid the moral hazardthat would be associated with high levels ofguarantee.Contract farming offers additional opportunitiesfor providing finance to farmers (as well as technicaladvice and inputs), but it has pitfalls and warrantsa discussion of its own. Successful contractfarming represents an alliance between farmersand the buyer that is long term and multidimensional.Contracts (oral or written) between sellerand buyer that consist only of an agreed spot pricefor purchase of a harvest are the most likely to fail,because the two sides are necessarily adversarialon that issue. If a rural trader comes in at harvesttime and offers a slightly higher price, small farmerssometimes break the contract, even thoughchapter 7Agricultural Sector: Assessment and Priorities for Public Investment and Policy67This refers to the establishment of lines of credit to banks at rates that in turn allow them to onlend to consumers (in this case, exporters)that will prove competitive in the financial marketplace.A classic work that summarizes the issues related to these kinds of collateral and other topics is Yaron, Benjamin, and Piprek(1997).127

chapter 7Agricultural Sector: Assessment and Priorities for Public Investment and Policy1. Expansion of the country’s irrigated area, alongwith formation of water user groups and associatedtraining. For the cropping subsectorin general, no single intervention improvesproductivity per hectare more than irrigation,properly managed. The fact that solittle of Belize’s agricultural land is irrigated,along with the requirements of export agriculture,argues for giving a high priority tothis activity, replicating the country’s recentexperiences with small-scale irrigation projhonoringit would mean a stable market for theirproduce in the longer run.The incidence of this kind of problem can be reducedif (1) the buyer provides effective technicalassistance, so that farmers see concrete benefitsfrom it; (2) seller and buyer negotiate a flexibleprice with a floor and a mechanism for increasingthe payment to farmers if the market pricerises; (3) the buyer offers other kinds of support tofarmers, such as support for local health care clinicsor providing sewing machines or other meansof earning income to women in the community. 8Some coffee cooperatives make two payments totheir growers: one at the time of collecting thecoffee berries, and another after the processedcoffee is sold on world markets; the amount ofthis second payment depends on the export pricereceived.The Ministry of Agriculture and Fisheries canhave a role in facilitating these kinds of alliances,as long as it does not try to dictate the terms. Itcan go as far as guaranteeing reimbursement tofarmers for the first year or two of a particularcontract, if the buyer does not uphold his or herend of the bargain, and providing partial compensationto the buyer if the farmers sell theirharvests elsewhere, with appropriate monitoringprovisions, as transitory incentives to both sidesto cement a new alliance.It should not be overlooked that grants and equityalso can play a role in financing agricultural valuechains, though in most developing countries,equity is a trivial source of new finance (Stiglitz1998, 3). Grants can be extended in a manageableway via the well-established model. Equityis rarer, but venture capital funds for innovativeagricultural projects have been discussed. Keys tothe success of a venture capital fund for Belizeanagriculture would be (1) having an external boardof experts to select the eligible projects, (2) limitingthe fund’s equity stake in the venture to a certainpercentage of total capital, and (3) having anexit strategy, for example, a rule that the fund willdispose of its shares at the end of five years, givingfirst purchase option to the new enterprise itselfand otherwise selling them at open auction.7.9.2 Eliminate or Greatly Simplify theLicensing System for Exportsand ImportsThe operations of Belize’s present system of licensingfor exports and imports present serious obstaclesfor agricultural exporters and other economicagents, including causing difficulties for exportersto obtain their imported inputs in a timely fashion.Eliminating these obstacles could go a longway toward unleashing the creative energies inthe sector, and in any case, it is required under theWTO accords to which Belize has subscribed.7.9.3 Redefine the Role of the BMDCand Reduce the Use of PriceControls on Food ProductsRedefining the BMDC’s role and reducing theuse of price controls on food products would supportsimplification of the country’s trade-licensingregime. Both the licenses and the actions of theBMDC impede the functioning of agriculturalmarkets, affecting the timeliness of food imports,creating price disincentives for farmers, and makingit more difficult for them to compete in exportmarkets. Most countries of the region have closedtheir counterparts to the BMDC. More appropriateroles for the organization might be to fund constructionand leasing of storage facilities, includingcold stores, and to educate and inform farmersabout quality standards and market opportunities.7.9.4 Make Strategic InvestmentsA number of strategic investments could havesubstantial payoffs:8The example of providing sewing machines is taken from the practice of the tea factory SORWATHE in Rwanda, which producessome of the most highly rated teas in the world.128

ects. Management of large-scale irrigationsystems presents a different set of challenges,and therefore it is recommended that thefocus remain on relatively small systems inwhich farmers can participate not only insystem operation and maintenance, but alsoin design of the systems. It will be importantto codify water use rights in legislation.2. Investments in genetic improvements of the country’slivestock herds, including both cattle andsmall ruminants. This is another type of investmentthat yields very substantial increases inproductivity, and the results have already beendemonstrated on a small scale in Belize. If thetrade-related issues can be resolved with Mexicoand Guatemala, exports of beef (carcasses tostart with) and sheep could become importantsources of farm income and foreign exchange.3. Investments in programs to bring in specializedtechnical expertise in production for export,postharvest handling, and making links to exportmarkets. This kind of assistance is critical forlaunching new value chains. One model forsupplying the expertise is to respond to farmers’requests through a model like that of ProCompetitividadin Panama, mentioned in Section7.5. But regardless of the model used, it is importantthat this expertise be made available,because export agriculture is an increasinglyspecialized field, and importers’ requirementsare increasingly strict. The expertise oftenwill bring with it knowledge of new varietiesand how to adapt and manage them and willemphasize intensive and continuous technicalassistance at the field level on all relevant topics,including product quality and sanitary andphytosanitary and food safety standards.4. In coordination with the private sector, investmentsin expansion of the country’s storagefacilities and cold chain, including at the internationalairport, as mentioned in Section7.5. These facilities should include simpleevaporative coolers at the farm level to takethe field heat out of products before theybegin their journey to the next stage in thevalue chain. Probably one regional cold store,privately operated, is needed in the northernpart of the country and one in the south, andtheir management should be in private hands,but a feasibility study should be carried outbefore making the decision to go ahead withthese investments. The program can also includedryers (solar or otherwise) at the farmlevel for some products such as hot peppers.5. Scaling up of the recent experiences with productionunder covered structures, for the domesticmarket as well as for exports. This is anotherarea of investment that has very high returnsin terms of increased productivity, in this casefor vegetables.6. Improvements in rural roads, especially in zonesof concentration for production of perishablecrops. The aims should be to make the roadspassable year round, to speed up transit timeseven in good weather, and to reduce significantlythe wear and tear on trucks and damageto cargo. In a broader context, economicstudies have consistently shown that investmentsin better rural roads generate high returnsin terms of the economic well-being ofrural populations.7.9.5 Redefine and Strengthen BAHAStrengthening BAHA is a high priority, becausereforms in this area will facilitate agricultural exportsof all types over the longer run. It is perhapsless urgent than irrigation and genetic improvementsof livestock, because considerable expansionof exports could take place with the presentBAHA system, provided that trade negotiationscan be concluded successfully and productivitycan be increased, but it is nonetheless important.The institutional structure, funding, and operatingprocedures for BAHA need to be redefined.The institution’s governance issues need to beaddressed head on, and its structure needs to bemade consistent with its role as a public sector institutionthat provides services that are substantiallypublic goods, while of course allowing it tocharge fees as appropriate for its certificationsand other services. These governance reformsshould be accompanied by additional investmentin BAHA, in both physical and human capital,including the relocation of the Central InvestigationLaboratory from Belize City to Belmopan,purchase of an X-ray machine, and installationof livestock holding facilities with dips. 9 It willchapter 7Agricultural Sector: Assessment and Priorities for Public Investment and Policy9Moving the Central Investigation Laboratory to Belmopan is also advisable on disaster risk management grounds (see Chapter 9).129

chapter 7Agricultural Sector: Assessment and Priorities for Public Investment and Policybe important to reduce the fees to users and thedegree of imposition on producers that BAHAinspections currently represent. In the contextof strengthening BAHA, priority should also begiven to implementing a system for monitoringand controlling brucellosis and tuberculosis inherds, with the aim of eradicating those diseasesin Belize. After that is achieved, it will be importantto control and eradicate Newcastle disease inpoultry as well. At the same time, priority shouldbe given to developing conditions for sanitaryapprovals of pitahaya for export. Food safety isas important as sanitary and phytosanitary standards,both for exports and the domestic market,including the local tourist market. In that area,laboratory capacity is needed for residuals analysis,along with training for farmers in managementof pesticides and in integrated pest management.International experience suggests that the sanitaryand phytosanitary concerns should be tackledfirst, without understating the importance offood safety. Sanitary and phytosanitary issues arefirst-order priorities in international trade, andthey go deeper at the farm level and can be moredifficult to resolve without the requisite technicalcapacity.7.9.6 Make Agricultural Research MoreParticipatory and CompetitiveBelize should institute a competitive mechanismfor allocation of agricultural research funding, for atleast part of the budget for such research. Privatesector entities have demonstrated their capacityto carry out agricultural research and sometimesare more attuned to the issues that represent prioritiesfor producers and processors. Competingfor research funding also tends to improve the researchproposals of public sector research entities,above all making them more relevant to farmers’most pressing needs.Schemes should also be developed to apply participatoryapproaches to agricultural research and extension,for example, farmer field schools for cacaoand livestock management. For research, the keyis to develop mechanisms to make the researchagenda more demand driven, or client oriented,rather than supply driven. 10 For extension, thekey is to provide extension agents with incentivesto respond to farmers’ concerns, that is, to satisfythe client, rather than to see the role as one ofdelivering technical messages developed at a centrallevel. Implementing participatory approachesinvariably requires a fundamental review and restructuringof the research and extension systemsand retraining of technical personnel.7.9.7 Formulate AlternativeInstitutional Structures forAgricultural CooperativesAlternative institutional structures should beformulated for Belize’s agricultural cooperativesbefore the present review of legislation governingcooperatives is concluded, with the aim ofincorporating more entrepreneurial options inthe amended legislation. The new options shouldbe reviewed with a sample of farmers’ groups tosolicit their inputs into the formulation process.Cooperatives and other forms of organization arevital for enabling small farmers to participate inmore-sophisticated markets, but the structure ofcooperatives must be compatible with entrepreneurialdecision making.7.9.8 Strengthen the StatisticalFramework for the SectorBelize’s current system for gathering statistical informationon its agriculture sector is outdated andshould be improved through the introduction ofscientific sampling methods. The current systemis based on opinions, and as informed as they maybe, they are no substitute for observations of whatfarmers actually do. As a consequence, it is notpossible to assess the potential range of error inestimates of crop production and areas planted,which would be possible under a more rigoroussystem.10A number of examples of this approach are presented in Chapter 8 of Norton (2004).130

ReferencesBeltraide (Belize Trade and Investment Service).2004. “Furniture Manufacturing.” Sectorprofile. Belmopan.García García, J. 1981. The Effects of ExchangeRates and Commercial Policy on AgriculturalIncentives in Colombia, 1953–1978. ResearchReport no. 24. Washington, D.C.: InternationalFood Policy Research Institute.Government of Belize. 2002. Living StandardsMeasurement Survey, 2002. Cited in NationalHuman Development Advisory Committeeand Ministry of National Development,Investment, and Culture, “National PovertyElimination Action Plan (NPEAP), 2007–2011,” prepared by Patricia B. Mendoza andYvonne S. Hyde. Ministry of National Development,Investment, and Culture, Belmopan.Available at http:// www.ncabz.org/Portals/0/docs/FINAL%20NPEAP%202007-2011.pdf.IDB (Inter-American Development Bank). 2008.“Belize: Exporting for Growth.” Trade SectorPolicy Note, preliminary version. Integrationand Trade Sector. Washington, D.C.IFAD (International Fund for Agricultural Development).2007. Belize Rural Poverty EvaluationMission Report. Rome. Unpublished.———. 2008. Report no. 2021-BZ. Latin Americaand the Caribbean Division, ProgrammeManagement Department, Rome.NES Belize Design Core Team and Beltraide.2006. National Export Strategy: Belize,2007–2010. Belmopan.Norton, R. D. 2004. Agricultural DevelopmentPolicy: Concept and Experiences. London: JohnWiley and Sons.Roseboom, J. 2009. “An Analysis of the ExistingApplied Research and Extension Capacity inBelize.” Technical Annex to Agricultural ServicesProgram (BL-L1009). Inter-AmericanDevelopment Bank, Washington, D.C.SCANAGRI Denmark Consortium. 2007. BelizeMarketing Study. European Commission,Brussels.Singh, R. H., G. Seepersad, and L. B. Rankine.2006. “Executive Summary: The GlobalMarket for Small Ruminant Meat—Sourcesof Supply and Competitiveness for the CAR-ICOM Industry.” CARICOM RegionalTransformation Programme for Agriculture,Georgetown, Guyana. Available at http://www.caricom.org/jsp/community/agribusiness_forum/small_ruminant_global_market_exec_summary.pdf.Stiglitz, J. 1998. “The Role of the Financial Systemin Development.” Paper presented at“Banks and Capital Markets: Sound FinancialSystems for the 21st Century,” the FourthAnnual World Bank Conference on Developmentin Latin America and the Caribbean,San Salvador, El Salvador, June 28–30.UNData. 2010. Country Profile: Belize—EconomicIndicators. Available at http://data.un.org/CountryProfile.aspx?crName=Belize.USDA-APHIS (U.S. Department of Agriculture–Animaland Plant Health InspectionService). 2007. Report to IDB on BelizeAgricultural Health Authority. Riverdale,Maryland.World Resources Institute. 2006. “Water Resourcesand Freshwater Ecosystems: CountryProfile—Belize.” Earth Trends: The EnvironmentalInformation Portal. Available athttp://earthtrends.wri.org/text/water-resources/country-profile-19.html.Yaron, J., M. P. Benjamin, Jr., and G. L. Piprek.1997. Rural Finance: Issues, Design and BestPractices. Environmentally and Socially SustainableDevelopment Studies and MonographsSeries no. 14. Washington, D.C.:World Bank.chapter 7Agricultural Sector: Assessment and Priorities for Public Investment and Policy131

The Challenges of Managingthe Oil Sector88.1 IntroductionAfter years of unsuccessful exploration activities,Belize discovered oil in 2005 and is now producingit commercially (Figure 8.1). So far, thecountry has only one producing oil field, whichproduces 4,400 barrels a day. The industry believesthat Belize could have 10 fields that couldproduce similar amounts of oil.Oil production has made important contributionsto Belize’s fiscal account and to growth in its grossdomestic product (GDP). Although productionwas relatively low in 2006 and 2007, it has grownand generated important fiscal revenue. Its contributionin the future could be significant.Figure 8.1. Oil ProductionTBD5.04.54.03.53.02.52.01.51.00.50.02006 2007 2008 2009(e)Sources: EIA (2008) and IMF (2008).Table 8.1 presents some sample indicators on the size of Belize’s oil sector, based on the most recentIMF staff reports. The expected size of the sector is estimated based on actual production data. Thetable includes values for the potential size of the sector—a “feasible” scenario—which implies two morefields in production. In addition it includes an “oil industry scenario” that reflects the belief within thesector that there could be up to 10 fields similar in production capacity to the one currently in operation.It is important to bear in mind that these statistics do not take into account the current price of oil; theyrepresent only the impact of production.It is evident from the figures in Table 8.1 that even when only the current production figures are considered,oil has become a substantial merchandise export and a substantial fiscal contributor as well. Infact, it has become the main merchandise export of Belize and the main fiscal contributor. 1 However, itcould still be argued that the oil sector in Belize is “manageable.” Figure 8.2 compares the statistics in thelast two lines in Table 8.1 with comparable ones for other countries, in the table’s “feasible scenario” oftwo more fields being brought into production. Under the scenario, the relative size of Belize’s oil sectorcould be similar to that in some net oil exporters, like Bolivia and Ecuador in Latin America, or Algeriaand Cameroon outside the region. Therefore, it may be useful to examine and perhaps learn from theexperience of those countries.1Tourism is Belize’s leading export.133

Table 8.1. Potential Size of Oil Sectorchapter 8The Challenges of Managing the Oil SectorIndicator 2006 20072008 at 2007pricesFeasiblescenarioOil industryscenarioOil production (thousands of 0.839 2.740 4.400 13.200 44.000barrels per day)Oil as percentage of GDP 2.87 3.83 6.08 17.20 47.75Oil exports (millions of $US) 41 57 91.54 274.63 915.42Oil as percentage of exports 9.60 13.73 18.74 40.89 69.75Oil revenue as percentage of 0.30 1.50 2.41 7.23 24.09GDPOil as percentage of fiscal1.23 5.81 8.11 20.93 46.88revenueOil production per capita 1.065 3.397 5.455 16.366 54.554Oil production per thousanddollars of GDP0.249 0.782 1.241 3.510 9.745Source: IMF (2008).The objective of this chapter is to address thechallenges facing Belize’s oil sector and the implicationsfor policymaking in Belize if the sectorshould expand. The next section reviews the prospectsfor the sector. The chapter’s third sectiondiscusses the macroeconomic issues that arise inFigure 8.2. Oil productiona. Per capitaQatarUnited Arab EmiratesKuwaitBruneiNorwayOmanSaudi ArabiaEquatorial GuineaLibyaGabonVenezuelaIraqBelize: Oil Industry ScenarioCongo (Brazzaville)Trinidad and TobagoAngolaBahrainCanadaIranDenmarkAlgeriaSyriaBelize: Feasible ScenarioEcuadorAustraliaMexicoMalaysiaUnited KingdomNigeriaArgentinaSurinameUnited StatesColombiaPapua New GuineaBelize 2008EgyptNew ZealandBrazilBelize 2007TunisiaSudanIndonesiaCameroonVietnamBoliviaBarbadosPeruChinaBelize 2006GuatemalaHungaryAustriaThailandAlbaniaNetherlandsItalyCote d’Ivoire (Ivory Coast)TurkeyBelize: Oil Industry ScenarioBelize: Feasible ScenarioBelize 2008Belize 2007Belize 20060 50 100 150 200 250 300 350 400Continued on next page134

Figure 8.2. Oil production (Continued)Equatorial GuineaQatarCongo (Brazzaville)OmanAngolaNigeriaKuwaitSaudi ArabiaUnited Arab EmiratesBruneiGabonLibyaIraqVenezuelaNorwaySyriaEcuadorBelize: Oil Industry ScenarioPapua New GuineaMexicoTrinidad and TobagoMalaysiaAlgeriaEgyptColombiaIranIndonesiaVietnamSudanBahrainChinaSurinameBelize: Feasible ScenarioBoliviaArgentinaTunisiaCameroonCanadaPeruBrazilDenmarkUnited KingdomAustraliaBelize 2008Congo (Kinshasa)GuatemalaAlbaniaThailandIndiaBelize 2007PakistanUnited StatesGhanaCote d’Ivoire (Ivory Coast)HungaryNew ZealandBarbadosBelize 2006Belize 2007Belize 2006Belize: Feasible ScenarioBelize: Oil Industry Scenariob. Per thousand U.S. dollars of GDP0 10 20 30 40 50 60chapter 8The Challenges of Managing the Oil SectorSources: EIA (2008) and IMF (2008).Non-LAC countries LAC Belizeoil-producing countries. The fourth section considerswider development issues associated withoil exploitation, and the last section offers someconclusions.8.2 Prospects for the Oil SectorBelize has had a long history of oil exploration,dating to the 1950s, but oil in commercially exploitablequantities was not found until 2005.Because only one field seems to have yieldedcommercially viable production so far, most forecastshave predicted peak production around2008 and a decline from then on. The discoveryof a new field in the last quarter of 2009 seemsto suggest that a decline after 2008 is no longerlikely to occur.What are the prospects for Belize’s oil sector?This section argues that much depends on thepolicy decisions of the country’s government.8.2.1 BackgroundPolicymaking in the oil sector has for a long timebeen dispersed among various government bodies,in particular, the Ministry of Natural Resourcesand the Environment for oil explorationand the Ministry of Finance for regulation of oilproducts. 2The main law that frames activities in the sector,the 1991 Petroleum Act, vested all propertyrelating to and control over petroleum and petroleumproducts in Belize’s government. Under2Part of this section is based on Arbelaez (2008).135

chapter 8The Challenges of Managing the Oil Sectorthe act, however, the government can contractuallycede these property rights to a private economicagent (such as an exploration/productioncompany).Control of the country’s petroleum resources hasbeen a contentious issue. Although Belize’s Constitutiondid not include a provision covering thecountry’s underground resources, because Belizebecame independent (in 1981) after the nationalizationof coal royalties in the United Kingdomin 1938 and nationalization of the coal industryitself under the National Coal board (later BritishCoal) in 1946, it was widely assumed thatunderground resources were owned by the stateand not by the owner of the land on which theresources were located. This is what the 1991 PetroleumAct reaffirmed, and because oil had notyet been discovered in Belize at that time, ownershiprights were not an issue. However, when thegovernment tried to pass a constitutional reformin the first half of 2008 to ensure that it wouldown and control petroleum and petroleum products,it encountered unexpected opposition fromlandowners, who assert that they are entitled tosome benefits and are opposing the inclusion ofstate control in the Constitution.matters related to the administration and developmentof the oil industry.After having drilled 52 exploratory wells in Belizesince 1956—most of them unproductive anda few showing some oil but not enough for commercialexploitation—a small Irish-Americancompany, Belize Natural Energy Limited (BNE),discovered oil in a field near Belmopan in 2005.The field is currently producing 4,400 barrels perday of very-good-quality oil (40 degrees API 3 andwith a low sulfur content, which makes it easy torefine). Currently proven reserves are estimated at7 million barrels. BNE has obtained a syndicatedloan (in the form of a US$30 million credit facility)from the financing firm Corporación Interamericanapara el Financiamiento de Infraestructura,S.A. (CIFI) for further development of the field.Soon after the oil discovery, the Belizean governmentpassed legislation increasing the income taxon petroleum profits to 40 percent, resulting in anestimated increase in the total government takefrom 30 to 60 percent. This produced dissatisfactionamong the oil investors in the country, whoperceive it as an ex post change in the rules ofthe game and argue that the high tax rate maydiscourage future investors.Beyond the issue of property rights, explorationfor and production of crude oil in Belize aremainly regulated by a 73-page Production SharingAgreement, which provides a model contract.It follows the framework established by the 1991Petroleum Act and its associated 1992 regulations.The Production Sharing Agreement specifies indetail all aspects of the contract, such as duration,minimum work and expenditure required, valuations,royalties, production sharing, taxes, exemptionsfrom customs duties, and arbitration andtermination conditions. The contract is administeredby the Petroleum Inspector, who is alsothe Director of the Department of Geology andPetroleum at the Ministry of Natural Resourcesand the Environment. The government has alsoestablished a board to advise the ministry in allIn 2008, when oil prices surpassed the US$100per barrel threshold, the government wanted toincrease oil taxes again. This time the process involveda negotiation between the government andthe oil firms, leading to an eventual agreement thatincluded price contingencies in oil taxes. Whenoil prices reach any of the thresholds specified inthe agreement, tax rates on oil will increase; whenthe prices fall below the thresholds, the taxes willfall as well. The agreement also incorporates differentialtax treatment for BNE and the firmsthat have not yet discovered oil. Taxes for BNEare also higher than those for other firms, basedon the assumption that it has benefited from lowgeological risk (in a country where the risk level isconsidered high, based on its oil production history)and a period of high oil prices. 434API stands for American Petroleum Institute, which designed a scale measuring the weight of petroleum liquids compared to water;it is thus used to measure the relative density of petroleum liquids. Though the measurement is in reality unitless, the units areconventionally referred to as degrees. Oil with an API rating between 40 and 45 degrees is the most sought after by refineries andcommands the highest prices.There was also the issue that BNE sold part of its production in future contracts. The price of those contracts was clearly below themarket price. The change in the tax code included provisions for this issue.136

Oil production depends on other factors in additionto the natural endowment of the sector(Manzano and Monaldi 2008). The expansion ofoil production in Belize seems to be driven by thecompetitiveness of the sector under the currentmarket conditions. Therefore, Belize needs to attractinvestment for oil exploration and production.In order to accomplish this, the governmentshould handle with great care the way it introducesmodifications to its taxation (and other) laws inthe wake of oil discoveries. Changes in the rulesof the game that affect the expected cash flow ofcompanies after a contract has been signed, basedon different expectations, are likely to have a negativeeffect on the investment climate. They willalso affect the prospects for smooth growth of explorationactivities in a country still perceived ashaving high geological risk.The companies currently conducting oil explorationefforts in Belize are relatively small, independentoil companies. The regular big players inthe oil industry may not be willing to expand intoBelize (the country’s area is too small); independents,who are more willing to go, may not havethe financial wherewithal to develop a field, onceoil is found, and thus need financial resources todevelop any fields they discover (and likely for explorationas well). This situation has worsened asthe global financial crisis has cut lending aroundthe world. As shown in Figure 8.3, this contractionof credit is especially affecting countries thatare not considered investment grade (includingBelize). Latin American bond spreads have increasedsubstantially in 2009, making credit basicallytoo expensive for most firms that wouldlikely be interested in exploring for oil in Belize.Similarly, credit has contracted for sectors consideredhigh risk and those in which current pricesare low (both of which apply in the case of oil).Therefore, the oil sector is facing a potentially importantcredit crunch, even if its prospects for themedium and long run are good.8.2.2 Policy OptionsCertain structural features of the oil industrygreatly influence the way the institutional frameworkand the political economy of the sectorevolve (Manzano and Monaldi 2008). First, oilextraction generates important rents, and governmentsnaturally attempt to appropriate a significantshare of those rents. Second, oil extractionrequires sunk investments of major proportions.Once assets are deployed, the government canchange the rules of the game, leaving the investorwith little option but to acquiesce. Third, oil explorationinvolves high geological risks, whereasin the field development and production phases,these risks significantly decline. As a result, con-chapter 8The Challenges of Managing the Oil SectorFigure 8.3. Emerging Markets Bond Index(basis points)2000180016001400120010008006004002000Jan-07Mar-07May-07Jul-07Sep-07Nov-07Jan-08Mar-08May-08Jul-08Sep-08Nov-08Jan-09Mar-09May-09Jul-09Sep-09Nov-09Jan-10Source: Bloomberg.EMBI Global Latin America BelizeCosta RicaDominican RepublicEl SalvadorGuatemalaPanama137

chapter 8The Challenges of Managing the Oil Sectortractual frameworks designed to promote investmentin exploration have often been ill suited forthe later phases if significant oil reserves havebeen developed. Finally, the price of oil in theinternational markets has been volatile, especiallysince the 1970s, and as a result oil rents have alsobeen quite volatile, making it challenging for fiscalsystems to capture the oil rents under differentprice scenarios. The way oil-dependent countriesmanage the ensuing fiscal volatility can also affectthe contractual framework.As argued in Manzano and Monaldi (2008) forVenezuela and in Hogan and Sturzenegger (2010)in general, the above characteristics of the oil sector,combined with the lack of effective progressivetax systems and a weak institutional framework,have generated episodes of contract renegotiation,especially whenever oil rents increase significantly.These renegotiations affect investmentdecisions and production. Consequently, the mainchallenge is to create an appropriate institutionalframework that attracts foreign investors but atthe same time generates a fair share of revenuesto the government.Johnston (2008) argues that the type of contractualrelationship between oil companies and governmentsmatters less than other elements of thecontract and of contract performance. In particular,he argues that there are other issues that alsomatter, such as government participation, incentivesto keep costs down, the responsiveness ofany deals made to changing economic conditions,provisions to minimize risks, and provisions to allowcompanies to “book barrels.” 5 Based on hisanalysis, the author argues that in cases in whichgovernments are in a weak bargaining position—which could characterize Belize, given that it isa “frontier area”—negotiated deals are better, interms of the conditions given to the host country,than competitive bidding.This opens the door for a discussion of two importantissues. The first is taxation, which has tobe flexible in regard to various contingencies thataffect oil exploitation: oil prices, geological risk,type of field, etc. However, when governmentslack a strong collection agency, they may find thatroyalties may be easier to pursue and manage thanincome taxes. For that reason, Rigobón (2010) arguesthat royalties contingent on prices are a good“second-best” option for generating governmentrevenues from oil production.The second issue, no less important, is the politicaleconomy concerns around negotiated deals. Innegotiated deals, governments have to keep bothoil companies and the public happy. Therefore,transparency is crucial. Radon (2008) argues thatthere are many factors that have to be negotiated,and sometimes the factors that matter most tothe people are impacts on the environment, socialconditions, the economy, and politics. The fundamentalissue is determining what constitutesa “fair outcome,” and this requires a substantialamount of information, such as oil quality, fieldcharacteristics, required investment, and expectedcosts. Ideally, governments that have state-ownedcompanies have the necessary information. However,running an efficient state-owned companythat will generate the required information isfeasible only for large oil producers that can alsoforce the state-owned company to compete withother independent companies. Other countriesmight want to get information from these largerproducers to improve their negotiating positions.Clearly, the two renegotiations of the oil tax regimethat have already occurred in Belize mighthave reduced either the disposition of oil firms toinvest in Belize or of private capital to finance oilprojects in Belize. It is important to keep in mind,however, that as noted above, the last renegotiation(in 2008) was part of a dialogue between thegovernment and the oil companies; furthermore,it took place in a global context in which suchrenegotiations were taking place in most producingcountries. Therefore, the last renegotiationmight have had less impact. In this regard, littleinvestment took place in the beginning of 2009,when oil prices fell. However, investment seemsto have recovered with the oil prices and, as alreadymentioned, even a new discovery has beenannounced.Looking forward, the important issue for policymakersin Belize is to avoid further renegotiation5“Booking barrels” refers to including them in the balance sheets of oil-producing companies.138

of the oil tax regime. As this chapter was written,the oil market had experienced record high prices,which later fell almost 70 percent. In this context,oil firms are being careful in regard to wherethey invest. Additional legal uncertainty will onlymake them more reluctant to invest in Belize.Beyond this issue, if more oil is found in Belize, anext step would be to design institutions to dealspecifically with the country’s oil sector. In thisregard, it would be important to consider the recommendationsmade above regarding transparency,taking into account the factors that mattermost to the people, along with other issues.8.3 Macroeconomic Managementof Oil RevenuesIf more oil were to be found, the main challengefor Belize would be to manage the sector’s variousimpacts. One of the main areas of policymakingthat is affected by the oil sector is macroeconomicmanagement. The economy of Belize is based onnatural resources. In this context, petroleum hasbecome an important source of growth for thecountry.In terms of macroeconomic policy, Belize has apegged exchange rate that has contributed to lowlevels of inflation in recent years (except 2008, withthe rise in the price of commodities). Belize hasalso achieved important results in the fiscal sector.of the principal repayment (via a 12-year grace period)and a reduction in the interest rate.According to the IDB (2007), it is especially importantthat the country’s external debt stock bereduced prior to 2012, when the interest rate onthe superbond issued after the debt restructuringof 2004 will increase to 8.5 percent, making thedebt increasingly costly to service (see Chapter2). Furthermore, after 2019, principal repaymentson the superbond are scheduled to begin. Forthis reason, the government’s medium-term economicprogram consists of continuing the adjustmentprocess to stabilize the fiscal and externaldebt situation and to place public sector financeson a sustainable path. The oil sector could playan important role in helping or destabilizing themacroeconomic environment.8.3.1 BackgroundLooking at the poor performance of Latin Americanand Caribbean countries, Manzano (2002)argues that volatility of the terms of trade in theregion is one of the main causes of the high volatilityof output growth. Oil is one of the commoditieswith the highest price volatility (see Figure8.4), raising concerns about the impact of oil onthe Belizean economy.As argued by Manzano (2002), based on work byothers, the first impact of terms of trade shocksis capital flows volatility. In countries like Belize,chapter 8The Challenges of Managing the Oil SectorThe country’s public debt stock rose rapidly between1998 and 2006, reaching approximatelyUS$1 billion—around 102 percent of GDP—in2003. Faced with limited access to financial markets,the government undertook a significant fiscaladjustment, derived from both the revenue andexpenditure sides. The primary balance shiftedfrom a deficit of 6.9 percent of GDP in 2003 tonear balance in 2005 and a surplus of 4.1 percentin 2007. The overall fiscal deficit declined from−10.8 percent of GDP in 2003 to −1.1 percent in2007. Nevertheless, in spite of the impressive fiscaladjustment, an upcoming bunching of debt servicepayments in 2007 forced the government toreschedule the country’s debt service in late 2006.Belize undertook the exchange of its commercialdebt, which reduced debt in net present value termsby approximately 20 percent through an extensionFigure 8.4. Commodity Price VolatilityCoffeeNatural GasCopperSugarU.K. BRENTWTISoybeansSilverCoalWheatRiceGold0.1380.1240.1730.1630.1870.1850.2370.2200.2430.2770.3490.338Standard DeviationSource: Authors’ calculations based on data from the InternationalMonetary Fund’s International Financial Statistics.Note: Based on annual prices during 1987–2007.Trinidad & TobagoCosta RicaHondurasNicaraguaPanamaBelizeBermudaDominicaBarbados0.05139

chapter 8The Challenges of Managing the Oil Sectorwhich are non-investment-grade, capital flows areprocyclical. Therefore, when export prices are high,capital flows into the country, and when these pricesare down, there is a reduction in inflows or evenan outflow of financial resources. Consequently, oilprices could have a double impact on external volatility:through exports and through capital flows.In this regard, Belizean exports are relatively diversified.Nevertheless, they are highly dependenton commodities. Eighty percent of the exportsare commodities, 6 and 93.5 percent are primaryproducts. 7 Furthermore, the share of oil is increasing.All the same, the fact that a country faces higherexternal volatility need not necessarily translateinto high domestic volatility. Therefore, Manzano(2002) discusses some of the channels that transmitthis volatility.One channel through which the effect of externalvulnerability passed on is fiscal policy. Followinga procyclical fiscal policy has both a transmissioneffect and an amplifying effect on a country’s externalvulnerability. Furthermore, those countrieswith a public expenditure highly and positivelycorrelated with their terms of trade tend to havecapital flows that are also highly and positivelycorrelated with their terms of trade.Countries that have more difficulty accessing internationalmarkets tend to behave procyclically. Thiscould be a concern in the case of Belize, which haspractically no access to external financing, exceptfrom multilateral sources. The recent increases ingovernment expenditure could signal procyclicalbehavior, although it is too early to tell.A second channel through which the effect ofexternal vulnerability is passed on is the financialsector. There is evidence that in some countriesthe financial sector might induce a volatile economy,even when the fiscal authorities are behavingprudently. 8 In these cases, commodity pricebooms induce an expansion of credit to the privatesector. However, the opposite happens whencommodity prices fall. 9 Manzano (2002) providesan explanation of the channels for these creditbooms and crunches.Furthermore, monetary policy might not be relevant.As argued in Caballero and Krishnamurthy(2001), in countries where the financial sector isunderdeveloped but integrated with world capitalmarkets, foreign assets become the “hard collateral”of the economy. Therefore, when there is acommodity price boom, there is an expansion ofcredit, and the opposite happens when prices fall.In this situation, if the monetary authority tries tocurb the credit expansion through higher interestrates, this might trigger higher capital inflows andfuel the credit boom.In the case of Belize, the financial sector mightnot yet be a source of concern. Because of the collapseof the Development Finance Corporation 10and the restructuring of the country’s foreigndebt, Belize’s financial sector is still small andrelatively isolated from external financial markets.However, it will be important to take this variableinto consideration in the future, because the experienceof other countries shows that the expansionof the financial sector “on the wings” of theoil sector could have negative effects.For countries that export primary products, themanaging of macroeconomic stability should bea key policy priority. Recent literature has arguedthat macroeconomic instability could affect acountry’s pattern of specialization (see Hausmannand Rigobón 2003), an argument that has been678910These include sugar, orange concentrate, bananas, and petroleum.These include marine products, sugar, orange concentrate, grapefruit concentrate, bananas, papayas, and petroleum.See Barandiarán and Hernández (1999) for the case of Chile and Esanov and Kuralbayeva (2009) for the case of Kazakhstan.Braun and Hausmann (2002) find that terms of trade shocks increase the probability of a credit boom or crunch. Similarly, for thecase of Venezuela, Figueira and Padua (2004) find that provinces that saw an increase in oil activity also witnessed a credit boom, andthe opposite occurred when oil production fell.From 1998 to 2002, one of the policies used by the Belizean government to bolster the economy was to fund credit and investmentprojects through the Development Finance Corporation (DFC). This caused an expansion of the DFC’s loan portfolio, which wasfinanced with public debt, which the DFC was in no position to repay. To solve this problem, the government decided to assumeresponsibility for the repayment of some of those obligations, generating serious problems for the country’s public finances, becausethe obligations represented an important proportion of the fiscal deficit. Eventually, the government had to shut down the DFC toensure that it did not cause any more quasi-fiscal deficits.140

acked up by empirical evidence (see Ledermanand Xu 2002 and Manzano 2002, 2007). Therefore,managing the volatility of oil prices not onlyis important for macroeconomic stability, butcould also have long-lasting effects on development.8.3.2 Policy OptionsFiscal management of oil resources is key for Belizeto continue working to achieve fiscal sustainabilityand stability. The traditional view is that countrieswhere an important part of fiscal revenue dependson a commodity should employ some form of revenuestabilization fund (Hausmann, Powell, andRigobón 1993; Engel and Valdés 2000). Nevertheless,some have raised concerns about the feasibilityof this solution to the problem of revenuevolatility for two reasons. First, the optimal stabilizationfund might imply rules that are difficultto implement administratively. Second, thereis evidence that as resources accumulate in such afund, there are political incentives to “raid” it (Clemente,Faris, and Puente 2002).For this reason, there is a new view on how tohandle revenue volatility. Hausmann (2001) offersthree suggestions on how to avoid volatility:be solvent, be liquid, and be credible. To achievethe objectives of being solvent (having the abilityto borrow in bad times) and being liquid (beingprepared in case of not having access to debt rollovers),“contingent policies,” such as stabilizationfunds, have traditionally been the main suggestion.Hausmann argues that this solution raisesthree problems: (1) money is fungible; (2) stabilizationfunds constrain liquidity managementmore than the deficit; and (3) as money in thefund grows, so does the incentive to spend it.Therefore, according to Hausmann (2001), a stabilizationfund is not as important, as a remedyfor revenue volatility, as a country’s budget rulesand institutions (numerical and procedural rules,and rules that affect budget transparency), whichplay a key role. Hausmann’s recommendation isthat the rules and procedures be biased in an antideficitway, taking into account the importanceof political will.nues arising from a temporary windfall of foreignaid or natural resources. Such a windfall has manydifferent potential uses: investing in public infrastructure;reducing government debt and therebylowering interest rates and boosting private sectorinvestment; providing more education, healthcare, and other public goods to improve qualityof life or transferring resources directly to citizensthrough tax cuts; or transforming exhaustible resourceassets into interest-earning foreign assetsby setting up a sovereign wealth fund for futuregenerations.Van der Ploeg and Venables (2008) analyze howto address the policy choices associated with thesedifferent potential uses for the windfall in relativelypoor countries with less-than-perfect access tocapital markets. The authors focus on three governmentoptions for maximizing welfare: usingthe windfall for private (or public) consumption,spending on public assets that raise income and themarginal productivity of private investment, andaltering the country’s foreign asset/debt position.The results are as follows. When only the governmentcan borrow, at the world interest rate:●●●●If the windfall is small:The government immediately raises transfersto its citizens and boosts private andpublic consumption. Nevertheless, the increasein transfers is less than the increasein revenues.The government pays off debt relativelyrapidly, because the jump in consumptionis less than the flow of revenue.The windfall raises consumption, but doesnot raise the long-run level of consumptionto which the economy asymptotically converges.There is no sovereign wealth fund.If the windfall is larger:It is associated with a larger initial jump inconsumption.It is optimal to repay all debt before the resourceis depleted.A higher initial debt and a smaller and lessprotectedwindfall reduces the size of theterminal sovereign wealth fund.chapter 8The Challenges of Managing the Oil SectorFurthermore, in a recent work, Van der Ploeg andVenables (2008) examine alternative uses of reve-When only the government can borrow, with aninterest premium on foreign borrowing:141

chapter 8The Challenges of Managing the Oil Sector●●●●More resources are devoted to reducing thedomestic interest rate.A sovereign wealth fund is accumulated onlyif the resource windfall is temporary and largeenough to move the economy out of the regimein which it faces a premium on its foreigndebt.When there is private and public investment anda class of domestic capitalists with access to creditmarkets: 11●●●●●●●●Public and private consumption increasesahead of resource revenue flow, but to a lesserextent than would be the case under the permanent-incomehypothesis; 12 nevertheless,this increase leads to an increase in domesticinterest rates and consequent reduction in thegrowth of the capital stock and income.During the period of revenue flow, there israpid debt reduction, private investment, andinvestment in public infrastructure, whichcause wages to rise and make the optimalconsumption trajectory consistent with muchlower transfers (or higher taxes) for workers.This investment accelerates the asymptoticgrowth trajectory followed by the economyonce resource revenues have terminatedand—only if the windfall is large relative tothe economy’s state of development—mayalso be associated with a sovereign wealthfund and permanently higher consumptionlevel.The government finds it more attractive to investin public infrastructure rather than a sovereignwealth fund because the former is moredifficult for future political rivals to raid thanforeign assets held in such a fund.Van der Ploeg and Venables (2008) concludethat governments of developing countries facetrade-offs among using the windfall for debt reduction,boosting private or public consumption,and investing in public infrastructure. The size ofthe windfall is important in regard to the accumulationof a sovereign wealth fund. When thewindfall is small, the government uses it to reduceforeign debt and interest rates, so that little remainsto build up such a fund, and the long-runlevel of private and public consumption remainsthe same. By contrast, when the windfall is large,it is possible to accumulate a sovereign wealthfund, so the long-run level of private and publicconsumption is higher than it would have been inthe absence of the windfall.On August 31, 2007, Belize’s Parliament approveda bill establishing a Petroleum Revenue ManagementFund. According to the law, governmentrevenues from oil would be invested in the fund,and the budget would receive an amount that iscalculated as “permanent sustainable income.”Under the law, the Prime Minister will decidewhen to implement the fund, and this has not yetbeen done.The fund has a number of positive aspects, butit also raises some concerns. First, such a fundwill be relatively complex to manage, which canimpose a burden in a small country with a smallbureaucracy. This is particularly relevant for acountry such as Belize where the windfall fromoil revenues is still small. Second, there are concernsthat the fund will restrict the governmentin regard to how it can use oil revenues, given thefact that the government just underwent an importantdebt restructuring and has an importanttarget of fiscal surpluses. In light of the findings inthe recent literature, postponing the implementationof the fund may turn out to have been agood decision. Nevertheless, it is important thatBelize dedicate resources to repaying its externaldebt. Furthermore, the signal that the fund canbe implemented if the oil sector becomes largeris also important to show the country’s commitmentto macroeconomic stability.Further down the road, one of the main challengesfor Belize, even beyond the issue of revenuevolatility arising from its oil resources, will be thestrengthening and development of the country’sfinancial sector.1112For simplicity, the authors suppose that the “capitalists” receive no labor income; workers remain credit constrained; and the governmentinvests in public infrastructure, has at its disposal various tax/transfer instruments, and has access to international capitalmarkets.In its simplest form, the permanent-income hypothesis, developed by Milton Friedman (1957), states that consumption patterns aredetermined not by current income, but by longer-term income expectations.142

8.4 Local Impacts of Oil Activity8.4.1 EnvironmentHydrocarbon exploration and extraction lead tonegative environmental effects that range fromthe change in the use of soil to diseases of therespiratory system in humans. A number of oilindustry processes have direct impacts on the environment,such as effluent discharges, gaseousemissions, and the generation of solid waste.Water is the largest-volume liquid waste generatedduring the production of oil and gas, andthe volume typically increases as oil and gas fieldsage. This wastewater has a larger impact on theenvironment in the case of onshore productionand may impact potable aquifers. The IFC (2007)therefore advises that “produced water dischargesto surface waters or to land should be the last optionconsidered and only if there is no other optionavailable” for disposing of the wastewater.group includes drilled cuttings (which depend onthe location), 13 produced sand, and naturally occurringradioactive materials. The second groupconsists of general office and packaging wastes,waste oils, paraffins, waxes, oil-contaminated rags,hydraulic fluids, used batteries, empty paint cans,waste chemicals and used chemical containers,used filters, fluorescent tubes, scrap metals, andmedical waste, among other things. Both kindsof solid wastes should be separated according towhether they are nonhazardous or hazardous previousto their treatment and disposal (IFC 2007).Among the other effects of hydrocarbon explorationand exploitation are noise and the potentialfor spills of oil or refined petroleum products. Thesound and vibration propagation arising from seismicoperations may affect human populations orwildlife. Spills have a significant and visible impacton the environment; the degree of environmentalimpact is highly dependent on the nature of therelease, where it occurs, and how it is managed.chapter 8The Challenges of Managing the Oil SectorGaseous emissions from oil and gas productionprocesses, such as carbon dioxide (the largest gaseousrelease), methane, and nitrogen oxides, contributeto the greenhouse effect and to diseasesof the respiratory system in humans. In regard tothese emissions, IFC (2007) suggests that(1) All reasonable attempts should be madeto maximize energy efficiency and design facilitiesto minimize energy use. The overallobjective should be to reduce air emissionsand evaluate cost-effective options for reducingemissions that are technically feasible.(2) If flaring [burning of the emitted gases] isnecessary, continuous improvement of flaringthrough implementation of best practices andnew technologies should be demonstrated.Solid wastes generated in oil production can bedivided into two main groups: those specific toonshore oil and gas development activities, andthe typical nonhazardous and hazardous wastesroutinely generated at onshore facilities. The firstIn addition to its other effects, hydrocarbon extractiondramatically changes soil use in the areawhere it occurs. The soil in the affected area becomescontaminated by water discharges, drainage,accidents, and spills, so that it can never againbe used for certain activities, such as agriculture.Erosion caused by water discharges and changes inland slope resulting from extractive activities alsodramatically changes soil use in the affected area.The institutions required to manage hydrocarbonexploitation and its effects on the environment varyamong oil-producing countries. In some countries,one institution takes care of both regulation of theindustry and promotion and application of theenvironmental laws concerning the industry. Forexample, Canada has its National Energy Board, 14and Kuwait has its Ministry of Oil. 15Most countries, however, separate the responsibilitiesbetween a petroleum institution and anenvironmental institution. For example, Russiahas the Committee on Geology (for hydrocarbon131415These are small pieces of rock that break away while petroleum wells are being drilled.Canada’s National Energy Board regulates international and interprovincial aspects of the country’s oil, gas, and electricity industries.It also promotes safety and security, environmental protection, and efficient energy infrastructure and markets within the mandate setby the Canadian Parliament.Kuwait’s Ministry of Oil participates in the works and programs of the Environmental Public Authority, reviewing the operation andprojects of the oil sector to ascertain that they are fulfilling environmental requirements.143

chapter 8The Challenges of Managing the Oil Sectormatters) and the Ministry of Natural Resources(for environmental concerns). Norway has theNorwegian Petroleum Directorate to handlematters related to hydrocarbons, and on the environmentalfront three institutions are involved:the Norwegian Petroleum Safety Authority, theNorwegian Pollution Control Authority, and theNorwegian Social and Health Directorate. 16 TheUnited Kingdom recently created a Departmentof Energy and Climate Change for resource managementissues, and environmental concerns areaddressed by its Energy Efficiency Office, locatedin the Department of the Environment. Finally,Saudi Arabia has both a Ministry of Petroleumand Mineral Resources and an EnvironmentalProtection Department, which ensure that thestate-owned national oil company (Aramco) operatesin an environmentally responsible manner.8.4.2 Local DevelopmentHydrocarbon exploitation can have different effectsin different localities. Generally, the oil sectorhas been seen as an enclave. However, recentevidence points to different conclusions in thecase of onshore exploitation. In this context, likeany other economic activity, oil demands laborand services from the local economy.Therefore, recent work has found that increases inoil production expand labor market participationin the municipalities where oil is produced, 17 generallydue to an increase in wages. 18 These higherwages have an impact on other tradables sectors,which see their competitiveness reduced as a result.Therefore, this is another channel throughwhich Dutch disease operates. 19Data limitations preclude testing whether theseeffects are present in Belize. Nevertheless, anecdotalevidence seems to suggest that they alreadyare, at least in some form. Local agricultural pro-ducers have complained that they have to paytemporary workers twice as much as they usedto pay before oil was produced. Therefore, if thepetroleum sector continues to grow, the increasedwages it generates in the localities where oil isproduced could be an issue.Furthermore, if oil is affecting the relative priceof labor in the localities where it is produced, itshould be expected that it is also affecting otherdecisions by households, like education. Here theevidence is mixed. From a cross-country pointof view, resource exploitation could actually increasehuman capital, through better health andeducation. 20 Most probably this is due to greaterresources for the state, which can then providehigher levels of these services.Nevertheless, there is evidence that the productionof resources has a negative impact on schoolingat the local level. 21 This is directly associatedwith higher wages, which reduce the incentive toget more education.Given that they affect both firms and households,it is important to take these impacts into considerationat the time oil is developed in a particularlocality. Evidently, some of these effects canbe mitigated if the central government has soundmacroeconomic management and an appropriatetax schedule. Nevertheless, because most of theseimpacts are due to decisions by oil-producing firms,these government interventions are not enough.There is little or no evidence, at the global level,of successful management of these impacts. Inany case, any successful intervention has to takeinto consideration three factors:●●Generation of the appropriate incentives forboth firms and households to continue theirproductive behavior (either producing goods161718192021The Norwegian Pollution Control Authority and the Norwegian Social and Health Directorate are responsible for legislation onhealth, environment, and safety.See Manzano (forthcoming) for the Venezuelan case.See Herbertson, Skuladottir, and Zoega (1999) for the case of Iceland and Fuenmayor and Rivero (2002) for Venezuela.See Fuenmayor and Rivero (2002) for Venezuela and Stijns (2001) for a cross-country study. It is important to mention that Dutchdisease does not have a negative impact on welfare, unless one assumes some type of dynamic process of “knowledge.” In this case,there will be social losses, because firms are losing “knowledge capital” if they stop producing a particular good for a period of time.See Krugman (1987) and Sachs and Warner (1995, 1997).See Stijns (2001) for a panel study of the world.See Black, McKinnish, and Sanders (2005) for the case of coal in West Virginia and Badiola and Esquivar (2007) for the case of oilin Venezuela.144

