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2012 Investment Climate Statement - Belize


2012 Investment Climate Statement
Bureau of Economic and Business Affairs
June 2012
Report
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Openness To, and Restrictions Upon, Foreign Investment

The Government of Belize (GOB) attempts to attract foreign direct investments with generous incentives packages coupled with its availability of good land and an excellent natural environment. In practice, however, investors have complained that they do not always receive the full extent of the incentives available, that land purchases can be murky, and that the bureaucracy or corruption involved with starting a business in Belize can be troublesome. The global economic downturn, recent nationalizations of the major telecommunications and electricity companies, and new legislation on arbitration have coincided with a decrease in flows of foreign direct investment from a peak of 170 million USD in 2008 to 97 million USD in 2010. The GOB’s various investment incentive packages are available to assist new and existing enterprises.

Although the Belize Trade and Investment Development Service (BELTRAIDE) was established to serve as a one-stop-shop for export and investment assistance, bureaucratic delays may still be encountered when seeking government fiscal incentives, letters of support for business establishment, or business development counseling. BELTRAIDE continues to promote investment in the following sectors of the economy:

Agriculture, agro-industries, food processing and livestock

Tourism and tourism-related industries

Aquaculture and Mari-culture

Light-manufacturing industries and assembly plants

Call Centers and Information Communication Technology

Renewable Energy

Major laws and regulations that govern investment incentives are the: Fiscal Incentives Act, Export Processing Zone Act, Commercial Free Zone Act, International Business Companies Act, Trusts Act, Offshore Banking Act, Gaming Act, and Companies Act. Through these laws, Belize offers some attractive fiscal incentives to investors, but in practice these are not always realized. For example, the law allows for import duty and tax exemptions, but since 2002 these have not always been granted in practice.

Generally, Belize has no restrictions on the limits of foreign ownership and control of companies; however, there is a prerequisite that foreign investors obtain prior clearance from the Central Bank of Belize in order to own shares in a Belizean company. In addition, there are a few investment incentives which show preference to Belizean-owned companies. For example, the Small and Medium Enterprise (SME) Fiscal Incentive, offered by BELTRAIDE (www.belizeinvest.org.bz), stipulates that an entity applying for benefits under the SME incentive must have a minimum of 51% Belizean ownership. If this condition is met, the incentive provides for a lower application fee structure. According to the Belize Tourism Board (www.belizetourism.org), limitations also exist in the tourism sector, where a company must have a minimum of 51% Belizean ownership to qualify for a Tour Operator License.

Foreign investors undertaking large capital investments must be aware of environmental issues when designing and marketing their projects. The requirement to prepare an Environmental Impact Assessment is dependent on prescreening factors such as size of land area, industry, and location. Environmental clearance must be obtained prior to commencement of site development. The Department of Environment website http://www.doe.gov.bz/ has more information on the Environmental Protection Act, Chapter 328 of the Laws of Belize.

Belize, along with other developing countries, has until 2015 to comply with WTO requirements regarding Fiscal Incentives, Export Processing Zones, and Commercial Free Zones. The Ministry of Economic Development and BELTRAIDE are responsible to conduct countrywide consultations with current incentive holders to inform them of upcoming international trade requirements.

In November 2011 both the International Monetary Fund (IMF) and Standard and Poor’s (S&P) published reports on Belize. The IMF reported that Belize had weathered the global financial crisis relatively well in comparison to its Caribbean Community peers. It also expressed concern for growing poverty, and warned that there existed a high percentage of non-performing loans looming in the commercial banking sector. S&P predicted weak growth and investment outlook, rising crime, public-sector wage pressures, and difficult budget constraints. S&P downgraded Belize from stable to negative in light of a challenging economic environment combined with the government’s recent nationalizations of the country’s largest electricity and telecommunications providers, which will add to public debt.

The Corruption Perceptions Index (CPI) measures the perceived level of public-sector corruption in 180 countries and territories around the world. According to the CPI (www.transparency.org), Belize was ranked 99th overall in 2007 and 109th in 2008. Belize was not included in the survey for 2009, 2010, and 2011 due to insufficient sources. Countries are only included in the index if there are at least three data sources available.

On a scale of zero to one hundred (0 to 100), the 2011 Heritage Economic Freedom Index rated Belize at 63.8, ranking it as the 71st freest economy in the world. This was a slight improvement over 2010, when Belize had a score of 61.5 and an overall worldwide rank of 79. The 2011 improvement is due to improved scores in the fiscal, monetary, and labor sectors. Belize is ranked 14th out of 29 countries in the South and Central America/Caribbean region, however its entrepreneurial activity continues to be limited. Burdensome tariff and non-tariff barriers combined with the high cost of domestic financing and a very small domestic market have hindered entrepreneurial activities and economic diversification. Belize is classified as “moderately free,” having scored between 60.0 and 69.9 points. (http://www.heritage.org/index/Ranking)

According to the World Bank’s Doing Business 2012 Report (http://www.doingbusiness.org/data/exploreeconomies/belize/), Belize dropped 1 spot in overall rank from 2011, and now ranks 93 out of 183 economies surveyed worldwide. More specifically, the country lost between 1 to 5 spots on almost every criterion of the assessment, with the exception of paying taxes.

