A WORLD BANK COUNTRY STUDY e ~t BELIZE Economic Report I/ &N IBRD ~7615 B~00 a8~30~ ~j8B~00 'i 8~30' OCTCJP.ER 1983 f ~ ....-....CheiUnal MEXICO i8~30 ,-"Chan I ..~ j Chen Canseio icon *. C/wi jnw/ 8~y / Corozal I / M E X ICC 2-~ ~ S ./ Lob,mIIC /Fh~5C i"i9 ~Ji San j ~5I Douglas -... Progresso ) I CA~! BEAN SEA SanAntonio COROZAL ' Yo Oronge DISTRICT / jCreek Wall' Carmel~a "s' - AMBERGRIS I8~ 00 / Augusi ( L..~ PineR~dge ~?San Pedro I Neusia& Son FeIpe ~ I Maskall San tan -. ORANGE WAL K Chicago / DISTRICT r Y K (Bermud ~ Sand CC Boom/ Hill jtandng Ci / I < (Ranc a i7C30 /Dalaresj1 BELIZE Behze ~ "' Haitievitle '-. ~ 1r' ~1TURNEFFE 5 3 / 0 ISLANDS 7 Orange '--- I DISTRIf~7V i / .* ~i,4iA7~r',' t~ LS"I BELMOPAN . ~' 'It }i'ii.c del Carmen BELl ZE t~00' bC1 C~AYO DISTRICT ,~) AliaVisia Dangriga ~ j Main Roads 6' ____________ Other Roads U National Capital 7 DISTRICT ' 0 District Capitols ) I *,R;~ersdole ki a Towns and Villages e"Se,ne Bghi *~iag'~ ~ '''~ ' kind Boundaries 5Piacenr~a - -. International Boundaries 30 1 ~ Medino flank ~'" KILOMETERS 9 19 2p 39 49 5,0 *1 MILESi TOLEDOHeiIgO.- DISTRICT 0-"" ~ 0 ID 20 30 USA ' / Sin Aviv's Bi~ Fall - SAPODILLACAYS ,,- .-'C~p~ BAH-sM'-iS MEXiCO JTi~ ~ Punto Gorda JAMAICA uAirsr.aJ I I6~~G '~*'~ of H~ dc,ras I6~00 BELIZE EULC HONDURAS / s'"t - C '~ VENEZuELA IOU ~ ' SALVADOR . COLOMBiA I A F A -- t3'~--o P,,erro Care,,.' HONDuRAS .' I ______________________________________________________ A WORLD BANK COUNTRY STUDY BELIZE Economic Report The World Bank Washington, D.C., U.S.A. Copyright @ 1984 The International Bank for Reconstruction and Development/ The World Bank 1818 H Street, N.W. Washington, D.C. 20433, U.S.A. First printing February 1984 All rights reserved Manufactured in the United States of America World Bank Country Studies are reports originally prepared for internal use as part of the continuing analysis by the Bank of the economic and related conditions of its developing member countries and of its dialogues with the governments. Some of the reports are published informally with the least possible delay for the use of governments and the academic, business and financial, and development commu- nities. Thus, the typescript has not been prepared in accordance with the proce- dures appropriate to formal printed texts, and the World Bank accepts no responsi- bility for errors. The publication is supplied at a token charge to defray part of the cost of manufacture and distribution. Any maps used have been prepared solely for the convenience of the readers; the denominations used and the boundaries shown do not imply, on the part of the World Bank and its affiliates, any judgment on the legal status of any territory or any endorsement or acceptance of such boundaries. The full range of World Bank publications is described in the Catalog of World Bank Publications; the continuing research program of the Bank is outlined in World Bank Research Program: Abstracts of Current Studies. Both booklets are updated annu- ally; the most recent edition of each is available without charge from World Bank Publications in either Washington or Paris (see the back cover for addresses). Library of Congress Cataloging in Publication Data Main entry under title: Belize, economic report. (A World Bank country study) 1. Belize--Economic conditions. 2. Belize--Economic policy. 3. Belize--Foreign economic relations. I. World Bank. II. Series. H1C142.B45 1984 330.97282'052 83-25970 ISBN 0-8213-0308-2 - 111 - PREFACE AND ABSTRACT This report is based on the findings of an economic mission to Belize during November 1982. The mission consisted of: Carlos Elbirt, Chief (IBRD), Joe Eory (IBRD), Jorge Garcia Garcia (Consultant), Allan Slusher (CDB), Vilay Soulatha (IBRD), and Dolores Velasco (IBRD). The report has four main objectives. First, description of the economy of Belize. Second, analysis of current economic policies and development issues. Third, analysis of the public sector investment program. Fourth, assessment of the prospects of the Belizean economy and of the country's creditworthiness, The Belizean economy expanded steadily during the 1960's and most of the 1970's. But economic growth slowed sharply during 1978-82 mainly because of the international recession and diseases affecting sugarcane, the main activity. Central Government finances have been managed soundly while those of several statutory bodies typically have not. But with a weakened economy even Central Government's finances have deteriorated in recent years. As a result, domestic credit to the public sector has been growing very rapidly. National savings and current account balance of payments deficits have fluctuated sharply, reflecting fluctuations in sugar export earnings. Both averaged about 13% of GNP during the last quinquennium. Investments account for 25% to 30% of GDP. A sizeable part of public investment, about 70% of the total, has been financed by external capital, mostly in the form of grants and loans on concessional terms. The public sector investment program gives high priority to the execu- tion of those infrastructural projects that constitute a prerequisite to produc- tive investments; namely electricity, roads and ports. Belize has physical resources to develop further its economy in agri- culture, agroprocessing, fishing and tourism, Development policies are, by and large, sound. But the country lacks financial and human resources. Because of the small size of the domestic market, development efforts should concentrate on export-oriented activities, Prospects for economic growth and balance of payments sustainability look favorable provided that there is a recovery in the world economy. The public debt service ratio has been low, less than 5% of exports but is projected to increase reaching about 10% by 1995 as more loans in conventional terms are contracted. - iV - PREFACIO Y EXTRACTO Este informe se basa en las conclusiones alcanzadas por una misi6n econ6mica que visit6 Belice en noviembre de 1982. La misi6n estuvo compuesta de las siguientes personas: Carlos Elbirt, Jefe (BIRF), Joe Eory (BIRF), Jorge Garcia Garcia (consultor), Allan Slusher (BDC), Vilay Soulatha (BIRF) y Dolores Velasco (BIRF). El informe tiene cuatro objetivos principales: primero, descripci6n de la economia de Belice; segundo, anAlisis de las actuales politicas econ6micas y cuestiones relativas al desarrollo; tercero, anAlisis del programa de inver- siones del sector p6iblico, y cuarto, evaluaci6n de las perspectivas de la econo- mia de Belice y de la capacidad crediticia del pals. La economia de Belice creci6 constantemente durante el decenio de 1960 y la mayor parte del de 1970. Sin embargo, el crecimiento econ6mico disminuy6 pronunciadamente durante el perlodo de 1978-82, principalmente debido a la rece- si6n internacional y alas enfermedades que afectaron a la cafia de azalcar, cuyo cultivo constituye la principal actividad del pals. Las finanzas del Gobierno central han sido administradas adecuada- mente, en tanto que las de varios organismos de derecho palblico normalmente no lo han sido. No obstante, con una economia debilitada, incluso las finanzas del Gobierno central se han deteriorado en los 61timos afios. Como resultado de e110, el cr6dito interno al sector paiblico ha crecido muy rApidamente. Los d4ficit del ahorro nacional y de la balanza de pagos en cuenta corriente han fluctuado pronunciadamente, como reflejo a su vez de fluctuaciones en los ingresos de exportaci6n del azalcar. Ambos representaron como promedio aproximadamente el 13% del PNB durante el ii1timo quinquenio. Las inversiones representan de 25% a 30% del PIB. Una cuantiosa parte de la inversi6n paiblica, mis o menos el 70% del total, se ha financiado mediante capital externo, en su mayor parte en forma de donaciones y prestamos en condiciones concesionarias. El programa de inversiones del sector palblico da prioridad a la ejecu- ci6n de los proyectos de infraestructura que constituyen un requisito para las inversiones productivas, a saber, electricidad, caminos y puertos. Belice tiene recursos fisicos para desarrollar ain mis su economia en los sectores de agricultura, agroindustria, pesca y turismo. Las politicas de desarrollo son en general adecuadas. No obstante, el pals carece de recursos financieros y humanos. Debido al pequefio tamalo del mercado interno, los esfuerzos de desarrollo deben concentrarse en actividades orientadas a la expor- taci6n. Las perspectivas de crecimiento econ6mico y de viabilidad de la balanza de pagos se yen favorables, siempre que haya una recuperaci6n en la economia mundial. El coeficiente del servicio de la deuda pGiblica ha sido bajo, inferior al 5% de las exportaciones, pero se preve que aumentar& a aproximadamente 10% en 1995 a medida que se obtengan mis prestamos en condiciones ordinarias. - v - Ce rapport est fond6 sur les conclusions d'une mission economique compos&e de MM. Carlos Elbirt, Chef de mission (BIRD), Joe Eory (BIRD), Jorge Garcia Garcia (Consultant), Allan Slusher (BDC), Vilay Soulatha (BIRD) et de Mmne Dolores Veleasco (BIRD), qui s'test rendue au Belize en novembre 1982. Les quatre principaux objectifs de ce rapport sont de decrire 1'eco- nomie du Belize, d'analyser sa politique economique actuelle et ses problAmes de developpement, d'examiner le programme d'investissements publics et enf in, d'6valuer les perspectives de 1'e6conomie et la capacit& d'emnprunt du pays. L'economie du Belize s'est d6veloppee sans A-coups pendant les ann6es 60 et la majeure partie des annees 70, mais sa croissance s'test considerablement ralentie entre 1978 et 1982, principalement en raison de la recession mondiale et des maladies qui ont compromis la production de canne A sucre, principale activiti du pays. Contrairement A celles de plusieurs organismes dtEtat, les finances publiques sont convenablement gerees. Elles ont n4anmoins subi, elles aussi, le contrecoup du flechissement de 1'activit6 enregistre depuis quelques annees. Cela s 'est traduit par un gonflement tres rapide du cridit int6rieur au secteur public. L'6pargne interieure at le deficit de la balance des paiements courants ont accusA de fortes fluctuations, reflitant celles des recettes provenant des exportations de sucre. Leur niveau moyen s'est etabli a 13 % environ du PNB au cours des cinq dernies ann6es. Les investissements absor- bent de 25 A 30 % du PIB. Une part importante de 1'investissement public, equivalente A 70 % environ du total, est financee par des capitaux exterieurs provenant essentiellement de dons et de prAts assortis de conditions liberales. Le programme d'investissements publics attribue un haut rang de priorit6 aux projets d'equipement qui conditionnent la r4alisation d'inves- tissements productifs, A savoir les projets d'Alectricit& et d'amenagement routier et portuaire. Le Belize dispose des ressources matirielles nicessaires pour deve- lopper davantage son 4conomie et, en particulier, les secteurs de 1'agricul- ture, des agroindustries, de la pAche et du tourisme. Dans 1'ensemble, sa strat6gie de dAveloppement est bien conque. Toutefois, il manque de ressources financieres et humaines. Vu l'etroitesse du marche interieur, il devrait faire porter ses efforts de d&veloppement sur les activites orientees vers 1'exportation. Les perspectives de croissance 4conomique et de redressement durable de la balance des paiements semblent favorables, mais elles dependent de la reprise de 1'economie mondiale. Le ratio du service de la dette publique est faible puisqu'il repre- sente moins de 5 % de la valeur des exportations, mais il devrait passer A 10 % environ d'ici A 1995, A mesure que le pays contractera davantage d'emprunts aux conditions du marche.  - vii - TABLE OF CONTENTS Page No. PREFACE AND ABSTRACT COUNTRY DATA SUMMARY AND CONCLUSIONS....*****...................xi I. POPULATION AND EMPLOYMENT............................1 II. ECONOMIC BACKGROUND................................6 Output and Economic Growth.........................6 The Public Sector............................. 9 Balance of Payments.............................12 Foreign Currency Controls..........................17 Money and Credit............................ 18 III. POLICIES ON PRICES, IMPORT LICENSES AND INCENTIVES..................21 Introduction .........................................*....... 21 Import Tariffs..................................................... 21 Price Controls ................................................ 21 The Marketing Board and the Price Policy...................22 Import Licensing...............................23 Import Duty Exemptions..............................24 Development Incentives.............................24 Conclusions....................................25 IV. MAJOR SECTORAL ISSUES.............................27 A. Agriculture.................................................. 27 B. Fisheries...................................................... 32 C. Tourism............................... 32 D. Power............................... 34 E. Transport..................................35 F. Social Infrastructure..........................37 Education................................37 Health...........................**............38 Social Security...............................38 Telecommunications...........................39 V. PUBLIC SECTOR INVESTMENT PROGRA.....................40 VI. OUTLOOK.....................................45 A. Output, Income and Expenditure.....................45 B. Balance of Payments****.........................47 C. Creditworthiness..............................49 Projection of Capital Inflows.......................50 Conclusion*...............................51 ANNEX A - Government's Project List....................53 STATISTICAL APPENDIX............................59 MAP - v111 - CURRENCY EQUIVALENTS Currency Unit: Belize Dollar Since its creation the Belize Dollar (formerly the British Honduras Dollar) was tied to sterling at the rate Li = Bz$4.00. In May 1976 the link with sterling was broken and the Belize Dollar was aligned with the US dollar at the rate US$1.00= Bz$2.00. Since May 1976: Bz$1.00 = US$0.50 or US$1.00 = Bz$2.00 - lX -. Page 1 of 2 COUNTRY DATA - BELIZE AREA POPULATION DENSITY 22,960 km2 145,353 (1980 Census) 6 per km2 Rate of Growth: 1.9 (from 1970 to 1980) 15 per km2 of arable land POPULATION CHARACTERISTICS (1980) HEALTH (1980) Crude Birth Rate (per 1,000) 43.1 Population per physician 2202 Crude Death Rate (per 1,000) 4.9 Population per hospital bed 261 Infant Mortality (per 1,000 live births) 30.2 INCOME DISTRIBUTION 1975 DISTRIBUTION OF LAND OWNERSHIP % of national income, highest quintile .. X owned by top 10% of owners . lowest quintile .. % owned by smallest 10% of owners . ACCESS TO PIPED WATER (1980) ACCESS TO ELECTRICITY (1980) % of households - urban 87.5 % of households - urban) 86.5 - rural 29.5 - rural) 29.1 NUTRITION (1977) .EDUCATION (1980) Calorie intake as % of requirements 125.0 Adult literacy rate % 92.0 Per capita protein intake (gm/day) 69.3 Primary school enrollment % 85.0 GNP PER CAPITA in 1981: US$1,070 GROSS NATIONAL PRODUCT IN 1981 ANNUAL RATE OF GROWTH (%, constant prices) US$ M1n. %_ 1978-81 1981-82 GNP at Market Prices 160.7 100.0 4.9 0.1 Gross Domestic Investment 44.6 27.7 4.1 -16.6 Gross National Saving 22.4 13.9 -4.6 -54.3 Current Account Balance -22.2 -13.8.. Exports of Goods, NFS 145.9 90.7 0.0 -13.0 Imports of Gobds, NFS 176.0 109.5 5.9 -10.9 OUTPUT IN 1981 Value Added US$ M1n. % Agriculture 57.6 - 43.5 Industry and Construction 19.5 14.7 Services 55.2 41.7 Tota1. 132.3 100.0 GOVERNMENT FINANCE . Consolidated Public Sector Central Government *' ( Bz$ M1n.) % of GDP ( Bz$ M1n.) % of GDP 1980/81 1981/82 1980/81 1981/82 1980/81 1981/82 1980/81 1981/82 Current Receipts ., ,, .. .. 81.9 83.9 27.2 25.4 Current Expenditure .. .. .. .. 64.2 75.1 21.4 22.8 Current Surplus 16.3 9.3 5.4 2.8 17.7 8.8 5.8 2.5 Capital Expenditures 45.9 50.6 15.3 15.4 27.1 30.9 9.0 9.4 External Assistance (net) 20.3 29.4 6.8 8.9 5.1 15.3 1.7 4.6 .not available .not applicable Page 2 of 2 COUNTRY DATA - BELIZE MONEY, CREDIT and PRICES 1977 1978 1979 1980 1981 ___________________ - (Million outstand~ing end period) Money and Quasi Money 77.5 102.0 109.0 124.1 141.8 Bank Credit to Public Sector 12.2 18.4 20.7 27.6 38.0 Bank Credit to Private Sector 54.7 58.8 76.5 82.7 95.9 (Percentage or Index Numbers) Money and Quasi Money as % of GDP 41.4 47.9 43.9 41.3 43.0 General Price Index (1963 =100) .. .. . .. Annual percentage changes in: General Price Index . .. .. Bank credit to Public Sector 58.4 50.8 12.5 33.3 37.7 Bank credit to Private Sector -6.7 7.5 30.1 8.1 16.0 BALANCE OF PAYMENTS MERCHANDISE EXPORTS (AVERAGE 1979-81) 1979 1980 1981 USS M1n. % Exports of Goods, NFS 107.1 141.4 145.9 Sugar and molasses 42.4 58.5 Imports of Goods, NFS -145.0 -164.8 -176.0 Sawn Wood 1.3 1.8 Resource Gap (deficit = -) -37.9 -23.4 -30.1 Citrus Products 5.8 8.0 Fish Products 5.2 7.2 Interest Payments (net) -2.3 -3.6 -3.9 All other commodities 17.8 24.5 Net Transfers 15.7 14.9 11.8 Total 72.5 100.0 Balance on Current Account -24.5 -12.2 -22.2 EXTERNAL DEBT, DECEMBER 31, 1982 Public Capital 13.9 10.1 12.7 UJSS M1n. Disbursement (9.4) (9.1) (8.5) Amortization (-1.0) (-1.9) (-1.5) Public Debt, inc. guaranteed 70.7 Capital Grants (5.5) (2.9) (5.7) Non-Guaranteed Private Debt .._ Other Capital (net) 8.5 4.4 7.4 Total outstanding & Disbursed . Increase in Reserves (+) -2.1 +2.3 -2.1 DEBT SERVICE RATIO for 1981 af Public Debt, inc. guaranteed 4.4 Non-Guaranteed Private Debt . Total outstanding & Di.sbursed . RATE OF EXCHANGE IBRD/IDA LENDING, (latest month) (Million USS): Since .May 1976 IBRD IDA US $ 1.00'= Bz$2.00 Bz $ 1.00 =US$0.50 Outstanding & Disbursed - - Undisbursed .