●●●●A consequence of such legislation is the questionof jurisdiction over oil activities. In Canada, this issuehas not yet been included in the legislation beordeveloping human capital, depending onthe case) as oil production begins or increases.Ensuring that measures taken are statecontingent,so that if the circumstances thatprompted the interventions disappear, the interventionsend.In the context of a country, such as Belize,where the public finances are weakened, ensuringthat interventions are revenue-neutral.Finally, the relationship between the oil sector andlocal communities is also a matter of concern. Inthe case of Belize, this is an important issue, particularlybecause it is interwoven with the issue ofresource ownership. There are three important factors:the political economy of the sector, the relationshipbetween the central government and thelocal authorities, and the behavior of the oil firms.Karl (2008) argues for a transparent fiscal socialcontract: an implicit agreement and explicitregulation that create incentives for all agents—international firms, central government, localgovernments, and communities—to change rentseekingbehavior. The type of dialogue that takesplace between the various actors changes whenthe incentives for rent seeking are removed. AsKarl argues, the removal of the rent-seeking incentivesis not an easy task, because the presenceof democracy alone does not ensure it. Karl providesa series of recommendations to include inthe proposed social contract:●●●●●●●●Government monitoring of the oil sector, anddisclosure of that monitoring should, be transparent.Oil companies should publicly disclose allpayments to the government and to communities.They should also pledge to respectinternationally recognized environmental andhealth standards.International financial institutions shouldcondition any assistance on transparency.Nongovernmental organizations should help disseminateinformation on oil revenue, profits, taxpayments, etc They should also form “umbrella”coalitions, to avoid dispersion of interest aroundthe oil sector and better coordinate the dialog.In the case of Belize, the issue of transparency inregard to oil sector matters has been raised on severaloccasions, and the government has committeditself to having greater transparency in this area.BNE has received funding through the MultilateralInvestment Fund and therefore adheres to internationalstandards on environment and health.Therefore, the main challenge is to increase theflow of information between different actors.8.4.3 Land RightsThe issue of land rights for indigenous communitiesin Belize is still being discussed. On October18, 2007, Belize’s Supreme Court ruled thatindigenous villages and their members hold collectiveand individual rights over the lands andresources they have used and occupied accordingto customary practices and that these rights constitute“property” under the Constitution of Belize.A legal framework must now be developedto implement this ruling.Belize is practically on the frontier in these areas.The issue of indigenous rights is beginningto draw attention, and consequently legislation,even in developed countries. Canada, for example,is exploring the issue. 22 In Canada, legislationon land rights for indigenous peoples refersto “individual land rights on reserves.” One ofthe major challenges for Canadian policymakersis ensuring that the underlying jurisdiction overland titling provided by the British Crown, whichis the umbrella framework for the Canadian legalsystem, would remain. Conceptualizing this compromisebetween the current legal system and theFirst Nations system and designing legislationthat would allow for the creation of a First Nationsland title system comparable to the existingmunicipal, provincial, and federal land systemsis challenging. In Belize, it could be argued thatthe same challenges will arise, with the chief issuebeing the viable coexistence of indigenous landrights with the national land system.chapter 8The Challenges of Managing the Oil Sector22For the Canadian experience, see Indian Taxation Advisory Board (2007). In particular, from that compilation, it is relevant to mentionthe work of Cragg (2007) and Fiscal Realities Economists (2007) for the description of best practices for land titling to indigenouscommunities and the fiscal and economic impacts of such titling on those communities.145

chapter 8The Challenges of Managing the Oil Sectoring discussed. However, the issue of increasing thegeneration of revenues is being explored throughadditional sharing of fiscal powers. Currently, indigenouscommunities are entitled to generaterevenue by raising property taxes on their reserves,and some can also raise the tax on fuel, alcohol,and tobacco. However, discussions are underwayabout the extending these revenue-sharing activitiesto include the goods and services tax.The case in Australia is similar (see Leshy 1985).There, some indigenous land rights have a statutoryorigin (Northern Territory, South Australia),whereas others are derived from recognition inthe common law (although the latter have beenmodified somewhat by federal legislation). Ingeneral, however, the position in Australia is thatindigenous land rights do not confer ownershipof oil and gas resources. That ownership is vested—usuallyby statute—in the state or territoryin which the land is located, not in the Commonwealth.Indigenous land rights do confer a measureof control over access to the land to whichthey apply, and that control allows the holders ofthe land rights to negotiate with oil and gas explorersand producers. But that control over accessis not absolute; it is qualified by federal orstate legislation.Thus, how Belize manages any compromise betweenindigenous people and the Constitutionon the forms of land and property rights is animportant issue. Another important issue, in thecase of oil, is whether land rights translate intoownership of oil and gas reserves. For Belize, thisissue has not been fully resolved even for nonindigenousland. Therefore, it is important to developa clear legal framework on the ownershipof oil resources generally, and then on what thatownership implies in regard to indigenous lands.In addition, clear rules on the powers to generaterevenues for the indigenous communities on theirland will be needed.8.5 Final RemarksBelize is a relative newcomer to the oil business.Therefore, it might seem that the fundamentalchallenge is to set up the sector and deal withit institutionally. This might prove not to be achallenge, however, should oil production beginto decline. Consequently, the first challenge forBelize in regard to its oil business is to define thehorizon of that business in the country.The country might not have full control of thevariables that affect that horizon, however. Someof them are institutional. For example, the changesin the taxation rules for the oil sector have negativelyaffected its attractiveness for investors. Insmall-frontier oil-producing countries such as Belize,the appropriate solution to this issue seemsto be direct negotiation between the governmentand oil firms. The last compromise between thegovernment and oil firms in regard to taxationof oil revenues seems to have eased some of theconcerns of the private sector. The introduction ofcontingent rules in the tax code also seems to havereduced the risks of further changes to that code.A further issue, beyond the rules for the sector, isthe nature of oil activity in Belize. Because Belizeis a frontier province, it faces two particularchallenges. The first is that the costs associatedwith exploration and production are higher thancomparable costs for countries with developed oilindustries or better geology. The second is that oilproducers in Belize tend to be small, independentoil companies, which tend to finance themselvesthrough the use of their cash flow as opposed toborrowing or raising capital. Therefore, oil activityin the country might become highly procyclicalwith respect to oil prices. When oil prices are high,the sector will be profitable, and oil firms will havegreater cash flow. When oil prices are low, the sectorwill be less attractive as an investment optionand oil firms will have fewer resources. In this area,there is little the government can do.Beyond the issue of development of Belize’s oilsector, there are challenges to its very existence. Inall the issues discussed here, the common factorthat emerges is the need to set up the appropriateinstitutions for the multiple challenges that arisewith the exploitation of oil. As has been arguedin this chapter, from the macroeconomic managementof the sector to the issue of land rights forindigenous people, the key step in the Belizeancase is to establish the appropriate institutionsand rules that will ensure the proper managementof the issues that will arise with the exploitationof the resource. Therefore, this is the second areaof action for the government of Belize.146

ReferencesArbelaez, M. A. 2008. “Belize—Review of theEnergy Sector.” Background paper, Inter-American Development Bank, Washington,D.C.Badiola, M., and A. Esquivar. 2007. “Explotaciónde recursos naturales y su impacto sobre laacumulación de capital humano en Venezuela:un estudio por municipios, 1997–2003”[Natural Resource Exploitation and ItsImpact on Human Capital Accumulationin Venezuela: A Study of Municipal Data,1997–2003]. Thesis presented as a requirementfor the degree of Economist, UniversidadCatólica Andrés Bello, Caracas,Venezuela.Barandiarán, E., and L. Hernández. 1999. “Originsand Resolution of a Banking Crisis:Chile 1982–86.” Central Bank of ChileWorking Papers no. 57. Central Bank ofChile, Santiago.Black, D., T. G. McKinnish, and S. G. Sanders.2005. “Tight Labor Markets and the Demandfor Education: Evidence from the CoalBoom and Bust.” Industrial and Labor RelationsReview 59, no. 1 (October): 3–16.Braun, M., and R. Hausmann. 2002. “FinancialDevelopment and Credit Crunches: LatinAmerica and the World.” In World EconomicForum (ed.), The Latin American CompetitivenessReport 2001–2002. New York: OxfordUniversity Press.Caballero, R. J., and A. Krishnamurthy. 2001.“International and Domestic Collateral Constraintsin a Model of Emerging Market Crises.”Journal of Monetary Economics 48, no. 3(December): 513–48.Clemente, L., R. Faris, and A. Puente. 2002. “Dependenciade los recursos naturales, volatilidady desempeño económico en Venezuela: elpapel de un fondo de estabilización.” ProyectoAndino de Competitividad. Caracas: CorporaciónAndina de Fomento.Cragg, D. 2007. “Best Practices in First NationLand Title Systems: Considerations for ImprovingLand Title Certainty on First NationsLands.” In Indian Taxation AdvisoryBoard (ed.), Improving First Nation Land TitleCertainty and Modernizing the Land RegistrySystem. Ottawa, Ontario, Canada: IndianTaxation Advisory Board.EIA (Energy Information Agency). 2008. Officialenergy statistics from the U.S. government.Available at http://eia.doe.gov.Engel, E., and R. O. Valdés. 2000., “Optimal FiscalStrategy for Oil Exporting Countries.”Working Paper no. 00/118. InternationalMonetary Fund, Washington, D.C.Esanov, A., and K. Kuralbayeva. 2009. “Kazakhstan:Managing Boom-Bust Risks in aResource-Rich Economy.” Paper presentedat the 10th Annual Global DevelopmentConference, “Natural Resources in Development,”February 1–5, Kuwait.Figueira, A., and M. Padua. 2004. “Actividad petroleray credito bancario a nivel de entidadesen Venezuela: 1990–2000” [Oil Productionand Bank Credit at the State Level inVenezuela, 1990–2000]. Thesis presented asa requirement for the degree of Economist,Universidad Católica Andrés Bello, Caracas,Venezuela.Fiscal Realities Economists. 2007. “The Economicand Fiscal Impacts of Market Reformsand Land Titling for First Nations.” In IndianTaxation Advisory Board (ed.), ImprovingFirst Nation Land Title Certainty and Modernizingthe Land Registry System. Ottawa,Ontario, Canada: Indian Taxation AdvisoryBoard.Friedman, M. 1957. A Theory of the ConsumptionFunction. Princeton, New Jersey: PrincetonUniversity Press.Fuenmayor, M., and M. Rivero. 2002. “Explotaciónde recursos naturales y su impacto sobreel sector manufacturero en Venezuela: unestudio por entidades federales, 1990–2000”[Natural Resource Production and Its Impactin the Manufacturing Sector at theState Level in Venezuela, 1990–2000]. Thesispresented as a requirement for the degreeof Economist, Universidad Católica AndrésBello, Caracas, Venezuela.Hausmann, R. 2001. “Dealing with Terms-of-Trade Vulnerability.” Paper presented at theseminar “Volatilidad Externa y Competitividaden la Región Andina, Center for InternationalDevelopment, Harvard University, Cambridge,Massachusetts, September.Hausmann, R., A. Powell, and R. Rigobón. 1993.“An Optimal Spending Rule Facing Oil IncomeUncertainty (Venezuela).’’ In E. Engeland P. Meller (eds.), External Shocks and Sta-chapter 8The Challenges of Managing the Oil Sector147

chapter 8The Challenges of Managing the Oil Sectorbilization Mechanisms. Washington, D.C.:Inter-American Development Bank.Hausmann, R., and R. Rigobón. 2003. “An AlternateInterpretation of the Resource Curse:Theory and Policy Implications.” WorkingPaper no. 9424. National Bureau of EconomicResearch, Cambridge, Massachusetts.Herbertson, T., M. Skuladottir, and G. Zoega.1999. “Three Symptoms and a Cure: A Contributionto the Economics of the Dutch Disease.”Paper presented at the Latin Americanand Caribbean Economics Association meetings,Santiago, Chile, October.Hogan, W., and F. Sturzenegger. 2010. The NaturalResources Trap: Private Investment withoutPublic Commitment. Cambridge, Massachusetts:MIT Press.Indian Taxation Advisory Board. 2007. ImprovingFirst Nation Land Title Certainty and Modernizingthe Land Registry System. Ottawa,Ontario, Canada: Indian Taxation AdvisoryBoard.IDB (Inter-American Development Bank). 2007.“Belize: Independent Macroeconomic Assessment.”Washington, D.C.IFC (International Finance Corporation). 2007.“Environmental, Health, and Safety Guidelinesfor Onshore Oil and Gas Development.”Washington, D.C.IMF (International Monetary Fund). 2008. “Belize:Selected Issues.” IMF Country Reportno. 08/92. Washington, D.C.Johnston, D. 2008. “How to Evaluate the FiscalTerms of Oil Contracts.” In M. Humphreys,J. Sachs, and J. E. Stiglitz (eds.), Escaping theResource Curse. New York: Columbia UniversityPress.Karl, T. 2008. “Ensuring Fairness: The Case fora Transparent Fiscal Social Contract.” In M.Humphreys, J. Sachs, and J. E. Stiglitz (eds.),Escaping the Resource Curse. New York: ColumbiaUniversity Press.Krugman, P. 1987. “The Narrowing MovingBand, Dutch Disease and the CompetitiveConsequences of Mrs. Thatcher: Noteson Trade in the Presence of Dynamic ScaleEconomies.” Journal of Development Economics27: 41–55.Lederman, D., and C. Xu. 2002. “ComparativeAdvantage and Trade Intensity.” World Bank,Washington, D.C. Unpublished.Leshy, J. D. 1985. “Indigenous Peoples, LandClaims, and Development: Australia andU.S. Legal Systems Compared.” University ofNSW Law Journal 8, no. 2: 271–312.Manzano, O. 2002. “Vulnerabilidad externa y volatilidadeconómica.” In Corporación Andinade Fomento (ed.), Temas críticos para el desarrollode América Latina. Caracas: EdicionesCAF.———. 2007. “Recursos naturales y crecimientoen América Latina” [Natural Resources andGrowth in Latin America]. Research presentedas a requirement for advancing tothe level of Adjunct Professor, UniversidadCatólica Andrés Bello, Caracas, Venezuela.———. Forthcoming. “Venezuela after a Centuryof Oil Exploitation.” In R. Hausmannand F. Rodriguez (eds.), Venezuela: Anatomyof a Collapse. University Park, Pennsylvania:Penn State University Press.Manzano, O., and F. Monaldi. 2008. “The PoliticalEconomy of Oil Production in LatinAmerica.” Economía 9, no. 1: 59–98.Radon, J. 2008. “How to Negotiate an Oil Agreement.”In M. Humphreys, J. Sachs, and JosephE. Stiglitz (eds.), Escaping the Resource Curse.New York: Columbia University Press.Rigobón, R. 2010. “Dealing with Expropriations:General Guidelines for Oil Production Contracts.”In W. Hogan and F. Sturzenegger,The Natural Resources Trap: Private Investmentwithout Public Commitment. Cambridge,Massachusetts: MIT Press.Sachs, J., and A. Warner. 1995. “Natural ResourceAbundance and Economic Growth.” WorkingPaper no. 5398. National Bureau of EconomicResearch, Cambridge, Massachusetts.———. 1997. “Natural Resource Abundance andEconomic Growth.”, Center for InternationalDevelopment,Harvard University, Cambridge,Massachusetts. Unpublished.Stijns, J.-P. 2001. “An Empirical Test of the DutchDisease Hypothesis Using a Gravity Modelof Trade.” University of California, Berkeley.Unpublished.Van der Ploeg, F., and A. Venables. 2008. “HarnessingWindfall Revenues: Optimal Policiesfor Resource-Rich Developing Economies.”Research Paper no. 2008-09. Oxford Centrefor the Analysis of Resource Rich Economies,Oxford University, Oxford, U.K.148

Part IIIEnvironmentalSustainability149

Integrated Disaster Risk Management—Challenges and Opportunities99.1 Disaster Risk Profile9.1.1 Natural HazardsAs a result of its location, climate, and topography, Belize is exposed to a range of natural hazards. Figure9.1 shows the country’s high level of exposure to floods, storm surge, wind hazards (tropical storms),and earthquakes, as well as its general exposure to tornadoes, drought, hail, and lightning. The country’slocation in the Caribbean Basin, bordered as it is on the east by the Caribbean Sea, exposes it to frequenthurricanes and tropical storms, and its low elevations and coastal population centers render it particularlyvulnerable to storm surge and coastal flooding.Belize ranks 16th among the world’s countries in the degree to which it is affected by hurricanes andtropical storms (UNDP 2004). Exposure to storms has resulted in damage due to high wind speeds, aswell as heavy rainfall and coastal storm surges that lead to river flooding, landslides, and coastal flooding,affecting housing, crops, infrastructure, and clean water supply. Wind hazard is greatest in the country’snorth (Figure 9.2). Belize City, the most-populated area, lies in hazard zone 3, indicating that thereis a 10 percent chance it will experience hurricane wind speeds between 178 and 209 kilometers per hourduring any 10-year period. Figure 9.3 shows thatover the period 1998 to 2005 most coastal areaswere affected by flooding. The district of Corozalis prone to rain inundation, and the districtsof Orange Walk, Belize, Cayo, Stann Creek, andToledo are prone to river flooding and/or rain inundation(IDB 2000).Belize is located near the eastern boundary ofthe Caribbean and North American tectonicplates. Seismic hazard is low to moderate in thesouth of the country and almost nonexistentin the north, as shown in Figures 9.4 and 9.5.There are no records of major earthquake activity,though minor seismic events have occurred(Figure 9.4). Although the country’s seismichazard is fairly low, strong earthquakes withFigure 9.1. Natural Hazards Affecting BelizeEarthquakeVolcanic eruptionTsunamiTropical stormStorm surgeTornadoHail stormLightningFloodDroughtFrost0% % affected country area100%ExposureSource: Munich Re (n.d.).NoneVery high151

Figure 9.2. Wind Hazard MapFigure 9.4. Earthquake History, 1900–1999chapter 9Integrated Disaster Risk Management—Challenges and OpportunitiesSource: Munich Re (n.d.).Note: Map shows range of highest sustained wind speeds thathave at least a 10 percent probability of being experienced in aparticular location in any 10-year period.epicenters near Belize, for example, in Guatemalaor Honduras, can significantly affect thecountry. There are no active volcanoes in Belize,and there is no historical record of tsunamis affectingthe country.Source: Ministry of Works, Belize.Note: Star size is proportionate to earthquake magnitude.Figure 9.5. Seismic HazardFigure 9.3. Flood History, 1998–2005Source: SERVIR map maker.Note: Bathymetry values show depth of water body.Source: Munich Re (n.d.).Note: Map shows 10 percent probabilities that locations will exceedthe specified maximum intensity on the Modified Mercalliscale in any 50-year period. Ground acceleration is greatest insouthern Belize. The Modified Mercalli scale ranks earthquakeintensity, from I (not felt except by a few) to XII (total damage),based on observed effects at a given location.152

9.2 Disaster Vulnerability9.2.1 PopulationIn 2008, Belize had a total population of 322,100(SIB, n.d.) and a population density of 14 inhabitantsper square kilometer. The most populated districtsare Belize (with 30 percent of the country’stotal population) and Cayo (23 percent), with themost substantial population concentration in BelizeCity. Despite government efforts to relocatehousing inland because of hurricane vulnerability,nearly half of the Belizean population lives in thecoastal area (six of the country’s ten major towns aresituated on the coast) in locations that are at highrisk of flooding due to storm surge, heavy rainfallevents, and/or strong wave and wind action associatedwith tropical storms and hurricanes. 1 As thepopulation of coastal towns increases as a result ofrural to urban migration, there is additional pressurefor development in flood-prone locations.Although the Corozal District in the north is associatedwith moderate poverty levels, poverty isconcentrated in the Toledo District in the country’ssouth. These areas are primarily inhabited byMaya communities, which are the least integratedinto Belizean culture, the most impoverished, andthe most vulnerable, with little access to education,services, communications, and transport.9.2.2 Productive Sectors andInfrastructureThe Belizean economy’s dependence on naturalresource-basedactivities exacerbates its vulnerabilityto natural hazards and disasters. Tourismaccounts for 22 percent of gross domestic product(GDP) and is the main foreign exchange earner.The most important tourist centers are situatedin flood-prone areas. Among the country’s principalmerchandise exports, the sugar cane cropin the districts of Orange Walk and Corozal isexposed to rain inundation and river flooding, asare the citrus and banana crops in Stann CreekDistrict, and the generation of marine productsmay be affected by tropical storms, storm surges,and floods.Access to electricity, telephone, and water servicesis relatively good in Belize, although the countryhas the most expensive electricity in the region.Some roads, including sections of major highways,are subject to damage or closure during therainy season ( June to November).9.2.3 Historical Disaster ImpactAmong the natural hazards that Belize has experienced,tropical cyclones have historically had thegreatest impact (Table 9.1) and are responsible forall of the country’s fatalities from natural disastersbetween 1980 and 2000 (UNDP, n.d.). In 1931,Belize City was devastated by an unnamed hurricanethat attained Category 3 wind speeds andresulted in 2,000 deaths among the population of16,000. A number of hurricanes have affected thecountry in the last decade. For example, in October2000, Hurricane Keith crossed the northernparts of Belize, affecting the cayes principally;heavy rains resulted in more than 14 deaths andUS$280 million in damage. In 2001, HurricaneIris struck southern Belize, one of the poorest areasin the country. The country sustained lossesfrom these two hurricanes equivalent to 40 and 25percent of GDP, respectively. Belize City has frequentlybeen evacuated in response to hurricanes.In 1998, Belize City, San Pedro, Caye Caulker,Ambergris Caye, and Dangriga were evacuatedahead of Hurricane Mitch; large stretches ofcoastline and many cayes were evacuated in 2000prior to Hurricane Keith; and Placencia, MonkeyRiver, and Bella Vista were evacuated in 2001 as aresult of Hurricane Iris (NEMO, 2003).Recurrent flooding is also a major problem. In1979, Belize District was flooded as a result ofheavy rains associated with a cold front, and theroad between the airport and Belize City wasdestroyed in several places. In August 1995, SanIgnacio was flooded as result of a tropical system,and in 1995, flooding associated with HurricaneRoxanne affected the Rio Hondo and Corozalareas.Natural disasters in Belize can also result in damagethat is concentrated in particular sectors. Ta-chapter 9Integrated Disaster Risk Management—Challenges and Opportunities1The relocation of the government’s main administrative center to Belmopan after Hurricane Hattie in 1961; the threat from HurricaneMitch in 1998, which resulted in the development of plans for a satellite city at Mile 31 on the country’s Western Highway torelocate coastal residents; and the impacts of Hurricane Keith in 2000 are salient reminders of this vulnerability.153

Table 9.1. Natural Disasters, 1931–2005chapter 9Integrated Disaster Risk Management—Challenges and OpportunitiesYear Disaster a winds (kph)MaximumLandfalllocation bPopulationaffected cDamage (US$thousands) d1931 Hurricane (3) N/A Belize City 16,000 7,5001951 Hurricane Anna (1) 130 Stann Creek N/A N/A1955 Hurricane Janet (4) 241 Corozal N/A 5,0001960 Hurricane Abby (1) 121 Punta Gorda N/A N/A1961 Hurricane Hattie (4) 222 Belize City N/A 60,0001974 Hurricane Carmen (4) 222 Corozal 70,000 4,0001978 Hurricane Greta (2) 175 Stann Creek 6,000 6,0001979 Flood 17,000 N/A1990 Cold wave N/A 2,2501990 Flood N/A 2,2001995 Flood 2600 5001998 Hurricane Mitch (5) N/A 60,000 N/A2000 Hurricane Keith (4) 296 San Pedro 62,570 277,4602001 Hurricane Iris (4) 232 Stann Creek 20,000 50,0802001 Tropical Storm Chantal 111 Corozal N/A N/A2005 Hurricane Wilma (3) 201 N/A N/A2005 Tropical Storm Gamma N/A N/A2007 Hurricane Dean (2) 161 Mexico 2,000 107,000 eSource: EM-DAT, Belize Meteorological Service (except as otherwise noted).Note: N/A = not available.a For hurricanes, Saffir-Simpson category is provided in parentheses.b Landfall location is given only when storm made landfall in Belize.c Total affected: Persons that have been injured, affected, and/or left homeless after a disaster. Statistics in this column provide informationon the number of persons affected in Belize only.d In nominal terms for year of loss; for example, Hurricane Hattie caused $60 million in damage in 1961 U.S. dollars, equivalent to$413.6 million in 2007 U.S. dollars (Wikipedia, “Hurricane Hattie,” available at http://en.wikipedia.org/wiki/Hurricane_Hattie).Statistics in this column provide information on damage in Belize only.e Damage figure for Hurricane Dean is from “Hurricane Dean Costs Belize $107 Million,” San Pedro Sun, August 30, 2007, availableat http://www.sanpedrosun.net/old/07-342.html.Climate change is predicted to alter the naturalhazard dynamics of Belize in three main ways.First, it will shift the average values of meteorologicalcharacteristics. For example, it will increaseaverage day and night temperatures, affecting seasurface temperatures, which are significant in regardto hurricane formation, and also in regardto the spread of disease vectors. Second, it willaffect the range of likely climate extremes, for exble9.2 summarizes the main impacts of naturalhazards and disasters for each of Belize’s productivesectors.9.2.4 Impacts of Climate ChangeThe Intergovernmental Panel on Climate Changehas concluded that the global mean temperaturewill rise by 1.5 to 6 degrees Celsius during thenext 100 years, producing a rise in mean sea levelof 18 to 95 centimeters. The increase in globalmean temperature will also affect the hydrologicalcycle, leading to changes in evaporation and precipitationpatterns. The effects at the regional andnational levels are uncertain. However, the UnitedNations Framework Convention on ClimateChange recognizes Belize as one of the countriesmost vulnerable to the adverse impacts of climatechange as a result of (1) its long, low-lying coastline,(2) its more than 1,000 small islands, (3)its having the second-longest barrier reef in theworld and more than 17,000 square kilometers offorest cover, both home to fragile ecosystems, and(4) its susceptibility to natural disasters, especiallyhurricanes (Government of Belize 2002).154

ample, causing more episodes of intense rainfalland more droughts. The anticipated precipitationchange is of the order ±20 percent, which mayincrease the number of forest fires and pest outbreaks.Third, it will present new hazards, such assea level rise, which may exacerbate the existingstorm surge hazard, as well as new phenomenasuch as coral bleaching.Table 9.2 summarizes the anticipated effects ofclimate change on Belize’s productive sectors.9.2.5 Disaster Risk, Belize CityBelize City lies entirely at or below sea level. Thecity, including approximately 70,000 inhabitants,is particularly vulnerable to the impacts of hurricanesand tropical storms. As noted above, in1931, an unnamed hurricane caused widespreaddestruction, killing 2,000 of the town’s populationof 16,000. The city was struck again in 1955by Hurricane Janet, which made landfall in thenorthern district of Corozal as a Category 4 stormand also caused major damage to both Corozaltown and San Pedro on Ambergris Caye. In October1961, Hurricane Hattie, another Category4 storm, struck the city, killing 275 and causingmore than US$413 million (in 2007 dollars) indamage. Hattie destroyed an estimated 40 percentof all buildings in Belize and damaged halfof those that remained, leading the governmentto take the bold step of relocating the country’scapital 80 kilometers inland to the less-exposedtown of Belmopan. The town of Hattieville, nearBelize City, grew from temporary shelters erectedto house refugees and still bears the storm’s name.However, much of the population and many ofthe businesses remained in Belize City, and todayit continues to be one of the most vulnerablecommunities in the country.Due to the coarse resolution of available elevationdata, accurate flood hazard or storm surge hazardmaps for the city do not exist. However, itis estimated that storm surge from a Category 5hurricane would likely range between 15 and 20feet. 2 Flood risk in the city has been exacerbatedin recent years by continued development in lowlying,flood-prone areas surrounding the city. Inaddition, the flood risk to other parts of the cityhas increased as new development has blockednatural drainage channels and overflows. As a result,heavy rains cause rapid water accumulation,which discharges at lower rates. Although artificialcanals and new drains have been constructedand have significantly improved storm runoff followingtorrential rains, a lack of effective drainagemaintenance limits the sustained reductionof flood risk. In a low-lying area, such as BelizeCity, there are limited other cost-effective measuresthat can be implemented. The city thereforefaces a geographical/environmental barrier to furtherlateral expansion and may have to consideralternative options, such as building upward (withappropriate construction standards), investing in(relatively expensive) levee systems, and/or curtailingurban growth.The population of Belize City has traditionallybenefited from a 72-hour early warning systemfor approaching hurricanes, facilitating evacuationto Belmopan. The very rapid buildup ofstorm intensity is a new observed trend in stormdevelopment, potentially due to higher sea surfacetemperatures associated with climate change.That is to say, tropical storms have recently beenobserved to develop into Category 5 hurricaneswithin 24 hours and also to travel across the seasurface with forward velocities in excess of 40 kilometersper hour, in contrast to typical historicalspeeds of 29 kilometers per hour. These changes inobserved hurricane development and movementpatterns have recently forced Belize’s NationalMeteorological Service to fast-track many of itsearly warning alerts, reducing the overall warningtime to the population and hence increasing theirvulnerability.9.3 Disaster Risk Management9.3.1 Policy, Institutional, andLegislative FrameworkPolicies, Strategies, and PlansBelize currently does not have a national disasterrisk management policy, strategy, or plan. Inchapter 9Integrated Disaster Risk Management—Challenges and Opportunities2Personal communication, Ramon Frutos, Acting Chief, National Meteorological Service, 2007.155

chapter 9Integrated Disaster Risk Management—Challenges and OpportunitiesTable 9.2. Impacts of Natural Disasters and Anticipated Effects of Climate Change onBelize’s Productive SectorsSectorAgricultureTourismWater resourcesEnergyForestryCoastal zoneHealthFisheriesTransportinfrastructureImpacts from natural disastersAnticipated effects of climate changeSugarcane crop is exposed to flood damage in Orange Walk and Corozal. Citrus andbanana crops are especially vulnerable to wind and flood damage in Stann Creek.Expected increases of 1–2 degrees Celsius and rainfall changes of ±10 percent arepredicted to lower productivity by 10 percent in beans, corn, and rice. Banana, citrus,sugarcane, and emerging vegetable crops could face similar threats.The high season in Belize is limited primarily by the hurricane threat. Hurricanes bothcause direct damage to lives and property and impose indirect costs on the economy andcompetitiveness.Most tourist attractions—coastal islands, reefs, and Mayan heritage sites—are expected tobe threatened by increased flooding, stronger wind storms, and the higher energy costsrelated to emissions controls imposed as a result of climate change mitigation efforts.Saltwater intrusion during storm events affects Belize City, as well as offshore islandsand coastal plains. There is inadequate drainage and sanitation around Belize City duringheavy rain.Sea level rise has intensified the saltwater intrusion problem, particularly on offshoreislands and coastal plains. Changes in evaporation rates and rainfall are affecting waterresources in the country’s interior.Droughts affect hydropower availability. Excess rainfall at Chalillo dam catchments posessignificant flood risk to San Ignacio.Hydropower availability will most likely be affected by changing water resource availability.Pine bark beetle outbreaks and forest fires threaten the timber industry.Pests and fire hazards will increase as a result of higher temperatures and longer dryperiods.Tropical storms and hurricanes require frequent evacuations and provision of shelter.High winds/debris, coastal flooding, battering waves, and heavy rainfall result in loss oflife and property damage. Belize City is highly vulnerable; it has experienced three majorhurricanes in the past 100 years.Coastal erosion will have a greater impact: 100 percent of Belize’s beaches are expectedto disappear within the next 50 years. A one-meter rise in sea level would transform thecountry’s wetlands into lakes. Storms are expected to develop faster, be more intense, andlast longer, with increased coastal wind and flood damage.Heat waves can provoke severe stress in vegetation and humans (especially the elderly)and increase the risk of epidemics of vector-borne disease. Floods also trigger outbreaksof waterborne disease.New vector-borne diseases will be observed, as well as the reemergence of those such asmalaria, cholera, and yellow fever. Increased incidence of respiratory illnesses should alsobe expected.Exports of shrimp and other marine products are at risk from tropical storms and stormsurges. Habitats such as sea grass beds, mangroves, and coral reefs are vulnerable tostorm damage and silting.Traditional catches are expected to migrate as Belizean waters warm. Sea level rise andcoral bleaching also threaten habitats for fish nurseries, such as mangroves and coralreefs.Transportation infrastructure is frequently inaccessible as a result of flooding, which alsoraises road and bridge maintenance costs and makes the airport inaccessible.Flood and drought events related to climate change are expected to increase theseperiods of inaccessible transport infrastructure.Continued on next page156

Table 9.2. Impacts of Natural Disasters and Anticipated Effects of Climate Change onBelize’s Productive Sectors (Continued)SectorUrban areas2004, the government adopted a National HazardMitigation Policy that has two goals: sustainablesocial and economic development and environmentalmanagement through the integration ofhazard risk reduction into national developmentprocesses, and national institutional strengtheningfor disaster risk reduction. A 10-year NationalHazard Mitigation Plan, emphasizing a multisector,integrated, coordinated approach to hazardmitigation, was adopted in 2007. Several otherkey national policy documents explicitly promotethe integration of disaster risk management intoplanning processes. For example, the NationalCoastal Zone Management Strategy emphasizescross-sector coastal area planning and developmentand includes confronting coastal vulnerabilityas a component of one of its strategic objectivesto support planned development.LegislationImpacts from natural disastersAnticipated effects of climate changeAny further expansion of Belize City would infringe on flood plain and drainage channels,increasing flood risk. Dangriga, Corozal Town, the Placencia Peninsula, and AmbergrisCaye are extremely vulnerable to coastal erosion and flooding.These same localities are extremely vulnerable to the projected sea level rise. Protectingthese urban areas may require the construction of sea walls and dikes to withstand itsimpacts.Belize’s Disaster Preparedness and Response Act(2000) is the primary legislation governing disasterrisk management in the country. 3 The act establishedthe National Emergency ManagementOrganization (NEMO) as a government agency,headed by a National Emergency Coordinator, towhom it assigned broad responsibilities for “coordinatingthe general policy of the governmentrelated to the mitigation of, preparedness for,response to and recovery from emergencies anddisasters.” The act is skewed toward preparednessand response and is silent on financial protectionand risk transfer.Other relevant legislation on disaster risk managementincludes (1) the Belize Building Actof 2003 (amended in 2005), which provides forthe regulation of building operations, includingbuilding standards, in the country 4 but has limitedprovisions for monitoring and enforcement(Caribbean Disaster Emergency Response Agencyand Caribbean Development Bank 2006); (2)the Land Utilization Act (revised 2000), whichprovides for the National Emergency Coordinatorto be a member of the Land Subdivisionand Utilization Authority; (3) the EnvironmentalProtection Act, which assigns authority tothe Department of the Environment to approveenvironmental impact assessments, subject toconsultation with the National Emergency Coordinator;(4) the Coastal Zone ManagementAct of 1999 (supplemented in 2000), whichmandates that the Coastal Zone ManagementAuthority and Institute address cross-sector sustainabledevelopment of coastal resources; and (5)the Reconstruction and Development CorporationAct, which facilitated the 1970 relocationof the government’s main administrative centerfrom Belize City to Belmopan, following damagefrom Hurricane Hattie in 1961, but has not beenapplied since and has no currently functioningadministering unit.InstitutionsNEMO is the national coordinating and implementingentity for disaster risk management. Itconsists of a Secretariat and a network of 12 na-chapter 9Integrated Disaster Risk Management—Challenges and Opportunities34The Disaster Preparedness and Response Act was established with IDB financing under Belize’s Hurricane Rehabilitation and DisasterPreparedness Project.The act supersedes the Housing and Town Planning Act, which regulated development in Belize City and Belmopan only.157

chapter 9Integrated Disaster Risk Management—Challenges and Opportunitiestional-level operational committees and nine districtand special committees. NEMO’s nationaland district committees consist of representativesfrom public sector ministries and institutions,private sector agencies, nongovernmental organizations,and community organizations. Thesecommittees are responsible for discharging thefunctions of the National Emergency Coordinatoras described under the Disaster Preparednessand Response Act, including review and assessmentof programs that have an impact on disastermanagement; policy development and recommendations;disaster risk data collection and analysis(including preparation and review of disasterrisk maps); public education and information;information exchange with national, regional,and international agencies and harmonizationof policies; technical advice on draft governmentlegislation relating to disaster management; andthe conduct of research studies and surveys on disasterrisk as they relate to changes in the naturalenvironment.NEMO’s technical and financial capacity toimplement its mandate is generally weak. TheNEMO Secretariat functions primarily as the organization’scoordinating agency, although it doesundertake some project implementation (e.g.,training). The Secretariat has a core staff of three,with a high turnover rate, and is underresourced.Although staff members are generally well trainedin emergency preparedness and response, the organization’scapacity for mitigation and preventionis limited. The Secretariat’s annual budget isapproximately US$320,000, primarily allocatedto staff salaries.towns, villages, and cayes in nine municipalitiesand six districts. The Land Information Centerof the Ministry of Natural Resources and the Environment,which has primary responsibility fornatural resources data, has in its geographic informationsystem (GIS) detailed hazard maps ofSan Pedro town and Caye Caulker, including awind atlas and maximum coastal flooding atlas forstorm events with a 50-year and 100-year returnperiod, and flood risk maps for the entire country.However, the resolution of the flood risk maps(much of it 90 meters in the horizontal, and withcontour lines every 20 meters of elevation) is toocoarse for accurate detailing of flood extent. 5 Thecurrent GIS also includes topographical maps ofBelize, including land use and cadastre informationfor all urban areas to the village level. Thedata underlying most of these maps are in needof updating.Expertise in risk identification in Belize is limited,and NEMO relies on external support to developrisk information products. The SERVIR programis currently the sole source of both data and potentialfunding for training in hazard assessments.None of the Land Information Center’s informationis available online. Although it provides thepublic with maps at cost of reproduction, there isno clear policy or established practice to promotethe use of map data in public sector administration.Notwithstanding, the center’s database hasthe potential for the development of a nationalrisk information platform in which disaster riskdata could be routinely collected and manipulatedto inform development decision making and riskeducation.9.3.2 Disaster Risk ManagementPracticeRisk IdentificationRisk identification is in its incipient stages inBelize; few hazards have been appropriately assessed,and vulnerability and risk maps are limited.Some community-level vulnerability mappinghas been completed, and maps of wind, wave,and storm surge hazards are available for coastalBelize’s National Meteorological Service, whichis part of NEMO, is responsible for monitoringall water resources in the country and maintains aweather database that includes stream flow data,which is required for use in flood mapping andearly warning. Because of the persistent problemof the unavailability of high-resolution digitalelevation models, country-wide flood or stormsurge maps do not exist. Flood data gathering inBelize relies on manual collection of rainfall orstream flow data. Unfortunately, this means that5Flood mapping requires a baseline map with detailed elevation data, as flood heights are then superimposed on the map to visualizethe flooded areas. An ideal resolution for Belize would be the 30 meter Shuttle Radar Topography Mission data available from NASA(with special approval) or 5 meter SPOT Image data available commercially at higher cost.158

during a storm or flood emergency, the data areunlikely to be gathered. 6The Caribbean Community (CARICOM) ClimateChange Centre, located in Belmopan, isbeginning a series of climate impact studies inCARICOM member countries, with much of thedata expected to be useful for flood risk and stormsurge mapping. One project under developmentis to gather bathymetry data using light detectionand ranging (LIDAR), 7 which would yield theaccurate maps of Belize’s coast that are needed forprecise storm surge and flood modeling.Risk Reduction (Mitigation and Prevention)Primarily as a result of the impacts of HurricaneMitch in 1998 and other recent national, regional,and international disaster events, over the past decadeawareness has grown within the public andprivate sectors and among the general populationof the need to incorporate disaster risk reductionas an element in planning processes, and importantadvances have been made. In 1999, Belize’sPhysical Planning Section developed guidelinesfor design criteria for piers. The mandate of theCoastal Zone Management Authority and Institute,established that same year, includes riskreduction. In addition, in response to the explosionin construction in the country over the pastdecade, the Belize Building Act, which regulatesbuilding operations and building standards, wasadopted (2003), the Central Building Authoritywas established to monitor and control buildingdevelopment throughout the country, and a draftbuilding code is currently under review. However,the existing capacity for enforcement of buildingcodes and standards is weak.According to the law, disaster risk is to be includedas a criterion in the process for approvalof the siting of structures as well as in environmentalimpact assessments for planned buildings.However, hazard prevention and mitigation arenot systematically mainstreamed in the nationaland local planning process, because effective de-velopment planning and control are constrainedby a number of factors: lack of a land use policy,lack of technical and financial capacity in the keypublic sector line ministries, and conflicts in theexisting legislation regarding the jurisdiction ofvarious public sector agencies in permitting andregulating development, among others (CaribbeanDisaster Emergency Response Agency andCaribbean Development Bank, 2006). The PhysicalPlanning Section, for example, resides in theLands and Surveys Department of the Ministryof Natural Resources and the Environment. It isa fledgling unit that is highly underresourced andcurrently has no qualified planning staff. Thereare also well-known examples of private sectordevelopment that are exacerbating disaster risk,indicating that the mechanisms in place to ensurethat risk considerations are taken into account inplanning processes have been ineffective in multipleinstances.Existing laws, regulations, standards, and guidelinesgoverning risk reduction need to be strengthenedand harmonized to facilitate the routineintegration of disaster risk reduction in publicsector administration. Progress in this area couldalso be achieved with effective enforcement and agreater level of public awareness of and educationin ex ante risk reduction. The NEMO Secretariatalso needs to adopt a more proactive and visiblerole in hazard prevention and mitigation.Nevertheless, a number of best practices are beingapplied at the community level. For example,disaster risk is routinely considered as part of theapproval process in the siting, design, and constructionof small-scale social infrastructure projectsthat target poor communities in southernBelize and south Belize City.Financial Protection and Risk TransferThe government of Belize has not articulated acomprehensive national strategy for financing disasterrisk. The country’s laws do not require insurancefor financed infrastructure and personalchapter 9Integrated Disaster Risk Management—Challenges and Opportunities67Ideally, flood hazard data from monitoring stations would provide information on the extent and location of flood-prone areas; depthand duration of floods; velocity of water flow; rate of river rise; water level; and discharge, frequency, and timing of occurrence andrainfall.LIDAR is light detection and ranging, a technique similar to radar. LIDAR uses laser light rather than radio waves to detect distanceaccurately. By combining green-wavelength and blue-wavelength lasers, an airborne platform can measure the difference in distancefrom the aircraft to the sea surface and to the sea floor, thus giving accurate measurements of the subsurface topography.159

chapter 9Integrated Disaster Risk Management—Challenges and Opportunitiesproperty beyond the duration of the financingperiod. In addition, the domestic insurance marketappears to have minimal involvement in improvingthe general public’s limited awareness ofthe existence and benefits of postmortgage riskcoverage. It is estimated that 50 percent of thecountry’s housing stock is underinsured and thatthe majority of low-income housing is either uninsuredor uninsurable.Belize’s government, along with those of 15 othermember countries of the Caribbean Community(CARICOM), participates in the Caribbean CatastropheRisk Insurance Facility (CCRIF), establishedin 2007. Through risk pooling, the CCRIFprovides catastrophe insurance (against hurricaneand earthquake catastrophes) with low-cost pricing.Premiums are determined according to theestimated risk facing each country in order tominimize cross-subsidization. CCRIF insurancecontracts are parametric, that is, payments in responseto claims are based on the intensity (windspeed and earthquake intensity) of the event thattriggers the claim.Notwithstanding Belize’s insurance through theCCRIF, alternative and more cost-effective instrumentsfor financing disaster risk, such as budgetaryprovisions and contingent lines of credit,need to be considered.Preparedness and Emergency ResponseFollowing international support provided between1999 and 2006, NEMO’s capacity for emergencypreparedness and response has improved significantly.Belize now has a relatively well-coordinatedmechanism for disaster preparedness andresponse, with a modern national emergencyoperating center. It has active operational committeesin the areas of education, information,communication and warning, medical care andpublic health, housing and shelter, search andrescue evacuation, restoration of utilities and access,damage assessment and needs analysis, foreignassistance, transportation, human resourcesmanagement, and recovery. Through these committees,NEMO has been able to extend its reachacross the country by mobilizing communitiesto action immediately before and after a disasterevent. It has provided continuing supportfor training the staff in the NEMO Secretariatas well as national- and district-level staff. TheSecretariat also works with national media to promotepreparedness and response. Still, multiplesimultaneous emergencies challenge the country’sresponse capacity, as was seen in the Corozal Districtin 2007, when a major fire in the CorozalFree Zone occurred shortly after the passage ofHurricane Felix (which also affected the district).RecoveryAs noted previously, following Hurricane Hattiein 1961, the Belize government adopted the Reconstructionand Development Corporation Actto facilitate the relocation of its main administrativecenter from its vulnerable location in BelizeCity to Belmopan, 80 kilometers inland. FollowingHurricane Mitch, a satellite city was plannedat Mile 31 on the country’s Western Highwayto relocate coastal residents. The momentum ofthese hazard mitigation initiatives has not beensustained, and the incorporation of hazard mitigationinto the country’s recovery process continuesto pose a challenge, as political and socialpressures are applied to return to normalcy in theshortest possible time after disaster events. Nevertheless,a project to improve drainage in BelizeCity, implemented following Hurricane Mitch,remains an important example of an initiative incorporatinghazard mitigation into the recoveryprocess.The Private Sector and Disaster RiskManagementFollowing Hurricane Iris in 2001, the Associationof Professional Engineers of Belize (APEB)produced a technical publication highlighting thedeficiencies in the country’s building industryand recommending corrective measures (APEB2002). More recently, APEB and the Associationof National Architects have taken a leadershiprole in developing a draft national building codefor the country, in collaboration with the Ministryof Housing and Urban Development. Apart fromthis, private sector involvement in disaster riskmanagement has been most significant in emergencypreparedness and response. NEMO hasrecognized the need to engage with the privatesector, including financial institutions, insurancecompanies, and private utilities, in ex ante risk reduction;however, this engagement has received a160

