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Regional Economic Development Master Plan for Corozal District, Belize

Report prepared for the Inter-American Development Bank

Draft report and action plan

March 2019


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Executive Summary

The Inter-American Development Bank (IDB) has commissioned a consultant team led by Vivid Economics to re-purpose the Corozal Free Zone (CFZ) to facilitate regional economic development in the Corozal District. This Regional Economic Development Master Plan for the Corozal District conducts a diagnosis of current problems and priority sectors for investment opportunities, before providing a comprehensive set of recommendations for the CFZ and Corozal District.

The Corozal Free Zone was established to attract foreign investment into Belize, driving economic growth through the export of consumer goods. In 2015, the zone was home to 400 businesses employing 3,000 workers. The zone is an important contributor to national exports, with exports equivalent to 11% of Belize’s total in 2017.1 However, a large proportion of the zone’s reported activity is re-export trade (Central Bank of Belize, 2017).

However, the Free Zone’s earnings have declined in 2017 to BZD 385.9 million. In recent years, activity in the Free Zone has declined with sales decreasing by 14% between 2015 and 2017 (Central Bank of Belize, 2017).

The Free Zone also suffers from a lack of clear direction; official objectives are broad, with a large range for interpreting these objectives. The local area suffers from deteriorating infrastructure due to lack of maintenance, and the CFZ is negatively affected by a perception that the Free Zone is susceptible to risks of money laundering and other illicit activities. It is also clear that the zone is not embedded in the economy of the wider Corozal District.

The Free Zone’s current mission is related to broad economic development, but there is a lack of consensus in the country about how the zone is fulfilling this mission. Stakeholders identified a range of separate benefits that the zone should be performing against, including investment (zone businesses), foreign exchange (central government and banking sector) and employment (central and local governments). While these objectives are not necessarily mutually exclusive, a shared understanding of priority objectives for the zone is required to direct limited resources in an efficient and effective manner. From a longer list drawn for the international literature on economic zones, three priority economic objectives were identified, as follows (in order of importance):

foreign (and domestic) investment;

export promotion; and,

employment.

These broad economic objectives have formed the basis of a revised approach to identifying priority sectors and activities for the CFZ and the wider district.

1 Exports from Corozal Free Zone include re-exports


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To identify specific opportunities for export-led development in Corozal, a quantitative sector selection process was combined with qualitative cluster deep-dives. A list of 110 sectors were assessed against four indicators of success: relative export strength, market demand, input intensity, and development impact. These indicators were aggregated into weighted scores to allow comparisons across sectors. Three differently weighted scenarios were considered, to ensure sectors identified were robust to performing highly across different areas of prioritisation. The results of the sector selection exercise highlight several sectors that are consistently high performing across all weightings. Sectors that performed across all three weighting scenarios were, for goods:

food and agribusiness sectors, where Belize’s existing and potential competitiveness in the sector speaks to the economic viability of production there;

light manufacturing sectors, where high end market demand and perceived developmental impacts make the sector attractive despite low existing competitiveness;

and, for services:

travel and tourism services, due to significant competitive advantage and alignment with the skill level of the Belizean workforce; and,

business services, owing to high demand in end markets with whom Belize has a free trade agreement.

The four priority clusters are the basis of further analysis and are defined in Figure 1.

Figure 1 Four priority clusters were identified for qualitative deep-dives

Source: Vivid Economics

Based on the selected sector opportunities, the study developed three options for export-led development in the Corozal Free Zone area (and the broader district). These options include a strengthened status quo, characterised by capacity building and strengthened regulatory oversight of cross-border commerce; a redevelopment of the zone area to include a revised tourism-focused Free Zone and a separate, but contiguous, Designated Processing Area focused on agroprocessing exports (shown in Figure 2); and, an


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agriculture-led option that foresees the Free Zone activities wound down and integrated into the domestic customs area in the broader district.

Figure 2 Map showing recommended changes to the Corozal Free Zone and the surrounding area


The report focuses on capacity, policy and infrastructure reforms required to deliver the zone transformation option. Transport, logistics and telecommunication services play a crucial role for trade. Ensuring that infrastructure and related services are efficient and effective is the key to facilitating economic development in Corozal. Recommendations are broken down into cross-cutting and sector-specific for the 4 priority clusters identified, and a set of actions for each recommendation is presented in chapters 6 through 8; the recommendations are listed below.

Recommendation 1. Identify the strategic focus of the Corozal Free Zone (and its successor(s)) and alternative incentive mechanisms to focus investment in target sectors near the border

Recommendation 2. Develop a new positioning strategy and brand architecture for the Corozal Free Zone and the Designated Processing Area that signals a departure from perceptions of risk and lack of oversight in the past

Recommendation 3. Develop a portfolio of market opportunities in Corozal, packaged as specific Investor Value Propositions based around the Free Zone and the DPA


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Recommendation 4. Fast track a trade and investment agreement with Mexico that facilitates priority areas for trade and investment between Corozal District and Quintana Roo

Recommendation 5. Establish both formal and informal dialogues between the government of Belize and Quintana Roo and the relevant stakeholders

Recommendation 6. Improve the ease of doing business within the Free Zone (and its successor(s)) by consolidating regulatory requirements and information in an accessible format for both current and potential investors

Recommendation 7. Conduct a supply chain mapping exercise to identify market opportunities for Belizean fresh produce, including demand profile, current barriers to trade and mitigating actions to facilitate trade in these areas

Recommendation 8. Advertise supply opportunities for new raw products as inputs into agroprocessing production and for tourism consumer markets

Recommendation 9. Develop a cross-border tourism offer with Quintana Roo and engage with tourism operators (BTIA) to update and expand information around Corozal excursions

Recommendation 10. Develop information platform for Corozal products for 1) food and beverage operators in the tourism sector and 2) retailers serving tourist populations around Belize

Recommendation 11. Develop and provide English language training programmes in the new tourism focused Free Zone

Recommendation 12. Leverage Corozal District’s bilingual workforce to supplement Business Process Outsourcing businesses in Belize City and Quintana Roo

Recommendation 13. Explore organic opportunities to develop capacity around innovation and skills development in the growing sectors in Corozal

Recommendation 14. Strengthen the existing legal framework for Free Zones in the revised National Free Zones Law, by carefully considering policy and regulatory issues that inhibit their optimal function

Recommendation 15. Allow for a geographical area that can be designated as a DPA with multiple businesses and include clear regulations on management responsibilities, exports to other countries and sale to domestic markets with the DPA bill

Recommendation 16. Develop a cross-border customs enforcement policy with Mexico and introduce export certificates to allow goods purchased in the zone to be verified at the border

Recommendation 17. Facilitate cross-border dialogue to facilitate currency exchange between banks in Mexico and Belize, supported by the enforcement of electronic mode of payments for purchases made in the Free Zone

Recommendation 18. Increase compliance of the Corozal Free Zone businesses with the Anti-Money Laundering/Countering the Financing of Terrorism regulations by building compliance and monitoring capacity

Recommendation 19. Prioritise negotiations on a Partial Scope Trade Agreement for agricultural products between Belize and Mexico, including alignment on sanitary standards and labelling


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Recommendation 20. Empower the NFZA to allow tourism, retail, leisure and entertainment activities in the Corozal Free Zone (successor) and grant access rights to Belizeans

Recommendation 21. Align the visitor privileges for the Quintana Roo tourists visiting Belize with the allowance for Belizeans traveling to Quintana Roo

Recommendation 22. Resize the current Corozal Free Zone around a focused retail area on the Western side, including casinos currently in the customs area and all land to the manned border

Recommendation 23. Convert the Eastern side of the current Corozal Free Zone into an Agroprocessing Park/DPA

Recommendation 24. Evaluate the required changes in the infrastructure and spatial planning relevant to the Free Zone area to implement this Regional Economic Development Master Plan

Recommendation 25. Develop appropriate transport links to facilitate access to raw and agroprocessing markets in Mexico and San Pedro

Recommendation 26. Develop an Agroprocessing Park Infrastructure Plan within the Infrastructure Diagnostic Study and update iterations of the plan every few years to ensure it supports the long-term development of the manufacturing and processing facilities

Recommendation 27. Improve access for tourists to the new tourism Free Zone, including improved access roads

Recommendation 28. Include important elements of a tourism Free Zone, such as the retail space, storage and consumer amenities in infrastructure planning activities for the tourism Free Zone

Recommendation 29. Develop the infrastructure necessary to support the proposed electronic transactions, trade inventories and financial reporting within the Tourism Free Zone

Recommendation 30. Link Corozal District to the high-speed ICT line available to the Mexico border and expand infrastructure to connect zone businesses to high-speed internet


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Acronyms

AML Anti-Money Laundering GDP Gross Domesic Product

ASR American Sugar Refining GDS Gross Domestic Savings

BAHA Belize Agriculture Health Authority

GSDS Growth and Sustainable Development Strategy

BELTRAIDE Belize Trade and Investment Development Service

GST General Sales Tax

BPO Business Process Outsourcing

IBC International Business Corporations

BSCFA Belize Sugar Cane Farmers Association

ICT Information Communications Technology

BSI Belize Sugar Industries IDB Inter-American Development Bank

BTA Border Trade Alliance IDEFIN Pro Quintana Roo Investment Promotion Agency

BTB Belize Tourism Board IMF Internatinal Monetary Fund

BTEC Belize Training and Employment Center

IRS Industrial Roof Space

BTIA Belize Tourism Industry Association

IT Information Technology

BTL Belize Telemedia Limited KPO Knowledge Process Outsourcing

BZD Belize Dollar LAC Latin America and the Caribbean

CARIBCAN Caribbean-Canada Trade Agreement

MITC Ministry of Investment, Trade and Commerce

CARICOM Caribbean Community MoU Memorandum of Understanding

CARIFORUM

Forum of the Caribbean Group of African, Caribbean and Pacific (ACP) States

MXN Mexican Peso

CBB Central Bank of Belize NAFTA North American Free Trade Agreement

CBR Corresponding Banking Relationship

NES National Export Strategy


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CBS Correspondent Banking Service

NFZA National Free Zone Authority

CCJ Caribbean Court of Justice NGO Non-Governmental Organisation

CDD Consumer Due Diligence NIPS National Investment Policy and Strategy

CEO Chief Executive Officer NPL Non-Performing Loan

CET Common External Tariff NSTMP National Sustainable Tourism Master Plan

CFT Combatting the Financing of Terrorism

OECD Organisation for Economic Co-operation and Development

CFTAF Caribbean Financial Action Task Force

OSS One Stop Shop

CFZ Corozal Free Zone PSA Partial Scope Agreement

CFZMA Corozal Free Zone Management Agency

PSE Producer Support Estimate

CNTMP Comprehensive National Transport Master Plan

RCA Revealed Comparative Advantage

CSME Caribbean Single Market and Economy

RRD Revenue Replacement Duty

CTA Cotton Textile Apparels R&D Research and Development

DCT Domestic Customs Territory

SAGARPA Mexican Secretary for Agricultural and Rural Development

DPA Designated Processing Area

SCM Subsidies and Countervailing Measures

DPAC Designated Processing Area Committee

SEZ Special Economic Zone

EBOPS Extended Balance of Payment Services

SEDETUR Quintana Roo Secretary of Tourism

ECLAC Economic Commission for Latin America and the Caribbean

SICA Central American Integration System

EDI Electronic Data Interchange

SMEs Small and Medium-sized Enterprises

EMBI Emerging Markets Bond Index

STRs Suspicious Transaction Reports

EPA Economic Partnership Agreement

TIM International Transit of Goods System

EPZ Export Processing Zone TVET Technical and Vocational Education and Training


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ESL English as Second Language

UK United Kingdom

EU European Union UN United Nations

FAO Food and Agriculture Organisation of the United Nations

UNDP United Nations Development Programme

FAQ Frequently Asked Questions

UNESCO United Nations Educational, Scientific and Cultural Organization

FDI Foreign Direct Investment UNFCC United Nations Framework Convention on Climate Change

FIP Fiscal Incentive Programme

US United States of America

FIU Financial Intelligence Unit USD United States Dollar

FTA Free Trade Agreement USMCA US, Mexico and Canada trade deal

FTE Full-Time Equivalent VAT Value Added Tax

FTZ Free Trade Zones WHO World Health Organization

FZ Free Zone WTO World Trade Organization

FZA Free Zone Act

Contents

Acronyms ........................................................................................................................................... 7 Acknowledgements ......................................................................................................................... 12 1 Introduction ..................................................................................................................................... 13 2 Export-led development in Belize .................................................................................................... 14 3 The role of Corozal Free Zone ......................................................................................................... 46 4 Options for economic development for the Corozal District ........................................................... 76 5 Priority investment opportunities ................................................................................................... 80 6 Investment and trade promotion .................................................................................................. 105 7 Policy and regulation ..................................................................................................................... 120 8 Infrastructure and spatial planning ............................................................................................... 130 9 Action plan .................................................................................................................................... 137

List of tables


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Table 1 Belize is party to five main trade agreements, although some have limited effect given the pre-eminence of tourism in the Belizean economy ............................................................................... 18

Table 2 Belize’s goods exports to Mexico do not reflect its exporting strengths to the rest of the world ... 24 Table 3 Mexico’s exports to CARICOM are dominated by higher value goods, and provide an

opportunity to diversify and upgrade Belize’s exports through cross-border value chain integration ....................................................................................................................................... 24

Table 4 Biggest obstacles facing firms in Belize and the LAC region ............................................................ 29 Table 5 Belize’s export development policy landscape ................................................................................ 41 Table 6 List of permitted activities within the Corozal Free Zone and customs ‘no man’s zone’ area as

per the Free Zone Act and Export Processing Zones Act ................................................................. 49 Table 7 Overview of incentives available to investors in different types of Belize’s Economic Zones ......... 50 Table 8 Compliance results from 2016 FIU audit of CFZ businesses ............................................................ 55 Table 9 Cost per gallon of regular and premium fuel imported into Belize has declined since 2012 .......... 59 Table 10 Costs for firms in the Fiscal Incentive Programme .......................................................................... 61 Table 11 Commercial electricity rates in Belize vary by level of average consumption, across all regions .... 70 Table 12 Sectors were evaluated against a range of economic criteria to develop a short list ..................... 81 Table 13 Three distinct scenarios demonstrate the ‘sensitivity’ of top-performing sectors to different

weighting systems ........................................................................................................................... 83 Table 14 Food and beverage opportunities for Corozal and the CFZ ............................................................. 86 Table 15 Light manufacturing opportunities for Corozal ............................................................................... 92 Table 16 An action plan to deliver this Regional Economic Development Master Plan in Corozal District .. 138

List of figures

Figure 1 Four priority clusters were identified for qualitative deep-dives ...................................................... 3 Figure 2 Map showing recommended changes to the Corozal Free Zone and the surrounding area ............. 4 Figure 3 GDP per capita has remained at 2004 levels in terms of real value ................................................ 14 Figure 4 Belize’s economy has experienced sluggish growth in recent years, compared to regional peers . 15 Figure 5 Belize consistently experiences higher levels of unemployment that its regional peers, but is

slightly below the CARICOM average .............................................................................................. 16 Figure 6 Tourism has grown to contribute more than 40% of country’s exports .......................................... 17 Figure 7 Belize’s balance of trade has grown due to an increase in the net exports of goods and services . 20 Figure 8 Growth in service exports has driven Belize’s improved balance of trade ...................................... 20 Figure 9 A large fall in goods imports has driven a nearly 50% decrease in the net import of goods ........... 21 Figure 10 Agricultural products have displaced petroleum products as the major export from Belize .......... 22 Figure 11 Belize’s top destinations for goods exports include the US, the UK and the EU .............................. 23 Figure 12 Belizean Dollar to Mexican Peso exchange rate .............................................................................. 26 Figure 13 Belize has experienced low levels of inflation ................................................................................. 27 Figure 14 The government’s deficit, which reduced in the mid-2000s, started to grow again after 2012...... 28 Figure 15 Belize has the highest public sector wage bill as a share of GDP in the Caribbean ......................... 29 Figure 16 Belize has significantly lower tertiary education enrolment than the Latin America & Caribbean

average ............................................................................................................................................ 31 Figure 17 Belize lags behind the region in providing workplace skills programmes ........................................ 32 Figure 18 Belize’s relatively poor port infrastructure may hinder its economic development ....................... 35 Figure 19 Belize’s internet penetration lags behind other Caribbean countries ............................................. 36 Figure 20 A low share of Belizean firms invest in research and development ................................................ 37 Figure 21 Belize’s tertiary education enrolment rates are below regional and global averages, although

other countries in Latin America experience a similar trend ........................................................... 38 Figure 22 Belize is ranked 121st in the ease of doing business rankings ......................................................... 39 Figure 23 Tourism has a direct contribution of 14% to GDP and 13% to employment in Belize ..................... 44


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Figure 24 The CFZ accounts for a significant share of Belize’s trade and decreasing zone activity has affected the national current account ............................................................................................. 48

Figure 25 The Corozal Free Zone has become a less significant source of Belize’s foreign exchange ............. 53 Figure 26 The entrance to Corozal Free Zone is operated by the zone management agency ........................ 71 Figure 27 Map of Corozal Free Zone Area showing potential new drive through border crossing at Hondo

River bridge ..................................................................................................................................... 72 Figure 28 Option 1 envisions a strengthened status quo Free Zone structure ............................................... 78 Figure 29 Option 2 requires infrastructure investment to support significant new activity ............................ 79 Figure 30 Option 3 assumes the Free Zone is shut down to mitigate associated risks .................................... 79 Figure 31 A four-step methodology was applied to identify priority opportunities ........................................ 80 Figure 32 Four priority clusters were identified for qualitative deep-dives .................................................... 84 Figure 33 There is significant demand for agribusiness products in markets in which Belize has

preferential trade access ................................................................................................................. 88 Figure 34 Export opportunities for the food and beverage sector in the Corozal District ............................... 89 Figure 35 Manufacturing as a share of GDP has been declining in Belize since 2011 ..................................... 91 Figure 36 Examples of manufacturing sectors with high labour intensity and low skill requirements,

suggesting significant potential for poverty reduction through employment creation ................... 91 Figure 37 Cruise ships are the most common mode of arrival for visitors to Belize, with over three times

the number of airport arrivals ......................................................................................................... 95 Figure 38 Export opportunities for the tourism sector in the Corozal District ................................................ 99 Figure 39 Export opportunities for the professional services sector in the Corozal District ......................... 103 Figure 40. Cluster synergies promote positive spillover effects from investment ........................................ 104 Figure 41 Map showing Belize’s current and planned trade agreements ..................................................... 107 Figure 42 Lifecycle stage and marketing focus of across the Zone Marketing Strategy development

spectrum ....................................................................................................................................... 109 Figure 43 Approach to developing Investor Value Propositions .................................................................... 113 Figure 44 Imports and exports verification process recommended for Free Zones/DPAs ........................... 125

List of boxes

Box 1 Access to finance remains a binding constraint to doing business in Belize .................................... 34 Box 2 Corozal Free Zone was set up to attract foreign investment into Belize ......................................... 46 Box 3 Activity in the Benque Viejo FZ ........................................................................................................ 49 Box 4 The Designated Processing Area bill is considered an improvement on the EPZ regime ................ 52 Box 5 Trade and investment with Guatemala ........................................................................................... 54 Box 6 Lessons learned from border-based zones ...................................................................................... 68 Box 7 Lessons learned from retail-based zones ....................................................................................... 69 Box 8 Vision, Positioning and Branding in the context of Free Zones ..................................................... 111 Box 9 Considerations related to Trade and Investment for development options laid out for Corozal .. 119 Box 10 Considerations related to Policy and Regulation for development options laid out for Corozal ... 129 Box 11 Considerations related to Infrastructure and Spatial Planning for development options laid out

for Corozal ..................................................................................................................................... 136

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Acknowledgements

This Regional Economic Development Master Plan for Corozal District was commissioned by the Inter-American Development Bank and developed by a consultant team led by Vivid Economics.

