2011 Investment Climate Statement
Bureau of Economic, Energy and Business Affairs
March 2011
Report

Overview of Foreign Investment Climate

The Government of Belize (GOB) welcomes Foreign Direct Investment (FDI) although the investment climate has cooled over the past year. The GOB generally supports investments that contribute to the diversification and improvement of the country’s economic base, the creation of new and meaningful employment opportunities, the generation of foreign exchange earnings/savings, and the effective transfer of skills and technology. The GOB offers various investment incentive packages to assist new and existing enterprises. The Embassy is aware of a number of disputes between U.S. and other foreign investors and various GOB agencies as well as new legislation that hampers the ability of investors to seek arbitration to resolve disputes.

Although the Belize Trade and Investment Development Service (BELTRAIDE) was established to serve as a one-stop-shop for export and investment assistance, bureaucratic red tape may still be encountered when seeking government fiscal incentives. BELTRAIDE continues to encourage investment in the following sectors of the economy:

-Agriculture, agro-industries, food processing and livestock

-Tourism and tourism-related industries

-Aquaculture and horticulture

-Light-manufacturing industries and assembly plants

-Information Communication Technology (ICT) and Call Centers

-Forestry and forestry-based industries

There are several incentives designed to encourage investment in Belize, including the

Fiscal Incentives Act, Export Processing Zone Act, Commercial Free Zone Act, and the International Business Companies Act. While investors do not necessarily require development concessions to invest in Belize, many factor these concessions into their investment decisions to save on local duties and taxes. However, some foreign investors have complained that these incentives are rarely as open and effective as they might seem.

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 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 and requirements when designing and marketing their projects. See www.belizelaw.org for more information on the Environmental Protection Act, Chapter 328 of the Laws of Belize. Environmental Clearance is classified according to magnitude of development, sector of investment, and location, and must be obtained prior to site development.

According to the Ministry of Economic Development, Belize, along with other

developing countries, has been given until 2015 to comply with WTO requirements regarding Fiscal Incentives, Export Processing Zones, and Commercial Free Zones. According to the Corruption Perceptions Index (www.transparency.org), Belize was ranked 99th overall in 2007 and 109th in 2008. Belize was not included in the survey for 2009 or 2010 due to a shortage of survey sources, which is a technical criterion for the index. The Corruption Perceptions Index (CPI) measures the perceived level of public-sector corruption in 180 countries and territories around the world.

On a scale of zero to one hundred (0 to 100), the Heritage Economic Freedom Index scored Belize at 63.0 in 2009 with an overall worldwide rank of 66th. Belize scored 61.5 in 2010, causing it to drop to 79th overall. The report explained that the primary reasons for the decline in Belize’s overall score were problems with respect for property rights and for the rule of law. Belize is ranked 15th out of 29 countries in the region covering South and Central America, and the Caribbean. This is also a drop in rank from 2009 when Belize ranked 13th in the Caribbean, and Central and South American regions. Belize is classified as “moderately free,” having scored between 60.0 and 69.9 points. (http://www.heritage.org/index/Country/Belize) According to the World Bank’s Doing Business 2011 Report (http://www.doingbusiness.org/data/exploreeconomies/belize/), Belize dropped 6 positions from 2010, and now ranks 99th out of 183 economies surveyed worldwide.

The following table summarizes Belize’s scores and rankings according to the Millennium Challenge Corporation (MCC), a U.S.-founded institution leading the fight against global poverty (www.mcc.gov). Measurements are based on percentile ranking within income peer groups of countries surveyed for the 2011 country report.

If a scroll bar appears below the following table, swipe the table to move left/right of the dashed line.

Measure

Year

Index/Ranking

TI Corruption Index

2008

109

Heritage Economic Freedom

2010

79

World Bank Doing Business

2011

99

MCC Gov’t Effectiveness

2011

45%

MCC Rule of Law

2011

45%

MCC Control of Corruption

2011

81%

MCC Fiscal Policy

2011

70%

MCC Trade Policy

2011

33%

MCC Regulatory Quality

2011

45%

MCC Business Start Up

2011

14%

MCC Land Rights Access

2011

28%

MCC Natural Resource Mgmt

2011

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.