low priority in the absence of NEMO staff withthe requisite technical skills in risk reduction.Regional and International LinkagesBelize is a member of the Caribbean DisasterEmergency Management Agency (CDEMA,formerly the Caribbean Disaster EmergencyResponse Agency, CDERA) and has endorsedthe Enhanced Comprehensive Disaster Management(CDM) Strategy and ProgrammingFramework, 2007–2012. The objective of CDMis to strengthen national and community-levelcapacity for mitigation, preparedness, and coordinatedresponse to and recovery from natural andtechnological hazards and the effects of climatechange.NEMO maintains a close working relationshipwith the CDEMA Secretariat, as well as withnational disaster offices in CARICOM’s other15 member states. Belize has observer status inthe Central American Coordination Center forDisaster Prevention (CEPREDENAC) and ispart of the Regional Mechanism for Mutual Assistancein Disaster Management of the CentralAmerica Integration System (SICA) andCEPREDENAC.Belize maintains a number of commitments underinternational law as a signatory to various treaties:the Hyogo Framework for Action, the Conventionon Biological Diversity, the United NationsFramework Convention on Climate Change andits Kyoto Protocol, the United Nations Conventionto Combat Desertification, the Conventionson International Trade in Endangered Species,the Basel Convention (hazardous wastes), theUnited Nations Convention on the Law of theSea, the Montreal Protocol (ozone layer protection),the International Convention for the Preventionof Pollution from Ships, and the RamsarConvention (wetlands).9.4 ChallengesDespite the important steps that the governmentof Belize has taken to implement a more comprehensiveapproach to the management of disasterrisk, Belize faces many challenges for achievingsustained disaster risk reduction in the contextof a changing climate. In general, various factorshamper NEMO’s ability to lead the nationaleffort to implement Comprehensive DisasterManagement. Thus preparedness and responseremain the main focus of the national disaster riskmanagement system, and the more cost-effectiveapproaches of prevention and mitigation are minimallyapplied in public sector administration.9.4.1 NEMO’s Capacity forComprehensive DisasterManagementBelize’s main challenge in regard to managementof disaster risk is to reorient its public sectorto strengthen NEMO’s capacity to fulfill thebroader mandate of Comprehensive DisasterManagement, including adaptive capacity to climatechange. Currently public and private sectoragencies and civil society in the country lack institutionalcapacity for disaster risk management.Critically, there is scope for greater collaborationand coordination between the NEMO Secretariatand the key economic sectors with a high vulnerabilityto natural hazards and disasters (tourism,agriculture, transport), and between the NEMOSecretariat and the Ministry of Natural Resourcesand the Environment, including the Land InformationCenter, the Central Building Authority,the National Meteorological Service, the Ministryof Works, and the Ministry of Finance. Coordinationbetween the NEMO Secretariat, theCentral Building Authority, and the private sectorin regard to safe construction should also beimproved. Planning is currently centralized in theLands and Surveys Unit within the Departmentof the Environment of the Ministry of NaturalResources and the Environment. AlthoughNEMO has legal authority over the Departmentof the Environment’s actions related to disasterrisk management, lack of technical capacity preventsthe NEMO Secretariat from exercising thisauthority. It is also critical that counterpart organizationsin the private sector and in nongovernmentalorganizations maintain an effective link topublic sector agencies so as to ensure harmony inthe development, implementation, and monitoringof policies and regulations as they relate todisaster risk management activities.In the medium to long term, the organization’scapacity in ex ante risk reduction and in (natu-chapter 9Integrated Disaster Risk Management—Challenges and Opportunities161

chapter 9Integrated Disaster Risk Management—Challenges and OpportunitiesVulnerability to natural hazards and disastersappears to be especially high in communities insouthern Belize, where poverty levels are amongthe highest in the country and the populationshows the greatest diversity. Disaster preparedness,response, and mitigation plans need to beenhanced to incorporate the specific needs ofthese vulnerable groups and appropriate resourcesallocated. These needs include alerts and awarenesscampaigns provided in the community’sprimary language, vulnerability and needs assessmentsthat factor in the different priorities andcustoms of indigenous groups, and incorporationof these priorities and customs in national buildraldisaster) financial risk management needs tobe enhanced, taking into consideration climatevariability and change, and prevention and mitigationneed to be incorporated routinely into thecore operations of public sector institutions. Thiswill require (1) increased resource allocation forComprehensive Disaster Management, includingto facilitate greater investment in preventionand mitigation, among other things; (2) engagementof public sector institutions other than theNEMO Secretariat in ex ante disaster risk management;(3) interagency coordination based onthe careful articulation of roles of all disaster riskmanagement actors in the public and private sectorand civil society; and (4) public educationon NEMO’s role and scope under its expandedmandate for Comprehensive Disaster Management.In the short term, NEMO’s greatest challengewill continue to be the allocation of scarceresources to safeguard life and property, particularlyin coastal settlements and flood-prone areas,through the provision of improved infrastructureand enhanced institutional capacity for disastermitigation, preparedness, and response. The organizationis also challenged in the management ofpsychological and socioeconomic impacts of individualdisaster events as well as of simultaneousmultiple-disaster events, as the experience withHurricane Dean showed.9.4.2 Disparities in the Legal andRegulatory Framework forDisaster Risk ManagementBeginning in 1999, Belize’s government adopteda number of policies and plans to better managedisaster risk. Although several of these initiativespromote integrated disaster risk managementand development planning, they are notsupported by a comprehensive national disasterrisk management policy framework. In addition,overlaps, conflicts, and/or implicit treatment ofdisaster risk management in various pieces oflegislation (involving disasters, planning, the environment,and natural resources) have resultedin varying interpretations and applications ofthe law related to disaster risk management. Thegovernment, through NEMO, is faced with thechallenge of strengthening and harmonizing existinglegislation to facilitate consistency withthe principles of Comprehensive Disaster Management.9.4.3 Availability and Use of RiskInformationA principal challenge is to improve informationand education on risk (including climate changerisk) to inform development decision making.Baseline data on hazards and disaster impactsin the country are severely lacking. There are nocountry-wide hazard maps and few vulnerabilityand risk maps. A major constraint has beenthe coarse resolution of available data on elevation,which has hampered hazard mapping andrisk modeling, in particular, of flood events andstorm surge damage. There is also no recognizednational repository for disaster risk data and nonational risk information platform, nor is there amechanism for data sharing and dissemination.Where hazard databases do exist, they are oftennot used and/or not promoted as tools forrisk mitigation and development planning. Alack of clarity of responsibilities under the law,limited capability for updating existing mapsand risk mapping and modeling in general, poormaintenance, limited recognition of the needto promote the use of hazard data, and conflictingplans among government agencies forgeographic information system capabilities representmajor challenges for developing an effectiverisk identification and information platformthat could inform national and sector planning.The Land Information Center is appropriatelypositioned to house a national risk informationplatform. The center will have to coordinatecarefully with the NEMO Secretariat to achievethis objective.9.4.4 The Needs of Vulnerable Groups162

Disaster risk management and climate changeadaptation need to be addressed in a synergisticmanner at the level of development policyand practice. This includes the integration ofthe policy and legislative frameworks for Comingstandards. 8 Decentralization of the disasterrisk management function through the strengtheningof communities in regard to disaster riskmanagement is another major challenge.9.4.5 Financial Protection and RiskTransferThrough Belize’s participation in the CCRIF, asource of immediate liquidity is available to thegovernment in the aftermath of threshold disasterevents caused by hurricanes and earthquakes.However, the CCRIF policy is likely to coveronly a portion of the estimated government lossesincurred as a result of an event of high intensityor magnitude. A challenge for the governmentin the short to medium term is to adopt a morecomprehensive strategy for disaster risk financingthat would lead to a reduction in disaster losses.This would involve the careful allocation of scarcepublic resources between investments in risk reduction(e.g., risk identification, preparedness/response,and mitigation) and financial products forrisk retention (e.g., reserve funds and contingentlines of credit) and risk transfer (e.g., CCRIF, domesticcasualty and property insurance). In thecontext of the CCRIF, an immediate challenge isto develop ex ante criteria for allocating resourcesonce CCRIF payments are received. Much workalso is required to sensitize and educate Belizeanson the various options for disaster risk coveragefor personal property. Engaging the private sectoris yet another challenge.9.4.6 Sustainable Investment inInfrastructureBecause of Belize’s low population density, infrastructureinvestment such as roads, electricity,and water has a high per capita cost comparedwith most countries in the region. The maintenancechallenge is principally the responsibilityof the Ministry of Works and local governments,which suffer from limited financial resources, insufficientequipment, high levels of equipmentdowntime, and a high staff turnover rate. In a pe-riod of tight public expenditure restraint, routinemaintenance of public infrastructure and buildingsoften takes a low priority. Furthermore, localgovernments’ institutional and financial capacityis usually limited to the provision of basic services,such as solid waste disposal and traffic management,and they generally cannot undertakesignificant routine maintenance for public infrastructure.Without such routine maintenance,however, the sustainability of (post–HurricanesMitch and Keith) investments in hurricane preparednessand mitigation is at risk, thus presentingincreased challenges for disaster preparednessin the future.9.4.7 Adaptation to Climate ChangeAs noted previously, the changing climate is alreadyaltering many of the characteristics of thenatural hazards that Belize faces. Higher temperaturesand changing precipitation patternsare affecting drought, flood, and disease hazards.Stronger hurricanes that develop quickly andtravel across the Caribbean Sea at higher speedsare reducing the early warning times available tothe population. These threaten to make landfallwith higher wind speeds and longer duration thanpreviously experienced.Climate change not only affects Belize’s existingdisaster risk, but also introduces new threats.The country is most vulnerable to rises in sea levels,which will exacerbate storm surge damage,coastal erosion, flooding, and salinity problems.New hazards such as coral bleaching will affectfish stocks and tourism potential; new pests suchas pine beetles or aedes mosquitoes may spreaddisease and affect agricultural and human health.Water resources, agriculture, and coastal areasface the biggest challenges.chapter 9Integrated Disaster Risk Management—Challenges and Opportunities8Consultation and the adaptation of appropriate yet affordable technology are critical in disaster mitigation efforts where housingis concerned. It is also apparent that provision for this specific need is not incorporated in the draft building code prepared by theCentral Building Authority. For instance, reconstruction and rehabilitation efforts following Hurricane Iris in 2001 failed to identifyand incorporate adequately the priorities of the indigenous Maya population, who valued maize storage sites more than their owndwellings. This led them to use the more wind-resistant concrete structures constructed post-Iris in Maya communities for crop storageand adopt a “rebuilding is cheaper than reinforcing” philosophy toward their own thatched roof dwellings.163

chapter 9Integrated Disaster Risk Management—Challenges and Opportunitiesprehensive Disaster Management and climatechange adaptation, the design and implementationof integrated disaster risk managementand climate change adaptation programs atthe national and sectoral levels, the facilitationof greater interagency coordination, andthe strengthening NEMO’s capacity in climatechange adaptation.9.4.8 The Special Case of Belize CityBelize’s government has only partially implementedits initial strategy to move its main administrativecenter, and with it critical assets, away fromthe highly vulnerable coastal area of Belize City.It is now challenged to maintain a balance betweencontinued implementation of the strategyand recognition of the important role of BelizeCity in the country’s economic development. Thechallenge in the medium to long term will thereforebe to continue to facilitate the expansion ofBelmopan, as well as other centers located in lesshazardous areas, by encouraging commercial developmentin these locations. Public investmentplanning in these areas should incorporate disasterrisk management and climate change adaptation,particularly prevention and mitigation, as aconsideration. In the short term, the challenge isto continue to reduce the vulnerability of populationand infrastructure that remain exposed inBelize City. This may be achieved through implementationof proactive initiatives for reducingrisk, including the routine screening of infrastructureprojects for hazard and environmentalrisk, flood-level monitoring, enhancement andmaintenance of drainage infrastructure, strengtheningof buildings against multiple hazards, andevacuation planning. Effective disaster risk managementin Belize City also requires closer interagencycollaboration and coordination. Currentlythere is uncertainty regarding responsibility forflood data collection and monitoring, though itis apparent that the Belize City Council has verylimited capacity to perform this function effectively.The relationship between the Belize CityCouncil and the country’s central government hasbeen strained, largely as a result of political differences,adversely affecting general administrativecapacity. The city and Belize in general could alsobenefit from closer collaboration with the CaribbeanCommunity Climate Change Centre.9.5 Policy RecommendationsThis chapter’s overarching recommendation inregard to disaster risk management in Belize isthat the country develop and implement an integrateddisaster risk management policy and planningframework, to facilitate a transformation inthe delivery of disaster risk management servicesto the Belizean public. This policy and planningframework should be based on the principles ofComprehensive Disaster Management, promotingproactive disaster risk management. Thiswould improve disaster risk management practicesand lead to a reduction in damage and lossesresulting from natural hazards and disasters. Tothis end, a number of lines of action are proposed,as described in the following subsections.9.5.1 Improve Disaster RiskInformationInformation on disaster risks could be improvedthrough developing a national risk informationplatform in Belize and mainstreaming it into thecountry’s sectoral planning. The platform wouldprovide the essential baseline data, maps, tools,and equipment for risk evaluation, simulation,analysis, updating, and monitoring. It would require(1) the development of indicators of disasterrisk and risk management for Belize that can beused to monitor national performance in disasterrisk management; (2) an evaluation of countryrisk, including climate risk, that would provide adetailed assessment of the geographic areas andkey sectors at risk, the factors that contributeto vulnerability, probable maximum losses, andeconomic impacts; (3) the identification and resourcingof a national facility for risk evaluation;(4) the development of applications of risk managementin key sectors (emergency management,planning, tourism, agriculture); (5) enhancementof capacity in risk evaluation for sectoralstaff; and (6) the design and implementation ofa public education strategy on disaster risk. Theplatform and associated tools could be used toidentify and inform strategies for strengtheningrisk management, and to provide the financialevidence to justify resource allocations in disastermanagement budgets. The Land InformationCenter is a potential site for such a national riskinformation platform.164

9.5.2 Strengthen the Legislative andRegulatory FrameworksExisting legislation related to disaster risk managementand climate change adaptation shouldbe reviewed with a view toward harmonization, tofacilitate the strengthening of the NEMO systemand the mainstreaming of disaster risk managementand climate change adaptation in nationaland sectoral planning. As part of this process, it isrecommended that Belize’s government (1) developa land use policy and legislation for the operation ofthe National Meteorological Service; (2) upgradeplanning legislation to require routine integrationof disaster risk management into the national developmentproject cycle; (3) allocate more resourcesto the Physical Planning Section, to allow it to performits function more effectively; and (4) adoptand administer the draft national building code.9.5.3 Strengthen Institutional Capacityand CoordinationInstitutional capacity for disaster risk managementwithin NEMO, focusing on prevention andmitigation and financial risk management, shouldbe strengthened, with specific emphasis on keyeconomic sectors, namely, tourism, natural resourcesand the environment, and agriculture, aswell as the NEMO Secretariat and the Belize CityCouncil. Areas of focus should include hazard andrisk mapping; mitigation of flood impacts; climatechange awareness and adaptation, includingthe application of agricultural insurance schemesto deal with climate variability and change, andof climate change projections in long-term sectordevelopment plans; building codes and increasedcapacity to enforce them; flood mitigation anddrainage system maintenance; and communityapproaches to raise awareness and build resilience,including involvement of indigenous groups. Participationof civil society and the private sectorin disaster risk management should also be enhanced.Any institutional strengthening activityshould be guided by a needs analysis resultingfrom an organizational review.saster risk management framework. This wouldinclude the design and implementation of a combinationof financial instruments for reducingthe cost of disaster risk to within budget limits,including investments in risk reduction and financialproducts for risk retention, removal, andtransfer. Institutional strengthening of the Ministryof Finance and Planning in financial riskmanagement should be a part of this effort. Theprivate insurance industry should also be moreproactively involved in educating the generalpublic about disaster risk as well as in the developmentof insurance products, including thosetargeting lower-income clients and small commercialenterprises.9.5.5 Support Transition fromBelize City to Belmopan forVulnerability ReductionA strategy for transitioning of the main populationcenter away from Belize City to Belmopan shouldbe developed. This necessarily long-term, gradualprocess should not be disruptive and would becognizant of the high level of investment alreadymade in Belize City. However, Belmopan appearsto be growing at a relatively rapid rate, boostedby the transfer of an increasing number of embassiesand government agencies to the city. Continuedgrowth and the expansion of services andamenities would make it more attractive to livein the city, particularly for public officials. TheBelize government should continue to facilitateBelmopan’s growth and base its urban planningon a larger population for the city. (Brazil’s experiencewith Brasilia may be a useful reference.)Given that 30 percent of the country’s populationstill lives in Belize City, investments there in thenear term should not cease but must incorporaterisk reduction measures such as enhanced drainageand improved capacity for maintenance, earlywarning, and evacuation.9.5.6 Strategic Partnership with theCaribbean Community ClimateChange Centrechapter 9Integrated Disaster Risk Management—Challenges and Opportunities9.5.4 Identify Options for Disaster RiskFinancingA comprehensive disaster risk financing strategyshould be developed as part of the integrated di-The government should develop a strategic partnershipwith the Caribbean Community ClimateChange Centre, to benefit from its expertise andinternational outreach. Areas of collaborationcould include hazard mapping, risk assessment,165

chapter 9and resource monitoring; LIDAR bathymetrymapping of Belize’s coastline, which would supportboth the monitoring of rises in sea level andprovide the necessary data for storm surge mod-eling; and the integration of climate projectionsinto risk assessments in support of planning, inthe agricultural sector and to develop climaterelatedcrop insurance, among others.Integrated Disaster Risk Management—Challenges and Opportunities166

ReferencesAPEB (Association of Professional Engineersof Belize). 2002. “Hurricane Iris: LessonsLearned for the Engineering and ConstructionIndustries of Belize.” Belize City.Caribbean Disaster Emergency Response Agencyand Caribbean Development Bank. 2006.“Belize National Hazard Mitigation Plan(adopted 2007).” National Emergency ManagementOrganization, Belmopan.Government of Belize. 2002. “First NationalCommunication to the Conference of theParties of the United Nations FrameworkConvention on Climate Change.” Ministryof Natural Resources, the Environment, Climateand Industry, Belmopan.IDB (Inter-American Development Bank). 2000.“Institutional Strengthening of NEMO:Hazard and Risk Assessment.” Terminal Report,Project CANTAP II: IDB ATN/CP-6491-BL. Washington, D.C.Munich Re (Munich Reinsurance Company).n.d. NatCatSERVICE. Available at http://www.munichre.com/en/ts/geo_risks/natcatservice/annual_statistics/default.aspx.NEMO (National Emergency Management Organization).2003. Belize National HazardManagement Plan. Volume 5A: Evacuation.Belmopan. Available at http://www.nemo.org.bz/publications/Search_Rescue_and_Evacuation_Plan.pdf.SIB (Statistical Institute of Belize). n.d. DocumentManagement System (DMS) 2.0.Available at http://www.statisticsbelize.org.bz/dms20uc/Main.asp.UN (United Nations). 2004. Living with Risk:International Strategy for Disaster Reduction.Geneva.UNDP (United Nations Development Programme).2004. Reducing Disaster Risk: AChallenge for Development: A Global Report.New York.———. n.d. Disaster Risk Index Analytical Tool.Available at http://gridca.grid.unep.ch/undp.chapter 9Integrated Disaster Risk Management—Challenges and Opportunities167

Towards EnvironmentallySustainable Development1010.1 IntroductionBelize’s difficulty in placing sufficient weight on the future is a recurring theme of this book. This difficultyis reflected in several economic dimensions, such as the low national saving rate, which has underlainthe binding constraint on economic growth discussed in earlier chapters and reflects a prioritizationof consumption today over gains tomorrow. Similarly, and closely related, is the country’s high level ofpublic debt, which reflects consumption and investment brought forward from the future. Adequatelyvaluing the future is also key to environmental sustainability.The Belize Barrier Reef, the greatest water availability per capita in Latin America, and the presence ofvast tropical forests covering more than half of its territory testify to Belize’s natural resource wealth andbiodiversity. These characteristics have given rise to an export economy centered on tourism and naturalresources (from petroleum to marine products). At the same time, a substantial part of the populationdepends heavily on fisheries and traditional agriculture.To date, Belize has taken strategic steps to preserve its natural resources and use them in a sustainableway. This goal has had its practical realization in the creation of the National Protected Areas System,as well as in several pieces of legislation. However, even with protected areas and legislative bills, Belize’senvironmental assets are not free from peril, nor is their enduring existence guaranteed. Environmentaldegradation is on the rise, and different forms of economic activity pose undeniable threats to the delicatebalance that sustains ecosystems.Belize must now continue to advance its sustainability agenda, building on the gains made to date andwith a view towards ensuring a balance between present needs and those of future generations. Thischapter reviews the principal environmental challenges facing Belize and the government’s extensiveefforts to address them. It then identifies gaps in the country’s environmental governance and advancessome policy options and recommendations.10.2 Principal Environmental Sustainability ChallengesThis section consists of the diagnosis of the main environmental challenges in Belize, including managementof land use, forests and biodiversity, coastal resources and fisheries, water resources, solid waste,sanitation and liquid waste, and emissions and air pollution. 1 After a small summary assessment of sustainability,an analysis of the relationship between environment and growth is presented.1The topic of climate change is addressed in Chapter 9.169

chapter 10Towards Environmentally Sustainable Development10.2.1 Land UseBelize’s small population, as well as its historyand geography, including trends in infrastructuredevelopment, make the pattern of land usein Belize very different from that in most of itsneighbors, both in Central America and the Caribbean.While in both Central America andthe Caribbean, agricultural land comprises 50percent of the total territory, in Belize land devotedto crops and livestock accounts for only 6.6percent of total land. Of the territory used foragriculture, 46 percent is arable land, 21 percentpermanent crops, and 33 percent permanent pastures(FAOSTAT 2007). Similarly, in the case offorests, while 34.4 percent of Central Americanterritory is covered by forest, in Belize 72 percentof the territory is forested. The rest of the territory(i.e., that not covered by forest or devotedto agriculture, 21 percent) is dedicated to otheruses, mainly human settlements and tourist developments.A land resource assessment study cited by theBelize Forest Department (2004, 15) categorizedland use in the country as follows: approximately16 percent of Belize’s territory can be classifiedas soils suitable for agricultural development; approximately20 percent can be classified as soilsthat could produce sustainably, based on theiredaphic characteristics, but require high levels ofinput and management; approximately 14 percentof forests in the national territory are suitable forsustainable forest production; the rest of the territoryshould remain under protection.Currently, the principal environmental land useconcerns are competing and conflicting land useand the increasing conversion of coastal ecosystemsfor tourism and residential developments.No comprehensive land use policy exists at thenational level to select and put into practice thoseland uses that will best meet the needs of the peoplewhile safeguarding resources for the future.However, several projects have been developedat the national and subnational level, in conjunctionwith international cooperation, to achievesustainable use and proper management of landresources.10.2.2 Forests and BiodiversityBelize has the highest forest cover in both CentralAmerica and the Caribbean (see Figure 10.1):72 percent of Belize is forested, of which 37 percentagepoints are classified as primary forest(FAOSTAT 2007).Forests have played an important role in the developmentof Belize since colonial days, with theextraction first of logwood and then of mahogany.Forestry was the most important economicactivity in Belize until the middle of the twentiethcentury, but its importance has declined,Figure 10.1. Forest Cover in Central America and the Caribbean, 2007(percentage of land)BelizeAnguillaDominicaPanamaBahamasCosta RicaTrinidad and TobagoNicaraguaHondurasGuatemalaCentral AmericaJamaicaDominican RepublicSaint Vincent and Gren.Saint LuciaThe CaribbeanAntigua and BarbudaSaint Kitts and NevisEl SalvadorBarbados414212031282828273635394441475158616172NiBSHBahamCoTrinidad &El SGuDominican RACSource: Author compilation based on data from FAOSTAT.170

and currently, the gross value added by forestryand logging is just 0.7 percent of gross domesticproduct (GDP) (Statistical Institute of Belize2009). 2Deforestation is one of Belize’s major environmentalissues. The Belize Audubon Society, anongovernmental organization with a longstandingcommitment to environmental issuesin the country, stated that the country’s “forestedareas continue to diminish at an alarming rate”(2008, 35). FAO reports cited by Young (2008)and Medlin (2008) suggest that during the 1990sBelize lost an average of 2.3 percent of its forestcover each year, giving it the third-highest rate offorest loss in Central America. 3Various authors attribute deforestation in Belizeover the last five decades to the developmentof large-scale agriculture (citrus, bananas,sugarcane) and, more recently, to the growth oflarge-scale aquaculture coupled with rapid and increasingcoastal development, illegal logging andencroachment in reserves, bush fires, and slashand-burnagriculture. One of the main issues inthe ongoing Belizean-Guatemalan territorial dispute4 is the illegal logging and harvesting of forestproducts by Guatemalans.As a result of its tropical position in the transitionzone between two continents and its proximityto the Mesoamerican Barrier Reef System(MBRS), Belize is rich in terms of biodiversity.According to the Biodiversity & EnvironmentalResource Data System of Belize, the countryhosts more than 150 species of mammals, 540species of birds, 151 species of amphibians andreptiles, nearly 600 species of freshwater and marinefishes, untold numbers of invertebrates, and3,408 species of vascular plants. The Belize BarrierReef, which extends for 230 kilometers alongthe entire length of the country, has been declareda World Heritage Site because of its globally significantbiodiversity.Belize has a lower number of threatened speciesthan any other country in the isthmus. Accord-ing to the International Union for Conservationof Nature’s Red List of threatened species (2009),there are 89 threatened species in Belize, of which7 are mammals, 4 birds, 5 reptiles, 6 amphibians,25 fishes, and 30 plants.10.2.3 Coastal Resources andFisheriesBelize is also rich in terms of coastal resources,which comprise coral reefs, sea grass beds (whichhelp support fisheries and prevent erosion), mangroves(which shelter land and provide nurseryareas), estuaries, shallow inshore coastal environments,and offshore atolls.The Belize Barrier Reef is one of the country’smost important assets. It is part of the MBRS,which extends from the southern half of the YucatanPeninsula to the Bay Islands of Hondurasand is the second-longest reef in the world. Belize’scoral reefs and mangrove-lined coasts havesupported artisanal fishing communities for generationsand are the basis of a vibrant tourism industry.Moreover, they provide critical protectionagainst erosion and wave-induced damage fromtropical storms.According to a recent World Resources Institutepaper (Cooper, Burke, and Bood 2009), tourismassociated with the coral reef and mangroves accountedfor an estimated 12–15 percent of GDPin 2007, annual economic benefits from reef- andmangrove-dependent fisheries represent an estimatedUS$14–16 million, and protection providedby reefs and mangroves to coastal propertiesfrom erosion and wave-induced damages amountto an estimated US$231–347 million in avoideddamages per year. As the authors make clear,these estimates capture only three of the manyservices provided by coral reefs and mangrovesand should not be considered the total value ofthese resources.Despite its importance for the developmentof tourism and for the country’s fisheries (seebelow), Belize’s coastal zone is threatened bychapter 10Towards Environmentally Sustainable Development234Much logging that takes place in Belize is illegal and therefore underreported in the national accounts.In contrast, FAO’s database reports no significant change in forest cover between 1995 and 2010.Guatemalans have claimed Belize’s territory as theirs since before Belize’s independence in 1981. Even after a number of years of officialrecognition, Guatemalan squatters continue to settle in the largely uninhabited rain forests of Belize’s border region.171

chapter 10Towards Environmentally Sustainable DevelopmentEven though the country’s water situation is notcritical at present, institutional changes are needoverexploitationand degradation of resourcesfrom both of these industries. Climate changeis also one of the major threats to the BarrierReef, which has increasingly suffered from coralbleaching and disease since 1995 (Belize AudobonSociety 2008). Other major disturbances alsoaffect coastal resources, such as habitat alteration(including mangrove clearing) caused by coastaldevelopment, nutrient enrichment from agriculturalrunoff, erosion of the shoreline as a result ofremoval of mangroves and sea grass during landfilling, sewage pollution, and smothering of coralsby siltation resulting from dredging for coastalfilling and sand mining (Belize Audobon Society2008).Fishing is a significant cultural tradition in Belizeas well as a livelihood for many coastal inhabitants.It also provides a safety net: Belizeans relyon it when difficulties arise in other productiveactivities. In fact, the number of fishing licensesgranted in recent years has grown considerably asa result of problems in activities associated withvarious agricultural products, like sugarcane inthe north.strong fisheries regulations, including size limitsand closed seasons for the most heavily exploitedspecies. In fact, the decline in fisheries productionin Belize since 2002, as shown in Figure 10.2,could be partly explained by the establishment ofcautious catch quotas. 5 In addition, no-fishingzones in some marine protected areas also helpby serving as replenishment areas (Cooper, Burke,and Bood, 2009).In contrast to capture fishery production, aquaculturein Belize has been expanding in volumeand value (Figure 10.2). Aquaculture is one of thelargest consumers of freshwater resources in thecountry.10.2.4 Water ResourcesBelize has the greatest availability of water inLatin America and the Caribbean, approximately52,633 cubic meters per person (WorldBank 2006). The main sources of water for humanconsumption are surface water (some 18 majorwatersheds) and an undetermined volume ofgroundwater resources.Fisheries in Belize are threatened by overfishingas well as by the loss of healthy coral reefand mangrove habitat. However, Belize has fairlyFigure 10.2. Evolution of Fisheries andAquaculture Production (1990–2007)Tones (x1000)60504030201001990 1993 1996 1999 2002 2005Capture Aquaculture Total ProductionSource: Author compilation based on data from FAOSTAT.Belize consumes only 0.9 percent of its availablewater resources annually. Industry is the majorwater consumer, accounting for 73 percent oftotal freshwater withdrawal, while agricultureconsumes 20 percent and households 7 percent(World Bank 2006).The quality, quantity, and viability of a country’swater resources are highly related to its land usepractices. Belizean legislation protects a 66-footriparian buffer zone along all water bodies, butaccording to the Belize Audobon Society (2008),the law is not enforced. Although there is a limitedsystem for evaluating and monitoring waterquality, it is estimated that a large part of the superficialwater in urban areas is polluted becauseof inadequate disposal of liquid and solid wastes(Belize Audobon Society 2008).5According to the Ministry of Agriculture and Fisheries (2004), Belize was placed on the Category (ii) list of countries, which focuseson “species of possible concern by the Convention for the regulation of International Trade in Endangered Species (CITES).” Otherreasons that may explain the decline are merely statistical; since some fishermen sell fish directly to tourists, fishing cooperatives areunable to include that production in their accounting.172

Figure 10.3. Renewable Internal Freshwater Resources, 2006(cubic meters per capita)El SalvadorDominican RepublicAntigua and BarbudaBelize 52,633PanamaNicaraguaCosta RicaHondurasGuatemalaJamaicaBarbadosBahamas613314603,5142,9072,1598,18113,504ed to avert a water governance crisis. In 2000,the Food and Agriculture Organization identifiedthe lack of a unique authority responsiblefor water resources as the major barrier for thedevelopment and protection of water resources inBelize. In fact, not only does Belize not have anysupervisory institution for its water resources, ithas not ratified a national water policy or passedthe 2006 water laws. What is more, an assessmentconducted by the National Pro TemporeWater Commission in 2006 indicated that thecountry’s current system of water resources managementis incoherent and fragmented and doesnot provide for the planned allocation, sustainabledevelopment, and adequate protection ofBelize’s water resources (cited in Belize AudobonSociety 2008).10.2.5 Solid Waste ManagementDaily solid waste production in Belize fromhousehold and commercial establishments is approximately1.1 kilogram per capita, amountingto almost 200,000 metric tons annually (Medlin2008). The solid waste problem is especially acutein urban areas, such as Belize City, San Ignacio/Santa Elena, and San Pedro. In addition, the rateof solid waste generation is increasing at a rapidpace as population and tourist flows grow. In fact,waste generation projections for Belize’s westerncorridor indicate that domestic solid waste is expectedto increase by 70 percent by 2023 (IDB2008).25,18933,854Source: Author compilation based on data from World Bank, World Development Indicators.44,130While the amount of garbage generation per capitais low for the region, the inability to properlydispose of the waste produced poses a serious environmentalthreat to the country. Existing landfillsin the country are inadequate for the country’ssolid waste disposal needs. The construction of anew facility for the disposal of waste in a centrallocation (Mile 24 on the country’s Western Highway)with favorable environmental conditionsshould help address this inadequacy.In addition to being insufficient, the existing facilitiesprovide little in the way of environmentalprotection. The country’s biggest landfill, at Mile3, is an open dump located in an unsuitable, lowlyingmangrove area, and none of the landfills inthe country are properly sealed to prevent theleaching of pollutants into groundwater. Furthermore,management practices at the disposal sitesare inadequate, and a large amount of industrialwaste ends up in the country’s landfills. Moreover,solid wastes in landfills are frequently burned, apractice that is environmentally harmful with serioushealth implications.Solid waste is also currently being disposed of outsideof dumps, in backyards or by illegally dumpingalong roadsides, in empty lots, along seashores,on riverbanks, and in other environmentally sensitiveareas. Other waste disposal issues are insufficientwaste collection services and nonexistentwaste separation and recycling programs, whichexacerbate the main issues discussed above.chapter 10Towards Environmentally Sustainable Development173

chapter 10Towards Environmentally Sustainable DevelopmentHazardous waste disposal is another issue in Belize.Recent news reports 6 have indicated thathazardous waste can be found in regular garbage,giving rise to concerns about it.10.2.6 Sanitation and Liquid WasteManagementInadequate liquid waste (wastewater and sewage)management is also contributing to naturalresource degradation in Belize and posing a veryserious public health hazard. Adequate sanitation(sewers/septic tanks) stands at 64 percent coveragecountrywide. While 85 percent of the urbanpopulation has access to improved sanitation,only 40 percent of the rural population does so(Ministry of Health 2009).Currently, only three population centers in thecountry have sewage treatment facilities (BelizeCity, Belmopan, and San Pedro), though manylarge developments, particularly in high-tourismareas, have small-scale treatment plants. Even inthe three municipalities with sewage treatment facilities,a large portion of the urban population stillrelies on septic tanks. The rural population relies onpit latrines and septic systems, with the latter becomingmore prevalent, as statistics show. In someareas, sewage disposal is still directly into open canals,though this practice is now very limited.Though the disposal of waste liquids in openwaterways causes obvious damage, there are alsoproblems with the use of septic systems. Septictanks remove only solids and discharge an effluentwith a high microorganism count. Whenreleased into the environment, this effluent cancontaminate groundwater and waterways such asrivers, streams, and canals. In coastal areas, septiceffluent passed into the sea in large quantitiesposes a real threat to the marine ecosystem andthe Barrier Reef System.The large number of cruise tourists who visit thecountry annually further exacerbates the liquidwaste issue. The country lacks an appropriateinfrastructure (e.g., liquid waste facilities) andmonitoring and enforcement capacity to dealwith liquid waste resulting from the cruise tourismindustry.10.2.7 Emissions and Air PollutionPerhaps unsurprisingly, given its low populationdensity, air pollution is one the least problematicissues for environmental sustainability in Belize.The country has very little urban air pollution,largely as a result of the relative lack of motor vehicleemissions. Emissions of particulate matter (amixture of solid particles and liquid droplets, specifically,those with a diameter of 10 micrometers,or PM10), a common air quality indicator, havebeen decreasing constantly in recent years, from 24micrograms per cubic meter in 1990 to 15 in 2006.In fact, Belize has one the lowest levels of PM10concentration in the region, and its annual averageis well below both those in Latin American andthe Caribbean (33 micrograms per cubic meter)and lower-middle-income countries (69 microgramsper cubic meter) (World Bank 2005).The country’s consumption of ozone-depletingsubstances has also decreased significantly, from22.3 metric tons in 1995 to 2.2 metric tons in2007. Belize is thus fulfilling its internationalcommitments in regard to the phasing out ofozone-depleting substances (Montreal Protocol)and therefore in regard to the recovery of theozone layer (UNStats 2007).However, the picture with respect to carbon emissionsis more mixed. Belize’s carbon footprint andthe carbon intensity of its growth have been risingrapidly (World Bank 2010). Between 1990 and2005 the total CO2 emissions growth rate in Belizewas 162 percent, compared to 33.4 percentin Latin America and the Caribbean and 93.5percent in lower-middle-income countries. Furthermore,the country’s carbon footprint, as measuredby per capita CO 2emissions, tripled from 1metric ton in 1996 to 3 metric tons in 2006 and isnow equal to the lower-middle-income countriesaverage and above that of some of its neighborcountries, such as Costa Rica and Panama, as wellas above the Latin American and Caribbean average(2 metric tons).6See, for example, “Hazardous Waste Found amongst Regular Garbage,” News 5, February 12, 2010. Available at http://edition.channel5belize.com/?p=28164.174

For reasons that are unclear, the carbon intensityof economic output in Belize, measured by metrictons of CO 2emitted per million of GDP (2005dollars at international purchasing-power parity),has also increased, from 393.8 in 1990 to 447.8 in2005 (World Resources Institute, n.d.). It is nowequal to the Latin American and Caribbean averagebut still below that in lower-middle-incomecountries (World Bank 2005).The carbon intensity of growth is one of manyindicators used to relate a country’s environmentto its economic performance. The next sectionexplores the relationship between environmentalsustainability and growth.10.2.8 Environmental Sustainabilityand GrowthAccording to Dasgupta and Mäler (2001, 21), theidea of sustainable development is that “relative totheir respective demographic bases, each generationshould bequeath to its successor at least aslarge a productive base as it had inherited from itspredecessor. If it were to do so, the economic possibilitiesfacing the successor would be no worsethan those it faced when inheriting productive assetsfrom its predecessor.”As analyzed above, Belize has managed to preservevaluable natural resources and currently isin a very advantageous position in terms of forestsand freshwater. At the same time, accordingto Chapter 1, Belize’s long-term growth performancehas been comparatively good. Given thisevidence, one would think that Belize is on a sustainabledevelopment path. However, it is worthstopping to evaluate this assumption carefully.Traditional national accounts fail to measure thesustainability of Belize’s actual development path.For example, Belize is attracting cruise ships to itsshores, building tourism facilities, and drilling foroil, all of which is reflected as economic activity inthe national accounts. However, the negative en-vironmental consequences of economic activities(e.g., barrier reef deterioration and groundwaterpollution) and the depletion of nonrenewablenatural resources (e.g., petroleum) are not reflectedthere.To address this issue, the World Bank has developeda sustainability indicator, “adjusted netsavings,” also known as “genuine savings,” thatmeasures the “true” rate of saving in an economyafter taking into account investments in humancapital, depletion of natural resources, anddamage caused by pollution. 7 Positive and nondecliningadjusted net savings rates imply that acountry has saved at least enough to overcomethe deterioration of its capital base resulting fromresource use and associated damage. By contrast,negative adjusted net savings rates imply that acountry’s total wealth is in decline. The differencebetween gross national savings and adjusted netsavings can be used as a proxy for environmentalcosts, and countries that plan to grow today andprotect the environment tomorrow will be identifiedby their depressed (or even negative) rates ofadjusted net savings (CLACDS, 2005).Belize has historically had a positive and respectablerate of adjusted national savings (Figure10.4). However, Belize’s annual net savings ratecollapsed after 2000 and was negative between2001 and 2005. The collapse after 2000 reflectsboth a collapse in gross national savings (Chapters1 and 2) and a widening gap as well between grossnational savings and adjusted net savings, primarilyarising from an increase in capital consumptionfrom a range of 5–8 percent of gross nationalincome prior to 2001 to 12 percent after 2001.The commencement of crude oil production inBelize in 2006 implies that the wedge betweengross national savings and adjusted net savings inthe country is unlikely to return to zero, as it wasprior to 2000.Natural-resource-based economies like Belize aremost at risk of being flattered by respectable rateschapter 10Towards Environmentally Sustainable Development7Adjusted net savings are derived from standard national accounting measures of gross national savings by making four types of adjustments.First, estimates of capital consumption of produced assets are deducted to obtain net national savings. Then, current expenditureson education are added to net domestic savings as an appropriate value of investments in human capital (in standard nationalaccounting, these expenditures are treated as consumption). Next, estimates of the depletion of a variety of natural resources (includingforests, energy resources, and minerals) are deducted to reflect the decline in asset values associated with their extraction andharvest. These estimates are based on the calculation of resource rents, which are derived by taking the difference between world pricesand the average unit extraction or harvest costs (including a “normal” return on capital). Finally, pollution damages are deducted.175

chapter 10Towards Environmentally Sustainable DevelopmentFigure 10.4. Evolution of Gross National Savings and Adjusted Net Savings, 1980–2006(percentage of gross national income and GDP growth)% Annual Growth181614121086420–2–4198019811982198319841985198619871988198919901991199219931994199519961997199819992000200120022003200420052006GDP Annual Growth Gross National Savings (% GNI) Gross National Adjusted Net Savings (% of GNI)Source: Author compilation based on data from World Bank.Note: GNI = gross national income.of gross national savings that mask an unsustainabledevelopment path (Figure 10.5). The largestdivergences between gross national savings andadjusted net savings, reflecting environmental depletion,are in oil-producing countries, followedby those in mineral-producing countries. Ven-ezuela, Trinidad and Tobago, and Ecuador havethe highest average gross national savings rates inLatin America and the Caribbean but have negativeadjusted net savings rates. As noted above,Belize’s gross national savings were unusually depressedbetween 2000 and 2006 and have returned35302520151050–5–10% of GNIFigure 10.5. Average Gross National Savings, Adjusted Net Savings, and Environmental Cost, SelectedLatin American and Caribbean Countries, 2000–2006(percentage of gross national income)BelizePanamaEl SalvadorBrazilCosta RicaJamaicaNicaraguaHondurasChileDominican RepublicEcuadorTrinidad and Tob.Venezuela–14.8–5.9–5.0–0.61.24.23.14.67.214.015.016.311.4–20.0 –10.0 0.010.0 20.0 30.0 40.0 50.0Gross National Savings (% of GNI) Environmental Cost (% of GNI) Adjusted Net Savings (% of GNI)Source: Author compilation based on data from World Bank.Note: GNI = gross national income.176

to a more normal level since 2006. However, theincreasing role of petroleum in the economy impliesthat the country’s environmental costs havealso risen since then.As shown in Figure 10.5, some countries havebetter performance in terms of gross nationalsavings than others and thus appear to be able toprovide better futures for their people. However,when environmental variables are introduced, thepanorama changes.The main policy implication arising from thisanalysis is that intergenerational considerationsshould be taken into account when extractingnonrenewable natural resources. In other words,countries should invest at least some of the valueof the resources extracted in other assets to ensurethat once the resource is depleted, there is somethingleft to ensure welfare for both present andfuture generations. The investment can be eitherin financial assets (as has been done in, for example,Norway) or in assets that can be used forfuture generations (as in, for example, the Canadianprovince of Alberta). Given Belize’s institutionaland financial conditions, a good option forthe country would be the repayment of its debt.10.3 Environmental Governanceand Government ReformEffortsBelize has taken significant strides to protect theenvironment. It has signed numerous internationalenvironmental agreements, passed a significantbody of domestic legislation, and set asidea large proportion of the country in protectedareas. However, implementation of internationaland national legislation has lagged. In this section,Belize’s environmental legal framework andinstitutional structure is described and governmentefforts in regard both to public policy and toconservation are analyzed.10.3.1 Multilateral EnvironmentalAgreementsBelize participates in a number of multilateralenvironmental agreements (see Table 10.1). Inaddition, at the regional level, Belize is part ofboth Caribbean and Central American integra-tion systems. In the case of the Central AmericaIntegration System (SICA), through the system’senvironmental arm, the Central American Commissionfor the Environment and Development,there is a focus on streamlining and harmonizingkey environmental laws, particularly those relatedto environmental impact assessments.10.3.2 Legal FrameworkBelize has a significant number of regulations andlaws (more than 30 environmental acts) related tonatural resources management and conservation.These laws and regulations are very diverse: thereare comprehensive acts that reinforce the country’senvironmental governance system as wellas regulations for almost all productive activities(agriculture, fisheries, and mining) and resources(coastal, land, wildlife).The Environmental Protection Act (EPA), passedin 1992, is the foundation for Belize’s environmentalgovernance. It establishes the Departmentof the Environment and empowers it with variousfunctions and dictates guidelines for the preventionand control of environmental pollution,as well as for the investigation of “environmentalcrimes,” along with the procedures for investigationof such crimes and general penalties for thoseconvicted of committing them. The EPA wasamended in 2009 (see below).The EPA also requires an Environmental ImpactAssessment (EIA) for any project or activity thatmay have a significant impact on the environment,as set forth in the Environmental ImpactAssessment Regulations of 1995. A full EIA mustbe conducted for projects like oil drilling, manufacturingof pharmaceuticals, and construction ofnational highways. Other projects, like large-scalehousing and resort and recreational developments,may also require an EIA, depending on their sizeand location.10.3.3 Government EnvironmentalPolicy Reform EffortsBesides the enactment of the EnvironmentalProtection Act, Belize has worked in the developmentof a wide variety of legislation to address itsmain environmental challenges. Currently, thereare a number of policies (partially implemented,chapter 10Towards Environmentally Sustainable Development177

chapter 10Towards Environmentally Sustainable DevelopmentTable 10.1. Multilateral Environmental Agreements to Which Belize Is a PartyAgreementConvention on Wetlands of International Importance, Especiallyas Waterfowl Habitat (Ramsar Convention), 1971Convention Concerning the Protection of the World Cultural andNatural Heritage, 1972Convention on International Trade in Endangered Species of WildFauna and Flora, 1973Year of signature and year Belize becameparty to the agreementSignatureN.A.Party 1998SignatureN.A.Party 1990Signature 1973–1974Party 1986United Nations Convention on the Law of the Sea, 1982 Signature 1982Party 1983Vienna Convention for the Protection of the Ozone Layer, 1985 Signature …Party 1997Montreal Protocol on Substances That Deplete the Ozone Layer, Signature…1987Party 1998Basel Convention on the Control of Transboundary Movements Signature…of Hazardous Wastes and Their Disposal, 1989Party 1997Convention on Biological Diversity, 1992 Signature 1992Party 1993United Nations Framework Convention on Climate Change,Signature 19921992Party 1994United Nations Convention to Combat Desertification in Those Signature…Countries Experiencing Serious Drought and/or Desertification,1994Party 1998Kyoto Protocol to the United Nations Framework Convention on Signature…Climate Change, 1997Party 2003Convention on the Prior Informed Consent Procedure for Certain Signature…Hazardous Chemicals and Pesticides in International Trade(Rotterdam Convention), 1998Party 2005Cartagena Protocol on Biosafety to the Convention on Biological Signature…Diversity, 2000Party 2004Stockholm Convention on Persistent Organic Pollutants, 2001 Signature 2002Party…Source: Author compilation based on data from ECLAC.Note: N.A. = not applicable; ellipses signify that the information is not available.waiting to be enacted, drafted, or in process of development)and projects of international organizationsin execution aimed at addressing the keychallenges described in Section 10.2.Table 10.2 summarizes some of the recent policiesdrafted and enacted, of which the most importantare the following:●●Environmental Protection Act Amendment(2009): The amendment to the EPA providesgreater environmental control and managementof the petroleum industry (the most sig-nificant part of the amendment). It also makesprovisions for the improved protection of theBelize Barrier Reef System, establishes an environmentalmanagement fund, and providesfor the out-of-court settlement of environmentaldisputes in appropriate cases and forthe issuance of citations for pollution-relatedviolations, among other things.● ● Pollution Regulations (Amendment): Thisamendment complements the EPA in addressingthe petroleum industry, including refining.●● The National Integrated Coastal Zone ManagementStrategy for Belize: The purpose of178

