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2009 Investment Climate Statement - Belize


2009 Investment Climate Statement
Bureau of Economic, Energy and Business Affairs
February 2009
Report
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Openness to Foreign Investment

The Government of Belize (GOB) generally welcomes foreign investment that results in diversification of the economic base, employment opportunities, foreign exchange earnings and savings, and the transfer of technology and skills. The Belize Trade and Investment Development Service (BELTRAIDE) serves as a one-stop shop for export and investment assistance and continues to identify the following sectors as priority sectors for investment: Agro-processing/Agribusiness, Environmental Goods and Services, Tourism, Information Communication Technology, Aquaculture and Fisheries, International Financial Services, and Furniture Manufacturing.

The government normally gives special consideration through various fiscal incentives to export-oriented businesses established in less-developed areas of the country. Government fiscal incentives are designed to encourage investment in Belize and include the Fiscal Incentives Act, International Business and Public Investment Companies Act, Export Processing Zone Act, and Commercial Free Zone Act. However, bureaucratic red tape may still be encountered when seeking these incentives and some foreign investors have complained that these investment promotions are rarely as open and effective as they are portrayed. Investors do not necessarily need to utilize development concessions to invest in Belize. Nonetheless, many factor these concessions into their investment decisions to save on local taxes and duties.

Although the GOB maintains that it recognizes the importance of creating an enabling environment to attract local and foreign investors as a catalyst to achieve sustained economic growth and facilitate further diversification of the Belizean economy, the Embassy is aware of several disputes involving U.S. investors and the government of Belize. Lengthy trial delays are not uncommon; one case languished in the court system for over 13 years and is still unresolved despite the plaintiff's and USG's efforts. Investors should perform careful due diligence when making any substantial investments in Belize.

Conversion and Transfer Policies

Exchange Control Regulations require foreign investors to notify the Central Bank of Belize (CBB) of their intent to invest and to register investments and inflows of funds with the CBB in order to facilitate the repatriation of profits, dividends, etc.

The Exchange Control Regulations allow properly registered and documented companies to go directly to the commercial banks to request foreign exchange. In recent years, foreign currency supplies in commercial banks have been adequate to facilitate international transactions.

In order to pay for goods and services procured outside of Belize in a foreign currency, a foreign exchange permit must be obtained from an authorized dealer or directly from the Central Bank of Belize. The CBB's approval must also be obtained in order to secure and to service repayment of a loan outside of Belize involving foreign currency.

Officially, no person, other than authorized dealers and authorized depositories, may retain any foreign currency in their possession without the consent of the Central Bank.

Expropriation and Compensation

There have been no instances in which the government has expropriated a foreign company. There have been several contentious cases in which the government, under its right of eminent domain, appropriated land that belonged to private property owners, including some foreign investors. These "takings" were ostensibly made for public purposes, but there have been allegations that several involved political payoffs.

Furthermore, although Belizean law requires that the government assess and pay appropriate compensation based on fair market value; such claims can sometimes take years to settle. Additionally, the GOB and a U.S. investor have been involved in a complex and protracted legal dispute surrounding ownership of the national telecommunications provider.

Dispute Settlement

For most of 2005, the GOB and a U.S. investor were involved in a complex and protracted legal dispute surrounding ownership of the national telecommunications provider. Belize's Supreme Court issued a favorable ruling in September 2006 for the U.S. investor, however, subsequent changes to Belize legislation in May 2007 effectively made the original telecommunications company defunct by vesting its assets in a new company under a similar name. The dispute remains unresolved.

Similarly, another dispute between a town council and a U.S. investor is before the local courts. This dispute is over an alleged breach of contract for waste disposal services.

Two disputes over land expropriated by the GOB dating back to 1992 and 1994 are still unresolved. The Embassy has also received several complaints of investors having difficulty transferring land and acquiring titles. According to the Ministry of Natural Resources, this is due to a backlog of transfer requests accumulated prior to the general election in February 2008 and which they are working to resolve.

Performance Requirements and Incentives

According to BELTRAIDE, the government offers a number of fiscal and other incentives in order to attract private investment. Four of the most popular incentives schemes include: (a) the Fiscal Incentives Act, (b) the International Business and Public Investment Companies Act, (c) the Export Processing Zone Act, and (d) the Commercial Free Zone Act.

