2013 Investment Climate Statement
Bureau of Economic and Business Affairs
April 2013
Report

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 a resource-abundant natural environment. In practice, however, investors have complained that they do not always receive the full extent of the incentives available, that a land title is not always reliably secure, and that the bureaucracy or corruption involved in starting a business in Belize can be troublesome. The global economic downturn, the recent nationalization of the major telecommunications and electricity companies, high import tariffs, and new legislation on arbitration parallel a decrease in the flow of foreign direct investment (FDI).

The Belize Trade and Investment Development Service (BELTRAIDE, www.belizeinvest.org.bz) is the country’s official trade and investment promotion agency. BELTRAIDE identified the following economic sectors as priority areas to attract investments: 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. Although it was established to serve as a one-stop-shop for investment and trade assistance, over the past few years it has expanded its focus to include micro and small business development, which further dilutes the agency’s ability to deliver professional business counseling for investors. Foreign direct investors have commented on possible bureaucratic delays when seeking letters of support to establish businesses and when trying to secure fiscal incentives from the government.

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. These Acts offer some attractive incentives to investors, but in practice these incentives are often not realized. For example, development concessions under the Fiscal Incentives Act allow for import duty and income tax exemptions, but since 2002 companies have only received import duty exemptions due to an ongoing moratorium on awarding tax holidays, with the exception of one case due to specific legislation.

Generally Belize has no restrictions on foreign ownership and control of companies; however, there is a requirement that foreign investors obtain prior clearance from the Central Bank of Belize in order to own shares in a Belizean company. There are some investment incentives which show preference to Belizean-owned companies. For example, the Small and Medium Enterprise (SME) Fiscal Incentive, offered by BELTRAIDE, 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), 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 Belize’s environmental issues and status of environmental protection when designing and marketing their projects. There has and continues to be much debate about whether to allow any developments adjacent to or near designated protected areas. The requirement to prepare an Environmental Impact Assessment (EIA) is dependent on factors including land area, industry, and location of a proposed project. When purchasing land or planning to develop near an ecologically sensitive zone, it is recommended that the EIA fully address any measures by the investor and project to mitigate its impact on the environment. Environmental clearance must be obtained prior to the start 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 Trade and Investment, with BELTRAIDE, are responsible for conducting countrywide consultations with current incentive holders to inform them of Belize’s upcoming international trade requirements. Potential investors should consider this when discussing concessions with BELTRAIDE.

Belize’s judicial system is independent and is comprised of the Supreme Court, Court of Appeal, and the Caribbean Court of Justice. Belize has entered into numerous contracts over the years and usually tries to uphold the contract’s sanctity, but a high ratio of debt to GDP and sluggish economic performance may prevent the government from fulfilling some compensation payments in a timely fashion. Some investors, especially in real estate and land transactions, have expressed concern over the government’s significant and extended delays in meeting its obligations. In particular, investors have expressed concern about the lack of compensation for the nationalization of Belize Telemedia Limited (BTL) in 2009 and Belize Electricity in 2011. Criminal matters are challenging, as Belize has a weak investigative and prosecutorial system, which hinders the government’s ability to successfully prosecute crimes, including murder and robbery.

Some potential investors have also cited corruption as a barrier to attract foreign direct investments. It is alleged that at times investors were solicited for contributions in return for expedited immigration favors, land acquisition, investment incentives, and exclusive contracts. Investors have also cited insecurity in land tenure as a concern.

Due to the financial constraints and looming debt obligations on the Government, some believe that the government may try to be more accommodating to significant foreign investors. A recent example was the quick passage of special legislation to accommodate a buy-out of Belize’s existing sugar factory by foreign investors, though this was under special circumstances and in part due to the dire straits of the Belizean sugar industry.