The IDB and the consultant team would like to extend thanks to the wide set of stakeholders who have supported the research and development of the regional master plan through one-off and ongoing consultations over the course of its development over the past year. In particular, we extend our thanks to: Belizean government ministries and agencies which provided inputs and feedback for the project, including the Ministry with responsibility for Investment, Trade and Commerce, the Ministry of Tourism and Civil Aviation, the Ministry of Agriculture, Ministry of Finance, Ministry of Labor, the Central Bank of Belize, the Financial Intelligence Unit, the Statistical Institute of Belize, the Economic Development Council, the Border Management Agency, Customs and Excise Department, Immigration and Nationality Department; local governments including the town councils of Corozal and San Pedro; private sector representatives including Atlantic and Scotia Banks, Belize and Corozal Free Zone Chambers of Commerce and individual businesses in Belize City and Corozal District; and, state government agencies and institutes in Quintana Roo, Mexico.

The work was led by James Patterson-Waterston and Jake Wellman at Vivid Economics. The Vivid team also included Dan Aylward-Mills, Jason Eis, Zach Gaeddert, Naina Khandelwal and Shahbano Soomro. Jean-Paul Gauthier (Locus Economica), Gareth John (Gareth John Consulting) and Professor Mike Levi (Cardiff University) provided expert advice throughout the project. Carlo Arguelles (International Environments) provided local support and expertise.


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1 Introduction

The Inter-American Development Bank (IDB) commissioned Vivid Economics to conduct a study of Export-led Development in Corozal District, Belize. This document constitutes the Regional Economic Development Master Plan for the Corozal district, Belize, submitted as the final project deliverable as laid out in the project Terms of Reference and the Technical Proposal submitted by the consulting team. It is delivered by Vivid Economics, with support from local partners International Environments and a team of experts: Jean-Paul Gauthier, Gareth John, and Michael Levi. The analysis presented in this document is formed through a combination of desk-based research, stakeholder engagement and expert opinion. The Master Plan draws on: 1) desk research including review of national policy documents, development partner studies and other relevant literature; 2) analysis of economic data including exports, imports and financial flows provided to the consultant team by Belizean government agencies; 3) stakeholder engagement during the two missions in Belize; and 4) expert opinion on a range of technical issues, including anti-money laundering and combatting the financing of terrorism (AML-CFT) requirements, trade and Economic Zone regulation, and investment promotion. This Master Plan provides a comprehensive set of recommendations for the Corozal Free Zone and Corozal district, based on a diagnosis of current problems and identification of priority sectors and investment opportunities. The Master Plan is structured as follows:

● Chapter 2: provides a current and historical economic profile of Belize at the national level, including economic structure, barriers to investment and trade and the policy landscape, setting out economic development objectives of the Belizean government to 2030;

● Chapter 3: details the experience to date in the Corozal Free Zone (CFZ), including investment activity, policy and physical infrastructure, and the broader Corozal District; and assesses the performance of the CFZ against objectives laid out on the national and regional level;

● Chapter 4: summarises the economic development objectives that the Regional Development Master Plan aims to achieve in both the Corozal Free Zone (or its successor(s)) and the wider region;

● Chapter 5: identifies priority investment opportunities in the CFZ and Corozal district, setting out the methodology and results of the sector sector-selection process, and conducting deep-dive analysis into four priority clusters (based on the short-listed sectors);

● Chapter 6: sets out recommendations for improving the investment and trade climate in Corozal Free Zone and Corozal district to deliver opportunities identified in Chapter 5, based on an analysis of current practices and their implications for priority sectors;

● Chapter 7: sets out recommendations for improving the policy and regulatory framework in the Corozal Free Zone, based on international practice and zone objectives; and reviews measures to minimise risks associated with AML-CFT in the district;

● Chapter 8: reviews CFZ’s infrastructure requirements and provides detailed recommendations for zone infrastructure and spatial planning to maximise regional productivity, increase trade and help to create economic clusters in Corozal district; and,

● Chapter 9: sets out a comprehensive action plan for Corozal Free Zone and the regional economy, consolidating recommendations in the Regional Economic Development Master Plan and highlighting the timeframe and budget associated with each action.


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2 Export-led development in Belize

2.1 The economy of Belize

This chapter provides an overview of the environment for economic development in Belize including an overview of current economic performance at the national level, constraints to national economic development, and finally a summary of the development objectives laid out in national policy for the country and specific sectors.

2.1.1 Recent economic performance

The economy of Belize benefitted from the period of global economic expansion, from the mid-1990s up to the mid-2000s, as shown in Figure 1. From 2004 onwards, however, the economy has experienced stuttered growth, with a real term decline in GDP per capita in recent years. Significantly, this trend is apparent prior to the Global Financial Crisis of 2007-2008, suggesting wider malaise or structural issues in the domestic economy (IMF, 2017). Notwithstanding less rapid, and potentially declining, improvements in per capita GDP, this remains slightly higher in Belize than in several neighbouring countries, such as Guatemala, Honduras and El Salvador, many of which suffer from high perceptions of political and criminal instability. It remains about half the level of Mexico where, despite recent volatility, there has been consistent growth in GDP per capita over the same period.

Figure 3 GDP per capita has remained at 2004 levels in terms of real value

Source: Vivid Economics, based on data from the Central Bank of Belize

Adverse developments negatively impacted the economy in 2016, with a strong expansion of tourism the only area of significant growth (Figure 2). Economic output is estimated to have contracted by 0.8% in 2016, reflecting a continued slowdown in oil production and agriculture (IMF, 2017). Fish and citrus production were hit by diseases, with shrimp production particularly affected, and in August Hurricane Earl caused


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further destruction of crops. The authorities’ estimates suggest that total damage caused by the hurricane could amount to as much as 3-4% of GDP (Central Bank of Belize, 2016). Oil production continued to decline in 2016 owing to dwindling reserves, and further exploration has come to a halt. Unemployment increased to 11.1% in September 2016, from 10.2% a year earlier. Growth was supported by the expansion of the tourism sector, facilitated by improved airlift (additional and less expensive flights), better marketing, and new FDI-financed projects. Stopover arrivals increased by 13% in 2016, while cruise passenger arrivals increased by 5%.

Historic GDP growth in Belize, although moderate, has been insufficient for the country to experience real economic growth, and vulnerability to natural disasters further exacerbates this situation. Despite trends in nominal growth shown above, high growth rates among the population have caused GDP per capita to remain nearly stagnant (The World Bank Group, 2016). This has led not only to the inability to facilitate real economic development, but also high poverty rates. Whereas average poverty rates in Latin America and the Caribbean (LAC) declined from 42% to 30% between 2002 and 2009, poverty in Belize rose from 34% to 42% in the same time period, affecting predominantly rural areas (The World Bank Group, 2016). A significant issue affecting growth is the low savings rate, as limited investment hinders the country’s ability to innovate and diversify (Central Bank of Belize, 2016).

Figure 4 Belize’s economy has experienced sluggish growth in recent years, compared to regional peers

Source: Vivid Economics, based on data from IMF

In 2016, Belize recorded an economic contraction of 0.8% due to the devastating effects of Hurricane Earl. The primary agriculture sector suffered the most, as disease, flooding, and other hurricane damages led to a 24.9% contraction due to significantly lower crop yield (Central Bank of Belize, 2016). Secondary and tertiary sectors, however, managed to sustain growth, albeit limited. The expansion of the tertiary services sector, in particular tourism, drove the recovery seen in 2017 and 2018, as it was the primary factor behind a fall in unemployment despite an overall contraction of the economy (Central Bank of Belize, 2016).


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Despite several years of lagging growth, Belize’s economy is showing some signs of strength, supported by a favourable global environment. Real GDP grew by 1.4% in 2017, and recent data indicate an acceleration in economic activity, with growth in the second quarter of 2018 estimated at 5.4% (year on year). Tourism arrivals were up 17.1% in the period January to June 2018 compared with a year earlier, reflecting economic expansion in Belize’s trade partners and an increased number of flights. The unemployment rate declined to 9.4% in April 2018 from 9.7% six months earlier, while inflation was below 1% (year on year). The current account deficit narrowed to 7.6% of GDP in 2017 from 8.4% of GDP in 2016, reflecting subdued imports and higher receipts from tourism.

Belize suffers from a relatively high unemployment rate in regional terms, although the expanding services sector, including in tourism, could drive this down. According to the World Bank, Belize’s unemployment rate of around 8% is higher than the LAC average of 6.2%. This is disproportionately high and somewhat surprising for a country experience above-average growth in regional terms (The World Bank Group, 2016). Women and youth are disproportionately affected by unemployment, as they make up 62% and 43% of the total unemployed population, respectively (The World Bank Group, 2016). A significant driver of unemployment is Belize’s high rate of population growth, both from a high birth rate and immigration driven by crime and instability in neighbouring countries (The World Bank Group, 2016). This high population growth poses the risk of falling GDP per capita and rising unemployment, and thus speaks to the importance of sustainable economic development policies in the country.

Figure 5 Belize consistently experiences higher levels of unemployment that its regional peers, but is slightly below the CARICOM average

Source: Vivid Economics, based on IMF WEO data

2.1.2 Economic structure

Tourism is the single most important sector for Belize in both GDP and employment terms, with a direct contribution of 13% to employment and 14% to GDP; tourism’s total contribution may reach 35% to employment and 39% to GDP (World Travel & Tourism Council, 2017). The country’s natural beauty is the


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main attraction, making eco-tourism a specialty in Belize which has the world’s most important live coral reefs and lush forests that have unfortunately been subject to frequent illegal logging activity. In 2017, Belize received 427,000 tourists, an 11% increase from 2016 (Belize Tourism Board, 2017). This recent growth has been driven by North America, with 71% of tourists arriving from the US and Canada. Cruise visitors are in much larger numbers – with numbers in excess of 1 million in both 2016 and 2017 -, but their share of tourism expenditure is smaller and decreasing over time (from 17% in 2011 to 12% in 2017). The Belize Barrier Reef not only supports vibrant tourism, fishing industries, and livelihoods for communities, but also shelters Belize’s extensive coast from erosion and coastal damage caused by wave action. According to the World Resources Institute’s assessment in 2008, approximately two-thirds of the mainland coast is protected by coral reefs (World Resources Institute, 2008).

Figure 6 Tourism has grown to contribute more than 40% of country’s exports


The tertiary services sector, especially various tourism services, is the fastest-growing sector in the Belizean economy. Services accounted for 69% of the total workforce in 2012, up from 58.5% in 2000, and also accounts for over 55% of job growth (Central Bank of Belize, 2016). Services drove the fall in unemployment observed in 2016 despite a negative overall growth rate.

Agriculture is the second most important economic activity, accounting for about 10% of Belize’s GDP and employment, and the almost all goods exports. Some 38% of Belize land areas are suitable for agriculture but only 7% of that is currently utilized for farming. Traditionally Belize has grown commercial crops such as sugar, bananas and citrus for export to Europe and the US, whereas food crops have been traditionally cultivated at a subsistence/small scale for local consumption. After tourism, sugar is the number one foreign exchange earner in this small economy (36% of domestic merchandise exports), followed by bananas (19%), citrus juices (13%), and marine products (9.7%).

The oil sector has historically been an ever-present factor in economic diversification but will play a decreasing role in Belize’s future given dwindling reserves. Oil production at Spanish Lookout near the inland border with Guatemala started in late 2005/early 2006, peaked in 2011 (domestic exports of USD 146 million, or 41% of


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the total), but the reserves are dwindling rapidly (exports of USD 11 million in 2016, or only 5% of the total). Belize’s oil industry has been an important source of tax revenue but its contribution has been declining rapidly in recent years, exacerbated by the recent plunge in oil prices. Wealth creating opportunities are contrasted with environmental challenges: the impact on biodiversity, the coral reef and ecotourism. Considering these challenges, Belize recently passed legislation to prevent offshore oil drilling and exploration (OCEANA, 2018). This is a decisive step away from an oil-led development trajectory.

2.1.3 Trade performance

Belize has a small and open economy with a select few free and preferential trade agreements in place. As a member of the Caribbean Community (CARICOM), Belize enjoys preferential trade terms with fourteen other Caribbean countries. Trade agreements with Canada (CaribCan), the US (Caribbean Basin Trade Partnership Act) and the European Union (CARIFORUM-EU Economic Partnership Agreement) also offer preferential trade terms with these regions. However, not all of these agreements offer duty-free access for service exports which, given the significant share of tourism in Belize’s GDP, reduces their economic benefit for Belize.

Table 1 Belize is party to five main trade agreements, although some have limited effect given the pre-eminence of tourism in the Belizean economy

Trade agreement

Country/ region

Context Year Belize goods receiving preferential status

Services included?

CARICOM Single Market and Economy (CSME)

15 full-member Caribbean nations, with an additional 5 associate and 8 observer states

Development strategy within the Caribbean Community (CARICOM). Includes Common External Tariff (CET).

1998

Free movement of all goods and services from CARICOM country of origin with no exceptions, while goods from third country subject to CET. Main Belize goods exports are fruit juice, raw sugar, and crustaceans.

Yes

Caribbean Basin Initiative

United States

US government initiative to facilitate regional economic development through export diversification. One-way preferential access to US market

1984

Fruit products, seafood, textiles, medical devices, wood products. NAFTA-equivalent treatment for certain excluded items, including rubber footwear and petroleum products

No


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Trade agreement

Country/ region

Context Year Belize goods receiving preferential status

Services included?

CARIBCAN Canada

Preferential trade agreement between Canada and Caribbean countries

1986, renewed 2013-2023

Belize’s exports to Canada are “negligible”, include sugar, essential oils, and fruit juice.

No

CARIFORUM-EU EPA

European Union

FTA is part of the wider EPA aimed at improving Caribbean-EU dialogue and facilitating intra-Caribbean integration. Asymmetrical two-way preferential access

2008

All products are duty-free and quota-free. Belize’s main exports are crude petroleum, bananas, sugar, and rubber footwear

Yes

Partial scope agreement

Guatemala

Bilateral agreement which builds upon both countries’ obligations as members of the Central American Integration System (SICA)

2006

Tariff reductions granted by Guatemala to select exports from Belize. Includes fresh and processed fruit, fish and wood products.

No

Source: Vivid Economics, with information from the Belize Chamber of Commerce

As of 2017, Belize had a positive trade balance of USD 400 million in goods and services, resulting from a positive and growing net exports of services. In 2017, Belize was a net importer of USD 300 million goods and a net exporter of USD 700 million services (United Nations Statistics Division, 2017). Between 2013 and 2017, Belize’s overall trade position has improved, with a 600% increase in net exports, as shown in Figure 7. The major cause is a decrease in the net imports of goods, which fell 50% between 2013 and 2017, and an increase in the net export of services, which rose 30% between 2013 and 2017, as shown in Figure 8 and Figure 9.


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Figure 7 Belize’s balance of trade has grown due to an increase in the net exports of goods and services

Source: Vivid Economics, based on UN COMTRADE data

Figure 8 Growth in service exports has driven Belize’s improved balance of trade

Source: Vivid Economics, based on data from UN COMTRADE and the Central Bank of Belize


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Figure 9 A large fall in goods imports has driven a nearly 50% decrease in the net import of goods

Source: Vivid Economics, based on data from UN COMTRADE

Tourism services are the single largest export sector. Services are nearly 70% of Belize’s total exports, and tourism services exports accounted for approximately 50% of exports in 2017 (United Nations Statistics Division, 2017).

Belize also has a diversified export base in goods, with top exports including sugar, fruits, mineral fuels and shellfish. The largest exports in 2017 were cane sugar, bananas, fruit juices, crustaceans and crude petroleum, accounting for approximately 30% of Belize’s total goods export value, as shown in Figure 8. Belize’s top imports of goods were refined petroleum, cigarettes, insecticides, petroleum gas and motor cars (United Nations Statistics Division, 2017).


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Figure 10 Agricultural products have displaced petroleum products as the major export from Belize


In contrast, Belize’s service exports are highly concentrated in travel services, which account for nearly 75% of service export value.2 As of 2017, Belize is a net exporter in travel and government services, USD 750 million and USD 30 million net exports, respectively.3 Belize is also a net exporter of USD 60 million business-related services, with the largest share of net exports in communication and other business services.4 However, business services are only a small share, 5% in 2017, of Belize’s total service exports.

Belize’s top destinations for goods exports are the US, Europe, and CARICOM member states, which on average account for nearly 70% of total export value between 2013 and 2017. Over the preceding five years, the largest share of Belize’s goods exports accrued on average to the US (28% of total exported goods), the UK (20% of total exported goods), Myanmar and CARICOM member states (7% of total exported goods each) (United Nations Statistics Division, 2017).5 In comparison, Mexico and Guatemala accounted for 3% of total exported goods demand combined.

2 Based on Belize’s self-reported Extended Balance of Payments and Services (EBOPS) 3 Travel services include all goods and services purchased by non-residents of a country participating in business or personal travel. Product groups covered include goods, local transport, accommodation, food, education, and medical services. 4 Business-related services include Computer, Communication and IT services, Financial services and Other Business Services, as classified by the UN 2010 Manual on Statistics of International Trade in Services 5 Belize’s export relationship with Myanmar is driven by the large value of Belize’s exports to Myanmar in 2016 (approximately USD 107 million), 68% of which was exports of raw sugar


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Figure 11 Belize’s top destinations for goods exports include the US, the UK and the EU


Nearly 25% of Belize’s goods imports originate from neighbouring economies, Mexico and Guatemala. In the last five years, the largest share of Belize’s imported goods originated from the US (28% of total imports), Mexico (14% of total imports), China (10% of total imports), and Guatemala (8% of total imports) (United Nations Statistics Division, 2017).

There is no disaggregated service trade data for Belize, showing Belize’s top trading partners in services. Analysis on Belize’s trade partners is unable to show the destination of Belize’s export in services or the origin of service imports. Data on service trade is not reported at the country-level by Belize.

There are large irregularities in Belizean trade data, which may limit the results of quantitative analysis. Data on Belize’s exports and imports is highly variant depending on the reporter, with Belize’s self-reported exports consistently lower than imports reported from Belize. In 2017, Belize’s self-reported exports were nearly 50% less than Belizean imports reported by destination countries. In contrast, self-reported imports were over 10% higher than reported exports to Belize. Aggregate exports and imports of Belize also show significant fluctuations over a short time period. Exports to the US jumped by 80% in 2017.

Inconsistency and high volatility in trade data is partly driven by the trade in unspecified commodities. These unspecified goods accounted for over 80% of Belize’s total exports to the US in 2017 and are often not captured consistently by parties or per annum due to poor enforcement of customs reporting.