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 directly from the Central Bank of Belize (CBB).

Foreigners and locals, with the proper documentation from the Central Bank of Belize, are allowed to access foreign exchange directly from the commercial banks. Occasional shortages of foreign currency in the banking system have resulted in delays in payments when investors were conducting international transfers and transactions. This problem has spawned the evolution of a parallel market, which itself has created cash flow problems for the legitimate banking system, by funneling money through different channels, as opposed to creating an additional source of foreign exchange.

The Central Bank approval is required for businesspeople or firms wishing to secure a loan from outside Belize that involves a foreign currency, and for businesspeople or firms to service repayment of the loan. 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.

Expropriation and Compensation

Belizean law requires that the Government assess and pay appropriate compensation based on fair market value; however such compensation cases can sometimes take years to settle.

In 2005 the Government of Belize reached agreement to renationalize the country's sole water utility provider. There have been several contentious cases in which the previous 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 were political payoffs.

More recently, in August 2009, the current administration made the decision to nationalize the country’s largest telecommunications provider, stemming from ongoing disputes and litigations. The nationalization was triggered by a British court ruling that awarded the telecom firm damages resulting from the current administration not honoring a contractual arrangement concerning tax holidays. Ultimately, the Government flexed its political muscle and passed a special resolution in the National Assembly to take over the assets and operations of this firm, which was previously held by a series of companies operated by a prominent British politician. (Since 2004, the GOB and a U.S. investor have been involved in a complex and protracted legal dispute surrounding ownership of this same telecommunications provider.) To date, the GOB has not compensated investors affected by the nationalization, and the sides cannot agree on the valuation of the company at the time of nationalization. This has led to litigation against the GOB. Investors are reportedly seeking damages in the range of $300 million USD as compensation for expropriation while the GOB has commented that any future settlement would be far below that amount.

Despite numerous pieces of ongoing litigation surrounding the company, in October 2010 the GOB offered for public sale 44.54% of the GOB shares. The sale is intended to put the company back in the hands of Belizeans. The sale of shares closes in February 2011. It is unclear how future corporate decisions and political motives will impact the state of competition in the telecommunications sector in Belize.

Dispute Settlement

In March 2010, the Supreme Court of Judicature (Amendment) Act was passed quickly, without much debate, and without consultation with the opposition or business community. The Belize Supreme Court now has 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 directors, managers, shareholders and secretaries can be criminally charged and fined up to BZ$500,000 ($250,000 USD) or jailed for up to five years for contempt. A further BZ$300,000 ($150,000 USD) 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. This Act can apply "whether such injunction was issued before or after the commencement of this Act." This act can contravene agreements calling for arbitration to resolve disputes, including international arbitration agreements.

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.”

Several business groups and international organizations came out against the Act. 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 virus of the Constitution. The GOB is currently reviewing the legislation to make it compliant with the Constitution.

In December 2010, the Supreme Court of Belize ruled that the GOB is to adhere to and comply with a $43 million USD award to British Caribbean Bank and Belize Bank that resulted from international arbitration hearings. The Belize government has stated its intention to appeal the decision in the Belize Court of Appeal, and beyond, if necessary.

Several disputes in Belize involving U.S. investors are currently before the courts, and have not yet been resolved. Two unresolved disputes over land reportedly expropriated by the government date back to 1992 and 1994. 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 Chief Justice awarded $11.5 million USD to the Government of Belize for damages to the barrier reef. Appeals are pending.

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 statutory body responsible for investment and trade promotion. The GOB offers a number of fiscal and other incentives to attract private investment. The legal framework for incentives offered include the 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. (http://www.belizeinvest.org.bz)

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 serve 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 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 $150,000 USD; and the “Small and Medium Enterprise (SME) Program” for investments of less than $150,000 USD. 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) employment opportunities created.

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:

for investments below $250,000 the fee is $3,500

for investments between $250,000 and $500,000 the fee is $7,500

for investments between $500,000 and $2,500,000 the fee is $10,000

for investments above $5,000,000 the fee is $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, due to policy restrictions, a moratorium was put into effect and 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.

