By Richard Harrison:Prime Minister Hon. Dean Barrow’s government was elected to its third term in office almost one year ago, so he theoretically has four more years to serve out the constitutional 5-year term.
His government first came to power in 2008, on a wave of mass discontent with the corruption of the previous PUP governments of 1998-2008, and with the hope he gave the people with his manifesto promises to curb corruption and usher in a new era of good governance that would bring greater economic prosperity….complete with specific things that his government would do to achieve same.
Nine years into this adventure, his government finds itself nose deep in corruption…avoiding and evading the good governance agenda promised…with an economy that has “one foot on a banana skin, and one in the grave.”
I. WHAT ARE THE ECONOMIC CHALLENGES?
The national debt is nearing 100% of GDP and rising, with repayments on large portions of the debts to balloon in 2017-19, when principal becomes due and interest rates stepped up.
One of the principal creditors, Venezuela, is in an economic meltdown, and may be forced to call their loan or sell it on the market. The concessionary terms and conditions would not continue to exist, increasing annual disbursement to service them.
The foreign reserves are in free fall, with only a surplus of one month of imports over the 3-month benchmark required to maintain the fixed-exchange rate with the US dollar.
Production is falling and imports rising, increasing the deficit significantly above acceptable standards, with the economy increasingly dependent on seasonal tourism.
The government revenues are consistently below its expenses, leaning mostly on the middle-class and letting the rich ride free….with grants from Taiwan and European Union increasingly necessary to service the growing level of subsidies to politically-favored special interests…and to bridge the widening gap.
The local banks, and even the Central Bank of Belize, have lost the confidence of international bankers, reducing the ease with which money can flow into and out of the country.
The confidence of the investment community is at an all-time low and in decline, with more looking for a way to get out than those looking for a way to get in.
Many of the domestic production investors are hamstrung as a direct result of this government’s preference for the banks to slaughter challenged-investors balance sheets and sell off their assets at pennies on the dollar, in the wake of the difficulties brought on by the World Economic Crisis of 2008.
The ministers, CEO’s and cronies packed into the higher levels of the government services, especially those related with the economy, have hurt so many implementing their political agenda, that no bonafide investor wants to see them, much less do business with them.
II.WHAT NEEDS TO BE DONE?
Complete fiscal overhaul for an increasingly competitive and productive, economically independent Belize is of urgent importance. The tax headings don’t need to change…the rates need to be lowered, and the base broadened…so that ALL can advance according to merit, ability and integrity….with significantly improved management, especially employing integrated computer technology…to close loopholes and increase compliance. Fuel pump prices must be competitive with Mexico and the agricultural belt of the USA, who are our principal competitors.
All new loans must go towards the building and rebuilding of the productive sectors. In the case of traditional agro-industries, government needs to facilitate consolidation and growth strategies, and may need to assist in attracting joint-venture partners….and guarantee some of the loans. At least $500 million of new capital needs to be facilitated over 5 years to consolidate and grow the non-traditional sector, using the appropriate financing terms and conditions. This should include development of the production of materials for housing construction, especially using our timber and clay/limestone inventory. Most of this requires government FACILITATION, with some guarantees, but is mostly private sector debt.
The international financial sector in Belize needs to agree to complete overhaul of its business models, to orient itself to bonafide business, or find an exit route. Belize must be compliant with all the rules of the world financial community, especially those of our trading partners, within record time.
The government and its central bank needs to halt and reverse its slaughtering of investors balance sheets, and encourage the banks to clean up the histories of so-called “default” investors, so that they can start doing business with the banks again. Belize is so small, and the productive population even smaller….it cannot sideline half of its production capability….only few people in Belize have the capacity and capability to produce. This production capability needs to be rapidly enhanced by increasing scholarship orientation towards engineering and technologies, as well as to offer attractive packages for foreign talent to move to Belize. The banks need to change their senior managers, most of whom have run obtuse of the investment community because of implementing the wrong-headed “cleaning up the books” policies.
There needs to be a comprehensive re-writing of the home mortgage rules of the banks, allowing for younger persons to own their first home at 6.25% per annum over 20-30 years, once they qualify. This will allow many more home owners to stay in their homes, with refinancing that they can afford. This will create new demand for around 5,000 new homes annually, putting the unskilled and semi-skilled labor (which is mostly what Belize currently have) back to work.
Belize needs to significantly rearrange its debt through creative means such as debt-for-nature and debt-for-education swaps with friendly governments. This requires willingness on the part of international friends to have sympathy for your cause, and to trust that their investment will yield the mutually desirable results, in a transparent and accountable manner.
III. WHY THE BARROW GOVERNMENT CANNOT FIX IT?
None of the economic ministers, managers or advisors of the Barrow government have experience in the productive sector of Belize….and there are only few with the kind of experience necessary who would be willing to work with them. They do not KNOW where viable opportunity is, nor what to do.
Most in the Barrow circle of influence are heavily invested in the grey economy that feeds off corruption, and would not be inclined to the kind of overhaul necessary. Others are beneficiaries of the politically-favored government preferential treatment that are so sweet and too hard to let go. They would go for piece-meal reforms that would not work in the end, and the country will continue moving towards economic disaster.
The economic, political and justice reforms that are necessary requires principled political will that creates a level, just and good-will atmosphere that significantly improves the investment and working environment…and if the past is any predictor of the future, the Prime Minister just is not made of this kind of metal. He looks down on everyone….has a super-inflated ego….and he and his family are the best thing that ever happened to Belize besides peanut butter and jelly sandwiches.
The Barrow government, because of its pompous/boisterous intransigence, blatant corruption and out-right rudeness, have little or no friends in the international community. They have become inextricably linked, in the most intimate of ways, to some of the most feared criminals regionally and internationally. There will be no debt-swaps under the Barrow governments, anytime soon.
The views expressed in this article are those of the writer and not necessarily those of Breaking Belize News.
This article was written by Richard Harrison, Belizean investor in production and services businesses in Belize. He holds a Master’s in Business Administration degree from Lancaster University.