Criteria

Rank 2012

Rank 2011

Change in Rank

Starting a Business

152

147

-5

Dealing with Construction Permits

9

9

No Change

Getting Electricity

53

50

-3

Registering Property

137

135

-2

Getting Credit

98

96

-2

Protecting Investors

122

120

-2

Paying Taxes

55

73

+18

Trading Across Borders

107

106

-1

Enforcing Contracts

168

168

No Change

Resolving Insolvency

29

28

-1

The following table summarizes Belize’s scores and rankings according to the Millennium Challenge Corporation (MCC) (http://www.mcc.gov/documents/scorecards/score-fy12-old-belize.pdf). Measurements are based on percentile ranking within income peer groups of countries surveyed for the 2012 country report (higher percentages are better; for example, Belize does as well or better than 96% of the countries within its income peer group in the area of Natural Resource Management).

Measure

Year

Index/Ranking

TI Corruption Index

2008

109th

Heritage Economic Freedom

2011

71st

World Bank Doing Business

2012

93rd

MCC Gov’t Effectiveness

2012

52%

MCC Rule of Law

2012

55%

MCC Control of Corruption

2012

83%

MCC Fiscal Policy

2012

81%

MCC Trade Policy

2012

68%

MCC Regulatory Quality

2012

55%

MCC Business Start Up

2012

15%

MCC Land Rights Access

2012

27%

MCC Natural Resource Mgmt

2012

96%

Conversion and Transfer Policies

Foreign investments in Belize must be registered at the Central Bank of Belize (CBB) to facilitate inflows and outflows of foreign currency during transactions, including transfers, and the repatriation of profits and dividends.

In order to pay for goods and services procured outside of Belize in a foreign currency, a “Foreign Exchange Permit” must be obtained from authorized dealers, including: commercial banks, money transfer institutions, the Ministry of Finance, or the Central Bank of Belize. After securing an approved permit, foreigners and locals are allowed to access foreign exchange directly from the commercial banks.

Approval from the Central Bank is also necessary for business people or firms wishing to secure loans from outside Belize that involve a foreign currency. Occasional shortages of foreign currency in the banking system have resulted in delays in payments when investors were conducting international transfers and transactions.

Officially, no person, other than authorized dealers and depositories, may retain any foreign currency in their possession without the consent of the Central Bank, although in practice U.S. dollars are widely used and accepted.

Approved businesses under the Export Processing Zone and Commercial Free Zone incentives are allowed to open and operate foreign currency bank accounts.

The Belize Dollar has been pegged to the United States Dollar since May 1976 at a fixed exchange rate of BZ$2.00 to US$1.00.

Expropriation and Compensation

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 were ostensibly done for public purposes, but there have been allegations that several were political maneuvers. Belizean law requires that the Government assess and pay appropriate compensation based on fair market value; such compensation cases, however, can take many years to settle.

In July 2011 the Prime Minister proposed and in October the National Assembly passed the Eight Constitutional Amendment, which enshrined government (public) ownership of utility providers within Belize, including water, electricity, and telecommunications. The water utility provider had been government owned since 2005, the largest telecommunications company had been re-nationalized earlier in 2011, and the electricity company also had been nationalized earlier in 2011. The Eighth Amendment made public ownership mandatory. The telecom firm, which was previously held by a series of companies operated by a prominent British politician, was nationalized following ongoing disputes and litigation stemming as far back as 2009. The electricity company, which was previously held by a Canadian company, was nationalized following a series of rolling blackouts and government bailouts. As of January 2012, the GOB has not compensated investors affected by the nationalizations, and has not reached an agreement with investors on the valuation of the companies at the time of nationalization.

Dispute Settlement

In March 2010 the Supreme Court of Judicature (Amendment) Act granted the Belize Supreme Court the authority to issue an injunction against any person or entity that has commenced arbitrations against the Government of Belize, whether that arbitration occurs in Belize or abroad. If the parties against whom the injunction is issued continue in their arbitration, the Court can void the award, and those involved, including their lawyers, advisers, corporate director, managers, shareholders, and secretaries can be criminally charged and fined up to BZ$500,000 (US$250,000) or jailed for up to five years for contempt. A further BZ$300,000 (US$150,000) can be charged for each day a person continues in breach of the injunction. Even individuals only indirectly involved who provide counsel, advice, or investigative assistance, can be charged. It is not clear whether or not the Act supersedes Belize’s treaty commitments to international arbitration.