For investments below $50,000 the fee is $50.

For investments between $50,000 and $100,000 the fee is $100.

For investments between $100,000 and $150,000 the fee is $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 offshore call centers. Approved companies in this portfolio are treated as being outside national customs territory by benefiting from full import and export duty exemptions; exemptions from capital gains tax, property and land taxes, dividend tax, value-added tax, excise, sales and consumption taxes, trade turnover tax, foreign exchange tax, and transfer tax. 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. The site is usually located near a border point to facilitate duty-free and tax-free wholesale and retail activities with international customers. Sales are permitted to diplomats of third countries, ships that dock at ports, and for direct export. Goods originating from this free zone can only be sold into Belize’s national customs territory after the necessary duties and taxes have been assessed and paid. This CFZ portfolio is managed by the Commercial Free Zone Management Agency (CFZMA), sanctioned by the Government of Belize for monitoring and administration. 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 $2,000 USD 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 boats 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 the company to have a minimum number of employees at the point a development concession is granted.

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 as 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 10 acres may be made to the Commissioner of Lands and approved by the Minister of Natural Resources. While this has not been a major obstacle in the past, significant bureaucracy and red-tape have evolved, due to the limited amount of land not already held by private owners or leased for agricultural purposes. Applications for land purchases exceeding 10 acres require approval by the Cabinet of Ministers. 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 state 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 because it is often difficult to reliably trace ownership, history, and specific boundaries 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 real estate professionals and lawyers experienced in local property law.

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, so this has proven insufficient in reducing the number of complications. The time it takes to obtain a Certificate of Title has increased from one month to almost six months.

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 in stores and on the streets.

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

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, numerous taxes, and import duties (tariff barriers). One can expect delays with the import licensing regime, and obtaining basic licenses, permits, and registrations.

BELTRAIDE previously tried to establish a one-stop-shop service where all the procedures to set up a business can be completed within one business day; however, this was ultimately unsuccessful. The largest telecom firm in the country was nationalized in August 2009 (see Expropriation and Compensations). Prior to the nationalization, the company signed a secret accommodation agreement with the previous government, which provided concessions that discouraged competition in the industry. Since the takeover, the firm has been taken to court by their competitor for disabling a satellite connection to disrupt international phone calls and internet services of the competitor. The Supreme Court ruled that all of the competitor’s connections must be restored.

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.

A few investors have found a lack of transparency in the administration of some Belizean laws and procedures, such as the investment incentive programs, and import licenses.

Generally, proposed laws and regulations are published in the official Government Gazette for 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, the ruling party does have the ability to push through certain legislation very quickly and without debate, such as happened with the Supreme Court of Judicature Amendment Act.

On December 7, 2010 the Government of Belize declared an unprecedented ban on media house Great Belize Productions, which produces Channel 5. Channel 5 is affiliated with the opposition and the former owner of the telecommunications provider that was nationalized in 2009. The Government accused the television station of what they perceived to be unfair and biased reporting, and for not airing a television show created by the Government. The enforcement of the ban meant that no public official was authorized to speak with or give an interview to the Channel 5 news station. On December 23, the Chief Executive Officer of Channel 5 met with the Prime Minister to discuss ways to resume normal relations, and on January 4th, 2011 the Cabinet agreed to lift the ban and reinstate normal relations with Channel 5 on the condition that Channel 5 is visibly fair and impartial in its reporting. In the weeks the ban was in place, several local and international organizations weighed in in opposition of the ban.

Efficient Capital Markets and Portfolio Investment

According to http://www.centralbank.org.bz, Belize's financial system is small, consisting of five domestic commercial banks (largest bank holds more than $465 million USD in assets), seven international banks, a state-owned development bank, a mutual fund (unit trust), 14 credit unions, and 17 insurance companies nationwide.

The state-owned development bank suspended its lending program in 2005, but resumed operations in July 2009, offering educational/student loans and limited mortgage financing. Following the 2005 liquidation of assets, a Commission of Inquiry, and restructuring, the institution is now gradually reintroducing their services for development finance. At this time they offer financing for small agricultural projects, educational loans, and residential mortgages.