- - Outstanding inc. Undisbursed - - a/ Ratio of Debt Service to Exports of Goods and Non-Factor Services, excluding re-exports. .not available .not applicable October 12, 1982 - X1 - SUMMARY AND CONCLUSIONS i. Belize, located on the Yucatan Peninsula, Central America, attained in- dependence from the UK on September 21, 1981. With 145,000 people living in an area of 23,000 Kin2, the country has one of the lowest population densities in the world, six persons per Km2. An English speaking country, Belize is the homeland of peoples with varied backgrounds: Creole, Mestizos, Mayans, Garifunas, Euro- peans and Arabs. ii. The population has been growing relatively slowly at 2% per year in recent times. This is caused by large-scale emigration; as the natural population increase is relatively high, about 3.4% per year. About 15% the total population, 20,000 Belizeans, have emigrated to the US during the 1970s. iii. Belize's economy is based on sugar, bananas, citrus, fishing, some light industry and tourism. Economic activities are mostly export-oriented; on the other hand, there is heavy reliance on imports to satisfy a sizeable part of domestic consumption and practically all investment requirements. The last few years have seen the development of transshipment to Mexico as a significant con- tributor to the economy, especially in Belize City. iv. GNP per capita is around US$1,000 and appears to be relatively evenly distributed. Ownership of the economy is principally in the hands of the private sector. Foreign investment dominates manufacturing, banking, insurance, sugarcane processing and forestry. Local investment is important in agriculture, distribu- tion and tourism. The Government owns large tracts of mostly unutilized lands. v. The Belizean economy expanded steadily during the 1960s and most of the 1970s; real GDP grew 4 to 5% per year. Agriculture expanded rapidly as sugar pro- duction increased and the banana industry was reestablished. Manufacturing also grew fast as a number of import-substituting industries and an export-oriented garment factory were established. But economic growth slowed sharply during 1978-1981 with real GDP growing by an annual average of only about 1.8% during this period. Sugar, which accounts for about 25% of GDP, explains to a large extent this performance. Sugar production declined by 13% in 1979 as a result of smut disease. Some recovery took place in 1980 but it was followed by another decline in 1981. These fluctuations in sugar production are explained by two main factors: first, replanting with smut-resistance varieties has taken place gradually, thus the disease has not been totally erradicated; and, second, the new smut-resistant varieties have less sugar content than the ones they replace. Non-sugar agriculture and manufacturing performed satisfactorily during 1978-81. - X11 - vi. The Belizean economy suffered from the international recession in 1982. The decline in prices of sugar and citrus and the adverse impact on the banana industry of the appreciation of the US dollar against the pound sterling, have re- sulted in a 4.5% decline in the real gross domestic income during 1982. On the production side, sugar production increased by about 8% thus partially compensat- ing for the decline in construction, trade, and garments. As a result, GDP declined by about 0,3%. vii. The economy had been generating relatively high levels of savings. National savings have averaged about 14% of GNP in the last five years. However, savings are subject to sharp fluctuations associated with fluctuations in sugar export earnings. For instance savings accounted for about 20% of GNP in 1980 but they dropped to 9% in 1982. The private sector generates about 70% of the total savings. On the other hand, domestic investment accounts for 26 to 31% of GNP. Therefore, national savings have been financing about a half of the investment. viii. Unemployment is an acute problem in Belize City and among the young. Overall unemployment was estimated at 14.3% in 1980. About 67% of the unemployed workers are youngsters in the 15-19 year old bracket; more than half live in Belize City. As female participation in the labor force increased rapidly, the labor force has been growing at about 3.4% per yrear during the last decade. If the labor force continues to grow at this rate, unemployment could become a very serious problem unless the economy expands very fast so as to provide new jobs. The economy would have to grow more than 6% per year just to absorb the new workers coming into the labor market. ix. Unemployment in Belize presents some complex features. The country off ers a great deal of opportunity to work in agriculture which seems to meet neither the expectation nor the training of large segments of the population, particularly those living in Belize City, about 30% of the total, As a result, there is seasonal shortage of labor in rural areas and workers are employed from neighboring countries. For this reason, the Government has implemented an open immigration policy which resulted in new settlers coming into Belize. x. Public sector activities repre.sent around 30% of GDP. They include tra- ditional services (water, electricity, ports, communications and social security) and some involvement in productive activities (bananas and, to a lesser extent, beef). The public sector is made up of the National Government, nine statutory bodies, and two financial institutions (the Central Bank and the Development Finance Corporation). xi. National Governmnent's finances have been managed soundly while those of several statutory bodies typically have not. But with a weakened economy even the National Government's finances have faced problems in recent years. In fact, National Government's current savings which traditionally amounted to 5% of GDP - X111 - declined to 2.8% in FY1981/82. With the implementation of expenditure controls, savings are estimated to have increased to 3.7% of GDP in FY1982/83. The finances of the statutory bodies have been generally poor and deteriorated during 1982. The consolidated account of the statutory bodies shows operational deficits for practically every year in the last quinquennium. This is chiefly associated with inefficiencies and with subsidies prevailing in some statutory bodies. xii. Rapid increases in the wage bill have weakened the National Government's finances. These increases are largely associated with the situation created by Belize's independence and by the need to provide new type of services. Neverthe- less, a close control of the wage bill is needed. This should not however prevent the authorities from undertaking a careful study of the salary structure in view of the increasing shortage of highly qualified personnel. xiii. In spite of successive drops in real domestic income, the National Government's current revenues have been kept at high levels, about 27% of GDP. There is some room for increasing revenues mainly by reducing import duty exemp- tions. However, any substantial increase in the overall taxation could have a negative impact on private sector activities and does not, therefore, appear advisable. xiv. The poor financial performance of the statutory bodies are associated mainly to the operational deficits of the Electricity Board, the Banana Control Board, and the Marketing Board. The Government is taking some actions to improve the performance of these statutory bodies but major decisions remain to be taken. Management and administration at the Electricity Board need to be reorganized and strengthened, the distribution system should to be interconnected so as to reduce energy losses, and the level and structure of rates need to be reviewed. In relation to the Banana Control Board, since banana production is below the break- even level a rapid expansion in production is necessary. This expansion is already being undertaken by private farmers and by BCB. It should be noted that within the presently envisioned expansion, this industry does not have a market constraint. An additional problem is the high transportation costs due to the lack of proper port facilities; bananas are barged to Honduras and transshipped there to ocean-going vessels. Resolution of this problem will be examined as a part of the Master Transportation Plan Study currently under way. Finally, the key element for improving the financial performance of the Marketing Board is the elimination of subsidies to producers particularly those on corn. xv. Public investments have played an important role in Belize's develop- ment. They represent 60 to 70% of the total domestic investment and about 15% of GDP. The level of execution and the establishment of project priorities have been, overall, satisfactory. External assistance has played an increasingly important role in the financing of public investments as well as in the provision of much needed technical assistance. This assistance was provided for the execu- - X1V - tion of several projects such as the Belize City Port, the Northern Highway, the Western Highway, and water and sewerage expansion. xvi. The public sector has faced some major constraints affecting timting and quality of project execution. They include shortages of cash to cover local costs and bridge-financing; administrative weaknesses in the monitoring of project execution; and shortage of local personnel to participate in project execution which prevents the country from absorbing all the external technical assistance provided by donors/lenders. xvii. Belize's balance of payments reflects an open economy. Imports re- presents around 100% of GDP; exports about 80%. The openness of the economy is also reflected in large amounts of remittances sent by Belizeans living abroad, in increasingly important re-export trade with neighbouring countries and in size- able inflows of capital. xviii. The country relies heavily on imports for all its capital goods and for a considerable amount of consumption goods. The population has developed a sophisticated pattern of consumption and often prefers imported goods to local. The country imports all needed oil although there are good prospects for finding oil and gas in commercial quantities. Finally, there are some export-oriented industries that import their basic materials, for example garments. External trade is conducted mainly with the USA and UK. xix. Export performance depends mainly on sugar which accounts for around 60% of domestic exports. Sugar production and international prices have fluctuated sharply. For instance, production reached 113,000 long tons in 1978, a record level after only 62,000 tons in 1976 when the worst drought on record took place. Belize sugar exports benefit from the Loin Agreement and from the International Sugar Act but those agreements have not eliminated sharp fluctuations in the average price received by the country: US$296 per long ton in 1978; US$491 in 198C; and US$320 in 1982. xx. Current account balance of payments deficits have fluctuated sharply as a result of fluctuations in sugar export earnings. While in 1975 the deficit was US$5.2 million or 5.4% of GDP, in 1979 it reached US$24.5 million or 19.8% of GDP. Current account deficits have averaged about 13% of GDP during the last quinquennium. Since investments averaged about 26%, external resources have financed about a half of the total investment. xxi. External capital inflows to the public sector have financed about 70% of the current accounrt balance of payments deficits. Foreign private investments appear to have been modest in recent times although they are encouraged by a relatively liberal currency exchange system in which regulations have been admini- stered flexibly and pragmatically. Moreover, the fixed exchange rate policy has - xv - been supported by a consistent monetary policy. Inflows of capital to the public sector have been provided mostly in the form of grants and concessional loans, from bilateral and multilateral sources, mainly for development programs. The amount of official reserves has been traditionally low and declined to about four weeks of imports in 1982 (excluding re-exports). Since this decline has been caused by unfavorable terms of trade, the country is negotiating a Compensatory Financing loan with the IMF. xxii. Domestic credit to the public sector has been growing very rapidly; it currently represents about a third of the total domestic credit. This is attribu- table to the recent deterioration in public finances and, therefore, to the public sector's increasing reliance on domestic credits for financing investment and, sometimes, current expenditures. xxiii. The investment climate is favorable. Official policies are, on the whole, favorable to foreign and domestic investments, complemented by a fairly liberal immigration policy. But concerns among potential investors about the political situation in the region are a deterrent to private investment. The Government is trying to allay these concerns to the extent possible by promoting the country outside, emphasizing its characteristics as astable democracy. Concerns shown by investors include the still unresolved issue with Guatemala which now appears to be gradually dissipating. xxiv. Price controls are imposed on some imported and locally produced goods. On imported goods, through maximum mark-ups; on locally produced goods, through maximum prices. Import licenses have been required for some commodities since 1974. Originally the process of granting import license was a simple one; now it is being tightened. On the other hand, some local activities enjoy development incentives through exemptions from income tax and from import duties on capital goods and occasionally on raw materials. Price controls, import licenses and development incentives do not appear to have had much impact on the economy. Part of the reason for this may be because they often neutralize each other. In addition these policies are applied in a relaxed fashion. Nevertheless, they create administrative costs and raise some unnecessary concerns. among potential private investors. Therefore, it is recommended that measures be implemented in a coordinated fashion, aimed at: (a) relaxing price controls and enforcing them only in cases of monopoly; (b) relaxing import restrictions in a manner consistent with balance of payments sustainability; (c) minimizing import duty exemptions; and (d) giving priority in future development incentives to export-oriented activities based on the use of local raw materials. - XV1 - xxv. Present land tenure policies encourage development. First, the Government owns more than one million acres of land suitable for agriculture which are being made available to locals or foreigners at relatively low prices so long as the land is developed according to a plan agreed with the Government. Second, a new land tax on unimproved value is being introduced to encourage land development but the success of this tax will depend on how well it is implemented. xxvi. Prospects for economic growth in Belize largely depend on the inter- national situation. Belize's economy is very open, and given the small size of the domestic market any significant growth in production needs to be export- oriented. To the extent that a recovery appears to be emerging in the world economy, Belize's prospects for economic growth look promising. Moreover, the country has several competitive advantages. First, abundant natural resources; second, sound Government policies; and third, a climate for domestic and foreign investment which is good and industrial relations which are, on the whole, smooth. Provided that an international recovery takes place, a 3% economic growth is projected by the mission for 1983, accelerating to 4% in 1984 and to 5% from 1985 on. Growth is expected from sugar (until production reaches the maximum level given the present plant capacity of 115,000 tons plus a planned expansion of 5,000 tons to be executed in 1984), citrus, bananas, livestock, fish farming, poultry, rice, corn, and other non-traditional agricultural products. Construc- tion, food processing and tourism are also expected to grow steadily. xxvii. Efforts need to be undertaken to increase national savings. The public sector is expected to increase its savings from the present level of 3% of GNP to 5% by 1985. This should not be difficult because this level of public savings has been prevailing in previous years. Nevertheless, to sustain this 5% level will require close monitoring, as among other things, the financial surplus of the new Social Security System could potentially decline in future years. Private savings which averaged about 9% of GNP in the last quinquennium, can be expected to increase to about 13% in 1990. This implies that the rate of increase in private consumption will be slightly lower than that of the GNP, but will still allow a significant improvement in real per capita consumption. xxviii. The medium- and long-term balance of payments position can be expected to improve. This improvement is predicated upon an export-oriented strategy that emphasizes non-sugar exports so as to make the economy of Belize less vulnerable to the cyclical behavior of sugar. On the import side, a key element in improving the balance of payments performance is a slowdown in the growth of imports of food, fuel and durable consumption goods. To reduce the growth in imports, several measures need to be taken, such as the gradual elimination of import duty exemptions and the implementation of energy-savings projects particuarly in rela- tion to electricity. In the short-term, the balance of payments is expected to benefit from an improvement in the terms of trade. - XVlli - xxix. The current account balance of