Table 10.2. Recent Developments in Environmental PolicySector Policy Year StatusEnvironmental governance Environmental Protection Act (Amendment) 2009 EnactedEnvironmental Impact Assessment2007 EnactedRegulations (Amendment)Land use National Planning Bill DraftedAmbergis Caye Master Development Plan 2009 DraftedForests New Forest Policy In processCoastal resourcesNational Integrated Coastal ZoneManagement Strategy for Belize1999 PartiallyimplementedNational Aquaculture Zoning Plan 2003 DraftedWater resources Integrated Water Resources Policy 2006 DraftedWater Resources Bill 2006 DraftedWaste management National Solid Waste Management Plan 1997 ReactivatedHazardous Waste Regulations 2009 EnactedEnvironmental Protection (Effluent2009 EnactedLimitations) RegulationsPollution Pollution Regulations (Amendment) 2009 EnactedNational Protected Areas System National Protected Areas Policy and SystemPlan2000 EnactedSource: Author compilation based on information from Belize Audobon Society, Department of the Environment, Coastal Zone ManagementAuthority and Institute, Inter-American Development Bank, and Amandala.chapter 10Towards Environmentally Sustainable Development●●this strategy is to facilitate improved managementof coastal resources at a national level toensure that economic growth is balanced withsound environmental management. It has threeobjectives: “knowledge and sustainable coastalresources use,” “supporting planned development,”and “building alliances to benefit Belizeans,”as well as defined actions to achievethem. The Coastal Zone Management Actof 1999 established the Coastal Zone ManagementAuthority and Institute (CZMAI),whose purpose is to coordinate and consolidatethe segmented functions related to economicdevelopment and resource and environmentalmanagement in Belize’s coastal area. Theauthority and institute monitored coastal resourcesbetween 1999 and 2004; however, sincea budget cut in 2005, both of them are stillfunctioning, but barely. The Act also requiresCZMAI’s Chief Executive Officer to preparea Coastal Zone Management Plan. Since CZ-MAI is not fully functioning, the preparationof the plan is currently on hold.National Solid Waste Management Plan: In1997, an agreement was signed between theGovernment of Belize and the Inter-AmericanDevelopment Bank for a technical assistance●●●●project funded by the Japanese governmentto aid in the preparation of a National SolidWaste Management Plan. The resulting planincludes policy criteria for the developmentof education and public awareness programs,preliminary designs and site development programsfor landfills, environmental monitoringplans, plans for dump site closures, recyclingprograms, and planning for capital and recurrentcosts and cost recovery. Implementationof the plan had been stymied for various reasons,such as lack of political will, but has recentlypicked up.Hazardous Waste Regulations: These regulationsaddress the overall management ofhazardous wastes, including storage, transportation,treatment, and prohibitions.Integrated Water Resources Policy and WaterResources Bill: The aim of the bill is to providefor the management, controlled allocation, andsustainable use and protection of Belize’s waterresources of Belize and to provide for waterquality control and for the establishment of aNational Water Resources Commission.In addition, the government of Belize is executinga number of projects that complement the policy179

chapter 10Towards Environmentally Sustainable Developmentreform efforts addressed above. The most significantare the following:●●●●●●IDB Solid Waste Management Project: Theproject will finance investments in infrastructureto improve solid waste disposal in Belize’smain urban areas, as well as services to strengthenthe Solid Waste Management Authorityas the entity responsible for improving solidwaste management across the country. The infrastructureinvestments include the closure ofthe open dump site at Mile 3 on the country’sWestern Highway; the construction, at Mile24, of a main waste transfer facility to facilitatewaste separation and recycling and the haulingof waste volumes for final disposal, as well asa new regional waste disposal facility; and theclosure of open dump sites in San Pedro, CayeCaulker, and San Ignacio and construction oftransfer facilities in those sites or in alternativesites. The institutional-strengthening componentwill provide resources to support to theSolid Waste Management Authority in executingthe project and carrying out its broadercapacities according to its mandate.United Nations Development ProgrammeLand Management Project: To support theadoption of sustainable land managementcapacities in Belize, the United Nations DevelopmentProgramme is developing a projectto address widely recognized problems of lowinstitutional and human resource capacities,increased poverty, and inadequate capacities inland management. Funded by the Global EnvironmentFacility (GEF), the project will alsoenable Belize to strengthen policy, regulatory,and economic incentive frameworks to facilitatewider adoption of sustainable land managementpractices across sectors.The Mesoamerican Barrier Reef System Project:The goal of the MBRS Project, funded by GEFand the governments of Belize, Guatemala,Honduras, and Mexico, is to enhance protectionof the unique and vulnerable marine ecosystemscomprising the MBRS and to assist the countriesin strengthening and coordinating regionalpolicies, regulations, and institutional arrangementsfor the conservation and sustainable useof this global public good. The MBRS Projectsupports training for staff in monitoring and forfisheries workers in alternative livelihoods andprovides financing to conduct monitoring.10.3.4 Institutional StructureThe key agencies responsible for environmentalprotection and natural resources managementin Belize are the Ministry of Natural Resourcesand the Environment, which is one of the largestministries of Belize and includes the Departmentof the Environment, Department ofGeology and Petroleum, Forest Department,and Lands and Surveys Department; the Ministryof Agriculture and Fisheries, which includesthe Coastal Zone Management Authority andInstitute; the Ministry of Health; and the Ministryof Tourism, Civil Aviation, and Culture. Inaddition, the Solid Waste Management Authority(SWMA) has the mandate to implement asolution to the country’s solid waste problem atthe national level.The Department of the Environment has a broadmandate to ensure the protection and sustainableuse of the country’s natural resources and the responsibilityfor monitoring the implementationof the EPA and subsequent regulations, as well asfor taking the necessary actions to enforce its provisions.Its chairman is the Chief EnvironmentalOfficer, who is also the head of the National EnvironmentalAppraisal Committee (NEAC), anagency that has the primary role of reviewing allEIAs and advising the department on their adequacy.Eight government agencies are representedon this advisory body, and of its thirteen members,two are required to be from a nongovernmentalorganization or the private sector. Other advisorybodies are the Fisheries Advisory Board, attachedto the Fisheries Department and the Land UtilizationAuthority.10.3.5 Natural Resources andBiodiversity ConservationNational Protected Areas SystemBelize is not only a country with a rich naturalresources endowment, but also a country with agreat awareness of the need for preservation ofthese resources. Forest reserves and national parkshave existed in Belize since the 1920s and 1980s,respectively. Currently, 36 percent of Belizeanterritory is under protection, which is the highestproportion in the Central American and Caribbeanarea (World Bank 2006).180

Figure 10.6. Protected Areas, 2006(percentage of land)BelizeGuatemala3336chapter 10Dominican Republic24Costa RicaHondurasNicaraguaLatin America & CaribbeanSt. LuciaJamaicaSt. Vincent and the Gren.Lower middle incomePanamaTrinidad and TobagoEl SalvadorBelize’s National Protected Areas System consistsof 94 terrestrial and marine protected areas thatinclude private, public, and community-basedconservation initiatives. These areas representthe principal tools for the conservation of criticalhabitat, such as coastal, freshwater, and forest areas,and are a provider of environmental services,including biodiversity protection, production ofwater, and the provision of scenic beauty. Theyalso generate a positive externality for recreationand research.According to the National Protected Area SystemsAnalysis conducted in 2005, only one-thirdof the terrestrial protected areas in Belize are reservedstrictly for the conservation of biodiversity,since the majority of the protected areas areextractive reserves that allow the removal of flora,timber, and fauna. The country’s marine realm ismuch less protected than the terrestrial realm, asonly 13.6 percent of the country’s marine territoryis protected. This substantial underrepresentationof the marine realm results from thesignificant portion of deep water located awayfrom the coastal shelf that has not been considereda conservation target (Meerman and Wilson2005).Belize’s Marine Protected Areas System consistsof 18 protected areas, covering approximately250,000 hectares of marine area. Despite the sub-1Source: Author compilation based on data from World Bank (2006).5101111151517182022stantial underprotection of its marine realm incomparison to its terrestrial realm, Belize has thelargest proportion of marine protected areas inCentral America. Some of its Caribbean neighbors,however, have bigger proportions of marineareas under some kind of protection. In fact, in astudy of Belize’s Marine Protected Areas System,Cooper, Burke, and Bood (2009) concluded thatmarine protected areas are a useful tool for addressinga number of threats to coral reefs, particularlythose related to tourism, development,and overexploitation of commercial species. Theauthors consider Belize’s Marine Protected AreasSystem among the best in the world and an exampleof forward thinking in marine conservation.Belize’s National Parks System Act of 1981,which provides the regulatory framework for thepreservation and use of Belize’s natural and culturalfeatures, is the statutory authority for theNational Protected Areas System. Protected areasin Belize are under the responsibility of the ForestDepartment, the Fisheries Department, and theInstitute of Archaeology. There are also arrangementsbetween nongovernmental organizationsand the Forest Department and the FisheriesDepartment for the comanagement of selectedterrestrial and marine protected areas. Privatelyowned and managed lands have also been designatedprotected areas, and some are recognized byTowards Environmentally Sustainable Development181

chapter 10Towards Environmentally Sustainable DevelopmentFigure 10.7. Terrestrial and Marine ProtectedAreas, by Type of Conservation100%90%80%70%60%50%40%30%20%10%0%TerrestrialMarineArcheological Reserves Private Reserves Extractive ReservesConservation ZonesTerritory without conservationSource: Author calculations based on data from Meerman andWilson (2005).Another model project is the Rio Bravo Conservationand Management Area, 260,000 acres ofmixed lowland, moist subtropical broadleaf forestlocated in northwest Belize. This was one of thefirst fully funded forest sector projects acceptedand implemented (in 1995) under the U.S. Initiativeon Joint Implementation, which promotesprojects for reducing greenhouse gas emissionsand encouraging sustainable development. TheWorld Land Trust’s Programme for Belize managesthe private reserve with a mixed model thatcombines private external funding and sustainabletimber extraction. According to The Nature Conservancy,studies undertaken before the beginningof the project indicated that without further prothegovernment. However, problems of nationalcoordination, planning, and financing hamper themanagement of protected areas in many cases.Some of Belize’s protected areas are “paper parks”with no visible on-the-ground management ormanagement plan.A major issue facing protected areas in Belize ismineral and petroleum extraction within legallyrecognized protected areas. In fact, a map availablefrom the Belize Geology and Petroleum Departmentshows oil concessions approved by thegovernment of Belize in protected areas, includingBelize’s Barrier Reef. The most recent suchmap shows 19 production-sharing agreements,six of which are for coastal or offshore sites. Asa result of the ongoing oil spill in the Gulf ofMexico that began in April 2010 and continuesas of the printing of this book, various nongovernmentalorganizations in Belize are asking thegovernment to place a ban on offshore oil exploration.8Other important issues in regard to Belize’s protectedareas are illegal logging, hunting, and fishing.In fact, competing demands for use of Belize’snatural resources have led to conflicts resultingfrom uses of resources in protected areas by communitieswith customary rights or access. A finalconcern is the poorly regulated visitor use of someprotected areas in Belize.10.3.6 Payment for EnvironmentalServices in BelizeSchemes for payment for environmental servicesseek to assign a value to environmental servicesand then establish an appropriate pricing systemfor those services to foster sustainable and sociallyoptimal use of natural resources.Belize’s Protected Areas Conservation Trust, afund dedicated to the promotion, conservation,and sustainable development of Belize’s protectedareas system, was the first Belizean initiative usingthe concept of payment for environmental services.It was formally endorsed through the U.S.Agency for International Development’s projectfor the development of a National ProtectedAreas System Plan and began operating in June1996. Its main source of funding is an “exit tax” ofUS$7.50 per person collected from nonresidentvisitors (i.e., consumers of the Belizean scenicbeauty), although cruise ship visitation chargesand donations also provide support. These funds,as well as a portion of the entrance fees collectedat protected areas, go into the trust and thenare distributed in the form of grants to organizationsto facilitate the sustainable managementof Belize’s natural resources and preservation ofthe ecosystem services. The trust has become animportant and efficient fund for conservation inBelize, and its contribution to natural resourcesmanagement and conservation is internationallyrecognized.8For more information about the impact of petroleum on the environment, please refer to Chapter 8.182

tection, up to 90 percent of the forest cover wouldhave been converted to agricultural use.In 2001, Belize signed its first Tropical ForestConservation Agreement with the U.S. governmentand The Nature Conservancy. The agreementincluded a Debt-for-Nature Swap, wherebythe government of Belize will fund three nongovernmentalorganizations and the Protected AreasConservation Trust over a 26-year period in exchangefor being released from US$8.6 millionin debt to the U.S. government. With resourcesalready received under the agreement, the nongovernmentalorganizations have administeredconservation activities in 23,000 acres of vulnerableforest in Belize’s Maya mountains.10.3.7 Environmental ManagementGapsAs noted in the foregoing analysis, Belize has abroad range of laws, regulations, and ratified multilateralenvironmental agreements, as well as institutionsto implement them. However, there are stillimportant constraints on creating better environmentallaw enforcement and a sound monitoringsystem. The following subsections discuss obstaclesto environmental sustainability in the country. 9Suboptimal Implementation of ExistingEnvironmental PoliciesIn addition to the gaps in environmental policycoverage, the implementation of existing environmentalpolicies in Belize is in many ways suboptimal.First, a significant number of informal and/or draft policies are held up under legal review.An apparent bottleneck after a policy or legislationis drafted delays or prevents it from beingadopted or signed into law. Second, althoughEIAs are a requirement in connection with manyprojects, their quality is questionable, and thereis a lack of compliance with environmental managementplans, including preventative and mitigationmeasures recommended in EIAs. Third,there are advisory bodies with limited powers(e.g., the Fisheries Advisory Board, the NationalEnvironmental Appraisal Committee, and theLand Utilization Authority). Fourth, althoughBelize participates in any number of multilateralenvironmental agreements (see Table 10.1),making them operational and taking advantageof their provisions is still a challenge. Fifth, thereare problems of coordination, fragmentation, andoverlaps in environmental management.Lack of Resourceschapter 10Towards Environmentally Sustainable DevelopmentGaps in Environmental PolicyEnvironmental policy in Belize suffers from anumber of substantial gaps. First, national developmentpolicies fail to take environmental issuesinto account. Second, there are notable areas notcovered by environmental policies and/or law.One of the major gaps is the lack of a NationalLand Use Policy and Plan that could act as theframework to guide development. Third, tools toensure compliance with environmental laws areinsufficient. Fourth, environmental regulations inBelize do not always reflect present-day realities;for example, the current national forest policy waspromulgated in 1954 and does not effectively addressthe present realities of the forestry sector (infact, the term “sustainable development” is mentionedonly once). Additionally, fines for environmentaldamage are too small to act as a deterrentfor big developments.According to the recent report Millennium DevelopmentGoals: Advances in EnvironmentallySustainable Development in Latin America and theCaribbean (ECLAC 2010), in 2005, Belize’s publicenvironmental expenditure as a percentage ofGDP (0.019) surpassed that of Argentina (0.01),Chile (0.015) and Uruguay (0.01). Moreover,between 2000 and 2005, it increased 72 percent.However, given the size of Belize’s economy, evenwith this recent growth, the amount of resourcesdevoted to environmental issues in the country isstill insufficient to cope with all its environmentalchallenges.To address this matter, the Environmental ManagementFund was created in 2009. It receives0.10 percent of the country’s oil revenues, as wellas other fees, penalties, and donations. The fundhas a number of objectives: to assist the Departmentof the Environment in covering all costs as-9This section is based on work by the Belize Audubon Society in its Environmental Agenda for Belize.183

chapter 10Towards Environmentally Sustainable Developmentsociated with oil spills, to carry out programs toprevent and reduce pollution, to support environmentalmonitoring and enforcement, to promoteenvironmental public awareness and research,to encourage local environmental initiatives, topublish reports and other publications about theenvironment, and to plan and implement otherinitiatives for the effective and efficient use of theenvironment.10.3.8 SummaryEnvironmental governance in Belize is based on awide range of national legislation, multilateral environmentalagreements, and both governmentaland nongovernmental institutions. However, gapsin this governance represent an obstacle to soundenvironmental management in the country. Themain constraints are a lack of coordination andresources, antique laws that fail to address today’schallenges properly, ambitious policies and regulationsthat are developed but never enacted, andthe absence of a land use policy as well as a uniqueauthority responsible for water resources management.Policy options for addressing these gaps arediscussed in the following section.The following subsections provide brief introductionsto these models.10.4.1 Integrated Water ResourcesManagementIntegrated water resources management is a systematicprocess that takes into account the interdependenceof many different uses of finite waterresources. Its main objective is to allow the sustainabledevelopment, allocation, and monitoring ofwater resources in the context of social, economic,and environmental objectives. Out of 95 countriesexamined at the Fourth World Water Forum inMexico in 2006, 74 percent were found either tohave integrated water resource management strategiesin place or to have initiated a process for theformulation of such strategies. In two CentralAmerican countries (Costa Rica and Honduras),the integrated water resources management concepthas been included in key government documentsthat guide and regulate (or aim to) the useof water resources (Hassing et al. 2009).10.4.2 Community-Based NaturalResources Management10.4 Policy OptionsThe establishment of a sound environmentalmanagement framework is a challenging task,even more so in a country like Belize, which ishighly indebted, has a small population, and facesthe difficult challenge of finding equilibriumbetween the exploitation of natural resourcesand sensitive ecosystems preservation. However,Belize is not alone in the pursuit of sustainabledevelopment. After decades of research and discussion,some resource management models (forexample, integrated water resources managementand community-based natural resources management)applied in countries with characteristicssimilar to those of Belize have demonstrated successand therefore gained acceptance. Equally,given the necessity of carbon capture to combatclimate change, academics and policymakers havedeveloped attractive financial options for forestpreservation that Belize can and should consider.Community-based natural resources managementrelates to direct control of rural resourcesby communities. There is evidence that models ofcommunity-based natural resources managementhave improved livelihoods and have boosted developmentof village infrastructure and representationin decision-making roles. These modelscould be implemented in Belize, particularly inthe case of fisheries and forests. In fact, there aresuccess stories of implementation of communitybasedmanagement models in Guatemalan forestsand fisheries in Bangladesh that are relevant forBelize (World Resources Institute 2008).10.4.3 Reducing Emissions fromDeforestation and ForestDegradationAccording to a United Nations website on thetopic, 10 reducing emissions from deforestationand degradation (REDD) is an effort to createa financial value for the carbon stored in forests,10See the website of the United Nations Collaborative Programme on Reducing Emissions from Deforestation and Forest Degradationin Developing Countries at http://www.un-redd.org/.184

offering incentives for developing countries toreduce emissions from forested lands and investin low-carbon paths to sustainable development.It is very likely that REDD will be included inany post–Kyoto Protocol climate change managementregime. According to Allen Blackman(2010), one of the main arguments for the inclusionof REDD in such a regime is that REDDwill be inexpensive compared to fuel switching,carbon capture and storage, and other greenhousegas abatement options available. Buyersof REDD credits would be predominantly foreignentities, which would be an advantage in acountry like Belize. In the Central America area,Panama has already developed a strategy to implementREDD, and Costa Rica participates asan observer to the UN Collaborative Programmeon REDD Policy Board. Through activities associatedwith REDD, a country like Belize (where,as noted earlier in the chapter, approximately72 percent of the land is covered by forest) cantake advantage of the benefits of implementingclimate change mitigation policies (includingpreserving biodiversity, protecting hydrologicalservices, minimizing economic development andcultural trade-offs, and maximizing long-termconservation).10.5 Policy RecommendationsFrom the diagnosis of the state of natural resourcesand the environmental governance in Belizepresented in the foregoing sections, 10 environmentalpolicy recommendations emerge.10.5.1 Take Advantage of What HasAlready Been DoneBelize does not have to start from scratch in formulatingits agenda for sustainable development.The country has put a great deal of effort andresources toward developing policies relevant toaddressing environmental problems, and thesepolicies should not remain as drafts or be onlypartly implemented. Belizean authorities, inconjunction with stakeholders, should review allexisting environmental policies still at the draftstage and initiate legislative discussion on thoserelated to the most urgent environmental challenges.Equally, existing and future environmentallaws should be enforced, and institutions withenvironmental mandates that have been allowedto languish should be reactivated.10.5.2 Plan for SustainableDevelopmentIt is highly recommended that Belize’s governmentdevelop a land use policy and strategy.Moreover, the government should formalize abody responsible for coordinating land use andterrestrial development in the country, with representationfrom key implementing agencies andstakeholders. This is key to assuring sustainabledevelopment and becomes crucial in the case oftourism development and conservation of Belize’smarine ecosystems. Existing regional plans (e.g.,the Ambergris Caye Master Development Plan)could be revised and launched. It is also recommendedthat economic valuation be incorporatedinto planning processes (e.g., EIAs) and that distributionaleffects (“winners” and “losers”) of proposeddevelopments be evaluated.10.5.3 Improve Waste TreatmentAlthough there has been rapid progress in the improvementof hygienic conditions in Belize, thechallenge for the country is to ensure improvedsanitation coverage, particularly in rural areas.Establishing liquid waste facilities in the principaltourism destinations is important, both tocope with the concentrated waste volumes and toenhance as well the sustainability of the tourismindustry. Sewage and solid waste disposal shouldbe incorporated in planning for tourism development.10.5.4 Establish a Unique WaterAuthorityWater governance is essential to ensure plannedallocation, sustainable development, and adequateprotection of freshwater resources. Belize shouldavoid at all costs degradation of its water resources,but until there is a unique institution in charge ofwater resources management in the country, thatis not going to be possible. As mentioned before,the implementation of integrated water resourcesmanagement has showed success all around theworld, in both developed and developing countries.Therefore, the currently pending IntegratedWater Resources Policy and Water Resources Billchapter 10Towards Environmentally Sustainable Development185

chapter 10Towards Environmentally Sustainable DevelopmentCruise tourism and oil extraction are two of thelargest sources of foreign exchange in Belize andat the same time are two major generators of enshouldbe revised and then adopted, enacted, andinstitutionalized.10.5.5 Strengthen Protection of theBelize Barrier ReefThe 2009 Amendment of the EnvironmentalProtection Act includes provisions for the improvedprotection of the Belize Barrier ReefSystem. This represents a step in the right direction,however, there is still much left to be donein regard to preserving Belize’s Barrier Reef. Itis crucial that Belize empower the CZMAI andbuild capacity for monitoring the state and useof coastal resources. Once reinvigorated, theagency should develop and implement a CoastalZone Management Plan. It is essential that thisplan incorporate means to minimize the loss ofmangroves along the shoreline. In terms of fisheries,it is recommended that fishing regulationsbe tightened and greater resources be investedin their enforcement. It is also important to encouragethe revision and approval of the NationalAquaculture Plan. Overall investment in marineprotected areas should increase, and fee collectionand monitoring of visitors should improve.Resilience to coral bleaching should be built intothe management and expansion of the marineprotected areas network. Finally, Belize shouldconsider the regulation of cruise tourism. Ecuador,for example, has set regulations to limit thenumber of cruises visiting sensitive ecosystems inthe Galapagos Islands.10.5.6 Avoid DeforestationInformation systems for monitoring Belize’s forestresources should be improved, as Indonesia isdoing to provide a tool to combat illegal logging.In addition, Belize can implement win-win solutionsto finance sustainable development andavoid deforestation. The country has the conditionsto participate in carbon markets and canstudy the feasibility of new options in the market(e.g., REDD). Equally, nontimber forest productsare gaining importance and have great potentialas a sustainable resource. A number of examplesare relevant for Belize: latex extraction for chicle,medicinal plants, honey, raw materials for handicrafts,xate palm leaves, houseplants, spices, oils,pharmaceuticals, forest tree seeds for nurserypropagation, orchid plants, and wild fruits.10.5.7 Implement Adequate Legislationto Address Today’s Needs andAdopt Incentive Systems andStandardsThe Belizean government should establish strongerpenalties for noncompliance with laws and reviewnational parks fee structures. It will also beimportant to adopt a system of incentives to encouragegood environmental stewardship for compliancewith environmental laws. For example, theimplementation of the International Organizationfor Standardization (ISO) 14001 11 certification isvery popular in Latin America (in 2008, there were5,470 ISO 14001–certified enterprises), and theEconomic Commission for Latin America and theCaribbean uses the number of ISO 14001–certifiedenterprises in a country as an indicator of itslevel of environmental management.10.5.8 Optimize Use of ScarceResourcesEstablishing clear roles to avoid fragmentationand overlapping in organizations involved in naturalresources management will lead to a betterallocation of the limited financial resources thatcan be devoted to such management. Belize’s governmentalso must make sure that the resourcesof the country’s recently initiated EnvironmentalManagement Fund is deployed exclusively for environmentalmatters.10.5.9 Internalize Environmental Costsin Economic Activities11ISO 14000 is a family of internationally recognized standards for environmental management systems applicable to any businessor organization, regardless of size, location, or income. These standards are developed by the International Organization for Standardization,which has committees with representation from all over the world. The ISO 14000 family includes most notably theISO 14001 standard, which represents the core set of standards used by organizations for designing and implementing an effectiveenvironmental management system.186

vironmental impact in the country. For this reason,the government should weigh revenues fromthese two sources against potential economic lossesfrom environmental impacts. There has beenprogress in this area in the case of petroleum, withthe creation of the Environmental Fund in 2009,and the government should consider the incorporationin a future long-term tourism strategyof compensation for the environmental damagegenerated created by cruises.10.5.10 Promote EnvironmentalAwareness at the NationalLevelBelize should develop an environmentally consciouscitizenry. Environmental education shouldbe integrated into all levels of formal education,workplaces, media, and other social institutions.It is also recommended that people involved intourism be educated about the environment.chapter 10Towards Environmentally Sustainable Development187

chapter 10Towards Environmentally Sustainable DevelopmentReferencesBelize Audubon Society. 2008. An EnvironmentalAgenda for Belize 2008–2013. Belize City.Available at http://www.belizeaudubon.org/documents/publications/EnvAgenda-Full-Report-web.pdf.Belize Forest Department. 2004. Latin AmericaForestry Sector Outlook Study Working Paper:National Report Belize. ESFAL/N/17.Rome: Food and Agriculture Organization.Available at http://www.fao.org/docrep/007/j4051b/j4051b00.htm.Biodiversity & Environmental Resource DataSystem of Belize. Available at http://www.biodiversity.bz/.Blackman, A. 2010. “RFF Policy Commentary:Will REDD Really Be Cheap?” Resources 174(Winter/Spring): 4. Available at http://www.rff.org/RFF/Documents/Resources_174_Will_REDD_Be_Cheap.pdf.CLACDS (Centro Latinoamericano para laCompetitividad y el Desarrollo Sostenible).2005. Belize: Country Environmental Analysis—TowardsCompetitiveness and SustainableDevelopment. Alajuela, Costa Rica: INCAEBusiness School.Coastal Zone Management Authority & Institute.1999. The National Integrated CoastalZone Management Strategy for Belize. Belmopan.Available at http://www.coastalzonebelize.org/publications/czmai_strategy.pdf.Cooper, E., L. Burke, and N. Bood. 2009. “CoastalCapital: Belize—The Economic Contributionof Belize’s Coral Reefs and Mangroves.”World Resources Institute Working Paper,Washington, D.C. Available at http://pdf.wri.org/working_papers/coastal_capital_belize_wp.pdf.Dasgupta, P., and K.-G. Mäler. 2001. Wealth asa Criterion for Sustainable Development.World Economics 2(3):19–44.ECLAC (Economic Commission for LatinAmerica and the Caribbean). 2010. MillenniumDevelopment Goals: Advances in EnvironmentallySustainable Development in LatinAmerica and the Caribbean. Santiago, Chile.FAO (Food and Agriculture Organization of theUnited Nations). N.d. FAOSTAT. Availableat http://faostat.fao.org/.Hassing, J., N. Ipsen, T. Jønch-Clausen, H. Larsen,and P. Lindgaard-Jørgensen. 2009. IntegratedWater Resources Management in Action.World Water Assessment Programme DialoguePaper, United Nations Educational,Scientific, and Cultural Organization, Paris.IDB (Inter-American Development Bank). 2008.Solid Waste Management Project. IDB DevelopmentProject. Washington, D.C.International Union for Conservation of Nature.2009. The IUCN Red List of ThreatenedSpecies. Version 2009.2. Gland, Switzerland.Medlin, R. 2008. State of the Environment: Belize.Jonesboro, Arkansas: Arkansas State University,Department of Biological Sciences.Meerman, J. C., and J. R. Wilson (eds.). 2005. TheBelize National Protected Areas System Plan.Belmopan: Task Force on Belize’s ProtectedAreas Policy and Systems Plan. Availableat http://www.inbio.ac.cr/web-ca/biodiversidad/belice/appendix3.pdf.Ministry of Agriculture and Fisheries. 2004. AnnualReport. Belmopan.Ministry of Health. 2009. Annual Report. Belmopan.Statistical Institute of Belize. 2009. Gross DomesticProduct (GDP), 2002–2008. Available athttp://www.statisticsbelize.org.bz/dms20uc/dynamicdata/docs/20090813191333_2.pdf.United Nations. UNStats. Various years. Availableat http://unstats.un.org/unsd/default.htm.World Bank. Various years. World DevelopmentIndicators. Washington, D.C.World Resources Institute. N.d. EarthTrends EnvironmentalInformation . Available at http://earthtrends.wri.org.Young, C. A. 2008. “Belize’s Ecosystems:Threats and Challenges to Conservation inBelize.”Tropical Conservation Science 1(1):18–33. Available at http://tropicalconserva-tionscience.mongabay.com/content/v1/08-03-03-Young.htm.188

Part IVSocialDevelopment189

Protecting the Poor and Vulnerablein a Tight Fiscal Environment1111.1 IntroductionThere is no unique definition of social protection; however, a commonly agreed-upon description isthat social protection is a group of policies or programs aiming to enhance the capacity of poor andvulnerable persons to manage economic and social risks, such as unemployment, sickness, disability, andold age. According to the United Nations Development Programme (UNDP) (International PovertyCentre 2006), policy interventions can improve these persons’ well-being by, among other things, moderatingthe impact of shocks that cause sharp reductions in their income or consumption; indeed, this isthe purpose of the social protection system in Belize. As Chapter 1 showed, Belize’s economic growthslowed after 2004, even before the onset of the global recession in late 2008 and 2009. Moreover, thereare indications that the economic growth that took place in Belize during the early years of the 2000s,such as tourism growth in Placencia and San Pedro and the emergence of the oil sector, had limited“trickle-down” impacts in terms of poverty alleviation. Unemployment in the country remains high, especiallyamong the young population and women. In this context, a robust and efficient social protectionframework is essential for protecting the poor and vulnerable.Limited social assistance services and social security programs exist in Belize, but fiscal constraints limitthe government’s capacity to increase social spending and invest in existing programs. This points to aneed to ensure that these programs are as efficient as possible.This chapter analyzes social protection in Belize and its major challenges and outlines possible policyoptions and recommendations for strengthening protection of the country’s poor and vulnerable.11.2 Social Protection in Belize11.2.1 Who Are the Poor and Vulnerable in Belize?According to the 2009 Country Poverty Assessment, 33 percent of households representing 43 percentof the population in Belize are poor, and 10 percent of households accounting for 16 percent of thepopulation are indigent (Government of Belize 2009). Poverty rates are highest at the country’s geographicalextremes—Toledo (51 percent), Corozal (47 percent), and Orange Walk (36 percent)—andlowest at its center—Belize (24 percent) and Cayo (31 percent). Closely related to this, poverty is farmore prevalent in the country’s rural areas (44 percent) than in its urban areas (19 percent) (Governmentof Belize 2009).191

chapter 11Protecting the Poor and Vulnerable in a Tight Fiscal EnvironmentPoverty rates in the country are strongly correlatedwith household size; only 16 percent offamilies of two or three persons are poor, whereasthe proportion rises to 61 percent of householdsof six or more persons. The poverty rates of maleheadedhouseholds differ little from those of female-headedones. Poverty rates are also stronglyinversely correlated with the level of educationof the head of household (Government of Belize2009).There is also some association of poverty withextremes of age. Children under 15 years of age(52 percent), youth between 15 and 24 years ofage (45 percent), and the elderly (41 percent) havehigher poverty rates than working-age adults (37percent between the age of 25 and 44 and 33 percentbetween the age of 45 and 64) (Governmentof Belize 2009).Poverty in Belize is also closely associated withemployment and labor market status; it is morelikely to be associated with work in less-skilledoccupations and unemployment. Fifty-six percentof the unemployed in the country are poor,compared with only 33 percent of the employed.Forty-five percent of those not in the labor force(i.e., people not looking for a job, but without anyincome) are poor.Furthermore, the unemployment rate in Belizehas increased in recent years, from 9 percent in2006 to almost 14 percent in 2009. A comparisonof Belize’s unemployment rate with those ofother Central American and Caribbean countriesshows that Belize has the fourth-highest unemploymentrate in the region, behind Antigua andBarbuda (almost 39 percent), St. Vincent and theGrenadines (almost 18 percent), and the DominicanRepublic (almost 16 percent). Unemploymentis higher among Belize’s women than among itsmen and higher for its youth than for adults over24 years of age (Table 11.1).Child labor is a widespread problem in Belize.Among children between 5 and 17 years of age, alittle over 6 percent are working, and the averageage of entry into the workforce in the country is8.7 years. Males are three times more likely to beengaged in child labor than females, and Mayachildren are more likely to participate in workthan children from other ethnic groups; theyare also the largest group in absolute terms of allworking children. Child labor is most prevalent inlarge families, single-parent families, and familieswhose heads have less than a primary school education.Contributing factors are limited classroomspace, an uninteresting curriculum, and provisionof instruction in a language other than the child’snative language (Young 2003).Finally, disability is an often forgotten but pressingsocial problem in Belize. The number of personswith disabilities has shown a significant increasein the country since the 1991 census, particularlyin its poorer areas. In 1991, around 2 percent ofthe population was reported as unable to workas a result of disabilities; by 2001, the number ofreported disabilities had grown to 10 percent ofthe population (Meerhoff 2007). Although theserates include persons with multiple disabilities,the rapid growth stands out as significant, especiallysince the distribution of the disabled is notuniform geographically. Cayo and Toledo—thecountry’s two poorest districts—stand out fortheir high proportion of persons with disabilities,Table 11.1. Unemployment Rates by Sex and Age Group, 2009(percent)Age group Female Male Both sexes Difference14–19 43.4 26.1 33.0 17.320–24 27.9 16.2 20.8 11.725–49 15.9 5.0 9.6 10.850–64 21.1 6.3 11.3 14.765+ 9.4 4.6 5.7 4.8All ages 21.1 9.1 13.9 12.0Source: Government of Belize (2009), 31–32.192

in both relative and absolute terms. Cayo accountsfor 27.6 percent of all persons with disabilities inthe country but has only 21.9 percent of the nationalpopulation. Orange Walk and Toledo eachshow 13.9 percent of disabilities, but 16.2 percentof the population lives in Orange Walk, as opposedto Toledo, where only 9.7 percent of thepopulation lives. 1 Belize District is home to 28.4percent of the country’s people and 20.7 percentof the disabled.11.2.2 Major Social ProtectionProgramsBelize seeks to protect its poor and vulnerablethrough three broad mechanisms: (1) the socialsafety net programs of the Social Security Board,(2) the programs of the Ministry of Human Developmentand Social Transformation, and (3) theSocial Investment Fund.Social Security BoardThe major social protection programs administeredby Belize’s Social Security Board includetransfer payments to cover sickness, maternity,retirement, invalidity, death, and disability, bothto retired or disabled insured workers and to survivorsof insured persons.The Social Security Board is financed by contributionsfrom both employees and employers. Theamount payable by each category varies and dependson the level of income. The total payroll taxpayable by all persons in insurable employment is8 percent of the employed person’s average weeklyearnings. In 2006, more than 60 percent of thecountry’s population was registered with the SocialSecurity Board, with 70 percent of them beingof working age and most of the rest being minors.This nevertheless does not represent the numberof those actually making contributions to Belize’ssocial security programs. Only 71,000 peopleparticipated in the programs in 2005, around 72percent of the employed population. Participationrates were similar for men and women andwere highest in Belize City and Corozal andStann Creek Districts. Consequently, the board’sassistance is focused on the formal economy andworking individuals, but coverage of the informaleconomy is lacking.The major part of benefit expenditures, 78 percent,is made for short-term benefits (e.g., sickness,work injury, and maternity). Another 15percent is allocated for long-term benefits (e.g.,old age, survivors, and invalidity pensions) (Table11.2). The remainder (7 percent) goes into paymentsfor employment injuries and disability.In 2003, a Non-Contributory Pensions (NCP)program was initiated for women 65 years of ageor older, as part of the country’s poverty alleviationstrategy. Leakage rates are high, however,both for this program (more than half of its recipientslive in nonpoor households) and for thecountry’s social welfare programs in general (morethan 40 percent of recipients come from nonpoorhouseholds).Ministry of Human Development and SocialTransformationBelize’s Ministry of Human Development andSocial Transformation is in charge of managingsocial protection in the country by facilitatingpolicy development and the implementation ofprograms to promote social justice and equity. Assuch, it is involved in areas such as strengtheningof the family’s supportive role, 2 provision ofalternative care for the elderly, strengthening ofcivil society, and increasing advocacy and publicawareness, although it focuses particularly on maternal-childsocial protection issues.chapter 11Protecting the Poor and Vulnerable in a Tight Fiscal Environment12Different hypothesis have been advanced to try to explain this high incidence in Toledo: inheritance/genetics; drinking/drug abuse;intermarriage (endogamy); environmental factors (wood and kerosene smoke inhalation in the home); dietary and nutrient/micronutrientintake deficiencies (for example, lack of iron, iodine, Vitamin A, Vitamin B, Vitamin D, etc.); agricultural poisoning throughcontaminants (insecticides, pesticides, other); industrial poisoning, cuts, burns and other accidents; traffic accidents and violence; accidentsand violence at home; and consequences of disability-causing illnesses such as diabetes.For example, skills training, entrepreneurship and empowerment programs (e.g., sewing, cosmetology, housekeeping, child care, smallbusiness management). As of 2009, there were about 450 participants in these programs, which are often targeted at single mothers.The training courses are generally always full, despite the requirement for a small financial contribution to participate. Personaldevelopment sessions are offered as well, focusing on gender sensitization, HIV/AIDS/sexually transmitted infections, gender-basedviolence, self-esteem, child abuse, and sexual harassment (Government of Belize 2009, 153).193

chapter 11Protecting the Poor and Vulnerable in a Tight Fiscal EnvironmentTable 11.2. Social Security Statistics, 2001–2005Benefit2001 2005 2001 2005 2001 2005 2001 2005Amount (BZ$)Number ofbeneficiariesDistribution (%ofexpenditures)Average annualchange (%)Average payments(BZ$)Grants/one-timepayments MonthlyShort term 4,913,453 7,912,056 13,091 25,124 33 78 12.6 17.7 n.a. n.a.Sickness 2,471,184 4,412,500 8,789 20,674 18 64 15.6 23.8 219 n.a.Maternity 1,457,171 2,506,045 1,032 1,185 10 4 14.5 3.5 1,932 n.a.allowanceMaternity 985,098 993,511 3,270 3,265 4 10 0.2 0.0 304 n.a.grantLong term 8,656,782 12,411,847 3,773 4,787 51 15 9.4 6.1 n.a. n.a.Retirement 5,554,636 7,873,354 1,799 2,360 32 7 9.1 7.0 2,921 244pensionaSurvivors 1,668,597 2,409,361 1,276 1,588 10 5 9.6 5.6 703 100pensionaInvalidity 837,453 1,459,284 200 310 6 1 14.9 11.6 5,853 327pensionaFuneral 596,096 669,848 498 529 3 2 3.0 1.5 1,266 n.a.grants (NC)Employment 6,406,326 3,931,361 3,023 2,163 16 7 −11.5 −8.0 n.a. n.a.injuryInjury 4,172,056 1,909,623 2,537 2,020 8 6 −17.7 −5.5 945 n.a.Disability 1,775,223 1,414,791 331 371 6 1 −5.5 2.9 2,733 216Death 445,547 602,447 325 332 2 1 7.8 0.5 n.a. 129Funeral (ET) 13,500 4,500 10 3 0 0 −24.0 −26.0 1,500 n.a.Total b 19,976,561 24,255,264 19,887 32,074 100 100 5.0 12.7 n.a. n.a.Source: Calculations based on Social Security Board (2007).Note: n.a. = not available.a Grants and regular monthly pensions.b Excluding National Health Insurance program and noncontributory pensions program.The ministry’s expenditures for 2008–2009 wereBZ$6.6 million, of which BZ$1.6 million wasspent on grants to the needy, both directly andto institutions and organizations caring for them.About 60 percent of its budget was devoted tosalaries and benefits (see Table 11.3), despite thefact that it has only a small technical staff.The ministry’s most recent annual report listsas its accomplishments providing assistance tomore than 1,000 families in areas related to familystrengthening, supervising the center for eldercare in the country and the shelter for the homelessin Belize City, 3 interventions in more than1,000 cases of child abuse, and provision of supportservices in nearly 1,000 other cases. In addi-tion, the ministry helped draft investment policiesin the areas of education, health, and potable waterfor the National Poverty Elimination Strategyand Action Plan (2007–2011).The ministry’s Human Services Departmentpromotes alleviation of poverty, strengtheningof families, protection of children from violenceand abuse, and improvement of the quality of lifeof individuals, children, and families. It has staffpresence in each of the country’s six districts, andits leadership in the area of intrafamily violence iswell recognized. Nonetheless, it is a small officethat lacks social workers and has a low budget (25percent of the total ministry budget) barely sufficientto cover its salaries and operating costs.3The center and shelter serve around 50 people per month.194

Table 11.3. Distribution of Belize’s HumanDevelopment Budget, 2006–2008(BZ$)DescriptionProjected2006–2007Proposed2007–2008Personal emoluments 57.78 55.71Travel and subsistence 2.42 2.56Materials and supplies 4.59 4.86Operating costs 4.50 3.59Maintenance costs 1.47 1.55Training 0.21 0.16Public utilities 3.76 3.54Contracts and0.27 0.26consultancyGrants 25.00 27.70Grand totals (BZ$) 5,527,384 5,880,105Source: Ministry of Human Development and Social Transformation.The ministry’s Child Placement and SpecializedServices Division provides assistance to childrenin institutional care and in the areas of foster careand adoption and also engages in internationalcase work. A total of 146 children were placed infoster care in Belize in 2006.The mission of the ministry’s Women’s Departmentis to promote gender equality and equity inthe country. Its objectives are, among other things,to lobby for greater participation of women in keygovernment leadership positions and to ensurethat Belizean women enjoy legal status equal tothat of men and that the country’s women becomemore economically empowered in terms oftheir access to loans and involvement in trade andcommerce. The department supports proactive(e.g., training and advocacy) and reactive (e.g.,case work) activities. It sees increasing activitiesfor rural women as a priority. Its long-term aim isto become a Gender Affairs Department addressingmen’s as well as women’s issues.Like those of other departments, the Women’sDepartment’s activities are limited by lack offunds. Donations, volunteers, internships, andgrants from donors for identified programs provideadditional resources beyond the department’sbudget.The ministry’s Community Rehabilitation Departmentdeals with children and youngsters thatcome in conflict with the law and others whocome in voluntarily seeking assistance. Its maintarget population is youths under 16 years of agewho have infringed penal rules under the JuvenileOffenders Act, which protects those in that agegroup who have been apprehended and are notreleased on parole or on bail. Its primary activitiesconcentrate on assessing the national juvenile justicesystem, strengthening it through legislativeimprovements, and assisting with the administrationof juvenile court cases, which totaled 1,144in 2006, with 495 cases pending. The departmentalso operates a youth hostel residential facilityfor youths and other smaller facilities for olderchildren that have been established in Belize andCayo Districts. At present the department is establishingpsychosocial response teams in four ofthe country’s districts.Social Investment FundThe overall objective of the Social InvestmentFund, which was created in 1996 as a statutoryautonomous body under the Ministry of EconomicDevelopment, Industry, Commerce andConsumer Protection, has been to improve theaccess of poor communities to basic social andeconomic infrastructure and services, largely bysupporting small-scale projects, identified andimplemented with a high degree of communityparticipation (World Bank 2003). As such, it ischarged with the construction and rehabilitationof infrastructure in the areas of water supply inrural areas and of schools and health care facilitiesin poor areas, improvement of feeder roads,improvement of infrastructure for and managementof solid waste and sewage in poor areas, andcommunity training in infrastructure planningand management.However, the fund’s original focus on poorercommunities has been modified when necessaryto respond to national emergencies generated bynatural disasters, such as Hurricane Keith in October2000 and Hurricanes Chantal and Iris inthe fall of 2001, which forced the fund to focuson the repair and rehabilitation of all kinds ofpublic infrastructure throughout the country. Asa result, its propoor focus was not implementedduring those times as originally intended. Asthese needs have diminished (despite the impactof the damage caused by Hurricane Dean in 2007chapter 11Protecting the Poor and Vulnerable in a Tight Fiscal Environment195

chapter 11Protecting the Poor and Vulnerable in a Tight Fiscal Environmentand floods in 2008), the fund has returned to itsoriginal mission, albeit on a limited scale. As itsbudget shows, the amount expended for projectsin education and health executed between March2006 and April 2007 was modest, totaling lessthan BZ$2 million for the former and less thanBZ$150,000 for the latter.The fund has served as the contractor of last resortfor the government when it has been necessaryto circumvent bureaucratic processes that couldbe problematic during times of emergency (Arcia2009). What needs to be explored, however,is whether the fund could be transformed into aforefront mechanism as an arm of the Ministry ofHuman Development or into a specialized agencydealing with local development and communityparticipation processes, as has been done in otherCentral American countries (El Salvador, Nicaragua)or whether it should be phased out entirely.11.2.3 Conclusions on SocialProtection in BelizeBelize has fragmented, diverse, and limited arrangementsfor providing social assistance andprotection, which leads to high administrativecosts in relation to the benefits provided. Its socialprograms lack a sound system for identifyingand targeting assistance toward the poor. The lackof a system for targeting beneficiaries and weakcoordination among Belize’s social sectors in theprovision of services seriously limits the efficiencyof social services provided in the country and generatesduplications of interventions and omissionsof beneficiaries. In addition, many programs areonly weakly propoor, lacking specific focus on theneeds of the most vulnerable population. Moreover,the lack of an institutionalized objective basisfor beneficiary selection lends itself to politicalinterference in the selection of beneficiaries andthe provision of services.The absence of a program for cash transfers targetedtoward the poor creates pressures for lessefficient, less well targeted and more distortionaryinterventions to mitigate the impact of shockson the poor. For instance, as a response to thesharp rise in food prices in 2008, the governmentremoved the general sales tax from a number offood items, including powdered milk, cookingoil, chicken Vienna sausages, corned beef, cof-fee, and tea. Aside from introducing complexityinto the tax system, this measure was not targetedto the poor and benefited all consumers of suchgoods, rich and poor alike.In sum, Belize has a social protection system thatcould be substantially improved in terms of its efficiencyand effectiveness. Moving towards establishedbest practices in the region, such as usingtargeting instruments, focusing on the poor, anddelivering services with proven effectiveness thathelp households gradually move out of poverty,would strengthen protection of the country’s poorand vulnerable even in the absence of increasedexpenditures.11.3 Policy Recommendations11.3.1 Improve the BeneficiaryInformation and TargetingSystems for Social ProgramsA first step towards the creation of a more effectivesocial protection system in Belize would bethe identification of the poor, where they are located,what their characteristics are, and what unmetneeds they have. A beneficiary informationsystem is the preferred mechanism for providingthis type of information. Such a system consistsof at least the following: (1) a registry or databasewith structured and systematic informationon the current and potential beneficiaries of thenet of social programs and on the benefits they receive;(2) a targeting index—an algorithm or statisticalprocessing of the information containedin the registry to produce an index of prioritiesof the beneficiaries; (3) a data-based system forthe exchange and integration of information anddatabases on diverse social programs; and (4) asystem for monitoring and evaluating social programs,fed by the registry and social programsdatabase, to carry out the follow-up, monitoring,and evaluation of key social services based on performanceindicators. The information system anddatabase of the beneficiary information systemshould be shared by all government ministries, toenhance the formulation of consistent policies. Ahousehold survey should be carried out, providingthe country’s social programs with evidence withwhich to design national policies and help evaluatetheir performance and outcomes.196

