Belize: Economy

Forestry was the only economic activity of any consequence in Belize until well into the 20th century, when the supply of accessible timber began to dwindle. Cane sugar then became the principal export. Exports were augmented by expanded production of citrus, bananas, seafood, and apparel. The agricultural sector suffered from damage caused by hurricanes that struck Belize in late 2007 and late 2010 and heavy flooding in mid-June and October of 2008. The farmed shrimp industry, a chief export earner until 2005, continues to decline.

Belize was adversely impacted by the global downturn in 2009, but the economy recovered modestly in 2010. GDP growth reached 2.4% during 2010, supported by government services and commerce. However, Belize's economic performance is highly susceptible to external market changes. Tourism is Beilze’s number one foreign exchange earner, followed by exports of crude oil, marine products, citrus, sugar, bananas, and garments. Because of the uncertain future of these traditional exports, efforts are being made toward agricultural diversification. Agriculture currently provides some 71% of the country's total foreign exchange earnings and employs approximately 29% of the total labor force.

Although about 1,998,230 acres (or 38% of the total land area) are considered potentially suitable for agricultural use, only approximately 10% to 15% is in use in any one year. About half of this is under pasture, with the remainder in a variety of permanent and annual crops. The traditional system of "milpa" (shifting cultivation) involves the annual clearing of new land for crop production; however, increasing numbers of farmers are making permanent use of cleared land by mechanical means. A tax is levied on the unimproved "value" of the land. To curb land speculation, the government enacted legislation in 1973 that requires non-Belizeans to complete a development plan on land they purchase before obtaining title to plots of more than 10 acres of rural land or more than one-half acre of urban land.

Domestic industry is limited, constrained by relatively high-cost labor and energy and a small domestic market. Some 185 U.S. companies have operations in Belize, including Archer Daniels Midland and Texaco. Tourism attracts the most foreign direct investment, although U.S. investment also is found in the telecommunications and agricultural sectors.

A combination of natural factors--climate, the longest barrier reef in the Western Hemisphere, numerous islands, excellent fishing, safe waters for boating, jungle wildlife, and Mayan ruins--support the thriving tourist industry. The Government of Belize has designated tourism as one of its major development priorities.

Belize’s banking system has reported a surge in nonperforming loans (NPLs), equivalent to 20% of total loans in mid-2010. While banks comply with current regulations, provisioning remains low by international standards, covering less than 16% of NPLs. The increase in NPLs has been largely concentrated in three banks (two domestic banks and one offshore), which account for over 40% of deposits in the banking system.

Belize's investment policy is codified in the Belize Investment Guide, which sets out the development priorities for the country. A Country Commercial Guide for Belize is available from the U.S. Embassy's Economic/Commercial section and on the Internet at: http://belize.usembassy.gov/investing_in_belize2.html.

Infrastructure
A major constraint on the economic development of Belize continues to be the scarcity of infrastructure investments. As part of its financial austerity measures started in late 2004, the government froze expenditures on several capital projects. Although electricity, telephone, and water utilities are all relatively good, Belize has the most expensive electricity in the region. Hydroelectric facilities at Vaca Dam and a bagasse cogeneration plant at a sugar cane processing facility were brought fully online in 2010 in an effort to increase domestic capacity for electricity generation. Large tracts of land, which would be suitable for development, are inaccessible due to lack of roads. Some roads, including sections of major highways, are subject to damage or closure during the rainy season. Ports in Belize City, Dangriga, and Big Creek handle regularly scheduled shipping from the United States and the United Kingdom, although draft is limited to a maximum of 10 feet in Belize City and 15 feet in southern ports. American Airlines, Continental Airlines, U.S. Air, Delta Airlines, and TACA provide international air service to gateways in Dallas, Houston, Miami, Charlotte, Atlanta, and San Salvador.

Trade
Belize continues to rely heavily on foreign trade. World commodity price fluctuations and preferential trading agreements, especially with the United States and the European Union (cane sugar) and the United Kingdom (bananas), greatly impact Belize's economic performance. European Union (EU) and U.K. preferences have been vital for the expansion and prosperity of the sugar and banana industries. U.S. trade preferences allowing for duty-free re-import of finished apparel cut from U.S. textiles have significantly expanded the apparel industry.

Imports for 2009 totaled $668.1 million, while total exports were $250.5 million. The United States continues to be Belize's number-one trading partner. Through 2009, the United States provided 38.0% of all Belizean imports and accounted for 37% of Belize's total exports. Other major trading partners include Mexico, the United Kingdom, the European Union, Central America, and the CARICOM member states. Belize aims to stimulate the growth of commercial agriculture through CARICOM. However, Belizean trade with the rest of the Caribbean is small compared to that with the United States and Europe.

Sources:
CIA World Factbook (September 2009)
U.S. Dept. of State Country Background Notes (May 2011)