2.1.4 Trade relationship with Mexico

As of 2017, Belize is a net importer of USD 100 million in goods from Mexico, with a low and decreasing level of exports. In the same period, Belize exported USD 1.5 million goods to Mexico, an 85% lower export value than in 2013. Despite a downwards trend, there are high annual fluctuations in Belize’s exports with Mexico. For instance, exports jumped by 175% between 2013 and 2014, falling by 75% in the following year. There has been little change in Belize’s overall trade balance with Mexico however, due to the small share of exports relative to imports over the period. Bilateral trade data with Mexico is likely to consistently underreport the trade in goods and services between the economies, due to the occurrence of illegal border


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trade which is not counted in official data. The issue of underreporting exists in both Belize’s and Mexico’s trade data.

Belize’s top goods exports to Mexico are concentrated in a few sectors, diverging from Belize’s export strengths in the rest of the world. Exports to Mexico were far less diversified than those to the rest of the world. In 2017, 75% of goods exported to Mexico were in iron and steel, fish, man-made filaments, copper and electrical machinery. An additional 6% of exports to Mexico were in unspecified commodities.6 A diverse range of goods were imported from Mexico, with the largest imports in mineral fuels, iron and steel and salt (30% of imports from Mexico).

Table 2 shows Belize’s top exports to Mexico are in Belize’s less competitive sectors. High total exports in a sector can reveal a country’s competitive strengths in producing and exporting a commodity. However, Belize’s current exports to Mexico are in sectors which Belize exports relatively little to the rest of the world. For instance, the top ten export sectors for Mexico account for only 13% of Belize’s total world exports. Of Belize’s most competitive exports, only fish and crustaceans account for a large share of exports to Mexico.

Table 2 Belize’s goods exports to Mexico do not reflect its exporting strengths to the rest of the world

Share of exports to Mexico (%) Share of total exports to the world (%)

Top exports to Mexico

Iron and steel 29 0

Fish and crustaceans 20 7

Man-made filaments1 10 0

Copper 9 0

Electrical machinery 8 0

Commodities not specified 6 0

Essential oils; perfumery, cosmetic or toilet preparations

6 4

Aluminium 5 0

Live animals 3 0

Miscellaneous edible preparations2

1 2

Note: 1staple fibres and filaments of organic polymers produced by manufacturing processes; 2 includes extracts of coffee, yeasts, sauces, mixed condiments, soups and ice cream among other edible preparations

Source: UN COMTRADE, Vivid Economics

Table 3 Mexico’s exports to CARICOM are dominated by higher value goods, and provide an opportunity to diversify and upgrade Belize’s exports through cross-border value chain integration

Exports to CARICOM (% of a country’s total exports)

Rank Top exports from Belize Top exports from Mexico

1 Preparation of vegetables (41%) Mineral fuels and oils (25%)

6 Commodities which do not fall into any other UN classification of traded goods


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Exports to CARICOM (% of a country’s total exports)

2 Vegetables (16%) Boiler and mechanical appliances1 (11%)

3 Fish and crustaceans (12%) Electrical machinery (8%)

4 Food industries, residues and waste (10%) Plastics (8%)

5 Mineral fuels and oils (6%) Vehicles (5%)

6 Products of the milling industry2 (5%) Products of the milling industry2 (5%)

7 Sugar (4%) Iron or steel articles (5%)

8 Salt, cement and plastering material (1%) Preparation of cereals3 (4%)

9 Cereals (1%) Soap (2%)

10 Paper and paperboard (1%) Ships and boats (2%)

Note: Analysis based on average exports between 2013 and 2017. 1Includes nuclear reactors, steam boilers, dishwasher machines, mechanical appliances; 2includes flours (e.g. wheat, meslin, cereal) and starches (maize, potato, manioc); 3preparations of flour, pasta, tapioca, bread and pastry not containing cocoa


The Mexican-Belizean trade relationship can only be partially assessed due to a lack of data on bilateral service trade. Despite a lack of data on service trade flows between Mexico and Belize, such flows could be high with large impacts on the bilateral balance of trade. Travel services are likely to take a large share of Mexico-Belize’s service trade due to their significant share in each country’s total trade. Travel services account for 75% of Belize’s service exports and 30% of Mexico’s service imports in 2017, implying Belize could be a net exporter to Mexico in travel services.

2.1.5 Macroeconomic stability

Belize’s small size, geographic location, and lack of economic diversification make it highly vulnerable to external shocks, both natural disasters and economic downturns in the economies of its trading partners. For example, the World Bank reports that natural disasters have accounted for an average loss of around 4% of Belize’s GDP per annum (The World Bank Group, 2016). Current climactic trends suggest that this situation will only worsen, and the devastating effects of Hurricane Earl on Belize’s primary agriculture sector in 2016 perhaps further accentuates the situation. Volatility remains a key characteristic of the Belizean economy. The relatively small size of the economy and reliance on imports mean it is heavily affected by economic fluctuations by its trading partners, as evidenced by the negative effect of recessions in the US in the early 1990s and 2007. Belize also suffers from low gross domestic savings as a percentage of GDP (10%, which is over 50% lower than the regional average) and lack of economies of scale due to its size.

Despite these factors, the value of the Belizean Dollar enjoys relative stability, although the recent depreciation of the Mexican Peso has adversely affected the economy. In 1978, the Belizean Dollar was pegged to the US Dollar at a rate of 2 BZD to 1 USD, affording the currency a great deal of stability. However, as mentioned above, the Belizean economy is highly vulnerable to exogenous shocks from its trading partners. The devaluation of the Mexican Peso, beginning in 2014 with a fall in oil prices and spiralling in 2016 due to geopolitical instability, adversely affected Belize’s exports. The Corozal Free Zone (CFZ) was particularly hard-hit, as it observed a 12.3% decrease in revenues (Central Bank of Belize, 2017). Although the situation improved marginally in 2017 owing to the depreciation of the US Dollar and policy from the Bank of Mexico (Universidad Francisco Marroquín, 2018), uncertainty surrounding the renegotiation of NAFTA has caused the Peso to plummet again in 2018 (Financial Times, 2018), suggesting further adverse


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effects for the CFZ. The impact of the 1 October 2018 deal between the US, Canada, and Mexico (USMCA) deal to replace NAFTA remains to be seen.

Figure 12 Belizean Dollar to Mexican Peso exchange rate

Note: Gaps in chart reflect unreported data Source: Vivid Economics, based on Federal Reserve Bank of the United States data

Historically, inflation in Belize has remained very low for over thirty years. It has only breached 5% three times since 1986, and has not exceeded 2% since 2009 (IMF World Economic Outlook Database, 2018). This serves as evidence of relative stability, as other countries in the region have experienced hyperinflation. A more predictable investment climate should lower the risk profile of investment into the Corozal Free Zone, which will be vulnerable to Dollar-Peso movements.


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Figure 13 Belize has experienced low levels of inflation

Source: Vivid Economics, based on IMF data

2.1.6 Public finances

Belize’s public finances have demonstrated weak fiscal discipline, contributing to the stuttering performance of the national economy. The country’s fiscal situation has been characterized by consecutive years of deficits which improved after the debt exchange and oil production in mid-2000s but has started to deteriorate after a second restructuring in 2013 on the back of falling revenues from the oil sector (IMF, 2017). The expansionary policies adopted in the 1990s through to the first half of 2000s contributed to a significant deterioration in the fiscal account and the stock of debt soared to over 100% of GDP (The World Bank Group, 2016). Rising world oil prices and declining export prices coupled with sharp increase in external debt service led to a significant current account deficit which was principally financed through a build-up of external public debt. As debt service obligations rose and market financing became increasingly difficult to secure, the government resorted to financing from the central bank, whose international reserves fell below one month of import coverage. This erosion of reserves has left the Belizean economy highly vulnerable to both endogenous and exogenous shocks.


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Figure 14 The government’s deficit, which reduced in the mid-2000s, started to grow again after 2012


Recently, employment has been growing most quickly in the services sector (69% of the total in 2012 vs. 58.5% in 2000). Public sector employment in Belize is large relative to the economy and tends to grow rapidly (Statistical Institute of Belize, 2012). The country’s public sector wage bill is high by regional and international standards. Belize’s wage bill increased significantly since 2000 partly because of a doubling of the government payroll, including teachers, but educational achievement in Belize remains well below regional levels. The wage bill also increased owing to salary increases. On average, public sector wages increased by 5.5% per year during the period 2000 to 2013, compared with an inflation rate of 2.1% per year during the same period.


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Figure 15 Belize has the highest public sector wage bill as a share of GDP in the Caribbean

Source: IMF Country Report 2017

The government significantly reduced spending in the 2017/18 financial year. The primary balance increased to a surplus of 1.3% of GDP in FY2017/18, excluding a one-off effect of a Caribbean Court of Justice (CCJ) ruling, implying a 3.2% of GDP turnaround from the previous financial year. The adjustment occurred largely through a reduction of government investment, which affected growth. Tax measures raised revenues, although their yield was lower than anticipated.

The 2018/19 financial year budget approved by Parliament raises the primary fiscal surplus further, to just above 2% of GDP. The planned adjustment is mainly through higher revenues. Measures include broadening the base of the General Sales Tax (GST) by removing zero-rated items, higher excises on fuel, and higher import duties on selected items, supported by stronger tax administration and spending restraint. In a budget speech, the Prime Minister underscored the importance of raising the primary fiscal surplus to achieve a reduction in public debt to 60% of GDP over the long term.

2.2 Constraints to economic development

This section provides an overview of the main constraints to growth facing the Belizean economy. Many of these factors have been introduced in the previous section, including excess government size, insufficient infrastructure investments, inadequate access to finance and poor-quality education outcomes. Further binding constraints include the lack of structural reforms, including the persistence of trade barriers, distortions to incentives and high costs created by the high and uneven tariff and non-tariff barriers to trade and associated tax policy distortions. The most significant constraints, as reported by firms, are outlined in Table 4 Biggest obstacles facing firms in Belize and the LAC region.

Table 4 Biggest obstacles facing firms in Belize and the LAC region

% respondents identifying barrier

Obstacle cited by respondents Belize Latin America & Caribbean

Tax Rates 16.3% 10.0%


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% respondents identifying barrier

Access to finance 15.6% 15.0%

Inadequately educated workforce

15.0% 12.0%

Transportation 13.4% 3.0%

Crime, theft, and disorder 11.7% 8.7%

Customs and trade regulation 7.7% 4.7%

Corruption 6.1% 6.6%

Political instability 4.7% 6.4%

Labour regulations 3.5% 4.5%

Tax administration 3.5% 2.2%

Electricity 1.6% 8.8%

Business licensing and permits

0.3% 2.6%

Courts 0.3% 1.0%

Practices of the informal sector

0.3% 13.5%

Access to land 0.0% 1.0%

Note: Sample size of 150 firms Source: World Bank Enterprise Survey, 2018

2.2.1 Labour markets

Poor access to, and quality of, education has a negative effect on the skills profile of the Belizean labour force. Although Belize has relatively high rates of primary and secondary education, enrolment rates fall significantly for tertiary education. According to the World Bank, university enrolment grew noticeably in the ten years from 2003 to 2012, from 14.6% to 24.3%; however, growth in university enrolment rates have stagnated since 2012 (The World Bank, 2018). Business owners and managers in Belize widely cite a ‘poorly-educated workforce’ as one of the leading obstacles to growing their businesses. However, this may be overstated, as a study by the IDB revealed business owners’ diagnoses as too general, concluding that skills mismatch, lack of ‘signalling’ to employers, and overall sluggish economic growth may be more prominent factors (Metzgen, 2013).


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Figure 16 Belize has significantly lower tertiary education enrolment than the Latin America & Caribbean average

Note: Data is for 2015 and includes repeaters Source: Vivid Economics, based on data from the World Bank

Another constraint to Belize’s economic development may be the lack of vocational training and technical skill development. Despite rising public spending on education, quality and skills are also reported as inadequate by businesses. Very few firms in Belize offer formal training programmes, resulting in the perception among firms that low skill levels are a significant business constraint. This suggests that significant investments are required to bridge the skills gap so as to ensure the labour force can meet market demand. There was a widespread belief among stakeholders that education focusses excessively on academia instead of vocational skills training, and it is commonplace for government officials to attribute poor labour market outcomes to inadequate training (Metzgen, 2013).


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Figure 17 Belize lags behind the region in providing workplace skills programmes

Note: Data from 2010 Source: Vivid Economics, based on data from the World Bank Enterprise Survey

Most stakeholders believe that issues with labour regulations, although notable, do not present a binding obstacle to business and economic development. Although roughly 20% of firms mentioned labour regulations as a constraint, only around 3.5% considered this to be a ‘top’ barrier to business. Lack of education and skill likely plays a far more prominent role in poor labour market outcomes. Nevertheless, reforms could significantly improve the situation. As most labour laws were modelled after those in the UK in the early twentieth century, some measures are not appropriate for contemporary employment conditions; hence, easing such regulations could improve labour market outcomes (Metzgen, 2013).

Many of these negative perceptions are also held by foreign investors, potentially acting as a constraint to FDI. For example, according to US Department for Commerce, Belize’s ‘labor force is largely unskilled with almost 52% of employed persons engaged elementary work occupations. The education system continues to be poorly equipped in preparing labor force entrants to become entrepreneurs and adapt to a technology-driven global environment.’

In order to mitigate some of these perceptions, Belize’s investment promotion agency (BELTRAIDE) operates a Belize Training and Employment Center (BTEC) to provide skilled labour required by potential investors. BTEC offers job preparedness training for entry level positions in the hospitality, business services and home health care industries. Training programmes last from three to five weeks and participants are granted an industry recognised certificate upon completion of each course. Since 2014, BTEC has been involved in the provision of training programmes for:

305 staff in offshore business processes;

459 staff in hospitality; and,

108 staff in home health activities.7

7 data shared with consultant by BELTRAIDE 11 October 2018


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2.2.2 Capital markets

Belize’s relatively under-developed and uncompetitive banking system limits access to credit, thus creating a significant barrier to business growth. While under-developed financial infrastructure is a common characteristic of smaller economies, Belize’s financial system has faced a rather unique maelstrom of challenges in recent years due to the additional regulatory and compliance burdens.

In early 2016, as part of international banks’ efforts to de-risk their operations, much of Belize’s banking system suffered from the revocation of correspondent banking relationships (CBRs). This had the immediate impact of limiting Belizean businesses ability to settle international financial transactions. Formal CBRs are now limited to the Atlantic Bank and Scotia Bank. Anti-Money Laundering (AML) and Combatting the Financing of Terrorism (CFT) regulations and their compliance requirements are a significant barrier to the rapid growth of financial services provision in the country, as banks are eager to de-risk their portfolios. Access to financial services, in terms of credit, and more basic services such as deposit and settling facilities, is cited as the single biggest constraint to growth by business in Belize (World Bank Group, 2018).

According to the IMF, Belize’s financial sector continues to pose financial stability and fiscal risks, although the gap between non-performing loans (NPLs) and provisions has been narrowing (IMF, 2017). The Emerging Markets Bond Index (EMBI) spread for Belize remains at high levels, significantly higher than the average for LAC or Jamaica. However, given the small size of the country, the costs for commercial banks to operate in the country are expected to remain high.

Despite these challenges, the financial sector is strengthening, supported by the authorities’ resolute actions to enhance financial soundness and reduce risks to CBRs. The overall domestic banks’ gross NPL-to-total loans ratio fell to 7.5% in 2017, from 10.4% in 2016, and bank profitability has improved (IMF, 2017). All banks affected by the loss of CBRs during the period 2015 to 2016 have now found some replacement CBRs and alternative ways of processing cross border transactions, although full service has not been reinstated for consumer or business customers. In 2018, the Central Bank intervened to capitalise an offshore bank, and conducted AML and CFT supervision of a domestic bank, three offshore banks, and two credit unions. The Belizean Parliament adopted amendments to improve the transparency of International Business Corporations (IBCs), by prohibiting the issuance of bearer shares and by requiring beneficial ownership to be held in Belize.


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Box 1 Access to finance remains a binding constraint to doing business in Belize

Financial de-risking in response to money laundering concerns has adversely affected the financial sectors of many Caribbean economies, including Belize. In recent years, increased regulatory pressure on financial institutions to increase accountability in the financial flows under their management has led to a reduction in correspondent banking services (CBSs) in many Caribbean economies, a process known as ‘de-risking’ (Mclean, Metzgen, Singh, & Skerrette, 2017). Updated regulatory guidance and fines for non-compliance have led to a reassessment of risk-reward trade-offs for correspondent banks. The Caribbean region was one of the most affected due to perceptions of high risk, small scale and low profitability (i.e. slim rewards) of doing business in small Caribbean economies. As of May 2016, at least 16 banks in the Caribbean region had lost all or some of their CBSs (Erbenová et al., 2016).

Domestic banks who lose their relationship with ‘correspondent banks’ in foreign territories are less able to exchange currencies and complete cross-border transactions. A correspondent banking arrangement ‘involves one bank (the correspondent) providing a deposit account or other liability accounts, and related services, to another bank (the respondent)’ (Erbenová et al., 2016). Withdrawal of a CBS can reduce a domestic banks ability to access foreign financial markets and facilitate cross-border payments. Access to CBSs and CBRs are particularly important for small, open economies such as Belize, which rely heavily on remittances, FDI and international trade.

The riskiness of Belize’s financial sector has significantly improved in recent years, following actions to strengthen AML-CFT regulation. Anti-money laundering and combatting the financing of terrorism (AML-CFT) are a cornerstone of recent regulation affecting the international financial sector. In the past, Belize’s financial sector has been recognised at high risk of such activities, in particular money laundering associated with regional drug trafficking (Caribbean Financial Action Task Force, 2011). As of 2018, both CFTAF and IMF have noted significant improvements in Belize’s AML-CFT regulation, recognising compliance across all 14 recommendations made in CFTAF’s 2011 Mutual Evaluation Report (CFTAF, 2015). However, some concerns remain over the enforcement of AML/CFT in Belize’s offshore financial sector (IMF, 2017).

Despite strengthening of AML-CFT frameworks, Belize’s financial sector has witnessed a loss in CBRs. The withdrawal of CBSs began in the onshore domestic banking sector, with the largest domestic bank affected by the withdrawal of all CBSs in 2015 (Mclean et al., 2017). As of May 2016, only two of the country’s nine domestic and international banks (Atlantic and Scotia Bank) had maintained CBRs with full banking services (Erbenová et al., 2016). Perception of risk was a major driver of de-risking by correspondent banks, despite the IMF and CFTAF reports noting Belize’s significant progress in AML-CFT regulation (CFTAF, 2015).

The primary impact of de-risking is an increased cost of banking services. Since de-risking began, there has been an increase in the banking sector’s costs of doing business, some of which have been passed onto bank customers. Negative impacts on banks include higher transaction and operating costs, shift in deposits, income losses and costs related to strengthening AML-CFT. In a survey conducted by ECLAC, eight out of ten banks noted a doubling of transaction and operating costs, and some degree of cost pass-through to customers (Mclean et al., 2017).

Poor access to finance remains a binding constraint to growth in Belize’s business sector, an effect which is aggravated by de-risking. The withdrawal of CBS and increased cost of doing business has negative spill-over impacts on Belize’s wider economy (Mclean et al., 2017). The businesses worst affected are those in Export Processing Zones and Free Zones, which have suffered from reduced access to banking services, including access to foreign exchange necessary for foreign trade. Businesses in the tourism sector are also impacted by increased banking charges and the costly transfer of US funds. Higher costs and longer transaction times erode business competitiveness in Belize, acting as a significant constraint to doing business.