Additionally, more research and more rigorousresearch is needed on identifying specific groupsof people living in poverty and target groups, andefforts should be undertaken to share knowledgeon who and where they are. The National HumanDevelopment Advisory Committee should be reenergized,and its technical secretariat should bestrengthened with a solid mix of technical skills.Many countries in Latin America and the Caribbeanhave established beneficiary informationsystems. For example, in 2001 the Braziliangovernment launched a major effort to constructa single beneficiary registry database in order toimprove efficiency and coordination of data collectionand to reduce duplication of administrativecosts across the country’s numerous safety netprograms. Chile has had the Ficha de ProteccionSocial, a database that is used by all social serviceprograms, since the 1980s and now has informationabout almost two million families in need.Jamaica provides another good example of how abeneficiary information system can be put to usein the design and execution of targeted conditionalcash transfer programs.As a corollary of the lack of a single, integratedinformation system on beneficiaries, Belize lagsbehind the remainder of the region in the implementationof a conditional cash transfer program.Such programs transfer cash to poor households,on the condition that those households make prespecifiedand preagreed investments in the humancapital of their children: health, nutrition, andeducation. Moreover, they have often provided anentry point for reforming badly targeted subsidiesand upgrading the quality of safety nets. Such wasthe role of the creation of Mexico’s conditionalcash transfer program Oportunidades in 1997.Replacing inefficient food subsidies, 4 Oportunidadesintroduced the concept of coresponsibilityin the Mexican social protection system. Beneficiariesreceiving the program’s cash transfers mustprove compliance with its educational, health,and nutrition conditions. The program handlesits own targeting and program registration. It usesa geographic targeting approach to identify poorareas and a proxy means test to target poor householdswithin localities and urban areas.Jamaica’s Program of Advancement ThroughHealth and Education (PATH) is another exampleof a conditional cash transfer program thatgrew out of a reform and expansion of other socialassistance programs and now offers large-scalesocial assistance to the poorest and most vulnerableamong the population. It is executed by Jamaica’sMinistry of Labour and Social Securityand combines the country’s Outdoor Poor ReliefProgram and the Food Stamp and Old Age/IncapacityPrograms. PATH rationalizes the operationsof these income transfer programs and thuseliminates duplication, reduces administrationcosts, makes the use of resources more efficient,and increases effectiveness in delivering benefitsto the poor (Fiszbein and Schady 2009, 34).The program’s objectives are to (1) increase educationalattainment and improve health outcomesand thus reduce poverty; (2) reduce current povertyby increasing the value of transfer to thepoor; (3) reduce child labor by requiring childrento maintain a minimum of 85 percent school attendanceper term; and (4) serve as a safety net bypreventing families from falling further into poverty,in the event of adverse shock. Jamaica hasestablished a proxy means test for targeting theprogram’s beneficiaries, using data collected duringthe country’s Annual Survey of Living Conditions.A scoring formula identifies the householdsthat are poor. Additionally, letters are sent to beneficiariesof the previous social welfare programsto ensure their inclusion (World Bank 2003).11.3.2 Reduce Vulnerability among theDisabledImproved information would help to establish theactual prevalence of disabilities and the number ofpersons with disabilities in Belize, which appearsto be expanding faster than the general populationand to be higher in poorer areas. Researchshould be conducted to explain the differentialprevalence of disabilities among districts, bothto prevent or reduce their occurrence and to findappropriate solutions, through subsidies to families,special education programs, scholarships,employment quotas in civil service, and other al-chapter 11Protecting the Poor and Vulnerable in a Tight Fiscal Environment4In the mid-1990s, Mexico had 15 food subsidy programs, mostly funding bread and tortilla. These programs targeted mostly ruraland urban households, but showed high inclusion errors. An estimated 60 percent of the rural poor were not covered by any of thesesubsidy programs (Fiszbein and Schady 2009).197

chapter 11Protecting the Poor and Vulnerable in a Tight Fiscal Environmentleviation measures. Public policies can reduce thevulnerability of the disabled to unemployment byencouraging the public as well as the private sectorto employ disabled persons where feasible.11.3.3 Reduce Child LaborMore attention should be paid to the issue ofchild labor. Research on the actual dimension andcharacteristics of the problem is needed, and supplyand demand side interventions should be putin place. Supply side interventions could includemore financial support to poor families whosechildren are at risk of entering the labor market,instead of participating in the education system,in order to support their family. This increased financialsupport could be provided partly througha conditional cash transfer program that providesincentives for attending school and earninggrades, as evaluations of ongoing programs of thistype in other Latin American countries show thepotential for success of such a program in Belize.Demand side interventions could include disincentivesfor firms to employ children that motivatethem to look instead for qualified adults fortheir labor needs.198

ReferencesArcia, G. 2009. “Belize: Social Sector PublicSpending and the Poor—A Review.” Inter-American Development Bank, Washington,D.C.Fiszbein, A., and N. Schady. 2009. ConditionalCash Transfers. Washington, D.C.: WorldBank.Government of Belize. 2009. Country Poverty AssessmentReport. Belize City.International Poverty Centre. 2006. “Poverty inFocus: Social Protection.” International PovertyCentre, United Nations DevelopmentProgramme, Brasilia, Brazil.Meerhoff, R. 2007. “Social Protection and HealthSectors in Belize.” Inter-American DevelopmentBank, Washington, D.C. Unpublished.Social Security Board. 2007. Statistical Abstractof the Social Security Board 2005. Belmopan.Available at http://www.socialsecurity.org.bz/publications/Statistical%20Abstract%202005.pdf.World Bank. 2003. “Implementation CompletionReport on a Loan in the Amount ofUS$7 Million and a Supplemental Loan inthe Amount of US$1.4 Million to Belize fora Social Investment Fund Project.” HumanDevelopment Sector Management Unit, CaribbeanCountry Management Unit, LatinAmerica and the Caribbean Region, Washington,D.C.Young, R. A. 2003. “Child Labour in Belize: AQualitative Study.” International Labour Organization,Geneva.chapter 11Protecting the Poor and Vulnerable in a Tight Fiscal Environment199

A Health Sector in Transition1212.1 IntroductionBelize is facing a number of important challenges in the health sector that threaten the population’s recentgains in health status, including high poverty levels, susceptibility to natural disasters, and a humanresource crisis in the health sector. These challenges add to the public health concern of treating andpreventing communicable and noncommunicable health diseases; the latter are showing an alarminggrowth, which combined with a beginning demographic transition will impose growing health demandpressures in the near future. This chapter analyzes Belize’s health sector and its major challenges andmakes recommendations for possible approaches and policy options for meeting those challenges.12.2 Characteristics of and Trends in Belize’s Health Sector12.2.1 Major Health ProblemsHealth infrastructure in Belize has improved in recent years, and figures for life expectancy (73.2 yearsfor women and 67.2 years for men) and infant mortality (from 31.5 per thousand live births in 1993 to12.0 in 2008) are optimistic. However, the country still faces a relatively high prevalence of neglectedtropical and traditional infectious diseases, as well as an emerging epidemic of chronic diseases headedby heart disease and diabetes. Among the leading causes of death in 2001–2005, four were chronic diseases:hypertension (8.0 percent of the total) and diabetes (6.1 percent) were first and second, with acuterespiratory infections fourth (5.7 percent) and pulmonary, circulatory, and other heart diseases fifth (5.6percent). The under-five mortality rate per 1,000 births was at 25 in 2007, below that in many neighboringcountries, which show a mortality rate of 35 (Mexico, Nicaragua) and 39 (Guatemala), or almostequal with the mortality rates of El Salvador and Honduras (24) (World Bank 2009). The leading causeof death among children is slow fetal growth, immaturity, and malnutrition, accounting for 24 percent ofcases for 2005, followed by hypoxia, birth asphyxia, and other respiratory conditions (14 percent). 1The major causes of hospitalization in Belize are preventable and highly susceptible to primary caremanagement. Leading causes among adults are normal deliveries and complications of pregnancy, with7,838 cases in 2006 (39 percent), followed by acute respiratory infections, which accounted for 5 percentof the hospitalizations in that year. Hospitalization rates in 2006 associated with certain illnesses andconditions increased compared to their 1996–2000 baselines, especially in the cases of asthma and bron-1It is questionable whether the information from Belize’s Ministry of Health, like the data presented in this paragraph, accuratelyreflects reality. The available series show inconsistencies, which makes it difficult to derive proper conclusions from them. Data onmortality causes sometimes show drastic changes from one year to the next. Information collected at local Ministry of Health facilitiesis reported to central offices, but it is not processed or consolidated. Private providers are not required to send information about theirprovision of services or the population served. All of these factors make it difficult to draw a complete picture of the demand side inthe country’s health sector. Notwithstanding this observation, the Ministry of Health has shown a remarkable improvement in datacollection, processing, and dissemination.201

chapter 12A Health Sector in Transitionchitis (40 percent increase from the 1996–2000baseline), diabetes mellitus (60 percent increase),and hypertension (37 percent increase) (CentralStatistical Office 2001; Ministry of Health 2006,142).Hospitalizations of children under one year of agein Belize are mainly the result of acute respiratoryinfections (23.34 percent), other conditions in theprenatal period (14.3 percent), or asphyxia (9.8percent), as well as slow fetal growth (8.1 percent)and infectious intestinal diseases (7 percent). Forchildren between one and four years of age, hospitalizationstood at close to 1,400 cases for the2003–2005 period. In this age group acute respiratoryinfections are the leading cause of hospitalization,with 22.8 percent in 2005, followedby bronchitis, emphysema, and asthma with 15.1percent and infectious intestinal diseases with12.3 percent; these top three causes together accountedfor 50 percent of total hospitalizations inthat year (see Table 12.1).In addition to an increasing incidence of emergingchronic diseases such as asthma, bronchitis,diabetes, and hypertension, Belize shows a highprevalence of neglected tropical and traditionaltransmissible diseases typically associated withpoverty and poor living conditions, such as scabiesand other diseases caused by parasites, as wellas a high prevalence of HIV/ AIDS, as can beseen in Figure 12.1.Communicable DiseasesThe most prevalent communicable diseases presentinga serious health concern in Belize aremalaria, tuberculosis, dengue, and HIV/AIDS.Malaria has, until recently, been the leadinghealth concern among communicable diseases inBelize, its prevalence peaking in 1994 with 9,000cases. 2 The numbers have since decreased considerably,to 844 cases in 2006 (Ministry of Health2009, 55). Malaria in Belize appears mainly in thecountry’s rural areas and is concentrated in Cayo,Table 12.1. Leading Causes of Hospitalization for Children One to Four Years of Age, 2001–2005Cause(decreasing 2005 order) 2001 2002 2003 2004 2005Percentage oftotal, 2005Cumulativepercentages,2005Acute respiratory infections 336 238 330 276 314 22.80 22.80Bronchitis, emphysema, and 78 101 194 117 208 15.11 37.91asthmaInfectious intestinal diseases 171 240 213 256 169 12.27 50.18Injury, poisoning, and other89 128 132 97 72 5.23 55.41external causesOther diseases of the digestive 18 25 27 48 49 3.56 58.97systemAppendicitis, hernia, intestinal 23 45 50 41 48 3.49 62.45obstructionAccidental falls 2 17 21 38 2.76 65.21Nutritional deficiencies and 29 34 22 27 17 1.23 66.45anemiaSymptoms, signs, and ill-defined 69 112 117 115 78 5.66 72.11conditionsResidual 93 111 127 128 157 11.40 83.51All other causes 213 170 209 241 227 16.49 100.00Grand total 1,121 1,204 1,438 1,367 1,377 100.00Evolution (1998 = 100) 100 107 128 122 123Source: Ministry of Health (2006), 146.2As previously mentioned, the information system of Belize’s Ministry of Health is not completely reliable; therefore some analysis andconclusions presented here may have flaws as a result of inaccurate data.202

Stann Creek, and Toledo Districts, which accountfor 96 percent of all cases. Falciparum malaria, themost dangerous type, was high in 2005 in Cayoand Stann Creek, representing 96.3 percent of allcases in 2005 (Ministry of Health 2009, 55) .HIV/AIDS is now a major and growing healththreat in Belize, and as it is gradually changingfrom a fatal to a chronic disease, it is placing heavypressure on the consumption of scarce resourcesas a result of its high treatment costs, in additionto the heavy social burden associated with it.The estimated rate for Belize is at 2.1 percent forHIV/AIDS in 2007, more than twice as high asin the neighboring countries of Guatemala (0.8percent), Honduras (0.7 percent), and El Salvador(0.8 percent) (World Bank 2009). For manyyears Belize has been ranked as having the highestinfection rate per thousand people in the CentralAmerican region, and it ranks in fifth position inthe Caribbean region (see Figure 12.1).HIV/AIDS cases in Belize are concentrated inthe Belize District and are found especially amongmen and women aged 25–29, followed by thoseaged 30–34. People infected with HIV/AIDS areat high risk of contracting tuberculosis, the leadingcause of death among those infected with HIV/AIDS. The Ministry of Health reported 21 casesof tuberculosis/HIV coinfection in 2005 and 13cases in 2006 (Ministry of Health 2006).Figure 12.1. HIV/AIDS Incidence in Central America,20073.0%2.5%2.0%1.5%1.0%0.5%0.0%BahamasGuyanaSurinameHaitiBelizeJamaicaSource: Authors’ calculations based on World Bank, World DevelopmentIndicators (2009).Dominican RepublicPanamaEl SalvadorGuatemalaHondurasCosta RicaNicaraguaAmong the population not infected with HIV/AIDS, tuberculosis shows an oscillating decreasingtrend for the 2001–2005 period. The numberof cases of dengue was below 50 in most yearsduring that same period, but jumped to 652 in2005 as a result of an outbreak in Cayo District.Dengue, as opposed to malaria, which is concentratedin younger populations, seems to affectall age groups relatively evenly, likely an effectof a lack of previously acquired natural defenses(Ministry of Health 2006, 34–38).Noncommunicable Diseases and Other Health-Related ProblemsNoncommunicable diseases, mainly cardiovasculardiseases, cancers, chronic respiratory diseases,and diabetes, represent a leading threat to humanhealth and development in Belize. 3 The data ongender distribution of diabetes in the countryshow either a higher incidence of diabetes amongwomen, or a higher degree of medical self-awarenessand health-related responsibility amongwomen, expressed as a higher rate of diabetesrelatedhospital usage. The average proportionof hospitalizations attributable to diabetes was34 percent for men and 66 percent for women in2001–2006; women’s rate of hospitalization thuswas almost double men’s. Data on severity of illnessis not recorded, so there is no informationregarding the type of diabetes involved or the degreeof impairment resulting from it.The high incidence of diabetes among Belize’spopulation is indicative of the strong prevalenceof nutritional problems in the country, specificallyobesity in the case of diabetes; the range ofnutritional problems in the country encompassesthe full spectrum, however, from obesity to nutritionaldeficiency. Although child malnutritionis apparent among all socioeconomic and ethnicgroups in Belize (Central Statistical Office 2007),the national prevalence of stunting 4 was reportedin the 2002 Living Standards Measurement Surveyat 32.3 percent among children under age fivein the poorest income quintile of the population(see Table 12.2), compared to a mere 4.9 percentchapter 12A Health Sector in Transition34On September 15, 2007, the heads of government of the Caribbean Community held a Regional Summit on Chronic Non-CommunicableDiseases in Port of Spain, Trinidad, and issued a joint declaration naming implementation of strategies for the reduction of theburden of noncommunicable diseases as a central priority of the Caribbean Cooperation in Health Initiative Phase III.Stunting is defined as having a height for age two or more standard deviations below the median of the reference growth curve.203

chapter 12Table 12.2. Stunting and Overweight in Children under Age Five by Income Quintile, 2002Quintile 1 (poorest) 2 3 4 5 (richest)Stunting 32.3 13.9 19.5 8.2 4.9Overweight 7.6 5.9 13.3 15.0 19.8Source: Meerhoff (2007), 36.A Health Sector in Transitionamong children in the highest income quintile.Thus there is a clear association between povertyand stunting in the country. The most affected arethe country’s indigenous populations. Deficienciesin weight and height for age, as well as inserum iron and vitamin A, found to be present inpreschool children in all ethnic groups in ToledoDistrict in 2002, were found to be present in ruralpopulations of the Maya and Mestizo groupsin other districts. The prevalence of stunting wasestimated to be 40 percent among Maya children,and stunting rates among the Maya, Mestizo, andGarifuna ethnic groups were higher than thosefor the rest of the population (see Table 12.3)(Meerhoff 2007). As stunting is also associatedwith reduced intellectual capacity and productivityin adulthood, this situation further perpetuatesthe vicious cycle of poverty among these alreadydisadvantaged and marginalized groups (Ministryof Health 2007).12.2.2 Organization of the Health Sectorand Patterns of Care DeliveryThe Ministry of Public Health is the main providerof health services in Belize. It operates anetwork of facilities consisting of eight hospitals,one each in the districts of Corozal, Orange Walk,Stann Creek, and Toledo, and two each in Cayoand Belize. Three are regional hospitals, and thenational referral institution is the Karl HeusnerMemorial Hospital (KHMH), located in BelizeCity, which is also the general hospital for BelizeDistrict. These facilities provide routine primaryhealth care and a wide range of secondary care.Three other hospitals are community hospitals;like the regional hospitals, they provide routineprimary health care, but unlike the regional hospitals,they offer only a minimal amount of secondarycare; thus patients with more complexissues have to be referred to other members of thenetwork (Meerhoff 2007, 46).Belize’s public hospitals provide inpatient andoutpatient services for the four basic specialties—pediatrics, obstetrics, gynecology, and internalmedicine and surgery—along with accident- andemergency-related care. KHMH provides, in addition,neurology and physiology services, servicesfor ear, nose, and throat conditions, and orthopedicsurgery. Outreach community medical servicesprovided include those relating to dental health,mental health, and communicable disease preventionand control. Mental health patients are treatedat Rockview Hospital, located 22 miles fromBelize City; each regional and community hospital,however, is staffed with psychiatric nurses,who also provide counseling to victims of genderbasedviolence and child abuse, as well as supportto HIV/AIDS patients.Table 12.3. Stunting in Children under Age Five by District and Ethnicity, 2002DistrictChildren insampleChildren withstunting Percentage EthnicityChildren withstuntingPercentageToledo 107 47 44 Maya 113 40Orange Walk 115 21 18 Mestizo 382 17Stann Creek 66 12 18 Garifuna 19 15Corozal 80 11 14 Creole 158 9Cayo 175 22 13 Others 42 10Belize 171 16 9Total 714 129 18Source: Meerhoff (2007), 36.204

With a ratio of 1.2 hospital beds per thousandpeople, Belize’s hospital capacity compares favorablyto that in neighboring counties. Guatemala,for example, has only 0.7 hospital bedsper thousand people, and Honduras has 1.0. Butcompared with countries elsewhere in the region,Belize’s ratio of hospital beds to people is significantlylower; Mexico, Trinidad and Tobago, andJamaica, for example, have ratios of 1.6, 2.7, and2.0 beds per thousand people, respectively (Governmentof Belize 2009, 132).In addition to the routine primary care providedby the hospitals, primary health care is addressedthrough a network of health posts and ruraland urban health centers and clinics, as well asthrough mobile units, community nursing aides,traditional birth attendants, and voluntary collaborators.This network provides pre- and postnatalcare, immunization services, growth monitoringof children under age five, treatment of diarrheaand minor ailments, and general health education.The facilities provide pharmaceuticals, which areimported from other countries, since Belize hasno pharmaceutical industry. Laboratory testsare conducted in the regional hospitals and atthe Central Medical Laboratory in Belize City,a national referral laboratory that offers servicesto both public facilities and those in the privatesector. Its services include bacteriology, serology,cytology, histology, and special chemical andhematological analyses. Samples requiring somelaboratory tests, such as the enzyme-linked immunosorbentassay (ELISA) test for HIV/AIDS,are sent to facilities abroad.According to Belize’s 2009 Country Poverty AssessmentReport (Government of Belize 2009), asof 2009, the public network included 39 healthcenters and 34 health posts, 5 a reduction in respectto 2001, when 42 health centers and 56health posts were operative.In addition to the public health network, there isalso a private health sector in Belize, composedof five private hospitals (with a total of 79 beds),58 clinics, numerous nongovernmental organizationsand religious groups providing outpatientservices, several private laboratories and providersof radiological services, about 100 private pharmacies,and individual practitioners. Most doctorsare solo practitioners, with some organizedinto group practices or other types of formal relationships.The private outpatient network comprises58 outpatient facilities and clinics, most ofthem located in Belize City; some offer specializedservices such as dentistry, dermatology, andgastroenterology.Nationally, as of 2002, 68.5 percent of those reportingillness or injury sought health care, whether inBelize or abroad, and Maya and Mestizos showedthe lowest levels of health care seeking (thoughreporting the highest levels of illness). Publichealth facilities were the main providers of healthcare for persons who were ill (71.1 percent), while35.4 percent of those ill sought care from privatefacilities; a small percentage (6.5 percent) visitedboth public and private facilities. Among thoseseeking health care, 15.5 percent of persons in thepoorest consumption quintile used private facilities,with the percentage steadily increasing to amaximum of 52.2 percent in the wealthiest quintile(National Human Development AdvisoryCommittee 2004, 85).Hospital admissions in Belize remained relativelystable over the first half of this decade. The averagelength of hospital stays fluctuated over theperiod, from 3.4 days in 2001 to 2.8 days in 2006,and the occupancy rate was low in all years; itwas 49.2 percent as of 2006 (Ministry of Health2006).12.2.3 Issues in Provision and Evaluationof Health Care ServicesA number of factors inhibit provision and monitoringof health care services in Belize. Its geographyand population distribution pose substantialchallenges. The numbers of doctors and certainother medical care personnel are inadequate, andstaffing and resource problems detract from theefficacy of the care that can be provided. Privatehealth care services are largely unregulated, as theresult of a lack of monitoring mechanisms, andthe country’s medical information system, thoughrecently upgraded, is as yet unable to provide con-chapter 12A Health Sector in Transition5Health centers and health posts are both primary care facilities. Health centers tend to be bigger, and their resolution capacity issomewhat more sophisticated.205

chapter 12A Health Sector in TransitionBelize’s Ministry of Health has few regulationsand/or programs in place through which to regulateor monitor private sector services and facilities.The Belize Medical and Dental Associationhas agreed to contribute to the development ofa regulatory framework for private sector medicalservices and facilities, and it has made a firmcommitment to disseminating the norms, standards,and protocols developed. However, Belizestill has a long way to go in the regulation, sursistentlyreliable data on health care provision inthe country.Belize also faces important geographical constraintsand population patterns that inhibit theprovision of health care services. It has a lowpopulation density, at 13 people per square mile.A substantial proportion of the country’s population,49.9 percent, lives in rural areas (in 247 villageswith an average 515 inhabitants each). Theterrain in parts of the country is rugged, mountainous,and tropical. Paved highways and interdistrictroads are limited and the majority offerdifficult passage during the rainy season. Thustransportation is difficult, especially for the mostremote villages, and in Punta Gorda, for example,a journey to the local hospital can take up to twodays and cost a minimum of BZ$15, a substantialsum for the prevailing income levels.According to the Pan American Health Organization(PAHO) (2007), Belize has one of thelowest levels of physician coverage in the LatinAmerican and Caribbean region, but the supplyof nurses is somewhere in the middle of the range(see Table 12.4b). Whereas the number of physi-cians has remained stable over time, the numberof dentists has diminished severely, both becauseof the relatively small number of dentists in thecountry and also because many seek better opportunitiesabroad and emigrate.Management of medical staff and resources in Belizeshows a need for improvement. Recruitmentsof new or replacement staff are often delayed, sohealth institutions are often understaffed. Deliveryof services is often hampered by low staff moraleand discipline and inadequate resources forequipment, operation, and maintenance, whichtends to diminish the effectiveness of servicesprovided.Table 12.4a. Registered Medical Personnel in Belize, 2003–2007Category 2003 2004 2005 2006 2007NumberPhysicians 203 221 249 263 256Nurses 465 449 441 443 522Community health aides 212 204 219 217 204Rate per 10,000 populationPhysicians 7.7 7.8 8.5 8.7 8.2Nurses 17.0 15.9 15.1 14.7 16.8Community health aides 8.0 7.2 7.5 7.2 6.5Source: Statistical Institute of Belize (2008).Table 12.4b. Registered Medical Personnel in Latin America and Caribbean, 2003–2007Indicator Belize Guatemala Honduras Mexico Jamaica Trinidad and TobagoPhysiciansper 10,000peopleNurses per10,000peopleSource: PAHO (2007).8.1 9.9 9.0 14.0 10.4 7.515.7 4.0 1.7 19.0 8.0 28.7206

veillance, monitoring, and control of the privatemedical care system. The lack of information onprivate sector production of health services is anobvious example.The Belize Health Information System has recentlybeen upgraded, and in terms of managementinformation systems, it stands out as stateof the art. However, in regard to the reliabilityof the health information it generates, some issuesremain to be addressed. Data inconsistencieshave been identified, presumably indicating thatnot all activities are being recorded, and errors occurto a variety of degrees. Though not apparentin national averages, large fluctuations from yearto year, beyond what should occur, statisticallyspeaking, are apparent when information is brokendown analytically, leading to the conclusionthat the data in the Health Information Systemare not reliable. The system, by and large, doesnot follow up on primary care providers or privatesector providers in the national health insuranceprogram in regard to the data they provide. 612.2.4 Health Care ExpendituresPublic expenditures on the health sector in Belizehave increased briskly over the last five years orso. Health care expenditures rose from 9 percentto 11 percent of the overall government budgetover the two-year period ending in 2008 (Table12.5) and from 2.5 percent to 3.4 percent of grossdomestic product (GDP) between 2004 and 2008(Figure 12.2).This increase in public expenditures on healthhas brought Belize near the international median.Belize’s expenditure level is significantly abovethose of some Central American and Caribbeancountries (such as the Dominican Republic, Guatemala,and Jamaica, which spent only 2 percentof their GDP on health in 2007) but well behindFigure 12.2. Expenditures on Health as Percentageof GDP, Belize, 2004–20084.0%3.0%2.0%1.0%2.5%3.0%3.1%3.4% 3.4%0.0%2004 2005 2006 2007 2008Source: Authors’ calculations based on Government of Belize(2009), 136.chapter 12A Health Sector in TransitionTable 12.5. A Macro View of Government and Health Expenditures in 2006–2007 and 2007–2008 (BZ$)ItemRevised budget,2006–2007Proposed budget,2007–2008Total government revenues and grants 626,885,289 678,522,913Total government recurrent expenditures 589,272,273 585,236,290Total government capital expenditures 113,633,300 117,999,441Total government expenditures 702,905,573 703,235,731GDP 2,428,000,000 2,558,000,000Health recurrent expenditures 55,529,219 64,707,871Capital II 3,834,653 3,211,288Capital III 4,500,000 6,500,000Total health expenditures 63,863,872 74,419,159Health recurrent expenditures as percentage of total government9 11recurrent expendituresHealth total expenditures as percentage of total government9 11expendituresTotal government expenditures as percentage of GDP 29 27Total health expenditures as percentage of GDP 3 3Source: Musa (2007).6For more information on the Ministry of Health production of data, see Meerhoff (2007).207

chapter 12A Health Sector in TransitionFigure 12.3. Expenditures on Health as Percentage of GDP, Selected Latin Americanand Caribbean Countries, 2007Dominican RepublicGuatemalaJamaicaBelizeLatin America & CaribbeanSt. Vincent and the GrenadinesSt. LuciaSt. Kitts and NevisEl SalvadorBahamas, TheHondurasPanamaBarbadosNicaraguaCosta RicaPublic Health Expenditure (% of GDP) 20071.92.12.42.633.33.43.43.63.74.14.34.44.560 1 2 3 4 5 6 7Source: Authors’ calculations based on World Bank, World Development Indicators (2007).those in the richest and most-developed CentralAmerican and Caribbean countries (Costa Rica,Nicaragua, Barbados, and Panama, where publicexpenditure on health accounted for between 4and 6 percent of GDP in that year) (Figure 12.3).A global comparison of public expenditures onhealth shows that if the level of Belize’s publicexpenditure on health is adjusted to take incomelevels into account, it is in line with that in othercountries of similar income (Figure 12.4).Consequently, the major issues relating to publichealth expenditures in Belize relate to the efficiencyand effectiveness of the allocation anduse of such expenditures. Arguably both the efficiencyand equity of health expenditures in thecountry can be strengthened through improvingthe distribution of health expenditures by specificspending category and geographical district.At an aggregate level, the allocation of Belize’shealth budget according to the economic classificationof expenditure appears reasonable andappropriate (Table 12.6). Salaries and benefitsrepresent 46 percent of total expenditures, whichis consistent with such spending in other healthcare systems in middle-income countries. However,if grants to hospitals are included as wages,then the percentage of wages in the total budgetincreases to 70 percent, which is above average forthis group of countries. If the budget is examinedby type of expenditures (e.g., hospitals, medicines,district health, and administration and other expenditures),there appears to be room for improvingefficiency by shifting the operational burdento the district level and reducing the burden ofadministration and other expenditures (laboratories,centralized maintenance, epidemiology, etc.).Furthermore, there may be room for improvingcost recovery at the hospital level by increasingthe copayment for those who could be treated atthe health center level (Arcia, 2009).Efficiency might also be increased by initiating asystem of cost recovery associated with treatmentat public health facilities. Public expenditures onFigure 12.4. Is Belize Spending Enough on Health?Log health expenditure per capita54321Belize02 3 4 5Log GDP per capitaSource: Authors’ calculations based on World Bank, World DevelopmentIndicators (2006).Note: Figure presents a scatterplot, for a sample of countriesworldwide, of the log of per capita health expenditure with respectto the log of per capita GDP.208

Table 12.6. Distribution of Health Budget by Type of Expenditure (BZ$)Budget item 2006–2007 Percent 2007–2008 PercentMaterial and supplies 12,132,231 21.85 11,488,911 17.76Operating costs 2,302,329 4.15 2,585,850 4.00Maintenance costs 523,527 0.94 1,283,093 1.98Training 51,000 0.09 182,344 0.28Public utilities 1,247,473 2.25 1,162,388 1.80Contributions and subscriptions 106,379 0.19 1,000,000 1.55Contracts and consultancy 39,420 0.07 684,162 1.06Grants 12,637,760 22.76 16,941,305 26.18Total 55,529,219 100.00 64,707,871 100.00Source: Arcia (2009).health are propoor by default, since the systemserves primarily the poor, while the nonpoor tendto be served by private providers. There is a highdegree of self-selection, with those having higherincomes visiting private health providers. However,a significant proportion of the nonpoor alsoreceive services at public facilities. People who aresick and seek treatment at a public facility tendto spend about the same amount out of pocket,regardless of their income level. Thus, there is aneed for a more explicit policy of cost recovery forservices rendered at public facilities to individualswho are not members of the targeted population.Nevertheless, such a commonsensical approach tocost recovery would still be insufficient to ensureefficiency, because the poor sometimes also visitprivate providers. Hence, efforts should be madeto identify the poor more explicitly in order tomake cost recovery more propoor.Toward this end, the Office of the Director ofHealth Services receives an allocation with a highamount devoted to recurrent funding—4.5 percentof the budget—but one-half of it is allottedto salaries. This office is responsible for policy implementation,human resources management, andintermediation between policymaking and healthservice delivery. It is heavily staffed, with a relativelylarge number of technical positions whosejob descriptions are similar to those of technicalstaff assigned to the district level. For instance,the Central Administration Office has a recurrentallocation of BZ$1 million for telephone, and theOffice of the Director of Health Services has atelephone allotment of BZ$800,000.The equity of health care system expendituresis also an area for closer examination. Inequitiesbetween richer and poorer districts are apparent.Based on the data on personnel costs allocated foreach district, for example, it can be observed thatin general, poorer districts receive lower budget allocationsbecause they pay lower salaries, as disadvantagedareas typically have younger medical stafftrying to gain experience. As a result, the higherpaidmedical staff in the country are found in administrativeand central technical positions, whilethe lower salaries are found among personnel intwo disadvantaged districts, Corozal and Toledo.The fact that health care workers in Belize’s poorerdistricts have the lowest salaries has negative implicationsfor health equity in the country, becauselower salaries imply a poorer quality of service inthose districts (Arcia 2009). Not only do healthcare staff in these districts have less training, butthey tend to stay for shorter periods, as a result ofthe low incentives/salaries to continue working inthese areas. 7Inequities based on the size of the populationserved are evident as well. The correspondencebetween a district’s population and its budget ischapter 12A Health Sector in Transition7Belize hosts many health care professionals from Cuba and Nigeria, all of whom practice medicine in rural areas. The Nigerian physiciansare paid by the government of Nigeria; the Cuban health care professionals are paid by Belize’s Ministry of Health throughpersonal emolument accounts. All Cuban medical professionals in Belize, irrespective of rank (i.e., whether a nurse, a doctor, or aspecialist), receive a fixed stipend of BZ$500 per month; the Ministry of Health also provides accommodations, including paymentsfor water, electricity, and gas, and transportation to and from work.209

chapter 12A Health Sector in Transitionweak. While Cayo District has 23 percent of thetotal population, it receives only 10 percent of thedistricts’ budget; Orange Walk has 15 percent ofthe total population but receives almost 24 percentof the budget; and Stann Creek has 10 percent ofthe population but receives almost 18 percent ofthe budget (Table 12.7).Finally, urban-rural inequities are an ongoingproblem. Similar to the pattern in other countriesin the region, health care in Belize is concentratedin the urban areas, leaving rural areas underserved.At the national level, the Ministry of Health hasmade some efforts at increasing coverage in ruralareas through use of mobile units, and informally,the allocation of medical supplies tends to favorpoor areas in Stann Creek and Toledo, wherethe amounts spent by sick people are the lowest.Nevertheless, most health practitioners are locatedin the main cities, especially in Belize City, inwhich about 50 percent of all health care personnelin the country are concentrated (Arcia 2009).This concentration of staff in one region inevitablyleads to problems of equity in health access.Another area of concern is the insufficiency ofthe budget for the provision of free basic medicationto the population, augmented by a relativelyineffective procurement and distribution system.As a result, health care in Belize is not as good asit could be, especially for the rural poor (PAHO2002).12.2.5 Private Expenditures on HealthBasic health care in Belize is financed by the government,but there is also private health care expenditure,especially on curative services, and thisis the main component of the government’s costrecovery mechanism for health care, although theamounts recovered are minimal. 8Living standards surveys in Belize show that privatehealth care expenditures in the country aredirectly correlated with income, that the incidenceof poverty is inversely correlated with privateexpenditures, and that there are significantdifferences by region and ethnic group (NationalHuman Development Advisory Committee2004). For instance, more than 80 percent of sickpeople in Toledo and Belize Districts use publicfacilities, whereas the sick in Corozal (42.7 percent)and Orange Walk (53.2 percent) Districtsuse them considerably less. In addition, the use ofpublic health facilities is highest among Creolesand Garifuna and lowest among Mestizos, whoshow the highest use of private health care (41.5percent) among Belize’s ethnic groups. By agegroup, the elderly (47.2 percent) have the highestrate of private health care use. As expected,the use of private health care providers correlatespositively with income. Whereas only 15.5 percentof those in the lowest consumption quintileuse private facilities for health care, 52.2 percentTable 12.7. Distribution of District and Total Health Expenditures and Estimation of perCapita Expenditures (BZ$)Description Belize CayoOrangeWalk Corozal Stann Creek Toledo2006–2007 district budget 4,978,814 1,958,625 4,631,533 2,592,602 3,490,052 1,908,545Pro-rated total expenditures per 15,722,970 10,315,191 10,122,991 6,866,389 7,202,755 5,298,923district aPopulation 90,000 70,000 46,000 35,800 31,100 28,400Percentage of total population 29.87 23.23 15.27 11.88 10.32 9.43Percentage of district budget 25.45 10.01 23.68 13.25 17.84 9.76Percentage of total budget 28.31 18.58 18.23 12.37 12.97 9.54District per capita expenditures 55 28 101 72 112 67Total per capita expenditures 175 147 220 192 232 187Source: Authors’ calculations.a Pro-rated on the basis of each district’s population.8Revenues collected at the seven regional hospitals during fiscal year 1995–1996 amounted to 4.2 percent of operational costs. Fundscollected went directly to general revenue rather than to the collecting facility (PAHO 2002).210

of those in the highest consumption quintile doso (Arcia 2009).Also, as expected, private health care is significantlymore costly than public health care. Table 12.8shows average monthly private expenditures onhealth care in Belize per episode of illness in 2002,according to the Country Poverty Assessment Re-port for that year. Nationally, whereas individualswho went to a public facility for treatment spentBZ$16.23 during the 30-day period leading up totreatment, those who went to a private practitionerspent BZ$133.45. In addition, individuals visitinga public facility spent an average of BZ$29.63 ondrugs prescribed by the practitioner, whereas thosevisiting a private facility spent BZ$44.74.Table 12.8. Average Private Expenditures on Health Care, by District, Ethnicity, and Sex, 2002 (BZ$)SelectedcharacteristicsAverage number ofvisits to health careproviders, preceding30 daysTotal expenses, all visits,preceding 30 daysAverage cost of drugsPublic care Private care Public care Private careDistrictCorozal 2.5 30.33 103.23 26.47 42.07Orange Walk 1.7 11.38 219.06 29.34 25.77Belize 2.0 20.33 211.59 46.62 60.74Cayo 1.8 14.89 103.42 25.10 44.48Stann Creek 1.9 7.94 63.23 7.88 49.03Toledo 2.1 8.91 93.27 17.90 41.84LocationUrban 1.9 18.85 146.13 30.69 47.38Rural 2.1 12.48 112.97 29.00 40.19EthnicityCreole 2.1 12.10 246.91 44.25 43.85Garifuna 1.8 0.58 35.51 25.84 62.41Maya 1.8 4.99 55.42 6.04 28.70Mestizo 2.0 25.37 108.78 24.79 41.92Other 1.9 14.36 223.32 58.62 80.59Quintile1 2.0 14.62 76.15 16.90 22.682 2.0 13.94 122.2 16.28 42.443 2.0 9.76 77.91 26.38 33.544 1.9 19.62 70.89 30.40 41.225 2.1 21.64 217.00 47.89 64.67SexMale 2.0 12.68 123.38 28.17 45.05Female 2.0 19.42 139.50 30.87 44.52Age Cgroup0–4 1.8 7.50 51.67 23.00 36.615–9 1.6 1.63 65.73 32.02 28.2010–19 1.8 2.23 84.41 16.46 25.4420–24 1.5 14.49 45.21 14.45 31.9725–34 2.2 21.13 122.95 26.70 44.1635–64 2.3 40.89 265.46 39.24 73.9365+ 3.1 39.11 142.07 40.35 58.03Belize 2.0 16.23 133.45 29.63 44.74Source: National Human Development Advisory Committee (2004).chapter 12A Health Sector in Transition211

chapter 12A Health Sector in TransitionA more accurate picture can be obtained, however,by focusing on results at the district level.Sick people visiting a public facility in StannCreek and Toledo Districts in 2002 spent lessthan BZ$10 in the 30-day period preceding thevisit, whereas those living in Corozal Districtspent between three and four times as much. Ifthe visit was to a private facility, those in StannCreek and Toledo still spent less than in otherdistricts, but the difference was not as marked.However, those who visited a private health careprovider in Belize or Orange Walk District spenta little more than twice as much as those living inthe rest of the country. Overall, the sick living inStann Creek spent considerably less than those inthe other districts (Arcia 2009).An unexpected finding of the survey is the relativelysmall difference in health care spending betweenurban and rural dwellers. There are largedifferences in the costs of health care by agegroup, however, with costs increasing in directproportion to the age of the individual treated bythe health care system. Thus, adults at least 35years of age spent between four and five times theaverage expenditure for a child.practitioner, nursing staff, administrative staff,and support services. The NHI Fund pays a uniformmonthly capitated amount to the primarycare provider for each registered person under itscare, and the PCP abides by a health care contract,under a managed-care concept. Performance bonusesare linked to targets of satisfaction, quality,organizational change, and compliance with informationrequirements.The pilot project began in Belize City’s poorsouth side and was extended to Stann Creek andToledo Districts in 2005. As of late 2009, 95 percentof the eligible population of Belize City’ssouth side and 84 percent of the eligible populationin the country’s southern region were coveredby the program. This amounted to 73,000persons, roughly 22 percent of the country’spopulation. Although no longer considered a pilotintervention, the NHI has not been expandedbeyond southern Belize City and Stann Creekand Toledo Districts, and there are, at present, noplans for further expansion or for any form of costrecovery or cost sharing in the existing scheme,because of the cost implications of doing so (seeSection 12.5.1).12.3 Government Reform EffortsIn recent years Belize’s government has undertakena reform process that has as basic guiding principlesthe separation of the regulation, financing,and provision of health services functions, andthe outsourcing of the delivery of health servicesthrough performance agreements with publicprimary care providers and contracting of privateones. In 2001 Belize’s Social Security Boardused noncontributory funds to initiate a NationalHealth Insurance (NHI) pilot project and contractuallyfinance provision of a free package ofbasic services to registered active social securitycard holders through public and private primarycare providers (PCPs). 9 PCP teams provide thebasic care package at no cost to any social securitycard holder who is registered in the NHIprogram, regardless of work status, age, gender,or other characteristic. Each PCP consists of oneor more group practices, composed of a generalAn evaluation of the NHI pilot in 2007 showedthat the NHI’s primary care provider model wassignificantly more efficient in providing primaryhealth care than was public provision by the Ministryof Health. Whereas the Ministry of Health’scost per outpatient visit increased from BZ$55 in2001 to BZ$96 in 2004, then subsequently decreasedsomewhat to BZ$80 in 2006, 10 the costper visit in the NHI pilot areas was less than halfthis amount, reaching BZ$32 in 2006.The quality of services provided through the programis evaluated directly by NHI managementthrough medical audits of all PCPs and has beenshown to be improving over time. As for impact,the pilot was evaluated after six months of execution.Out-of-pocket payments were reducedfrom 60 percent to 25 percent of total spendingby beneficiary households. Moreover, access toservices improved significantly, and perception ofthe quality of care increased from a baseline of20 percent of beneficiaries indicating they were910All citizens and legal residents in Belize are entitled to a social security number and card.The cost per outpatient visits of the MOH may be underestimated, as they do not include the costs of drugs and lab services.212

eceiving the best care possible to more than 60percent.Several structural changes to the primary careprovider contracts were introduced in FY2008–2009. Promotion and prevention were addedas part of the basic care package. A new list ofkey performance indicators was included in themethod for assessing NHI providers’ performance,and a section was introduced to monitorcontract execution and compliance, includingsanctions for contract default. Per-member-permonthcapitation rates were lowered, based oncosts and quantities verified through the pilotexperience and in order to include the marginalcosts of rural or temporary clients, despite thefact that new items like promotion/prevention,publicity, and social workers have been includedin the basic care package. 11Finding a sustainable financing mechanism forthe NHI program continues to be a challenge.Initially, the program was funded almost exclusivelyby the Social Security Board, out of itsshort-term funds, without any correspondingcontributions from beneficiaries (in contrast to thepractice prevailing in the social security programsprovided by the Social Security Board). This exhaustedthe board’s short-term funds and was notsustainable. Consequently, in 2006, financing ofthe NHI program was gradually taken over byBelize’s government, with the Ministry of Healthmaking a contribution out of its own budget andthe Ministry of Finance contributing 40 percentof the cost directly. In FY2008–2009, the entirecost of the NHI program was absorbed into thecentral government’s budget, although the SocialSecurity Board continues to administer the programthrough the NHI Fund.12.4 ConclusionsThe literature shows a strong link between health,economic growth, and poverty reduction. Poorhealth limits the level of human capital significantlyand imposes major costs in terms of healthcare and loss of income, which have negative effectson individual productivity and economicgrowth. There is also a documented correlationbetween increased life expectancy and economicgrowth (Bloom and Canning 2000). Additionally,the health care costs and lost income associatedwith medical emergencies can lead to impoverishment.Belize’s main health indicators, life expectancyand infant mortality, are generally better than oron a par with those in other Central Americancountries and larger Caribbean ones, but on otherhealth indicators, such as access to quality basichealth care by the poorest and most vulnerablepopulation, Belize lags behind. Indeed, the mainhealth sector challenge in Belize is to expandquality basic health care, including preventionand promotion, to the poorest and most vulnerablepopulation.Increased expenditures on health care could relievecurrent constraints in a number of areas.However, Belize’s total expenditures on publichealth appear appropriate relative to its income.Moreover, the government is facing tight fiscalchallenges (see Chapters 1 and 2), and it is unlikelythat it would be in a position to increasehealth care expenditures significantly over themedium term. Hence, the major emphasis in regardto health sector enhancement will have tobe on getting better health outcomes from thecurrent levels of resources. Fortunately, the foregoinganalysis indicates that there are several avenuesthrough which this could be achieved, andit should arguably be the focus of policy over themedium term.12.5 Policy Recommendations12.5.1 Continue to Strengthen BasicPrimary Health CareThe major policy recommendation offered bythis chapter is that Belize continue and deepenthe reform process currently underway to allowthe health sector to continue to strengthen theprovision of basic primary health care. The currentmain causes of hospitalization in Belize arepreventable and highly amenable to primary carechapter 12A Health Sector in Transition11The average cost of the package is about BZ$180 per person per year, with regional differences.213

chapter 12A Health Sector in Transitionmanagement. In addition, given that an evaluationof Belize’s NHI pilot program showed thatthe PCP model was significantly more efficient inproviding primary care than was public provisionby the Ministry of Health, it makes sense to usethe NHI as the main vehicle for strengtheningprimary care. The key question is how to do thisin a tight budgetary environment.Current NHI program coverage of about 73,000beneficiaries in Belize City’s south side and Toledoand Stann Creek Districts is projected tochange little over 2009–2011, in light of the significantcost implied by a progressive expansion ofthe NHI program to the rest of the country (Table12.9). Moreover, eliminating identified gapsbetween the current NHI package of benefits andthe overall national health model would requirean expansion of the NHI package to improve servicesto prevent malnutrition and chronic diseases,specifically education and case management.This would have the effect of further increasingthe cost.care providers and are also included in the budget,this means the salaries are included twice inthe budget (Cercone et al. 2007). Second, thereis a need to further align the incentives to generalpractitioners that private and public PCPsemploy. Private PCPs offer these practitionersperformance bonuses that public providers donot. Finally, to increase efficiency and consumerchoice, a system of cross-payments of monthlycapitated amounts among PCPs needs to be adopted,so that payments follow patients who use aPCP with whom they are not registered.NHI enrollment has up to this point been largelydemand driven, thus excluding some of the mostvulnerable households living in remote areas; thispoints to the need to implement proactive measuresto increase the enrollment of the populationin the country’s southern districts by issuingsocial security cards to eligible individuals andsimultaneously holding regional and local eventsto promote registration, as well as registrationdrives.In light of the current hard budget constraint,further expansion of the NHI will require thatsavings be achieved elsewhere in the health system(see below) and that the NHI itself be madeas efficient and cost-effective as possible. Existingreforms of the NHI need to be consolidated withfurther improvements in the management and efficiencyof the program’s contracting model.First, eliminating the double accounting of Ministryof Health staff salaries could result in somesavings and help finance improvements in theNHI. The Ministry of Health continues to includein its public budget the salaries of personnelcovered by the PCP contracts; as the contractsthemselves include compensation for the primaryTable 12.9. Resource Requirements to Maintainand Expand NHI Program Coverage, 2009–2011(BZ$ millions)Maintaining currentcoverage (73,000 people)Reaching 50 percent oftotal population by 2010Reaching 80 percent oftotal population by 20112009 2010 201114.8 15.2 15.630.8 31.648.5 49.712.5.2 Seek Allocational EfficienciesBeyond a general strengthening of primary healthand some efficiency within primary health careprovision discussed above, there is scope for additionalefficiencies through improving the allocationof expenditures within the broader healthcare system in Belize. There appears to be roomfor improving efficiency by shifting the operationalburden from the national to the districtlevel and reducing the burden of administrationand other expenditures at all levels, especially atthe central offices (laboratories, centralized maintenance,epidemiology, etc.). The Ministry ofHealth should review its administrative structureto increase its efficiency, since there is apparentlysubstantial duplication on different levels in functions,such as maintenance, operational costs, andthe management of materials and supplies.12.5.3 Improve Cost RecoveryBecause a significant proportion of Belize’s nonpoorreceive services at public facilities, a propoorapproach through better identification of the poorand nonpoor and a more explicit policy of cost recoverywould improve the equity of public healthexpenditures.214