In the 2013 World Bank Doing Business Report, Belize’s rank fell from 93rd to 105th overall. Compared to other countries in the region, two Caribbean countries ranked above Belize, Trinidad (69th) and Jamaica (90th); two Caribbean countries ranked below Belize, Guyana (124th) and Haiti (174th). Two Central American countries ranked above Belize, Panama (61st) and Guatemala (93rd); El Salvador (113th) ranked below Belize. For more information, visit http://doingbusiness.org/rankings.

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 has not been included in the survey since then due to insufficient sources. Countries are only included in the index if there are at least three data sources available.

The table below summarizes Belize’s scores and rankings according to Transparency International, the Heritage Foundation, the World Bank, and the Millennium Challenge Corporation (MCC). High numbers in the first three indexes indicate poor performance; higher percentages in the rankings reflect good performance. The MCC measurements are based on percentile ranking within income peer groups of countries surveyed for the 2013 country report. See rankings below or visit http://www.mcc.gov/pages/selection/scorecards for more information.

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Measure

Year

Index/Ranking

TI Corruption Index

2008

109th

Heritage’s Economic Freedom Index

2011

71st

World Bank Doing Business Report

2013

105th

MCC Gov’t Effectiveness

2013

59%

MCC Rule of Law

2013

44%

MCC Control of Corruption

2013

75%

MCC Fiscal Policy

2013

80%

MCC Trade Policy

2013

66%

MCC Regulatory Quality

2013

44%

MCC Business Start Up

2013

13%

MCC Land Rights Access

2013

21%

MCC Natural Resource Mgmt

2012

97%

Conversion and Transfer Policies

Foreign investments in Belize must be registered at the Central Bank of Belize (CBB) in order to facilitate inflows and outflows of foreign currency during transactions, including transfers, and 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 an authorized dealer, including: commercial banks, money transfer institutions, the Ministry of Finance, or the Central Bank of Belize. After securing the permit, foreigners and locals are allowed to access foreign exchanges directly from 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. There have been occasional shortages of foreign currency in the banking system, which have resulted in payment delays 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.

In September 2012, Belize undertook a selective default of its major external commercial debts totaling an estimated US$554 million, commonly referred to as the “Super Bond”. Subsequently the government made a 50% payment of the US$23 million payment due as a show of “good faith”. The Government of Belize announced the successful renegotiation of the terms of the bond in early 2013, and stated that the restructuring is expected to save Belize an estimated US$150 million in total payments through 2029.

Expropriation and Compensation

The government expropriated a major telecommunications provider and the electricity company owned by foreign investors in 2011 (the telecommunications provider had been nationalized in 2009 and was renationalized in 2011 to overcome a court ruling that the 2009 nationalization was illegal). In 2011, the government passed special legislation that allowed for the Eighth Constitutional Amendment, which enshrined majority government ownership of utility providers (including water, electricity, and telecommunications). Official offers by the government to compensate previous owners of nationalized companies have not been revealed, but unofficial government offers placed the firms at what the previous owners felt were significantly reduced market values. As of January 2013, the GOB had not compensated investors affected by the nationalizations nor had it reached an agreement with investors on the companies' values at the time of nationalization.

There have been several contentious cases in which the government, under its right of eminent domain, expropriated land that belonged to private property owners, including some foreign investors. Belizean law requires that the Government assess and pay appropriate compensation based on fair market value; compensation cases often take many years to settle.

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 arbitration proceedings 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 US$250,000 or jailed for up to five years for contempt. A further 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. As of January 2013, the Act had never been used to issue an injunction against any party.

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 conflicted with the Belize Constitution.

The government has been taken to international courts for dispute settlements in the past and has lost some cases. Despite rulings against the government for the payment of foreign arbitral awards, such settlements can take years to be reached, and even longer for compensation to actually be paid.

Although Belize signed on to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards prior to obtaining independence, Belizean courts have ruled that Belize is not a party to the Convention since it did not sign on again after gaining independence. A total of 147 countries have signed onto the Convention.

Belize signed on to but never ratified the Washington Convention on the Settlement of Investment Disputes Between States and Nationals of Other States. For more information, visit http://sice.oas.org/dispute/comarb/icsid/w_conv1.asp.

