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Corozal Free Zone in trouble!

Among the many observations, the most notable is that business in the CFZ has declined, in some cases, by as much as 90 percent, and the dire situation already has forced some businesses to close.

Today, Amandala spoke with Minister of Enterprise and Tourism, Hon. Mark Espat, about the issue of the CFZ. (Espat was appointed Minister of Enterprise, bringing the CFZ under his portfolio, in August of this year.) He offered his own figures, and stratagems for the improvement of the CFZ?s operation.

Espat spoke about figures on importation of merchandize into the CFZ for the past four years, which show that the business peak for the CFZ was in 2002. In 2002, imports into the CFZ totaled BZE $263.1 million, a 32 percent increase in only one year. But by 2003, imports fell by about 21 percent.

On Friday, December 10, the newspaper had the opportunity to speak to several local investors in the CFZ concerning the state of business in the zone. Amandala has been asked not to use the names of the investors or any descriptions that would suggest their identities, for fear of reprisals.

On a daily basis, said one CFZ investor, there was a plethora of vehicles coming into the CFZ from Mexico, with each vehicle carrying an estimated minimum of three or four persons. These Mexican vehicles would form a line that went from as far back as the foot of the Mexican side of the Belize-Mexico Friendship Bridge, to the gate of the CFZ, this investor commented.

One report that the newspaper had received, which prompted this investigation, was that business in the CFZ had fallen terribly in less than two years. That report quoted a 90 percent decline in sales.

One local investor told us that his business sales had fallen by at least 75 percent in the past 18 months alone. The investor did say, however, that he knew of other businesses in the CFZ who were experiencing sales declines as sharp as 90 percent.

In this respect, Hon. Espat said that while it is indeed down, he disagreed with the 90 percent claim.

Another local investor said that his sales had fallen by at least 90 percent, confirming the initial reports the newspaper had received. It is important to note that both these two investors who were open about their sales figures sell different genres of merchandise, although both businesses are retail-based.

Amandala also had the opportunity to meet with Omar Ayuso, Promotions and Marketing Officer for the CFZ Management Agency (CFZMA). When questioned about the contracting CFZ economy, Ayuso insisted to the newspaper that while sales have declined, they have only declined by 25 percent, across the board. He said that it was important to remember that most of the businesses in the CFZ are retail-based, and that they generally sell the same types of goods. Hence, it is expected that some retailers would experience a sharp decline in sales, Ayuso told the newspaper.

Amandala observed that most retail businesses in the CFZ sold apparel, and another observation was that most merchandise sold in the CFZ were fakes, which is to say, imitation brands, and both observations were confirmed by several investors.

According to CFZMA figures, importation for the month of October has declined by as much as 23.2 percent, with imports for October 2004, totaling $13.9 million, while imports totaled $18.1 million for October, 2003.

Meanwhile, overall imports into the CFZ up to the end of October 2004, have declined by as much as 17.4 percent. At the end of October 2003, imports into the CFZ totaled $168.6 million, but at the end of October this year, imports only totaled $139.3 million.

The drop in imports, which echoes the sharp decline in sales, also seems to extend to the number of Belizeans employed in the CFZ.

One of the investors who spoke with the newspaper told us that she used to have as many as 30 employees in her shops during the Christmas season, but this Christmas season, she only has 10 employees. She said that there is no longer the need to have so many staff on hand, because fewer people are coming into the CFZ to shop.

This investor also pointed out that some investors who owned as many as three retail stores in the CFZ, have been forced to close down at least two of them. The investor told us that it is simply not economical for most CFZ investors to keep three stores open, when there is not enough business to sustain them.

It was noticeable that some sections of the CFZ that were bustling with business and patrons about two or three years ago are now virtual ghost towns.

On average, the CFZ employs about 2,000 Belizeans during the summer months, and about 1,200 to 1,500 Belizeans during the other months. CFZMA could not say how many Belizeans are currently employed in the CFZ.

Another investor who spoke with the newspaper went as far as to suggest that at the end of the Christmas Season, as many as 24 stores or companies in the CFZ would fold within a few months.

Naturally, the Christmas Season is one of the busiest times of the year for most businesses. But the newspaper observed that even though it seemed as though there were many Mexicans in the CFZ on Saturday, December 11, sales were still slow.