Under the Fiscal Incentives Act, duty exemptions and tax holidays may be granted to encourage investments and development in the Belize economy while also considering appropriateness in terms of the government's development plan. Investment incentives include:
  • Duty exemption of up to a maximum of 15 years to companies granted an Approved Enterprise Order.
  • Duty exemption may be renewed for a further term of 10 years or a total of 25 years for companies engaged in agriculture, agro-industrial products, mariculture, food processing, and manufacturing with operations centered on export, and that are highly labor intensive.

Several categories of items may benefit from full or partial relief from Import Duty, depending on the nature of the business.
Examples of categories that may be approved are:
  • Building Materials and Supplies
  • Plant, Machinery, and Equipment
  • Specialized Tools (excluding hand tools)
  • Utility and Transport Vehicles
  • Fixtures and Fittings
  • Office Equipment and Appliances
  • Spare Parts for Plant, Machinery and Equipment
  • Agricultural Machinery and Supplies
  • Raw Materials or other items for the sole use of the approved enterprise.

The length and extent of a development concession is determined by several factors, including: (a) the extent of local value added; (b) the projected profitability of the enterprise; (c) foreign exchange earnings or savings; and (d) employment opportunities created.

A Small and Medium Enterprise (SME) Fiscal Incentives Program also exists and was designed and created to encourage investments by enterprises that are investing less than USD $150,000.

Under the Belize International Business Companies (IBC) Act, IBCs, also known as offshore companies, are not allowed to own property or conduct business in Belize but nonetheless enjoy a host of incentives including:
  • Exemption from taxes on all income.
  • Exemption from taxes on all dividends.
  • Exemption from taxes on all interests, rent, royalties, compensations and other amounts.
  • Exemption from taxes on capital gains on shares, debt obligations or other securities of an IBC by nonresidents.
  • No currency restrictions.
  • Meetings of shareholders and/or directors may be held in any country and may be attended by proxy.
  • No citizenship or residency requirements for directors, officers or shareholders

Belize's Export Processing Zone (EPZ) Program is intended to attract domestic and foreign investment to boost production for export markets with a focus on manufactured goods and non-traditional agricultural products. An EPZ is classified as a non-customs territory of the host state, where export-oriented activities are undertaken in the manufacturing, processing, assembly, and service sectors. The benefits of EPZs include:
  • Full import and export duty exemptions
  • Exemptions from capital gains tax, property and land taxes, excise, sales and consumption taxes, taxes on trade turnover, foreign exchange, and transfer tax.
  • Tax holiday of 20 years with an option to extend and deduct loses from profits following the tax holiday period.
  • Dividend tax exemption.
  • Opportunity to open foreign currency bank accounts in Belize.
  • Opportunity to sell, lease or transfer items, goods, and services within an EPZ.
  • Exemption from the Supplies Control Act and its regulations.
  • No import restrictions on raw materials.
  • No import or export licensing requirement.

The Commercial Free Zone Act of 1994 was established to attract foreign investment and provides for various activities including manufacturing, processing, packaging, warehousing, and distribution of goods and services.

The following benefits are available to investors in a
Commercial Free Zone:
  • Merchandise, articles or other goods entering a CFZ for commercial purpose.
  • Fuel and goods including building materials, furniture, equipment, supplies, and parts required for the proper functioning of the CFZ business.
  • Exemption from income tax, capital tax, gains tax or any new corporate tax levied by the Government of Belize during the first 10 years of operation.
  • Exemption from such tax for the first 25 years of operation on dividends paid by a CFZ business.
  • Imports or exports by a CFZ business do not require an import or export license.
  • No restrictions on the sale of foreign currency or transfer of foreign exchange in a CFZ.
  • No Government charges and taxes imposed on the use of foreign currency in a CFZ.
  • CFZ businesses are allowed to open an account in any currency with any registered bank.
  • Income tax deductions on the chargeable income of every developer and CFZ business after the first ten years of operation.
  • CFZ businesses incurring a net loss over the ten year tax holiday may deduct the loss against profits in the three years following the tax holiday period.

Right to Private Ownership and Establishment

BELTRAIDE contends that while government supports and encourages joint venture and partnership investments as a preferred mechanism for investment, the government does allow 100 percent foreign ownership of an enterprise.

Acquiring national land is initiated by applying to the Commissioner of Lands. Applications for land purchases require the approval of the Minister of Natural Resources, but this is usually not an obstacle. However, applications for land purchases in excess of 10 acres require approval by the 21 member Ministerial Cabinet. According to the Central Bank, Section 40 of the Exchange Control Regulations stipulates that Exchange Control approval must be obtained when a non-resident is involved in any transaction relating to the transfer by way of sale, exchange, gift, or mortgage of any land, buildings, or other hereditaments in Belize. Different procedures apply when leasing land or when purchasing land through a real estate agent.