payments deficits is projected to fall gradually from 16% of GDP in 1982 to 8% in 1990, remaining at that level in future years. In order to finance the current account balance of payments deficits as well as a modest increase in foreign reserves, net capital inflows averaging about US$25 million per year will be necessary during the rest of the 1980s and about US$40 million per year during 1990-95. Net external capital inflows to the private sector are projected to provide about 30% of these requirements. This should be well within the realm of possibility given the very wide range of private investment opportunities in Belize, which will become even more attractive as the world economy recovers. Net external capital inflows to the public sector are projected to average about US$18 million per year during the rest of the 1980s and about US$28 million during 1990-95. xxx. The public sector investment program gives high priority to those infra- structural projects that constitute a prerequisite to productive investments; namely electricity, roads and ports. Therefore, this investment program is crucial for the resumption of economic growth. Total public sector investments for the FY1983/84 - FY1987/88 period amount to US$142 million, or about US$28 million per year. This investment is projected to be financed as follows: (a) public sector savings, 38%; (b) net external capital inflows, 55%; and (c) net domestic borrowing and domestic capital revenues, 7%. xxxi. Successful execution of the public sector investment program has several requirements. First, public savings should increase to about 5% of GDP. This should be achieved mainly by improving the financial performance of the Electri- city Board, the Marketing Board and the Banana Control Board. Second, external funds should be secured. In this regard, prospects appear favorable as evidenced by the fact that required external funds for 1983 and 1984 are already in the pipeline. Third, other domestic funds, particularly borrowing from domestic sources, should decline sharply leaving more resources available to the private sector. xxxii. The external public debt has been increasing rapidly in recent years. There is no available information on external private debt but indications are that loans have been contracted mostly for investment purposes. External public and publicly guaranteed loans at the end of 1982 were estimated at about US$70 million, or 45% of GDP. The service on public debt has been low, less than 5% of domestic exports (excluding re-exports). This resulted from a favorable structure of the debt and from the concessionality of most loans, The debt services is projected to increase to about 12% in 1983 and 1984 as several loans start to be repayable and because the Government, in response to the financial difficulties of 1981-82, contracted several loans on conventional terms. xxxiii. The public sector expects to obtain funds from several concessional and conventional sources during the next decade. Conventional loans are projected to - XV111 - increase from the current 35% of the total disbursements to about 60% in 1990 and to 76% in 1995. The debt service ratio, however, is projected to decline from 12% in 1983 to about 7% in the late 1980s as export earnings increase. Then, it is projected to increase again as increasing amounts of loans on conventional terms are contracted, reaching 10% in the mid-1990s. The debt service ratio *is, there- fore, projected to remain within manageable limits. On this basis, Belize should be considered creditworthy for limited borrowing on conventional terms provided that the Government continues to pursue an export-oriented development strategy as well as prudent financial policies; that the public statutory bodies improve their financial performance; and that the public investment concentrates on high priority projects with acceptable rates of return. - xix - RESUMEN Y CONCLUSIONES i. Belice, pais situado en la peninsula de Yucat&n, en America Central, obtuvo su independencia del Reino Unido el 21 de septiembre de 1981. Con una poblaci6n de 145.000 personas en una superficie de 23.000 kmn2, tiene una de las densidades demogr&ficas mis bajas del mundo: seis personas por kil6metro cua- drado. Belice es un pais de habla inglesa cuyos habitantes tienen origenes muy diversos: criollos, mestizos, mayas, garifunas, europeos y Arabes. ii. La poblaci6n ha aumentado a una tasa relativamente lenta de 2% al afio en 6pocas recientes. La causa de e110 ha sido una emigraci6n en' gran escala, puesto que el crecimiento natural de la poblaci6n es bastante alto, de alrededor de 3,4% al afio. Unos 20,000 beliceios --aproximadamente el 15% de la poblaci6n total-- emigraron a los Estados Unidos durante el decenio de 1970. iii. La economia de Belice se basa en el aziicar, el banano, los citricos, la pesca, alga de industria ligera y el turismo. Las actividades econ6micas estin orientadas en su mayor parte a la exportaci6n; por otro lado, se depende en gran medida de las importaciones para satisfacer una proporci6n considerable del consumo interno y pr&cticamente todas las necesidades de inversi6n. Durante los 61ltimos afios, los reembarques a M6xico se han desarrollado coma una activi- dad que contribuye en grado considerable a la economia, especialmente en Ciudad Belice. iv. El producto nacional bruto (PNB) per ci.pita es de alrededor de US$1.000 y parece estar distribuido en farina bastante pareja. La propiedad de la economia esti. principalmente en manos del sector privado. Las inversiones extranjeras predominan en las manufacturas, la banca, los seguros, la elabora- ci6n de cafia de azuicar y la silvicultura. Las inversiones locales son importan- tes en la agricultura, las actividades de distribuci6n y el turismo. El Gobierno posee vastas extensiones de tierras en su mayor parte sin utilizar. v. La economia de Belice creci6 con firmeza durante el decenio de 1960, y la mayor parte del de 1970; el producto interno bruto (PIB) real aument6 en 4% a 5% al aijo. La agricultura creci6 r&pidamente a medida que se in,crement6 la pro- ducci6n de azilcar y se reestableci6 la industria bananera. Las manufacturas tambi6n se desarrollaron con rapidez al establecerse varias industrias de susti- tuci6n de importaciones y una fibrica de prendas de vestir orientada a la expor- taci6n. Sin embargo, el crecimiento econ6mico se hizo pronunciadamente mi.s lento durante el periodo de 1978-81, en el que el PIB real creci6 a una tasa media anual de apenas 1,8%. El aziicar, que representa mAs o menos un 25% del PIB, explica en gran medida este resultado; su producci6n disminuy6 en 13% en 1979, como consecuencia de la enfermedad 11amada tiz6n del azulcar; hubo cierta recuperaci6n en 1980, pero le sigui6 otra baja en 1981. Estas fluctuaciones en .la producci6n de aziicar tienen como causa dos factores principales: primera, la plantaci6n de variedades resistentes al tiz6n ha ocurrido en forma gradual, par lo que la enfermedad no se ha erradicado totalmente, y, segundo, esas nuevas variedades tienen menor contenido de aziicar que aquellas a las que reemplaza- ran. El resto de las actividades agricolas y el sector manufacturero tuvieron resultados satisfactorios durante el periodo de 1978-81. - xx - vi. La economia belicefia sufri6 las consecuencias de la recesi6n interna- cional de 1982. La disminuci6n de los precios del azilcar y los citricos y los perjudiciales efectos en la industria bananera de la valorizaci6n del d61ar de los Estados Unidos frente a la libra esterlina han tenido coma consecuencia una disminuci6n de 4,5% del ingreso interno bruto real durante 1982. En 10 que atafie a la producci6n de azilcar, esta aument6 en alrededor de 8%, compensando parcialmente la baja en las sectores de la construcci6n, el comercio y las prendas de vestir. Como resultado de ella, el PIB disminuy6 en cerca de 0,3%. vii. Hasta entonces la economia habia venido generando niveles relativa- mente altos de aharro. El ahorro nacional ila sido coma promedio un 14% del PNB en los (a1timos cinco anoas; sin embargo, estA sujeto a pronunciadas fluctuaciones asociadas con los altibajos en los ingresos de exportaci6n del aziicar. Par ejemplo, el ahorro represent6 mis a menas un 20% del PNB en 1980, pero descendi6 a 9% en 1982. El sector privado genera aproximadamente un 70% del ahorro total. Par atra parte, la inversi6n interna representa de 26% a 31% del PNB. Asi pues, el ahorro nacional ha financiado mis a menos la mitad de la inversion. viii. El desempleo constituye un problema serio en Ciudad Belice y entre los j6venes. Su nivel total se estim6 en 14,3% en 1980. Aproximadamente el 67% de los trabajadores sin empleo son j6venes de 15 a 19 afios y de el10s m&s de la mitad vive en Ciudad Belice. Coma resultado del ri.pido aumento de la participa- ci6n de las mujeres en la fuerza laboral, esta ha crecido a un ritmo de mis a menos 3,4% al afio durante el il1timo decenio. Si continua increment&ndose en esta farina, el desempleo podria convertirse en un problema muy grave, a menos que la economia se desarrolle con gran rapidez a fin de crear empleos. S6o para poder absorber a los nuevos trabajadores que ingresan al mercado laboral tendria que crecer en mis de 6% al an0. ix. El desempleo de Belice tiene algunas caracteristicas complejas. El pals ofrece una gran cantidad de oportunidades de trabajo en la agricultura, pero 6stas no parecen satisfacer las expectativas ni ajustarse a la capacitaci6n de amplios sectores de la poblaci6n, especialmente los que viven en Ciudad Belice, que constituyen mis a menos el 30% del total. Coma resultado de ella, hay escasez estacional de mano de obra en las zonas rurales y se emnplea a traba- jadores de paises vecinos. Par esta raz6n, el Gobierno ha puesto en pr&ctica una politica abierta de inmnigraci6n que ha tenido coma consecuencia que acudan a Belice nuevas pobladores. x. Las actividades del sector pilblico representan aproximadamente un 30% del PIB. Comprenden los servicios ordinarios (agua, electricidad, puertos, comnunicaciones y seguridad social) y alguna participaci6n en actividades produc- tivas (banana y, en menor medida, carne de vacuno). El sector pilblico est& cam- puesto par el Gobierno nacional, nueve organismos de derecho pilblico y dos ins- tituciones financieras (el Banco Central y la Saciedad Financiera de Desarrollo). xi. La finanzas del Gobierno nacional se han administrado adecuadamente, en tanto que las de varios de los organismos de derecho pdblico en general no lo han sido. Sin embargo, con una economia debilitada, incluso las finanzas del Gobierno nacional se han enfrentado a problemas en los ii1timos aflos. De hecho, - XX1 - el ahorro corriente del Gobierno nacional, que habitualmente alcanzaba a 5% del PIB, disminuy6 a 2,8% en el ejercicio econ6mico de 1981/82. Con la puesta en prActica de controles de gastos, se estima que el ahorro ha aurnentado a 3,7% del PIB en el ejercicio de 1982/83. Las finanzas de los organismos de derecho piiblico han sido en general deficientes y empeoraron diurante 1982. Su cuenta consolidada muestra d4ficit de explotaci6n pr&cticamente en todos los afios del uiltimo quinquenio. Esto se asocia sobre todo con la ineficacia y las subven- ciones prevalecientes en algunos de estos organismos. xii. Los rApidos aumentos de los costos salariales han debilitado las finanzas del Gobierno nacional. Estos aumentos se relacionan en gran medida con la situaci6n creada por la independencia de Belice y por la necesidad de propor- cionar nuevos tipos de servicios. No obstante, es preciso que se establezca un estrecho control de los costos salariales. E110 no deberia en todo caso impedir a las autoridades la realizaci6n de un estudio cuidadoso de la estructura sala- rial, an vista de la escasez cada vez mayor de personal altamente id6neo. xiii. A pesar de sucesivas disminuciones del ingreso interno real, los ingresos corrientes del Gobierno nacional se han mantenido a niveles altos, es decir, en alrededor de 27% del PIB. Hay lugar para aumentar los ingresos, principalmente mediante la reducci6n de las exenciones de los derechos de importaci6n. Sin embargo, cualquier aumento considerable de la tributaci6n general podria tener un efecto negativo en las actividades del sector privado y, por 10 tanto, no parece aconsejable. xiv. La deficiente actuaci6n financiera de los organismos de derecho p'iblico se relaciona principalmente con los dAficit de explotaci6n de la Junta de Electricidad, la Junta de Control del Banano y la Junta de Comercializaci6n. El Gobierno estA aplicando algunas medidas para mejorar el desempeiio de estos organismos, pero es necesario ain que se adopten otras decisiones importantes. La direcci6n y administraci6n de la Junta de Electricidad deben reorganizarse y fortalecerse; se tendria que interconectar el sistema de distribuci6n con el fin de reducir p6rdidas de energia, y es preciso examinar el nivel y la estructura de las tarifas. En cuanto a la Junta de Control del Banano, es necesario lograr un rApido aumento de la producci6n de esa fruta, ya que se halla por debajo del nivel de equilibrio. Los agricultores privados y la Junta de Control del Banano ya han adoptado medidas para lograr este aumento, respecto del cualcabe decir que actualmente esta industria no tiene limitaciones de mercado. Un problema adicional son los altos costos del transporte, debidos a la falta de instala- ciones portuarias adecuadas; los bananos se envian en barcazas a Honduras, donde se reembarcan en buques de navegaci6n oc4anica. La soluci6n de este problema se examinarA como parte del estudio que se realiza actualmente para elaborar un plan maestro del sector de transportes. Por fi1timo, el elemento fundamental para mejorar la actuaci6n financiera de la Junta de Comercializaci6n es la eli- minaci6n de los subsidios a los productores, especialmente los aplicados al maiz. xv. Las inversiones pidblicas han cumplido un papel importante en el desa- rrollo de Belice. Representan de 60% a 70% de la inversi6n interna total y alrededor de 15% del PIB3. El nivel de ejecuci6n de proyectos y el estableci- miento de prioridades al respecto han sido en general satisfactorios. La asis- tencia externa ha desempeshado una funci6n cada vez mis importante en el finan- ciamiento de inversiones pCiblicas asi como en el suministro de asistencia - XX11 - ticnica, sumamente necesaria. Esta asistencia se prest6 para la ejecuci6n de varios proyectos, como el del puerto de Ciudad Belice, las carreteras septen- trional y occidental y la ampliaci6n de los servicios de agua y alcantarillado. xvi. El sector p iblico ha enfrentado algunas limitaciones importantes que han afectado a la oportunidad y calidad die la ejecuci6n de los proyectos. Entre ellas cabe citar la escasez de efectivo para sufragar costos en moneda local y financiamiento transitorio, deficiencias administrativas en la verificaci6n de la ejecuci6n de los proyectos y escasez de personal local para participar en dicha ejecuci6n, 10 que impide que el pais absorba toda la asistencia tecnica externa proporcianada par las danantes y prestamistas. xvii. La balanza de pagos de Belice es reflejo de una economia abierta. Las imipartaciones representan alrededor de 100% del PIB y las expartaciones mis a menos el 80%. La abierto de la economia se observa tambi4n en las grandes cantidades de remesas de divisas enviadas par los belicejos que viven en el exterior, en el comercia de reexpartaci6n con los paises vecinos, cada vez mAs impartante, y en la cuantiasa afluencia de capitales. xviii. El pals depende fuertemnente de las importaciones para obtener todos sus bienes de capital y una cantidad considerable de biences de cansumo. La poblaci6n ha desarrallado caracteristicas ref inadas de consumo y a menudo pre- fiere las productos importados a los nacionales. Se imparta todo el petr61eo necesario, aunque hay buenas perspectivas de encontrar petr61eo y gas en canti- dades comerciales. Finalmente, hay algunas industrias orientadas a la exparta- ci6n, par ejemplo la de prendas de vestir, que importan sus materiales bAsi- cas. El comercia exterior se realiza principalmente con los Estados Unidos y el Reino Unido. xix. Las resultados de las exportaciones dependen sabre todo del azilcar, que representa apraximadamente un 60% de esta actividad. La producci6n y las precios internacionales del azi.car han registrado pronuncidas fluctuaciones. Par ejemplo, la producci6n alcanz6 113.000 toneladas largas en 1978, nivel sin precedentes despu4s de haberse logrado solamente 62.000 toneladas en 1976, cuando acurri6 la pear sequia de la historia del pais. Las exportacianes de azilcar de Belice se benefician de la Convenci6n de Lome y del Convenio Interna- cional del Azicar, pero estos acuerdos no han eliminado las grandes oscilaciones que ha experimentado el precio media que recibe el pals: US$296 par tonelada larga en 1978, US$491 en 1980 y US$320 en 1982. xx. Las d6ficit de la balanza de pagos en cuenta carriente han sufrido marcadas fluctuacianes coma resultado de las variaciones en los ingresos de exportaci6n del aziicar. Mientras en 1975 el d6ficit fue de USq5,2 millones, as decir, 5,4% del PIB, en 1979 alcanz6 US$24,5 millones, a sea, 19,8% del PIB. Las deficit en cuenta carriente han sido coma promedio de apraximadamente 13% del PIB durante el U1timo quinquenia. Puesto que las inversianes fueron de alrededor de 26% coma promedio, los recursas externas han financiado mis a menos la mitad de la inversi6n total. - XX111 - xxi. La afluencia de capital externo al sector piiblico ha financiado cerca de 70% de los d4ficit de la balanza de pagos en cuenta corriente. Las inversio- nes privadas extranjeras parecen haber sido moderadas 61ltimamente, aunque tienen el estimulo de un sistema cambiario bastante