In addition, “A person charged with an offense under this section may be tried in his absence if the Court is satisfied that such a person was given at least 21 days’ notice of the charge and the date, time and place of the trial and that he had a reasonable opportunity of appearing before the Court but had failed to do so.” The notice referred to can be delivered “personally, or by registered post, or by a notice in the Belize Gazette.”

In September 2010, several claimants brought a constitutional challenge of the Act to the Supreme Court. In December 2010 a judgment was read which found that while the Act was valid, there were certain sections that were ultra vires of the Constitution. The GOB is reviewing the legislation to make it compliant with the Constitution.

Several disputes in Belize involving U.S. investors and property claims remain before the courts, and in some cases have not been resolved for several years. At least one dispute involves an international arbitration that the government seemingly could challenge with the Supreme Court of Judicature (Amendment) Act, but the government has not done so.

Court proceedings are still underway for settlement of damages to the Belize Barrier Reef by a cargo ship, registered in the Netherlands, that ran aground in 2009, causing damage to over 6,000 square meters of the coral system. In April 2010, the Supreme Court awarded US$11.5 million to the Government of Belize for damages to the barrier reef, but the Court of Appeal reduced the judgment to US$2 million. The government is in the process of appealing the ruling to the Caribbean Court of Justice, the highest appellate court for Belize, seeking a higher award.

Chapter 244 of the Laws of Belize (Bankruptcy Act) provides and allows for bankruptcy filings (http://www.belizelaw.org).

Performance Requirements/Incentives

BELTRAIDE operates under the GOB’s Ministry of Economic Development and is the official statutory body responsible for investment and trade promotion. The GOB offers a number of fiscal and other incentives in order to attract private investment. The legal framework for incentives offered include: Fiscal Incentives Act, Export Processing Zone Act, Commercial Free Zone Act, International Business Companies Act, Retired Persons Incentives Act, Trusts Act, Offshore Banking Act, and Gaming Control Act. The first five programs are the most popular. Belize, along with other developing countries, has until 2015 to comply with WTO requirements regarding Fiscal Incentives, Export Processing Zones, and Commercial Free Zones, which may entail eliminating some of these incentives. (http://www.belizeinvest.org.bz)

Regulations require that incentives and the extent of benefits granted to an enterprise are awarded based on the investment’s socio-economic contributions to the Belizean economy, specifically: employment creation, transfer of skills and technology, and foreign exchange earnings or savings. Projects must be in the public interest. Their appropriateness within the Government’s development plan is also considered.

The Fiscal Incentives Act awards a qualified entity a development concession during the start-up or expansion stages of a business, in order to foster its growth by offsetting custom duties. According to www.belizeinvest.org.bz, two programs are offered under this Act, namely the “Regular Program” for investments exceeding US$150,000; and the “Small and Medium Enterprise (SME) Program” for investments of less than US$150,000. In general, the legal framework allows for full Customs Duties exemption and Tax Holidays for up to 15 years for approved enterprises. According to the Act, this is renewable for a further term of 10 years, totaling 25 years for companies engaged in agriculture, agro-industrial products, mariculture (aquaculture), food processing, and manufacturing with export operations that are labor intensive. Examples of categories that may be exempted from Import Duties and Revenue Replacement Duties are Building Materials and Supplies; Plant, Machinery, and Equipment; Specialized Tools; Utility and Transport Vehicles; Fixtures and Fittings; Office Equipment and Appliances; Spare Parts for Plant, Machinery & Equipment; Agricultural Machinery and Supplies; and Raw Materials or other items for the sole usage of the approved enterprise. The length and extent of a development concession are 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; (d) transfer of skills and technology; and (e) new employment opportunities.

Under the Fiscal Incentives Regular Program, entities must be incorporated under the Companies Act Chapter 250 Laws of Belize to apply. Application fees under the Regular Program are nonrefundable and depend on the level of proposed investment:

Estimated Investment (USD$)

Fee (USD$)

for investments below $250,000

$3,500

between $250,000 and $500,000

$7,500

between $500,000 and $2,500,000

$10,000

above $5,000,000

$15,000

There is also an annual administration and monitoring fee of $500 if the application is successful and a publication fee of $400 for two week’s circulation of an announcement of a successful application in a newspaper. For any amendment to the Statutory Instrument an amendment fee of $1,750 is charged.

Occasionally, foreign investors have complained that these investment promotions are rarely as open and effective as they might seem. For example, the Fiscal Incentives Act allows a tax holiday period; however, only in rare cases within the past 10 years was this tax holiday even considered during the approval process.