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 Government of Belize’s Ministry of Trade and Investment. It functions as the country’s official trade and investment promotion agency. BELTRAIDE promotes several fiscal and other incentives to attract foreign investment. The legal frameworks authorizing and providing for incentives include: the Fiscal Incentives Act, the Export Processing Zone Act, the Commercial Free Zone Act, the International Business Companies Act, the Retired Persons Incentives Act, the Trusts Act, the Offshore Banking Act, and the Gaming Control Act.

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 government is trying to create alternatives that would be WTO compliant.

Regulations require that incentives granted to an enterprise be awarded based on the investment’s socioeconomic contributions to the Belizean economy: employment creation, transfer of skills and technology, and foreign exchange earnings or savings. All projects approved must be in the public interest, and must fit within the government’s overall development plan.

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 exemptions 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, mari-culture (aquaculture), food processing, and manufacturing with export operations that are labor intensive. Categories that may be exempted from Import Duties and Revenue Replacement Duties under the Act include 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 of the Laws of Belize to apply. Application fees under the Regular Program are nonrefundable and depend on the level of proposed investment:

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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 US$500 if the application is successful and a publication fee of US$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 US$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 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 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. There exists a significant variance in the application fee structure between the programs, shown in the chart below.

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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 US$50 if the application is successful. For any amendment to the Statutory Instrument an amendment fee of US$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 duties, capital gains taxes, property and land taxes, dividend taxes, value-added taxes, trade turnover taxes, foreign exchange taxes, transfer taxes, 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 the importation of raw materials or on the exportation of finished products. There is a non-refundable application fee of US$500. The program also allows for the sale, lease, or transfer of goods and services within an EPZ, Customs inspections in the zone for expediency, work permits at no cost for all professional and technical staff, and, if necessary, authorizing up to a 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 offices, insurance services, banking and financial services, offshore financial services, professional or related services, processing, packaging, warehousing, and the 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 exemptions 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 are 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 US$500 and for successful applicants an annual fee of $1,000 is charged.

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. See www.ibcbelize.com for more information.

The Belize Tourism Board offers the Retired Persons Incentive Act, which 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 generated outside of Belize are also free of 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. Visit www.belizeretirement.org for more information.

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.

If a company is benefiting from incentives, there are certain conditions which may include minimum employment targets based on the size and scope of the project. For example, the Fiscal Incentives regime requires that beneficiaries maintain a minimum number of employees over the life of a development concession.

The Department of Immigration is responsible for the processing of Work Permits and Residency applications. An applicant for a work permit generally is required to be in Belize to apply. 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 30 days or less. The length of stay on such visas can be extended at any local district immigration office.

Import Duties, Environmental Taxes, and General Sales Taxes levied by the Belize Customs and Excise Department at the point of importation are the country's largest source of revenue. It is responsible for providing around 53 percent of the total recurrent revenue collected by government.

Belize is a member of the Caribbean Community (CARICOM) and as such is entitled to the free movement of goods and services within CARICOM member countries. CARICOM member states are expected to work toward eliminating barriers to intra-regional movement and trade by harmonizing standards to ensure equal treatment and acceptability of goods and services. CARICOM countries have established a Common External Tariff, which is a rate of duty applied by all member states to products imported from any that is not a member of the region. The Common External Tariff makes most imported goods in Belize relatively expensive. The associated costs for any business that uses imports can be significant. Tax concessions, if granted, can ameliorate these costs.

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 the company is incorporated to conduct business in Belize.

Private entities, whether foreign or domestic, 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 Land purchases exceeding ten acres require approval by Cabinet. The Department of Lands and Surveys can advise which lands are 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. A transfer tax, also called Stamp Duty, is levied on all land transactions exceeding US$20,000 at the rate of 5%.