tolerante en el que los reglamentos se han aplicado con flexibilidad y pragmatismo. AdemAs, la adopci6n de un tipo de cambio fijo ha tenido el apoyo de una politica monetaria consecuente. La afluencia de capital al sector pdiblico ha consistido principalmente en donacio- nes y pr4stamos en condiciones concesionarias, de fuentes bilaterales y multila- terales, sobre todo para programas de desarrollo. El monto de reservas oficia- les ha sido tradicionalmente bajo y disminuy6 a alrededor de cuatro semanas de importaciones en 1982 (excluidas las reexportaciones). En vista de que esta disminuci6n ha sido causada por una relaci6n de intercambio desfavorable, el pais negocia actualmente con el Fondo Monetario Internacional (FMI) un pr4stamo al amnparo del servicio de financiamiento compensatorio. xxii. El cr4dito interno al sector pilblico ha aumentado muy r&pidamente. Representa en la actualidad mis o menos una tercera parte del credito interno total. Esto es atribuible al reciente empeoramiento de las finanzas piablicas y, por 10 tanto, a la dependencia cada vez mayor del sector piablico de los creditos internos para financiar las inversiones, y a veces los gastos corrientes. xxiii. El clina para las inversiones es favorable. Las politicas oficiales son, en general, propicias a las inversiones extranjeras y nacionales, y a ello se agrega una politica de inmigraci6n bastante liberal. Sin embargo, ha inquie- tud de los posibles inversionistas acerca de ha situaci6n politica en la regi6n es un obsticulo para la inversi6n privada. El Gobierno trata de mitigar esta inquietud en la medida de 10 posible promoviendo ha imagen del pais en el exte- rior, haciendo hincapid en los aspectos que 10 destacan como una democracia estable. Uno de los elementos que inquietan a los inversionistas es el problema aian no resuelto con Guatemala, que parece ahora ir disipindose gradualmente. xxiv. Se imponen controles de precios a algunos bienes, tanto importados como producidos en el pais, a los primeros mediante m&rgenes de utilidad mAximos y a los segundos a trav6s de precios maximos. Se exigen licencias de importa- ci6n para algunos productos bAsicos desde 1974; originalmente el proceso de otorgar estas licencias era sencillo, pero en la actualidad se procede a hacerlo mis estricto. Por otra parte, algunas actividades locales gozan de incentivos para su desarrollo consistentes en exenciones del impuesto a ha renta y de los derechos de importaci6n sobre bienes de capital y, en ocasiones, sobre las mate- rias primas. Los controles de precios, las licencias de importaci6n y los incentivos al desarrollo no parecen haber tenido mucho efecto sobre ha econo- mia. En parte, la raz6n de esto puede ser que a menudo se neutralizan mutua- mente; ademis, se aplican sin rigurosidad. No obstante, estas politicas tienen costos administrativos y dan origen a inquietudes innecesarias entre los posi- bles inversionistas privados, por ho que se recomienda ha adopci6n coordinada de medidas destinadas a: a) Relajar los controles de precios y ponerlos en vigor s610 en casos de monopolio; b) Rehajar las restricciones alhas importaciones en forma coherente con ha sustentabilidad de ha balanza de pagos; - X1V - c) Reducir al minima las exencionies de los derechos de importaci6n, y d) Dar prioridad, en los incentivos al desarrollo que se ofrezcan en el futuro, a las actividades orientadas a la exportaci6n que se basen en el uso de materias primas nacionales. xxy. Las actuales politicas en materia de tenencia de la tierra estimulan el desarrollo. Primero, el Gobierno es propietario de mis de 400.000 ha de tierras adecuadas para la agricultura que se estin poniendo a disposici6n de los nacionales del pais a de extranjeros a precios relativamente bajos, a condici6n de que se exploten de acuerdo con un plan acordado con el Gobierno. Segundo, se va a introducir una nueva contribuci6n territorial sobre el valor de la tierra no bonificada, a fin de estimular su explotaci6n, pero el buen 6xito de este impuesto depended de la forma en que se ponga en prictica. xxvi. Las perspectivas de crecimiento econ6mico de Belice dependen en un grado considerable de la situaci6n internacional. La economia del pais es muy abierta y, dado el pequeio tamafio del mercado interno, cualquier aumento consi- derable de la producci6n necesita estar orientado a la exportaci6n. En la medida en que se haga efectiva la aparente recuperaci6n de la economia mundial, Belice tiene buenas posibilidades de mejoramiento econ6mico. Ademis, el pais goza de varias ventajas competitivas: primero, tiene abundantes recursos natu- rales; segundo, las politicas gubernamentales son apropiadas, y tercero, el clima para las inversiones nacionales y extranjeras es favorable y las relacio- nes industriales son ei general buenas. Siempre que ocurra una recuperaci6n internacional, la misi6n pronostica para 1983 un crecimiento econ6mico de 3%, que se acelerarA. a 4% en 1984 y a 5% de 1985 en adelante. Se prev6 que regis- trarAn crecimniento los rubros siguientes: azilcar (hasta que la producci6n alcance el nivel mAximo con la actual capacidad de plantaci6n de 115.000 tonela- das, m&s una ampliaci6n planeada de 5.000 toneladas a 11evarse a cabo en 1984), citricos, bananos, ganado, piscicultura, ayes de corral, arroz, maiz y otros productos agricolas no tradicionales. Tambi6n se espera un crecimiento firme en la construcci6n, la elaboraci6n de alimentos y el turismo. xxvii. Es necesario hacer esfuerzos para aumentar el ahorro nacional. Se preve que el sector pdiblico aumentar& su ahorro desde el nivel actual de 3% del PNB a 5% en 1985. Esto no deberia resultar dificil, ya que 6ste es el nivel de ahorro pilblico que ha prevalecido en afios anteriores. Ahora bien, mantener este nivel de 5% exigird. practicar una cuidadosa vigilancia, ya que entre otras cosas el superivit financiero del nuevo sistema de seguridad social podria disminuir en los afios venideros. Cabe esperar que el ahorro privado, que fue como prome- dio de aproximadamente 9% del PNB en el il1timo quinquenio, aumente a cerca de 13% en 1990. Esto significa que la tasa de crecimiento del consumo privado serA ligeramente inferior a la del PNB, pero permitirA a6.n alcanzar un mejoramiento considerable del consumno per cApita real. xxviii. Puede preverse que mejorarA la situaci6n de balanza de pagos a mediano y largo plazos. Esta mejora se funda en una estrategia orientada a la exporta- ci6n que hace hincapid en productos distintos del azdlcar con el fin de lograr que la economia de Belice sea mnenos vulnerable a las tendencias ciclicas de este articulo. En cuanto a las importaciones, un elemento fundamental en el mejora- miento de la balanza de pagos es una desaceleraci6n del crecimiento de las - xxy - importaciones de alimentos, combustibles y bienes de consumo duraderos. Fara ello, deben adoptarse varias medidas, tales como la eliminaci6n gradual de las exenciones de los derechos de importaci6n y la ejecuci6n de proyectos que ahorren energia, especialmente en relaci6n con la electricidad. A corto plazo, se prev6 que la balanza de pagos se beneficiarA de un majoramiento de la rela- ci6n de intercambio. xxix. Las proyecciones indican una baja gradual de los d6ficit de la balanza de pagos en cuenta corriente, de 16% del FIB en 1982 a 8% en 1990, para permane- cer en ese nivel con posterio.ridad. Con el fin de financiar estos d6ficit, asi como un aumento moderado de las reservas de divisas, serA necesaria una afluen- cia neta de capital de US$25 millones al afio como promedio durante el resto del decenio de 1980 y de unos US$40 millones al afio durante el periodo de 199C-95. Se prev6 que la afluencia neta de capital externo al sector privado cubra aproximadamente el 30% de estas necesidades, 10 que estA muy en el terreno de 10 posible dada la amplia gama de oportunidades de inversi6n privada que hay en Belice, que seran auln mas atractivas a medida que se recupere la economia mun- dial. Las proyecciones de la afluencia neta de capital externo al sector pdablico muestran un promedio aproximado de US$18 millones al aflo durante el resto del decenio de 1980 y de unos US$28 millones anuales durante el periodo de 1990-95. xxx. El programa de inversiones del sector piiblico otorga prioridad a los proyectos de infraestructura que constituyen un requisito para las inversiones productivas, es decir, los de electricidad, carreteras y puertos. For 10 tanto, este programa de inversiones es decisivo para la reanudaci6n del crecimiento econ6mico. El total de inversiones del sector pdlblico para el periodo que abar- can los ejercicios de 1983/84 a 1987/88 asciende a US$142 millones, es decir, aproximadamente US$28 millones al aijo. Las proyecciones de financiamiento de estas inversiones son las siguientes: a) ahorro del sector p(6blico, 38%; b) afluencia neta de capital externo, 55%, y c) empr6stitos internos netos e ingresos internos de capital, 7%. xxxi. El buen 6xito en la ejecuci6n del pr:ograma de inversiones del sector pfiblico tiene varios requisitos. Primero, el ahorro pdiblico deberia aumentar a alrededor de 5% del FIB. Esto tendria que lograrse principalmente mediante el mejoramiento de la actuaci6n financiera de la Junta de Electricidad, la Junta de Comercializaci6n y la Junta de Control del Banano. Segundo, deberian obtenerse fondos externos; a este respecto las perspectivas parecen favorables, como 10 prueba el hecho de que los fondos externos necesarios para 1983 y 1984 ya se hallan en tramitaci6n. Tercero, otros fondos nacionales, en especial los empr4stitos de fuentes internas, deberian disminuir pronunciadamente, dejando asi mas recursos disponibles para el sector privado. xxxii. La deuda piiblica externa ha aumentado con rapidez en los ii1timos afias. No hay informaci6n disponible sobre la deuda privada externa, pero si indicios de que se han contraido pr&stamos principalmente para fines de inver- si6n. Los pristamos externos pilblicos y con garantia piTblica se estimaron a fines de 1982 en unos US$70 millones, es decir, 45% del FIB. El servicio de la deuda piiblica ha sido bajo, menos de 5% de las exportaciones del pais (excluidas - XXVI - las reexportaciones). Esto fue resultado de una estructura favorable de la deuda y de las condiciones concesionarias de la mayoria de los pr6stamos. Las proyecciones indican un aumento del servicio de la deuda a aproximadamente 12% en 1983 y 1984, a medida que varios prestamos sc hagan pagaderos, y tambien debido a que el Gobierno contrajo varios pr4stamnos en condiciones ordiinarias como respuesta a las dificultades financieras de 1981-82. xxxiii. El sector pilblco espera obtener fondos de varias fuentes concesiona- rias y ordinarias durante el pr6ximo decenio. Se preve que los prestamos ordi- narios aumentarin del actual 35% de los desembolsos totales a mis o menos 60% en 1990 y a 76% en 1995. Sin embargo, se estima que el coeficiente del servicio de la deuda disminuirA de 12% en 1983 a alrededor de 7% a fines del decenio de 1980, a medida que aumenten los ingresos de exportaci6n; luego subirA nueva- mnente, segiin se obtengan cantidades cada vez mnayores de prestamos en condiciones ordinarias, alcanzando un 10% a mediados del decenio de 1990. For 10 tanto, las proyecciones del coeficiente del servicio de la deuda muestran que 4ste permane- cerA dentro de limites gobernables. Conforme a esto, deberia considerarse a Belice con capacidad crediticia para obtener tin volumen limitado de pristamos en condiciones ordinarias, siempre que el Gobierno siga una estrategia de desa- rrollo orientada a la exportaci6n y politicas financieras prudentes, que los organismos de derecho pilblico mejoren sui actuaci6n financiera y que la inversi6n pdiblica se concentre en proyectos prioritarios con tasas de rentabilidad aceptables. - XXV11 - RESUME ET CONCLUSIONS i. Le Belize est situ6 dans la peninsule du Yucatan en Am&rique centrale. Ancienne colonie britannique, il est devenu independant le 21 septembre 1981. Il couvre 23.000 km2 et compte 145.000 habitants. La densit6 de la population, de six personnes au k2, eSt 1'une des plus faibles du monde. Pays anglophone, le Belize est une mosaique d'ethnies :Cr6oles, "Mestizos", Mayas, Garifunas, Europeans et Arabes. ii. Au cours des dernidres decennies, la croissance demographique aet relativement lente (2 % par an), bien que 1'accroissement naturel de la popu- lation alt &t6 assez rapide (3,4 % environ par an). Ce ph6nomene est impu- table A une 6migration massive :20.000 Beliziens, soit pres de 15 % de la population totale, ont emigre aux Etats-Unis dans les annees 70. iii. L'&conomie du Belize repose sur la production de sucre, de bananes et dtagrumes, ainsi que sur la p&che, une industrie legere peu d4velopp6e et le tourisme. L'activit& 6conomique est largement axee sur l'exportation. Mais le pays est aussi largement tributaire des importations, qui satisfont une bonne part de la consommation interieure et la quasi-totalit6 de la demande de biens d'e.quipement. On assiste depuis quelques ann6es au d6velop- pement des activit6s de transit vers le Mexique, qui jouent un r61e important dans 1'6conomie du pays et en particulier A Belize. iv. De 1'ordre de 1.000 dollars par habitant, le PNB semble assez equi- tablement r6parti. L'economie est principalement contr61ee par le secteur priv6. Les investisseurs 6trangers occupent une place pr6dominante dans les secteurs des industries manufacturieres, des banques, des assurances, de 1'industrie sucridre et de la sylviculture. Le r6le des investisseurs locaux est important dans les secteurs de 1'agriculture, de la distribution et du tourisme. L'Etat posshde de vastes etendues de terres, generalement laissees en friche. v. L'Aconomie s'est d&velopp6e sans A-coups pendant les annies 60 et la majeure partie des annees 70. Le PIB rdel a en effet augmente de 4 A 5 % par an. L'agriculture a connu un essor rapide grAce A 1'augmentation de la production sucridre et au rdtablissement de 1'industrie bananidre. Le secteur manufacturier a lui aussi progress4 rapidement, suite A la creation de plu- sieurs industries r6ductrices d'importations et d'une fabrique de v&tements destines A 1' exportation. Toutefois, 1'expansion s'1est consid6rablement ralentie entre 1978 et 1981 et le taux de croissance annuelle du BIB r6el nta plus 4te que de 1,8 % environ en moyenne. Cet 4tat de choses est impu- table pour une bonne part A la production sucridre, qui represente 25 % environ du PIB et qui a diminu4 de 13 % en 1979 A cause des deg&ts provoquis par le charbon. Aprds un mieux en 1980, el1e a de nouveau marqu4 le pas en 1981. Ces fluctuations tiennent principalement A deux facteurs :premierement, le remplacement des cannes par de nouvelles varidt6s resistantes au charbon ne - XXV111 - se fait que progressivement, si bien que la maladie n'est pas compl6tement jugul6e et, deuxiemement, les nouvelles varidtes contiennent moins de sucre que les vari6t6s cultiv6es auparavant. De 1978 A 1981, les autres activitis agricoles et le secteur manufacturier ont donne des r6sultats satisfaisants. vi. En 1982, la recession mondiale a atteint 1'6conomie du Belize. La chute des prix du sucre et des agrumes et la hausse du dollar par rapport A la livre sterling, d6favorable A l'industrie bananiAre, ont provoqu4 cette ann6e- lA une diminution de 4,5 % du revenu int6rieur brut r6el. Cependant, la production sucriere a augments de 8 % environ, ce qui a partiellement compense le recul enregistre dans les secteurs de la construction, du commerce et de 1'habillement. En consiquence, le PIB a diminu6 de 0,3 % environ. vii. L'e6pargne int6rieure est relativement importante. Au cours des cinq dernidres annees, elle a repr4sent6 en moyenne 14 % environ du PNB. E11e a cependant accus6 de brusques fluctuations, ref letant celles des recettes provenant des exportations de sucre. Ainsi, el1e est tombie d'environ 20 % du PNB en 1980 A 9 % en 1982. Environ 70 % de 1'4pargne totale proviennent du secteur priv&. Par ailleurs, 1'investissement int6rieur absorbe de 26 A 31 % du PNB. L'dpargne nationale a donc financ6 pres de la moiti6 des investisseme{nts. viii. Le ch6mage, notamment parmi les jeunes, pose de graves problemes A Belize. En 1980, le taux de ch6mage total 4tait estimb A 14,3 %. PrAs de 67 % des ch6meurs sont des jeunes Ages de 15 A 19 ans. Plus de la moiti6 habitent A Belize. Du fait de 1'augmentation rapide du nombre des femmes qui travaillent, la population active a augment6 de 3,4 % par -n environ au cours des dix dernidres ann6es. Si cette progression se poursuit, le ch6mage risque de devenir un problhme extr&mement grave, A moins qu'une expansion trAs rapide de 1 'Aconomie ne permette de crier des emplois. Il faudrait que le taux de croissance d6passe 6 % par an pour que 1'Aoonomie parvienne A 6ponger 1'exc6- dent de main-d'oeuvre arrivant sur le march& de 1'emploi. ix. Le problAme du ch6mage au Belize est complexe. Il existe de nombreuses possibilit6s d'emplois dans 1'agriculture, mais elles ne semblent correspondre ni A l'attente ni A la formation de vastes couches de la popu- lation, notamment parmi les habitants de Belize qui repr6sentent 30 % environ de la population totale. Cela se traduit par une penurie saisonniAre de main- d'oeuvre agricole, qu'il faut pallier par 1'emploi de travailleurs de pays voisins. Les pouvoirs publics ont donc 6td amen6s A poursuivre une politique d'immnigration ouverte qui a favorisk 1'arrivee au Belize de nouveaux colons. x. Les activit4s du secteur public representent 30 % environ du PIB. Aux services traditionnels (eau, electriciti, ports, communications et s&cu- rite sociale) s'ajoutent quelques activit6s productives (bananes et, dans une moindre mesure, viande de boeuf). Le secteur public comprend l'administration centrale, neuf organismes