The Fiscal Incentives SME Program is aimed at smaller enterprises with a minimum of 51% Belizean ownership, and offers the same benefits of the Regular Program, with the exception of the allowable timeframe for tax holidays and duty exemptions. Under this program, companies are allowed a maximum of five years of development concessions, with the expectation that after this period, companies can mature into the larger Regular Program. However, there exists a significant variance in the application fee structure between both programs, as can be seen below.

Estimated Investment

Fee (USD$)

for investments below $50,000

$50

between $50,000 and $100,000

$100

between $100,000 and $150,000

$250

There is also an annual administration and monitoring fee of $50 if the application is successful. For any amendment to the Statutory Instrument an amendment fee of $50 is charged.

The Export Processing Zone (EPZ) Act, which is administered by the Ministry of Economic Development, was designed to attract local and foreign investments to boost production for export markets. Activities targeted by this incentive include manufacturing, non-traditional agricultural products, processing, assembly, and services, including call centers. Approved companies in this portfolio are treated as being outside national customs territory by benefiting from exemptions from full import and export duty, capital gains tax, property and land taxes, dividend tax, value-added tax, trade turnover tax, foreign exchange tax, transfer tax, as well as excise, sales, and consumption taxes. The program allows a tax holiday period of 20 years, with an option to extend and deduct losses from profits following the tax holiday period. Companies are allowed to open foreign currency bank accounts, and are exempted from import and export licensing requirements, resulting in no restrictions on imports of raw materials or exports of finished products. There is a non-refundable application fee of $500. The program also allows for the sale, lease, or transfer of goods and services within an EPZ; Customs inspection at the zone for expediency; and work permits at no cost for all professional and technical staff, and, if necessary, up to 20 percent foreign workforce.

A Commercial Free Zone (CFZ) is a specifically designated area for the conduct of business operations, including, but not limited to: manufacturing, commercial office, insurance services, banking and financial services, offshore financial services, professional or related services, processing, packaging, warehousing, and distribution of goods and services. Belize currently has two CFZs: one on the northern border with Mexico and a small zone on the western border with Guatemala. Goods originating from these free zones can only be sold into Belize’s national customs territory after the necessary duties and taxes have been assessed and paid. The Commercial Free Zone Management Agency (CFZMA), sanctioned by the Government of Belize, monitors and administers the free zones. Incentives include exemption from import duties, income tax, taxes on dividends, capital gains tax, or any new corporate tax levied by the Government during the first 10 years of operation. In addition, all imports and exports of a CFZ shall be exempt from all customs duties, consumption taxes, excise taxes, or in-transit taxes, except those destined for or directly entering areas subject to the national customs territory. CFZs are free of import and export licensing requirements, as well as taxes imposed on the sale of foreign currency. Additionally, CFZ businesses incurring a net loss over the five-year tax holiday may deduct losses from profits in the three years following the tax holiday period. There is a non-refundable application fee of $500 and for successful applicants an annual fee of $1,000 is charged.

According to www.ibcbelize.com, the International Business Companies (IBC) Act allows international investors to establish offshore companies in Belize. These entities are not allowed to own an interest in real property in Belize or to conduct business in banking or insurance with Belizean residents. However, they benefit from tax exemptions on: all income; dividends paid to persons resident in Belize or elsewhere; interest, rent, royalties, and compensation paid to persons who are not residents of Belize; and capital gains realized on shares, debt obligations, or other securities of an IBC by persons who are not resident in Belize. There are no currency restrictions for banking transactions, and no restrictions on citizenship or residency requirements for directors, officers, or shareholders. All IBCs must be registered through an authorized IBC agent of the International Business Companies Registry.

According to the Belize Tourism Board (www.belizeretirement.org), the Retired Persons Incentive Act was designed to benefit retired persons over 45 years of age. To qualify, applicants need proof of income not less than US$2,000 per month through a pension or annuity generated outside of Belize. An approved Qualified Retired Person is allowed to import personal effects and an approved means of transportation, free of all customs duties and taxes. All income and receipts which are accrued outside of Belize are also free of all duties and taxes. A timeframe of one year is given to import all personal and household effects into Belize, using multiple shipments as necessary. Duty and tax free importation of an automobile, light aircraft (less than 17,000 kg), or boat is allowed. Vehicles may only be replaced at intervals exceeding three years. Effects and items imported under this program can only be sold, given away, or leased after the appropriate payment of applicable duties and taxes.

Purchasing from local suppliers is encouraged, although firms can import products as long as duties are paid and relevant licenses have been acquired.

Companies conducting business with international trading partners have access to foreign currency, provided that the appropriate permit is secured from the Central Bank of Belize.