An investor told the newspaper that even though there were more people in the CFZ today than there were last week Saturday, his sales have not improved considerably, at least not when compared to previous years. He said that around this time last year or the year before, his shop would be sold out at the end of a Saturday. But today, while he did make some money, his shelves are still stocked.

Almost everyone the newspaper interviewed agreed that the sharp decline in commerce was largely due to the strict regulations that the Mexican officials have placed on their citizens when returning from the CFZ.

One investor explained to us that when the Mexicans – mostly those living in Quintana Roo (Chetumal) – started flocking to Belize to buy goods at a cheaper rate, the merchants in Chetumal took a beating. The truth is that when the Mexicans came into the CFZ, they were able to fill their gasoline tanks for about 50 percent less than what they would pay in Chetumal, and they could buy cheaper electronics and clothing, too. And when they went back across the border, they did not pay duty.

In fact, it was the cheap rates at which gasoline was sold in the CFZ that launched the CFZ ?boom.? Ayuso told the newspaper that it was the cheap gasoline that first attracted the Mexicans to the CFZ, and gradually the Mexicans started shopping and eating in the CFZ. So that what started out as a simple trip to fill the gas tank with bargain-priced fuel, became a shopping expedition and a family outing, Ayuso commented.

It is highly probable that goods might have been cheaper in the CFZ for the Mexicans than in Chetumal because the Commercial Free Zone (Amended) Act of 1999, stipulated ?all merchandise, articles, or other goods entering a CFZ for commercial purposes shall be exempt from import duties, stamp duties, and revenue replacement duties.?

And while the retail business was booming in the CFZ and Belizean investors in the CFZ were making a hefty profit, the merchants in Chetumal were losing a lot of money.

The boom in the CFZ was enough to create a negative impact on the economy of Quintana Roo, so much so that the Chamber of Commerce of Quintana Roo had to formulate and insist on the institution of measures that would prevent their consumers from flocking across the border to shop in Belize, our investor said.

The Mexican customs officials started to make it more difficult for Mexican shoppers to return with their goods purchased in the CFZ. At first, they made it tedious for Mexicans to re-enter Mexico by making the customs officials check each vehicle. Understandably, it would take hours to cross the border again, if there are hundreds of vehicles that had flocked over from Mexico.

During the CFZ business peak in 2001, as many as 1900 Mexican vehicles entered the CFZ on a weekday, on average. That number was believed to go up considerably on weekends.

Another stratagem that the Mexicans instituted was to lower the cost of gasoline at the gas pumps that were within 20 Km of the Belize-Mexico border, said Hon. Espat, making it unnecessary for Mexicans to flock across the border to buy cheap gasoline. He pointed out that this stratagem was well within Mexico?s capability, considering they produce fuel (member of OPEC).

Next came the institution of ?la flaquencia,? where Mexicans could only spend $50 USD in the CFZ, without being heavily taxed. By the time the Mexicans who still flocked across the border, had purchased gas, clothes, electronics, or household products in the CFZ at a cheap rate, the tax levied on them when returning home did not make the trip to the CFZ economically profitable anymore.

Looking at the vehicle entries into the CFZ for October, 2004, it could be easily seen easily how the above-mentioned stratagems have affected business in the Zone. On October 2004 weekdays, only 1065 vehicles were entering the CFZ, on average; and only 1, 285 on October 2004 weekends. After three years of Mexican restrictions, vehicle entries into the CFZ have shrunk by roughly 44 percent.

When the newspaper asked if the figures seemed accurate, an investor pointed out that ?business in the CFZ was booming because the buses were coming in then, not because of the cars.? The investor said, ?The buses brought in the wholesalers, so you would be selling your goods in bulk to them, instead of just one item at a time to the retailers. But it is no longer profitable for the wholesalers to buy in the CFZ, because of the tax that the Mexicans levy on them when they have to cross the border.?

So now that the CFZ is facing possible collapse, the question becomes what steps can be taken to salvage the CFZ, especially since so many Belizean families have come to rely on its success and existence.

(Part Two of this article, including the response of the Hon. Mark Espat in more detail, will be published in the next issue of Amandala, of Sunday, December 26, 2004, issue #1920.)

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