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2.2.3 Infrastructure

The condition of existing, and deficit of planned, infrastructure presents a severe barrier to Belize’s development. Deficient transport infrastructure is a key obstacle reducing the competitiveness of Belize’s domestic industries and deterring foreign investment (The World Bank Group, 2016). Over half of businesses surveyed identified transport infrastructure as a ‘major constraint’ to business (World Bank Group, 2010). Not only is road infrastructure poor, but the situation has also been markedly exacerbated in recent years, as IDB report that the proportion of roads considered to be in ‘bad’ condition has jumped from 12% in 2008 to nearly 60% in 2013. The available evidence suggests that the country has been severely affected by the significant contraction in public investment and the continuation of extreme and damaging climate events. Annual gross capital formation/GDP averaged 21.6% from 1991 to 2013 in Belize. It was about the same in the period 2000 to 2008, but it has since fallen to an average of only 16.7% in the most recent period of 2009 to 2013.

Maritime port capacity presents a further barrier. Studies show that port infrastructure can play a vital role in the economic development of developing countries (Munim & Schramm, 2018). Given that the Port of Belize is currently performing below regional and global port infrastructure averages, improvements in port infrastructure may be necessary to facilitate faster economic development. Belize has 2 liner services, connecting the Port of Belize to the hubs of Kingston and Miami, and a Liner Shipping Connectivity Index of 8/100, compared to 17/100 for Trinidad (Caribbean Development Bank, 2016).8

Figure 18 Belize’s relatively poor port infrastructure may hinder its economic development

Note: Data from 2011

8 The Liner Shipping Connectivity Index aims at capturing a country’s level of integration into the existing liner shipping network and is calculated based on four major components: containership deployment (and deployment per capita); container carrying capacity (and capacity per capita); number of shipping companies, liner services and vessels per company; and, average and maximum vessel size.


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Source: Vivid Economics, based on data from the World Economic Forum

Access to affordable electricity presents a further constraint to enterprises in Belize. According to World Bank Enterprise Surveys, over 78% of firms reported experiencing regular power outages, at an average duration of one hour and forty-eight minutes. This is well above the Latin America and Caribbean and world averages of 64.1% and 59.4%, respectively (World Bank Group, 2010). Interestingly, far fewer Belizean businesses own backup generators then the global or regional average, and the percentage of business owners identifying electricity as a ‘major constraint’ is nearly identical with the LAC average and not far above the world average (World Bank Group, 2010). Electricity rates are between BZD 0.33 – 0.44 per kilowatt hour – standard for Caribbean countries, but very high in regional and global terms (Belize Electricity Ltd, 2019; The World Bank Group, 2016).

Internet penetration rates are rising in Belize, although lack of access and high costs of internet still present barriers. Despite access rates being on par with the world average enjoying rates much higher than its regional peers in Central America, it still lags well behind Mexico and Caribbean countries. More prohibitive is the cost of high-speed internet, which is one of the highest in the region according to the US foreign trade website export.gov (US export. gov, 2018).

Figure 19 Belize’s internet penetration lags behind other Caribbean countries


2.2.4 Innovation

Investment in research and development (R&D) does not generally appear to be a priority among firms in Belize. Only 4.8% of firms reported expenditure on R&D, which is well below the regional average of 21.2% (World Bank Group, 2010). Perhaps even more telling, only 5.6% of firms had introduced a process innovation in 2010, compared to a LAC average in excess of 30.2% and a global average of 33.4% (World Bank Group, 2010).


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Figure 20 A low share of Belizean firms invest in research and development

Source: Vivid Economics, based on World Bank data

Belize has relatively low rates of tertiary educational enrolment. As mentioned above, only around 24% of Belize’s population receive higher education, with only 52% of these completing their studies within five years (University of Belize, 2018). Further investment in access to education would not only create conditions that would facilitate innovation and wider economic development, but may also assist in achieving goals laid out in the government’s Horizon 2030 Plan, including building a more inclusive society and reducing crime rates (The World Bank Group, 2016).


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Figure 21 Belize’s tertiary education enrolment rates are below regional and global averages, although other countries in Latin America experience a similar trend

Note: *data for CARICOM average only includes Belize, Grenada, Jamaica, and St. Lucia Source: Vivid Economics, based on data from World Bank Open Data

2.2.5 Business environment

Improving the ease of doing business is a central development goal of the Belizean Government. At present, Belize ranks 125 in the World Bank’s Ease of Doing Business rankings, falling four places from their 121 ranking in 2017. This situation dissuades foreign investment into the country, which in turn slows economic development. Stakeholders attribute Belize’s poor ranking to: 1) lack of consensus in prioritising foreign investment as a development strategy; 2) fragmented public sector policies; 3) lack of harmonised investment procedures; and 4) regulatory and institutional weakness (Government of Belize, 2017). Starting a business and getting credit are cited as particular constraints to business in Belize, ranking 162 and 172 out of 190 countries in the World Bank’s Doing Business report, respective (World Bank Group, 2018). Starting a business in Belize, for example, takes an average of 43 days, compared to an average of 8.5 days in other OECD high income countries (World Bank, 2019).


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Figure 22 Belize is ranked 121st in the ease of doing business rankings

Source: World Bank

Belize has not featured in Transparency International’s Corruption Index since 2008, when it ranked 109 out of 180 countries (Transparency International, 2008). Belize’s most widely-circulated newspaper, Amandala, suggests that this is due to the unwillingness of the current administration to release the necessary information since they came to power in 2008 (Amandala, 2018). Belize’s primary development policy document, Horizon 2030, suggests that corruption may be a serious issue in Belize, and advocates greater accountability among elected officials and a less intrusive role of political parties in citizens’ daily lives.

The risk, and fear of, crime is a significant barrier to doing business in Belize. Over half of businesses in the World Bank’s Enterprise Survey cited crime as a ‘major constraint’ to their business (World Bank Group, 2010). This situation, however, is not unique to Belize – most of its neighbours in the LAC region, including Guatemala, Honduras, Trinidad and Tobago, Jamaica, and Colombia, all received among the lowest rankings in the World Economic Forum’s ‘cost of crime and violence to business’ score (World Economic Forum, 2017). Nevertheless, Belize is perhaps disproportionately affected by crime, as it acts as a deterrent to growth in the tourism sector. Given the central role that the tourism industry plays in Belize’s economy, data from the Enterprise Surveys indicate that crime is a more significant business obstacle for Belizean businesses than the LAC or world averages (World Bank Group, 2010).

Belize struggles with large flows of illicit trade that thwart investment and subsequent development. According to the Economist Intelligence Unit’s Illicit Trade Index, Belize is ranked 77 out of 84 countries included in the index. The index creates an overall score based on four pillars: supply and demand; government policy; transparency and trade; and customs environment. Transparency is a particularly important issue for Belize,


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as the country scores second from the bottom, surpassing only Libya. These issues prove a critical factor in the overall business environment and must be solved in order for Belize to achieve its goal of attracting foreign investment to facilitate economic development.

Trade and customs regulations also have a negative impact on the business environment in Belize. Over 44% of firms surveyed identified trade and customs regulations as a ‘major constraint’ to business, which is significantly higher than the 21% and 18% LAC and world averages, respectively (World Bank Group, 2010). Given the particularly open nature of Belize’s economy, however, customs barriers may be a relatively more significant issue for Belizean firms. While time and cost of border compliance remain a significant issue, survey respondents find that Belize outperforms its regional peers.

2.2.6 Climate change

As Belize is a country with extensive, low-lying coastal areas, it faces significant vulnerability to climate related-disasters such as tropical cyclones and flooding. The UNFCCC recognizes Belize as one of the countries most vulnerable to the adverse impacts of climate change. This is primarily due to: 1) Belize’s long, low-lying coastline; 2) 1,060 small islands; 3) barrier reef, which is the second longest in the world and the largest in the Western Hemisphere; and 4) 17,276 km2 of forest cover, each of which supports fragile ecosystems (United Nations Development Programme (UNDP), 2009). Such vulnerability to the adverse physical, environmental, and economic impacts of climate change suggest that priority must be directed towards the implementation of viable adaptation measures targeting the most vulnerable sectors and ecosystems of Belize.

Intensifying Belize’s ongoing efforts to build resilience to climate change and natural disasters would reduce economic volatility and raise growth over the medium term. Belize’s National Climate Resilience Investment Plan and Growth and Sustainable Development Strategy prescribe resilience-building projects, such as more robust roads, bridges, and seawalls. Costing and prioritizing these plans and developing an investment promotion strategy to increase access to grants and climate funds is a priority. Belize also needs more self-insurance through a natural disaster reserve fund, to facilitate immediate recovery and response efforts following floods and hurricanes. Natural disaster risks should also be cost-effectively managed through contingent lines of credit and optimized participation in regional insurance options, as both public and private assets are under-insured.

2.3 Development policy context in Belize

This section provides an overview of the various development priorities in Belize, with a focus on their implications for the Corozal District. This includes a review of published strategies and development plans, with a particular focus on the key tourism and agricultural sectors.

The Belizean government’s development policies are primarily centred around: 1) investment in human capital; 2) improving social cohesion and governance; 3) foster a competitive business climate; and 4) ensuring environmentally-sustainable economic growth. These values are laid out in a number of government documents, including:

Horizon 2030: which summarises stakeholder views of an ideal social, economic, and political climate in Belize;

Growth and Sustainable Development Strategy: which draws on the goals set out in various ministerial strategy documents to formulate a tangible plan of action to implement Horizon 2030;

National Export Strategy: aimed at facilitating economic development by means of increasing the competitiveness of Belize’s export sector; and, the


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National Investment Policy and Strategy (planned to commence in Spring 2019): which measures aimed at improving the ease of doing business in Belize.

Table 5 Belize’s export development policy landscape

Policy document Time period Key interventions Sectors targeted

Horizon 2030 2016-2030

Focus on four pillars: — democratic governance — educational development — economic resilience — social and environmental

health

Agriculture Agroprocessing Aquaculture Tourism

Growth and Sustainable Development Strategy

2016-2019

Identifies four Critical Success Factors: — optimal income and national

income — enhance social cohesion and

resilience — sustained or improved

health of natural, environmental, historical and cultural assets

— enhance government and citizen security

Agriculture Agroprocessing Aquaculture Internet and communication services Light manufacturing Professional services Real estate Renewable energy and biofuels Tourism (including medical, cultural and entertainment)

National Investment Policy and Strategy; National Investment Portfolio

in development

Aims to improve the ease of doing business in Belize to stimulate local and foreign direct investment.

Agroprocessing Aquaculture Business services (offshore) Light manufacturing Logistics Sustainable energy

National Export Strategy

2015-2019

Identifies: — seven ‘target’ sectors — ‘cross-cutting’ issues

thwarting development of export sector

— measures to mitigate ‘cross-cutting’ issues

— framework for implementation

Agriculture Agroprocessing Aquaculture Internet and communication services Light manufacturing Professional services Real estate Renewable energy and biofuels Tourism (including medical, cultural and entertainment)

National Sustainable Tourism Master Plan

2012-2030

Aims to double overnight tourist arrivals, increase average length of stay and daily expenditures A 500% growth in economic contribution of overnight and cruise tourism expected by 2030

Tourism — cultural — nature-based — sun & beach — cruise — nautical — leisure and entertainment

National Agroprocessing Strategy

in development



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Horizon 2030 lays out an overarching framework for improving Belize’s overall social, economic, and political situation by the year 2030. Drawing primarily from interviews with a diverse array of stakeholders, the document addresses thematic areas across four main ‘pillars’: democratic governance, educational development, economic resilience, and social and environmental health (Government of Belize, 2010). Democratic governance remains a key factor in Belize’s overall development, as lack of accountability, poor capacity within the judicial system, and an intrusive partisan political system continue to affect the livelihood of Belize’s citizens. Educational development is presented as an opportunity to improve social cohesion and inclusivity, improve skill levels in the labour force, and foster civic engagement among the population. Belize’s economy also remains highly vulnerable to external shocks, from both natural disasters and economic recession, due in part to reliance on its agricultural sector and lack of diversification. Further developing and diversifying its small business and export sectors for job creation can mitigate these risks. Public health and environmental sustainability are presented as the ‘bricks and mortar’ of success. Strategies to achieve these goals include universal public health care, investment in green energy, and incorporating environmental concerns into development planning.

The Growth and Sustainable Development Strategy (GSDS) lays out a comprehensive set of harmonised economic, social, and environmental policies with the common goal of improving the quality of life among Belizeans. The GSDS is intended to act as the nation’s primary planning document, as it compiles policy aims from various other ministerial planning documents in its endeavour to create concrete policy measures to address the goals laid out in Horizon 2030. The framework is divided into four critical success factors , which are then further broken down into necessary conditions and actions (Government of Belize, 2016). The four critical success factors are:

optimal national income and investment, including export promotion, attracting FDI, facilitating access to credit and raw material inputs, strengthening factors of production, and improving production efficiency;

enhance social cohesion and resilience, including improving access to and quality of healthcare and education, social programmes, improved wages and working conditions, and national identity building;

sustained or improved health of natural, environmental, historical, and cultural assets, including environmental and ecosystems management, climate resilience measures and disaster mitigation, urban and rural planning, and protected historical, cultural, and ecological sites; and,

enhance government and citizen security, including improving governance and accountability, developing the judicial system and police force to reduce crime, and alleviation of economic and social issues that may incentivise crime.

The National Investment Policy and Strategy seeks to improve the business climate, a central priority in Belize’s economic development. Given Belize’s status as a small and vulnerable economy, promoting an environment conducive to local and foreign direct investment will prove vital in achieving its goal of creating a healthy, resilient economy. Belize fell four spots in the World Bank’s ease of doing business rankings, from 121 (2017) to 125 (2018) (World Bank, 2019). Stakeholders attribute lack of consensus on prioritising investment in development policies, fragmented public-sector policies on investment, the absence of harmonised procedures for foreign investment, and regulatory weaknesses as the key factors behind Belize’s poor performance in the Doing Business report (World Bank, 2019). The national investment policy provides a harmonised framework to guide investment in the country that will coordinate policies across government agencies in order to ease doing business. The policy prioritises agroprocessing, aquaculture, offshore services, sustainable energy, and light manufacturing/logistics as primary sectors for private sector development (Government of Belize, 2017).


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Belize’s National Export Strategy (NES) lays out an implementation plan to enhance the international competitiveness of Belize’s export sectors. It first identifies targeted sectors, in which Belize has the highest potential to be competitive: agriculture, agroprocessing, fisheries and marine products, energy, ICT services, professional services, and tourism services (Belize Trade and Investment Devleopment Service, 2015). These sectors were chosen based on a multi-criteria assessment that included considerations of development impact, trade flows, relevance to existing trade agreements, existing and potential competitive advantage, existing and potential value addition, employment creation, promotion of food security/poverty reduction, and international demand. The NES identifies cross-cutting structural and policy issues that currently thwart Belize’s potential to be competitive in the international market. These include low labour productivity, low skill levels in its workforce, poor access to ‘input’ sectors (e.g. steep import duties on raw materials), lack of quality assurance infrastructure, issues with intellectual property rights, and a poor incentives regime. Finally, it prescribes actions to address these issues and a management structure for implementation.

2.3.1 Sector focus: Tourism

Belize’s tourism offer is based around natural and cultural attractions and includes access to unique tourism assets. These include (Belize Tourism Board, 2012):

the Belize Barrier Reef reserve system;

the Blue Hole marine reserve;

the Caracol Mayan site; and,

the Chiquibul Caves system.

In addition to attracting visitors from the global backpacking routes and high spending tourists with a focus on these natural and cultural attractions, Belize is also home to thousands of expatriates (largely from North America), retirees and those with holiday homes along the Caribbean coast.

The tourism sector has strong potential to increase growth and investment in Belize. In 2017, tourist arrivals to Belize grew 10% to 430,000 overnight visitors, linked to increased air transport access from the US and Canada (Belize Tourism Board, 2017). Tourism activity represents 48% of Belize’s GDP in 2017 (World Travel & Tourism Council, 2017). Visitor exports increased 5% in 2017 to USD 650 million, supporting an estimated 19,500 employees directly and 54,000 across the supply chain.


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Figure 23 Tourism has a direct contribution of 14% to GDP and 13% to employment in Belize

Source: World Travel & Tourism Council

The National Sustainable Tourism Master Plan (NSTMP) sets a strategy for the sector through to 2030. While the NSTMP envisions a 3.8% increase in the tourism sector by 2030 reaching 556,000 overnight visitors, current estimates put overnight sector growth alone at 9% indicating even greater potential for growth. Going forward, the NSTMP focuses on the development of six tourism markets: 1) cultural tourism; 2) nature-based tourism; 3) sun and beach tourism; 4) cruise tourism; 5) nautical tourism; and 6) leisure and entertainment (Belize Tourism Board, 2012). Other expected developments outlined in the sector plan include growth on the South Eastern Coast from 2008 levels of 6% of all tourist activity to 21% in 2030.

To deliver on this master plan, significant investment will be required in infrastructure and amenities to attract tourists to Belize. Constraints to growth in the sector include poor accessibility by both air and land, few recognisable international hotel brands, inadequate management of natural and cultural sites, insufficient support systems including waste management and spatial planning (Belize Tourism Board, 2012). Nearly 7,000 new hotel rooms are anticipated to be built between 2010 and 2030, with the majority delivered after 2020.

2.3.2 Sector focus: Agriculture

Agriculture is a major industry in Belize, employing a fifth of the working population and generating 9% of the country’s GDP (Valdés, Martel, & Salvo, 2017). Approximately 23,000 Belizeans work in the production of sugar, bananas and citrus. Food exports represent 80% of goods exported from Belize to the world. Belizean growers are in part protected through preferential agricultural policies that amount to a 6% increase in the cost of living that consumers face from tariffs, revenue replacement duties and environmental taxes on imported agricultural goods.

The sugar industry is a key economic driver in Belize. In 2012, it was responsible for 5% of the national GDP, 10% of the country’s employment and 6% of foreign exchange earnings (Sugar Industry of Belize, 2014). In 2017, exports of sugar totalled BZD 148 million (Central Bank of Belize, 2017). Exports to the EU accounted for BZD 128 million of this trade (and 90% of sugar exports over the past five years) and represent an area of concern for sugar exporters, given the October 2017 removal of EU sugar production caps and uncertainty


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caused by Brexit. Risk from reduced EU import of Belizean sugar is highlighted a significant area for concern in the latest IMF Country Report (IMF, 2017).

The Belizean sugar industry is beginning to consider strategies to intensify sugar cane growth and diversify crops grown on land freed up from intensification. The industry has explored alternative products derived from sugar cane, including energy from biomass and downstream products such as rum and vinegar (Sugar Industry of Belize, 2014).9

Further value-add to existing agricultural exports presents a significant opportunity for economic growth in Belize. These include fruit juices and cattle, among others. In fact, the CARIFORUM-EU EPA, by which Belize sells the bulk of its raw agricultural products by means of preferential access, specifically requires Caribbean economies to ‘move up the value chain’ and cease to rely on exports of unprocessed agricultural that characterise less-developed economies (European Commission, 2018b). However, this growth is contingent upon two main factors. Primarily, the Belizean agriculture sector will require further commercialisation and increased process efficiency at the farm level, including significant capital expenditure on land and irrigation, in order to produce competitively on the global market (The World Bank Group, 2016). Furthermore, Belize must improve its logistics processes and infrastructure to accommodate an increase in the export volume of cash crops (The World Bank Group, 2016).

