REPORT #309 June 2000

Produced by the Belize Development Trust

The IMF team found the Tourist Development Investment Policy to be a good one. From the cheap seats here, I agree with them. Far as we can tell it is working and there is a surge in tourism foreign exchange.

The IMF did find the housing scheme was fraught with danger. The main problem is that the houses are being built with borrowed money from Taiwan and the mortgage scheme, is to sell them on the Secondary Mortgage market in Barbados. However, the returned money is going to be spent again and not pay off the original debt from Taiwan. Unless Taiwan would give this money as a GRANT instead of a loan, this gives problems. As a recycling house building scheme it has merit, but has no merit, if the returned money is spent on other needs outside of housing, or paying off the loan to Taiwan. The major problem with the secondary mortgage package, is that the selling of mortgages recycles the money, which in of itself is a good idea. But the problem comes because the Government of Belize is actually guaranteeing that the mortgages will be paid, to the secondary mortgage market. This leaves the Government of Belize able to sell the mortgages because of the guarantee to pay, even if house buyers default. It is the guarantee that creates the problem of unlimited foreign liabilities in more foreign exchange. The Savings and Loan crisis in the USA and subsequent collapse in the billions of cost to the USA government was the same thing. In a no lose situation, I would buy the mortgages myself, if it is guaranteed! We are just cycling money and debt here. The recycling is great if you can keep building houses and keep finding qualified buyers. But the houses are being sold to people at poverty levels is the sales pitch. This means a lot of re-possessions and costs are going to be the norm and the costs will escalate and probably at some point the scheme could collapse leaving the Government of Belize in increased Foreign Debt for foreign exchange funds it does not have.

The IMF also said the statistical system in Belize is flawed. There is no doubt about that, as the cabinet just announced recently they were going to have government departments do Annual Reports again. It is a wonder there are any statistics! With computers this should be easy. There is talk of economic policy being done on GDP and CPI calculations. We don't know how they are calculating any of these formulas? For that matter, I don't even know what CPI is? Either way, calculating formulas on flawed statistics is hardly a worthwhile endeavor. You simply compound problems. Economy policy based on formulas on flawed statistics out of the Ministry of Finance is simply an accident waiting to crash.

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