d'Etat et daux institutions financiAres (la Banque centrale et la Soci6tdi financiAre de diveloppement). - XX1X - xi. Contrairement A celles des organismes d'Etat, les finances publiques sont convenablement g6r4es. Elles ont n&anmoins subi, elles aussi, le contre- coup du fl&chissement de 1'activit& Aconomique enregistr& au cours des derniA- res annd6es. En fait, 1 'epargne courante de 1'Etat, qui repr4sentait d'ordi- naire 5 % du PIB, est tombee A 2,8 % au cours de 1'exercice 1981/82. L'enca- drament des d6penses publiques a permis une reprise de 1'epargne qui serait pass6e, selon les estimations, A 3,7 % du PIB pendant 1 'exercice 1982/83. La situation financiAre des organismes d'Etat, gen6ralement m6diocre, s 'est aggravAe en 1982. Ces cinq dernidres ann4es, leur compte consolid6 a presque toujours fait ressortir un deficit d'exploitation. Cela tient principalement au manque d'efficacite de certains de ces organismes et aux subventions qu'ils accordent. xii. Les finances de l'Etat ont souffert de 1'accroissement rapide de la masse salariale, dfi pour une bonne part A la situation qui a suivi la procla- mation de 1'ind4pendance et A la n4cessite de mettre en place de nouveaux services. UJn contrble 6troit de la masse salariale s'impose donc. Mais cela ne doit pas empAcher les pouvoirs publics de reviser avec soin la structure des traitements pour rem4dier A la penurie croissante de personnel trAs qualifid. xiii. Malgr6 plusieurs baisses cons6cutives du revenu interieur reel, les recettes courantes de 1'Etat sont resties importantes; elles repr6sentent 27 % environ du PIB. Il serait possible de les augmenter, notamment en reduisant les exonerations de droits d'entree. Toutefois, il ne semble pas opportun d'alourdir les imp6ts, car cela risquerait de contrarier les activit6s du secteur prive. xiv. Les pietres resultats financiers des organismes d'Etat sont impu- tables principalement au deficit de fonctionnement de 1'Electricity Board, du Banana Control Board et du Marketing Board. Les pouvoirs publics tentent de redresser la situation, mais il leur reste encore A prendre des mesures d4ci- sives. Il leur faudrait notamment rdorganiser et renforcer la gestion et 1'administration de 1'Electricity Board, connecter les r&seaux de distribution entre eux pour r6duire les pertes d'6lectricit& et r6viser le niveau et la structure des tarifs. En ce qui concerne le Banana Control Board (BCB), il faudrait d&velopper rapidement la production de bananes, qui est actuellement en degi du seuil de rentabilit&. Les planteurs individuels a.t le BCB s' appliquent d6ja. Il convient de noter que le march6 peut absorber la produc- tion suppl6mentaire. Il faudrait aussi regler le problAme du cofit eleve des transports, dil A 1'insuffisance des installations portuaires :les r6gimes de bananes doivent en effet Stre acheminds en p6niche jusqu'au Honduras oui ils sont charges sur des cargos bananiers. Une solution sera recherchee dans le cadre de 1'6tude du plan directeur des transports, en cours de realisation. Enf in, pour am6liorer les r6sultats financiers du Marketing Board, il est essentiel de supprimer les subventions accorddes aux producteurs, n!otamment aux producteurs de ma'is. - xxx - xv. L'investissement public joue un r6le important dans le d&veloppement du pays. Il reprisente de 60 A 70 % de 1'investissement interieur total et 15 % environ du PIB. Dans 1'ensemble, la d6finition des prioritis et 1'ex6- cution des programmes sont satisfaisantes. Les investissements publics et l'assistance technique, dont le pays a grand besoin, sont de plus en plus financ6s par des capitaux exterieurs. Plusieurs projets ont bendficid d'une aide ext6rieure, notamment les projets d'amenagement du port de Belize, de remise en etat des routes principales dans le nord et 1'ouest et d'extension des r6seaux d'alimentation en eau et d'assainissement. xvi. Le secteur public se heurte A de graves probl6mes qui nuisent A l'ex6cution des projets et entrainent des retards. Ces problemes sont notamment :le manque de liquidites pour financer les depenses en monnaie nationale et le manque de credits de soudure; des insuffisances adminis- tratives au niveau de la supervision des projets et la penurie de personnel local pouvant participer A leur execution, qui empiche le pays de tirer plei- nement parti de 1'assistance technique exterieure fournie par les donateurs et les bailleurs de fonds. xvii. L'6conomie du Belize est ouverte sur 1'exterieur, comme en t6moigne sa balance des paiements :les importations reprisentent pres de 100 % du PIB et les exportations environ 80 %. Le volume consid6rable des envois de fonds des Beliziens expatries, 11'importance croissante du commaerce de reexportation vers les pays voisins et les entrees de capitaux en sont d'autres preuves. xviii. Le pays est largement tributaire de l'dtranger, puisqu'il importe la totalite de ses biens d'equipement et une tres importante partie de ses biens de consommation. La population, qui a acquis des habitudes de consommation assez evoluees, pr6fe souvent les produits import6s aux produits nationaux. Le Belize importe tout le p6trole dont il a besoin, alors qu'il y a de bonnes chances de decouvrir des gisements de petrole et de gaz naturel commercia- lement exploitables. Enf in, certains secteurs produisant pour 1'exportation (notamment le secteur de 1'habillement) importent leurs matiAres premibres. Les principaux partenaires commerciaux du Belize sont les Etats-Unis et le Royaume-Uni. xix. Les r4sultats A 1'exportation d&pendent principalement du sure, qui represente pres de 60 % du total des exportations nationales. Or, la production sucridre et les cours mondiaux fluctuent fortement. Ainsi, la production de sucre a atteint le niveau record de 113.000 tonnes longues en 1978, contre 62.000 tonnes seulement en 1976, ann6e ofi la s&chceresse a &t6 catastrophique. Bien qu'ils aient un effet favorable sur les exportations de sucre, la Convention de Lome et 1'Accord international sur le sucre n'ont pas supprim6 les fortes fluctuations du prix moyen obtenu par le pays :296 dollars la tonne longue en 1978, 491 dollars en 1980 et 320 dollars en 1982. - XXX1 - xx. Le deficit de la balance des paiements courants a enregistr6 d'amples variations, sous 1'effet des fluctuations des recettes provenant des expor- tations de sucre. De 5,2 millions de dollars en 1975 (5,4 % du FIB), il a atteint en 1979 24,5 millions de dollars, soit 19,8 % du FIB. Il s 'est 4tabli A environ 13 % du FIB en moyenne au cours de ces cinq dernidres annees. Comme les investissements repr6sentaient en moyenne 26 % environ du FIB, ils ont donc &te financ4s pour moitid par des ressources exterieures. xxi. Les apports de capitaux ext4rieurs au secteur public permettent de financer pres de 70 % du deficit de la balance des paiements courants. Il semble que les investissements etrangers prives aient At peu importants ces dernidres ann4es, bien qu'ils soient encourages par un regime de change rela- tivement lib&ral, appliqu6 de fagon souple et pragmatique. En outre, la pra- tique du taux de change fixe est soutenue par une politique monetaire coh6- rente. Les capitaux proviennent essentiellement de dons et de pr&ts assortis de conditions lib&rales, consentis par des organismes d'aide bilatArale et multilat6rale, essentiellement pour des programmes de diveloppement. Le volume des reserves officielles, qui a toujours 4tA faible, ne reprisentait plus en 1982 que quatre semaines d'importations environ (non compris les reexportations). Comme cette diminution resulte de la ddterioration des termes de 1'dchange, le pays n6gocie avec le FMI un prdt au titre du mecanisme de financement compensatoire. xxii. Le credit interieur au secteur public augmente trds rapidement. Il repr6sente actuellement un tiers environ du credit int6rieur total. Cela tient au fait que les finances publiques se sont recemment deteriorees et que le secteur public d6pend donc de plus en plus de cr&dits interieurs pour financer ses investissements et, dans certains cas, ses d6penses courantes. xxiii. Les conditions sont favorables A 1'investissement. Dans 1'ensemble, la politique officielle, et en particulier la politique d'immigration qui est relativement libbrale, favorisent 1'investissement etranger et national. Toutefois, les inqui6tudes suscit6es par la situation politique dans la r6gion tendent A decourager les investissements prives. Les pouvoirs publics mettent tout en oeuvre pour apaiser ces inqui4tudes, en s'efforgant de projeter A ~1'etranger 1'image d'un pays stable et d6mocratique. Ltune des questions qui pri.1ccupe les investisseurs est le diff6rend qui oppose encore le Belize au Guatemala mais qui semble desormais s 'attinuar peu A peu. xxiv. Certains produits importes et certains produits locaux sont soumis au contrble des prix, les premiers, par le biais de taux de marge maximums et les seconds, par le biais de prix plafonds. Depuis 1974, des licences d'importation sont exigees pour certains produits. A 1'origine, ces licences 6taient faciles A obtenir mais les conditions d'octroi ont et durcies. Far ailleurs, les pouvoirs publics ont voulu encourager le d&veloppement de certaines branches d'activit6 en les exon6rant de 1'impbt sur les b4ndf ices et des droits d'entrAe sur les biens d'6quipement et, parfois, sur les matidres premihres. Toutefois, le contr6le des prix, les licences d'importation et les - XXX11 - incitations au d&veloppement ne semblent pas avoir beaucoup d'effet sur 1'Aconomie. Cela tient peut-Stre en partie a ce que dans bien des cas, ces mesures se neutralisent. En outre, elles ne sont pas appliqu6es rigoureu- sement. Quoi qu'il en soit, elles impliquent des d4penses d'administration et suscitent de vaines inqui4tudes parmi les investisseurs priv6s potentiels. Il est donc recommand6 d'adopter et d'appliquer de fagon coordonnde les mesures suivantes: a) assouplir le contr61e des prix et ne 1'appliquer que dans le cas des monopoles; b) liberaliser les importations sans compromettre le redressement de la balance des paiements; c) r&duire au minimum les exon6rations de droits d'entree; d) donner desormais la priorit6 aux incitations visant A encou- rager le d6veloppement des activitis tourndes vers 1'expor- tation et employant des matidres premidres locales. xxv. Le regime foncier en vigueur est favorable au d4veloppement. D'une part, 1'Etat posshde prds de 500.000 hectares de terres agricoles qu'il of fre, A relativement bas prix, A la population locale ou aux 6trangers, A condition que ceux-ci les mettent en valeur conformement A un plan arr&t6 avec les pouvoirs publics. D'autre part, le fisc est en train d'instituer un nouvel imp6t foncier sur les sols non exploit6s pour encourager la mise en valeur des terres. L'efficacit6 de cette mesure d6pendra de la manidre dont elle est .ppliqu6e. xxvi. Les perspectives de croissance economique sont 6troitement li6es A 1'Avolution de la conjoncture internationale. Comme 1'Aconomie du pays est tres ouverte et que le march& int&rieur est peu important, on ne peut accroi- tre sensiblement la production qu'e 1'orientant vers 1'exportation. Puisque la reprise 6conomique mondiale semble s'amorger, les perspectives de crois- sance du Belize paraissent encourageantes. En outre, le pays jouit d'un avantage comparatif dans plusieurs domaines. Premidrement, il posshde d'abon- dantes ressources naturelles; deuxi&mement, la politique suivie par les pou- voirs publics est judicieuse, et troisiemement, les conditions sont favorables A 1'investissement int6rieur et 6tranger et, dans 1'ensemhble, les relations professionnelles sont harmonieuses. Si la reprise de l'&conomie mondiale se confirme, le taux de croissance devrait atre, d'apris les projections de la mission, de 3 % en 1983, et passer a 4 % en 1984 puis A 5 % A partir de 1985. La croissance devrait reposer sur les secteurs suivants :sucre (jusqu'a ce que la capacit& des sucreries, soit 115.000 tonnes actuellement, auxquelles on doit ajouter une capacit6 de 5.000 tonnes en 1984, soit pleinement exploitie), agrumes, bananes, elevage, pisciculture, aviculture, riz, mals et autres cultures non traditionnelles. La construction, 1'industrie alimentaire et le tourisme devraient 6galement progresser r6gulibrement. - XXX.111 - xxvii. Les pouvoirs publics doivent s'ef forcer d'encourager 1'epargne nationale. On s'attend A une augmentation de 1'epargne du secteur public, qui devrait passer de 3 % du PNB actuellement A 5 % d'ici A 1985. Ce niveau, ddjA atteint dans le passe, devrait pouvoir 1'Atre A nouveau sans difficultd. N6anmoins, pour le maintenir, il faudra faire preuve d'une grande vigilance, notamment parce que 1'exc6dent financier du nouveau systeme de s6curit6 sociale risque de diminuer dans les annees A venir. L'epargne priv6e qui, ces cing dernieres anndes, a represent& en moyenne 9 % environ du PNB devrait passer a 13 % environ en 1990. Cela signifie que le taux de croissance de la consommation privee sera legArement inferieur A ce1ui du PNB; il sera n6anmoins suffisant pour permettre une augmentation sensible de la consommation reelle par habitant. xxviii. On peut s 'attendre a une amelioration de la position de la balance des paiements A moyen et A long terme. Ce redressement est subordonn4 A l'application d'une strategie de developpement axee sur la diversification des exportations, qui permettrait de proteger 1'economie du Belize contre les fluctuations cycliques du sure. ILl est essentiel, pour r66quilibrer la balance des paiements, de freiner la croissance des importations de produits alimentaires, de combustibles et de biens de consommation durables. Pour y parvenir, il faut prendre plusieurs mesures :en particulier supprimer progressivement les exonerations de droits d'entree et mettre en oeuvre des projets ax6s su~r les 4conomies d'energie, notamment des projets d'elec- tricit4. Dans 1'imm6diat, 1'am4lioration des termes de 1'6change devrait avoir un effet favorable sur la balance des paiements. xxix. Le d6ficit de la balance des paiements courants devrait diminuer progressivement, tombant de 16 % du PIB en 1982 A 8 % en 1990 et au-deli. Pour financer ce deficit et augmenter legArement les reserves de devises, ii faudrait que les entrees annuelles nettes de capitaux soient de l'ordre de 25 millions de dollars en moyenne jusqu'A la fin de la decennie et de l'ordre de 40 millions de dollars de 1990 A 1995. Les apports nets de capitaux ext6- rieurs au secteur prive devraient couvrir pres de 30 % des besoins. Cette projection pourrait fort bien se v6rifier, car le secteur priv6 of fre de nombreuses possibilit6s d'investissement, situation qui ne pourra que s'ab liorer avec la reprise de 1'economie mondiale. Les apports annuels nets de capitaux ext6rieurs au secteur public devraient Stre de 1'ordre de 18 millions de dollars en moyenne jusqu 'A la fin de la decennie et de 1'ordre de 28 millions de dollars de 1990 A 1995. xxx. Le programme d'investissements publics conf Are un haut rang de priorite aux projets d'equipement qui conditionnent la realisation d'inves- tissements productifs, A savoir les projets d'4lectrification et d'am6nagement routier et portuaire. Ce programme est donc essentiel pour la relance de 1'Aconomie. Les investissements publics pr6vus pour les exercices 1983/84 A 1987/88 s'61Avenit A 142 millions de dollars, soit environ 28 millions de dollars par an. ILls devraient Atre financ4s comme suit :a) 6pargne du secteur public, 38 %; b) entr6es nettes de capitaux exterieurs, 55 %; et c) emprunts int&rieurs nets et recettes interieures en capital, 7 %. - XXX1V - xxxi. La reussite du programme d'investissements publics depend de plu- sieurs facteurs. Premierement, ii faudrait que 1'epargne du secteur public atteigne 5 % environ du PIB. Pour cela, il faudrait tout d'abord ameliorer les r4sultats financiers de 1'Electricity Board, du Marketing Board et du Banana Control Board. Deuxiemement, 11 faudrait obtenir des capitaux exte- rneurs, ce qui ne devrait pas poser de problemes; en effet, le Belize s'est dej& assur6 les ressources necessaires pour 1983 et 1984. Troisiemement, il faudrait reduire considerablement la part des capitaux interieurs consacr6e aux investissements publics, et en particulier les emprunts contractis loca- lement, de maniere que le secteur priv4 dispose de davantage de ressources. xxxii. La dette publique exterieure a augment6 rapidement ces dernidres anndes. Bien que 1'on ne dispose pas de renseignements sur la dette ext6- rieure du secteur priv6, on sait qu'il a contracts des emprunts principalement & des fins d'investissement. A la fin de 1982, le montant des emprunts exth- rieurs contractes ou garantis par 1'Etat etait estime A. 70 millions de dollars environ, soit 45 % du PIB. Le ratio du service de la dette publique 4tait faible :moins de 5 % de la valeur des exportations (non compris les rdexpor- tations). Cela tenait A ce que la structure de la dette 6tait favorable et que la plupart des emprunts 4taient assortis de conditions liberales. Le ratio du service de la dette devrait passer a. pres de 12 % en 1983 et 1984; en effet, divers emprunts arrivent & Ach6ance et les pouvoirs publics ont diG contracter plusieurs emprunts aux conditions du march6, pour faire face aux difficult6s financieres de 1981-82. xxxiii. Au cours de la prochaine decennie, le secteur public compte obtenir des fonds aupres de diverses sources, A des conditions lib6rales et aux con- ditions du march&. Le volume des emprunts aux conditions du march& devrait augmenter, passant de 35 % du total des d4caissements &. environ 60 % en 1990 et A 76 % en 1995. On prevoit cependant que le ratio du service de la dette tombera de 12 % en 1983 & 7 % environ & la fin des anndes 80, A mesure que les recettes d'exportation augmenteront. Ii devrait ensuite s'taccroitre de nou- veau, parallelement au volume des emprunts contract4s aux conditions du mar- che, pour atteindre 10 % au milieu des ann6es 90. Le ratio du service de la dette devrait donc rester dans des limites raisonnables. Par cons4quent, le Belize devrait pouvoir contracter des emprunts limitAs aux conditions du mar- chi, si les pouvoirs publics continuent d'appliquer une strat4gie de develop- pement ax6e sur l'exportation et une politique financiere avisee, si les orga- nismes d'Etat ameliorent leurs resultats financiers et si les investissements publics sont consacres & des projets hautement prioritaires ayant un taux de rentabilite satisfaisant. I. POPULATION AND EMPLOYMENT 1. Belize, located on the Yucatan Peninsula in Central America, attained independence from the UK on September 21, 1981. The country has many different races, cultures and languages; the Creole population comprises about 40% of the 145,000 inhabitants, Mestizos account for 33% and Amerindians for 17%. The rest includes people of European, Arabic, East Indian, Garifuna, and Chinese background. 