REPORT #136 Nov 1999

Produced by the Belize Development Trust

By Meb Cutlack

BTL, BEL and the banks are holding back development in Belize, according to the 1997 survey conducted by the InterAmerican Development Bank and discussed last week at a workshop in Belize entitled "Private Sector Development and Public Sector Reform; two sides of the same coin."

Lack of Financing, the Value Added Tax and high utility rates were among the obstacles of doing business in Belize. This is according to the results of the survey and economic data from the region which were discussed at the workshop. Economist Jose Juan Gomez said that Belizean banks have been tight fisted when it comes to lending and that interest rates an among the highest in the region.

The authors of the report, Gomez said, were startled to discover that Belize, which has the fastest-growing economy in the region and one of the lowest unemployment rates, has lagged behind our Caribbean and Central American neighbors in private investment and export growth.

It was also revealed that our electricity rates are among the region's highest and that we are paying the most for telephone and intemet services.

The answer for really lower BTL internet rates could lie in the results of a legal action taken in March against a similar, recently privatised, telephone company in the Caribbean.

In March a private communications company in the Commonwealth of Dominica sued the telephone company, Cable and Wireless, because "its constitutionally protected right to free expression had been violated by certain provisions of the Telecommunications Act 1995."

It might be worth checking our constitution to see if it is similar to Dominica's constitution under which the company, Marpin Telecoms, and Broadcasting Ltd., sued that, "the constitution specifically guarantees the fundamental fight and freedom to communicate ideas and information and to receive ideas and information without interference by ANY means of or through the media of its telecommunications including, but not limited to, the means of a mail/Internet, telephony, telegraphy and wireless broadcasting, which are the most important means or portant means or media of communications available in democratic society."

Phew! Doesn't that apply directly to Belize? BTL is not only pricing us out of the investment market but is monopolizing and gouging all our means of communications very much like a feudal baron of old!

What Marpin did was open a competing internet server service, at first through C&W and then, when they proved too expensive, Marpin simply installed its own small satellite system. That's when C & W went bonkers and tried to cut Marpin off the air.

Well! Cable and Wireless lost to Marpin and the original licence granted to Cable and Wireless in 1995 was declared to be in contravention of Dominica's constitution and therefore, "invalid." Cable and Wireless was ordered to pay Marpin's costs.

So, any Belizean company with huge telephone bills might just consider looking up the High Court papers from Dominica. The ruling was by High Court Judge Dunbar Cenac, the case heard between March 22 and 31, and the judgement delivered on April 29, 1999.

Mention was made in the Marpin case of the original government contract with C&W: "limiting the overall rate of return allowed to the company (C&W), and regulating specific rates." One wonders if a similar agreement was made by the Belize government with BTL when it was privatised. If so, is 50% return on investment considered "limited"?

Then there is the matter of high electricity bills. Whatever the Macal River people say, the new dam WILL NOT lower electricity rates. It can ONLY cause the price of electricity to rise. This is the considered opinion of BEL's own hydro engineer.

There is, however, a way to lower electricity rates, control our own electricity and not rely on Mexico or diesel power- and even possibly have the whole deal funded by someone else. This way our future electricity supply would never become the enormous burden on the Belizean electricity consumer and/or taxpayer that the second dam will impose.

The "How to do this?" is complicated but also extraordinarily simple and amounts to a biomass based waste-to-energy operation, utilizing both the operative Orange Walk and the presently inoperative Libertad sugar factories. A large U.S. utility/power company is currently preparing a simple analysis for me, including finding carbon credit finance to pay installation costs. I will come back to this another day with a full outline of their project.

Then there are the banks! It is probably unrealized by many Be]zeans that, while they are being forced to pay up to 18 percent, in the rest of the western world, interest rates are way down and destined to remain so. In Spain for example, and in most of the European Economic Union, private lenders can borrow for five percent and less. The inter-bank rate, which banks and commercial houses use between themselves, is even less. Financial institutions throughout the West are now in concert about guarding against the huge interest rate hikes of the '70s and '80s because they almost detroyed the capitalist system.

The Belize banks will not tolerate any attempt by other lending to lower these high rates. Recently they even unsuccessfully tried to intervene when an overseas bank lent an overeasclient rnoney on a Belizean-owned property for a lesser rate. They had to leave that one alone.

These ridiculously high interest rates leave many small businesses in Belize in constant jeopardy of foreclosure when there is the slightest downturn in the economy. They also allow the potential for an enormous, but legal, fraud to be perpetrated against the Belizean people as a whole.

Take the new dam for example. When BEL is privatised (supposedly within the next two months), there is a likelihood that the new BEL will buy out the present dam owners for US$75,000,000 and then build the second dam for US$24,000,000. This will amount to a total debt of almost debt of almost BZ$200,000,000. A payback over the next 40 years of more than one billion dollars in interest alone.

The potential fraud comes in IF the financiers of the old and new dams borrow overseas funds at five percent, for example, to pay for all this and then charge BEL the often mentioned 12 percent interest rate. A dam is not just a dam! It can also be, a bonanza for some, and a heavy financial burden for the Belizean people to bear for the next four decades.

Again and again the expensive evil, which is confronting and keeping the Belizean people poor, is contained in the word MONOPOLY. Belize Telephone Limited, Belize Electricity Limited and even "the banks" are all monopolies. Although the banks are supposedly competetive they have a cosy agreement NOT TO compete over interest rates.

As the Inter American Bank survey reveals, Belize will not be able to get up and go economically as long as these three monopolistic institutions are allowed a free hand to exploit the country and the people. There need to be curbs of some kind on the behavior of these entities. Curbs not so drastic as to deter investors, but at least some mechanisms in place to protect consumers from the price gouging that has become common practice by all three of these institutions.

Back to Main Belize Development Trust Page

Maintained by Ray Auxillou, Silvia Pinzon, MLS, and Marty Casado. Please email with suggestions or additions for this Electronic Library of Belize.