REPORT #282 May 2000

Produced by the Belize Development Trust

In a press release of 26th, of May, 2000 the Ministry of Finance, released a staff report covering some Article IV of an IMF agreement.

In this report, the PUP government says it designed it's operations with the help of IMF economic consultants to achieve high rates of economic growth and reduce poverty. ( latest buzzword in lending circles).

The PUP government then opted for a mixed policy, including of which are; a) initially boosting public sector spending on infra-structure, b) reducing taxes , c) promoting tourism, d) promoting direct foreign investment, e) limiting the growth of public external debt, f) privatizing the remaining public enterprises g) raising economic efficiency.

They, the PUP claim a 6% growth rate, while outside economists claim about 2%. They also claim a narrowing of the fiscal deficit and an increase in international reserves ( about $28 million). They also claim they have slowed down the external public debt. The year 2000 is expected to have a repeat ( according to them, growth rate of 6%), though they were ballyhooing a theoretical 10% in public rhetoric. They also claim concern over the sustainability of the fiscal approach of privatization, which will run it's course over two years.

There is considerable PUP rhetoric about establishing growth to fight poverty ( believed to be so much hot air from political observers, for consumption and reassurance for outside lenders- poverty is the latest fad buzzword and jargon on foreign loan lending borrowing); and creating acceptable standards of living ( doesn't say who? - remote rural villages communities maybe? Ha! Ha! -read Belize City crowd more likely, a non-issue! )

The report is slanted to warming the feelings of bookkeepers of foreign lending institutions and telling them what they want to hear. The idea it says; is so we as a government and country can increase our foreign loan borrowing. ( Whoops!) Or words to that effect.

Let's critique these goings on, to see if we can separate the meat from the fat on the bone of this morsel, or separate the wheat from the chaff, as they say in us coarser vocabulary deficient rural peon circles. Qualifications of the critique? Common sense, opinion and a little logic and direct observation of cause and effect! Academic credentials? High School education or less on average in the consensus.

First, let's get out of the way, the issue of credentials. First off, the academic expertise and qualifications! We are going to state two theorums here for providence.

1)People who are educated and degree'd work for a salary. This makes them qualified as academically educated.

2) People who are self employed, are intelligent and may be relatively uneducated, but employ salaried people who are educated.

In order of qualifications, we are going to place self employed intelligence as higher than salaried academic qualifications for reasoning purposes.

The IMF team on this project are all salaried people! The people in the PUP government and policy deciders are also salaried people.

At some point in the decision processing, there should be some inputs and consensus after debate from intelligent people. Unfortunately there are none in this study. This leaves it suspect in it's design and conclusions.

The goal of high economic growth is a laudable one. The question how do you do this, if you have no money in the treasury, as the PUP were faced with at the beginning of their term 18 months ago. You could indeed borrow some money, but it would have to be directed solely to productive purposes, with a two year horizon for seeing the results. Payback of such borrowings, not to exceed three years. Did the PUP do this? Apparently not, though we do not know for sure, as it is secret!

Borrowed money from Taiwan to put into building houses, is not all that bad a scheme. The way it is set up, it might even work, for it makes use of a new gadget in Belizean internal finance, called mortgage financing. The scheme and loans should eventually be self financing and pay for itself back. One catch was that no one as of yet, knows in the public arena what the interest rates are for the government part of these borrowed monies from Taiwan.

On the wrong side of this type of rationalization put forth by the educated academic crowd, is that it boasts this will raise poverty levels through growth. Hardly true! But, I suppose it depends on who you claim are poverty level? They are certainly not talking about South Side Belize City street people here, who are at poverty starvation levels. Or seasonal workers in the citrus industry of Pomona valley, or banana field workers around Big Creek. For to get a mortgage, it presumes you have a steady cash flow, or a job and income. So the housing scheme and mortgage financing, despite the rhetoric is certainly not aimed at raising poverty levels. It is aimed at a working middle class. The only real sized segment of this working population are in the port Belize City and Belmopan. With scattered individuals elsewhere, here and there around the six district countryside.

There was to be an initial boost for infra-structure. The southern highway is the main item for that. Can't think of any others, than schools and the last we heard publicly in the media, other means were being sought to achieve school expansion. Electricity and telephones are presumably the problem of the private sector nowadays. Normal port town government services still do not exist in the 288 to 300 villages nationwide. That hasn't been done yet.