12.5.4 Strengthen Education andPrevention InformationThe growing importance of noncommunicablediseases among health care issues in Belize requiresincreased emphasis on preventive nutritionfrom early ages and through the life cycle, encouraginghealthy lifestyles, which entails changingsedentary living and poor eating habits. Inaddition, provision of micronutrients and securingadequate feeding patterns for infants andyoungsters, including the promotion and protectionof exclusive breast-feeding for infants up tosix months, are highly cost-effective interventionsthat would provide value added in education andprevention health services. The introduction ofphysical education, sports, and regular exercise inschool curriculums, as recommended in the September2007 Caribbean Community RegionalSummit on Chronic Non-Communicable Diseases,should be considered as well.12.5.5 Improve DataAs noted throughout the chapter, there is a needto improve the quality and reliability of data generatedby the Belize Health Information Systemas well as its data-processing capacity, to supportevidence-based formulation of policies andinterventions. Improvements in this area couldbe achieved through the addition of selectivelychosen strategic personnel at the central and locallevels and through the training of public officersin knowledge management for policy decisionmakingpurposes.Belize should make an effort to improve dataregistry and data analysis, as well as the capacityto follow up cases, to generate empirical evidenceon rates of HIV infection as well as AIDS rates.Information on actual AIDS survival rates overtime and death rates should also be compiled viafollow-up data gathering, as well on how differentscenarios affect the dynamics of survivaland death rates. This information is importantfor policy decisions and for pursuing preventive/curative actions through the media, the educationalsystem, health facilities, local governments,and other relevant stakeholders. Educational andbehavioral campaigns in this area are needed,at all education levels, beginning in elementaryschools, and in the national media, to reduceinfection rates and control the country’s AIDSepidemic.chapter 12A Health Sector in Transition215

chapter 12A Health Sector in TransitionAppendix. Public Expenditures on Health, 2006–2007 and 2007–2008 (BZ$)Budget categoryProjected,2006–2007Percent oftotalProposed,2007–2008Percent oftotal19017—General Administration 15,856,800 28.56 20,159,588 31.15Personal emoluments 902,644 992,179Travel and subsistence 79,434 71,223Materials and supplies 219,900 25,700Operating costs 646,800 480,181Maintenance costs 146,600 177,800Public utilities 1,117,283 1,000,000Payments to contractors 106,379 500,000Grants (KHMH, others) 12,637,760 16,912,50519021—Director of Health Services 2,748,840 4.95 1,433,347 2.22Personal emoluments 1,303,363 777,874Travel and subsistence 164,162 47,098Materials and supplies 345,185 68,322Operating costs 909,930 480,353Maintenance costs 23,200 49,700Training 3,000 10,00019031—Belize District Health Services 4,978,814 8.97 5,862,283 9.06Personal emoluments 4,421,905 4,480,371Travel and subsistence 75,100 164,320Materials and supplies 277,611 337,980Operating costs 133,100 205,185Maintenance costs 27,600 128,395Training 40,000 40,000Public utilities 3,498 6,032Contributions and subscriptions 500,00019041—Epidiomology Unit 582,100 1.05 314,400 0.49Personal emoluments 502,800 235,160Other expenditures 79,300 79,24019074—Cayo District Health Service 1,958,625 3.53 2,256,592 3.49Personal emoluments 1,775,691 2,001,702Travel and subsistence 51,900 68,850Materials and supplies 58,131 87,894Operating costs 45,779 54,097Maintenance costs 15,904 37,409Public utilities 11,220 6,64019083—Orange Walk District Health Service 4,631,533 8.34 5,503,270 8.50Personal emoluments 4,200,974 4,558,117Travel and subsistence 89,208 102,600Materials and supplies 153,000 189,750Operating costs 127,020 155,000Maintenance costs 41,331 123,792Training 10,000Public utilities 20,000 40,011Contracts and consultancies 324,000Continued on next page216

Appendix. (continued)Budget categoryProjected,2006–2007Percent oftotalProposed,2007–2008Percent oftotal19092—Corozal District Health Service 2,592,602 4.67 2,939,759 4.54Personal emoluments 2,313,122 2,547,977Travel and subsistence 67,000 82,698Materials and supplies 61,500 115,089Operating costs 103,000 108,100Maintenance costs 32,980 58,258Training 14,544Public utilities 15,000 13,09319105—Stann Creek District Health Service 3,490,052 6.29 3,928,050 6.07Personal emoluments 3,153,217 3,480,380Travel and subsistence 70,000 98,600Materials and supplies 85,175 106,000Operating costs 98,000 119,000Maintenance costs 28,100 65,270Training 6,000 6,000Public utilities 49,560 52,80019116—Toledo District Health Service 1,908,545 3.44 2,230,264 3.45Personal emoluments 1,689,820 1,896,623Travel and subsistence 63,800 76,360Materials and supplies 50,425 103,960Operating costs 62,000 73,180Maintenance costs 22,500 42,641Training 10,000Public utilities 20,000 27,50019121—Medical Supplies 10,955,964 19.73 8,285,831 12.80Personal emoluments 212,500 207,069Travel and subsistence 6,000 20,496Materials and supplies 10,719,404 8,032,406Operating costs 10,500 14,500Maintenance costs 7,560 11,36019131—Medical Laboratory Services 704,423 1.27 751,108 1.16Personal emoluments 665,623 661,437Other expenditures 38,800 89,67119141—National Engineering and753,029 1.36 827,675 1.28Maintenance CenterPersonal emoluments 568,677 593,375Other expenditures 184,352 234,30019151—Planning and Policy Unit 459,446 0.83 402,300 0.62Personal emoluments 435,646 353,050Other expenditures 23,800 49,25019168—Belmopan Hospital 3,611,351 6.50 5,123,840 7.92Personal emoluments 3,310,819 4,418,514Travel and subsistence 63,000 71,248Materials and supplies 100,000 139,740Continued on next pagechapter 12A Health Sector in Transition217

chapter 12A Health Sector in TransitionAppendix. (continued)Budget categoryProjected,2006–2007Percent oftotalProposed,2007–2008Operating costs 67,000 85,000Maintenance costs 20,200 32,864Public utilities 10,912 16,312Contracts and consultancy 39,420 360,162Percent oftotal19178—HIV/AIDS 0 0.00 1,145,378 1.77Personal emoluments 181,378Other expenditures 964,00019188—Maternal and Child Health 0 0.00 1,352,790 2.09Personal emoluments 134,216Other expenditures 1,218,57419198—Environmental Health 0 0.00 423,634 0.65Personal emoluments 67,155Other expenditures 356,47919208—Regulatory Unit 0 0.00 234,814 0.36Personal emoluments 169,055Other expenditures 65,75919218—Belize Health Information System 0 0.00 637,146 0.98Personal emoluments 123,510Other expenditures 513,63619228—Vector Control 0 0.00 543,830 0.84Personal emoluments 44,095Other expenditures 499,73530241—National Drug Abuse Control297,095 0.54 351,972 0.54CouncilPersonal emoluments 247,995 223,332Other expenditures 49,100 128,640Total 55,529,219 100.00 64,707,871 100.00218

ReferencesArcia, G. 2009. “Belize: Social Sector PublicSpending and the Poor—A Review.” Inter-American Development Bank, Washington,D.C.Bloom, D., and D. Canning. 2000. “The Healthand Wealth of Nations.” Science 18, no. 5456:1207–9.Central Statistical Office. 2001. Abstract of Statistics,2000–2001. Belmopan: Ministry ofFinance.———. 2007. Living Standard Measurement Survey2002: Towards Eradicating Child Malnutritionin Belize. Belmopan.Cercone, J., et al. 2007. Health Financing Optionsfor the National Health Insurance of Belize. SanJosé, Costa Rica: SANIGEST.Government of Belize. 2009. Country Poverty AssessmentReport. Belize City.Meerhoff, R. 2007. “Toledo District: Informationfor Health Policy, Planning, Programmingand Budgeting Decision Making at theLocal Level. Rural Model of Health Provision.”(Inter-American Development Bank/Multilateral Investment Fund), Belize City.Unpublished.Ministry of Health. 2006. Health Statistics of Belize,2001–2005. Belmopan: EpidemiologyUnit, Ministry of Health.———. 2007. “Towards Eradicating Child Malnutritionin Belize.” Belmopan. Unpublished.———. 2009. Health Statistics of Belize, 2004–2008. Belmopan: Epidemiology Unit, Ministryof Health.Musa, S., Hon. 2007. “Budget Presentation forFiscal Year 2007/2008: Facing, Fixing, MovingAhead.” Speech by Prime Minister toNational Assembly, March 2, Belmopan.National Human Development Advisory Committee.2004. Poverty Assessment Report 2002.Belmopan: Government of Belize.PAHO (Pan American Health Organization).2002. “Health Systems and Services Profile:Belize.” Division of Health Systems and ServicesDevelopment, Washington, D.C.———. 2007. Regional Core Health Data Initiative.Technical Health Information System.Washington, D.C.: Health Analysis and StatisticsUnit.Statistical Institute of Belize. 2008. Abstract ofStatistics. Belmopan.World Bank. 2009. Online Atlas of the MillenniumDevelopment Goals. Available at http://devdata.worldbank.org/atlas-mdg/. Washington,D.C.———. Various years. World Development Indicators.Washington, D.C.chapter 12A Health Sector in Transition219

Education Sector: Analysis andOptions for a Policy Agenda1313.1 IntroductionOver the past two decades Belize has made great strides in improving education coverage and hasmade some progress in internal efficiencies. Enrollment in primary education is almost universal, andsecondary education coverage has doubled since the early 1990s. However, the country still faces majorchallenges in terms of access. Preschool, secondary, and higher education have yet to reach the lowest incomequintiles, and enrollment at the primary level shows signs of decline. The preschool gross and netenrollment rates of around 30 percent are among the lowest in Latin America and the Caribbean andconsiderably below the regional average gross enrollment of 65 percent. 1 Overall, only some 45 percentof secondary-school-aged children are enrolled, far below the regional average of 70 percent. Equity isan important issue at this level of education, as children from the wealthiest quintile are 2.2 times morelikely to be enrolled than those in the poorest quintile. 2Beyond additional quantitative advances, an orientation towards qualitative matters is necessary. Learninglevels tend to be low at both the primary and secondary levels, particularly in mathematics. Strikinginequalities in test scores persist between small rural schools—which tend to serve students fromsocioeconomically and ethnically disadvantaged backgrounds—and large private urban schools, whichprimarily serve students from more socioeconomically advantaged backgrounds. The deficiencies in thequality of education are troubling considering a growing body of research that indicates that educationquality is more important than education quantity for economic growth. 3In the face of these challenges, Belize is tasked with improving education quality and equity and increasingenrollment and completion rates. In view of the country’s current budgetary constraints, anysolutions to these education sector challenges must be as fiscally neutral as possible. This chapter analyzesBelize’s education sector—from preprimary through secondary education—and presents a seriesof policy options that may inform a future agenda for system reform.123Gross enrollment expresses the number of students enrolled at a particular level of education as a percentage of the number of studentsin the age group defined for that level of education; thus it can exceed 100 percent if students are enrolled outside the typical age groupfor that level. For example, secondary education in Belize is defined as being for those between ages thirteen and sixteen (see Section13.2.1); the enrollment of students past the age of sixteen in secondary education could make the gross enrollment ratio exceed 100percent. Net enrollment, by contrast, expresses the number of students enrolled at a particular level of education who are in the definedage group for that level, as a percentage of the total population in that age group. For Belize, for example, the net secondary enrollmentwould be the percentage of Belizeans between ages thirteen and sixteen who are enrolled at the secondary level. The maximum netenrollment is (theoretically) 100 percent.This chapter uses Ministry of Education administrative data for the 2008–09 academic year. International comparisons are based onUNESCO’s Education for All Global Monitoring Report 2009.Hanushek and Woessmann (2009) develop a new common metric to track student achievement across countries and find strongevidence that there is a causal relationship between cognitive skills and growth. Barro (2001) finds that increased numeracy skills havegreater effect on economic growth than the level of schooling attained.221

chapter 13Education Sector: Analysis and Options for a Policy Agenda13.2 Sector Characteristics andTrends13.2.1 Levels of EducationThe structure and management of Belize’s educationsystem have remained almost unchangedsince independence. Great Britain’s influenceis still present: Belize’s education system sharesmore characteristics with those in the Caribbeanthan with those elsewhere in Central America.The country introduced preschool education forthe three- to four-years age group after independencein 1981. In the early twentieth century, thecolonial government made primary educationcompulsory. This level of education is dividedinto two years of infant education for five- andsix-year-olds, and six standards (academic years)for the seven- to twelve-years age group. Secondaryeducation is divided into four forms (academicyears) and provides instruction for the thirteentosixteen-years age group. Secondary educationis not compulsory, but in theory this level of educationis free; in reality, a majority of secondarystudents pay school fees.13.2.2 Size of Education System andEnrollment LevelsOver the past decades there has been a smallbut steady expansion in the number of schools,teachers, and enrolled students. As indicated inTable 13.1, at present there are 548 educationalinstitutions in the country, most at the primarylevel, which comprises mostly rural schools (72percent). Although no official data are available,around half of the primary-level institutions arebelieved to be multigrade schools. At the second-ary level 61 percent of schools are located in urbanareas.As noted in the chapter introduction, Belize’sgross and net preschool enrollment rates of below30 percent are roughly half the Latin Americanaverage. At the primary level, the United NationsEducational, Scientific and Cultural Organisation(UNESCO) (2009a) reports that net enrollmentwas 97 percent in 2006, indicating that Belize ispoised to achieve the Millennium DevelopmentGoal of universalization of this level of education.However, these internationally reported data areinconsistent with Ministry of Education data indicatingthat net preschool enrollment was 88.1percent in the 2005–06 academic year, down byalmost seven percentage points from the 2001–02academic year.Until independence in 1981 secondary educationalopportunities were limited mainly to people ofhigher socioeconomic status. Progress in expandingsecondary education coverage has been slow.Gross enrollment has remained at around 60 percentsince 2001, and net enrollment has remainedaround 45 percent in the same time period. Thepopulation eligible to attend secondary educationis expected to increase by around 13 percent tosome 30,600 students by 2015. This demographicshift will place additional demands on the system,as an estimated 1,000 students per year should beenrolled.13.2.3 Institutional StructureMore than those in other Caribbean countries, theBelizean education system has been characterizedby strong church participation (Tsang, Fryer, andTable 13.1. Schools, Teachers, and Enrollment, 2008–09EducationSchools Teachers EnrollmentlevelUrban Rural Total Urban Rural Total Urban Rural TotalPreschool 83 99 182 216 162 378 3,503 2,531 6,034Primary 83 211 294 1,345 1,603 2,948 30,815 35,920 66,735Secondary 31 20 51 958 314 1,272 13,539 4,076 17,615Tertiary 7 4 11 182 36 218 2,736 655 3,391Vocational 4 6 10 44 45 89 394 403 797Total 208 340 548 2,745 2,160 4,905 50,987 43,585 94,572Source: Ministry of Education (2009).222

Arevalo 2002). The church-state partnership wasinstitutionalized in the nineteenth century, but itwas not until the 1960s that the state made consistentefforts to assume control over the educationsystem. Although the system continues to bemanaged through a partnership between the stateand the church, the influence of the church variesby level of education (Rapalo 2007).The government influence in preschool educationis recent. Whereas in 2000 there were nogovernment-run preschools in Belize, today closeto one-fifth of preschool institutions are governmentschools. Less than 19 percent of primaryschools are government operated, with the remainingschools run by various religious denominations.At the secondary level, governmentschools account for some 31 percent of schools,an additional 39 percent are operated by religiousdenominations, and the remaining schools are runby private organizations or communities.The managing authorities of the schools assumethe responsibility for hiring teachers and managingthe resources they receive for operation costsat the primary level and salaries and tuition grantsat the secondary. At the primary level, schools areexpected to implement a national curricular program,but the implementation is uneven. At thesecondary level, the schools’ managing authoritiesdefine their own curricular programs, resulting invery important variations in quality.Belize’s government is generally unable to fulfillits regulatory functions, and many schools fail tocomply with operational and reporting requirements.Ministry of Education centers in eachdistrict are tasked with supervising the schools,but in practice these lack the capacity to do so.As a result, implementation of Ministry of Educationregulations varies greatly across districtsand schools. The problem is particularly noticeablein relation to the teaching force, includingterms of employment and disciplinary action. Althoughthe Ministry of Education has a standardcontract that is required to be used by all publicschools, managing authorities often make adjustmentsand omit or add sections regarding conditionsof service. As a result terms of employmentvary greatly among schools (Stewart 2008). In thesame way, the Ministry of Education does nothold the managing authorities accountable formeeting established performance standards. Asinformation sent to the Ministry of Education isfrequently incomplete, the government lacks anyreal oversight of school quality.13.2.4 Financing of EducationRecent Belizean governments have consistentlyprioritized education, spending around 5 percentof gross national product (GNP) on education.As indicated in Figure 13.1, public spending oneducation increased from the mid-1980s untilabout 2000, then decreased marginally through2007. Despite the recent small declines, however,the net increase over the period (from 4.5 to 5.1percent of GNP between 1985 and 2007) reflectsa strong government commitment to education,particularly considering the ongoing governmentprogram to reduce the overall budget deficit.Most of the public education budget is used to financesalaries at the primary and secondary level. Atthe primary level, 100 percent of salaries of teachersin both public and nonpublic schools are financedby the Ministry of Education. The schools’ managingauthorities also receive a small amount of fundsper student for operation costs. At the secondarylevel, the Ministry of Education pays 70 percentof teacher salaries, and also finances enrollmentbasedtuition grants to denominational and aidedschools. However, there are large differences in thesize of the allocation per student. The unequal allocationcomes from funding formulas based onhistoric tuition fees charged by each secondaryschool. More affluent schools that charged highertuition fees when the grant was instituted now receivehigher allocations per student as a result.Figure 13.1. Education Expenditure(percentage of GDP)65432101985 1990 1995 1999 2003 2007Source: UNESCO (2009b).chapter 13Education Sector: Analysis and Options for a Policy Agenda223

chapter 13Education Sector: Analysis and Options for a Policy AgendaPublic financing for the education system is supplementedby churches, communities, and privateorganizations, which pay for maintenanceof the schools they operate, as well as 30 percentof teacher salaries at secondary schools. Despitethe substantial public and church contributions,many schools at both the primary and secondarylevels charge fees. At the secondary level, morethan 56 percent of students pay school fees that,on average, amount to BZ$450 per student (Table13.2). Schools’ practices in regard to charging feesvary widely across districts. While a majority ofstudents in Orange Walk (98.2 percent), Toledo(75.4 percent), and Corozal (63.5 percent) payschool fees, in Cayo only 6 percent do so.Thus, because of the fees that many schoolscharge, the private cost of schooling in Belize ishigh, despite government subsidization. Table13.3 indicates that at each level of education, Belizeanparents on average spend close to the sameamount as the government. In spite of the ministry’stransfers to schools in the form of tuitiongrants, one-quarter of the private spending oneducation is used to pay school fees. Other importantprivate education expenses include transportationand books, each of which accounts forslightly above 16 percent of overall householdeducation spending.Table 13.2. Average Annual Secondary EducationSchool Fees, 2007–08 (BZ$)FormFee1 437.12 450.23 485.94 526.7Total (four forms) 1,829.9Source: Ministry of Education (2009).Table 13.3. Average Spending per Student by Levelof Education, 2006(BZ$)Primary Secondary PostsecondaryPublic 1,120 1,971 1,225Household 1,062 1,926 1,260Total 2,182 3,897 2,485Sources: Ministry of Education (2009). Household data fromWorld Bank (2002).Belize’s heavy reliance on private resources to financeeducation results in high costs to householdsand raises questions regarding accessconstraints among poorer families, which in turnraises questions of equity. The high private cost ofeducation has been identified as one of the mainaccess constraints to the secondary level (Rapalo2007). Ministry transfers to schools in the form ofsalary and tuition grants are aimed at increasingcoverage. However, in spite of these grants, whichwere designed to minimize the private financialburden of secondary education, the design of thecurrent financing system inherently results in inequities.Larger schools in urban areas get morefunding because they historically have higher feesand pay higher teacher salaries.Furthermore, although fees tend to be higher forschools located in socioeconomically wealthier areas,the proportion of household expenditure representedby the fees is much higher in the poorestquintile. Fees paid for secondary education rangefrom 10.8 percent of household expenditure inStann Creek to over 19 percent in Toledo andBelize and 28 percent in Orange Walk. At thesecondary level, the private cost of sending a childto school is equivalent to one-third of the pooresthouseholds’ per capita expenditure, compared to7.8 percent of the per capita expenditure of thewealthiest quintile. Thus, to increase both the efficiencyand the equity of the country’s educationsystem, the mechanism for allocating resources tothe system needs to be reformed so that it adequatelytargets the population segments that facethe greatest obstacles to school attendance.13.2.5 Teaching ForceIn 2008–09 the teaching force in the Belize educationsystem from preschool through tertiaryeducation was composed of more than 4,900teachers, an increase of 24 percent since 2001.Despite substantial government efforts to trainteachers, a large proportion of Belize’s teachingforce remains untrained. In the 2008–09 academicyear, the proportion of trained teachers in primaryeducation—defined as one full-time year or twoand a half years of distance training to completea Level I certificate—was 42.5 percent. The sameyear, the proportion of trained teachers in secondaryeducation—defined as Bachelor of Educationin subject area—was 29.7 percent. As indicated224

Despite relatively high government investmentsin education by the government, education outcomesin Belize are disappointing in terms ofaccess, quality, and equity, particularly at the secondarylevel. As indicated in Table 13.5, spendingon education is only slightly below averagepublic expenditure in the Caribbean and is abovethe average spending in Latin America. Yet theproportion of youth between 15 and 19 years ofage who complete ninth grade (Form I) is merely17 percent, lower than that in most other countriesin the region, with only three Latin Americanand Caribbean countries ranking lower:Panama (9 percent), Guatemala (11 percent),and Haiti (16 percent). 4 The rate is substaninTable 13.4, there are great differences betweendistricts. At the primary level, the proportion oftrained teachers in Toledo is slightly less than halfthat in Corozal District. Similarly, at the secondarylevel, the proportion of trained teachers in StannCreek is considerably less than half the proportionof trained teachers in Belize District.Since 2002, more than 600 teachers have completedtheir preservice training. However, this hashad a limited effect on a national scale, as many ofthe approximately 1,000 new teachers who joinedthe teaching force during the same time periodwere untrained. Some 75 to 80 teachers leave theprofession each year. This attrition is in line withthe OECD countries that have the lowest attritionrates: Italy, Japan, and Korea (OECD 2005).The low attrition may be the result of teachersalaries that are relatively favorable compared tothose in other countries in the region.The very limited availability of teachers trainedin bilingual teaching practices aggravates theproblem of large numbers of untrained teachers.In spite of the substantial presence of particularlyMayan and Garifuna ethnic groups, Belize has nohistory of bilingual education. Teacher trainingfails to provide instruction in Mayan and Garifunaliteracy, bilingual pedagogy, and approachesfor attracting and retaining indigenous studentpopulations. Even in predominantly ethnic enclaves,teachers often possess limited written second-languageskills.Hiring practices that do not always select themost-qualified candidates exacerbate the limitedavailability of trained teachers. Although Belize’sEducation Act requires that all teachers be licensedand appointed by the Ministry of Education, inpractice the Ministry of Education has no realinfluence over decisions regarding the hiring ofteachers, as noted previously, nor does it have anyde facto control over dismissals or reassignmentsof teachers who are not performing up to standard.Anecdotal evidence suggests that some managingauthorities give preference in the teaching hiringprocess to certain personal characteristics—suchas lifestyle and religious affiliation—over level oftraining and years of experience.13.2.6 Education Outcomeschapter 13Education Sector: Analysis and Options for a Policy AgendaTable 13.4. Trained Teachers by District, 2008–09(percent)Primary EducationSecondary EducationUrban Rural Total Urban Rural TotalBelize 39.7 39.1 39.6 39.8 35.4 39.4Cayo 41.4 34.6 37.6 24.5 22.7 24.2Corozal 66.7 64.4 65.0 35.2 26.5 29.6Orange Walk 58.0 53.1 54.9 23.6 21.7 23.3Stann Creek 50.5 28.6 34.5 21.1 17.5 19.4Toledo 53.4 26.7 31.7 26.5 26.3 26.4Total 45.1 40.4 42.5 31.2 25.2 29.7Source: Ministry of Education (2009).4The comparison is made among 19 countries for which data are available for this indicator: Belize, Bolivia, Brazil, Chile, Colombia,Costa Rica, Dominican Republic, Guatemala, Guyana, Honduras, Haiti, Jamaica, Mexico, Nicaragua, Panama, Paraguay, Peru, Suriname,and Venezuela.225

chapter 13Education Sector: Analysis and Options for a Policy AgendaTable 13.5 Education Expenditure and Ninth Grade Completion, by CountryTotal publicexpenditure oneducation(% of GDP)tially poorer than that in some countries of theregion, including Jamaica (80 percent), Peru (69percent), and Costa Rica (60 percent). Completionrates are even lower among the economicallydisadvantaged, with only 4.7 percent of youthfrom the first quintile, compared with 40.4 percentin the fifth quintile, completing secondaryeducation (Näslund-Hadley, Arcia, and Cercone,forthcoming).Total public expenditureon education(% of total governmenteducation expenditure)Ninth gradecompletion rate (% ofthose aged 15–19)Belize 5.1 18 17Costa Rica 5.0 21 60Guatemala 3.0 n/a 11Haiti n/a n/a 16Jamaica 5.5 9 80Mexico 4.8 26 65Peru 2.5 n/a 69Panama 3.8 n/a 9Caribbean average 5.8 15 n/aLatin America average 4.0 15 48Sources: UNESCO (2009a); Ministry of Education (2009).Note: Year of data varies by country and ranges from 2004 through 2008. n/a = no data available.Race and geographic area are key determinantsof school attendance in Belize. As indicated inTable 13.7, youth from the Garifuna, Maya, andMestizo ethnic groups face greater obstacles toattending secondary education than the Creolepopulation. The net enrollment rate of Creoleyouth is 1.6 times that for Garifuna and Mayanyouth. Similarly, the net enrollment rate in urbanareas is 1.3 times that in rural areas.Although children have access to primary educationregardless of their economic status, the poorface barriers to secondary education, as discussedin the previous subsection. As indicated in Table13.6, in 2002 net secondary enrollment was 34.6percent in the poorest consumption quintile,compared with 75.2 percent for children in thewealthiest.Table 13.6. Primary and Secondary Education EnrollmentRates by Consumption QuintileQuintilePrimary netenrollmentSecondary netenrollment1 98.6 34.62 98.9 50.13 99.3 65.64 99.6 67.25 100.0 75.2Total 88.1 45.3Sources: Household data from World Bank (2002); Ministry ofEducation (2009).The country’s dropout and repetition rates showthat education quality is also a concern. The grossprimary education enrollment rate is 123 percent,indicating that the number of students enrolled atthe primary level—independent of age—exceedsTable 13.7. Ratio of Net Secondary EnrollmentRates by Ethnic Group and Geographic AreaCreole 1.6Garifuna 1.0Maya 1.0Mestizo 1.2Other ethnic group 1.5Urban 1.3Rural 1.0Source: World Bank (2002).Note: Numbers in table represent ratios of net enrollment ratesfor the various groups. The lowest net enrollment rates are usedas denominators in the ratios; for example, urban over rural,and Creole over Maya and/or Garifuna. If the ratio was 1 for allgroups, there would be perfect equality.226

Table 13.8. Average Primary Education Repetition and Dropout Rates by District and Sex, 2007–08(percent)DistrictRepetitionthe population in the 5 to 14 years age group byalmost 25 percent. Although dropout rates remainunder 2 percent in all districts, the repetition ratesare elevated (Table 13.8). As in other developingcountries, the problem is most severe in the firstgrade—around 17 percent—but the rate remainshigh as well in other grades. The average primaryrepetition rate of 7.2 percent is higher than thatin other Caribbean countries. As a direct resultof the high repetition rates, the average completionrate—the proportion of students enteringprimary education who are expected to completeit in the prescribed eight years—is a mere 42.6percent.Whereas Belize’s overall repetition rate in secondaryeducation of 7.7 percent is around averageamong Caribbean and Central Americancountries, its 10.5 percent dropout rate is amongthe highest (Table 13.9). Only a little less thanhalf the students who enter ninth grade (FormDropoutMale Female Total Male Female TotalBelize 6.3 3.6 5.0 0.4 0.4 0.4Cayo 9.3 6.7 8.0 1.4 0.9 1.1Corozal 8.3 6.1 7.2 1.1 0.8 0.9Orange Walk 8.2 6.7 7.5 1.0 0.9 0.9Stann Creek 10.4 7.3 8.9 1.3 1.2 1.2Toledo 10.0 8.1 9.1 1.1 1.0 1.0Total 8.4 6.0 7.2 1.0 0.8 0.9Source: Ministry of Education (2009).I) are able to complete their secondary educationin the predicted four years. At the secondarylevel, the cost of repetition and dropout amountsto BZ$2,253,420, the equivalent of one year ofschooling for 1,143 students (8.5 percent of thestudent population).Enrollment rates at the primary level show nosignificant gender differences, but a disproportionatenumber of males drop out (see Table13.8). As a result, the primary education completionrate is 35.8 percent for males compared to44.5 percent for females. At the secondary levelboth net and gross enrollment rates are close tofive percentage points higher for females. Probablyas a result of the disparities at these lowerlevels, females account for 61.6 percent of enrollmentat the tertiary level and outnumber maleseven in programs that traditionally tend to bemale dominated, such as business and naturalsciences.chapter 13Education Sector: Analysis and Options for a Policy AgendaTable 13.9. Average Secondary Education Repetition and Dropout Rates by District and Sex, 2007–08(percent)DistrictRepetitionDropoutMale Female Total Male Female TotalBelize 8.1 6.3 7.1 13.7 8.6 10.9Cayo 9.7 7.0 8.3 14.6 10.4 12.4Corozal 10.4 6.6 8.5 13.2 9.2 11.1Orange Walk 10.9 7.9 9.3 11.1 6.0 8.5Stann Creek 9.2 7.6 8.4 9.9 7.1 8.5Toledo 4.9 3.9 4.4 7.5 7.6 7.6Total 8.9 6.7 7.7 12.5 8.6 10.5Source: Ministry of Education (2009).227

chapter 13Education Sector: Analysis and Options for a Policy AgendaTable 13.10. Best and Worst Schools According to Performance on Primary School Examination, 2005Ranking District Management1 Belize Private U HummingbirdElementaryBelize’s sustained high levels of spending in thesector have not translated into better educationoutcomes in terms of student learning. Between2007 and 2009, more than 40 percent of participatingstudents earned less than satisfactoryratings in English in the Primary School Examination,which is administered to some 70 percentof students at the primary level. During thesame time period, more than 60 percent of participatingstudents earned less than satisfactoryratings in mathematics. At the secondary level,test scores are also low, especially considering theoverrepresentation of students with aspirationsto tertiary education in the testing pool. In 2008,only 60 percent of test takers achieved at leastsatisfactory ratings on the Caribbean CouncilExamination in English, and 67 percent of participatingstudents achieved at least satisfactoryon the mathematics exam. 5 The highest-performingschools in Belize, based on standardizedtest results, tend to have lower student-teacherratios, higher proportions of trained teachers,greater financial resources, better (i.e., urban) locations,and larger sizes. By contrast, the worstperformingschools are located in rural areasand have smaller student populations and lessqualifiedteachers However, as can be seen bythe third-ranked school in Table 13.10, there areimportant exceptions: schools without trainedteachers can also rank high.Urban/rural School name Enrollment Mean13.3 Reform EffortsNumber ofteachersNumber oftrainedteachers154 324.1 13 132 Belize Private U Belize Elementary 381 320.1 25 83 Belize Private U Bernice Yorke 147 305.8 13 0286 Toledo Mennonite R Jordan Mennonite 35 115.5 4 0288 Belize Anglican R St. Stephen’s 39 110.5 2 1289 Toledo Mennonite R Blue CreekMennoniteSource: Ministry of Education (2005).13 47 2 0Although the government of Belize recognizesthe urgency of improving coverage at all levels ofeducation, as demonstrated in particular by thesustained high levels of financial support for thecountry’s education system over the past two decades,even in an atmosphere of serious budgetconstraints, its goals are unlikely to be achievedin the time frames established in the country’splanning documents. At the preprimary level, theNational Poverty Elimination Strategy and ActionPlan (NPEAP) 2007–2011 sets out to provideearly childhood education to 50 percent ofpreschool-aged children by 2010. However, thegovernment has been unable to train the teachersand provide the infrastructure required forthe approximately 150 new preschools needed toachieve this goal. As a result, since the adaptationof the NPEAP in 2007, net enrollment in preprimaryeducation has remained among the lowestin the region, at less than 30 percent. Similarly,at the secondary level, a principal NPEAP objectiveis universal coverage in secondary educationby 2011. However, since the adaptation of theNPEAP, access to secondary education has remainedaround 45 percent.To address Belize’s substantial shortage of trainedteachers, the government has made considerable5The Caribbean Council Examination, the principal international standardized test used at the secondary level in Belize, tests studentknowledge on a wide spectrum of subject areas. Although the test is not compulsory, access to tertiary education requires a passingrating on the tests for at least five of the subjects covered by the examination, two of which must be English and mathematics. Thusstudents who hope to pursue tertiary education are overrepresented in the test-taking population, and if that overrepresentation couldbe factored out of the test scores, the passing rates on the English and mathematics examinations would likely be considerably lowerthan 60 and 67 percent, respectively.228

efforts to train and retain more teachers. Thecountry’s teacher training system is in a constantstate of reform, and the number of students enrolledin the Faculty of Education has more thantripled in recent years. However, as discussedearlier in the chapter, as a direct consequence ofthe hiring of untrained teachers, the proportionof trained teachers in the country’s teaching forceremains unchanged despite the government’s efforts.To reach the government goal, establishedclose to two decades ago as part of the Belize PrimaryEducation Development Project, of increasingthe representation of trained teachers to 80percent, the proportion at the primary level wouldhave to almost double. If the same goal is appliedto the secondary level, the proportion of trainedteachers would have to almost triple.13.4 Policy OptionsThe foregoing review of the Belize education systemreveals that in spite of a sustained elevatedlevel of education expenditure, glaring inequalitiesin access and quality persist, particularly atthe secondary level. The successful approaches ofother countries suggest a number of policy optionsfor addressing the challenges associatedwith these inequities.13.4.1 Strengthen Quality AssuranceFunctionsGlobal research on school-based managementstructures generally presents a wide spectrum ofadvantages of a decentralized school managementmodel, including increased parental involvement,fewer bottlenecks in procurement processes, andgreater local ownership. However, the literaturealso emphasizes the importance of guidance andoversight of school-based management systemsby a central body. Countries that are most successfulin generating and supporting student learningtend to have education ministries that carry outsome degree of quality assurance, including establishmentand communication of educationalstandards, definition of criteria and instrumentsfor performance measurement, development ofstructures for reporting as well as education managementindicators and statistics, maintenance ofinformation systems, and evaluation of performancebased on international standards.Ensuring quality education in Belize will requirethat the Ministry of Education develop qualitystandards by which the country’s schools can beheld accountable and that the Ministry’s capacityto monitor compliance with those standards andensure accountability through appropriate proceduresbe strengthened. These procedures shouldlay out the steps to be followed when there is alack of compliance or when schools perform beyondrequired standards and merit recognition orawards. The country’s district education centerswould necessarily constitute a cornerstone of suchan improved quality assurance framework. Theseentities must be given the power and resourcesnot only to execute their supervisory functions,but also to provide concrete technical support andguidance to school directors and teachers.As another important step towards assuming astrengthened quality assurance role, the Ministryof Education should reinforce the use of national,regional, and international assessments. AlthoughBelize has a relatively long-standing tradition ofadministering both the Caribbean Council Examinationand national assessments, the resultsare rarely used for education planning. Universallyapplied tests, in particular, should be widelydisseminated and used as a tool for identifyingwhere schools are failing and better target policiesto improve teaching and administrative practices.It is also critical that parents have routine accessto test scores so that they can monitor both theirchildren’s learning and the relative performanceof the schools their children attend.To benchmark its performance against internationalstandards and establish medium- andlong-term targets, Belize should also participatein international standardized learning assessments,such as the Second Regional Comparativeand Explanatory Study (SERCE), the Trends inInternational Mathematics and Science Study(TIMSS), and the Programme for InternationalStudent Assessment (PISA). Participation inthese assessments will enable comparisons beyondthe Caribbean and allow Belize to adopt specifictargets for the proportion of students that shouldperform at the higher proficiency levels.Perhaps the most important area in which theMinistry of Education’s quality assurance functionsshould be enhanced is teaching services. Inchapter 13Education Sector: Analysis and Options for a Policy Agenda229

chapter 13Education Sector: Analysis and Options for a Policy AgendaA growing body of research and empirical evidenceindicates that high-quality preschool educationcan improve readiness to learn and timelyentry into primary education (see, for example,Heckman 1999 and Williams 2002). Early interventioncan compensate for a negative homeenvironment, and early childhood programs havebeen shown to have an effect on enrollment andachievement years after participation. In light ofthis evidence, preschool opportunities in Belizeshould be expanded to a broader segment of thepopulation. Since the developmental impacts ofinitial education have been found to be most protheEnglish-speaking Caribbean and other Commonwealthcountries, teaching services councilstend to exercise responsibility for appointments,licensing or accreditation, and disciplinary matters.Based on a review of the experiences ofgeneral teaching councils, teaching services commissions,and other entities with similar roles andresponsibilities, Stewart (2008) identifies a seriesof important advantages of these organizations.Perhaps the most important lesson for Belize isthat even in highly decentralized education systems,the existence of these bodies has resulted inincreased levels of accountability and compliance.Other benefits of such commissions or councilsinclude the establishment or strengthening ofstandards for entry into the profession, a morestructuredframework for disciplinary action andhandling of teacher complaints, and improvedability to track the status of teachers. Notwithstandingthese benefits, teaching commissionsand councils also present a series of challenges,including the cost of establishing an efficientbody, lack of interest among teachers in gettinglicensed or accredited, and inadequate registrationdatabase systems.Taking on the functions put forward above wouldimply a significant increase in the roles and responsibilitiesof Belize’s government. Successfulassumption of these undertakings would requireconsiderable capacity building across the entireeducation system.13.4.2 Strengthen the Teaching Forcerequire the establishment of an in-service teachertraining program. A distance in-service trainingprogram would be an interesting option thatwould also make it easier for teachers in ruralareas—where the proportion of untrained teachersis higher—to comply with the Education Actrequirement of continuous professional development.Belize also needs to establish a system that linksteacher performance to student learning. Internationally,experiments with performance-basedpay have had mixed results, including positive effectsin Chile and Brazil, but no effect in Mexico.The design and size of the incentives is critical, asthese must be substantial enough to be consideredworthwhile (Vegas 2007). The government hasalready modified the salary structure to motivateteachers to complete their training, but the Ministryof Education may want to experiment withadditional modifications to the salary structureto encourage teachers to excel. A regional comparisonshows teacher salaries in Belize are high,however, a more flexible pay scale might motivateteachers to improve performance, aid in retainingqualified teachers, and encourage teachersto accept assignments in remote areas. The salarystructure could, for example, reward teacherswhose students perform well under demandingconditions, such as multigrade schools in ruralareas. The Ministry of Education should also experimentwith nonmonetary incentives, such asdistinctions for extraordinary performance andproviding opportunities for further study.As has been made clear throughout the chapter,increasing the proportion of trained teachers isa key issue for improving the quality of educationin Belize. A simple way to do this wouldbe to enforce the Education Act regulation thatprohibits hiring teachers without proper qualifications.However, this regulation is not easilyimplemented in an education system that doesnot produce enough trained teachers. In addition,Belize’s teacher-training institutions need to provideinstruction in Mayan and Garifuna literacyas well as bilingual pedagogy to prepare teachersfor the particular educational needs of childrenfrom these ethnic backgrounds.Reaching the government target of raising theproportion of trained teachers to 80 percent will13.4.3 Improve Enrollment andAchievement amongDisadvantaged Populations230

nounced among disadvantaged children, the firsttarget should be to provide at least one zero gradein all primary schools located in socioeconomicallydisadvantaged communities. The educationoffered needs to be strictly monitored and evaluatedto ensure high-quality services and developmentalimpacts.Despite the absence of international standards onsecondary education enrollment rates, many countriesaim for universal secondary coverage. At thelevel of the individual, secondary education is increasinglynecessary to obtain employment, and atthe national level, it is central to productivity andinternational competitiveness. The greatest challengefor Belize in regard to secondary educationis to improve enrollment and achievement amongthe poor and the Garifuna, Maya, and Mestizoethnic groups. The country’s problems in regardto access to secondary education are related notonly to the lack of infrastructure and the highprivate cost of education—mainly for books, fees,and in some districts transportation—but also tothe low quality and relevance of the education offeredby many schools. When the education offeredis deemed inadequate, students and parentsdo not consider it worthwhile, which results invery low completion rates.A complete overhaul of the secondary educationsystem is needed, including the establishment ofa national curriculum to ensure that all studentshave access to instruction in at least core subjectareas such as Spanish, English, and mathematics.The mechanism through which the country’spublic education financing is distributed needs tobe reformed to eliminate the profound inequitiesthat currently exist (see Section 13.4.4). The governmentshould also seek to expand access to secondaryeducation through nonformal alternativessimilar to Mexico’s Telesecundaria, Colombia’sEscuela Nueva, or Honduras’s EducaTodos. Besidesbeing cost-effective, these programs have theadvantage of flexible hours, thereby allowing studentsto combine their studies with employment.The gap between female and male completionrates in the country suggests a need for further researchto determine whether Belizean males dropout as a result of factors external to the school—such as employment, gang membership, andmigration—or because of in-school factors suchas classroom dynamics, teacher beliefs and expectations,or peer effects. Only by accurately identifyingthe roots of the problem can appropriateaction be taken to retain males in the educationsystem.Although in Belize the problems of access to educationclearly are most pronounced at the preprimaryand secondary levels, it is neverthelessimportant to avoid further slippage at the primarylevel. If it continues, the trend toward decreasedprimary coverage in recent years may jeopardizeachievement of the Millennium DevelopmentGoal of universal access to this level of education.To ensure quality primary education, the qualityassurance functions need to be strengthened ateach level from the Ministry of Education to theschools. The primary-level curriculum also needsto be reformed to recognize that Belize is a multiethnic,multicultural, and multilingual society. Animportant aspect of such a reform would necessarilyinvolve the strengthening of bilingual andmulticultural education opportunities. Guatemalahas developed some interesting programs in thisrespect that could be used as examples in transmittingMayan culture.13.4.4 Reform the Financing ofEducationIn view of Belize’s tight budget and the alreadyelevated levels of public education expenditure,to make it possible to implement the reformsrecommended in the preceding subsections, thecountry needs to increase the efficiency of itsspending in the sector. Human resources expendituresat the central and district levels should bereviewed, since this is the only personnel spendingthat could be reduced without affecting student-teacherratios.Although efficiency gains need to be achieved atall levels, the situation is particularly alarming insecondary education, where the high per-studentspending is not reflected in key indicators such asthe proportion of youth between 15 and 19 yearsof age who complete ninth grade. It is incumbenton the country to use existing resources atthis level more effectively. Belize should thereforereform its system for financing of secondaryeducation to achieve better results with existingresources.chapter 13Education Sector: Analysis and Options for a Policy Agenda231

chapter 13Education Sector: Analysis and Options for a Policy AgendaThere are many models for financing secondaryeducation, with each model responding to historicalpatterns of finance, strategies for attainingequity and quality in education, and governmentstructures. Federal systems, for example, share governmentfunding with lower levels of government,while nonfederal systems tend to bypass local governmentsand fund schools directly. School controlover funds may be full, partial, or completely absent.The amount of funding can be based eitheron the number of students or on the payroll.Very little evidence links funding levels or internalefficiency to test scores or academic performance,mainly because educational performance is theresult of the interplay of many different variables,some of which are difficult to quantify, such asschool leadership, teacher quality, and parent input.If one uses education indicators from differentcountries to evaluate the appropriateness ofa particular funding formula—without takingcontext into consideration—it is easy to reach awrong conclusion. The direction of the incentivesproduced by a funding formula should run in thesame direction as the desired policy goal. Thus, ifone seeks equity in access, paying all teachers thesame salary without any concern for targeting disadvantagedpopulations via salary supplementationfor teachers of students who belong to thosepopulations is bound to be counterproductive,whereas providing extra compensation to schoolswith high populations of students who live inpoverty or have special needs is bound to producea more equitable system.The main change proposed in regard to Belize’sfunding of secondary education is to link secondaryschool financing to the number of studentsand the standardized curriculum to which theyhave access, replacing the existing link to teachersalaries and historical grants. Such a change wouldsignificantly increase equity in school financingand ensure that students from different socioeconomicand ethnic groups have equal opportunityto study a sufficiently broad and relevant curriculum.The new financing system should also incorporatemechanisms to increase enrollment amongchildren with special education needs. It is alsocritical that a mechanism be put in place that rewardsschools for decreasing repetition rates andincreasing completion rates.At the pedagogical level, the implementationof such a financing mechanism would involve acompromise: poor schools that currently cannotteach a basic curriculum would see their resourcesincreased and, by implication, increase the qualityof the education offered to their students. Schoolsthat now offer curricular programs that exceed therequirements of the basic curriculum would haveto find nongovernmental sources of funding tocontinue the same curriculum. For large denominationalschools in urban areas, the implementationof this type of system would probably meanan increase in school fees to families at the topof the country’s income distribution. Arcia (2007)finds that families in Belize’s upper expenditurequintiles should be able to support an increase ofsome 10 percentage points in private participationin the total cost of education, bringing thecountry more in line with other countries in theregion. That may not be popular and may not befeasible in the short run, since these are familieswith substantial political influence. Hence, anychange in the pattern of grant allocation wouldhave to be gradual. Rather than actually decreasingallocations, it might be more politically palatablesimply to freeze funding to richer schools atcurrent levels (Näslund-Hadley, Arcia, and Cercone,forthcoming).13.5 ConclusionsThe review of Belize’s education system and relatedpolicy options presented in this chapter recommendsfour policy shifts for education reform inBelize: (1) strengthening the capacity of the Ministryof Education to monitor the education systemand to collect and use data to inform decisionmaking; (2) improving the quality of the country’steaching force, including the strengtheningof both initial and in-service training of teachers;(3) enhancing enrollment and achievementamong disadvantaged populations, including thepoor, indigenous populations, and males; and (4)using resources more efficiently, particularly atthe secondary level. These recommendations areconsistent with a wide body of literature and empiricalevidence on education sector reform. Theyseek to improve education quality and equity at alllevels and increase access and completion rates atthe secondary level.232

