January 12, 2011
It is a new year and a time for improvements. I would like to contribute to the national discourse on Belize’s development. As a nation, we seem to be stuck in a cycle where it is easier to borrow than to produce real economic growth. No government from independence has been able to govern Belize without borrowing.
We have an archaic habit of framing our shortcomings as a nation in a political timeframe. Politicians capitalize on our unwillingness to act intelligently; although we are intelligent, we must start to see national development as everyone’s responsibility.
Belize is part of both the Caribbean and Latin America. Since Latin America has three countries in the G-20, group of 20, which comprises 80% of world trade and 85% of global gross national products, I will focus on two countries in this region – Brazil and Chile.
Brazil’s economy is over 40 per cent of the total GDP of Latin America and the Caribbean, and 55 per cent of South America. Brazil has raised its economic status tremendously in recent years.
With large and growing agricultural, mining, manufacturing and service sectors, Brazil’s economy ranks highest among all the South American countries and it has also acquired a strong position in the global economy.
As a result of falling real wages during 2001 to 2003, the economy of Brazil grew only 2.2% per year (average). The country was hit by a number of global and internal economic crises. But Brazil’s economy did not collapse. The reason behind this is the strong Brazilian economy and the economic policies and programs taken up by President Cardoso and strengthened by President Lula Da Silva.
Brazil’s economy has been undergoing a continuous growth and development from 2004 which has led to a rise in employment and real wages. The economic system of Brazil is standing on a floating exchange rate, a regime that is inflation targeting and compressed fiscal policy.
Brazil had to face a sharp depreciation in the currency, which led to a drastic adjustment in current account from 2003 to 2006.
This was followed by trade surpluses. Surplus agricultural production also led to an increase in exports.
In 1973, inflation in Chile was hundreds of percents, the country had no foreign reserves, and GDP was falling. The economic changes were originally prepared by Chilean economists known as the “Chicago Boys,” because many of them had studied at the University of Chicago.
The plan had three main objectives: economic liberalization, privatization of state owned companies, and stabilization of inflation.
The first reforms were implemented in three rounds – 1974-1983,1985 and 1990. The changes were continued and strengthened after 1990.
Hernan Buchi, Minister of Finance under President Augusto Pinochet between 1985 and 1989, wrote a book detailing the implementation process of the economic reforms during his tenure.
Successive governments have continued these policies. In 2002 Chile signed an association agreement with the European Union (comprising free trade, political and cultural agreements), in 2003, an extensive free trade agreement with the United States, and in 2004 with South Korea, expecting a boom in import and export of local produce and becoming a regional trade-hub.
Continuing the coalition’s free trade strategy, in August 2006 President Bachelet promulgated a free trade agreement with the People’s Republic of China (signed under the previous administration of Ricardo Lagos), the first Chinese free-trade agreement with a Latin American nation; similar deals with Japan and India were promulgated in August 2007.
Chile has one of the strongest economies in Latin America, with high rates of investment and employment. The Chilean market is one of the region’s most open, with 57 different free-trade agreements.
The human development index of 2010 gives us a measure of how Belize is doing as compared to others in our region. The best in the region, Barbados (42), Bahamas (43), then Chile and Argentina, are in the 45th and 46th places, respectively, followed by Uruguay (52), Panama (54), Mexico (56), Trinidad and Tobago (59) Costa Rica (62), Peru (63), Brazil (73), Venezuela (75), Ecuador (77), Belize (78), Colombia (79) and Jamaica (80). We are not doing so well.
UCLA’s Henry Ford II, Professor of International Business Economics. Sebastian Edward’s 2010 book, Left Behind: Latin America and the False Promise of Populism, presents a good economic history of Latin America and analysis of useful economic and social strategies Belize can implement.
We must study the practical examples of other countries and implement the best practices for Belize. We do not have a sensible energy policy. Belize’s oil is fully exported, as there are no local refining facilities.
In 2006, Belize’s oil exports amounted to US$40.6 million. In the same year, Belize imported US$111 million worth of gasoline and other refined products.
In line with the above production projections and WEO projected market price for oil, oil exports peaked at US$57 million in 2007 (4 ½% of GDP), and would be gradually declining to US$15 million in 2019 (IMF Feb.7, 2008).
How can you develop a nation without good energy policy and practices? It is time for Belize, as a nation, to get serious or suffer the consequences.
One of the consequences of our shortcomings is that 132 human beings were murdered in Belize for 2010.