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 that are the result of unreliable land title certificates. Several landowners have been victims of land fraud, where title documents were transferred out of their possession without their knowledge, and the owners have not received compensation. Title insurance is not commonly available in Belize, but is offered by a few of the larger insurance companies. Generally, 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. There have been public allegations that government officials have been complicit in some of the fraud. The GOB is in the process of completing a digital database of land titles that may deter fraud. That system, however, is not yet operational as of March 2013.

The purchase of land often takes several months. A digitized land title database may speed the process some, but the database is not yet operational (see above).

Belize has fulfilled its obligation under the World Trade Organization (WTO) to implement the Agreement on Trade-Related Aspects of Intellectual Property, also known as the TRIPS Agreement. BELIPO (http://belipo.bz/) was established to administer intellectual property rights (IPR) laws, and it functions as Belize’s national intellectual property registry. Its mandate covers the protection of copyrights, industrial designs, patents, trademarks, new plant varieties, and layout designs (topographies) of integrated circuits.

Despite the IPR laws and administrating office, enforcement is lacking. Illegally copied CDs and DVDs are widespread and continue to be marketed throughout the country. Local cable companies and television stations continue to broadcast content pirated from U.S. television networks and cable channels, as well as sports programming and movies.

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 relevant Committee Meeting of the House of Representatives. However, sometimes laws are passed quickly without meaningful 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 (especially electricity and telecommunication), internet, wages, fuel, and import duties (tariff barriers).

Setting up a business remains a complicated process. The World Bank’s Doing Business 2012 Report ranked Belize 105th out of 183 countries on the “Starting a Business” criterion. Initial business name 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. They offer traditional banking services such as consumer and commercial loans, sale of foreign currencies, mortgages, credit cards, savings and checking accounts, and time deposits. They also provide letters of credit and bank guarantees. The largest domestic commercial bank holds approximately US$440 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. Most international banks also provide corporate formation services to register International Business Companies as well as the establishment of trusts.

Fourteen credit unions operate as non-profit cooperatives that function as savings banks, offering mainly savings accounts and consumer, education and residential loans to their shareholders. Credit unions are popular for saving and borrowing for the general public, largely due to their service ethos and favorable terms of borrowing and repayment schedules. The largest credit union has over 47,700 members, with total assets of approximately US$200 million.

There is also a state owned development bank that offers loan financing services in various sectors, including agriculture, aquaculture, tourism, eco-products, housing, education, and micro and small enterprises.

There are 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 the stability of the exchange rate and promotes 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 11.0% and 15.0% in 2012.

Credit is made available on market terms. Despite the fact that this is regulated by the central bank, 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 2011 took constitutional control over the operations of the largest telecommunications provider along as well as 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.

Current and previous administrations have been accused of nepotism in staffing its SOEs. The current administration has also been accused of conflicts of interest when board members or directors of SOEs are also on the board of other organizations that do business with the SOE.

Corporate Social Responsibility (CSR)

Many foreign and local companies engage in corporate social responsibility each year. Some companies donate educational scholarships to students 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 infrastructure maintenance or donations of equipment. This may include painting school buildings, construction of bus stops and classrooms, or donating computers, fans, tables, chairs, and other necessary items. Some larger companies also undertake the maintenance of major playgrounds or parks. 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 nonviolent public demonstrations and brief traffic stoppages. In 2012, the teachers’ unions held a peaceful demonstration in front of National Assembly.

Neighboring Guatemala makes a historical territorial claim on a large part of Belize. This issue remains largely political between both governments, although there were three incidents in 2012 in which a Guatemalan engaged in illegal harvesting of natural resources in Belize was killed by Belize Defense Forces. 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 simultaneous referenda were scheduled to be held on October 6, 2013 in both countries. The Organization of American States (OAS), which maintains an office in the “adjacency zone” of the two countries, serves as a mediator for any incidents that arise. Illegal logging and extraction of exotic hardwoods, illegal harvesting of xate palm leaves, poaching of animals, and agriculture by Guatemalans on the Belize side of the adjacency line continued to increase in 2012.