9 also as discussed in meetings during the initial project mission in Belize


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3 The role of Corozal Free Zone

This chapter provides an introduction to the Corozal Free Zone, the historical and current activities taking place within the zone, and its performance against its stated objectives. This also includes a review of the regulatory context in which the Free Zone operates and a focus on the status of the economy in Corozal District.

3.1 Introduction to the Corozal Free Zone

This section provides an overview of the aspirations of the Corozal Free Zone, its vision and mission. The Corozal Free Zone was created in 1994, with the aim to attract foreign exchange from Mexico and provide sustainable employment in the Corozal District. The zone was designed to attract consumer spending from Mexico, first through the offer of duty-free petrol then retail goods and more recently a focus on wholesale trade. In 2015, the zone was responsible for USD 400 million in annual turnover and home to 400 businesses employing 3,000 workers.

The export of consumer goods has been the main focus of the Free Zone from its inception. Initially, the zone competed with duty-free petrol that was sold for prices substantially cheaper than the Mexican market. A retail sector offering general merchandise including clothing, alcohol and fragrances developed to offer Mexican consumers products at lower prices than they would find in their home market. As the retail offer in the border Mexican State of Quintana Roo has grown, the shift in activity in the Corozal Free Zone has moved to wholesale trade in general merchandise to supply Mexican vendors. Lower profit margins in wholesale sales and a decline in the value of purchases made by zone visitors has driven some businesses to leave the zone, while others have significantly reduced their workforce.10

The CFZ is governed by a management agency responsible to a zone Board of Directors. The Board is made up of representatives from businesses active in the zone as well as government appointees. Activity in the zone is regulated not only by the policies of Corozal Free Zone Board of Directors, but also the legal framework set by the Belizean national government. Rules governing import of goods from the zone into Mexico, including per capita allowances, are set by Mexican regulators.

Businesses operating in the CFZ benefit from duties and tax exemptions, but now pay a social charge on imports. Free Zone incentives include zero duties on all imports and ten years of corporation tax exemptions, as detailed in section 3.4.2. Additional costs faced by businesses include both social charges levied by the

10 Based on information shared during investor focus groups in the Corozal Free Zone held 26 September 2018

Box 2 Corozal Free Zone was set up to attract foreign investment into Belize

Zone vision

To promote economic growth to the country of Belize

Zone mission

The Corozal Free Zone's mission is to become a dynamic economic investment engine for trade, manufacturing and services in an environment with legal, practical and business certainty in partnership with the government and people of Belize, investors and other stakeholders thereby becoming a major

contributor to sustainable economic growth

Source: (Corozal Free Zone, 2018)


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national government on imports into the zone (ranging from 3% of value for general merchandise to 15% of value for cigarettes) and user fees for operating in the CFZ, including fees on imports and service charges.

Financial regulations on zone-based businesses create significant constraints on operations and investment. Only one bank11 now operates in the CFZ and all businesses located in the zone are required to bank within the zone. Due to concerns with de-risking the financial sector, the bank (and others across Belize) sets a deposit cap for each firm, often less than the value of a firm’s imported inputs. The bank only accepts US Dollars and nearly all business in the zone is conducted in Mexican Pesos. This has led to a parallel market of money changers (‘peseros’), undermining reporting systems set up to reduce risks of legitimate business in the zone. These factors are not limited to businesses operating in the zone, with the issues restated by businesses operating in the wider Corozal District also.

3.2 Activity in the Corozal Free Zone

This section provides an overview of the historical and current performance of the Corozal Free Zone. Between 119 and 400 businesses are actively operating in Corozal Free Zone. Reports from 2015 cite 400 businesses operating in the zone, though reports from the Financial Intelligence Unit from October 2018 indicate only 119 businesses have maintained up to date records required by anti-money laundering legislation.12

The Free Zone’s earnings declined to BZD 385.9 million in 2017 due to: 1) depreciation in the Mexican Peso; and 2) increased social charges on imports into the zone (Central Bank of Belize, 2017). Despite the increased charge on imports, goods destined for the CFZ saw a 0.6% increase in 2017. Interest in the retail offer from the Free Zone has declined as the retail offer in Chetumal and the broader region of Quintana Roo has improved. The relative advantage of shopping in Corozal Free Zone for Mexican consumers and businesses is likely to be further reduced by the new Mexican President’s plans to open a Free Zone in Chetumal and reduce value added tax further for goods sold in Quintana Roo State.13

The Corozal Free Zone accounted for over 10% of total exports from Belize in 2017, despite a fall in exports from the zone in recent years.14 As of 2017, Corozal Free Zone had net exports of USD 60 million, falling 12% since 2013. The fall in net exports from the CFZ is driven by a fall in overall trade, both exports and imports decreased by over 20% between 2013 and 2017, as seen in Figure 24.

11 Atlantic Bank 12 FIU submission to consultant 05/10/18 13 https://quintafuerza.mx/quintana-roo/cancun/anuncia-amlo-zona-libre-reduccion-iva-chetumal/ 14 Exports from the Corozal Free Zone include re-exports (Central Bank of Belize, 2017)

https://quintafuerza.mx/quintana-roo/cancun/anuncia-amlo-zona-libre-reduccion-iva-chetumal/


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Figure 24 The CFZ accounts for a significant share of Belize’s trade and decreasing zone activity has affected the national current account

Source: Vivid Economics, based on trade data provided by CFZ Management and UN COMTRADE

Investment into the CFZ is only a small share of total FDI inflows reported by Belize. Investment inflows to CFZ are only reported up to 2010 by the Corozal Free Zone Board of Directors. from 2000 to 2010, nearly BZD 30 million was invested in the Free Zone, representing about 2% of total FDI flows into Belize over the same

period.15

15 based on data provided to consultant by Central Bank of Belize

11% 11% 11% 11% 10%

0

200

400

600

800

1000

1200

1400

1600

1800

2013 2013 2014 2014 2015 2015 2016 2016 2017 2017

Valu

e o

f im

po

rts,

USD

m

Belize Services Import Belize Goods Import CFZ Goods and services Imports

17% 16% 16% 14% 11%

0

200

400

600

800

1000

1200

1400

1600

1800

2013 2013 2014 2014 2015 2015 2016 2016 2017 2017

Mill

ion

s

Valu

e o

f ex

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USD

m

Belize Services Export Belize Goods Export CFZ Goods and services


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Businesses not eligible for location within the Free Zone (as shown in Table 6) can currently operate within the ‘no man’s land’ customs area surrounding Corozal Free Zone. The Las Vegas Hotel and Casino and Princess Hotel and Casino operate as Export Processing Zone (EPZ), providing leisure and entertainment services to tourists visiting the CFZ.16 The casino employees 236 staff and purchases nearly BZD 1 million annually in wholesale Belizean food and beverages.17 The Free Zone and Export Processing Zone legislation and regulations respectively allow activity in the permitted industrial sectors.

Table 6 List of permitted activities within the Corozal Free Zone and customs ‘no man’s zone’ area as per the Free Zone Act and Export Processing Zones Act

Activities permissively allowed in Free Zones18

Activities allowed in Free Zones, with restrictions19

Export-targeted activities allowed in EPZs20

Non-Export activities allowed in EPZs21

Activities allowed in DPAs with incentives22

Activities allowed in DPAs without incentives23

Export-oriented manufacturing

Non-export manufacturing, for up to 25% of output

Export-oriented processing, manufacturing, assembly

Non-export manufacturing under Ministerial waiver

Agroprocessing, and light manufacturing of environmental goods

Manufacturing, processing, assembly, for domestic or export markets

Tourism Tourism

Telecommunications

ICT services

Export-oriented wholesale, retail, trade, warehousing, and commercial activity

Domestic wholesale of warehoused imported merchandise, subject to duties

Export-oriented non-tourism services (including warehousing, commercial and data processing activity)

Support services to EPZ firms Other professional services

Wholesale, retail, warehousing, commerce, data processing services

16 Based on information provided by the MITC, the company will not be able to maintain this status and receive incentives under the proposed DPA bill, planned to replace Belize’s EPZ Act 17 based on data provided to consultant by El Dorado Investment Co Ltd 18 Free Zone Act, Secs. 17 and 18 19 Free Zone Act, Secs. 19(10), 21(3) and 26(10)) 20 Export Processing Zones Act, Cap. 280, Secs. 2(c), 7(3)a), 8(3), and 3rd Sched., Reg. 4, Chart 2) 21 Export Processing Zones Act, Cap. 280, Secs. 2(c), 7(5) and 8(3)) 22 Information on the DPA Bill provided by the MITC; “National Priority Sectors” as defined by the Minister of Government with responsibility for Designated Processing Areas 23 Information on the DPA Bill provided by the MITC

Box 3 Activity in the Benque Viejo FZ

The Benque Viejo Free Zone does not report sales or investment data to the Central Bank. Data is only available on imports into the zone, which accounted for BSD 51.2 million in 2018. Due to lack of data on activity within the zone, it is considered to be insignificant in Belize’s total trade and investment trends.


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Activities permissively allowed in Free Zones18

Activities allowed in Free Zones, with restrictions19

Export-targeted activities allowed in EPZs20

Non-Export activities allowed in EPZs21

Activities allowed in DPAs with incentives22

Activities allowed in DPAs without incentives23

Professional services

Banking, foreign exchange, other financial services

Professional services

Professional, banking and other services

Gaming Gaming Gaming

Aquaculture and export-oriented agriculture

Energy services (including electricity, biofuels and petroleum)

Note: Information on activities allowed in DPAs with incentives is based on priority sectors outlined in the NES as referenced by the MITC, and may be subject to change


Table 7 Overview of incentives available to investors in different types of Belize’s Economic Zones

Regime Incentives

Free Zones

exemption from customs duties, sales tax, consumption taxes, excise taxes, transit taxes and export taxes

10-year corporate income tax exemption

business tax credits of up to full value, depending on workforce

3-year loss carry-forward

capital gains exemption on sales of a zone business Note: a “Social fee” (of 1.5% for goods) on imports into and transfer between the zones

Export Processing Zones

import exemptions from duties, consumption taxes, excise taxes, turnover taxes, and other taxes

export exemptions from tonnage, foreign exchange and other taxes

20-year exemption from income, withholding and capital gains taxes, with option to extend

unrestricted loss carry-forward

perpetual capital gains exemption Note: a “Social fee” of 1.5% applies to all imports

Designated Processing Areas

For “allowed” DPA activities:

imports suspensive of duties and consumption taxes

10-year exemption from ‘trade turnover tax’, property and land tax


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Regime Incentives

10-year exemption from capital gains and withholding tax on dividends For “permitted” DPA activities:

eligibility for FIP incentives for qualifying activities Note: a Social fee applies to all imports

Note: Under the current EPZ act, incentives only apply for export-targeted EPZ activities Source: Vivid Economics, based on information provided by the Ministry with responsibility for Investment, Trade

and Commerce

There is a substantial overlap between the two incentive regimes. These differences can broadly summarised as follows:

general tourism-related and hotel activity are allowed in the Free Zones but not in the EPZs;

general telecommunications services (subject to ordinary regulatory restrictions) are allowed in the Free Zones, whereas only data processing activity is allowed in the EPZs; and,

companies located in Free Zones may only ever sell 25% of the goods they manufacture into the domestic market, whereas the level of possible waivers for domestic sales available to EPZ companies is flexible.

In effect, unless one is providing tourism, hotel or telecommunications service, there is no particular activity-specific eligibility reason to opt for the Free Zone regime over the EPZ regime. On the contrary, as the period of the tax holiday offered under the EPZ regime is ten years longer than that of the Free Zone regime and may be indefinitely extended, and the social charges are lower for some products, it is fiscally disadvantageous to set up under the Free Zone rather than under the EPZ regime for sectors where there is overlapping eligibility. Foreign currency bank account and transaction restrictions are similarly greater under the Free Zone regime than they are under the EPZ regime’s guarantees. Finally, it bears noting that it is even more disadvantageous for export-oriented manufacturers to set up under the Free Zone regime as opposed to the FIP, which offers even longer tax holidays.

Incentives offered to businesses with EPZ status will change under the proposed Designated Processing Area (DPA) bill, highlighted in Table 7. The impact of these changes on Belize’s EPZ and Free Zone activity today is analysed in Box 4.


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3.3 Performance against stated objectives

The existing objectives of the CFZ are broadly stated in the CFZ Board of Directors’ mission to ‘support the economic development of Belize’ (see Box 2), but there is a large range for interpreting these objectives into economic indicators. Government stakeholders acknowledge that the zone’s specific objectives in recent history have included: 1) the attraction of foreign exchange; and 2) the creation of employment opportunities for Belizeans in the northern districts.24 Additional objectives may include the attraction of foreign investment, diversification of the economy and contribution to the country’s current account. This section will discuss against the specific objectives identified by government stakeholders.

A 2015 evaluation of the economic impacts of free zones found that net benefits from Belize’s Free Zones include an average annual net benefit of BZD 118 million from 2007-2014, largely driven by exports (Preville & Associates Consulting Group, 2015). Export Processing Zones were found to deliver an average annual net benefit of BZD 336 million from 2009-2014.

3.3.1 Attraction of foreign exchange

Sales in the zone have contributed around 10% of total foreign exchange coming into the country, as reported by the Central Bank of Belize. As shown in Figure 25, CFZ previously served as the source for nearly one fifth of the country’s foreign exchange but supplies less than 10% of total foreign exchange. This data reflects the

24 based on feedback provided to consultant from MITC staff on initial mission

Box 4 The Designated Processing Area bill is considered an improvement on the EPZ regime

Overall, the proposed DPA bill can be considered a policy and operational improvement over the current EPZ regime. The DPA bill is set to replace the EPZ act if passed into law. Notable positive changes introduced by the DPA bill include:

● improved governance - resulting from an expansion of the oversight Committee’s role, to include facilitation of trade and investment; introduction of a of a standing regulatory Secretariat; and, modifications to the Appeal Board mechanism resulting in better private sector resignation among other things;

● reduced arbitrage between Free Zone and EPZ regimes - incentives offered under the DPA will face a fixed 10-year cap in most cases. The reduction in fiscal incentives will partially remove the ‘perverse incentive’ for regime arbitrage today, which placed the EPZ regime at an advantage over the Free Zone regime; and,

● increased WTO compliance (still to be determined) - the DPA bill’s language shifts logic away from investment in “exports” to “priority sectors”, pointing towards greater WTO compliance. Provided that the ‘national priority sectors’ listed in the DPA context do not explicitly require that produced goods or services be exported, the DPA could remove current WTO SCM Agreement issues. However, priority sectors currently listed under the NES may not meet this standard, with sectors chosen for export potential and eligible for proposed export subsidies under the NES.a

Despite positive changes, the DPA bill still fails to meet international best-practice in its provision of non-fiscal incentives, minimising its attractiveness to investors. Continued gaps in the scheme include the absence of a one-stop shop to streamline business processes and a lack of infrastructure or location incentives.

a Export subsidies for the ICT sector are proposed in BELTRAIDE’s “National Export Strategy: 2015-2019”


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foreign exchange (USD) deposited in the bank within the Free Zone. As businesses have faced tighter restrictions on depositable funds, the data reported to the Central Bank is unlikely to represent the full scale of foreign currency entering the zone. Currency voluntarily declared at the Belizean border station will represent some of the revenues to zone businesses in excess of the CFZ bank deposit caps, but is likely to provide only a partial picture.

The Corozal Free Zone has been responsible for the bulk of foreign exchange voluntarily declared at the northern border. Customs declaration data shows that while currency declarations from people entering Belize from the Free Zone make up 81% of total currency declared at the Santa Elena border adjacent to the CFZ, entries from the zone accounted for 94% of all US Dollars declared at the border in 2017. Currency declarations from the zone made in 2017 included USD 6 million in US Dollars and USD 9.5 million in all currencies.25

Figure 25 The Corozal Free Zone has become a less significant source of Belize’s foreign exchange

Note: *2018 figures are provided through August 2018 Source: Vivid Economics, based on data provided by Central Bank of Belize

3.3.2 Employment of Belizeans in the northern districts

While specific employment data was not available at the time of writing, there is a perception across Corozal District that the Free Zone is the most significant employer in the region. In 2015, the CFZ directly employed 3,500 people and indirectly employed an additional 1,500 (Preville & Associates Consulting Group, 2015). In comparison, employment at the Benque Viejo Free Zone was reported at only 187 FTE in 2015.

3.3.3 Trade and investment with Mexico

Corozal Free Zone accounts for a significant share of Belize’s total reported exports. The CFZ’s export data shows significant exports from the zone, equivalent to 10% of Belize’s total exports in 2017. Belize’s self-

25 Currency declaration data provided from the Belizean Customs and Excise Agency


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reported export data is noted to suffer from poor reporting, discussed in more detail in sub-section 2.1.3 on Trade performance. The issues of underreporting are particularly relevant in Corozal district, due to the higher likelihood of unreported trade at the Mexican border. The size of these trade flows is not quantified and not included in CFZ’s official reports, though they may contribute to the zone’s export activity. The CFZ’s contribution to Belize’s total exports is therefore likely to be greater than reported in official data.

The CFZ is not reliant on the export of goods to Mexico. There is no data on the destination of the zone’s exports. However, the zone is an exporter of services, and does not contribute to the Mexican Belizean goods trade. As both national and zone level data does not capture potential illegal trade flows at the Mexican border, Belize’s and CFZ’s export to Mexico are likely to be higher than official reports.

The CFZ mostly exports services to Mexico, not captured in bilateral trade data. Available trade data highlights a gap between Belize’s reported export of goods to Mexico, and the CFZ’s total exports. This is because most of CFZ’s exports are the sale of services to Mexican consumers. Tourism and retail services dominate CFZ activity but are not included in Belize’s reported goods trade with Mexico. Stakeholder interviews also reveal some retail services to visitors in CFZ, such as apparel, to Mexican wholesalers. CFZ’s export activity reveals the importance of the Mexican market for Belize’s export-led development, despite the low levels of exports to Mexico reported at the national level.

Bilateral service trade is not recorded by Mexico or Belize, so the importance of the zone in Belize’s service trade with Mexico is difficult to assess.

3.3.4 Potential for illegal activities in the zone

Globally, Free Trade Zones such as Belize’s Free Zones are viewed as especially susceptible to risks from money laundering and other illicit activities. The same characteristics that attract investors to zones may also increase the ease of illicit activities.

Belize created a Financial Intelligence Unit (FIU) to implement its Anti-Money Laundering and Countering the Financing of Terrorism responsibilities. The FIU’s responsibilities include:

Box 5 Trade and investment with Guatemala

As of 2016, Belize is net importer of USD 60 million goods from Guatemala. In the last five years, trade with Guatemala has increased due to growing exports to and imports from Guatemala. The trade position has remained relatively stable, with a 7% increase in net imports between 2012 and 2016.

Belize’s top goods exports to Guatemala are highly diverse, including cereals and vehicles. Nearly 50% of Belize’s exports to Guatemala are concentrated in cereals, fish and vehicle exports. Other top exports include iron and steel, the preparation of vegetables and nuclear reactors, 6% of exports each.

However, many of Belize’s exports to Guatemala are in less competitive sectors. Belize’s exports to Guatemala do not reflect sectors where Belize has a revealed competitive advantage in total world exports. For instance, sugar, fruit and nuts and vegetable preparation account for only 6% of exports to Guatemala, despite their high share of total world exports. In contrast, exports in cereals, fish and vehicles account for only 9% of Belize’s total exports despite their high share of exports to Guatemala.