There was to be raised economic efficiency. This to be successful demands a flattening of the bureaucratic and political structure into a more horizontal multi-layered model. The translation here is district governments and re-arrangement of political representation by a six district national geographical voting system, replacing the population representation, one layered hierarcheal model currently in use. There has been absolutely no change in this status. Indeed, every indication that any such economic efficiencies by doing this that get put forward; will be fought by tooth and nail from the political party gangs of the port town Belize City, who currently control the inefficient current model of governing for their own private gain. So increased rhetorical efficiencies by PUP spokespersons are just outward tinkering to sooth foreign lenders and quiet dissatisfied local voters, with the froth of doing some actions, when in fact none are being done. It is just hot air and bombast. Bunch of soap suds, to blow away on the wind.

Reducing taxes. There was a reduction of VAT to sales tax. There has been some controlled reduced taxes on gasoline. There has been also some reduction on taxes on lower level wage earners. This is all to the good, but not really good enough. In fact, in most of the sectors, taxes are increasing and are expected to rise even more, as foreign debt load becomes unmanageable. Mixed reviews on this one.

Limiting the growth of external public debt. I believe they mean the national foreign debt. So far, none of this has been done. In fact, all signs from public announcements in the media, point to the opposite viewpoint. This external public debt is believed to be worse in the last 18 months and more than doubled from the beginning of the PUP term.

One worrisome clause, or phrase, was the PUP declaration in the report, that the Government of Belize (PUP party) must be ambitious about GROWTH in order to fight poverty and seriously tackle raising the standard of living. It is the translation, or intrepretation of the "ambitious about GROWTH" that is worrisome. For they are generally believed to mean borrow more, and borrow more and keep borrowing as long as someone will lend. As to fighting poverty, there is no sign that any of this is fighting starvation style poverty, or poverty areas in the countryside. It seems to be going to middle class city people only. So that much is baloney!

It also says, that the policy depends on privatization receipts. Meaning the sale of BEL and any HYDRO DAM projects. The monies from such sales to pay off the borrowed loans in the meantime. How that part is working out, I have no idea, but once you sell and blow your money from the assets, you are done! Any fisherman can tell you that. Such a policy is unsustainable even in a short term and impossible for any long term. It is a nice windfall, but at the end you are usually left with less than you had before and have to start all over again from scratch. Money has a strange way of disappearing fast. Makes you wonder where it went?

There is a debt ratio of 37% of GDP. Not sure how Fonseca calculates the GDP, nor where to find the data and references in Belmopan literature, either in print, or on the internet. Pray explain this one! As to 37% of GDP. It sure has a weird sound to it. In my own jargon, I like a limit of maximum of 20% of government annual revenues. Belize has a mean exponential average of $380 million a year income. The desired foreign national debt should be around 12% or a total of $45 million. If you max out your limits under controlled circumstances to not more than 20% of annual revenue, Belize can only max out the foreign national debt to $76 million. These are the ways they figure your credit worthiness in Wall Street. The foreign national debt is currently supposed to be between $900 million and $1200 million. We are way over extended beyond conservative judgements, credit worthiness, or any other measure; even if you sugar coat it with a percent of GDP that noone in the public arena has the financial data to figure it out with. The Finance Ministry is running a con game here with a bunch of smooth talking malarky. Belize by Wall Street mathematics is a tottering bankrupt.

There has been much debate in the past few years about the veracity and qualifications of IMF and World Bank development loans, consultations worthiness, as applied to third world development. The current foreign expert general feeling is that the IMF and the World Bank should stick to loans and get out of recommendations and consultations on third world development. Locals could do much better and current thinking is that a sector of the United Nations should do it. Not the IMF or the World Bank. The past number of decades have shown that the IMF and World Bank have been consistantly wrong with all development proposals. Because they are based solely on lending money, to the maximum the borrowing country could carry, or not carry as the case may be. Not about long term succesful development. In lending money they have been successful, in development economics, they have a 100% strike out failure record.

Time for you independent thinkers to look at this and form your own opinions. If you like it fine, say so and why! If you don't like, say so and why! How else can the voting public monitor the Ministry of Finance in Belmopan and your government actions? Cause when it is all over, YOU WILL BE PAYING THE BILLS THROUGH TAXES, probably increased taxes if my own opinion is worth anything and it might not be worth anything! Take that into account.

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