Corruption

Belize 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. In 2012, the auditor general reported that government expenses and procurement were rife with improper accounting. As of March 2013, no significant steps had been taken in response to the auditor general’s report. One such law is the Prevention of Corruption in Public Life, which has not been enforced since coming into effect in 1994. 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.

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 by public officials and includes measures on the use of office for private gain, code of conduct breaches, the 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 signed the United Nations Convention Against Corruption (UNCAC).

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

Belize has established the Office of the Ombudsman, whose 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. After being vacant since December 2011 a new Ombudsman was installed in January 2013.

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 an umbrella organization comprised of the various Belizean workers’ unions.

Belize is dominated by two political parties, the People’s United Party (PUP) and United Democratic Party (UDP). In 2008, the UDP were elected on an anti-corruption platform, and again re-elected in 2012, but still has not yet signed the UNCAC. There is a third party, currently without national representation, called Vision Inspired by the People (VIP), which has focused on the issue of corruption and the need to sign UNCAC. Many businesspeople complain that both major political parties can and do practice partisanship bias 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 middle-class citizens and business owners throughout the country have complained of government officials, including police and others, soliciting bribes.

There are occasional reports of requests for bribes from border 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 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, but payoffs allegedly circumvent court charges or payment of fines.

The illegal harvesting and extraction of exotic hardwoods from the Belize forest continues to be a problem. Large volumes of mahogany, rosewood, cedar, and other species have been over-harvested, which has severely depleted the natural stock. In 2012, the GOB placed a moratorium on the harvest of rosewood. As of March 2013, the Convention on the International Trade on Endangered Species adopted a proposal from Belize and placed three varieties of rosewood on its Appendix 2, which limits the trade of rosewood across international lines. Belize made a formal observation that allows “value-added” products to be traded freely.

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). The Common External Tariffs, which Belize’s CARICOM membership requires, are another obstacle to being a commercial bridge between Central America and the Caribbean.

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 15 Tax Information Exchange Agreements (TIEA) with countries such as Australia, United Kingdom, Belgium, Netherlands, Sweden, Finland, Greenland, Norway, Iceland, Denmark, Faroes, Portugal, France, Ireland, and Mexico. 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, the Multilateral Investment Guarantee Agency (MIGA) of the World Bank, and the Central American Bank for Economic Integration (CABEI).

Labor

According to the Statistical Institute of Belize, the population is approximately 338,000 persons of which 148,000 comprised the labor force in 2012. The unemployment rate was 14.4%.

Belize has nine trade unions and an umbrella organization, the National Trade Union Congress of Belize (NTUCB). (See the Country Report on Human Rights at http://www.state.gov/j/drl/rls/hrrpt/2011/wha/186492.htm).

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 May 2012 the national minimum wage was increased to BZ$3.30 (USD$1.65) per hour across-the-board, this includes agricultural, manual labor, and agro-processing.

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 section on “Openness To, and Restrictions Upon, Foreign Investment.”

Foreign Direct Investments and Foreign Portfolio Investment Statistics

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

In September 2012, a leading U.S. sugar refining company finalized a major investment in Belize’s only functioning sugar factory, located in the Orange Walk District. The deal had a total value exceeding US$90 million to pay off accumulated debt, and to purchase, expand, and upgrade the existing facilities. The facility includes a cogeneration plant that can produce over 25MW of electricity, some of which feeds the national grid. The Belizean government cited the investment as an indication that foreign companies are not afraid of investing in Belize.

The Guatemalan branch of a major sugar refining company headquartered in Spain also made a major investment in Belize in 2012. The investment was estimated to be valued over US$65 million, and would establish a new sugar factory in the Cayo District.

The government is also in negotiations with other investors, particularly in agriculture.

The following is a list of some of the largest U.S. investments in Belize. This list is not comprehensive.

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

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%

American Sugar Refining (ASR)

Sugar and Agro-Processing

78.6% in 2012

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