2. Belize has the lowest population density.in Central America and one of the lowest in the world, 6 persons per km2. This seem to be explained by the swampy and barren land near the coast which discouraged intensive settlement and the limestone mountains covered with tropical forest in the interior which hampered both communications and settlement. Moreover, being the only English speaking country in Central America has kept Belize more isolated from the neighbouring countries and has strengthened its links with more distant countries: the U.S. A., UK, and the Caribbean English speaking countries. 3. Increasing relations with, and significant migration from Central America have developed in recent years. As a sizeable part of the population now speaks Spanish, 32% of the total, the country is building up its communication infrastructure with Mexico, Central America and the Caribbean and is projecting its image as a new independent and multicultural political entity. This process is expected to bring significant economic and cultural advantages to Belize. It may also raise some complex social and political issues in the years to come. 4. The average annual rate of population growth during the period 1970-80 was 1.95%, fairly modest in relation to the economic potential of the country and its capacity to sustain a significantly larger population. This slow population growth has resulted mainly from a large emigration, mostly to the U.S.A. where more than 20,000 Belizeans have settled since 1970. However, as the natural population increase has remained relatively high, around 3.4% per annum, because of high birth rates (about 40 per thousand) and declining death rates (from 7 per thousand in 1970 to less than 5 in 1980), the prospects are for significant population increases in the years to come, particularly if the economy maintains a significant rate of economic growth. - 2- Table 1: Population Trends 1970-1980 Number of People %__ Population - 1970 Census 119,934 100.0 Total births - 1970/1980 53,295 44.4 Total deaths - 1970/1980 7,482 6.2 Net Migration - 1970/1980 -20,394 -17.0 Population - 1980 Census 145,353 121.2 Source: Abstract of Statistics 1981, Central Planning Unit. 5. Belize City, the former capital, has always been the center of population. After Hurricane Hattie severely damaged Belize City in November 1961, a decision was taken to move the capital to Belmopan, some 80 kilometers inland. The Government continues to spend considerable sums to improve the infrastructure and social services of Belize City which, nevertheless, remain poor because of the City's swampy location. The population of Belize City has stagnated over the last ten years at about 39,000 inhabitants, thus declining as percentage of the total population from 33% in 1970 to 27% in 1980. 6. Female participation in the labor force increased dramatically during the last twenty years. While the labor force participation rate of males has re- mained at about 98% during the past two decades, the female participation has increased from 20% in 1960 to 30% in 1980. As a result, the total labor force has increased as a percentage of the work age population from 58% in 1960 to 60% in 1970 and to 65% in 1980. -3 - Table 2. Employment: Structure 1960 1970 1980 Population at working age-Total 46,335 55,624 71,510 Females 23,739 27,845 35,096 Males 22,596 27,779 36,414 Economically active population-Total 27,006 33,360 46,457 Females 4,883 6,012 10,627 Males 22,123 27,348 35,830 Employment - Total 24,477 31,465 39,806 Females 4,498 5,981 8,024 Males 19,979 25,484 31,782 Labor force participation (%) 58.3 60.0 65.0 Females 20.6 21.6 30.3 Males 97.9 98.4 98.4 Unemployment (%) 9.4 5.7 14.3 Females 7.9 0.5 24.5 Males 9.7 6.8 11.3 Source: 1960, 1970 and 1980 Census. 7. The structure of employment by economic sectors has not experienced any significant change during the past decade. Agriculture, forestry and fishing continued to be the most important sector, accounting for one third of the labor force. Industry and transport ranked second with about 24%. The rest of the labor force is employed in the service sector. A relevant element, however, is the difference between the sectoral allocation of males and females. Females are employed mostly in the service sectors, while agriculture and industry remain largely male occupations. Table 3. Structure of Employment by Economic Sectors (%) 1970 1980 Males Females Total Males Females Total Professional and Technicians 4.8 23.7 8.4 5.4 23.1 9.0 Administrative and Managerial 0.6 0.3 0.5 0.7 0.4 0.6 Clerical 3.9 12.6 5,5 4.6 16.9 7,1 Sales 6.1 12.4 7.3 5.3 11.8 6.6 Service 4.6 28.8 9.2 4.9 24.4 8.8 Agriculture, Fores try and Fishing 39.4 8.1 33.5 40.8 4.9 33.6 Industry and Transport 27.8 12.6 24.9 26.0 14.8 23.7 Other 12.8 1.5 10.7 12.3 3.7 10.6 TOTAL 100.0 100.0 100.0 100.0 100,0 100.0 Source: 1970 and 1980 Census. 8. Unemployment is an acute problem in Belize City and among the young. The unemployment rate was estimated at 14.3% in 1980 or about 6,800 workers, of which 67% were in the 15-19 year old bracket and almost 50% lived in Belize City. Unemployment has increased sharply from 5.7% in 1970 to 14.3% in 1980. Unemploy- ment in the sugar area continues to be minimal. Table 4: Unemployment Labor Country Belize City 15-19 Years Old Force % #% #% #/ TOTAL 46,457 14.3 6,652 21.8 3,284 40.0 4,520 MALE 35,830 11.3 4,048 20.3 1,983 33.4 2,569 FEMALE 10,627 24.5 2,604 24.5 1,301 54.2 1,951 Source: 1980 Census. 9. Future patterns of employment will largely depend on emigration and incorporation of females into the labor market. Two basic scenarios are forseen: (a) the labor force will grow at the same rate as the total working age population during the 1970s, about 2.5% per year. This growth rate is based on two key assumptions: female labor force - 5- participation will remain at about 30% and net outmigration will account for 1% of the population per year. Under this scenario the economy will have to grow an annual average of about 4% to 5% In order to employ the 1,200 new workers per year; or (b) the labor force will grow, at least, as fast as during the 1970's, 3.4% per year. This implies that female participation in the labor market will continue to increase and that outmigration will continue at the same rate. Under this scenario, the economy will have to grow more than 6% per year just to absorb the new workers coming into the market. As scenario (b) is more likely, an increase in unemployment is to be expected un- less the economy grows very rapidly. This is a serious situation as unemployment is already high, thus the issue is to provide jobs not only to new workers but also to unemployed ones. Unemployment is however a complex issue. The country offers considerable employment opportunities in agriculture which appear to meet neither the expectations nor the training of large segments of the population, particularly those persons living in Belize City, who are reputedly the most inclined to emigrate. As a result, there is a seasonal shortage of labor in rural areas and some 1,500 workers from neighboring countries are needed every year in the sugar and citrus areas during crop season. At the same time the Government has not discouraged new settlers from neighboring countries from coming to Belize, and they have done so in increasing numbers during the last three years. Further- more, the Government is also considering a scheme for Haitian emigrants ex- perienced in agriculture, in addition to the UN project for Salvadorian-Belizean Settlement in the Valley of Peace, 10. The Government has recently implemented an open immigration policy in an attempt to attract greater numbers of people interested and experienced in agri- culture. Access to government-owned land is easy and cheap provided that the land will be productively exploited. Within the context of this policy, the Government is implementing a rural development project for the settlement of Salvadorean refugees and Belizean families who want to work the land. The project, funded by the U.N., appears to be well designed and managed with the relevant economic and sociological elements properly dealt with. So far 44 families have been settled. Each family receives 50 acres, pays no land tax during the first three years, with any further land tax or royalty payment to be set off against the purchase. For the continuation and enlargement of this project 15,000 acres of land will be made available in the Valley of Peace, near Belmopan. - 6- II. ECONOMIC BACKGROUND Output and Economic Growth 11. During the eighteenth and nineteenth centuries forestry was the main economic activity of Belize and perhaps the chief reason for the existence of a British settlement in Central America. A declining trend in the forest industry began to be noticeable at the beginning of the twentieth century. By the end of the Second World War the decline was evident in both absolute and relative terms as forest resources has become largely depleted. 12. A transition to agriculture started at the end of the 19th century; large estates exported bananas to the United States as early as in the 1880s. After a rapid expansion in the Stann Creek Valley, banana cultivation declined rapidly as a result of the Panama disease and by the end of the 1930s bananas as a commercial crop had practically disappeared.1! The industry was reestablished in the early 1960s for export to the UK. Sugar played practically no role in the country's economy until the middle of the 19th century. It is believed that mestizos fleeing from the Yucatan during the "cast wars" in the 1850's, came with sticks of cane and gave the first major impetus to sugar activities. By the end of the 19th century there were about twelve small sugar mills in the north of Belize operating under primitive methods. Around 1870 there were also over 10 small sugar mills in the southern Toledo district, operated by Americans who settled in Belize after the American Civil War using labor from India. The large expansion of the sugar industry took place in the 1960s and made this activity the most important one in Belize. Exports of citrus started around 1925 and expanded rapidly twenty years later. Citrus was initially produced on large estates, but outgrowers, who bring their products to the estates for processing now account for half tie output. 13. Agriculture and services are the most important sectors of the Belizean economy, each of them accounting for 40% of GDP. Sugarcane, citrus and bananas are dominant in agriculture; trade, public administration and tourism in services. Manufacturing, is about 8% of GDP but this includes sugar and citrus processing. Construction is a dynamic sector which traditionally contributes more than 5% of GDP, a percentage that may increase as large investment projects are implemented. It should be noted that trade and transportation include the value added generated by re-exports to Mexico which had until recently been an expanding activity. Mining and quarrying is a very small sector; it accounts for less than 0.5% of GDP. 1/ This caused the closure of the railway system that had been operating since 1892. - 7- Table 5. GDP by Sector (%) 1978 1979 1980 1981 1982 Agriculture, Forestry and Fishing 47.5 44.7 4623 43.6 39.6 Manufacturing 7.9 7.6 8.4 8.2 7.0 Construction 5.4 6.3 5.7 6.6 5.7 Mining and Quarrying 0.4 0.4 0.3 0.3 0.3 Services 38.8 41.0 39.3 41.3 47.4 100.0 100.0 100.0 100.0 100.0 Source: Mission estimates. 14. The Belizean economy expanded steadily during the 1960s. Real GDP grew about 4.5% per annum, or 1.6% in per capita terms, as the country, assisted by British aid, recovered from the devastation of Hlurricane Hattie which hit in 1961. The purchase and expansion of sugar mills by Tate and Lyle in 1964 accele- rated sugar exports, a key element in the growth performance. 15. Econ.omic growth continued during the 1970s, with real GDP growing by an annual average of neairly 5%. But growth in Belize is subject to fluctuations as the economy is small and thus very sensitive to fluctuations in major activities such as sugar production and to the pace of implementation of new activities. During the period 1970-78 agriculture expanded about 5% per year as sugar production increased and the banana industry was being reestablished. Manufacturing also grew fast as a number of import-substituting industries including cigarettes, flour mills, beer, fertilizer mixing, and an export-oriented garment factory were established. 16. A slowdown occured during 1978-81 with real GDP slowing to an annual average of 1.8%. Sugar, which accounts for about 25% of GDP, explains to a large extent this perf?ormance. In 1979 sugar production declined by 13% causing a decline in GDP of 1.4%. Some decline in sugar production had been expected in 1979 because the previous year had been exceptionally good, however, smut diseases made the decline even deeper than expected. Sugar production grew by 5% in 1980 while the whole economy grew almost the same, increases in citrus and garment productions were also significant that year. 17. In 1981, sugar production declined by 5%, but other sectors particularly construction, fishing, livestock, poultry, corn, and rice performed well. Thus, the trends were offsetting with real GDP increasing by 2.6%. The decline in sugar production in 1981 resulted from a combination of bad weather and smut disease - 8- which has not been totally eradicated. An additional factor is having an impact on sugar production: the smut-resistant varieties being planted have in the early stages, lower sugar content than traditional varieties. 18. The Belizean economy suffered from the international economic recession in 1982, real GDP is estimated to have declined by 0.3%. Agriculture grew 2% thanks to sugarcane production whose increase was large enough to offset the decline experienced in other agricultural products. Manufacturing grew about 5% mainly as a result of the increase in sugar production, citrus processing and beer, but the production of other manufactured products particularly garments and cigarettes declined. The combined service sector declined by an estimated 1%, a performance associated with the 10% decline in "Trade, Restaurants and Hotels" which constitute 25% of the service sector. This 10% decline is, in turn, chiefly associated with the general recession affecting particularly transshipment trade with Mexico and tourism. Construction declined by 21.5% in 1982. This was related to several factors such as the completion of some major public projects, the slowdown in the execution of new ones due to financial constraints and the decline in private construction because of the drop in income. Table 6. GDP Growth By Sector 1979 1980 1981 1982 Agriculture, Forestry and Fishing -7.0 4,9 2.7 2.0 Manufacturing -7.1 10.7 -1.8 5.0 Construction 7.7 0.5 12.5 -21.5 Mining and Quarrying 0.0 0.8 0.0 0.0 Services 6.2 2.9 2.0 -1.0 GDP -1.4 4.3 2.6 -0.3 Source: Mission estimates. 19. Belize's economy is vulnerable to external shocks because of its dependance on sugar. As such, the country has suffered from unfavorable terms of trade in recent years, particularly in 1982. The decline in prices of sugar and citrus and the adverse impact on the banana industry of the appreciation of the US dollar against the pound sterling, have resulted in a drop in the real Gross Domestic Income of about 5% during 1982. 20. The economy has been able to generate relatively high levels of savings, national savings have averaging about 14% of GNP in the last five years. However, savings are subject to sharp fluctuations associated with fluctuations in sugar export earnings. For instance national savings accounted for 20% of GNP in 1980 -9 - but dropped to 9% in 1982. The association is evident; in 1980 sugar prices were high; in 1982 they dropped sharply. The private sector generates about 70% of the total savings. Gross fixed capital formation has been fluctuating between 25 and 30% of GDP during the last quinquennimum. Therefore, national savings have been financing, as an average, about a half of the capital formation (investment) while the rest has been financed by external resources. Table 7. Investment and its financing (% of GDP) Balance of Payment Gross National Savings Current Account Year Investment Total Public Private (Deficit) 1978 28.1 17.6 4.5 13.1 10.5 1979 30.8 11.0 3.9 7.1 19.8 1980 27.8 19.8 5.4 14.4 8.0 1981 27.1 13.6 2.8 10.8 13.5 1982 25.2 8.9 3.1 5.8 16.3 Source: Mission estimates The Public Sector 21. The public sector comprises the National Government and nine statutory bodies. 