ReferencesArcia, G. 2007. “Belize: Social Sector PublicSpending and the Poor: A Review.” Inter-American Development Bank, Washington,D.C. Unpublished.Barro, R. 2001. “Human Capital and Growth.”American Economic Review 91, no. 2:12–17.Hanushek, E. A., and L. Woessmann. 2009. “DoBetter Schools Lead to More Growth? CognitiveSkills, Economic Outcomes, and Causation.”Working Paper no. 14633. NationalBureau of Economic Research, Cambridge,Massachusetts.Heckman, J. 1999. “Policies to Foster HumanCapital.” Working Paper no. 7288. NationalBureau of Economic Research, Cambridge,Massachusetts.Ministry of Education. 2005. National EducationReport. Belmopan.———. 2009. Administrative database. Belmopan:Ministry of Education.Näslund-Hadley, E., G. Arcia, and J. Cercone.Forthcoming. “Improving Equity and Efficiencyin the Public Financing of SecondaryEducation: Introducing Financing Reform inBelize.” Policy Brief, Inter-American DevelopmentBank, Washington, D.C.OECD (Organization for Economic Cooperationand Development). 2005. TeachersMatter: Attracting, Developing and RetainingEffective Teachers. Paris.Rapalo, R. 2007. “Belize Education Sector Assessment.”Inter-American DevelopmentBank, Belize City. Unpublished.Stewart, M. A. 2008. “Review of the Nature andFunctions of General Teaching Councils,Teaching Services Commissions and OtherOrganizations with Similar Roles and Responsibilities.”Inter-American DevelopmentBank, Kingston, Jamaica. Unpublished.Tsang, M. C., M. Fryer, and G. Arevalo. 2002.Access, Equity and Performance: Education inBarbados, Guyana, Jamaica and Trinidad andTobago. Washington, D.C.: Inter-AmericanDevelopment Bank.UNESCO (United Nations Educational, Scientificand Cultural Organisation). 2009a. Educationfor All Global Monitoring Report 2009.Paris.———. 2009b. Education database. Institute forStatistics, Paris.Vegas, E. 2007. “Teacher Labor Markets in DevelopingCountries.” Future of Children 17,no. 1: 219–32.Williams, J. D. 2002. “Standards of Care: Investmentsto Improve Children’s EducationalOutcomes in Latin America.” In Mary EmingYoung (ed.), Investing in Children’s Future:From Early Childhood Development to HumanDevelopment. Washington, D.C.: WorldBank.World Bank. 2002. Living Standards MeasurementStudy Survey, Belize. Washington, D.C.chapter 13Education Sector: Analysis and Options for a Policy Agenda233

Indigenous Peoples: Cross-CuttingConcerns and Needs1414.1 IntroductionBelize is often referred to as a multicultural success story because of the positive relationships betweendisparate groups within the country and the relatively low level of violent conflict (Moore 2008, 4). Ethnictensions do exist in Belize, however, and changes in demographics and shifting national and regionalpolitics—including the development of revenue-generating activities such as tourism—will require thatthese relationships and tensions be more actively addressed.In general, Belize has four main ethnic groups: Mestizos, Creoles, Maya, and Garifuna (Figure 14.1).The Mestizos (of mixed European and Yucatec Maya background) live in Corazal, Orange Walk, andCayo Districts, and the Creoles or Blacks (of mixed European and African background) 1 are mostlybased in Belize District. These two groups tend to dominate politics and economics in Belize and haveoften been referred to as the country’s “elite.” Until recently, Creoles constituted the majority of Belize’spopulation, but the 2000 population census (Central Statistical Office 2000) shows that Mestizos nowdominate the population. This shift can be explained by the large influx of migrants and refugees fromsurrounding Spanish-speaking Central American countries that identify as Mestizo. Other socioethnicgroups include the Mennonites (3.2 percent; religious rather than ethnic group), East Indians (3 percent),Chinese (0.9 percent), and people of Arab descent (Lebanese, Afghani, and Palestinian).14.2 Indigenous PopulationsAccording to Belize’s 2004 Labor Force Survey,the Maya and Garifuna represent approximately16 percent of the total population of Belize (adecrease of 1 percent since the 2000 census). TheMopan and Q’eqchi’ Maya live in about 50 inlandcommunities in Toledo and Stann Creek Districts,and the Garifuna are primarily located incoastal towns and villages in the same districts.Figure 14.1. Population of Belize by EthnicityMaya11%Garifuna6%Indian3%Mennonite4%ChineseCreole25%1% Other2% dk/ns0%Mestizo48%Source: Central Statistical Office.Note: dk/ns = don’t know/not specified.1The Creoles are descendants of enslaved Africans brought to Belize by the British to work in the timber industry.235

chapter 14Indigenous Peoples: Cross-Cutting Concerns and Needs14.2.1 The Maya of Southern BelizeAccording to Belize’s 2000 census, Mayans representapproximately 11 percent (or 24,501 persons)of the total population of Belize. Theybelong to three different ethnic groups: Yucatec(1.4 percent), Mopan (3.9 percent), and Q’eqchi’Figure 14.2. Map of Belize(5.3 percent), all of whom are the direct descendantsof the ancient Maya civilization that inhabitedBelize before the arrival of the Europeans in1650. Of these, 74 percent (approximately 18,000individuals), primarily Mopan and Q’eqchi’, livein the Toledo and Stann Creek Districts (Figure14.2), with the vast majority living in ruralSource: Toledo Maya Cultural Council/Toledo Alcaldes Association (1997).236

Table 14.1. Garifuna and Maya Population byDistrict, 2000 CensusDistrict Garifuna MayaCorozal 332 2% 921 4%Orange Walk 372 3% 1,229 5%Belize 3,487 25% 708 3%Cayo 747 5% 3,616 15%Stann Creek 7,584 54% 2,898 12%Toledo 1,539 11% 15,129 62%Country total 14,061 100% 24,501 100%Urban 10,785 77% 3,140 13%Rural 3,276 33% 21,361 87%Source: Central Statistical Office (2000).The Garifuna speak a distinct language that is amixture of African, Carib, European, and otherlanguages. In this language, some forms andstructures are marked for exclusive male or femaleuse—a rare linguistic feature. For example, a manand a woman engaged in conversation will use differentwords to refer to the same thing. In 2001,the United Nations Educational, Scientific, andCultural Organization (UNESCO) proclaimedthe Garifuna language, music, and dance of Belize“a Masterpiece of the Oral and IntangibleHeritage of Humanity.” However, Garifuna culareas(see Table 14.1). A small number of YucatecMaya live in northern Belize, close to their relativesacross the border in Mexico.The Maya have largely retained their distinct culturalidentity, including language, religion, music,and other forms of cultural expression. 2 Land andnatural resources are central to their economicand cultural livelihood and integrity. They practicerotational farming and communal use of land,which distinguishes them from other Belizeansengaged in agriculture. This system, called milpaagriculture, allows for two years of cultivation of aparticular area followed by eight years of letting itlie fallow. Agronomists point out that the systemis designed to produce relatively large yields offood crops without the use of artificial pesticidesor fertilizers, but they caution that although it isself-sustaining at current levels of consumption,it may not be at more intensive levels. It is importantto note that milpa is a sociocultural constructrather than simply a system of agriculture.It involves complex interactions and relationshipsbetween farmers, as well as distinct personal relationshipswith both the crops and the land. Forexample, it has been noted that “the making ofmilpa is the central, most sacred act, one whichbinds together the family, the community, theuniverse. . . . [It] forms the core institution of In-dian society in Mesoamerica and its religious andsocial importance often appear to exceed its nutritionaland economic importance” (Nigh 1976).14.2.2 The GarifunaThe Garifuna are the descendants of Arawak(Taino) and Carib peoples who intermixed withAfricans (believed to be of Yoruba, Ibo, andAshanti descent) on the island of St. Vincent duringthe seventeenth century. In 1797, the Britishforcibly relocated the “Black Caribs,” as they wereknown at the time, to the island of Roatán, off thecoast of Honduras. It is widely believed that thefirst Garifuna settlement in Belize was establishedin 1799, and the Garifuna assert that, unlike theCreoles, they entered Belize as free people, notslaves. 3In 2000, the total Garifuna population in Belizenumbered 14,061, or 6 percent of the totalpopulation. Whereas they were traditionally selfsufficientcommunities of fishermen and farmers,many Garinagu 4 now maintain urban lifestylesand are employed as teachers and other professionalsin the public and private sectors. A majoritylive in coastal villages and towns in StannCreek and Toledo Districts, with a significantnumber now living in Belize City (see Table 14.1).In addition, many Garinagu have migrated to theUnited States and live in large cities such as LosAngeles and New York.chapter 14Indigenous Peoples: Cross-Cutting Concerns and Needs234Many Maya are now nominally Catholic, Nazarene, Baptist, or Pentecostal as a result of the historical efforts of missionaries. Althoughsome practice these religions, many have combined them with traditional spiritual beliefs and practices.November 19 is recognized annually as Garifuna Settlement Day and is celebrated as a national holiday. It is celebrated in Dangriga,Stann Creek; people arrive in canoes loaded with drums, utensils, cassava, and banana saplings as a reenactment of the arrival of theirancestors.This is the plural form of Garifuna in the Garifuna language and is used when referring to multiple members of the ethnic group; theGarifuna is generally used when referring to the ethnic group as a whole.237

chapter 14Indigenous Peoples: Cross-Cutting Concerns and Needsture is increasingly threatened, largely as a resultof “migration in search of economic opportunitiesnot available in Garifuna communities, discriminationand the failure of the school systemto acknowledge the language and culture in theeducational curriculum, even in Garifuna communities”(Cayetano and Cayetano 2005, 243).14.3 Socioeconomic Indicators14.3.1 The Challenge of DataRecently, efforts have been made to improve thecollection of data to enable disaggregation and toinclude the views of indigenous peoples in nationalplanning processes such as the National PovertyAssessment. 5 The government of Belize does notsystematically collect data in such a way that itcan be disaggregated by ethnic or indigenous origin;most indicators are not disaggregated furtherthan the district level (Central Statistical Office2005). Policymakers in Belize resist the collectionof data to permit finer disaggregation, as thereis some belief that policies targeting indigenouspeoples are discriminatory because they accordpreferential treatment to one ethnic group overanother. This position stands in marked contrastto the increasing recognition by the internationalcommunity and most countries in the region thatprograms targeting indigenous peoples do notnecessarily provide preferential treatment, butthat special programs or adaptations are neededto ensure that these populations receive the fullbenefit of interventions and investments, and thatdisaggregated data allow governments and donorsto better target their projects and monitor impactsand results (see, among others, CERD 1997). At aUnited Nations Permanent Forum on IndigenousIssues workshop, “Data Collection and Disaggregationfor Indigenous Peoples,” the Inter-AgencySupport Group on Indigenous Issues (2005, para.51) stressed the fundamental importance of collectingdata that can be disaggregated by genderand ethnic identity in order to gain “an accurateunderstanding of indigenous peoples’ povertysituation, to qualify policies, and to develop appropriateprograms and monitor impact.”Despite the government policy against data collectionpractices that enable certain types of disaggregation,the 2006 Multiple Indicator ClusterSurvey (MICS) (Statistical Institute of Belize2006) does include some disaggregated data.MICS, developed by the United Nations Children’sFund (UNICEF), surveys households toassist countries in filling data gaps for monitoringhuman development in general and the situationof children and women in particular; it is capableof producing statistically sound, internationallycomparable estimates of social indicators. Thecurrent round of MICS focused on providing atool for monitoring progress toward the MillenniumDevelopment Goals and the World Fit forChildren, as well as for other major internationalcommitments, such as the United Nations GeneralAssembly Special Session on HIV/AIDS andthe Abuja targets for malaria. MICS consists ofseveral questionnaires: one for households, onefor women aged 15–49, and one for children underthe age of 5 (to be administered to the motheror caretaker). The questionnaires are modular,and other than a set of core modules, countriescan select which modules they want to includein each questionnaire. The 2006 MICS was thethird conducted by the Statistical Institute of Belizewith the support and assistance of UNICEFand other partners. One of its conclusions wasthat rural children, generally Maya and Garifuna,are less likely to be registered at birth than theirurban peers, which makes the disaggregation andsubsequent analysis of collected data even moredifficult. 6The 2002 Poverty Assessment Report (PAR) (CentralStatistical Office 2004) is the most recent assessmentof poverty in the country. It consists ofa Living Standards Measurement Survey covering1,680 households and 15 focus group interviews:5 presurvey and 10 postsurvey. 7 Although567Although the Poverty Assessment Report mentions Maya and Garifuna and some effort has been made to collect the different ethnicgroups’ views on poverty in the Public Consultation Report for the country’s National Poverty Elimination Strategy and Action Plan,the strategy and action plan themselves are silent on policies focusing on Maya and Garifuna. The same is true for the Ministry ofEducation Plan of Action 2005–2010 and the 2004 Millennium Development Goals report for the country.For more on this, see Harbitz and Boekle (2009).In an attempt to mitigate the typical reluctance to share information on incomes, the Living Standards Measurement Survey collecteddata on expenditures on food and nonfood items for two periods: the 7 days and the 30 days prior to the survey date.238

the PAR does include some data disaggregated byethnicity, the reported sample size for the LivingStandards Measurement Survey is small: only 3.1percent of total households were surveyed, comparedwith the 10 percent figure normally usedby the Central Statistical Office (2004, AppendixC). The focus groups included only one Mayavillage (San Antonio in Toledo District) and oneGarifuna town (Dangriga in Stann Creek District),with a total of 46 Maya and 46 Garifunaparticipants: clearly, the results are not representativeof the experience of all Maya and Garinaguliving in Belize. 8Given that most available data on Belize arenot disaggregated, many of the results obtainedthrough these various instruments are of limitedvalue in the context of this chapter. However, importantindicators can be extrapolated from thedata collected in Toledo District, where Mayarepresent 65 percent of the total population, andStann Creek District, where the Garifuna representthe largest population group at 31 percent(Central Statistical Office 2000).14.3.2 PovertyAccording to the National Poverty EliminationAction Plan for 2007–2011 (Ministry of NationalDevelopment, Investment and Culture 2007a),the poverty line in Belize was derived by addingthe minimum estimated cost of nonfood itemsthat a household requires to meet its basic needsto the indigent line, which is the minimum estimatedcost of food necessary for healthy existence;thus the poverty line is based on the minimumcost of both basic food and nonfood items. It isadjusted by district; in the two districts of interestfor this chapter, the monthly poverty line isBZ$236.81 (US$119.90) for Toledo District andBZ$179.03 (US$90.65) for Stann Creek. Themonthly indigent line is BZ$128.70 (US$65.16)and BZ$102.30 (US$51.79) for the two districts,respectively.The 2002 PAR indicates that among Belize’s ethnicgroups, the estimated incidence of poverty isTable 14.2. Poor Population by District(percent)DistrictCorozal 26.1Orange Walk 34.9Belize 24.8Cayo 27.4Stann Creek 34.8Toledo 79.0Country average 33.5Source: Central Statistical Office (2004).highest among the Maya (77 percent) and lowestamong the Garifuna (24.3 percent). With anational average of 33.5 percent living below thepoverty line, Toledo District stands out at 79 percent(see Table 14.2), with 56.1 percent being“very poor” or indigent. Poverty affects childrenmost profoundly, and according to PAR estimates,83.3 percent of Maya children under 17 years ofage live in poverty, compared with 39 percent ofall Belizean children in that age group. Educationand health indicators show similar gaps.In general, the government of Belize is addressingpoverty reduction in indigenous communitiesthrough a series of direct investments: the SocialInvestment Fund, the Belize Rural DevelopmentProgramme, and the Toledo Strategy and ActionPlan. The Social Investment Fund (SIF) aimsto improve social stability and increase the productivityof the poor. SIF investments are usedmainly for infrastructure (potable water systems,health and education facilities, roads, and drains),but also for community empowerment and capacitybuilding. Despite the identification of ToledoDistrict as a priority area for the fund, a reviewof SIF projects completed since 1997 shows thatToledo received only 22 percent of the total investments,about the same as Cayo and BelizeDistricts (Figure 14.3). Of a total of BZ$2.1 millionfor economic infrastructure projects, Cayoreceived 69 percent of the investments, comparedwith 5 percent for Stann Creek; there were noeconomic infrastructure projects in Toledo (Socialchapter 14Indigenous Peoples: Cross-Cutting Concerns and Needs8It is generally acknowledged among international and intergovernmental organizations that data collected for National Poverty Assessments,Poverty Reduction Strategy Papers, or the Millennium Development Goals do not adequately capture the situation ofindigenous peoples because of their relatively small sample sizes and the low levels of birth registration among these peoples, whichresult in overall weak data.239

chapter 14Indigenous Peoples: Cross-Cutting Concerns and NeedsFigure 14.3. Total SIF Investment by District, 1997to September 2007Stann Creek9%Toledo22%Cayo20%Belize20%Corozal15%OrangeWalk14%Source: Social Investment Fund/Basic Needs Trust Fund (2007).Investment Fund/Basic Needs Trust Fund 2007).Although the government asserts that the SIF’sgeographic focus alone ensures that indigenouspeoples will be the major beneficiaries of SIF investments,it is difficult to monitor and/or measureany benefits that may accrue without properbaselines and disaggregated data.Similar to but distinct from the Social InvestmentFund, the Belize Rural Development Programme(BRDP) was created in 2006 with approximatelyUS$20 million in funding from the EuropeanUnion. Its objective is to alleviate poverty in ruralareas through enterprise development. TheBRDP provides training, marketing support,and equipment for small productive projects, andmicrogrants are available for specific vulnerablegroups. Assessments of the program’s impact onand relevance for Maya and Garifuna communitiesand to what extent they will benefit have yetto be conducted, but most Garifuna will clearly beexcluded, as they are based in urban areas, whichare not the program’s geographical target.The Toledo Strategy and Action Plan 2006–2009(TSAP) is considered the government’s comprehensiveapproach to development in the district(Toledo Development Corporation 2006) andwas initially prepared by the Toledo DevelopmentCorporation (TDC), established as part of thegovernment’s Environmental and Social TechnicalAssistance Project. The TDC was intended tobe the overall coordinating body for the developmentof the Toledo District, including monitoringthe eventual implementation of another plan,the Regional Development Plan for Toledo.Garifuna6%In general,ChineseTSAP is a poverty reduction strategythat uses a1%geographical OtherMennoniterather than a populationtargetingapproach dk/ns2%4%Indian(Toledo0%Development Corporation3%2006, 16). It focuses on a number of priorityareas for investment: agriculture and fisheries,education and awareness, infrastructure, land useand natural resource management, governanceMestizoand networking, opportunities 48% and enterprise development,and health and nutrition. Given thatit is a regional Creole development plan, its implementationdepends on fulfillment of a number of condi-25%tions: continued national consensus and politicalwill among all levels of government to provide thenecessary resources to implement the plan; goodgovernance and absence of corruption, minimizingpolitical intervention as it may deviate fromimplementation of the strategy; good managementor absence of major natural disasters; and astable global economy and a good relationship betweenBelize and Guatemala. The National PovertyElimination Strategy highlighted the need tobuild the TDC’s capacity to manage the plan andthat funding for the program had not yet beenfinalized (Ministry of National Development, Investmentand Culture 2007b, 50).Maya11%TSAP was developed without the systematic participationof the indigenous communities (both Mayaand Garifuna) in Toledo, which are effectively theplan’s major target groups. Although the governmentrefers to TSAP as “the product of large scalepublic consultations with the residents of Toledo,”few details are available regarding the participationmethodology or participants (Ministry of NationalDevelopment, Investment, and Culture 2007b, 50).When questioned about this statement, a representativeof the Maya Leaders Alliance could not recallbeing consulted or receiving the final documentand indicated that the plan includes few Maya andGarifuna development priorities.14.3.3 HealthTo date, there has been no comprehensive studyon the specific health situation of the Maya andthe Garifuna. The Belize National Health Agenda2007–2011 refers only generally to indigenouspeoples, stating that “distant communities withhigh proportion of rural and indigenous populationare in need to improve their health andavailability of health professionals” (Ministry ofHealth 2006, 32).240

Statistics provided in the agenda on consultationsand primary health care interventions conductedat the community hospital in Toledo and at theSouthern Regional Hospital in Dangriga are generallyhigh compared with those for the rest of thecountry, but they do not specify whether the patientsreceiving the services were primarily indigenousor members of other ethnic groups living inthe district. The 2002 PAR found that althoughMayans and Garinagu were most likely among thecountry’s ethnic groups to report illnesses (26.9percent and 20.1 percent), fewer Mayans (62.0 percent)sought conventional health care than Mestizos(65.1 percent), Garinagu (73.0 percent), andCreoles (77.5 percent). The PAR also found thatMayans often used health care facilities in Guatemalabecause they were perceived to be more reliableand effective than public health care in Belize.It also found that many Maya still used traditionalhealers and medicines to reduce health care costs(Central Statistical Office 2004, 44). AnthropologistLiza Grandia (2004, 59) reports that Mayansoften turn to traditional healers for conventionalillnesses, like diarrhea, fevers, cuts, and wounds, aswell as for illnesses that they feel Western medicineis less effective at healing, such as problemswith bones and rheumatism/arthritis, snakebites,reproductive and women’s health, medicine, andmental illness. As a result, the high number of consultationsand primary health care interventionsreported in these two districts might not accuratelyrepresent the level of primary health care receivedby the Mayan population in particular.Despite the limitations of the data, it is clear thatchild mortality rates in Toledo District show asharp upward trend, from 4.0 (per thousand livebirths) in 2000 to 11.6 in 2005, significantlyhigher than the national average of 4.4 in thesame year. In Stann Creek District, by contrast,child mortality rates decreased from 8.0 in 2001to 3.9 in 2005 (Figure 14.4). In terms of childhealth, in the 2002 PAR, 39.8 percent of Mayanswere found to have low height for age (stunting),the highest percentage among all ethnic groups. 9Figure 14.4. Child Mortality Rate by District,2001–2005Per 1000 live births141210864202001 2002 2003 2004 2005YearCorozal Orange Walk Belize Cayo Stann Creek ToledoSource: Central Statistical Office (2005).No significant differences were found in the levelof wasting (low weight for age). 10The maternal mortality ratio 11 shows the samedisparities between Toledo District and the restof Belize: 147.3 per 100,000 live births in 2000,compared with the national average of 68.4 forthat year. In 2005, this increased to 231.7 in Toledo,compared with 0 in Corozal, 59.7 in OrangeWalk, 98.8 in Cayo, 195.5 in Stann Creek,and 135.4 in Belize, with the national average at119.1. The majority of mothers in Belize Districtgave birth in a health facility compared with onlyhalf of the mothers in Toledo District (52.4 percent).A nurse or midwife attended the majorityof those who gave birth at home (Statistical Instituteof Belize 2006). The 2006 MICS found thatonly 79.5 percent of women in Toledo District receivedprenatal care, compared with 93–100 percentof women in all other districts. The surveyalso found that the percentage of women usingany method of contraception in Maya-speakinghouseholds is very low (15.4 percent) (StatisticalInstitute of Belize 2006).Although the results of studies on the prevalenceof HIV/AIDS remain controversial becauseof the lack of disaggregated data, it is generallyPercent14121086420Jamaicachapter 14Indigenous Peoples: Cross-Cutting Concerns and NeedsDominica2000 2001 2002 2009The 2006 MICS estimates that growth retardation is more apparent in children of Maya descent (50 percent).10There is some doubt about the quality of the anthropometric data collected by the 2002 PAR. Apparently, the measuring scales usedto conduct the anthropometrics had to be transported on rough roads, which caused irreparable damage to some of the equipment,and some of the buildings used for the anthropometrics “were not leveled which might have caused some inconsistencies in the measures”(Central Statistical Office 2004, Appendix C).11It should be noted that the small size of the population relative to the measure makes the statistics regarding this ratio unreliable.241

chapter 14Indigenous Peoples: Cross-Cutting Concerns and Needsagreed that HIV/AIDS incidence is higher thanaverage in Belize and Stann Creek Districts,which has led to the conclusion that the Garifunaare disproportionally affected. However,given that the Garifuna make up only 31 percentof the population in Stann Creek and the dataare not disaggregated by ethnic group, this conclusionis questionable. According to the head ofthe National AIDS Commission, the Ministryof Health does not collect and “does not intendto collect data disaggregated by ethnic group,” asthis might lead to stigmatization. 12Health Care Delivery in Toledo DistrictFor the most part, primary health care in the remoteareas of Toledo District is provided by mobilehealth clinics run by the private, faith-basednongovernmental organization (NGO) HillsideHealthcare International. 13 Each community inthe district is visited about once every six weeks byrepresentatives of the NGO, and most communitieshave community nurse’s assistants trained bythe Ministry of Health to provide basic medicalservices. However, villagers complain that thenurse’s assistants lack medical supplies and havelittle training to provide more than very basic caresuch as suturing (University of Wisconsin MedicalSchool 2005).For emergency or tertiary medical care, patientsin the district must travel to the public hospital inPunta Gorda. This is difficult because most peopledo not have cars and rely on walking, biking, orbus to travel outside their village. Public buses aregenerally available only four times a week, and anambulance service is available but is unreliable andcan take 1–4 hours to reach Punta Gorda becauseof the bad state of the roads. The Punta Gordahospital employs only general physicians; for majoroperations or specialist medical care, patientsare referred to hospitals in Dangriga, Belize City,or abroad if services are not available in Belize.14.3.4 EducationAs with the available health data, the gaps betweenthe Toledo District and the rest of Belizeare clearly visible in the education statistics. Primaryschool enrollment, which was 88.1 percentnationally in 2005/06, is lowest in Toledo District(Figure 14.5). Toledo also has the highest repetitionrate at 12.5 percent, compared with 6.1percent in Belize District, and the highest numberof untrained teachers (Castellanos 2007, 34).Despite a low rate of trained teachers nationally(46.7 percent), Toledo and Stann Creek Districthave an even lower proportion of trained teachers:36.3 and 36.1 percent, respectively (Table 14.3).The national repetition and dropout rates showsignificant gender disparities, with increasinglyhigher dropout rates reported for boys. Accordingto Castellanos (2007, 34), for the 2005–06 year,of the total enrollment, 3,507 male students (10.8percent) repeated a grade, in contrast to 2,549females (8.2 percent). Ministry of Educationstatistics for 2005–06 indicate that whereas theStann Creek District follows the national trendin regard to dropout rates (with a higher rate formales), Toledo District does not: there, more girlsdrop out of primary school than boys (Ministry ofEducation 2006, Table 8).Despite the disparities in education indicators betweenthe Toledo and Stann Creek Districts andthe rest of the country, the Ministry of Education’s(2005) action plan for 2005–2010 includesno specific actions or policies aimed at narrowingthe gender gaps in repetition and dropout rates.Figure 14.5. Primary Enrollment by District andArea, 200540000350003000025000200001500050000Belize Cayo Corozal OrangeWalkUrbanSource: Castellanos (2007), Figure 8.StannCreekRuralToledoTotal1213Dr. Marvin Manzanero, Ministry of Health, personal communication, November 8, 2007.Additional information about this organization is available on its website at www.hillsidebelize.org.242

Secondary EducationAs illustrated in Figure 14.6, secondary enrollmentin Belize is lowest in Toledo (7.3 percent)and highest in Belize District (34.8 percent). Accessto secondary education is limited in ToledoDistrict by the lack of schools; in 2005, there were50 primary schools in Toledo, but only 4 secondaryschools and 1 junior college (Ministry of Education2006, Table 2). By contrast, Stann Creekboasted 32 primary schools, 4 secondary schools,and 1 junior college. Cayo District, with few Mayansand Garinagu, has 61 primary and 11 secondaryschools and 2 junior colleges (Table 14.3).Figure 14.6. Secondary Enrollment by District,2005–06Orange Walk12.2%Stann Creek10.6%Corozal12.5%Toledo7.3%Source: Castellanos (2007), Figure 10.Cayo22.6%Belize34.8%In addition to limited access to facilities, financialcosts were also cited in the 2002 Poverty AssessmentReport as a major reason why Mayanfamilies were unable to send their children tosecondary school. 14 Mayans were estimated inthat report to have the lowest access to financialassistance for education: 93.5 percent of the Mayansinterviewed for the report said they had nosource of financial assistance, as compared with71.8 percent of Creoles, 73.9 percent of Garifuna,and 87.9 percent of Mestizo (Central StatisticalOffice 2004, Table 5-9).Intercultural and Bilingual EducationIn general, instruction in the schools in Maya andGarifuna communities is provided in English,and all schools follow the national curriculum.The lack of a national government policy on interculturaland bilingual education makes Belizean exception in the region. 15On the initiative of the Maya Leaders Alliance andthe National Garifuna Council, several programsfor intercultural bilingual education have beenestablished. For example, the Tumul K’in Centerof Learning in Blue Creek, Toledo District, 16 afive-year residential high school governed entirelyby Maya, was established in 2002 by the MayaLeaders Alliance with the mission of “promotingchapter 14Indigenous Peoples: Cross-Cutting Concerns and NeedsTable 14.3. Percentage of Trained Primary School Teachers by District and Number of Schools by Leveland DistrictDistrictPercentageof trainedprimary schoolteachersNumber ofpre-schoolsNumberof primaryschoolsNumber ofsecondaryschoolsNumberof juniorcollegesNumberof tertiaryschoolsCorozal 63.1 27 42 6 2 0Orange Walk 56.0 14 37 7 1 0Belize 45.3 45 96 18 5 4Cayo 44.8 24 61 11 2 2Stann Creek 36.1 19 32 4 1 0Toledo 36.3 13 50 4 1 1Overall 46.7 142 288 50 10 5Source: Ministry of Education (2006).14In 2002, secondary-level students paid BZ$1,006 and tertiary-level students BZ$3,443 for school fees, transportation, and materials(Central Statistical Office 2004, Table 5-8, 48).15In 2004, UNICEF reported that 18 countries in the region (out of 24 surveyed) included bilingual education services as part of theirpublic policy.16The center’s website is available at http://tumulkinbelize.org.243

chapter 14Indigenous Peoples: Cross-Cutting Concerns and Needssustainable development with identity throughintercultural education, training, and researchfusing modern and Maya values, knowledge, andphilosophy” (Tumul K’in Center of Learning,2010a). Programs include agricultural productionand food processing, and the school calendaris adapted to the Maya community calendar, allowingthe students to return to their homes andassist their families with seasonal agricultural activities.During their fifth year, students work ona business plan that integrates traditional knowledgeand modern technology. The center has alsoestablished Ak’ kutan, an indigenous community–basedradio station that serves as a communityinformation resource as well as a training tool forthe Tumul K’in curriculum. Although Tumul K’inis based on Maya values and philosophy, attendanceis not limited to Maya students. There areGarifuna students enrolled in the program, andefforts are made to incorporate Garifuna cultureinto the program. 17 The Ministry of Educationnow pays 70 percent of the teachers’ salaries.In addition to its own curriculum, Tumul K’in isalso coordinating a pilot project, executed in partnershipwith the National Garifuna Council andthe Maya Leaders Alliance, which has introducedintercultural and bilingual education in three primaryschools: one for Garifuna children in Dangriga(the Gulisi Community Primary School,established in 2007 by the National GarifunaCouncil, which follows the national curriculumbut incorporates Garifuna language and culturein all lessons), one in a Mopan community, andone in a Q’eqchi’ village. The UNICEF-supportedproject’s goal is “to improve the overall qualityof education and promote a more inclusive society”(Tumul K’in Center of Learning, 2010b).The curriculum includes language training forteachers in reading, writing, and teaching of indigenouslanguages and a school-based languageprogram accompanied by an increase in parentaland community involvement in education.14.4 National Legal and PoliticalFrameworkBelize has no national legislative framework orgovernment policy that specifically addresses therights and interests of indigenous peoples. Unlikein neighboring countries, there is no specific ministryor minister responsible for indigenous affairs,nor is there a formal national-level body tocoordinate and mainstream policies and activitiesaffecting these populations. The government assertsthat these are unnecessary because the Maya,in particular, belong to the poorest segment ofBelize society and will therefore benefit from nationalprograms, such as the Toledo Strategy andAction Plan, which is targeted at the Toledo District,where they form the majority population.However, their overall socioeconomic indicatorsremain low, and the lack of disaggregated dataand baselines makes it difficult to discern whetherthey are in fact benefiting from these programsand the associated services. 18National legislation on indigenous rights in Belizeis limited to the Belize Constitution, whichcontains one reference in the Preamble:Whereas the people of Belize…(a) affirmthat the Nation of Belize shall be foundedupon principles which acknowledge…faithin human rights and fundamental freedoms…and the equal and inalienable rights withwhich all members of the human family areendowed…(e) require policies of state whichprotect…the identity, dignity and social andcultural values of Belizeans, including Belize’sindigenous peoples…with respect for internationallaw and treaty obligations in the dealingsamong nations. 19In the recently decided Maya Villages case, theSupreme Court of Belize recently interpreted thisto include rights to land and natural resources. 2017181920Esther Sanchez, Director, Tumul K’in Center, personal communication, November 2, 2007.See Ministry of National Development, Investment, and Culture (2007b, 50): “Toledo District, with 79 percent of its populationbelow the poverty line remains the poorest district in Belize. . . . The predominantly Maya inhabitants observe mostly traditionalpatterns of production and culture. A large proportion of communities identified by the Poverty Map as extremely poor are located inToledo. . . GOB [Government of Belize] has formulated a more comprehensive approach to development in the District and a ToledoStrategy and Action Plan (TSAP) was published in 2006.”Belize Constitution Act, Chapter 4 of the Laws of Belize (Revised Edition 2000), available at www.belizelaw.org/lawadmin/index2.html (emphasis added).Aurelio Cal, et al v. Attorney General of Belize and Coy et al. v. Attorney General of Belize, Consolidated Claims 171 and 172 of2007, Supreme Court of Belize (referred to as the Maya Villages case).244

In his decision, Chief Justice Abdulai Contehaffirmed the rights of Belize’s Maya communitiesto their traditional lands and resources anddeclared that the Constitution of Belize protectsthese rights. He consequently ordered the state todelimit, demarcate, and title the lands in question.In framing his decision, the Chief Justice indicatedthat Belize is subject to “relevant internationallaw,” which includes the various declarations,treaties, and conventions adopted by internationalorganizations such as the United Nations, Organizationof American States, Central AmericanIntegration System, British Commonwealth, andCaribbean Community. 21 According to the decision,these instruments protect, among otherthings, rights to land, natural resources, culture,the right to an identity, and other social and economicrights, such as the right to live in a healthyenvironment.There is no minister of department responsiblespecifically for indigenous peoples in Belize. TheGarifuna, however, have established the NationalGarifuna Council of Belize (NGC), and the governmentsigned a Memorandum of Understandingin 1999 in which the government recognized theNGC as a legitimate representative of the Garinaguin Belize and committed to “consult the NGCwhenever consideration is being given to legislativeor administrative measures which will directly andespecially affect the Garinagu of Belize” (NationalGarifuna Council of Belize and Government ofBelize 1999, para. 3). For its part, the NGC, whichwas established in 1981, endeavored to cooperatefully with the government in “identifying, planningand implementing development projects andprograms which affect the Garinagu in Belize”(para. 8). Although the NGC has been invited toexpress its views on issues affecting the Garifuna,there is still no formal procedure or institution inplace that allows for effective consultation or participationof the Garifuna in government policiesand decisions affecting them.There is no Mayan organization that is formallyrecognized by the government. However, theToledo Maya Women’s Council participated inthe stakeholders’ consultative process and focusgroups that were organized in two Maya communitiesduring the development of the NationalPoverty Elimination Action Plan. 22 However,there may be a role for Mayan representative organizationssuch as the Maya Leaders Alliance inproviding inputs for national planning and decision-makingprocesses.14.5 Community-Level GovernmentThe Maya are the only ethnic group in Belize thathave retained a traditional form of self-governmentin the form of the alcalde system. Althoughthis system was adopted by the Spanish in CentralAmerica, and later embraced by the Britishin Belize, it is of pre-Columbian origin. In thissystem, the alcalde or chief (in Mopan the termNotch Winic or Pohlil Kah is used, and in Q’eqchi’he is known as Mamh or Ruj’il) is democraticallyelected by the community every two years.He appoints a second and third alcalde (ToledoMaya Cultural Council/Toledo Alcaldes Association1997, 6). The alcaldes receive a small stipendfrom the government of BZ$50–100 (US$25–50) per month. Anthropology Professor RichardWilk, who served as an expert witness in the SupremeCourt of Belize in the Maya Villages case,described the current role and function of the alcaldesas follows in an affidavit filed in that case:Alcaldes continue to administer customary law inits judicial, economic, social and religious aspects,including the customary land tenure system inMaya villages, with the full knowledge and acquiescenceof the Government. For example, inJanuary 2000, the Final Report of Political ReformCommission, in recommending the VillageCouncils Act not be imposed upon Maya villages,reported that:[The Alcalde system] is the traditional Mayaway of administering villages and has beenhistorically acknowledged by governments.chapter 14Indigenous Peoples: Cross-Cutting Concerns and Needs2122Belize has not ratified the American Convention on Human Rights nor has it accepted the jurisdiction of the Inter-American Courton Human Rights.There was also no indication that there was meaningful participation of indigenous peoples, either at the community level or throughthe representative organizations, in the development of the 2002 Poverty Assessment (United Nations 2005), the UN DevelopmentAssistance Framework 2007–2011 (UNDAF Belize), or Belize’s First Millennium Development Goals Report 2004 (Government ofBelize/Ministry of National Development 2005).245

chapter 14Indigenous Peoples: Cross-Cutting Concerns and NeedsThe alcalde or mayor, who is elected by themen of the village, …has the responsibility todecide who resides in a village, to pass judgementson disputes among residents and tohand out punishment for some crimes…The Government of Belize website states that:“The alcalde system is part of the local governmentstructure of Belize. …The alcaldesare effectively local magistrates operating atthe village and community level. … They havethe power to decide who can live in the villageand can call for the communal cleaning of avillage. They are responsible for managing thecommunal land and act as school officers.” 23The Toledo Alcaldes Association was establishedin 1992 to advocate on alcaldes’ behalf and to addressthe concerns of the Maya community ingeneral. Martin Chen, the former chairman ofthe association, argues that the alcaldes are keyto social order in the communities and that “thereis not much crime in the Maya communities andwe should keep that (alcaldes).” 24 He calls for fullrecognition of the alcaldes as part of the centralgovernment. In his view, the main challenges forthe present alcalde system are potential for conflictswith the village council system that was introducedin 1998 and the lack of resources, suchas transportation and office space, that are necessaryfor alcaldes to do their work.By contrast, although the alcalde system was alsointroduced in the Garifuna communities duringthe 1940s and 1950s, the colonial administrationfelt that traditional leadership was autocraticand at odds with formal democracy. In 1969, thelast Garifuna alcaldes were removed and replacedwith a village council (Moberg 2005, 90–91).14.6 NongovernmentalOrganizationsGiven the lack of a larger national policy framework,NGOs (Box 14.1) play an increasingly importantrole in Belize in representing indigenouspeoples at the federal level and in the delivery ofservices in rural areas. Both the Garifuna and theMaya have strong nongovernmental representationthrough the National Garifuna Council andthe Maya Leaders Alliance. In addition, the councilhas official consultative status with the centralgovernment, and the alliance has provided inputsfor national policy dialogues.The Maya Leaders Alliance was established in1999 as an umbrella membership organizationthat originally comprised a number of highprofileindigenous organizations: the Toledo AlcaldesAssociation, Ke’kchi Council of Belize,Julian Cho Society, Toledo Maya Cultural Council,Toledo Maya Women’s Council, and VillageCouncil Association. The organization has beenundergoing some changes recently, and some ofthe original member organizations have changed.The current members are the Toledo Alcaldes Association,Ke’kchi Council of Belize, Toledo MayaCultural Council, Julian Cho Society, and TumulK’in Center of Learning. In general, most of thework of the member organizations is focused onprojects and programs in the Toledo District. TheToledo Maya Cultural Council and the ToledoAlcaldes Association have also worked extensivelywith international organizations and representthe Maya at international meetings and sessionssuch as those organized by the United Nationsand the Organization of American States.The Toledo Maya Cultural Council was foundedon April 15, 1978, with a mandate to supervise andpromote the economic, social, and cultural activitiesof the Maya; work for the recognition of theMaya as the country’s indigenous people; and pursueresolution of their land rights. The council wasone of the petitioners in the Maya Villages case. Inthe early 1990s, the council worked in close collaborationwith the Toledo Alcaldes Associationto develop the Maya Atlas (Toledo Maya CulturalCouncil/Toledo Alcaldes Association 1997), animpressive book that documents the land and lifeof the 42 Maya communities located in Toledoand Stann Creek Districts. The Maya worked withgeographers from the University of California atBerkeley and published the Atlas in 1997 underjoint copyright with the university’s Geology De-23Second Affidavit of Richard Wilk in the Maya Villages case, paras. 69–70, available at http://www.law.arizona.edu/Depts/iplp/advocacy/maya_belize/documents/SecondAffidavitofRichardWilkfiledJune132007.pdf.24Martin Chen, personal communication, October 14, 2007.246

Box 14.1 Key Indigenous Organizations in BelizeThe National Garifuna Council of Belize has branches in every district and in every community where there areGarifuna.The Maya Leaders Alliance is an umbrella group comprising• The Toledo Alcaldes Association• The Ke’kchi Council of Belize• The Julian Cho Society• The Toledo Maya Cultural Council• The Tumul K’in Center of LearningThe executive membership of the alliance also includes past leaders of the Toledo Alcaldes Association andToledo Maya Women’s Council, as well as Maya Village leaders.Other indigenous organizations:• The Toledo Cacao Growers’ Association• Toledo Maya Women’s Council• Sarstoon-Temash Institute for Indigenous Management• Yaakche AcheAs in many countries in Latin America, the issueof land rights and most importantly of reconcilingthese rights with long and complicated historiesof land tenure and use has been a continuing challengefor the government of Belize and indigenouscommunities. For the Maya of southern Belize, inparticular, the lack of land security is perceivedas the “overarching problem, from which severalother issues threatening Mayan existence originate”(Toledo Maya Cultural Council/ToledoAlcaldes Association 1997, 122). 27 Activities aspartment.25 At time of writing, this organizationwas also undergoing many changes and lacked afull-time staff, limiting its operating ability.A community-based indigenous environmentalorganization, the Sarstoon-Temash Institute forIndigenous Management, 26 works to protect theecological integrity and cultural values of Belize’ssouthern region. In particular, SATIIM comanages,in collaboration with the Belizean ForestryDepartment, the 41,898-acre Sarstoon-TemashNational Park which was established in 1994 onlands traditionally used by the Garifuna and Mayacommunities. The park is home to an impressivevariety of flora and fauna, including jaguar, manatee,and ocelot. Although SATIIM’s agreementwith the government of Belize to comanage thepark expired in April 2008, the Forest Departmenthas given verbal assurances to SATIIMthat it should continue to do so. The organizationis governed by a nine-member Board of Directors,five of whom are elected by the neighboringcommunities (Barranco, Midway, Sunday Wood,Conejo, and Crique Sarco) and one each appointedby the Ke’kchi Council of Belize, the ToledoAlcaldes Association, the National GarifunaCouncil, and the Forest Department, respectively.The institute has recently been quite vocal in itsopposition to seismic activity and oil explorationin the park (see Section 14.7).14.7 Protection of Lands,Territories, and Resourceschapter 14Indigenous Peoples: Cross-Cutting Concerns and Needs252627“The Making of the Maya Atlas,” available on the university’s website at http://geography.berkeley.edu/ProjectsResources/MayanAtlas/MayaAtlas/making.htm,offers a detailed look into the process of compiling and publishing the Atlas.Further information on the institute is available on its website at http://www.satiim.org.bz.This position was affirmed during the research for this chapter, at a focus group interview conducted with the Maya Leaders Allianceand in personal interviews and informal conversations with villagers.247

chapter 14Indigenous Peoples: Cross-Cutting Concerns and NeedsThe Supreme Court of Belize’s September 2007decision in the Maya Villages case resolved along-standing dispute regarding the legal statusof Maya lands in southern Belize. In the decision,Chief Justice Abdulai Conteh ruled that theMaya villages and their members hold collectiveand individual rights to the lands and resourcesthey have used and occupied according to Mayacustomary practices and that these rights constitute“property” under the Belize Constitution. Heordered the government to “determine, demarcateand provide official documentation of SantaCruz’s and Conejo’s title and rights in accordancewith Maya customary law and practices, withoutprejudice to the rights of neighboring villages”and to cease and abstain from any acts, includsociatedwith oil and tourism have presented particularchallenges to traditional land rights amongthe Maya and Garifuna.Oil exploration in southern Belize in particular isincreasing pressure on Maya lands. In April 2006,the government of Belize granted an exploratorypermit to Texas-based U.S. Capital Energy tobegin seismic testing in the Sarstoon-TemashNational Park. The Maya claim that grantingthis permit without the prior informed consentof the Maya violates their indigenous rights. InMay of that year, SATIIM filed a lawsuit askingthe Supreme Court of Belize to revoke the permit.The Court subsequently granted SATIIM’srequest for revocation of the permit, ordering thegovernment and the company to comply with theEnvironmental Protection Act, which mandatesan environmental impact assessment prior to anyseismic and/or other exploratory activity.Tourism activities along the country’s Atlanticcoast are a source of pressure in regard to traditionalGarifuna lands. Increasing investment intourism, especially near Placencia and Hopkins,has resulted in the alienation of lands previouslyused by the Garifuna without their consent orinvolvement (and with no benefit accruing tothem).14.7.1 Maya Land and Natural ResourceUse and Customary LawMaya land use patterns are governed by unwritten,customary law. The lands and resources ofthe 40-plus Maya communities in southern Belizeare held collectively under customary law, andindividuals and families enjoy rights of use andoccupancy using the milpa (rotational farming)system. As anthropologist Liza Grandia (2004,27) explains, although this system has sometimesbeen misinterpreted as “communism,” it is not:Quite to the contrary, an individual Mayafarmer works his own land, but it is part ofa customary or community system. The basisfor customary land management is a conceptof “usufruct” rights—that is, the person whouses the land has a right to control it. He orshe may recruit group labor, but ultimatelythe land and the crops are his/hers. If someoneclears a piece of forest, other members ofthe community will respect that land as his/hers even as it lays fallow. That allows peopleto rotate their crops every five to seven yearsso that the soil will be aerated and nutrientsrestored by the forest regrowth.Corn is an important traditional crop that hasboth a nutritive and a ceremonial role in Mayanlife. Mayan farmers also cultivate a wide variety ofother crops, including rice, citrus, and cacao, forcommercial purposes; the market for organicallygrown cacao in particular shows great revenuegeneratingpotential (IFAD 2007, xiii). Mayanfarmers also use their traditional lands for hunting,fishing, and gathering of wild foods and medicinalplants, and the forest provides firewoodand materials for building houses, canoes, andbaskets.Access to land and natural resources is extremelyimportant for Mayan religious beliefs and spirituality.Every Mayan community has at least one sacredsite in the form of a cave or a mountain, andthe religious and spiritual significance of the landand resources is apparent in all aspects of Mayanlivelihoods and daily life (see Toledo Maya CulturalCouncil/Toledo Alcaldes Association 1997;Grandia 2004). Milpa agriculture, for example, “isnot merely a mode of production but an entireway of life . . . the milpa cycle confirms and reaffirmsreligious holidays, kinship and friendships,and really the whole human lifecycle” (Grandia2004, 27).14.7.2 Legal Status of Maya Lands248