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 Central Bank of Belize (CBB) regulates liquidity and cash reserve requirements, and monitors interest rates of the commercial banks. 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 2010.

Credit is made available on market terms. Despite 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)

SOEs are active in the utilities and services sectors. The Government operates a company for the provision of water services and maintains majority ownership of the telecommunications firm acquired in 2009.

SOEs 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 SEO.

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 in the last five years. The latest was a low-grade industrial action at the Government hospital, where doctors, nurses, and staff staged a “sick-out” to protest allegations of corruption. There was also a demonstration in February 2009 in northern Belize over sugarcane prices, which 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. All of these events were non-violent in nature.

There lingers an historic territorial claim by neighboring Guatemala over Belize’s sovereignty and land mass. This issue remains largely a political one between both governments and violence has rarely been seen in recent years. Some argue that this political hurdle can only be overcome by improving the commercial relationship between the two countries. However, in December 2009, there was widespread anger with the Belize Foreign Minister, and even calls for his resignation, for making comments that the border between Belize and Guatemala was “artificial.” While he contends that his phrasing was misinterpreted by the media and general public, this discontent reflects the sensitive and nationalistic nature of the issue. No physical violence has resulted from the incident. 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. The two countries have yet to set a date for the referenda, which are not expected until at least 2013.

Corruption

According to the Corruption Perceptions Index published by Transparency International (TI) (www.transparency.org), the level of corruption in Belize has increased in recent years. Belize was ranked 99th overall with a score of 3.0 in 2007 and 109th in 2008 with a score of 2.9. Belize was not included in the survey for 2009 or 2010 due to shortage of survey sources within Belize, which is a technical criterion for the index. The Corruption Perceptions Index (CPI) measures the perceived level of public-sector corruption in 180 countries and territories around the world.

On a scale of zero to one hundred (0 to 100), the Heritage Economic Freedom Index scored Belize at 63.0 in 2009, with an overall worldwide rank of 66. According to the report for 2010, Belize ranked 79 overall, with a total score of 61.5. The report explained that Belize’s overall score has declined 1.5 points from 2009 primarily due to problems with respect for property rights and the rule of law. Belize is ranked 15th out of 29 countries in the Caribbean and Central and South America. This is down two places from 2009, when Belize ranked 13. Belize is classified as “moderately free,” having scored between 60.0 and 69.9 points. (http://www.heritage.org/index/Country/Belize)

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.

An Integrity Commission was established to ensure compliance with the Prevention of Corruption in Public Life Act. The Integrity Commission was established 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 by persons in public life, including members of the National Assembly, the Mayors and Councilors of all cities, and Town Boards. The last report filed by the Integrity Commission was in 2005.

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 her findings since taking office in early 2009.

Corruption is viewed as being most prevalent in the conduct of government business and procurement. There have also been allegations of nepotism. In September and October 2010, several GOB agencies came under fire for possible involvement in a scandal where 33 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 are 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.

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 were later recovered. The case is currently before the Belize courts.

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.

There are occasional reports of requests for bribes from Customs officials 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.

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.

Under U.S. law, American companies and their affiliates are prohibited from bribing foreign officials according to the Foreign Corrupt Practices Act, which strictly prohibits 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 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).

For additional information on Belize’s Bilateral Investment Treaties see http://www.sice.oas.org/ctyindex/BLZ/BLZBITs_e.asp.

OPIC and Other Investment Insurance Programs

The Overseas Private Investment Corporation (OPIC) (http://opic.gov/) offers political risk insurance, which includes coverage for exchange inconvertibility, expropriation, and war. OPIC also offers financing for qualified U.S. investments in foreign countries. OPIC has been involved in two projects in Belize, one in 2002 and the other in 2006.