Certain conditions are only imposed during the investment process if a company is benefiting from incentives which have minimum employment targets in relation to the size and scope of the undertaking. For example, the Fiscal Incentives regime requires that beneficiaries maintain a minimum number of employees over the life of the development concession.

The Department of Immigration is responsible for the processing of Work Permits and Residency applications. According to the Department of Immigration, citizens of the United States and the British Commonwealth do not require Visitor Visas to travel to Belize and remain for fewer than 31 days.

Right to Private Ownership and Establishment

The Government of Belize supports and encourages joint venture and partnership investments as a preferred mechanism for investment, but still allows 100 percent foreign ownership of an enterprise, so long as it is incorporated to conduct business in Belize.

Private entities, whether foreign or local, have the right to freely establish, acquire, and dispose of interests in property and business enterprises.

According to the Ministry of Natural Resources, http://www.mnrei.gov.bz/, applications for purchasing National Lands below ten acres may be made to the Commissioner of Lands and approved by the Minister of Natural Resources. Applications for National Lands purchases exceeding ten acres require approval by Cabinet. The Department of Lands and Surveys can advise which lands remain available.

Land purchases can also be made from private land holders, either directly or through a real estate agent. This type of purchase is considered a private transaction and does not require prior Cabinet approval.

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.”

There are numerous property disputes involving foreign investors and landowners related to the unreliability of ownership histories and specific boundaries of land holdings. Title insurance is not commonly available in Belize, although the government is in the process of creating a title insurance process and database. Generally, as in the United States, property buyers will avoid problems by dealing with real estate professionals and lawyers experienced in local property law, but disputes have arisen in such cases as well.

The Lands Department in the Ministry of Natural Resources has attempted to rectify the situation by computerizing the land titles database; however, a backlog still exists, which has proven insufficient in reducing the number of complications. At times it can take up to six months to obtain a Certificate of Title.

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). BELIPO (http://belipo.bz/) was established to administer these IPR laws, and it functions as Belize’s national intellectual property registry. Its mandate covers the protection of copyrights, industrial designs, patents, trademarks, protection of new plant varieties, and protection of layout—designs (topographies) of integrated circuits.

Despite the existence of IPR laws and an administrating office, enforcement is lacking. Illegally copied CDs and DVDs continue to be marketed throughout the country.

Local cable companies and television stations continue to broadcast content pirated from American television networks and cable channels, as well as sports programming and movies, with impunity.

Transparency of the Regulatory System

Legal and regulatory accounting systems are consistent with international norms.

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.

The government publishes a Gazette that includes proposed laws and regulations to solicit public comment. Interested persons can review, recommend changes, or object to draft laws and regulations at the Committee Meeting of the House of Representatives. However, sometimes laws are passed quickly without publication or public review, as was the case with the Supreme Court of Judicature (Amendment) Act.

Relative to the region, there is a high overall cost of doing business regarding payments for utilities (such as electricity and water services), internet, wages, and import duties (tariff barriers).

BELTRAIDE previously tried to establish an ambitious service where all the procedures to set up a business could be completed within one business day; however, this was ultimately unsuccessful. Setting up a business remains a complicated process. As noted in the table above, the World Bank’s Doing Business 2012 Report ranked Belize 152nd out of 183 countries on the “Starting a Business” criterion. Initial registration can often be accomplished quickly, but obtaining necessary licenses, including at the local level, can be time consuming.

Efficient Capital Markets and Portfolio Investment

Belize's financial system is small. Five commercial banks operate domestically, of which three are local subsidiaries of international banks, offer traditional banking services such as consumer and commercial loans, sale of foreign currencies, credit cards, savings, checking and time deposits. They also provide letters of credit and bank guarantees. The largest domestic commercial bank holds over US$465 million in total assets.

There are seven international banks that offer banking services in foreign currencies exclusively to non residents. These services include personal and commercial loans, brokerage services, foreign exchange, credit cards, savings, demand and time deposits.

Fourteen credit unions operate as non-profit cooperatives that function as savings banks, offering mainly savings accounts, consumer, education and residential loans to their shareholders. Credit unions are among the most popular forms of savings and borrowing institutions for the general public, largely due to their service ethos and favorable terms of borrowing and repayment schedules. The largest credit union has approximately 42,500 members with total assets estimated at US$160 million.

There is also a state owned development bank that suspended its lending program in 2005, but resumed operations in July 2009. Following the 2005 liquidation of assets, a Commission of Inquiry, and restructuring, the institution has gradually reintroduced their services for development finance. They now offer loan financing in various sectors including agriculture, aquaculture, tourism, housing, education, and small enterprises.