Protection of Property Rights

The Constitution of Belize protects the right to private property. Chapter II, Article (3d) guarantees "protection from arbitrary deprivation of property." Among other documents, records of companies and real estate mortgages are kept in the government's company registry office.

There are many property disputes involving foreign investors and landowners, because it is often difficult to trace reliably the ownership history or specific borders of land holdings. Title insurance is not commonly available in Belize. Generally, as in the U.S., property buyers will avoid problems by dealing with reputable real estate professionals and lawyers experienced in local property law.

Belize has fulfilled its obligation under the World Trade Organization (WTO) to implement the Agreement on Trade-Related Aspects of Intellectual Property (the TRIPS Agreement). The Belize Intellectual Property Office (BELIPO) was established to administer intellectual property rights (IPR) laws, which include copyrights, industrial designs, patents, trademarks, protection of new plant varieties, and protection of layout - designs (topographies) of integrated circuits.

Belize is a party to the Paris Convention for the Protection of Industrial Property, the Berne Convention for the Protection of Literary and Artistic Works, the Patent Cooperation Treaty (PCT), and the Hague Agreement Concerning the International Deposit of Industrial Designs. However, Belize has ratified neither the WIPO Copyright Treaty (WCT) nor the WIPO Performances and Phonograms Treaty (WPPT).

Stores throughout the country continue to sell and rent pirated CDs, DVDs, and tapes. Local television stations and cable companies also continue to pirate American television network and cable channel programming with impunity.

Several importers, primarily those doing business in the Corozal Commercial Free Zone, continue to import and sell counterfeit merchandise, such as cigarettes and clothing. Under Belize's Copyright and Trademarks Laws, the onus to institute legal action against violators of intellectual property rights lies upon the holder of the copyright and trademark, and not upon local law enforcement officials.

However, on the interdiction and seizure side of intellectual property enforcement in Belize, there is a lack of sufficient political will and a lack of resources to prosecute and see cases closed.

Transparency of Regulatory System

Belize's laws and regulations on tax, labor, customs, and health and safety do not significantly distort or impede the efficient mobilization and allocation of investment capital. However, a few investors have found a lack of transparency in the administration of some Belizean laws and procedures, such as compulsory acquisition of land, investment incentive programs, and import licenses.

Generally, proposed laws and regulations are published in the official government gazette for public comment. Also, persons interested in recommending changes, or objecting, to the draft laws and regulations, can do so at the Committee meeting of the House of Representatives.

Efficient Capital Markets and Portfolio Investment

Belize's financial system is small. It is limited to five domestic commercial banks, eight international banks, a now defunct parastatal lending institution, a mutual fund (unit trust), thirteen credit unions, and seventeen insurance companies nationwide.

The Central Bank of Belize regulates the liquidity and cash reserve requirements as well as the interest rate structure of the commercial banks. Interest rates in Belize are relatively high. Current lending rates of local banks are high, average personal lending rates were 16.0% and commercial lending rates were 13.7% at the end of September 2008.

Political Violence

Belize has traditionally enjoyed one of the most stable political environments in the region, having held six trouble-free democratic elections since it attained independence on September 21, 1981.

On February 7, 2008, the country held a general election which resulted in a landslide victory for the opposition party, the United Democratic Party. The new government was elected on a platform of good governance, improved transparency, and accountability.

Corruption

The law provides criminal penalties for official corruption; however, there have been no successful prosecutions for official corruption, and officials previously engaged in corrupt practices with impunity. The World Bank's worldwide government indicators reflect that corruption was a serious problem and Belize's rankings in the Worldwide Governance Indicators and Corruption Perceptions Index have slipped in recent years.

There were public indications of government corruption under the previous administration during the year. The former Prime Minister and the former Minister of Home Affairs were arrested and charged with theft of ten million U.S. dollars, the proceeds of a grant from Venezuela. The former Prime Minister allegedly directed the funds be paid to satisfy a government guaranteed private hospital debt without authorization. The case remains pending. Commissions were appointed in 2006 to investigate the Social Security Board (SSB) and in 2007 to investigate the Development Finance Corporation (DFC). The DFC authorized the use of millions of dollars in public, domestic, and international loan funds to assist inappropriately, the business interests of certain citizens. The case is still unresolved. The SSB investigation resulted in resignations and firing of key personnel; although the commission also pledged to forward a copy of its report to the Director of Public Prosecutions for a determination of criminal charges; charges have not been filed.