The Benque Viejo Free Zone is unlikely to contribute substantively to Belize’s trade activity with Guatemala. Though no data is available on exports from the zone, feedback received during the inception mission indicate low levels of export-related activity in the zone.


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receive and collect reports on suspicious and prescribed financial transactions and other information relevant to money laundering and terrorist financing activities;

receive reports on the cross-border movement of large amounts of currency or monetary instruments;

analyse and assess the information it receives;

provide international law enforcement authorities with the financial intelligence that would be relevant to the investigation and prosecution of money laundering offences and terrorist financing offences;

ensure that personal information under its control is protected from unauthorized disclosure;

ensure compliance by financial intermediaries and other entities with their obligations under the FIU Act and the Money Laundering and Terrorism (Prevention) Act and Regulations; and,

enhance public awareness and understanding of matters related to money laundering and terrorist financing (Belize Financial Intelligence Unit, 2016).

Belize’s Financial Intelligence Unit has been charged with supervision of activities related to anti-money laundering and countering the financing of terrorism (AML/CFT) in the country’s Free Zones since 2014. In that period, the authority has undertaken a number of capacity building activities aimed at increasing awareness and knowledge amongst businesses operating in the Corozal Free Zone. These efforts include:

publication and distribution of Free Zone Businesses Overview of AML/CFT Responsibilities and Obligations;

holding training sessions for 154 businesses on AML/CFT best practices and requirements;

individual visits to 130 free zone businesses to review bilaterally businesses’ legal obligations under AML/CFT legislation; and,

a compliance audit of 21 Free Zone businesses in 2016, the results of which are summarised in Table 8.

Table 8 Compliance results from 2016 FIU audit of CFZ businesses

Finding Number of firms out of compliance

No AML/CFT policies and procedures in place 5 (24%)

Compliance manual and procedures does not meet standards 16 (76%)

Money Laundering Compliance Officer is not trained in AML/CFT 21 (100%)

No procedures in place to determine if a customer or potential customer is a Politically Exposed Person or a family member or close associate of a Politically Exposed Person

21 (100%)

No evidence for risk based approach in dealing with customers 21 (100%)

No evidence of Suspicious Transactions Reports filed or a log for such reports filed

21 (100%)

No evidence of AML/CFT staff training, records or logs 21 (100%)


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Finding Number of firms out of compliance

Written job description for Money Laundering Compliance Officer not established

5 (24%)

Enhanced Due Diligence procedures not established 5 (24%)

Source: Belize Financial Intelligence Unit submission to consultant team

It is apparent that CFZ businesses are not currently complying with AML/CTF requirements. Belize’s Money Laundering and Terrorism (Prevention) Act requires Free Zone business to register with the FIU and update their registration annually. As of October 2018, 269 businesses from Corozal Free Zone were registered with the FIU, but only 119 (44%) have updated their registration as required by law.26 Noncompliance carries a potential penalty of up to BZD 500,000 as well as employment bans, state administration of a business, or other measures as authorised in AML/CTF legislation. However, no fines or sanctions have been levied on Free Zone firms found to be noncompliant to date.27

Furthermore, it has been noted by government that no comprehensive nor unified list of certificates of compliance issued to business in the CFZ is maintained, and that such a list should be.28 It is clear that the current system of Free Zone business authorisation has, relative to international best practice application screening, some information gaps as regards applicant company continued good standing, foreign jurisdiction records, director/officer/shareholder details,29 criminal record checks, etc. Furthermore, such due-diligence and the information that it produces is only as useful as is the follow-through on it, including beyond the start-date and during ongoing business operations. In operations, Free Zone business inventory reports could be more frequent than the current annual requirements. These should be provided at least on a monthly basis, if not in real-time, based on smart technology systems.30

The lack of a clearly structured compliance and reporting process between the FIU and various Free Zone authorities is exacerbated by a lack of terminological uniformity in the Free Zone legal instruments. This includes the expressions ‘CFZ Business’, ‘CFZ Occupier’, ‘CFZ Firm’ and ‘Company’, the terms ‘CFZ Developer’ and ‘CFZ’, and the expressions ‘CEO’ and ‘Chairman’. As this confusion, even if minor, could potentially result in legal enforcement challenges, it would be appropriate to ensure perfect terminological alignment.31

Along with poor compliance amongst audited businesses, community perceptions of illicit activities in the zone persist. Concerns amongst members of the public in Corozal District include potential drug trafficking via boat across the zone’s northern border and money laundering facilitated by the large amounts of cash passing through the zone.32

Despite poor compliance amongst businesses within the Corozal Free Zone, no evidence has been found of actual illicit activity occurring in the zone. The mission found no evidence of CFZ transborder criminal activity involving the CFZ and Guatemala or Mexico, nor of any money or drug laundering involving these countries or transit to the US. However, this is not to say certain areas of risk in this regard do not exist. A 2018 US Government review found that 'Belizean law enforcement agencies strongly suspect there is money

26 FIU submission to consultant 05/10/18 27 Per communication with FIU staff 16/11/18 28 Based on information provided by the MITC on proposed free zone legislation 29 Note that proposed free zone legislation reflect the same concern, based on information provided by the MITC

30 Note that proposed free zone legislation reflects the same concern, based on information provided by the MITC 31 Note that an element of this concern is already under consideration in proposed free zone legalisation, based on information provided by the MITC 32 Concerns voiced during stakeholder meetings on initial mission


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laundering, illicit importation of duty-free products, and large sums of cash moving through the Free Trade Zones (FTZs)' (U.S. Department of State, 2018).

There are clear inconsistencies between reported trade flows and those described by businesses in the Corozal Free Zone, particularly regarding ‘unspecified commodities’. While businesses and Free Zone designation are subject to various technical, financial, planning, legal and administrative requirements, there is no formal requirement for industry, demand or economic analysis or studies, leaving some macro-level scope for uncertainty around activities conducted therein.33 Formally requiring that specific sectors, industries and clusters be identified and targeted (reducing the scope for unspecified trade practices), that approximate demand for these activities over time, and that investment targeting and promotion approaches by the CFZ Developer, in advance of and as part of the CFZ designation and approval framework, including through the inclusion of such studies and plans as annexes to the Developer’s Free Zone Operations Agreement, would reduce the scope for uncertainty in terms of activities promoted and conducted in the CFZ.

While there appears to be considerable delegate authority to the CFZ in terms of management and oversight, it is clear that centrally managed National Free Zone Authority (NFZA) governance of the CFZ could be improved. This would ensure greater transparency and efficacy. For example, the existing NFZA Board terms for instance do not appear to be staggered,34 presenting the risk of losing all Board capacity and institutional memory all at once. Furthermore, the Board election process is organised and supervised by the Board itself, rather than by a General Assembly or a third-party committee.35 This presents a risk of Board ‘capture’ by vested interests.36 These risks could easily be mitigated through introduction of a few good corporate governance practices.

Furthermore, existing Free Zone developer reporting requirements are wanting. The NFZA should receive at least annual Free Zone developer progress reports37 rather than just biennial ones, as well as monthly progress reports during the zone development stage. Furthermore, and more seriously, the current Free Zone Operations Contract is a short, four-page agreement, which in no way conforms to international best practices for the licensing of zone users, let alone for their developers or operators, in terms of defining obligations.38 Based on international practices, one would generally expect to see 20-, 40- or even 200- page agreements in this regard, aimed at proper public and project risk mitigation. Good practice agreements, based on available international models, should be introduced. This would further improve oversight and risk management.

3.4 Regulatory framework for export-led development

This section reviews the legal and regulatory context in which both the risks for negative Free Zone regime outcomes, as well as the opportunity for positive ones, are grounded.39 In order to do so, this section of the report will consider permissible activities within the zones, relevant fiscal incentives, their regulatory and supervisory framework, and their regional and international contexts.

33 CFZ Regulations, First and Second Schedules 34 NFZA Regulations, Secs. 4(1) and 9 35 NFZA Regulations, Secs. 4-8 36 It bears stressing that our legal concern in this regard is a separate issue from Board representativity, and that it is a different one than the one raised in the proposed free zone legislation. 37 This concern is echoed by proposed free zone legislation, which recommends both moving to Developer annual reports as well as to the filing of annual audited Developer financial statements with the NFZA. 38 Based on information provided by the MITC on proposed free zone legislation 39 A set of proposed Free Zone Law amendments (referred to as a “Matrix of amendments and Action Plan,” dated 3rd May 2018) were received by the Consultant on October 6th, which we understand were primarily drafted and/or collated by the Ministry of Investment, Trade and Commerce, and reviewed by the Attorney General’s Office. It is understood that these proposed amendments were drafted in an effort to respond to Caribbean Financial Action Task Force (CFATF) and WTO Agreement on Subsidies and Countervailing Measures (ASCM) requirements. It is furthermore understood that the legislative amendment process is ongoing, with a view to adopt a definitive set of legislative amendments in the near-term


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3.4.1 Activities allowed in the Free Zones by Law

A large number of activities are fully authorised for operation within Belize’s Free Zones. Wholesale, retail, services, trade, investment, commercial, office, warehouse, tourism, hotel and manufacturing activities are permitted in the Free Zones – provided that authorised businesses operate (as regards their Free Zone activity) only within the Free Zone where they are licensed and within the terms of their zone business license.40

Certain other activities are also permitted, but with additional restrictions. Banking, foreign exchange and other financial services activities may be authorised under the usual conditions, permitted by the Financial Services Commission. The Free Zone Act (FZA) was explicitly amended in 2005 in order to clarify that these are activities are to be regulated and controlled ones. Gaming and telecommunications services are likewise subject to regulatory approvals at the national level.41

Free Zone businesses can make limited sales to the Belizean economy. Imports into base economy are limited to 25% of the imports of a business operating in the Free Zone. In order to sell goods to the base economy, zone businesses must first obtain permission from the Ministry of Finance.

3.4.2 Incentives offered under the Free Zones Programme42

The primary incentive for Free Zone businesses in a broad exemption from import duties. Under the Free Zones Programme, all goods, merchandise, articles, fuel, building materials, furniture, equipment, supplies and parts imported by Free Zone businesses and developers for business purposes are exempt from customs duties, sales tax, consumption taxes, excise taxes, transit taxes and export taxes.43 The Free Zone Act grants discretion for law and the zone regulators to impose limits on such goods as they may deem fit.44

Zone tenants also benefit from a ten-year corporate income tax exemption. This tax-free period compares to usual tax rates of up 6-15%, 24.5% in telecoms). After ten years, zone tenants pay 0-15% in tax, depending on the level of employment they generate and the sector of activity they are in, as well as from capital gains exemption on sales of a zone business.45 It is understood that there is also a moratorium on the imposition of increased tax rates after the ten-year period. Moreover, no trade quotas, rent controls or monopolies apply within the zones.46

The existing incentive structure has been flagged as noncompliant with WTO requirements and is under revision. The combination of income tax incentives and of a domestic sales quota represents a red-light (actionable) export subsidy under the WTO’s Subsidies and Countervailing Measures Agreement, as noted by the Commonwealth Secretariat in a 2015 report (Preville & Associates Consulting Group, 2015). Amendments under consideration include:47

retain certain powers and approval authority for Free Zone businesses and workers with the NFZA rather than the Free Zone management;

add representatives of the Ministry of Finance, Labour Department, Financial Intelligence Unit and Customs and Excise Department to the board of any Free Zone (including privately managed Free Zones), which will ensure that a majority of the board’s seats are held by public representatives;

40 FZA, Secs. 17 and 18 41 FZA, Sec. 26(10) 42 Offered under the Free Zone Act (“FZA”), Cap. 278, Laws of Belize, as at 31 December 2011 43 FZA, Secs. 19(1)-(9), 21(3) and 29(1) 44 FZA, Secs. 20(c) and 20(d) 45 FZA, Secs. 27(1)-(2) 46 FZA, Secs. 26(5) and 26(7)) 47 based on draft work product provided to consultants by the Ministry of Investment, Trade and Commerce 05/10/18


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exclude manufacturing, tourism and temporary hotel accommodation from eligibility for Free Zone incentives;

establishes the Income and Business Tax legislation as the source for tax rates paid by Free Zone businesses that have exhausted their ten-year exemption from business tax, including allowing tax credits for Free Zone businesses in accordance with the level of employment once the ten-year exemption period has expired;

require separate books and accounts for businesses operating in multiple Free Zones;

ensure clear requirements for audited financials or certified accounts for all businesses operating in Free Zones;

require all Free Zone developers and businesses to have an electronic sales system linked to a central server for the Free Zone and report both sales and inventory data; and,

reforms the Corozal Free Zone board of directors to include private sector representatives elected by all businesses operating in the zone, rather than appointed by the Free Zone Chamber of Commerce.

A social charge (of 3% for goods, 6% for alcohol and 15% for cigarettes) is levied on imports into and transfer between the zones.48 This fee has recently been increased from 1.5% for general merchandise. Revenue from the social fees is collected by central government and used to support national priorities, rather than specific projects within and around the zone.

Table 9 Cost (USD) per gallon of regular and premium fuel imported into Belize has declined since 2012

Type of fuel 2012 2013 2014 2015 2016

Regular 3.16 3.10 2.94 1.92 1.58

Premium 3.35 3.18 3.04 2.11 1.78

Note: Costs include the costs of insurance and freight Source: Ministry with responsibility for Trade and Commerce

3.4.3 Export Processing Zones Programme49

In addition to the Free Zones programme, Belize provides incentives to qualified exporting firms through its Export Processing Zones programme.50 Eligible business includes those involved in processing, manufacturing, assembly, data processing, and other non-tourism services solely targeting the export market. However, EPZs are eligible for a domestic market exemption under certain qualifying conditions,51 with permission of the Ministry with responsibility for Investment, Trade and Commerce.

EPZ businesses are eligible for similar import tax exemptions as businesses operating in a free zone. Under the EPZ Programme, a business with EPZ designation may import goods and supplies, including operations-related vehicles and fuel, free of customs duties, consumption taxes, excise taxes, turnover taxes, and other

48 FZA, Sec. 24 49 Offered under the EPZ Act, Cap. 280, Laws of Belize, as at 31 December 2004 50 Note that a Designated Processing Area (DPA) Bill is proposed to replace the EPZ legislation, and if passed will result in a change in incentives offered 51 Conditions include if trade with domestic Belizean business enterprises will 1) aid the economic development of Belize, 2) alleviate shortages of goods and services, 3) or otherwise be in the best interest of Belize (EPZ Regulations, Sec. 8 (1))


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taxes. Furthermore, all of its EPZ exports are exempt from tonnage taxes, foreign exchange taxes, or other taxes.52

EPZ businesses are exempt from income tax, withholding tax and capital gains tax for their first twenty years of operation, with the option to extend the exemption.53 The dividends they pay are exempt from taxation in perpetuity. If an EPZ business incurs a total net loss over the twenty years of its tax holiday, it may be carried forward and deducted against profits in the years following the tax holiday.54 The proceeds from the sale of stock or of the ownership, in whole or in part, of an EPZ business are exempt from capital gains tax,55 while real property within an EPZ is exempt from property or transfer taxes.56 Other EPZ benefits include (Belize Trade and Investment Devleopment Service, 2016):

streamlined customs process, where a Customs Officer accompanies all goods entering the designated EPZ;

eligibility to open foreign currency bank accounts in Belize; and,

allowance for work permits equivalent to 15% of workforce, limited to senior managers or technical level employees.57

EPZ businesses are subject to costs based on footprint and output. There are two principal costs:58

an annual Industrial Roof Space (IRS) fee of BZD 0.25 per square foot, due for the first time immediately upon signing an Operations Contract; and,

a social charge levied on the value of all imported goods and services and of 3% on merchandise.

The restriction on sales of products manufactured in the EPZ into Belize’s Domestic Customs Territory (DCT) without a wavier issued by the Export Processing Zone Committee,59 in the context of these exemptions, still constitutes a prohibited export subsidy under the WTO SCM Agreement.

3.4.4 Fiscal Incentive Programme60

Belize has instituted a Fiscal Incentive Programme to encourage investment in certain sectors. Under the FIP, duty exemptions are granted for up to 25 years, to companies ‘engaged in agriculture, agro-industry, food-processing, mariculture or manufacturing and whose operation is highly labour intensive and whose production is strictly for export’.61 Companies active in tourism, health care, manufacturing, auto rental, computer and information technology and arts and craft production are also eligible. Security companies, condominium developers (with the exception of hotel developers) and time shares, casinos and wholesale/retail business are not eligible to receive FIP incentives.

In the case of small and medium enterprises (SMEs), the duty exemption is of two years, with the possibility of extension up to five. During FIP tax holidays, all profits are partially exempt from application of the Income and Business Tax Act.62 The FIP duty exemption is limited to capital equipment, fixed assets and parts.

52 EPZ Act, Secs. 9(2) and 9(6) 53 EPZ Act, Sec. 12 54 EPZ Act, Sec. 12 (3) 55 EPZ Act, Sec. 12 (4) 56 EPZ Act, Sec. 12 (5) 57 Note that a Designated Processing Area (DPA) Bill is proposed to replace the EPZ legislation, and if passed will result in a change in incentives offered 58 BELTRAIDE, EPZ Program Quick Facts (August 2016), p. 7 59 EPZ Act, Sec. 8(3) 60 As offered under the Fiscal Incentives Act (“FIA”), Cap 54, Laws of Belize 61 FIA, Secs. 6-7 62 Commonwealth Secretariat, op. cit., pp. 27-28


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A moratorium on the issuance of tax holidays, for all businesses, has recently been put in place by the Government of Belize.

Programme costs collected by the government from firms in the FIP vary across investment size and ownership structure. Table 10 Costs for firms in the Fiscal Incentive Programme sets out the variance in costs for firms receiving incentives, including discounts for Belizean-owned SMEs. In order to qualify as a Belizean SME, a firm must have at least 51% Belizean ownership, employ no more than 15 persons and have an annual income of less than BZD 500,000 per year.

Table 10 Costs for firms in the Fiscal Incentive Programme

Size of capital investment

Application/processing fee

Publication fee Administration and Monitoring Fee

All firms

BZD 300,000 – 499,999 BZD 7,000 BZD 800 BZD 1,000/year

BZD 500,000 – 1,000,000

BZD 15,000 BZD 800 BZD 1,000/year

BZD 1,000,001-5,000,000

BZD 20,000 BZD 800 BZD 1,000/year

BZD 5,000,001 + BZD 30,000 BZD 800 BZD 1,000/year

Belizean SMEs

BZD 0 – 100,000 BZD 100 BZD 400 BZD 100/year

BZD 100,001 – 200,000 BZD 200 BZD 400 BZD 100/year

BZD 200,001 – 300,000 BZD 500 BZD 400 BZD 100/year

Source: Vivid Economics, based on BETRAIDE (2016)

The existing FIP regime has been found non-compliant with the WTO’s SCM Agreement, owing to the combination of the partial income tax holiday with an export requirement. It is understood this is also currently under review.

3.4.5 Regulatory governance structures in the Free Zones

Belize’s Free Zones are governed by the Free Zones Act, which is overseen by the Ministry with responsibility for Investment, Trade and Commerce (MITC) and its National Free Zone Authority. In practice, as the NFZA is set up, the Free Zones are governed by respective Free Zone Management Authorities and regulated by the MITC.

