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The Two Headed Monster: Debt and Development

By Richard Harrison

The blue monster ruled Belize from 1998 – 2008, while the red monster has ruled Belize from 2008 to current.

The external debt of Belize in 1998 stood at US$338m, or around 50% of GDP. By 2003, the debt had grown to US$1,011m, or around 100.35% of GDP. Bundling of debts for refinancing with a discount under the so-called SuperBond 2029, discovery of oil in 2005 and tightening of expenditures slowed the growth of national debt such that external debt stood at US$1,086 in 2008, or around 79.75% of GDP.economics

In aggregate, external debt grew by US$748m during the period 1998-2008, or an average growth of US$75m per year.

By 2012, the external debt had only grown to US$1,189, or around 75% of GDP. The red monster just barely won the general elections that year.

Since then, debt has grown to US$1.304m in 2014, or 76.31% of GDP. If the Government implements its 2015-16 budget plans, this debt will grow to around US$1,360m, thus an average annual increase in debt of around US$39.1m.

The IMF estimates that the Government would move to settle the debts related to the appropriated public utilities in 2015, and that it would cost around 17% of 2015 GDP to do so, including interest accumulated thus far. This would raise the debt-to-GDP ratio to around 93.3%, however the government could choose to pay in cash or in treasury bills with maturity of five years.


The GDP of Belize in 1998 was US$0.69 billion, and rose to US$1.37 billion by 2008….an average increase of US$0.068 billion per year during the blue monsters reign. The Government estimates that the 2014 GDP stood at US$1.7 billion, which would mean average annual growth of US$0.047 billion during the red monsters reign. The fact is that most of our GDP growth is driven by growth in borrowing, and less borrowing generally means less GDP growth….no matter if its blue or red.


When the blue monster tightened the reins on debt during its second term as a result of public outcry and demands (2003-2008), it got pounded in the 2008 general elections, winning only 6 out of 31 seats, after having won decisively in 2003 with 22 of 29 seats. The red monster was slow to take up debts in its first term (2008-2012), and almost lost the 2012 elections, winning only 17 of the 31 seats, with very small margins in two constituencies that could have changed the government. Since then, they have picked up the pace of borrowing, and recent results of the Cayo North bi-election and countrywide municipal elections show that it is yielding major political dividends for them.


The blue monster placed the lion’s share of its bets on housing construction, engaging in major public sector housing projects in all districts. They were severely criticized for the substandard quality of houses delivered, the high monthly costs of the mortgages to acquire them, the poor planning of infrastructure and utility availability for the project sites and the corruption perception that were associated with the contracts to acquire lands and build these houses. The only beneficiaries were those who were able to access the home properties, whether by favored financing arrangements or otherwise. By the end of their term in 2008, many of the homes were unoccupied and abandoned.

The red monster has followed the lead of the Belize City mayor in investing in high visibility projects such as highways, streets, bridges, drains and parks, when at first they saw him as too ambitious and reckless. I had written in support of the mayor at that time, when he faced opposition and criticism from his own party. All the people are beneficiaries of highways, streets, bridges, drains and parks improvements, no matter where they are built, thus the number of direct beneficiaries far outnumber the beneficiaries from the blue monster projects. The 2:1 voter’s margin that the red currently enjoy over the blue is directly related to this differential in range of beneficiaries of the chosen flagship and other investments, perhaps combined with a lesser degree of corruption perception due to voters having grown “numb” to corruption accusations and scandals.


Both the blue and the red chose public sector spending based on borrowing to “stimulate” the economy.

The largesse of the 1998-2003 period resulted in significant numbers employed in the housing projects, which delivered the political victory for the blue in 2003. By 2008, these projects had pretty much come to a halt, with most of these workers now unemployed. The blue lost miserably.

The ongoing highways, streets, drains and parks projects by the red has again created significant amount of part-time project employment for workers. This certainly has helped the red to develop its 2:1 momentum. It is left to be seen if the reds can keep increasing these part-time jobs all the way to the next general elections, because 7,000 new workers join the employable workforce each year..


Both the blue and the red have chosen public-sector driven economy over a private-sector driven one.

The principal reason for this seems to be that this method is more conducive to controlling the reins on the nations purse, giving the elected the ability to better help friends and hurt foes. This is purely a political survival strategy, not unique to red nor blue….nothing to do with a national development strategy.

They both are reticent, even fearful, about tampering with the colonial-heritage status-quo-entrenched importation-preferred economy of fear and favor. Thus they have both ended up as champions of consumption-importation-driven tourism, upon which the economy is increasingly hinged….instead of making the necessary law and policy changes to turn Belize from a colonial economy towards a more productively diversified and economically independent state, based on sustainable development of its natural and human resources.

This choice to not do enough to propel the private sector forward….by creating the enabling environment for a more competitive and productive private sector, through fiscal overhaul based on low and more balanced taxation, strengthening of our justice systems, improving safety and security and through a social compact for improved education, health and the environment…is our greatest failure…because this is the only way how we can make payment of these loans sustainable, without selling off our birthright….land, citizenship rights and soul….for pennies on the dollar.


Belize must be a country of honorable people….it must pay its bills.

To acquire private property by force and taking much too long to compensate is not the kind of behavior that can be expected of an honorable people. Earliest agreement must be reached with all those entities with whom the Government of Belize has outstanding issues, especially as regards BTL and BEL. Any debt thus recognized must be included in our national debt schedule and programming.

The Government of Belize is walking on the narrow edge of a debt-cliff and each step must be properly calculated. If they choose to settle these disputes, national debt will hover unsustainably close to 100% of GDP….and there will be a slow-down in the short-term infrastructure projects with substantial number of workers returning to sit on the couch at home, with all the side effects of that….a similar situation that the blues found themselves in at the time of the general elections in 2008.

The use of PetroCaribe soft-loan to pay down the higher-interest SuperBond 2038 may be helpful in the near-term….however, given the outlook for Venezuela and oil in general, putting all your eggs in that basket would be a comfort to a fool.

The financial gurus of the reds could be imagined holding hands around their rose wood table praying for a major oil find, hoping for the God-sent relief similar to what the blues got in 2005 with the Spanish Lookout oilfield discovery.


When in hindsight we analyze our economic history years down the road, the nationalization of utilities will be seen to have been a political ploy (patriotism was to triumph here but not in sugar and citrus industries and in the stemming of distress sell-off of Belizean-owned properties) to satisfy a narrow range of chest-thumping special interests….there has not been and will never be a credible economic or financial valuation that proves these moves to be in the best interest of Belize and Belizeans.

Any purported gains to consumers in the form of cost-savings or improved service-quality, or to the government in increased revenue, could have been achieved through negotiation and/or legislation/oversight. The fact is, these Chavez-style authoritarian tactics do not go down so well around the table where we have to break bread….they will have hurt us terribly.

Had this government not appropriated these utilities, Belize would be in a much better macro-economic position and the reds would have their hands on faster-turning wheels leading up to the next general elections.

All things remaining equal….the reds and the blues are basically the same….borrow and spend….no private sector development to provide for paying back….living in hope for a God-send.

Belize, without a more competitive and productive private sector working in a more balanced and fair environment, will continue with high structural unemployment, reduced real-incomes with increased difficulty for individuals, families and businesses to make ends meet, increased levels of desperation, crime and violence; and Belizeans (selling off under duress) owning less and less of the jewel.

This article was written by Richard Harrison, Belizean investor in production and services businesses in Belize. He holds a Masters in Business Administration degree from Lancaster University.

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