The Export Import Bank of the United States (Ex-Im Bank) (http://www.exim.gov) offers a variety of products to assist with the export of U.S. goods and services to overseas markets, including export credit insurance that covers the risk of buyer nonpayment for commercial risks and certain political risks. Ex-Im Bank can provide working capital financing, which enables U.S. exporters to obtain loans that facilitate the export of goods or services. Ex-Im Bank can also assist exporters by providing fixed-rate loans or guaranteeing term financing to creditworthy international buyers, both private and public sector, for purchases of U.S. goods and services. This loan guarantee allows international buyers to obtain competitive term financing from lenders when financing is otherwise not available or there are no economically viable interest rates on terms over one-to-two years.

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).

Since 1976, the Belize dollar has been pegged to the United States dollar. One United States dollar is equal to two Belize dollars (US$1.00 = BZ$2.00).

Labor

Belize’s population estimates for September 2009 exceed 321,000, of which 144,363 comprised the labor force. Approximately 18,176 were unemployed, resulting in an unemployment rate of 12.6 percent.

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 mmigrants 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 ($1.55 USD) per hour across-the-board, with the exception of agricultural and agro-processing workers, who earn BZ$2.75 ($1.38 USD) per hour.

The Labor Department has also proposed an amendment to the Labor Act which increases the obligations of employers upon severance of employees. The amendment remains a contentious issue for both business and unions, none of whom have consented to the bill. The bill has not passed the National Assembly, but could increase costs for employers.

Foreign Trade Zones/Free Ports

Free Trade Zones are given favorable treatment by Export Processing Zone (EPZ) Incentives and Commercial Free Zone (CFZ) Incentives, detailed earlier in this Chapter. According to BELTRAIDE (http://www.belizeinvest.org.bz), the 1990 Export Processing Zone (EPZ) Act of Belize allows for three (3) types of EPZs, namely EPZ Developer, EPZ Business, and Special EPZ. The Developer is established to construct and administer the EPZ site. The Developer provides factory space, communications, water/sewage networks, power, and any other facilities to assist qualified EPZ companies to set up promptly. The EPZ Business is a company that has been granted a Certificate of Compliance and conducts trade or business within a developed EPZ site; operations may include, but are not limited to, manufacturing, commercial trade, value-added processing, assembly, office, warehousing, professional, or other export related activities. A Special EPZ is a company granted EPZ status at a specific site to accommodate proximity-to-resource-based activities. EPZ companies are required to export a minimum of 85% of output; however in exceptional circumstances the Ministry of Economic Development may consider a waiver of this requirement.

The Commercial Free Zone (CFZ) Act of 1994 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. The site is usually located near a border point to facilitate duty-free and tax-free wholesale and retail activities with international customers. Sales to diplomats of other countries, to personnel on ships that dock at ports, and for direct export are permitted. Goods originating from this free zone can only be sold into Belize’s national customs territory after the necessary duties and taxes have been assessed and paid.

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

o ADM Belize Mills Ltd.

Sector: Agro-processing

Date established: 1974

U.S. foreign ownership: 100%

o Blue Sky Belize Ltd.

Sector: Producer (petroleum products)

Date established: 2007

U.S. foreign ownership – majority

o Captain Morgan Caribbean – Vacation Beach Club

Sector: Tourism

U.S. foreign ownership: 100% American

o Esso Standard Oil S.A. Ltd. - Belize

Sector: Importer (petroleum products)

Date established: 1954

U.S. foreign ownership – unspecified

o Fort Street Tourism Village

Sector: Tourism

U.S. foreign ownership - unspecified

o Fruta Bomba Limited

Sector: Agriculture

Date: 1995

U.S. foreign ownership: 100% American

o Hamanasi Dive and Adventure Resort

Sector: Tourism

U.S. foreign ownership: Majority

o Journey’s End Hotel

Sector: Tourism

U.S. foreign ownership: Majority

o Ramon’s Village (Reef Resorts) Ltd.

Sector: Tourism

Date established: 1981

U.S. foreign ownership – unspecified

o Turtle Inn Resort

Sector: Tourism

U.S. foreign ownership – 100%

o Yalbac Ranch and Cattle Corporation (Belize) Ltd.

Sector: Timber and agriculture (citrus, cattle)

Date established: 1986

U.S. foreign ownership – 100%

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