New Free Zones can be designated by the Prime Minister, the Minister of Investment, Trade and Commerce or the NFZA – subject to approval by the National Assembly.63 The NFZA assesses job creation potential of a designated zone, collects application and annual (operation, administration and inspection) fees, and requires the signature of an Operations Contract by all Free Zone developers and businesses.64 The Minister

63 FZA, Secs. 5 and 6(2)-(4) 64 CFZ Regulations, Secs. 2-6


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of Investment, Trade and Commerce approves and sponsors CFZ regulations proposed by the NFZA before the National Assembly.65 The Minister may also enquire into any import or export transaction.66

The NFZA oversees the work of Free Zone developers, through whom it collects the charges which zone businesses pay.67 The NFZA is structured with a staff of compliance officers, receives notification of all exports by Free Zone enterprises, regulates and may enquire into any Free Zone import or export transaction.68 Furthermore, audited financial statements of zone activity must be provided by zone businesses annually to the NFZA.69 The NFZA must be consulted by the Central Bank of Belize in its decisions regarding the currencies in which zone transactions (and salaries payment) may occur, and receives related bank statements (along with the Central Bank) monthly and on demand.70

The NFZA can issue regulations within the zones, as well as authorize zone developers to do likewise.71 The NFZA issues free zone regulations through the Minister of Investment, Trade and Commerce, and subject to the National Assembly.72 Zone businesses must file annual physical inspection and reconciliation reports with the NFZA (and Customs), as well as potentially pay specific fees for each trading transaction to NFZA.73 With the Department of Immigration, the NFZA monitors foreign nationals in the zones.74 The NFZA controls the activities of both zone developers and businesses within the zones, notably through specified fines.75 The NFZA monitors and can fine zone users for rubbish violations.76 The NFZA (along with Customs) also controls fuel transportation and sales within the zones, and can fine or revoke zone businesses’ operating licenses after fuel transport rules violations.77 The NFZA can similarly fine or revoke the business licenses of currency regulation violators.78

Zone developers receive and review user applications, and issue and revoke Certificates of Compliance as regards zone businesses. They must report to the Ministry of Investment, Trade and Commerce, collect administrative fees specified under the Act, and receive user monthly inventories.79 Developers must furthermore exercise control and vigilance over goods imported into zones and over the firms importing them.80 Mandatory business records of goods movements must be provided to developers on a monthly basis for their review.81 Developers may revoke business licenses.82 All zone business acquisitions of other zone businesses must be registered with the developers.83 Zone developers, with NFZA permission, can moreover issue regulations and fines within zones.84 Developers may inspect zone users at their discretion.85

Zone businesses must file annual physical inspection and reconciliation reports with the Belize Customs Department (as well as with the NFZA).86 The Customs Department regulates all zone import and export transaction, verifies the seals on cargo imported into the zones, receives notification of all exports, and fines

65 FZA, Sec. 32 66 FZA, Secs. 23(2)-(3) 67 FZA, Sec. 30(11) 68 FZA, Secs. 22(4) and 23(1)-(3) 69 FZA, Secs. 22(2) and 22(3) 70 FZA, Secs. 25(2), 26(2)-(3) and 28(1) 71 FZA, Secs. 30(1)-(2) 72 FZA, Sec. 32 73 CFZ Regulations, Secs. 5(6) and 9 74 CFZ Regulations, Sec. 10 75 FZA, Secs. 30(1)-(2); and CFZ Regulations, Secs. 10.01 and 11 76 CFZ Removal of Refuse Regulations 77 CFZ Fuel Transport Regulation, Secs. 4-6 78 CFZ US Dollar Currency Use Regulations, Sec. 6 79 FZA, Secs. 10(4),11(1), 18 and 26(7) 80 FZA, Sec. 19(7) 81 FZA, Secs. 21(4) and 22(1) 82 FZA, Sec. 30(3) 83 FZA, Sec. 26(9) 84 FZA, Secs. 30(1), 30(2) and 30(11) 85 FZA, Sec. 30(4) 86 CFZ Regulations, Secs. 5(6) and 9


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violators of Customs law and regulation within the zones.87 Customs (along with the NFZA) also controls fuel transportation and sales within the zones.88 Relatedly, the Ministry of Finance (presumably through Customs) must approve all sales of goods from zones into the Domestic Customs Territory, as well as transfers of goods between such zones.89

The Central Bank of Belize (CBB), along with the Financial Services Commission regulates financial systems within the Free Zones. The CBB, after consulting with the NFZA, may ‘prescribe’ currencies in which zone transactions (and salaries payment) may occur, prescribe banks into which the proceeds of such transactions shall be deposited, and receives related bank statements (along with the NFZA), both monthly and on demand.90 The Financial Services Commission must provide its permission for banking, foreign exchange and other financial services activities.91

Other national ministries are responsible for regulating their areas of jurisdiction in the Free Zones. The Commissioner of Income Tax is responsible for tax collection in the zones.92 The Immigration Department issues and revokes zone work permits to foreigners.93 It similarly (with the NFZA) monitors all foreign nationals within the zones.94 The Health Department can require the removal of goods in the CFZs, where appropriate.95 The Land Registry at the Ministry of Natural Resources is responsible for CFZ boundary enforcement.96 All Government of Belize regulators may inspect zone users at their discretion.97

3.4.6 Regulatory framework in place to monitor and combat criminality

The regulatory system governing Free Zones includes several mechanisms to ensure accountability amongst firms operative in the zones. Free Zone developers and businesses must comply with all of the existing Belizean laws and regulations, as well as with NFZA rules.98 Furthermore, all Government of Belize regulators, the NFZA, as well as Zone Developers, may inspect any zone business, at their discretion.99 Zone developers must provide the NFZA with biennial progress reports.100 In their applications as Free Zone businesses, companies must provide a business plan, financial and commercial references, as well as tax information.101 Moreover, all zone business acquisitions of other zone businesses must be registered with the concerned zone developer.102

Basic Anti-Money-Laundering measures are in place to mitigate potential risks in the zones. For instance, some types of listed transactions in the zones must be in US Dollars,103 while others may be in US Dollars or Mexican Pesos.104 The proceeds of zone transactions must be deposited into Central Bank-prescribed banks In the zone where possible), whose statements are provided to the Central Bank and NFZA monthly and on demand.105 Audited financial statements of zone activity (with separate books of account kept for outside of zones) must be provided by zone businesses annually to the NFZA.106 Separate books of account must be

87 FZA, Secs. 21(1), 23(1)-(3) and 29(2) 88 CFZ Fuel Transport Regulation, Secs. 4-5 89 FZA, Secs. 19(10) and 24(6) 90 FZA, Secs. 25(2), 26(2)-(3) and 28(1) 91 FZA, Sec. 26(10) 92 FZA, Sec. 27(6) 93 FZA, Secs. 28(3) and 30(5) 94 CFZ Regulations, Sec. 10 95 FZA, Sec. 21(6) 96 As confirmed under various FZA Orders (Subsidiary Law) 97 FZA, Sec. 30(4) 98 FZA, Secs. 18(3)c) and 30(6)-(7); and CFZ Regulations, Sec. 6(2) 99 FZA, Sec. 30(4); and CFZ Regulations, Secs. 2-6 100 CFZ Regulations, Fourth Schedule, Sec. 5 101 CFZ Regulations, Third Schedule 102 FZA, Sec. 26(9) 103 CFZ US Dollar Currency Use Regulations, Sec. 3 104 CFZ US Dollar Currency Use Regulations, Sec. 5 105 FZA, Secs. 25(2), 26(2)-(3) and 28(1) 106 FZA, Sec. 22(2) and 22(3)


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kept for business conducted inside and outside the zones.107 There is now also a formal government proposal that free zone businesses operating in more than one Free Zone should report their Free Zone activities separately.108 To enforce these various legal provisions, the NFZA, in addition to its inspection powers, may either fine or revoke the zone business licenses of applicable currency regulation violators.109 Finally companies must also file annual physical inspection and reconciliation reports with the NFZA and with Customs.110 Business due-diligence, registration, reporting, inspection, and sanctioning chain represents thorough and good practice.111

Belize has set up a Financial Intelligence Unit to monitor financial activities in the country and develop capacity in businesses operating there to comply with Anti-Money Laundering requirements. The FIU has tabled several proposals to improve risk management in the Free Zones:

‘establish Anti Money Laundering and Combating the Financing of Terrorism compliance program;

require Free Zone Businesses to apply Consumer Due Diligence (CDD) measures and make Suspicious Transaction Reports (STRs);

require Free Zone Businesses to report all cash transactions that exceed USD 10,000 or equivalent; and,

generate an instruction manual detailing, compliance obligations, and internal Anti Money Laundering mechanisms (including reporting and record keeping requirements) that must be maintained.’112

The FIU is currently conducting a National Risk Assessment to identify those areas which are the highest priority for intervention. Free Zones are included in this assessment.

3.4.7 Benchmarking Belize’s zone structure in an international context

Belize’s Free Zone regime, as designed, in effect seeks to promotes investment in all of the export-oriented secondary (including agroprocessing) and tertiary sectors of the economy (including tourism). This in turn incentivises economic diversification away from any potential dependence on the domestic market and unprocessed agricultural production, as well as the reinforcement of the struggling Belizean manufacturing sector, without disincentivising the national competitive advantages in tourism and other services.

The specific technical design of the regime however begs at least three critical questions:

Are the offered incentives overly generous, as compared with regional benchmarks?

In a number of respects, Belize’s Free Zone regime is either comparable or less generous to the commonplace incentives generally found in other Free Zone programs around the world. For instance:

it is not unusual, internationally, for Free Zone and EPZ regimes to grant capital gains tax exemptions, particularly as capital gains are in any event usually taxed as income in the absence of any such fiscalisation;

the “social charge” duties being applied on the imported Free Zone and EPZ merchandise are unusual (as free zones are generally deemed extraterritorial for tax purposes) and neither generous nor

107 FZA, Sec. 22(3) 108 Based on information provided by the MITC on proposed free zone legislation 109 CFZ US Dollar Currency Use Regulations, Sec. 6 110 CFZ Regulations, Secs. 5(6) and 9 111 Based on expert consultation with Jean-Paul Gauthier, World Economic Processing Zone Association Secretary-General 112 Based on information provided by the MITC on proposed free zone legislation


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competitive, by international free zone standards. Free Zone and EPZ regimes are axiomatically duty- and VAT suspensive, much as are the world’s older and universally prevalent bonded warehousing and manufacturing-under-bond customs schemes; and,

the Government’s discretion to limit import of various products into the Free Zones is, once again, neither generous nor competitive by international free zone standards.

Belize's tax rates are low by global standards.113 Income tax exemptions offered by the Free Zone regime on their face seem unnecessary and are unlikely to impact investment given low tax rates outside of the zone. Indeed, much of Central America (including Guatemala and Honduras) has corporate income tax rates of 25%, if not of 30% (as is for instance the case in Nicaragua, Costa Rica and El Salvador), as is also the case in Mexico.114

On the other hand, many of the Caribbean island nations, including Aguila, Bermuda, the Bahamas,115 the Cayman Islands, and Turks and Caicos,116 impose no income nor capital gains taxes whatsoever.117 Furthermore, Costa Rica, Nicaragua, Panama, Guatemala and Honduras all provide full income tax exemption (as well as zero-rated VAT suspension) within their Free Trade Zones.118 Mexico also recently announced the launch of an SEZ regime offering 0% income tax for the first ten years, followed by a 50% reduction in income tax rates for the following five years of investor operations.119

And finally, as noted earlier in this report, as the period of the tax holiday offered under the EPZ regime is ten years longer than that of the Free Zone regime and may be indefinitely extended, and the social charges are lower for some products, it is fiscally disadvantageous to set up under the Free Zone rather than under the EPZ regime for sectors where there is overlapping eligibility.120 Indeed, foreign currency bank account and transaction restrictions are similarly greater under the Free Zone regime than they are under the EPZ regime’s guarantees. This situation presents investors with a perverse internal ‘regime arbitrage’ motive to invest in one of Belize’s other incentives regimes, given their greater fiscal attractiveness.

The matter of setting the appropriate fiscal incentives for Belize’s Free Zone regime is thus far from a straightforward one.

Assuming one eliminates the WTO-illegal minimum export quotas under the regime, as is planned, one must still, in order to promote processed or manufactured exports to the EU and the US, compete with alternative potential investment location choices in Central America and the Caribbean offering full income tax exemptions -not to speak of the domestic alternatives offered by the Belizean EPZ and FIP regimes. At the margin, these fiscal considerations may thus tend to push investors toward these other regime and jurisdiction options.

Are the incentives offered are truly appropriate to encouraging the growth of the tourism and manufacturing/agroprocessing service sectors?

113 Although it varies by sector, apart from ICT, the maximum 'Business Tax' is of 15% and the standard Business Tax rate is of 1.75% (https://www.belize.org/business-tax/). There are no capital gains taxes, and property taxes are assessed at just 1-1.5% of the unimproved value of the land (https://cerrossands.com/tax-benefits-of-moving-to-belize/). The standard Income Tax is however of 25% (against which any paid Business Tax is deducted). 114 https://home.kpmg.com/xx/en/home/services/tax/tax-tools-and-resources/tax-rates-online/corporate-tax-rates-table.html. 115 The Bahamas is a member of CARICOM, but not part of the Customs Union 116 The Cayman Islands and Turks and Caicos are Associate Members of CARICOM 117 https://home.kpmg.com/xx/en/home/services/tax/tax-tools-and-resources/tax-rates-online/corporate-tax-rates-table.html. 118 See: http://www.asociacionzonasfrancas.org/en/invierta/directorio 119 See: https://www.taxand.com/wp-content/uploads/2018/04/Mexico-Special-Economic-Zones.pdf

120 It is noted that this situation will be mitigated if the DPA Bill is enacted into Law, as the EPZ's 20-year tax incentives are proposed

to be replaced by 10-year incentives; see Table 7 and Box 4 on the DPA bill

https://home.kpmg.com/xx/en/home/services/tax/tax-tools-and-resources/tax-rates-online/corporate-tax-rates-table.html

https://home.kpmg.com/xx/en/home/services/tax/tax-tools-and-resources/tax-rates-online/corporate-tax-rates-table.html

http://www.asociacionzonasfrancas.org/en/invierta/directorio

https://www.taxand.com/wp-content/uploads/2018/04/Mexico-Special-Economic-Zones.pdf


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The literature around fiscal incentives tends to show that income tax incentives and duty-suspensive regimes are helpful in incentivising export-oriented manufacturing. The tax incentives on offer under the current Belize Free Zone regime should thus for instance, at a minimum, to some extent contribute to the potential for increased agroprocessing and other manufactured exports to Belize’s neighbours. Having said this, a number of different, sector-oriented Free Zone solutions have been successfully tested and applied around the world, including Tourism Free Zones (generally built on a resort model) and Integrated Agro-food Park SEZs. In both of these models, bespoke, sector-specific policy measures, as well as common infrastructure and services, are a core part of the zones’ value proposition.

Issues such as hotel licensing and grading, agricultural research and development, varietal protection and countless other regulatory issues of import to these sectors are not however addressed under Belize’s Free Zone regime as currently designed. Nor, for instance, are special ‘defined consumption’ and duty-free shopping privileges for tourism-oriented retail. It is however precisely these characteristics of such zones, rather than generic tax holidays, which are their features of greatest interest to the investors establishing themselves within them. None of these is readily apparent in the incentives offered in the context of Belize’s Free Zones Regime, which are ‘transversal’ rather than sector-oriented.

Is the Belizean Free Zone regulatory regime competitive when compared with international SEZ benchmarks, in other respects?

By international standards as regards enabling business in what are meant to be economically ‘free’ or ‘special’ zones, there are number of suboptimal features and arrangements present in Belize’s Free Zone regulatory regime, as designed. These for instance include the following:

the designation process is simultaneously overly discretionary and complex (involving too many potentially competing parties);

the CBB’s requirements as regards Free Zone foreign currency transaction regulation is onerous;

the inspection powers of both of NFZA, as well as the undiminished and uncoordinated inspection powers remaining vested in other ministries, are potentially a source of frustration to businesses in the zones; and,

Free Zone developers’ regulatory powers are potentially inconsistent with the protection of the public purpose, as they allow private parties to regulate, fine and potentially impede the freedom of commerce.

Even more problematic than these shortcomings is the lack of the introduction or application, in Belize’s Free Zone regime, of any meaningful regulatory or sectoral policy measures to guarantee ease of doing business measures. These include investment freedoms, ease the regulatory conditions for doing business (notably as regards business start-up, land acquisition, construction regulation, customs procedures, resolving commercial disputes, etc.),121 or in any respect guarantee appropriate infrastructure, supra-structure, amenities, facilities or “value add” services to investors.

On all of the counts, Belize’s Free Zone regime is currently rather far from the ‘international best practices’ horizon and benchmarks for similar regimes.

Belize’s Free Zones can also be considered against experience around other Free Zones in similar situations. First, border-based zones can be studied to understand how the legal and physical challenges inherent in

121 www.doingbusiness.org

http://www.doingbusiness.org/


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these structures are often overcome. Second, zones offering retail may present some useful lessons for Belize’s continued zone-driven development.

The overall lessons of international experience regarding the implementation of border-based and retail-oriented Free Zones are not particularly favourable. Apart from their value in terms of promoting more efficient cash-management by importers, who can utilise the zones in order to reduce ‘dead capital’ costs tied-up in customs duties, by taking advantage of their duty-suspensive warehousing, while distributing to their domestic clients on a ‘just in time’ basis,122 these zones have few clear economic and political benefits.

122 This is one of the key economic rationales for the US Foreign Trade Zones.


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Box 6 Lessons learned from border-based zones

Some of the principal, established border-based zones around the world including zones in Mexico, USA, Chile, Peru, Palestine, Jordan, Lesotho, Spain, Kazakhstan, Nepal, Turkey, Cambodia, Lao and Korea. Such zones are also under development on the Botswana border with South Africa, Kuwaiti borders with Iraq and Saudi Arabia, Qatari border with Saudi Arabia, and Lebanese border area with Syria (Tripoli SEZ).

Considering these various initiatives, taken together, several challenges to their optimal performance as economic policy solutions can be noted:

● One issue is any unproven assumption that manufacturing activity necessarily benefits from a location near a border. Indeed, if a border is designed to work for the national economy and for business, it is designed to enable fluid and efficient passage. If it enables fluent and efficient passage, would-be manufacturers and shippers have little inherent reason to stop, unload inputs and reload finished products on or near a border. Manufacturers will produce as near as possible either to the sources of their raw materials, inputs and skilled labour markets, or to their main consumption markets. Borders are of no inherent economic interest either to factor markets or to transporters, and thus to transport economics. They are simply a spot on a map, somewhere between Point A and Point B. This reason leads to many failed border zone initiatives.

● A second issue in border zones can be their “micro-siting” at a location near but not on a border. Because economic transformation and transport activity involves transport of inputs or imports into a zone, and transport of outputs and exports out of a zone, if these activities for some reason benefit from the border (for reasons usually relating to labour cost differentials), then fluid transport is key. Unfortunately, if the zone is not situated immediately on the border, then a customs-controlled entry/exist in/out of the zone, onto or off of a truck, and in/out of a border post are all required. This is a procedurally tedious set of operations, which is rarely streamlined simply by being “near” a border, if 5, 10 or 30km of the Domestic Customs Territory must be crossed. Customs vigilance and enforcement procedures will typically negate the usefulness of the “proximity” of the border, as the risk of leakage of non-dutied and non-VAT-ed goods into the national economy remains the same, from their perspective.