2/ The Government also owns two financial institutions: the Development Finance Corporation (DFC) and the Central Bank; their operations are discussed in the money and credit section of this report. 22. Public sector activities represent about 30% of GDP. Involvement of the public sector in the economy is basically through traditional services: electri- city, airport, port, communications and social security. There is, however, some involvement in agriculture, mainly banana and, to a lesser extent, beef production. 23, The National Government is the most important component of the public sector, It employs about 4,000 people, including temporary workers. The National Government's main revenues are import duties and direct taxes. On the expenditure side, the wage bill accounts for 45% of the total current expenditures, while goods and services account for about 30%. 24. Import Duties are the most important current revenues for the National Government; they provide about 35% of the total. Import duties are charged on goods imported into the country excluding goods in transit which are subject to a 2% fee. Belize has adopted the Caricom Common External Tariff whose main characteristics are: 2/ Water and Sewerage Authority, Belize Electricity Board, Telecommunications Authority, Belize Marketing Board, Belize Meats Ind., Banana Control Board, Port Authority, Social Security, and Reconstruction and Development Corporation & Housing (RECONDEV). - 10 - (a) the highest nominal tariff is 45 percent; (b) the lowest nominal tariff is zero percent; (c) import tariffs increase according to the degree of processing of commodities; and (d) in some cases, specific duties are used instead of ad-valorem ones. 25. Direct taxes provide around 20% of the current revenue. They include income tax, personal and company, and land tax. Rates on personal income -tax are variable; up to a maximum of 50% on taxable annual income, of US$30,000 or more. Companies pay a flat rate of 45% on their income. Land tax is paid according to the type of land, with rates rising when the land is close to a road maintained with public funds or is coastland. 26. Other taxes provide for most of the rest of National Government's current revenues. They are: (a) export duties (2% on sugar; 5% on the rest); (b) excise on spirits, beer and cigarettes; (c) stamp duties; and (d) fee on goods in transit (2%). 27. The National Government's finances have in general been managed soundly while those of several statutory bodies typically have not. The National Governmment's current savings traditionally amounted to about 5% of GDP but they declined to 2.8% in FY1981/82 and 3.7% in FY1982/83. These declines in current savings are associated with increases in the wage bill and with reductions in fiscal revenues resulting from the drop in export prices. The financial situation of the statutory bodies has been generally poor and continued to deteriorate during 1982. This poor performance is associated with both inefficiencies as well as subsidies imposed by the government in major statutory bodies. 28. National Government's current expenditures have been growing fast mainly as a result of the growth in the wage bill. This growth is largely associated with Belize's independence because of the need to provide new type of services. Nevertheless, close control of the wage bill is needed; a control that should refer to both salaries and number of employees. However, the increasing shortage of qualified personnel in the public sector suggests a careful study of the salary structure with a view to selected increases. 29. The National Governmment's current revenues have remained at high levels in recent years, about 27% of GDP. While there is some room for increasing revenues, especially by reducing import duty exemptions, any substantial increase in the overall tax burden could have a negative impact on the economy. 30. The savings generated by the Telecommunications Authority, the Port Authority, the Social Security and, lately, RECONDEV (housing) have generally not been able to compensate for the current deficits of the Electricity Board, the Banana Control Board, the Marketing Board, Belize Meats and the Water & Sewerage Authority. The situation has deteriorated further in 1982. 31. The Government is committed to the improvement of the financial performance of the statutory bodies but major decisions are yet to be taken. Subsidies to producers, inefficiencies, and the international economic situation are responsible for the situation of the major statutory bodies: - 11 - (a) The Marketing Board has been purchasing and selling the local production of rice, corn, beans, and sorghum. These operations contain an element of subsidy as profit margins have been too small to cover overhead costs or, in some operations, have even been negative. Heavy losses were made on corn operations during 1982 because the price paid to the growers was far above the international and domestic prices at which the corn had to be sold. The Marketing Board lost about US$0.5 million in FY1981/82 and about US$0.7 million in FY1982/83. The government now appears more cautious about subsidies but, nevertheless, a clear resolution to discontinue this type of operations is advisable; (b) The Electricity Board (BEB). The electricity system is fragmented and inefficient; as a result energy losses are substantial, and current financial losses for FY 1982/83 are estimated at US$1 million. Several requirements appear to be needed to improve BEB's finances. First, management and administration need to be reorganized and strengthened; second, the distribution system should be interconnected so as to reduce energy losses; and third, the level and structure of rates should be reviewed. To solve these issues a number of projects are envisaged by the authorities; and (c) The Banana Control Board. This board has the monopoly on banana exports and controls practically all the banana production in Belize. Its finances have been negatively affected by two main elements. First, the level of activities is not large enough to make the industry profitable; in particular transportation costs per unit are high; and second, while sales are in sterling, costs are in US dollars thus the depreciation of the Pound Sterling in the last year has reduced export earnings from bananas. BCB's operational losses, were more than US$1 million in 1981 and 1982. To solve this problem, the Government has taken the following approach: (i) over the course of time BCB will retain its only export functions; banana lots will be sold to farmers currently employed by BCB who have demonstrated sound management conditions after a training period; (ii) new farmers, already experienced in agriculture, are expanding banana production. The Government is encouraging this development because it has been estimated that 4,000 acres (3 times the present size) should be in production to make the industry economically and financially viable; and (iii) resolution of the transportation problem will be examined as a part of the Master Transportation Plan Study. High transportation costs are due partly to the lack of port facilities; bananas are barged to Honduras and transshipped there to ocean-going vessels. 32. Public investment has played an important role in the economic devel- opment of Belize representing between 60 to 70% of total domestic investment and about 15% of the GDP. The public sector has executed infrastructure projects such as the Northern Highway, the Western Highway, the Belize City Port, electricity - 12 - expansion, and water and sewerage expansion. Execution of projects, however, has slowed as declining public savings has limited the domestic resources available to finance investment. As a result, public investment is estimated to have declined in real terms during FY 1982/83. 33. The Public Sector has relied increasingly on external funds to finance its investments. In 1975, external capital funded 27.2% of the total public investment; in FY1982/83, more than 70%. The use of other domestic resources, mostly credit from the domestic financial system, has been increasing because savings have not grown in line with investment. However, this situation was improved somewhat in FY1982/83 as a result of the increase in external fund inflows, on one hand, and the reduction in public investment, on th other, Table 8. Public Sector Capital Expenditures: Sources of Financing (%) Public Sector Net Other Current External Domestic Year Savings Financing Sources 2/ Total 75 70.9 27.2 1.9 100.0 76 26.9 58.3 14.8 100.0 77 8.2 66.4 25.4 100.0 78 23.7 58.5 17.8 100.0 79/80 1/ 25.1 52.7 22.2 100.0 80/81 -~ 35.6 44.2 20.2 100.0 81/82 18.4 58.1 23.5 100.0 82/83 17,2 78.7 3/ 4.1 100.0 1/ January 1, 1979 to March 31, 1980. 2/ Includes: a) Capital revenues; b) Credit from the financial system; and c) suppliers and other credits. 3/ Includes borrowing from local banks denominated in US dollar. Balance of Payments 34. Belize's balance of payments reflects an open economy: total imports traditionally represent around 100% of GDP; exports around 80%. The openness of the economy is also reflected in large amounts of remittances sent by Belizeans living abroad, in increasingly important re-export trade with neighboring countries, and in sizeable inflows of capital. - 13 - Table 9. Exports and Imports as Percentages of GDP Year Exports of Imports of Resource Goods and NFS Goods and NFS Gap 1975 70.9 90.1 19.2 1976 59.9 95.1 35.2 1977 73.7 95.6 21.9 1978 90.3 111.8 21.5 1979 86.4 116.9 30.5 1980 94.0 109,7 15.7 1981 88.6 106.7 18.1 1982 74.0 96.4 22.4 Source: Mission estimates. 35. Belize's commodity export base is narrow and depends heavily on sugar. Exports of citrus (fruit and concentrates), fish and bananas are increasingly important. Other exports include garments, where the local value added on imported material is fairly low; wood, which experiences fluctuations along a long-term declining trend; and meat, which is still small but has a good potential. Table 10. Exports by Products a/ (% of Domestic Exports) Citrus Year Sugar and Molasses Products Fish Bananas Other Total 1978 61,5 7.6 3.3 3.1 24.5 100.0 1979 55.0 7.3 7.2 5.6 24.9 100.0 1980 60.8 7.8 5.0 4.3 22.1 100.0 1981 62.1 8.7 9.7 2.9 16.6 100.0 1982 55.7 12.0 11.1 4.0 17.2 100.0 a! Not including unrecorded exports. Source: Mission estimates. 36. Belize's balance of payments performance is, therefore, largely depen- dent on production and prices of sugar, citrus, bananas and fish. Sugar has been affected by droughts, by diseases and by sharp changes in international prices. Production reached 113,000 long tons in 1978, a record level, after only 62,000 long tons in 1976 when the worst drought in the century took place. Sugar prices have also been very unstable; although Belize benefits from the Loin Agreement and from the International Sugar Agreement (ISA), these agreements have not eliminated sharp fluctuations in the average price received by the country. In 1978, the country received a low US$296 per long ton and two years later in 1980 the average price reached a high US$491 per long ton. Since that time, sugar prices have dropped about 35%. Export earnings from citrus concentrates have been steadily increasing in recent years; increases in production more than offsetting the 30% drop in prices since 1980. Volumes of fish exports have not changed very much in recent years; however, export earnings show an increasing trend because the activity has become more concentrated on high value species such as lobster. Banana production and prices have both moved along a declining trend during the last quinquennium, however new plantations in the Big Greek area should produce a significant increase in volume in the next four years. 37. The country relies heavily on imports. There are several reasons for this. First of all, the small size of the market makes it unprofitable to produce capital goods and, in many cases, consumption goods. Second, the population being so close to North America has developed a sophisticated pattern of consumption and often prefers imported goods to local. Third, the country depends on imported oil for its energy requirements, although there are good prospects for finding oil and gas in commercial quantities as well as for using hydro-energy. Finally, there are some export-oriented industries that import their basic materials, for example garments. Except for fuels, the structure has experienced only marginal changes in recent years. Food represents between 20 to 25% of the total imports. Fuels increased from about 5% of total value of imports before the 1973 oil shock to more than 15% in 1981, Imports of manufactured goods represent around 15%; machinery and transport, an investment-related item, around 20%. Table 11. Import Structure (%) 1973 1975 1977 1979 1980 1981 Food 26.1 26.1 22,3 24.5 21.9 24.6 Fuels 6.7 8.3 13.0 12.6 18.2 15.8 Manufactured Goods 19,5 17.9 15.9 14.7 13.9 12.2 Machinery and Transport 21.0 23.7 25.2 21,5 19.3 17.8 Other 26.7 24.0 23.6 26.7 26.7 29.6 *Total 100.0 100.07 100.0 100.0 100.0 100.0 Source: Mission estimates. 38. Exports of domestic goods are largely directed to the USA and UK. Exports to the USA have increased in both absolute and relative terms and currently, more than half of exports of domestic goods are directed to the USA. Exports to UK, on the other hand, declined in relative terms from around 40% of the total in the mid-70s to about 27% in 1981, The volume of sugar exports to the USA has increased faster than those to the UK; this chiefly explain the change in the relative composition of export trade. Exports to CARICOM are still small; -15 - they amounted to US$3 million or 4% of the total during 1981. Practically all the exports to CARICOM countries are to Jamaica and Trinidad and Tobago. Table 12. Direction of Trade Exports of Domestic Goods (%) Year USA UK CARICOM Other Total 1970 37.8 31.0 5.7 25.5 100.0 1975 51.6 41.9 3.4 3.1 100.0 1978 43.5 48.1 3.4 5.0 100.0 1979 44.1 38.9 5.1 11.9 100.0 1980 52.5 28.7 4.5 14.3 100.0 1981 52.7 26.7 3.9 16.7 100.0 Source: Mission estimates. 39. Goods are imported mainly from the USA and UK. Imports from other countries particularly Mexico, Netherlands and Japan have been increasing steadily. Imports from the CARICOM region are very small; about 2% of the total, and practically all such imports are from Jamaica. 40. Trade with neighboring countries is becoming increasingly important; particularly trade with Mexico and, to a lesser extent, Guatemala, This trade in- cludes both re-exports and transshipments, which are not the same. The first is a regular import which may or may not be re-exported. Transshipment, on the other hand, is sent immediately to the third country. In the re-export trade, the Belizean traders buy the merchandise and sell it to other countries, if and when the market allows. In the transshipment trade Belize contributes its facilities--port and roads--for which it charges a 2% fee. The balance of pay- ments data include recorded re-exports on both sides, imports and exports, but only reflect transshipments as the 2% fee, which is included in non-factor service earnings. 41. Re-exports have increased sharply in recent years, In 1975, they amounted to US$12 million, or 20% of total recorded exports of goods; by 1981, they had increased to US$44 million, or 36% of the total. Transshipments have also increased sharply in recent years, reaching US$48 million in 1981. Both re-exports and transshipments, were adversely affected by the Mexican crisis in 1982. 42. Balance of payments transfers to Belize are substantial. They come mainly from two sources. One is remittances sent to Belize by nationals living abroad. About 20,000 Belizeans have settled in industrial countries, mainly the - 16 - USA, and regularly send money to their relatives in Belize. The other main source is the transfers for the British Army stationed in Belize. Consequently, net transfers, have financed a sizeable--but decreasing--part of the resource gap. Table 13. Transfers and Resource Gap (US$ million) Net Transfers/ Resource Gap Year Net Transfers Resource Gap (%) 1975 15.0 18.5 81.1 1976 15.0 32.5 46.2 1977 15.2 22.3 68.2 1978 15.3 23.0 66.5 1979 15.7 37.9 41.1 1980 14.8 23.4 63.2 1981 11.8 30.1 39.2 1982 13.2 34.7 38.0 Source: Mission estimates. 