Belize also has one mutual fund (called unit trust) and seventeen insurance companies that operate country wide.

The Central Bank of Belize (https://www.centralbank.org.bz/) is responsible for formulating and implementing monetary policy that fosters stability of the exchange rate and promote credit instruments that are conducive to economic growth. The Belize Dollar has been pegged to the United States Dollar since May 1976 at a fixed exchange rate of BZ$2.00 to US$1.00.

To preserve the peg to the U.S. dollar, the Central Bank is required to maintain external assets of at least 40% of its domestic liabilities and manage credit growth to ensure that the savings/investment balances of the public and private sectors are at sustainable levels so that the resulting import consumption does not put undue pressure on official reserves.

Since commercial banks dominate lending in the financial system, monetary policy specifically targets the liquidity of commercial banks through management of reserve balances. Manipulation of mandatory reserve requirements are a major instrument of monetary policy as they affect credit growth, interest rates, and the level of money supply.

Overall interest rates on commercial loans, personal loans, and mortgages in Belize are relatively high; average personal and commercial lending rates ranged between 13.0% and 16.0% in 2011.

In early December 2011, several commercial banks and credit unions refused to accept “fixed deposits” (or certificates of deposit, “CDs” in the United States), due to hefty surplus liquidity in the banking system. Over the past thirteen months liquidity more than doubled from US$24 million to almost US$55 million dollars. This meant that the rate of deposits was exceeding the rate of loans being approved. This imbalance in the banking system created a fiscal environment where banks were forced to reduce their lending rates. Banks have been relatively tight with extending credit since 2010, when Belize’s banking system reported a surge in nonperforming loans (NPLs), equivalent to 16.1% of total loans by the end of 2010, although by mid-2011 the number had declined slightly to 15.2%.

Credit is made available on market terms. Despite the fact that this is regulated by the CBB, interest rates are largely set by local market conditions prevailing within the commercial banks.

Belize does not have a stock market and lacks the regulatory legal framework for the development of one in the near future.

Competition from State-Owned Enterprises (SOEs)

SOE’s are active in the utilities and services sectors. The Government operates the sole provider of water services, and as of September 2011 took constitutional control over the operations of the largest telecommunications provider along with the sole distributor of electricity.

SOE’s usually engage senior government officials, and at times include members of local business bureaus and chambers of commerce, labor organizations, and quasi-governmental agencies as a part of their management and board of directors. There is usually an independent board of directors that guides the direction, policies, and decisions of the SOE.

Despite these general guiding principles, the current administration has been accused of nepotism in staffing at least one of its SOEs. The administration has also been accused of conflicts of interests when board members or directors of SOEs are also on the board of other organizations that do business with the SOE. Similar allegations have been made regarding other SOEs and their operation, privatizations, and procurement practices during other administrations as well.

Corporate Social Responsibility (CSR)

Many foreign and local companies engage in corporate social responsibility each year. Some companies donate educational scholarships to attend school both locally and internationally, while other companies sponsor football teams, basketball teams, and bicycle races. At times educational institutions benefit from assistance in infrastructural maintenance or donations of equipment. This may include painting school buildings, construction of classrooms and bathrooms, or donating fans, tables, chairs, and other necessary items. Firms often receive considerable positive media coverage for CSR projects.

Political Violence

Belize has traditionally enjoyed one of the most stable political environments in the region, having held relatively peaceful and transparent democratic elections since it attained independence on September 21, 1981.

Allegations of government corruption, economic mismanagement, and labor issues have led to occasional strikes and demonstrations. The most notable in recent history was a demonstration in February 2009 concerning sugarcane prices. This took place in northern Belize and resulted in one death and several injuries. 2010 saw two countrywide business shut-downs, as well as several public demonstrations in protest of the growing levels of violence in Belize. In 2011, there was a transit strike that involved public demonstrations and brief traffic stoppages. These events were non-violent in nature.

Border Issues: Guatemala makes a historical territorial claim on a large part of Belize. This issue remains largely a political one between both governments and violence has rarely been seen in recent years. In 2008 Belize and Guatemala signed a Special Agreement agreeing to hold simultaneous referenda to determine whether the dispute should be brought before the International Court of Justice for a decision. They have yet to set a date for simultaneous referenda to be held in both countries; however this is not expected until at least 2013.

There were several incidents in 2011 in which Belize Defense Force patrols encountered private Guatemalan citizens, some engaged in illegal logging activities. In one incident, a Guatemalan civilian was shot in the hand. The two countries exchanged public comments that were critical of each other, but the incident did not escalate, in part because both countries recognize the Organization of American States (OAS), which maintains an office in the “adjacency zone” of the two countries, as a mediator for such incidents. Illegal logging, illegal harvesting of xate palm leaves, poaching of animals, and agriculture by Guatemalans on the Belize side of the adjacency line continues and is reportedly increasing, according to an NGO that monitors Belize’s Chiquibul Forest Nature Reserve, which covers a sizable portion of the border area.

