Notwithstanding an unresolved territorial dispute, Belize and Guatemala are about to implement an agreement to partially liberalize trade between the two countries. The agreement is being sold as a mechanism for boosting the economies of both countries, by expanding access to regional markets in Central America for Belize and the Caribbean for Guatemala. Belize claims it could boost trade to as much as $14 million by 2014, the year the agreement would be up for its first major review.
“The main products benefiting from the agreement are: citrus, tilapia, cattle, yellow corn, black beans, red beans, poultry and pepper sauce, and this market is expected to offer premium prices relative to world prices,” a Government of Belize press release declares, adding that the agreement would provide new and preferential market access for Belize’s productive sector.
Even if Belize is able to boost trade to $14 million within 5 years, the trade deficit between Belize and Guatemala—the shocking difference between what we export to Guatemala and what we import from Guatemala to Belize—would certainly not be narrow enough.
Last year, Belize imported 26 times more than it exported to Guatemala, in dollar value – a staggering $114.7 million, dwarfing the $4.5 million in exports Belize made to Guatemala that same year. Historically, Belize has always been at a trade disadvantage with Guatemala, and the new agreement clearly won’t eliminate that trade deficit. (See more on trade stats on page 24.)
The partial scope agreement is a part of a wider agenda to completely liberalize trade between the two countries. That’s according to a framework agreement signed between the countries back in September 2005, when the parties, acting under the auspices of the Organization of American States (OAS), formally gave their commitment to advancing trade talks that had begun the year before.
That OAS agreement said, “The conclusion of negotiations of a partial scope agreement is a first step towards a future free trade agreement between Belize and Guatemala.”
Almost five years ago, Belize’s Cabinet gave its stamp of approval for those trade talks, mandating the Ministry of Foreign Affairs to proceed with negotiations. On June 26, 2006, the then Minister of Foreign Affairs, Senator Eamon Courtenay, finally penned his signature to the document. Meanwhile, Marcio Ronaldo Cuevas Quezada, Guatemala’s Minister of Economy, signed for his country; however, it was not until last week, more than two years later, that Guatemala’s Congress approved the agreement.
The Embassy of Guatemala in Belize has informed that a formal decree was posted in the country’s official newspaper on October 13, but takes effect on Wednesday, October 21, 2009.
“This is an important development for bilateral relations between Belize and Guatemala and especially for the productive and commercial sectors of the two countries [which] will have new doors opened to them to stimulate private enterprise,” the Belize Government’s press release said, welcoming the news on Monday.
The partial scope agreement, 48 pages long with appendices, including details for rules of origin and tariffs, has an indefinite duration.
According to its terms, any party can opt out, but not before the first year has expired. Furthermore, 6 months’ prior notice is required for termination. The agreement is up for review in 2014, at the end of the 5th year.
“This important instrument will assist both countries to consolidate a new environment on commercial trade, stimulating the economies of both countries through the increase in investment, the sustained increase of production and the generation of employment opportunities,” the Embassy of Guatemala in Belize remarked in its statement last week.
The Belize Ministry of Foreign Affairs and Foreign Trade encourages Belizean entrepreneurs to familiarize themselves with the contents of the 48-page Belize-Guatemala Partial Scope Agreement, which should be published at www.governmentofbelize.gov.bz, “so that they can take advantage of opportunities that become available.”
Back in November 2004, a Cabinet Brief had announced that the Ministry of Foreign Trade had been mandated to negotiate a partial scope trade agreement with Guatemala.
“The main elements of the agreement would be to increase cross-border trade and investment and establish clear, transparent and stable rules to govern trade and investment,” Cabinet had said.
“On November 22, 2004, the Minister of Foreign Trade of Belize and the Minister of Economy of Guatemala launched negotiations for a Partial Scope Trade Agreement (PSA) with the objective of enhancing trade and commercial linkages to the benefit of both countries,” Government’s latest statement says. “This was the first bilateral trade agreement negotiated by Belize.”
It added that “…with the protection of investment guaranteed, Belizean investors can do their processing and value-added in Guatemala and qualify for preferential treatment into Central America. In turn, Guatemalan investors can through joint ventures or otherwise, operate in Belize and tap into the preferential markets of CARICOM and the EU.”