It is important to note that the Chief Justicecited international and inter-American jurisprudencein his decision in the Maya Villages case,which codifies many of the principles includedin the Ten Points Agreement between the MayaPeoples of Southern Belize and the Governmentof Belize 31 as well as the conclusions of the 2004Inter-American Commission on Human Rightsreport on the case. For example, the Ten PointsAgreement recognized the rights of the Mayapeople to lands and resources in southern Belizeand provided for a program to survey and protectcommunal lands. The commission’s report recingthe issuance of leases, grants, or concessionsfor resource development, that might affect theexistence, value, use, or enjoyment of the propertylocated in the geographic area occupied and usedby the Maya people of Santa Cruz and Conejowithout their informed consent. 28Shortly after the Maya Villages decision, then–Prime Minister Said Musa announced thathis government would not appeal the case andpublicly welcomed the “landmark decision.” 29The Maya Leaders Association has met numeroustimes with the government of current PrimeMinister Dean Barrow since his February 2008election. A government directive issued in lateMarch, suspending the issuing of leasing permitsand other land-use-related permits in the ToledoDistrict pending the process of implementing theSupreme Court decision, was seen as an encouragingsign. However, a few weeks later, on April23, the government effectively revoked the directiveby limiting its application to the two claimantvillages in the lawsuit. In response, the associationfiled a second lawsuit, which at the time of writinghad not yet been heard by the Court, in June2008, asking the government to maintain the statusquo on Maya lands by not issuing new permitsand concessions.Prior to the Maya Villages decision, the governmentconsidered most land in southern Belize, with theexception of several plots for which a few Mayanshad obtained individual land leases or grants, tobe national land. Belize’s British colonial governmentcreated several Maya reservations totalingapproximately 77,000 acres in the late nineteenthcentury, but the boundaries of these “reservations”did not conform to Maya land use practices, andtheir legal status remains uncertain, as they arenot referenced in the National Lands Act. Onlya few of these reservations remain, and they areconsidered national lands and are the propertyof the state, requiring payment of annual rentsand fees, while the government retains the rightto sell, lease, or grant licenses over the reservationlands without any compensation to the Maya(Toledo Maya Cultural Council/Toledo AlcaldesAssociation 1997, 7; Berkey 1994, 33).The petitioners in the case, the Maya LeadersAlliance, stated that the nature of Belize’s leasesystem conflicts with the traditional Maya formof land tenure because the lease areas are “not bigenough to accommodate the long fallow agriculturalsystem (milpa) the Maya have developedover centuries to maintain soil fertility, and leasesdo not take into account the needs of future generationswithin that system.” They further statedthatMany Maya cannot afford to obtain a lease atall, and even for those that can, they are onlyable to lease a small portion of the larger areaof land to which they have customary rights,which is inadequate to sustain themselvesand their families over time. Furthermore,the expense of the leasing process forcesmany members of the claimant communitiesto mortgage their lease lands, with the associatedsignificant risk of complete dispossessionby foreclosure. This increases the likelihood,as permitted under the National Lands Act,that leases will be transferred to outsiderswithout the consent of the community. 30chapter 14Indigenous Peoples: Cross-Cutting Concerns and Needs28293031The full text of the judgment in the case is available at http://www.law.arizona.edu/Depts/iplp/advocacy/maya_belize/documents/ClaimsNos171and172of2007.pdf.Belize Times, “‘Landmark Decision’ says Prime Minister, Rt. Hon. Said Musa,” October 28, 2007.“First Joint Affidavit of Gregorio Choc, Cristina Coc, and Martin Chen in the Supreme Court Case of Aurelio Cal and others versusBelize,” paras. 39–40, available at http://www.law.arizona.edu/Depts/iplp/advocacy/maya_belize/documents/AffidavitfromtheMaya-LeadersAlliance.pdf.“Ten Points of Agreement between the Government of Belize and the Maya Peoples of Southern Belize” (2000), available at http://www.law.arizona.edu/Depts/iplp/advocacy/maya_belize/documents/TENPOINTSOFAGREEMENT.pdf249

chapter 14Indigenous Peoples: Cross-Cutting Concerns and Needsommended that the state, through informed consultationswith the Maya, adopt and implementlegislative, administrative, and other measuresfor the delimitation, demarcation, and titling ofthe territory in which the Maya have a communalproperty right. It also recommended that thestate abstain from any acts that might affect theexistence, value, use or enjoyment of the propertyoccupied and used by the Maya people and thatit repair the environmental damage caused by thelogging concessions granted by the state (Inter-American Commission on Human Rights 2004,paras. 193–96). 3214.7.3 Garifuna Land RightsAfter their forced relocation from the Caribbeanisland of St. Vincent to Central America in theeighteenth century, the Garifuna survived by engagingin seasonal wage labor, subsistence farming,hunting, fishing, and gathering of medicinalherbs and other forest products used for the constructionof houses, canoes, and the productionof household items. They settled primarily incoastal communities from Honduras to southernBelize. The majority of the Garifuna now live inurban settings where, according to Joseph Palacio(2001), they “engage minimally in the primaryincome-earning coastal activities of fishing andtourism.” Despite urbanization and migration,however, the Garifuna maintain their culturaland social attachment to the land, sea, islands,and coasts of the areas they have traditionallyoccupied and used. For example, certain islands(cayes) continue to be used in the adugahani (ordügü, as it is also known), a three- to four-dayritual intended to appease ancestor spirits, whichcan attract hundreds of Garinagu from all overthe diaspora (Palacio 2005, 109).The traditional lands of the Garifuna, notablyin and around the villages of Hopkins and SeineBight, are now under increasing pressure resultingfrom their high tourism potential. Improved infrastructureand white sandy beaches are attractingboth Belizean and international investors,which has resulted in much land developmentand a boom in property prices. Almost all theland on both sides of Hopkins and Seine Bighthas now been purchased—primarily by non-Garinagu—andthe cayes to which the Garifuna havetraditionally had unrestricted access are beingpurchased, mostly by foreign investors.The National Garifuna Council is very concernedabout the difficulty Garinagu are now experiencingin securing land titles in and around theircommunities and their increasing loss of accessto the cayes. 33 A preliminary legal analysis ofGarifuna land rights by the International HumanRights Advocacy Center concluded that theGarifuna “do possess some form of land rightswhich is entitled to protection under domesticand international law” (Noe 2001, 1). However,there is lack of clarity among the Garinagu aboutthe nature of their title and rights to lands and resources(e.g., individual titles, communal titles, ora mix of both), and they have indicated that thisissue needs to be discussed more thoroughly inthe communities, particularly in Hopkins, SeineBight, and Barranco.14.8 ConclusionBelize clearly represents a unique set of circumstancesin the region in regard to its treatmentof indigenous peoples, with multiple, sometimescontradictory messages regarding the country’sattitudes toward its indigenous groups. Thoughthere is a high degree of ethnic diversity in thecountry and a distinct indigenous presence, Belizehas no official government policy on indigenouspeoples. Yet the country’s Supreme Courthas taken a progressive position on land rightsfor indigenous peoples. On the other hand, thatdecision has not yet been implemented. Theseconflicting impulses regarding the country’s indigenouspopulation make an assessment of thesituation of indigenous peoples in Belize a dauntingundertaking.Socioeconomic indicators for indigenous peoplesand Garifuna remain low compared with the restof the country despite relatively high levels of investmentin the districts in which they live. A lack32At least 17 logging concessions were issued in the 1990s; more recently, as noted earlier, the government granted an oil explorationconcession to a U.S. company, U.S. Capital Energy.33National Garifuna Council of Belize (n.d.) and Michael Polonio, personal communication, October 5, 2007.250

of disaggregated data makes it difficult to designand target such investments as well as to monitorand evaluate their impact. As a result, there is aneed for comprehensive assessments of the healthand education status of Maya and Garifuna communities,including barriers to access and qualityof service, in order to design programs and measuresthat will fully benefit these communities. Toensure their relevance and appropriateness, Mayaand Garifuna representatives should participatein the design, implementation, and results sharingof any assessments conducted.The traditional lands, territories, and resourcesof the Maya in Belize are extremely vulnerableto increasing pressure from land developmentrelated to expanding tourism along the Caribbeancoast, seismic exploration in the country’ssouth, and climate change initiatives such ascarbon credits that limit use. The recent SupremeCourt of Belize decision in the MayaVillages case provides some certainty regardingindigenous rights to land, but implementationof the decision is likely to be problematic. Thismeans that land tenure for both the Maya andthe Garifuna is still highly uncertain, and protectionof these lands, territories, and resourcesremains the number-one priority for these communities.Land tenure security is also importantfor sustainable economic development activities.Both the Maya and Garifuna are looking fornew ways to participate in traditional economicactivities such as agriculture as well as new areasof opportunity in tourism, and having titlesto their lands and, therefore, exerting controlover the associated resources are seen as importantprerequisites to any kind of significantinvestment. Closely related to both land tenureand sustainable economic development is effectiveparticipation in decision making. Both theMaya and the Garifuna have identified capacitybuilding, inclusion of women, and strengtheningtraditional governance systems as key long-termpriorities for their communities. Strong and effectivegovernance at the local level will ensurethat their needs and concerns are heard at thenational level and that they are prepared to participateand contribute to national-level planningand decision making regarding issues thataffect their lives and livelihoods.chapter 14Indigenous Peoples: Cross-Cutting Concerns and Needs251

chapter 14Indigenous Peoples: Cross-Cutting Concerns and NeedsReferencesBerkey, C. 1994. “Maya Land Rights in Belize andthe History of Indian Reservations.” Reportto the Toledo Maya Cultural Council, IndianLaw Resource Center, Washington, D.C.Castellanos, R. 2007. “Belize Education SectorAssessment.” Report, Inter-American DevelopmentBank, Washington, D.C. Unpublished.Cayetano, M., and R. Cayetano. 2005. “GarifunaLanguage, Dance and Music: A Masterpieceof the Oral and Intangible Heritage of Humanity.How Did It happen?” In J. O. Palacio(ed.), The Garifuna: A Nation across Borders;Essays in Social Anthropology. Belize: CubiolaBooks.Central Statistical Office. 2000. Population Census2000: Major Findings. Belmopan.———. 2004. 2002 Poverty Assessment Report–Belize. Belmopan.———. 2005. Abstract of Statistics 2005. Belmopan.CERD (Committee on the Elimination of RacialDiscrimination). 1997. RecommendationXXII (51) concerning Indigenous Peoples,adopted at the Committee’s 1235th meeting,on 18 August 1997. CERD/C/51/Misc.13/Rev.4. Office of the UN High Commissionerfor Human Rights, Geneva.Grandia, L. 2004. “The Wealth Report”: Q’eqchi’Traditional Knowledge and Natural ResourceManagement in the Sarstoon TemashNational Park. Sarstoon Temash Institute forIndigenous Management (SATIIM). KrishnaCopy Center, Berkeley, California.Harbitz, M., and B. Boekle. 2009. “Gobernabilidaddemocratica, ciudadanía e identidadlegal—vinculo entre la discusíon téorica y larealidad operativa.” Inter-American DevelopmentBank, Washington, D.C.IFAD (International Fund for Agricultural Development).2007. “Community-InitiatedAgriculture and Resource Management/RuralDevelopment (CARD) Project: CompletionEvaluation.” Rome. Available at http://www.ifad.org/evaluation/public_html/eksyst/doc/prj/region/pl/belize/belize08.htm.Inter-Agency Support Group on Indigenous Issues.2005. “Technical Position Paper on the MDGsand Indigenous Peoples.” E/C19/2005/2 AnnexIII. Available at http://daccess-dds-ny.un.org/doc/UNDOC/GEN/N05/237/10/PDF/N0523710.pdf?OpenElement.Inter-American Commission on Human Rights.2004. “Maya Indigenous Communities of theToledo District v. Belize, Case No. 12.053.”Report no. 40/04, Oct. 12. Organization ofAmerican States, Washington, D.C.Ministry of Education. 2005. Plan of Action 2005–2010. Belmopan.———. 2006. Belize Education Statistics at aGlance 2005–06. Belmopan.Ministry of Health. 2006. Belize National HealthPlan: Health Agenda 2007-2011. Belmopan.Available at http://health.gov.bz/moh/pdf/epi/BLZNationalHealthAgenda2007-2011.pdf.Ministry of National Development, Investmentand Culture. 2007a. National Poverty EliminationAction Plan (NPEAP) 2007–2011.Belmopan.———. 2007b. National Poverty EliminationStrategy (NPES) 2007–2011. Belmopan.Moberg, M. 2005. “Continuity under ColonialRule: The Alcalde System and the Garifunain Belize, 1858–1969.” In J. O. Palacio(ed.), The Garifuna: A Nation across Borders;Essays in Social Anthropology. Belize: CubiolaBooks.Moore, A., with K. Williams. 2008. “CountryStudies Series: Belize.” Coexistence Internationalat Brandeis University, Waltham, Massachusetts.National Garifuna Council of Belize. n.d. “NGCStrategic Plan 2006–2010.” Dangriga.National Garifuna Council of Belize and Governmentof Belize. 1999. “Memorandum ofUnderstanding between the National GarifunaCouncil and the Government of Belize.”Available at http://ngcbelize.org/pdf/memoran.pdf.Nigh, R. 1976. “Evolutionary Ecology of MayaAgriculture in Highland Chiapas, Mexico.”Ph.D. diss., Stanford University, Stanford,California. Ann Arbor, Michigan: UniversityMicrofilms International.Noe, S. 2001. “Land Rights of the Garifuna of Belize:A Preliminary Analysis under Domesticand International Law.” Prepared for the NationalGarifuna Council. International HumanRights Advocacy Center, University ofDenver, Denver, Colorado. Available at http://www.du.edu/intl/humanrights/garifuna.pdf.252

Palacio, J. O. 2001. “Coastal Traditional Knowledgeand Cultural Values—Their Significanceto the Garifuna and Rest of theCaribbean Region.” Paper presented at BelizeCountry Conference, University of theWest Indies, Cave Hill, Barbados, November21–24. Available at http://www.cavehill.uwi.edu/bnccde/belize/conference/papers/palacioj.html.———. 2005. “The Multifaceted Garifuna: JugglingCultural Spaces in the 21st Century.”In J. O. Palacio (ed.), The Garifuna: A NationAcross Borders; Essays in Social Anthropology.Belize: Cubiola Books.Social Investment Fund/Basic Needs Trust Fund.2007. “Completed Economic InfrastructureProjects; Social Services/Skills Training/Community Markets/Housing/Agriculture/Organizational Strengthening Projects; SanitationProjects; Water Projects; EducationProjects; Health Projects 1997–Present.” SocialInvestment Fund, Belmopan, Belize, andCaribbean Development Bank, St. Michael,Barbados.Statistical Institute of Belize. 2006. Multiple IndicatorCluster Survey: Belize 2006. Belmopan.Available at http://www1.statisticsbelize.org.bz/mics/survey0/overview.html.Toledo Development Corporation. 2006. “ToledoStrategy and Action Plan 2006–2009.”Eldrigeville, Belize.Toledo Maya Cultural Council/Toledo AlcaldesAssociation. 1997. Maya Atlas: The Struggleto Preserve Maya Land in Southern Belize.Berkeley, California: North Atlantic Books.Tumul K’in Center of Learning. 2010a. Homepage. Tumul K’in Center of Learning, BlueCreek Village, Toledo District, Belize. Availableat http://tumulkinbelize.org.———. 2010b. “Community Outreach.” BlueCreek Village, Toledo District, Belize. Availableat http://tumulkinbelize.org/outreach.html.UNESCO (United Nations Educational, Scientific,and Cultural Organization). 2001. “TheGarifuna Language, Dance and Music,” in“Proclamation of Masterpieces of the Oraland Intangible Heritage of Humanity.” NewYork. Available at http://www.unesco.org/bpi/intangible_heritage/belize.htm.University of Wisconsin Medical School with theHillside Clinic. 2005. “Belize Health NeedsAssessment Results, March 19–27, 2005.”Punta Gorda, Belize. Available at http://www.hillsidebelize.org/links/healthneeds.html.chapter 14Indigenous Peoples: Cross-Cutting Concerns and Needs253

The Growing Threat toCitizen Security1515.1 IntroductionCitizen security in Belize is an issue that is growing in its importance and urgency. An increase in violentcrimes is causing a serious deterioration in the level of citizen security, especially in some areas of thecountry, and the measures implemented to deal with this have so far not been sufficient to reverse thistrend.Growing crime and violence directly damages its victims, sometimes costing them their lives, and indirectlyaffects the whole population by creating insecurity and lowering their subjective sense of wellbeing.Besides these apparent impacts, it can impede a country’s economy, particularly in the mediumand long term, as it raises business costs and discourages investment. Foreign direct investment, whichwill be so crucial for Belize’s economic growth over the medium term (Chapter 1), may be particularlysensitive. It is well documented that one of the conditions potential foreign investors in a country lookfor is the citizens’ sense of security (whether factual or perceived) (see, for example, Daniele and Marani2008). Crime and violence deters foreign visitors, and Belize’s tourism industry has consistently raised itas a long-term concern. Furthermore, crime—particularly organized crime related to drug trafficking—can undermine governance.This chapter is structured in the following way: first it presents information on violence and crime inBelize. Then it summarizes the broad institutional issues related to organizations involved in citizensecurity in the country, as well as recent government policy reform efforts. Finally, it sets out additionalpolicy options regarding citizen security, taking into consideration the specificities of the country.15.2 Violence in BelizeAs noted in the previous section, citizen security is an important theme not only from the viewpoint ofthe well-being of a country’s residents, but also from that of its economic growth and governance. Todemonstrate the dimension of the problem in Belize, this section includes key information about crimesand violence in the country, providing some international comparisons. It is intended to highlight someof the characteristics of citizen security in Belize, with a special emphasis on juvenile violence.15.2.1 Characteristics of Violence and Crime in the CountryIn essence, Belize’s violence and crime situation is characterized by high rates of homicide, its urbannature, high levels of firearm use, a strong relationship to drug trafficking, and the generally young ageof both perpetrators and victims.255

chapter 15The Growing Threat to Citizen SecurityIn spite of data limitations (see the Appendix),criminal statistics for Belize show that violence inthe country increased over the last decade. Thenumber of homicides, the most common indicatorused to analyze a country’s level of violence,steadily increased between 2003 and 2008 (seeFigure 15.1). Nevertheless, total numbers of severalmajor crimes (rape, burglary, and theft) havedeclined since 2006 (see Table 15.1). The totalnumbers of all five categories of major crime declinedfrom 2008 to 2009, although it is too soonto tell whether crime has peaked.International comparison shows that Belize has ahigh homicide rate (32 murders per 100,000 inhabitantsin 2008) even by Latin American standards.Not only is it higher than the CaribbeanFigure 15.1. Homicides in Belize and Belize City,2002–09120or Latin American average, but it nears the levelsobserved in Jamaica, Guatemala, Honduras, orColombia, countries known for their high crimerates (see Figure 15.2).Crime in Belize is predominantly urban. Of themurders committed in the country during 2005–07, 42 percent occurred in Belize City, where 25percent of the country’s population lives. Themurder rate in Belize City increased to 61 forevery 100,000 inhabitants in 2007. Most of themurders took place in three constituencies of thecity (Lake Independence, Port Loyola, and Collet),all of which are areas of extreme poverty.The majority of Belize’s murder victims are youngand male. In 70 percent of the murders in BelizeCity in 2006, the victims were men under the ageof 35. Declining arrest, prosecution, and convictionrates resulted in a conviction in only one inten murder cases between 1999 and 2007 (Crooks2008).1008060402002002 2003 2004 2005 2006 2007 2008 2009Another predominant feature of the crime situationin Belize is the high levels of use of firearmsin the commission of crimes. Most murders in thecountry are committed with firearms. As of 2008,the percentage of people injured by firearms wassignificantly higher in Belize, compared to otherCentral American countries (see Figure 15.3).Additionally, firearms are used in the majority ofthe country’s violent robberies.Total CountryBelize CitySource: Police Department statistics.Note: Data on homicides are not available for Belize City in2008 and 2009.According to the Belize Police Department, crimesagainst property have decreased in number since2005 (see Table 15.1), but at the same time, theTable 15.1. Frequency of Five Major Crimes, Belize, 2003–09Crime 2003 2004 2005 2006 2007 2008 2009Murder 66 79 81 92 95 103 97Rape 50 53 47 43 38 38 30Robbery 443 440 653 526 514 532 526Burglary 1,741 1,660 1,758 1,514 1,256 1,303 1,286Theft 1,707 1,533 1,587 1,587 1,233 1,413 1,332Carnaln/a n/a n/a 90 66 98 62knowledgeTotal 4,007 3,765 4,126 3,852 3,202 3,487 3,333Source: Belize Government Official Portal (http://www.belize.gov.bz/).Note: n/a = not available256

Figure 15.2. International Comparison of Homicide Rates(murders per 100,000 inhabitants)El SalvadorJamaicaGuatemalaHondurasColombiaBelizeMexicoLatin AmericaGuyana*Caribbean*Dominican RepublicTrinidad and Tobago*NicaraguaSuriname*PanamaThe worldCosta RicaEuropeAregntinaUruguayChile0 10 20 30 40 50 60 70Source: Geneva Declaration Secretariat (2008).Note: Data are from 2006, except for countries marked with an asterisk, for which the most recent data available are for 2004.chapter 15The Growing Threat to Citizen SecurityFigure 15.3. Percentage of People Injured byFirearms, 20084.03.53.02.52.01.51.00.500.3El Salvador0.5 0.6Costa RicaSource: UNDP (2009).Panamatotal dollar amounts involved are increasing, evenafter adjustments for inflation. Property crimescontribute to increases in the perception of insecurity,particularly in urban areas like Belize City,where more than half of violent robberies in Belizeare committed (although the trend has fluctuated).The illegal trafficking of drugs—border traffickingor retail trafficking within the country—sets0.7Honduras0.8 0.8GuatemalaNicaragua3.7Belizea backdrop of violence and criminality in Belize.Like other Central American countries, Belize is adrug transit and distribution center for drugs goingto countries outside the region. The country’sgeography and topography make it ideal for drugsmuggling. It is located between major cocaineproducingand ‐consuming countries, sharesborders with Guatemala and Mexico, two majorheroin and marijuana producers, and has a long,hard-to-monitor coastline. It also has dense unpopulatedjungle areas and numerous inland waterways.In addition, there are about 140 isolatedairstrips and virtually no radar coverage except foran area within a 30-mile radius of the internationalairport near Belize City (Taylor 2000).The extensive flow of drugs through the countryensures accessibility of a supply of drugs for thecountry’s internal market as well. Belize’s incidenceof drug crime is much higher than that inneighboring countries and nears the level of theUnited States (see Table 15.2).Police Department and Coast Guard interventionhas resulted in the seizure of increasing amountsof illegal drugs in the country, mostly processedcannabis and cocaine in powder form.1This statistic was taken from the “Belize Central Prison Statistics” page on the Kolbe Foundation’s website (http://www.kolbe.bz/main/index.php?section=20). Note that “prisoners” include those remanded, not only those convicted.257

chapter 15The Growing Threat to Citizen SecurityTable 15.2. Suspected Drug Crimes in SelectCountries, 2005–06(per 100,000 inhabitants)Country 2005 2006United States 615.8 624.0Belize 612.2 444.2El Salvador 48.1 n/aDominican Republic 40.8 44.5Nicaragua 34.5 34.7Costa Rica 4.5 10.8Source: UNODC (2007).Note: n/a = not available.The U.S. Overseas Security Advisory Council considersorganized crime in Belize, including moneylaundering, trafficking in stolen vehicles, humantrafficking, drug trafficking, and stealing amongdifferent drug traffickers, to be beyond the abilityof the police to address effectively (OSAC 2009).Belize’s location, adjacent to the northern triangleof Central American countries, places it ina vulnerable position for importing the practiceof juvenile gang formation, which takes on substantialimplications given the country’s sizableyoung population (see Section 15.2.2). Thereare numerous indications of a growing presenceof internationally organized gang groups in thecountry. Seventeen to twenty gangs have beenidentified, with around 900 documented members(Crooks 2008). For example, Mara Salvatrucha,a large U.S.-based gang group whosemembers are typically either Salvadoran nationalsor first-generation Salvadoran Americans, is nowconfirmed to be accepting members from Belize(U.S. Department of Justice 2002). However, interms of international comparison, the levels ofgang membership in Belize at this point are stilllow (see Figure 15.4).Figure 15.4. Gang Membership in Selected LatinAmerican Countries, 2005(per 100,000 inhabitants)6005004003002001000BelizePanamaSource: UNODC (2007).Costa Ricahigher in Belize than in El Salvador, the CentralAmerican country that receives the highest numberof deportees per year. Belizean deportees aremainly young people, possibly juvenile offenderswho have been gang members.Belize’s high number of prisoners relative to thecountry’s population (see Figure 15.5) may be attributedto several factors. First, the delays in thecountry’s judiciary process are increasing the prisonpopulation. In every year between 2004 and 2007,the number of persons remanded exceeded the numberof persons convicted. Second, the high levels ofdrug-related crimes in the country, as previouslydescribed, are contributing to the higher numberof prisoners. In both 2006 and 2007, approximately20 percent of convictions in the country were in theoffense category of “dangerous drugs.”More than 85 percent of the country’s prisonersare Belizean; the rest are from other countries,mostly from Central America and the Caribbean.NicaraguaGuatemalaEl SalvadorHondurasAs has happened with citizens from other Caribbeanand Central American countries, deportationsof Belizeans from the United States haverisen. The number of Belizean deportees fromthat country rose by 26 percent between 2003 and2007, although the trend is somewhat uneven (seeTable 15.3) (Statistical Institute of Belize 2008).The number of deportees from Belize is lowerthan those for other countries of the region, butthe annual rate of deportees is proportionallyTable 15.3. Belizean Deportees from the UnitedStates, 2003–07YearNumber of deportees2003 1342004 1732005 1622006 1522007 169Source: Belize Police Department.258

Figure 15.5. Number of Prisoners per 100,000Inhabitants, 200545040035030025020015010050068Guatemala100Nicaragua158HondurasNon-Belizeans—mainly Guatemalans, Salvadorans,and Hondurans—have a substantial presencein the country’s prison system, accounting for 20–30 percent of the those convicted of crimes in thecountry each year between 2004 and 2007. 1Domestic violence represents another substantialthreat to security in the country. Since all violenceis mostly a learned behavior, national authoritieshave been making significant efforts to curbdomestic violence to avoid its intergenerationaltransmission. Although data related to domesticviolence in Belize vary depending on whether theyare provided by the Belize Police Department orthe Women’s Department of the Ministry of HumanDevelopment, the figures are in any case acause for concern. According to the Women’s Department’s2006 Annual Report, there were closeto 800 reported cases of domestic violence in thecountry in that year. Typically, reported instancesrepresent only a small percentage of all occurrences,because of a general reluctance to reportdomestic violence to the authorities.15.2.2 Juvenile Violence and theVulnerability of Young PeopleThe average age of Belize’s population is 20;three-fourths of the population is under age 35,and almost half is under age 18. This makes Belizea country of significantly young population inglobal comparison (Population Reference Bureau2010).184El Salvador177Costa Rica354Panama420Source: UNODC (n.d.).Note: The information is from the end of February 2005, thelatest available data.BelizeThus, juvenile violence in the country is a particularlypressing concern. Children and youth arethe most violence-prone groups in the country;youth are the main victims of violent crimes inBelize and, in the majority of the cases, also theperpetrators.Most crimes in Belize are committed by youngoffenders, mostly male. According to the BelizePolice Department (2006), 47 percent of thosepersons convicted of crimes in the country between2004 and 2006 were between 16 and 25years old, and 32 percent were between 26 and 35;80 percent were male. The average age of adultsserving a prison sentence is 23, and nearly 40 percentof those in prison are between ages 16 and25.Living conditions for young people in Belize contributeheavily to the crime rates among youth.According to data from the latest Country PovertyAssessment Report (Government of Belize 2009),60 percent of the country’s poor are under 24years old, and the proportion of children underage 17 who are poor ranges between 46 and 56percent (Table 15.4).Lack of job opportunities; an unemploymentrate of 33 percent for youth ages 14 to 19 (Table15.5), according to the latest Country Poverty AssessmentReport (Government of Belize 2009);low salaries for the jobs that are available; brokenfamilies; and a lack of basic public servicesare all factors that cause stress for Belize’s youngpeople.A substantial number of these Belizean youthsreport having economic difficulties (they have tosupport their families or are unemployed), havingemotional deficiencies (they have been ver-Table 15.4. Poverty among Belize’s ChildrenAge groupPercentage poor2002 2009Change,2002–090–4 38 46 +8%5–13 41 48 +7%14–17 37 56 +19%18–24 32 44 +12%Source: Government of Belize (2009).chapter 15The Growing Threat to Citizen Security259

chapter 15The Growing Threat to Citizen SecurityTable 15.5. Unemployment Rates by Sex and Age Group, 2009(percent)Age group Female Male Both sexes Difference between sexes14–19 43.4 26.1 33.0 17.320–24 27.9 16.2 20.8 11.725–49 15.9 5.0 9.6 10.850–64 21.1 6.3 11.3 14.765+ 9.4 4.6 5.7 4.8All ages 21.1 9.1 13.9 12.0Source: Government of Belize (2009).bally or psychologically assaulted), and havingsuffered physical assault. All these factors createobstacles to their social integration. Because ofthe lack of educational, recreational, and professionalopportunities, as a result of programs thatdo not reach these vulnerable youth, many timesthey seek solutions to their problems through illegalmeans, that is, by committing violent actsand crimes in general, as can be seen in the dataon convicted persons by age group cited above(Rosberg 2005).A striking increase in the incidence of young offendersis aggravating this situation. Accordingto statistics from Belize’s judiciary, between 2001and 2006, the number of offenders under age16—whose cases are heard by the Family Court,in accordance with the country’s Juvenile OffendersAct, since they are under the age of criminalresponsibility—rose almost 500 percent. Accordingto the Belize Police Department’s 2006Annual Report, 196 youths under age 16 wereconvicted of crimes in that year; crimes againstproperty were committed in 110 of the reportedcases, including 20 robberies, 28 burglaries, and36 thefts.As a result of the country’s heavy drug trafficking(see Section 15.2.1), drugs are readily available tothe country’s youth, as they are to the populationoverall, especially in urban settings. Many urbanyoung people lack recreational areas and educationor training to provide skills that would facilitatetheir entry into the labor market, makingthem easy prey to the rampant drug dealing inurban areas.15.3 Institutional IssuesAlthough a number of ministries and agencieshave undertaken various initiatives under the responsibilitiesassigned to them by law, crime anddelinquency in Belize have nevertheless been onthe increase. A qualitative diagnostic of the country’sinstitutions 2 suggests that a number of factorsmay be linked to the difficulty in halting andreversing this trend:1. Resource and information factors. In general,most institutions involved in the area ofcitizen security suffer from a shortage of financialand human resources and lack an adequateinformation system. The Belize PoliceDepartment, while making progress in theprofessionalization of its responsibilities, suffersfrom various dimensions of institutionalweakness, including the lack of an integralsecurity strategy that guides the department’sactivities, deficiencies in its data system, thelack of a system for monitoring and evaluatingthe impact and/or result of the activitiesit carries out, and weak support for the CommunityPolicing Unit. On the other hand,Belize spends significant resources on its policeforce. As of 2007, the Belize Police Departmenthad 1,234 officers—one for every252 inhabitants. This is a high ratio of policeto citizens compared to other countries in theregion, which have many more inhabitantsper police officer. For example, Guatemala,Honduras, and Nicaragua show 641, 791,and 557 inhabitants per officer, respectively(see Table 15.6).2See the Appendix, “Data and Methodology Issues,” regarding the basis for this diagnostic.260

Table 15.6. Total Number of Police Officers andNumber of Inhabitants per Officer(as of December 2007)CountryNumberof policeofficersNumber ofinhabitantsper officerBelize 1,234 252Costa Rica 12,553 350El Salvador 21,000 332Guatemala 20,299 641Honduras 8,887 791Nicaragua 9,216 557Panama 17,113 195Source: UNDP (2009).By contrast, Belize’s penitentiary system relieson financial sources outside the government,as the resources obtained from the nationalbudget are insufficient to cover the operatingcosts. These sources finance one-third ofthe costs, which could potentially affect thecontinuity of the treatment inmates receive,as the levels of funding from these sourcescannot be considered stable.2. Coordination and dialogue factors. With a fewexceptions, little coordination exists among theinstitutions involved. For example, there is nosystem for sharing information among publicprosecutors, the Police Department, andthe judiciary, which would allow the sharingof common statistical data regarding crime;thus, the information released to the public byeach institution has not been rigorously crosscheckedfor precision. Local government participationin citizen security matters is still atvery incipient stages. Local governments lackexperience with projects to prevent violenceand crime, limiting their capacity to plan andexecute activities associated with such projects.Their capacity to involve communities inthese types of projects is still weak.The participationof civil society in citizen security mattershas been scarce as regards the definitionof policies and the supervision of initiatives.This is making it difficult for the society as awhole to face the problem of citizen security,which could potentially contribute to reducingthe cost of crime prevention and control.Delays and decisions in the judicial process arenot duly explained to the public, which weak-ens the public’s perceptions of the reliability ofthe process and hence public support for thejudicial system and its important duties.Most of the initiatives implemented historicallyto prevent violence and crime in the country havebeen isolated; as they have not arisen from a commondiagnosis regarding the situation of violenceand crime, they have failed to thread togethercontrol and prevention.15.4 Government Policy Reform EffortsIn order to address the country’s challenges relatedto citizen security, in June 2010, Belize’s PrimeMinister, Dean Barrow, announced a new crime preventioninitiative: Restore (Re-Establish SecurityThrough Outreach, Rehabilitation and Education)Belize. Restore Belize will operate out of the Officeof the Prime Minister and replace the current Inter-Ministerial Committee on Crime. The initiative willpull together all government agencies to address therange of institutional, social, and economic risk factorsbehind the surge in violent crime in Belize. Atthe political level, it will be governed by the RestoreBelize Council, chaired by the Prime Minister andcomposed of the Ministers of the Police and PublicSafety, Defense, Education and Youth, Health,Human Development, Labour, and Sports. Therewill also be a Steering Committee at the operationallevel, composed of the chief executive officers ofthe seven ministries, the Chair of the Crimes ControlCouncil, and representatives from the businesscommunity and nongovernmental and communitybasedorganizations. The umbrella initiative willcoordinate the resources of the seven ministriesrepresented on the council to bring forth a holistic,integrated, and targeted approach to crime and violence.Its activities will include (1) law enforcementaimed at the main drivers of crime in targeted areas,(2) physical rehabilitation of communities, (3) socialoutreach activities, (4) community-strengtheninginitiatives, and (5) interventions targeted towardpreventing violence among vulnerable youths.15.5 Lessons from Experiences inOther CountriesBelize could benefit from valuable lessons providedby international experience as it grapples withchapter 15The Growing Threat to Citizen Security261

chapter 15The Growing Threat to Citizen Securitycitizen security issues. Successful and cost-effectiveactivities related to citizen security in LatinAmerica and the Caribbean are well documented(see, for example, Buvinić, Alda, and Lamas 2005)and include institutional strengthening of the organizationsinvolved, crime prevention programsfocused on youth, activities for social reintegrationof youth in conflict with the law, and support programsfor family members of delinquent youth.Many of these activities and programs have beenexecuted with modest resources, which makes itfeasible for Belize to replicate them.In general, international experience has shownthat violence tends to subside when a holistic,integrated and interagency approach is implemented,with precise targets at the local level(IDB 2010). However, this strategy also requiresthe engagement and ownership of local communities.In these respects, Restore Belize showsconsiderable promise. It is a coherent and integratedprogram that recognizes the need to actin the short, medium, and long terms. It is alsobased on considerable input from stakeholders,such as local communities and the private sector,and intends to promote partnerships between differentactors.Experience in Nicaragua points to the value ofcommunity policing and to the importance ofexploiting existing institutional strengths. Anevaluation of Nicaragua’s Citizen Security Program(Vera Institute of Justice 2009) shows thatits strength is that its design was based on a philosophicalfoundation of community policing andgovernance that already existed in Nicaragua.When the country’s National Police were establishedapproximately 30 years ago, most of theofficers were recruited from the the ranks of revolutionaryforces, which had strong links with thecommunity. Their strength is also backed by thesignificant voluntary participation of communitymembers, which was sensible in the case of Nicaragua,where there appears to be a culture of voluntarism.The Belize Police Department missionstatement emphasizes the concept of “the policeand community working in partnership for a saferBelize,” and its vision stresses the strengtheningof links with all community members. WhileBelize has no historical background equivalentto that of the revolutionary forces in Nicaragua,Belize could study and incorporate some usefulelements from Nicaragua’s model for establishingand maintaining ties with each neighborhood.International experience also underlines the importanceof strengthening data collection andprocessing capacities in order to enable evidencebasedpolicy to be made. The same evaluation ofNicaragua’s program concludes that the weaknessof the program lies in its failure to implement acitizen security clearinghouse to collect, validate,systematize, disseminate, and generate reports ondata and successful practices in the area of preventionand control of violence and crime. Sincesuch a clearinghouse has not been developed todate, the study says, the country lacks trustworthyand integrated data management tools regardingcrime and violence to permit more efficientand optimal focusing of the country’s limited resources.Of course, lessons can be learned as well from examplesin developed countries. One well-knownU.S. case is that of Boston. To cope with the city’shigh incidence of gang violence and murder inthe late 1980s, city authorities undertook a comprehensivecommunity-based strategy to reachat-risk youth before they took their first step intocrime and to deal with those already in trouble.The Youth Violence Strike Force, a coordinatedmultiagency task force of 45 full-time police officersand 15 officers from outside agencies, includesrepresentatives of the U.S. Bureau of Alcohol, Tobacco,Firearms and Explosives, the MassachusettsState Police, and juvenile corrections officers. It ischaracterized by the involvement of many differentparties in the fight against youth violence andthe use of close communication with youth. Thestrike force carried out nightly home visits, meetingwith gang members to let them know aboutthe city’s zero-tolerance policy (under which theywould be automatically and severely punished fora variety of infractions), and undertook partnershipswith businesses to engage at-risk youth inactivities geared to teach youth leadership and lifeskills, including conflict resolution and time management,and also to assign them mentors. As aresult, youth homicides dropped some 80 percentcitywide between 1990 and 1995, and in 1996,not a single youth died in a firearm homicide inthe city. Violent crime in public schools decreasedmore than 20 percent in the 1995–1996 schoolyear, and more than 150 drug dens were closed262

through joint federal-state-local cooperation(OJJDP 1999). As discussed earlier in the chapter,available data indicate that crime and violencein Belize is characterized by urban nature, highlevels of firearm use, a strong relationship to drugtrafficking, and the generally young age of bothperpetrators and victims. As these same elementswere covered in the Boston experience with goodresults, it seems plausible that the approach usedin Boston might be able to be applied successfullyin Belize as well. Additionally, the interinstitutionalapproach involving families and localcommunities used in the Boston experience couldbe characterized as one cost-effective way of preventingcrime, as opposed to expending resourceson isolated and uncoordinated efforts.The U.S. Centers for Disease Control and Prevention(Thornton et al. 2002) offers varioustypes of strategies on youth violence prevention,drawing on many experiences in this area: parentandfamily-based strategies, home-visiting strategies,social-cognitive strategies, and mentoringstrategies. For each type of strategy, an analysisis presented identifying elements that need to beconsidered in designing youth violence preventionprograms. A number of governmental andnongovernmental organizations in Latin Americaand the Caribbean that work with at-risk youthare engaged in activities in one or more subareasidentified by the Centers for Disease Controland Prevention. Some examples which are likelyto work for Belize include promoting sports as ameans for productive use of time, providing jobskills training, and creating neighborhood preventionteams that include parents and familymembers. These seem appropriate for Belize becausethey require a relatively small amount of resources,as they can be built on existing platforms,such as Youth for the Future.It is important that Belizean authorities examinewhat these various organizations are doing in asystematic and integrated manner, rather thanpursuing randomly selected examples, taking intoconsideration the specificities of the country thatare described in this chapter. To achieve this, Belizeneeds to study the cases that have been implementedat three different levels. At the primaryprevention level (crime and delinquency preventionin general), activities specifically designed fordiverting youth from antisocial behavior shouldbe the priority, considering the country’s youngpopulation. At the secondary level (for those whoare considered at risk for becoming delinquent),specific measures for keeping youth away fromfirearms and illegal drugs should be considered.Finally, at the tertiary level (for those who havealready been in conflict with the law), measuresfor social reinsertion for former inmates, particularlyfor young male ex-offenders, should be examined.chapter 15The Growing Threat to Citizen Security263

chapter 15The Growing Threat to Citizen SecurityReferencesBaston-Maio, C., and M. Russell. 2009. “BelizeCitizen Security Sector Note.” Inter-AmericanDevelopment Bank, Washington, D.C.Buvinić, M., E. Alda, and J. Lamas. 2005. EmphasizingPrevention in Citizen Security: TheIDB Contribution to Reducing Violence inLatin America and the Caribbean. SustainableDevelopment Department Best Practices Series.Washington, D.C.: Inter-American DevelopmentBank.Crooks, H. 2008. A Review of the Belize Police Department.Belize Ministry of National Security,Belmopan, Belize.Daniele, V., and U. Marani. 2008. “OrganizedCrime and Foreign Direct Investment: TheItalian Case.” Working Paper no. 2146,CESifo, Munich.Geneva Declaration Secretariat. 2008. GlobalBurden of Armed Violence. Geneva.Government of Belize. 2009. Country Poverty AssessmentReport. Belize City.IDB. 2010. Belize Community Action for PublicSafety (CAPS) (BL-L1014), Project Profile,Washington, D.C.: Inter-American DevelopmentBank.OJJDP (Office of Juvenile Justice and DelinquencyPrograms). 1999. “Boston Strategyto Prevent Youth Violence.” Profile no. 2. InPromising Strategies to Reduce Gun Violence.Washington, D.C.: Office of Justice Programs,U.S. Department of Justice. Availableat http://www.ojjdp.ncjrs.gov/pubs/gun_violence/profile02.html.OSAC (Overseas Security Advisory Council).2009. Belize 2009 Crime and Safety Report.U.S. Department of Justice, Washington,D.C. Available at https://www.osac.gov/reports/report.cfm?contentID=102760.Police Department. 2006. Annual Report 2006.Belize City.Population Reference Bureau. 2010. 2009 WorldPopulation Data Sheet. Washington, D.C.Available at http://www.prb.org/Publications/Datasheets/2009/2009wpds.aspx.Rosberg, M. 2005. Belize Study: Impact of Crimeand Violence on Children and Adolescents—Responding to the Emotional, Physical andFinancial Security Needs of Children andAdolescents. Belmopan: Community RehabilitationProgram of the Ministry of HumanDevelopment/UNICEF.Statistical Institute of Belize. 2008. Public OrderStatistics. In Abstract of Statistics 2008. Belmopan.Taylor, J. B. 2000. Caribbean Drug Trafficking andthe Western Hemisphere. Washington, D.C.:U.S. Air Force.Thornton, T. N., C. A. Craft, L. L. Dahlberg, B.S. Lynch, and K. Baer (eds.). 2002. Best Practicesof Youth Violence Prevention: A Sourcebookfor Community Action. Rev. ed. Atlanta, Georgia:Centers for Disease Control and Prevention,National Center for Injury Preventionand Control.UNDP (United Nations Development Programme).2009. Abrir espacios a la seguridadciudadana y el desarrollo humano, 2009–2010.La Libertad, El Salvador.UNODC (United Nations Office for Drugs andCrime). 2007. Crimen y desarrollo en Centroamerica.Vienna.———. n.d. “The Tenth United Nations Surveyof Crime Trends and Operations of CriminalJustice Systems (Tenth CTS, 2005–2006).”Vienna. Available at http://www.unodc.org/unodc/en/data-and-analysis/Tenth-CTSaccess.html.U.S. Department of Justice. 2002. “Drugs andCrime Gang Profile: Mara Salvatrucha.”Product no. 2002-M0465-002. Washington,D.C. Available at http://cryptome.org/gangs/mara.pdf.Vera Institute of Justice. 2009. “Report of the VeraInstitute of Justice’s Review of the IADBCitizen Security Program in Nicaragua,” no.1590/SF-NI. Washington, D.C.Women’s Department. 2006. Annual Report 2006.Belmopan: Ministry of Human Development.264

Appendix. Data and MethodologyIssuesThis chapter is based on available crime and violencedata from the main public agencies involvedin these issues in Belize. Additional informationprovided by international organizations has alsobeen considered. Although there is no specific researchthat analyzes the origin of the problemsof crime and violence in Belize in depth, otherstudies on the probable risk factors in the countryhave been taken into account.The lack of in-depth research on the causality ofcrime and violence has hindered a more completesystematization of the information collected. Inspite of this, in general terms, official informationis substantially reliable; the data bear a reasonablerelationship to the situation of violence andcrime acknowledged by the involved authoritiesand various individuals who were interviewed forthe chapter. In some cases, the statistical informationis also supported by an institutional networksurrounding an expressly established public policy(such as the gender policy).The Belize Police Department annually producescrime statistics and reports to the Ministry of thePolice and Public Security. It processes informationfrom reports on crimes received in its differentareas of responsibility (i.e., the country’sEastern, Northern, Southern, and Western Divisions).3 Police Department statistics providemonthly information on the total number of reportsreceived, classified under six main crimes(murder, rape, robbery, burglary, theft, and carnalknowledge, which was included in the “rape” categoryuntil 2005). Other crimes are grouped togetherunder “others.”The number of complaints filed by citizens is increasingat a faster pace than official statistics oncrimes reported. For example, in 2006, the totalnumber of crime reports rose by 4.6 percent comparedwith 2005 (10,569 vs. 11,077). However, inthe same year, the number of complaints receivedincreased 9 percent in the Eastern Division (BelizeDistrict), Cayo, and Stann Creek, where 55percent of Belize’s inhabitants live (Police Department2006).In its Annual Report, the Police Department groupscrimes using the same categories as in the BelizeCriminal Code: crimes against property (robbery,burglary, and theft), against persons (murder, manslaughter,attempted murder, harm, and wounding,among others), against public morality (includingrapes, indecent assaults, and incest), against lawfulauthority (public order, breaking a protective order,escape and rescue, etc.), and others (forgery, possessionof false documents, etc.).With the exception of the recording of domesticviolence cases, for which a methodology sharedby the involved agencies is applied, violence andcrime must be exclusively analyzed based on thereports recorded by the Police Department, withall their flaws and deficiencies. Information fromdifferent sources is not cross-checked, and nomapping of violence and crime based on informationshared among the different agencies is carriedout. There are no agreements between thedifferent institutions to share information, exceptfor the network of institutions working in the areaof domestic violence.There are no opinion polls that would allowmeasurement of the levels of victimization andreported crimes committed to verify the consistencyof the available information. This weakensthe statistical information, because the data cannotbe compared with objective information toverify their consistency and reliability. The lackof opinion polls creates difficulties in obtaininginformation on the probable “black figure” of unreportedcrimes or on underrecording.Any numbers and data quoted in this chapterwithout specific references are from Baston-Maioand Russell (2009).chapter 15The Growing Threat to Citizen Security3Belize’s Eastern Division includes Belize, San Pedro, Caye Caulker, Ladyville, and Hattieville. Its Northern Division includes Corozaland Orange Walk. Its Southern Division includes Belmopan, Benque, and Cayo. Its Western Division includes Dangriga, ISF, andPunta Gorda.265