Corruption

According to the Corruption Perceptions Index, published by Transparency International (www.transparency.org), the perceived level of corruption in Belize is moderately high and has increased significantly over the last several years. Belize was not included in the survey for 2009, 2010, or 2011 due to shortage of survey sources within Belize. Belize was ranked 99th overall with a score of 3.0 in 2007 and 109th in 2008, with a score of 2.9. It had been declining steadily for five years through 2008, from a score of 4.5 and ranking of 60 in 2004. Transparency International now includes countries in the survey only if they have at least three data sources. The Corruption Perceptions Index measures the perceived level of public-sector corruption in 180 countries and territories around the world.

Belize, like many countries, has anti-corruption laws on its books, but these laws, which come under the purview of the Office of the Attorney General, are seldom enforced. One such law is the Prevention of Corruption in Public Life, which came into effect in 1994, but to date has not been enforced. This law requires public officials, such as the Governor-General and members of the National Assembly, to disclose in the Government Gazette their assets, income, and liabilities. To date, only a handful of these officials have followed the law.

The Prevention of Corruption in Public Life Act established an Integrity Commission responsible to monitor, prevent, and combat corruption by examining declarations of physical assets and financial positions filed by public officers. The Commission is able to investigate allegations of corrupt activities, including by members of the National Assembly, Mayors and Councilors of all cities, and Town Boards. This Act criminalizes acts of corruption taken by public officials and encompasses the use of office for private gain, code of conduct, use of public funds, and bribery. Section 24 of the act covers punishment for breach which may include a fine of up to US$5,000, severe reprimand, forfeiture of property acquired by corruption, and removal from office. The last report of the integrity commission was published in 2005. No cases under this Act have ever led to prosecution.

Belize has not yet signed the United Nations Convention Against Corruption (UNCAC). UNCAC entered into force in December 2005 and is comprised of 71 Articles obliging countries to implement a wide and detailed range of anti-corruption measures affecting their laws, institutions and practices. It covers prevention, criminalization, law enforcement measures, international cooperation, asset recovery, technical assistance and information exchange. As of November 2011, the convention had been accepted by 157 countries as well as the European Union and applies to most of the world’s population.

In June 2001 the GOB signed the OAS Inter-American Convention on Corruption and it supports the revival of the Committee on Public Probity and Ethics, which would review implementation of the convention.

Since 1999, the country has had a parliamentary commissioner, known as the 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 current Ombudsman has not issued an official report of findings since taking office in 2009. The Ombudsman’s office has minimal resources to complete its work.

There exist two non-governmental institutions that monitor government activities; they are the Association of Concerned Belizeans (ACB), and the National Trade Union Congress of Belize (NTUCB). The first is comprised of concerned private citizens, and the latter is comprised of the various Belizean workers’ unions.

Belize is dominated by two major political parties, the People’s United Party (PUP) and United Democratic Party (UDP). In 2008, the UDP were elected on an anti-corruption platform, though it has yet to sign the UNCAC. There is a third party, currently without national representation, called Vision Inspired by the People (VIP), which has applied pressure on both the major parties to sign UNCAC. Many businesspeople, local and foreign, complain that both major political parties can and do practice a partisanship that affects businesses in terms of receiving needed licenses, winning government contracts for procurement of goods and services, and the granting of government land to private owners. Some middleclass citizens and business owners throughout the country have complained of government officials, including police and others, of soliciting bribes.

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

Some businesses and residents in the country have also alleged that some officials demand payoffs if an inspection reveals a breach of fisheries laws. For example restaurants and resorts carrying under-sized lobsters and conch are subject to court summons and a fine. However, payoffs allegedly circumvent fines or appearances in a court of law.

In December 2011, media reported about a leaked internal memo from state-run Karl Heusner Memorial Hospital that alleged corrupt hiring and procurement practices. The government launched an investigation in January 2012.

In December 2011, media reported on a November 16 incident at the Benque Viejo border crossing with Guatemala. A Mexican national and Honduran national alleged that immigration officials extorted 10,000 Mexican Pesos (approximately 725 USD) from them and sexually harassed one of them. The Ministry of Defense and Immigration told the media there was an ongoing internal investigation.

From July through November 2011, media occasionally reported the claim of several NGOs that the Forest Department in the Ministry of Natural Resources and Environment was ignoring or facilitating the illegal trade of rosewood.

In November 2011, an employee of the San Pedro Magistrate’s Court was charged with five counts of forgery.