In the event that a government moves to acquire an investment “for public purpose” – as the Belize Government recently did with Belize Telemedia Limited, the partial scope agreement also sets out terms for expropriation or nationalization of an investment held by a national of one country with an investment in the other country, saying that “…compensation shall amount to the value that the investment had immediately before the expropriation, or before the impending expropriation became public knowledge, shall include interest from the date of expropriation.”
If an investor has a dispute with the country where he or she is doing business, and the dispute cannot be settled through consultation, the parties, under the agreement, can submit the dispute for final and binding resolution to the International Centre for Settlement of Investment Disputes, which emanates from a convention formulated by World Bank executives; an international arbitrator; an ad hoc tribunal under the Arbitration Rules of the United Nations Commission on International Trade Law (UNCITRAL); or the International Court of Arbitration of the International Chamber of Commerce.
The concept of the partial scope agreement was enshrined in “The Agreement on a Framework for Negotiations and Confidence Building Measures between Belize and Guatemala,” signed by Belize and Guatemala in September 2005, under the auspices of the Organization of American States, as a part of broader talks on the still unresolved territorial dispute between Belize and Guatemala.
Despite the signing and acceptance of the Partial Scope Agreement, Guatemala maintains a claim over at least half of Belize’s territory – a dispute which governments on both sides agree should be put to the International Court of Justice if national referenda in both countries endorse that avenue of settlement. That decision has not yet been vetted by the Guatemalan Congress; neither has it been vetted by the Legislature in Belize.
The objective of this [Partial Scope] Agreement is to strengthen the commercial and economic relations between the Parties through:
– the facilitation, promotion, diversification and expansion of trade in originating goods from the Parties by granting preferential margins on their tariffs, eliminating non-tariff barriers to trade, and establishing clear regulations on technical, sanitary and phyto-sanitary measures;
– the development of mechanisms for the promotion of investments and the establishment of a legal framework aimed at conferring legal certainty to investments generated between the Parties, in accordance with the provisions of this Agreement;
– the facilitation of the land transportation of goods covered under this Agreement through the elimination of transit barriers between the Parties with a view to assuring non-discriminatory treatment;
– the establishment of an efficient, transparent and effective system to resolve trade disputes arising from activities provided for under this Agreement.
Source: The Partial Scope Agreement signed in June 2006
Belize’s trade profile
Janine Sylvestre, Belize’s Honorary Consul for Belize in Florida, USA, wrote in her 1995 Master’s thesis, titled The Cost of Conflict: The Anglo-Belize/Guatemalan Territorial Dispute:
“In 1994 Trade with Guatemala reflected imports to Belize, $17,309,220 (millions) exports to Guatemala, $33,038.00 – (Department of Statistics) (Annex G.)
This is a gross deficit for Belize… since 1988, Belize’s exports to Guatemala have been steadily declining, while its imports have been continuously increasing.
The year 1988 accounted for Belize’s biggest economic growth, 10%-12%, and it shows that this was the lowest for exports as well as imports.
This great imbalance will undoubtedly need to be addressed by Belize, if it hopes to be a trading partner with Guatemala and the rest of Central America. However, what does Belize have to offer a country that produces everything that Belize produces but in major volume and with a capacity to supply its 10 million inhabitants [now about 13 million] in addition to meeting its export markets?”
In 2008, Belize continues to suffer from a massive trade deficit with Guatemala, which has progressively expanded its exports to Belize from a reported $17 million in 1994 to $114.7 million today.
Meanwhile, Belize’s exports to Guatemala declined from $3.1 million in 2006 to $1.3 million in 2007, and then increased to $4.5 million in 2008. Belize imported 26 times more from Guatemala, in dollar value.
A similar scenario plays out in Belize’s trade with Central America as a region. Official stats say that while Belize exported $3.61 million to Central America in March 2009, for example, its imports were a whopping $56 million for that month. For 2008, Belize’s exports to Central America were valued at $120 million, whereas Belize imported $336 million in goods/services from the Central American region.
It remains to be seen whether Belize will make any major inroads in improving its level of exports with the Belize-Guatemala partial trade agreements in effect, as with other trade liberalization agreements, including its CARICOM agreements.
In 2008, Belize imported more than twice what it exported: $686 million exports versus $1.8 billion worth of imported goods/services.