In old maritime lingo, sailors would speak of battening down the hatches. This referred to a vessel’s crew making preparations for a storm by securing those sections of the craft which were exposed to high winds and rough seas.
Late last year our columnist Bill Lindo spoke of hard times to come in this 2016. We don’t know how seriously our readers took him, but at this newspaper’s editorial desk it appears to us that Belizeans would be wise to be more careful than reckless in their money management and financial projections.
We are still seeing the fallout in Belize from the period of excessive optimism during “growth economics” between 1998 and 2004. The Belizean public sector during growth economics featured a lot of government borrowing at commercial rates and the Belizean economy was awash in liquidity. Many Belizeans made decisions with respect to home ownership which were not all that realistic, and in fact proved unsustainable when Belize’s illusionary growth was exposed as more political rhetoric than real expansion. In 2016 we are still seeing pages and pages of advertisements for banks which are trying to dispose of homes whose owners defaulted on mortgages they took on during growth economics.
It was somewhat strange to see how some of the very politicians responsible for the excessive, false optimism of 1998 to 2004 remained prominent and powerful in the decision making of the Opposition People’s United Party (PUP). These politicians had surely benefited where their personal bank accounts and assets portfolios were concerned, but the taxpayers of Belize had been saddled with the crushing “superbond,” and in 2016, eight years after those responsible for the growth economics debacle were voted out of office, the pressure of superbond payments remains a discouraging fact of life for Belizean taxpayers.
The fact is that Belizean voters are still insufficiently educated about economic issues and remain vulnerable to the politics of personality, emotion, and tradition. Enraged, Belizeans had voted out the PUP in 2008 and replaced them with their only option – the right wing United Democratic Party (UDP), which was basically just as neoliberal in its economic philosophy as the PUP administration from 1998 to 2004 had been.
Perhaps the problem is that we Belizeans can only replace the PUP with the UDP, and vice versa, so that when the UDP, in turn, began to unravel where the honesty of its Cabinet Ministers was concerned, the UDP corruption apparently did not come in traumatic enough doses to make voters forget the superbond hell, so last year November the UDP succeeded in winning a third consecutive term, a feat unprecedented in the post-independence era.
The economic story in Belize for the whole of last year and some time before that, was the loan moneys at concessionary rates which Venezuela was making available to the UDP Dean Barrow administration through the Petrocaribe fuel arrangements. The UDP used these loan moneys to create the appearance of economic activity and growth in Belize, but the intent was cynically political, hence the function of the moneys was, in the context of economic development, relatively frivolous. The UDP succeeded in dazzling Belizean voters, winning the unprecedented third consecutive term to which we referred in the previous paragraph. Belize, however, only sank deeper into debt, and in 2016 the chickens are coming home to roost.
One of the fundamental problems in Belize is the short term thinking of our electoral politicians. The nature of the election cycle is such that politicians in power, when they are making decisions with our public funds, only see as far as the next big election. They feel, and no doubt rightly so, that they have to make sure they have something to show voters, even if their display projects do not have serious long term value. In electoral politics, the bottom line is making sure you win. After you win, then you are in a position to worry about budget projections. If you had lost, you would have had to deal with burdensome election campaign bills and even survival of your leadership. Lesson is, better win than lose, by any means necessary. The problem for the masses of Belizeans is that our PUDP paradigm has meant that even when the color changes on election day, the circus remains the same.
After Hurricane Hattie in 1961, the competitive advantage for our working class urban families lay in having their adult members travel north to become migrant workers in the United States. The remittances (in American dollars) from these migrant workers enabled whole families to go unemployed for years in Belize’s urban settings, so much so that thousands of Central Americans poured into the Belizean economy to take up the low paying jobs which urban Belizean families were refusing. In 2016, the derisking phenomenon among major American banks endangers the ability of Belize’s migrant workers to transfer money home. Derisking could force Belizeans in the urban settings to accept the jobs they have been refusing.
At the same time that derisking is threatening the Belizean standard of living, the Zika virus threatens our fastest growing “industry” – tourism. The backdrop to these threats is a crushing public sector debt which has paralyzed the Belizean economy. Not only that, heavy taxes of different persuasions have discouraged private sector initiatives.
For our economic malaise, the political leaders of both the ruling UDP and the Opposition PUP have the same answer – foreign direct investment (FDI). The problem with their mono answer is that they give the few investors such crazy tax breaks that only private Ministerial pockets are fattened: the consolidated funds of Belize do not really benefit from all these “development concessions” and “tax incentives.” This here remains the classic case of the underdeveloped economy. In 2016, expect things to get worse. Batten down the hatches.