In August 2011, media reported that eleven Sri Lankans attempted to enter Belize and immigration officials were planning to deny them entry. The government’s film commissioner intervened with immigration officials and the Sri Lankans were granted entry. In September, a magistrate court determined they were not in Belize to produce a film and they were fined. Unable to pay the fine, they were sentenced to three months in prison.

On November 13, 2010 the Belize Police Department intercepted a drug plane that had landed on the Southern Highway in the early hours of the morning. The pilot was missing, as was the cargo. Police intercepted a van that had been seen fleeing the scene and the four police officers and one Customs official inside were arrested, including one officer from Internal Affairs, and the current and former drivers of the Governor General. A fifth police officer was later charged in connection with the incident. Two point six (2.6) metric tons of cocaine was later recovered. The case remains before the Belize courts.

In September and October 2010 several GOB agencies came under fire for possible involvement in a scandal where thirty-three Chinese nationals were smuggled into Belize through the Phillip Goldson International Airport (PGIA). The Chinese nationals were brought to Belize on three aircraft over a couple of weeks. Arrival records were falsified, flight manifests duplicated, and visa numbers misrepresented. The flights all originated from Haiti, and all passengers were in possession of what were believed to be falsified passports. The Minister of Police explained at the time that Chinese passengers rarely spend more than 12 hours in Belize before being whisked away to the northern border with Mexico. An investigation ensued and six immigration officers were arrested as a result. The matter is currently in the Belize court system. No subsequent arrests have been made.

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 enables it to participate in the Economic Partnership Agreement (EPA) between CARIFORUM and the European Union (EU).

Belize is also a member of the Central American Integration System (SICA). This could enable the Belizean economy to function as a hub connecting the Central American and Caribbean markets, but Belize is not a part of the Secretariat of Central American Economic Integration (SIECA).

Belize has bilateral investment treaties with Austria, the People’s Republic of China, El Salvador, Italy, Netherlands, and the United Kingdom. For additional information on Belize’s Bilateral Investment Treaties see http://www.sice.oas.org/ctyindex/BLZ/BLZBITs_e.asp.

Belize has signed 14 Tax Information Exchange Agreements (TIEA) with countries such as Australia, United Kingdom, Belgium, Netherlands, Sweden, Finland, Greenland, Norway, Iceland, Denmark, Faroes, Portugal, France, and Ireland. For more information see http://www.ifsc.gov.bz/legislation.html.

OPIC and Other Investment Insurance Programs

The Overseas Private Investment Corporation (OPIC) (http://opic.gov/) has been involved in two projects in Belize, one in 2002 and the other in 2006.

Belize is a member of the Inter-American Development Bank (IDB), Caribbean Development Bank, and the Multilateral Investment Guarantee Agency (MIGA) of the World Bank. Belize is also a beneficiary member of the Central American Bank for Economic Integration (CABEI).

Labor

According to the 2010 Belize Population Census, Belize’s population is approximately 313,000 persons of which 131,000 comprised the labor force. Roughly 30,000 people were unemployed yielding an unemployment rate of slightly over 23%.

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

Foreign investors who have a development concession 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.

The Ministry of Labor is charged with enforcing the minimum wage, which generally has been respected in practice. In August 2010 the national minimum wage was adjusted to BZ$3.10 (USD$1.55) per hour across-the-board, with the exception of agricultural and agro-processing workers, for whom the minimum wage is BZ$2.75 (USD$1.38) per hour.

Foreign Trade Zones/Free Ports

Belize uses its Commercial Free Zone and Export Processing Zone regulations as incentives for foreign and domestic investors, see the opening section on “Openness To, and Restrictions Upon, Foreign Investment.”

Foreign Direct Investment Statistics

Statistics on foreign direct investments in Belize, by country of origin and sector, are unavailable, including the total invested by American investors. There are a number of successful and long-term U.S. owned businesses in Belize, including in the food processing, timber, agriculture, tourism, and service sectors.

The following is a list of some of the largest American investments in Belize.

Company

Sector

US Foreign Ownership

ADM Belize Mills Ltd.

Agro-processing

100%, since 1974

Yalbac Ranch and Cattle Corporation (Belize) Ltd.

Timber and Agriculture

100%, since 1986

Fruta Bomba Limited

Agriculture

100%, since 1995

Captain Morgan Vacation Beach Club

Tourism

100%

The Victoria House

Tourism

100%

Fort Street Tourism Village

Tourism

unspecified

Hamanasi Dive and Adventure Resort

Tourism

Majority

Journey’s End Hotel

Tourism

Majority

Ramon’s Village (Reef Resorts) Ltd.

Tourism

100%, since 1987

Turtle Inn Resort

Tourism

100%

Ready Call Center

Call Center

100%



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