Belize, like many countries, has anti-corruption laws on its books, but these laws, which fall under the Office of the Attorney General, are seldom enforced. One such law is the Prevention of Corruption in Public Life. This law requires public officials to make financial disclosures annually. However, the latest published annual report (2005-2006) by the Act's monitoring body, the Integrity Commission, indicated only a 27% filing rate.

Since 1999, the country has had a politically-appointed Ombudsman, whose primary responsibility is to investigate complaints of official corruption and wrongdoing. However, the Ombudsman has yet to conduct an investigation of official corruption or wrongdoing by an elected official. The position remained vacant for most of 2008 following the general election.

There are occasional reports of requests for bribes from customs officials in order to facilitate lower valuations and thus lower import duties. Bribery is officially considered a criminal act in Belize, but laws against bribery are seldom enforced.

Belize ratified the OAS Inter-American Convention against Corruption in 2002. Belize has neither signed nor ratified the UN Convention against Corruption. Under U.S. law, American companies and their affiliates are subject to the Foreign Corrupt Practices Act, which strictly prohibits the bribery of foreign officials.

Bilateral Investment Agreements

Belize has no bilateral investment treaty (BIT) or tax treaty with the United States. It did sign a mutual legal assistance treaty with the United States in 2000.

Belize is a Member State of the Caribbean Community (CARICOM), which includes 15 Member States. As a regional grouping, CARICOM has negotiated and entered into several bilateral trade agreements, namely;
  1. CARICOM - Dominican Republic Free Trade Agreement
  2. CARICOM - Costa Rica Free Trade Agreement
  3. CARICOM - Venezuela Trade and Investment Agreement
  4. CARICOM - Colombia Trade, Economic and Technical Cooperation Agreement
  5. CARICOM - Cuba Trade and Economic Cooperation Agreement
  6. CARICOM - European Union Economic Partnership Agreement
  7. CARICOM - Caribbean Basin Initiative

CARICOM is also pursuing other partnership agreements including:
  1. CARICOM - MERCOSUR negotiations
  2. CARICOM - Canada negotiations
  3. CARICOM - USA negotiations
  4. CARICOM - Central America negotiations

OPIC and Other Investment Insurance Programs

The Overseas Private Investment Corporation (OPIC) offers political risk insurance, which includes coverage for exchange inconvertibility, expropriation, and war. OPIC also offers financing for qualified investments.

Belize is a member of the Inter-American Development Bank (IDB) and the Multilateral Investment Guarantee Agency (MIGA) of the World Bank.

Labor

In September 2007, Belize's Labor Force Survey indicated an estimated total population of 314,000 of which about 123,000 comprised the labor force. Of this labor force, about 14,859 were unemployed, resulting in an unemployment rate of 12.1 percent.

Belize has eleven trade unions representing approximately 7% of the workforce and an umbrella organization, the National Trade Union Congress of Belize (NTUCB). In general, labor-management relations are relatively good.

Foreign investors who have certain development concessions are permitted to bring in skilled personnel to complement their local labor force, provided that appropriate training programs for Belizean nationals are established.

Most of the unskilled or semi-skilled workers in commercial agriculture are recent immigrants or migrant workers from neighboring Spanish-speaking countries.

Belize has adopted 42 ILO core labor standards, including Convention 182 against the worst forms of child labor.

Foreign-Trade Zones/Free Ports

According to BELTRAIDE, the 1990 Export Processing Zone (EPZ) Act of Belize enables companies to operate within special or general export processing zones in the country. Special EPZs are enclosed one-factory operations and general EPZs are enclosed multi-factory operations.

The Commercial Free Zone (CFZ) Act of 1995 provides for the establishment and operation of CFZs within Belize to foster commercial trade and investment with neighboring countries. Business enterprises generally encouraged under the CFZ scheme include commercial offices, warehouses, manufacturing, insurance services, and financial services.

Foreign Direct Investment Statistics

The most recent data from the Central Bank reveals that foreign direct investment in Belize from January through September 2008 was USD 94.25 million. However, statistics on foreign direct investment in the country, by country of origin and sector, are unavailable, including the total amount invested by American investors.



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