43. Current account balance of payments deficits have fluctuated sharply as a result of fluctuations in sugar export earnings but have averaged about 13% of GDP during the last quinquennium. For instance, while in 1975 the deficit was US$ 5.2 million or 5.4% of GDP, in 1979 it reached US$24.5 million or 19.8% of GDP. Current account deficits while manageable can be reduced in the long run by: (a) expanding exports, mainly non-sugar exports; (b) improving electricity and road services--therefore reducing fuel requirements--; (c) cutting food imports through efficient import-substitution; and (d) reducing imports of durable consumption goods by reducing exemptions on import duties. Table 14. Balance of Payments: Current Account Deficit Year US$ Million % of GDP 1975 5.2 5.4 1976 19.4 20.9 1977 8.8 8.6 1978 11.1 10.5 1979 24.5 19.8 1980 12.2 8.0 1981 22.2 13.5 1982 25.2 16.3 Source: Nission estimates. - 17 - 44, Current account deficits have been financed by inflows of capital, primarily to the public sector. These inflows include substantial amounts of grants and soft loans from the UK, CDB, CIDA, EEC, and the USA. Capital inflows to the private sector have been modest but are expected to increase in the future in response to the good opportunities for foreign private investment in Belize. International official reserves have been traditionally low, and had declined by $0.6 millions to about 4 weeks of imports (excluding re-exports) by the end of 1982. Since this decline has been caused partly by unfavorable terms of trade, the country is negotiating a Compensatory Financing loan with the IMF. 45. The balance of payments deteriorated in 1982, a situation largely caused by the international recession. Export earnings dropped more than 20% mainly as a result of the reduction in export prices--sugar, bananas and citrus--and the contraction of the re-export business. Imports also fell by about 15% as both consumption and investment declined. As a result, the current account balance of payments deficit reached. US$25 million or 16% of GDP. Capital inflows to the public sector increased but those to the private sector declined. Foreign Currency Controls 46. Only the Central Bank and authorized dealers can legally buy and sell foreign currency. Authorized dealers include commercial banks, which can retain some foreign currency. Transactions in foreign currency are subject to the following rules: (a) importers obtain foreign currency by presenting the invoice and, if the import requires a license, the authorization granted by the Ministries of Trade and Finance, Overinvoicing or undervoicing are considered fiscal offenses rather than breaking of foreign exchange regulations; (b) business travellers can obtain foreign currency up to BZ$6,000 per year; non-business travellers up to BZ$1,500 per year. These purchases can be made directly from authorized dealers but requirements in excess of these amounts need the Central Bank's authorization; (c) foreign investors have no limit on the amount of profits that they can send abroad. When a foreign investment has not been registered and the owner wants to repatriate profits, he has to demonstrate to the Central Bank the origin of the profits and the realization of the investment; (d) residents are not normally allowed to own accounts denominated in foreign currency. However, exceptions are made when a need for such an account can be demonstrated; (e) emigrants are authorized to take their capital with them (large amounts of money are authorized in annual installments); - 18 - (f) borrowing abroad is subject to permission if the borrower wants to repay interest and principal with foreign currency supplied by the Central Bank; (g) exports require permits by Customs; and (h) re-exporters have to demonstrate that in a reasonable time--up to six months--the foreign currency will be sold to the Central Bank. 47. Belize's exchange control system is relatively liberal because the exchange control regulations have been administered flexibly and pragmatically. The law, however, gives ample room to policy makers to operate in a more restrictive fashion if they so wish. As a key element in Belize's development strategy is to maximize capital inflows, the imposition of restrictions would adversely affect this objective and thus although present balance of payments difficulties may encourage a restrictive application of exchange control regulations, such action should have low priority. Money and Credit 48. The financial sector of Belize is made up by the recently created Central Bank and by four commercial banks which are branches of foreign banks. There is also an active Development Finance Corporation, owned by the Government, and about 50 credit unions, although not all of them are currently operating. 49. The Monetary Authority became the Central Bank in November, 1982.3/ The change was mainly institutional since few operational changes have been introduced. The newly established Central Bank will continue to wield the power that the Monetary Authority had in relation to other financial institutions: controls on liquidity, and on volume, terms and condition of credit, and in addition control on interest rates. The Act establishing the Central Bank states that one of its main objectives is "monetary stability especially as regards stability of the exchange rate". 50. Restrictions on fiduciary issue capacity are contained in the Act creating the Central Bank. It is stated that the Bank shall maintain a reserve of external assets of not less than forty percent of the aggregate amount of currency in circulation and of the Bank's liabilities for its sight and time deposits. Previously, a ratio of fifty percent was required. Outstanding loan advances to the Government, on the other hand, shall not exceed fifteen percent of the estimated current revenue of the Government for the current fiscal year. There are also limits to the Bank's holding of Government Treasury Bills and other securities. 51. The money supply has been increasing at an irregular rate. This "erratic" money supply movement is consistent with the fixed exchange rate policy applied in an economy largely dependent on primary agricultural exports and, therefore, subject to sharp changes in its nominal income. 3/ Legislation converting the Monetary Authority into the Central Bank was passed in November 1982 with retroactive effect from January 1, 1982. - 19 - Table 15. Money Supply (In millions of Bz$) dM/M Year dM M (%) 1977 3.3 21.8 15.1 1978 12.2 25.1 48.6 1979 1.1 37.3 2.9 1980 4.4 38.4 11.5 1981 -0.7 42.8 -1.6 1982 0.1 a/ 42.1 0.2 a! December 1981 - June 1982. dM - Increase in money supply (currency with public plus demand deposits). M - Money supply at the end of the previous year. Source: Central Bank. 52. Domestic credit to the public sector has been growing fast. At the end of 1976, total outstanding net credit to the public sector represented 11.6% of the total domestic credit. This percentage rose to 28.4 at the end of 1981, and 33.0 by the end of June 1982. This is associated with an increasing reliance on the part of the public sector on domestic credit to finance capital and--in some cases--current expenditures. Table 16. Domestic Credit a! (Outstanding - December 317 (Million Bz$ (%) To Public To Private To Public To Private Year Total Sector Sector Total Sector Sector 1976 66.3 7.7 58.6 100 11.6 88.4 1977 66.9 12.2 54.7 100 18.2 81.8 1978 77.2 18.4 58.8 100 23.8 76.2 1979 97.2 20,7 76.5 100 21.3 78.7 1980 110.3 27.6 82.7 100 25.0 75.0 1981 133.9 38.0 95.9 100 28e4 71.6 1982 b/ 144.4 47.7 96.7 100 33.0 67.0 a! Includes Monetary Authority and commercial banks. b/ June 30. Source: Central Bank. 53. Agriculture and trade are the principal borrowing sectors from the commercial banks. Agriculture was the largest recipient sector until 1979, since then, trade, stimulated by the growing trade with Mexico, has taken the lead with - 20 - about one-third of the total loans and advances from the commercial banks. Manufacturing and construction, each account for more than 10% of lending, while personal loans account for almost 10% of the total. 540 Interest rates on loans and deposits have been steadily increasing since 1980. Given the openness of the economy and the fact that the domiestic inflation seems to move in line with the international one, domestic interest rates reflect the conditions prevailing in the international financial market. Therefore, it is expected that domestic interest rates will decrease following the current trends observed in the international market. Table 17, Commercial Banks - Weighted Average Interest (%) End of Period Loans & Advances Deposits 1976 11.5 4.7 1977 11.3 4.3 1978 11.3 4.4 1979 11.6 4.4 1980 16.5 7.8 1981 19.5 9.9 1982 (June) 19,3 10.2 Source: Central Bank. - 21 - III. POLICIES ON PRICES, IMPORT LICENSES AND INCENTIVES Introduction 55. The economy of Belize is principally in the hands of the private sector but the Government plays a very active role. This role is exercised through the provision of public services and infrastructure (general administration, roads, electricity, port facilities, etc.); through some involvement in productive activities (mainly bananas); and through economic policies. In this chapter policies that appear to have some impact on resource allocation and, therefore, on economic development are analyzed. Those policies are: (a) import tariffs; (b) price controls; (c) import licences; (d) import duty exemptions; and (e) development incentives. Import Tariffs 56. Belize adopted the CARICOM Common external tariff (CET) in 1976. The main characteristics of these tariffs is that import duties increase according to the degree of processing of the commodities. This implies a reduction in the terms of trade of agriculture relative to other activities and thus a discrimination against agriculture. However, the agricultural industry benefits from exemptions on the importation of its capital equipment. Nevertheless, the authorities may wish to examine the impact of the CET in the Belize economy and possibly propose changes to CARICOM. Price Controls 57. Price controls have been imposed on some imported and locally produced commodities since 1963. On imported commodities, they work mostly through controls on mark-ups, at both wholesale and retail levels; on locally produced commodities, they consist of maximum prices. A wide range of products are subject to price controls including groceries, hardware, drugs, bread, beer, and corn. 58. Maximum mark-ups on imports vary according to the type of commodity. Basic commodities, such as groceries, are allowed low mark-ups: between 5 and 15% over landed costs are allowed to the importer, plus 10 to 25% added by the retailer. Motor spares, on the other hand, are allowed the highest mark-ups: 25 to 45% over landed costs plus 20 to 25% added by the retailer. In several cases, maximum mark-ups have been recently increased. 59. Local producers need Government's authorization to increase prices of domestic goods subject to price controls, They must request the increase--accompanied by a cost justification--to the Ministry of Tr'ade and Industry. Final decisions on prices, however, are taken by Cabinet. Therefore, this authorization can be a lengthy process involving extensive efforts from Ministries, government officers and private sector managers. - 22 - 60. Price controls on imported commodities operate more flexibly than on locally produced commodities because mark-ups are automatically applied over landed costs while increases in prices of domestic goods need previous authorization. This results in an incentive for imports as opposed to local production. The following example may be illustrative: the price level, as measured by the implicit price deflator of national accounts,4! more than doubled between 1972 and 1981, but only for conch fish and beer were authorized prices increased accordingly; for other local products, the increases ranged between 40 and 60%. 61. Various purposes appear to be associated with price controls. For example, locally produced beer is subject to price control while imported beer is free of controls. The reverse situation applies to milk where there is a mark-up limit on imported milk while local milk is free of control. Thus the purpose of these controls is sometimes not entirely clear. Moreover, the final result of price controls on incentives and resource allocation varies from product to product because price controls coexist with import licenses and tax exemptions which, sometimes, serve to neutralize the impact of price controls. 62. Price control on some items are imposed by the Government to keep down the cost of living. However, its enforcement of price controls is diff3.cul.t and, sometimes, even impossible. Full enforcement--if possible--of the regulations would require the establishment of a very costly organization (prcsently there are only four inspectors to cover the whole country). Moreover, price controls can be avoided without necessarily violating the law. For example, many restaurants sell soft drinks by the glass rather than by the bottle because the regulations refer to bottles, not to glasses. Some places do not sell local beer because its price is controlled while prices of imported beer are not. The price of bread is established on a per weight basis without any specification on quality, and this then becomes the adjusting factor. On the import side small allowable mark-ups combined with low--or nonexistent--import duties encourage overinvoicing. 63. The preceding suggests that the price control system should be relaxed. This would be a continuation of some measures already taken by the Government such as the elimination of price controls on certain cuts of meats. Additional steps could be taken by eliminating price controls in hotels, restaurants and other tourist establishments where the Belizean consumer protection argument is not particularly relevant, and where controls on local products lead to increased imports of uncontrolled foreign substitutes. The Marketing Board and Price Policy 64. The Belize Marketing Board (BMB) is a statutory body that operates rice mills and buys and sells local products such as rice, corn, and red kidney beans. Presently, BMB imports only milk. 4/ No official price indices are available in Belize. - 23 - 65. The BMB has been used as a tool to stimulate the production of rice, corn and red kidney beans. Although, purchase prices paid by the BMB have. generally been in line with international prices this has not been the case with corn prices in which subsidies to producers have been granted. In 1982, when international corn prices were falling rapidly, the BMB bought 4.0 million pounds of corn at US 12 cents per pound and sold them at US 7.5 cents per pound. 66. In general the BMB has been selling products with little or no mark-up. As a result, its financial situation has been poor in recent years and deteri- orated substantially in 1982 with the losses in corn. The cost/sales ratios indicate that practically all goods produced profits in some years and losses in others; although operations with corn and milled rice have consistently produced large losses. In addition, management and administrative problems have worsened the BMB's financial situation. 67, If well managed, the B3MB can play an active role in storage and milling, for which it has the necessary plant. The B3MB can also promote development by giving advice on market conditions to small and medium-size farmers, placing less emphasis on commercial operations as they are a serious burden on the Government's finances. Import Licensing 68. The Import License System was established in 1974. Presently, import licenses are required for 75 commodities, of which 42 are food products. Imports under license amounted to US$28 million in 1981 or about 18% of total imports. 69. It appears that import licenses are used for different and sometimes contradictory purposes. It is claimed that the license system is used to ease balance of payments constraints, but this is in some cases neutralized by the substantial number of duty exemptions granted for imports, both those requiring as well as those not requiring licenses. The licensing system is also claimed to be used to protect the local producer but, again, this is in some case neutralized by duty exemptions and by price controls aimed at protecting local consumers. 70. The processing for approval of import licenses is being tightened. Until April of 1982, the process of granting import licenses was rather simple; decisions being taken at the technical level. Government officials claim that this process was relatively smooth and fast. Since that time however, approval has had to be granted by the Ministers of Trade and Finance. Although temporary - 24 - difficulties on the balance of payments are the justification of this action, experience shows that once such restrictions have been established1 they have a tendency to become permanent. Import Duty Exemptions 71. As mentioned before, exemptions on import duties are substantial. Imports amounting to US$60 million, or 50% of the total, were exempted in 1981. Of this total, US$10 million were for goods requiring import licenses, They are granted for investment and consumption products; they are granted to promote industries or to benefit individuals; exemptions are granted for the full amount of the duty or for part of it. Estimates of government revenues foregone by import duty exemptions amounted to US$10 million in 1981, or 25% of total current revenues, It should be noted, however, that some imports probably might not taken place if they had not been duty exempted. The following table shows the nominal and actually paid duties on some selected imports. Table 18. Average Import Duties for Selected Commodities, 1981 (%) Name Nominal Actually Paid Furniture made of wood, metal or any other material 45 14 Cement 25 18 Pimento 30 21 Wood Articles 45 10 to 29 Sugar Confectionery 42 26 Barbed Wire 25 13 Nails 15 9 Staples 15 9 Mattresses 45 23 Bread & Bakery Products 30 11 Jeans 45 11 Shirts 45 25 to 41 Source: Mission estimates. 72. Therefore, in view of the present balance of payments and financial difficulties, it appears appropriate to reduce exemptions significantly. It would also be desirable to establish a clear policy on when and how to grant exemptions so as to minimize administrative costs and to simplify the decision making process. Development Incentives 73. The Government promotes certain industries by granting development incentives. These incentives consist primarily of exemptions from income tax and from import duties on capital goods and occasionally on raw materials. Tax - 25 - exemptions are granted for a maximum of 15 years depending on the ratio of value added to the amount of sales. There are cases where the local producer enjoys protection, or even a monopoly, in the domestic market as an implicit element of the development incentive. This protection is provided through the application of the import licence system. 74. No evaluation has been made of the development incentives alr-