Border zones are highly dependent on good transborder trade relations, and at high risk of productive volatility where these relations are themselves subject to border closures, temporary tariffs, trade or political spats.b Border zones often “put a spotlight on” and highlight the labour wage-rate and living standard differentials between neighbouring countries, and exacerbate any concerns regarding these issues from consumer groups, NGOs or the neighbouring State’s government, leading to reputational issues for the host State or for the SEZ in question -issues which may require significant efforts to manage.c

b This challenge has affected zones and zone initiatives, for instance, on the borders of India (in Nepal), North Korea (in South Korea), Saudi Arabia (in Qatar) and Iraq (in Kuwait).

c This issue has for instance affected Mexico’s Maquillas, as well as Lao SEZs on the Chinese border.


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3.5 Infrastructure in the Corozal Free Zone

This section provides a limited overview of the current state of infrastructure provided around and within the CFZ, including shortcoming and opportunities identified during the mission. The parlous state of infrastructure adjacent to the zone was mentioned by various stakeholders as a key constraint to growth, especially, in some cases, given the lack of transparency in terms of financial responsibilities between government agencies.

Physical infrastructure located within the Corozal Free Zone is managed by landowners and zone investors. All land parcels are privately-held and tenants pay rent to freeholders if they do not own parcels directly. Infrastructure within the zone is managed by the zone investors, through the Corozal Free Zone Board of Directors. The zone’s board has raised funds from tenants to provide for: 1) a staffed fire station, 2) security at zone entrances and gates (shown in Figure 26), 3) a recently reconstructed high street along the main corridor in the zone. The construction of the high street was funded through a bond supported by both central government and the Board of Directors’ grant funds.

Box 7 Lessons learned from retail-based zones

Looking at the above list of border zones, the following ones, for instance, have a duty-free retail-based element: Chile’s Punta Arenas and Iquique Free Zones; Peru’s Tacna Free Zone. Non-border retail-based zones sometimes include zones with a port location, such as Panama’s Colón Free Zone or the Subic Bay Freeport in the Philippines. Once again considering these various initiatives from the perspective of their activity focus, taken together, several challenges to their optimal performance as economic policy solutions can be noted:

Retail activity adds little value to the economy as it involves no transformation, is not labour-intensive (as it primarily involves minimal “shopfront”, as well as warehousing and, increasingly, automated logistics management). Its economic impact is therefore limited.

Border zones with a duty-free purchase dimension require additional internal customs controls within the host country itself, in order to prevent the leakage or smuggling of duty-free and VAT-free goods beyond regulatory limits into the Domestic Customs Territory. These additional controls have human and financial

resource implications for the State which may outweigh the benefits of the SEZ program. d

Retail-based activity on borders creates a perverse incentive for smuggling across the border into nearby neighbouring economies if said neighbouring countries have significant tariffs on the goods sold (which regularly, for instance, include automobiles, household electronics, etc.). Such smuggling can lead to poor

relations between border customs, as well as to reputational damage for the SEZ and the host country. e

Where allowed consumption of duty-free goods also involves exemption from (or zero-rating of) VAT on final consumption, the potential fiscal opportunity cost to the host State caused by high domestic consumption of these goods within any unfenced, adjacent “local extension areas” near to these zones (a policy sometimes advanced in order to provide an indirect fiscal transfer and subsidy to these areas,

where remote and less developed) can be significant. f

d Such challenges are, for instance, notable in Chile’s and Peru’s border-based free zones.

e Iquique Free Zone in Chile for instance faces such issues as regards smuggling into nearby Bolivia.

f These are significant issues in the Punta Arenas Free Zone in Chile and in the Tacna Free Zone in Peru, for instance.


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Electricity supply in the zone is largely reliable, but relatively expensive, compared to other countries. Reports of reliable energy supply are undermined by area businesses citing significant expenses from periodic blackouts.123 The small scale of CFZ businesses implies they are subject to Commercial 1 electricity rates, shown in Table 11. While there has been interest in developing renewable energy generation capacity in the zone, there is a perception of high regulatory hurdles, especially through the Public Utilities Commission to create any amount of self-supply. Telecommunication infrastructure, while improved, remains both costly and of a low quality (IDB, 2018a).

Table 11 Commercial electricity rates in Belize vary by level of average consumption, across all regions

Consumer type Service charge (BZD) Rate (BZD per kWh)

Commercial (less than 2,500 kwh average consumption)

10 0.32 (0 – 50 kWh) 0.39 (51 – 200 kWh) 0.42 (over 200 kWh)

Commercial (other) 150 0.41 (0 – 10,000 kWh) 0.39 (10,001 – 20,000 kWh) 0.38 (over 10,000 kWh)

Industrial 1 250 0.30

Industrial 2 250 0.26

Note: Rate schedule is approved by the Public Utilities Commission (PUC) for electricity rates in Belize, for the period July 1, 2018 to June 30, 2020

Source: Belize Electricity Limited

123 Feedback provided to consultant following initial mission


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Figure 26 The entrance to Corozal Free Zone is operated by the zone management agency

Source: Corozal Free Zone Management Agency

Infrastructure in the area surrounding the CFZ falls into ‘no man’s land’ and is not maintained. The road leading to the Free Zone from the Belizean border station has fallen into disrepair and is cited by zone businesses as a barrier to attracting customers.124 The Belize Border Management Agency has responsibility for facilities in the border area and raises revenue from departure taxes, parking fees and concessions for businesses operating in the border zone. It is not evident from the initial mission meetings that the Agency takes responsibility for road maintenance in the area surrounding the Free Zone.

The physical separation of the Belizean border station and the area around the zone allows for only partial security and enforcement. Customs and immigration facilities are provided for traffic entering the Belizean customs area from the CFZ (both pedestrian and vehicular), but not for traffic returning to Mexico. Customs and immigration staff monitor goods and currency imports from the zone into the Belizean customs area as well as work permits for Belizeans entering the zone as employees of zone businesses. No permanent Belizean Customs or Immigration officers operate in the ‘no man’s land’ between the border and the Free Zone, or within the Free Zone. This gap in coverage has led to concerns of unchecked potential flows of both smuggled goods and unpermitted Mexican workers.

A ‘Belize/Mexico Border Crossing Strategic Circulation Plan’ was developed in 2010 for the Border Management Agency. This plan includes the development of a drive through border crossing at the Hondo River bridge, as shown in Figure 27.

124 Feedback provided to consultant during initial missions meetings with zone businesses and Chamber of Commerce


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Figure 27 Map of Corozal Free Zone Area showing potential new drive through border crossing at Hondo River bridge

Source: International Environments, 2010 (as presented in the Border Management Agency Strategic Circulation Plan)

3.6 The Corozal District

This section outlines the current state of Belize’s northernmost Corozal District. This includes a review of the regional economy, with a particular focus on key sectors such as agroprocessing and tourism. The region had a population of 33,000 in 2000, of which just over a third reside in the regional capital of Corozal Town. While English is the dominant language of the region, the area’s proximity to Mexico means that significant numbers of residents are also proficient in Spanish.

Belize’s Corozal District has long had a focus on agricultural production and service provision to the nearby Mexican market. The agricultural sector provides the largest share of employment in the district (32%), followed by retail (23%) and personal services (13%) (Government of Belize & Caribbean Development Bank, 2010). The agricultural sector has been primarily driven by sugar cane farming and milling, though other agroprocessing activities including papaya canning have come and gone. The provision of tourism products


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to the Mexican market in Quintana Roo has decreased with the growth of Chetumal as a tourist destination in Mexico. Retail and wholesale shopping have been promoted through the Corozal Free Zone, located in the district.

The region has significant economic and social development needs. Corozal has amongst the highest poverty rates in the country, with a poverty rate in excess of 46% (compared to a national average of 31%), which has more than doubled over the past twenty years (Government of Belize & Caribbean Development Bank, 2010) The economy in Corozal is in the midst of recovering from the Global Recession and has experienced growth of 4.3% from 2010-2014 (IDB, 2015). The district’s unemployment rate was 12% in 2009 (Government of Belize & Caribbean Development Bank, 2010).

Corozal Town has recently elected a new mayor and council, which plans to develop the local economy through business-focussed capacity workshops and the development of tourism products. The new government’s local development plan is in progress, but Mayor Rigo Vellos’s campaign manifesto sets out several relevant targets for his administration, including:

a business support programme including capacity building workshops, a private sector business/investment advisory council and promotion of tourism activities drawing on the region’s cultural, natural and culinary offerings;

cross-border immigration reform to allow for easier visitor access to the district from Mexico; and,

improved infrastructure in the town limits, including street upgrading, drainage systems and garbage collection sites.125

The Corozal Free Zone is viewed as an important, but unintegrated economic actor in the region. Local government and other stakeholders reported a perception that the zone employs 40-90% of Corozal residents, but many of the jobs are viewed as low value positions. Corozal Town councillors do not participate in any planning activities with zone management and report not being allowed to access the zone. Few activities in the zone appear to be linked to the region’s broader economic focus or strengths, though some zone investors also operate in the broader district.126

3.6.1 Tourism in the Corozal District

Corozal District benefits from several strategic tourism assets, that while currently underutilised, present opportunities for future development, including:

Corozal Bay – a 730 km2 protected maritime bay, designated a Wildlife Sanctuary in 1998 for its biodiversity and manatee population;

cultural sites – including Maya heritage areas along the coast; and,

access to the Belizean Cayes – Corozal has a direct one-hour ferry to Ambergris Caye, but traffic has fallen as tourists choose to connect to the islands from nearby Chetumal, Mexico.

While the local tourism sector is acknowledged as not achieving its potential, the Corozal District does benefit from a solid visitor base. The region’s tourism sector is estimated to accrue 12,800 overnight arrivals staying for an average of two weeks and spending an average of USD 80 per day (although other sources suggest higher spend rates, see below) (IDB, 2015). The top activities reported by tourists to the district include: swimming, sunbathing and beach activities (73% of visitors reported engaging in this); discovering local

125 Corozal mayoral candidate manifesto provided to consultants 09/10/18 126 Feedback provided to consultant on initial mission


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history and culture (60%); water sport activities (42%); and visiting the Cerros Maya archaeological site (40%).

Despite the proximity of the large Mexican market, only 10% of overnight visitors to Belize enter through the northern border at Santa Elena, adjacent to the Corozal Free Zone (Belize Tourism Board, 2017). Only 3.8% of tourists surveyed by BTB reported Corozal as their final destination – this figure was highest amongst tourists from Central America (9.4% reporting Corozal as their destination), Canada (6% bound for Corozal) and Europeans (of which, were 4.8% bound for Corozal). Daily reported expenditure of tourists in Corozal averaged USD 122/day, ranging from USD 83 (purpose: visiting friends) to USD 180 (purpose: religion) per day, and from USD 70 (European visitors) to USD 160 (US visitors) per day.

Corozal Town was the location of thirty hotels in 2017 (of 856 nationally), providing a total of 571 beds – representing around 4% of the country’s accommodation capacity. Hotels in the region report a 34% occupancy rate in 2017, an increase on previous years and not far below the national average occupancy rate of 39%. The National Sustainable Tourism Master Plan envisions 923 new hotel rooms will be constructed in support of Corozal’s Leisure and Entertainment Area from 2020 to 2030. In addition, 116 rural accommodation facilities are anticipated.

In addition to the region’s accommodation offer, Corozal reported 59 local tour guides and five tour operators (1% of national stock) in 2017. The tourism sector is estimated to employ nearly 1,000 persons in Corozal (5% of national tourism workforce), led by the food and beverage industry (361 employees) and sports and recreational activities (343 employees).

The vision laid out for Corozal in the National Sustainable Tourism Master Plan includes both a leisure and entertainment focus as well as a culture and nature-based tourism offer (Belize Tourism Board, 2012):

“Corozal: Will be established as a mid-to-high shopping and entertainment destination as it will have fully developed an attractive open-air mid-high end shopping center hosting well

known brands, restaurants, cafes, bars and entertainment facilities such as casinos, theaters, and bowling alleys, among others. The area will have good access by land, boat and border crossings. As a secondary motivation it will host cultural and nature tourism

product offering such as Shipstern Nature Reserve, Corozal Bay, Sarteneja and the manatees.”

The 2016-2020 local tourism development plan developed by Corozal’s Local Tourism Committee includes a greater focus on nature and cultural tourism. The local plan’s vision is set out as: ‘a vibrant, family-friendly, nature-based, cultural destination with diverse tourism experiences and attractions developed in an equitable and sustainable manner’ (IDB, 2015). The strategy aims to increase tourist arrivals and overnight stays in Corozal through improve tourism products and more equitable distribution of the benefits from tourism.

The existing profile of the Corozal Free Zone is cited as a barrier to developing a more compelling tourism offer in the region. Local perceptions of frequent alcohol and drug abuse, as well as prostitution, impact the perception of the area amongst international visitors and local residents (Belize Tourism Board, 2012). The growth of Chetumal across the Mexican border has been cited as a key competitor to Corozal for both foreign tourists and Belizean retail spending (IDB, 2015). The border departure fee is cited as a deterrent for Mexican or cross-border traffic into Corozal from Mexico.

Key infrastructure needs identified for the tourism sector in Corozal District include: 1) a comprehensive waste management system including transport to collection facilities and sorting of waste; and 2) a sewage system for Corozal Town given groundwater contamination concerns related to the existing septic tank system (Belize Tourism Board, 2012). The district’s beaches and parks also lack the infrastructure (e.g. sandy


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beaches, community centres) to attract tourists. The NTSMP includes development of Corozal waterfront from 2018-2019.


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4 Options for economic development for the Corozal District

This chapter summarises the economic development objectives that the Regional Development Master Plan aims to achieve in both the Corozal Free Zone (or its successor(s)) and the wider region. The chapter provides an overview objectives in the context of the free zone as well as the wider region. Three distinct development options are presented as alternative pathways for delivering economic objectives in the region. The region’s economic objectives and development scenarios will guide the recommendations on priority sectors (chapter 5), investment and trade promotion (chapter 6), policy and regulation (chapter 7) and infrastructure and spatial planning (chapter 8).

Special Economic Zones, such as Belize’s Free Zones, can achieve a range of economic development objectives. Across the world, economic zones have been deployed as policy tools to attract foreign investment, promote employment in a particular region and pilot new economic policies in a subnational area. Zone structures and investment incentives vary across objectives. For example, Indonesia’s Special Economic Zones offer specific foreign ownership policies not available elsewhere in the country (targeting foreign investment), while Uruguay’s zonas francas feature a local employment requirement for any businesses operating in the zones (targeting employment).

Past experience shows that zones are successful when focussing on one or two economic objectives. Where zone objectives are not clear or are overbroad, it can prove difficult to align public resources and develop a compelling offer to investors. Explicit economic objectives should be identified by zone regulators and sector selection criteria developed to identify those sectors that reflect chosen objectives. For example, warehousing activities may perform well against export and trade facilitation objectives but deliver very low employment benefits, compared to other activities.

A zone’s economic objectives are key to informing investment incentives, performance metrics and promoting trade and investment opportunities in the zone. In order to develop an optimal zone structure for Corozal District (and across Belize’s system of zones), a clear economic vision relating to Corozal Free Zone must be agreed amongst zone regulators and zone developers/operators. Zone regulators set the mission of respective zones, which are then constructed and actively managed to deliver against that mission. In Corozal, the current vision of the Corozal Free Zone to ‘promote economic growth to the country of Belize’ is too vague to be effectively managed through the infrastructure and operations of the zone.

4.1 Economic objectives in the context of Corozal Free Zone

Historically, Corozal Free Zone’s economic objectives have been loosely focussed on foreign exchange and employment generation. While the zone’s mission statement discusses trade and investment, stakeholder engagement revealed that the practical focus of the Corozal Free Zone in recent decades has be first to draw in USD foreign exchange through the conversion of Mexican pesos spent by customers to the zone and second to provide employment opportunities for Corozal residents. Over time, Corozal Free Zone has delivered against both of these shadow objectives. As discussed Chapter 3, the CFZ continues to account for a significant share of Belize’s foreign exchange imports and is recognised as one of the top employers for Corozal District. Both of these trends are decreasing with the fall of spending levels in the zone.

The zone’s current mission is related to broad economic development, but there is a lack of consensus in the country about how the zone is fulfilling this mission. Stakeholders identified a range of separate benefits that the zone should be performing against, including investment (zone businesses), foreign exchange (central government and banking sector) and employment (central and local governments). While these objectives


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are not necessarily mutually exclusive, a shared understanding of priority objectives for the zone is required to direct limited resources in an efficient and effective manner.

Consultation with government stakeholders has identified three specific economic objectives for the free zone going forward. Through interviews with a wide range of stakeholders in the public and private sector, and a workshop with central government ministry representatives, a short list of economic development objectives for Corozal Free Zone has been developed. From a longer list drawn for the international literature on economic zones, three priority economic objectives were identified, including (in order of importance):

foreign (and domestic) investment;

export promotion; and,

employment.

These objectives inform the recommendations around zone structures and linkages in to the wider district economy outlined in chapters 5-8.

4.2 Economic objectives in the context of Corozal District

In the wider district, economic objectives reflect national priorities. As there is no separate regional government for districts in Belize, the national economic objectives are applicable to the district. These objectives, laid out in section 2.3, include developing a resilient, export-focussed economy through investment in the agribusiness and tourism sectors. Human development is also stressed in national development plans and all economic activity is envisioned to be compliant with principles of sustainability. Given Corozal’s significant agricultural activity and proximity to popular tourist destinations, the district has potential to play an important role in delivering these objectives at the national level, as well as locally.

Corozal Town’s leadership has prioritised business development and investment. Economic objectives for Corozal Town, the district’s largest population centre, are oriented around local business development and employment for residents, as articulated by the town’s mayor and council members. These objectives can be closely aligned to the Corozal Free Zone’s, especially in relation to backward linkages of zone activities to local labour and other supplies, where relevant.

4.3 Development options to deliver economic objectives in Corozal and through Corozal Free Zone

Three options are presented to facilitate discussion around future scenarios for the Corozal district, in relation to the role of a free zone in the district’s economy. These options are conceptual and intended to guide conversation rather than provide specific recommendations. Recommendations detailed in chapters 5-8 are developed with Option 2 in mind, but discussion of how these might change for other development options is included in each chapter.

Option 1 | Strengthen current retail offer to Free Zone-driven growth

This option considers the original objectives and structures of the Corozal Free Zone and includes policy and management reforms to deliver more successful retail sales to Mexican shoppers in light of the current policy and financial landscape in Belize. In this scenario, the current Free Zone borders would be extended to include casinos currently included in the periphery, but excluded from a proposed Designated Processing Act. Given the current realities of limited financial resources for infrastructure development, this scenario considers the most effective use of existing zone infrastructure.


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Opportunities to link economic activities in the broader region (including agricultural activity in Corozal and Orange Walk districts) may exist through the development of local supply chains for retail products. For example, processed agricultural products can be sold through free zone businesses to foreign buyers, building on existing examples. Our engagement with the private sector has already identified existing value chain in the assembly and/or repackaging of food products (such as hot sauce) and electrical products (such as fans and other appliances), in many cases for export to the Mexican market.

In order to reverse recent trends of declining business activity in Corozal Free Zone, many policy and management changes should be considered, as identified in chapters 6, 7 and 8. These reforms may have a perverse effect on the current markets served by the Corozal Free Zone. For example, competitive prices in southern Quintana Roo and additional financial compliance requirements may limit the growth potential for a status quo approach. Linkages between retail-focussed zone business and the broader district are also limited by scarce agroprocessing activity in the region.

Figure 28 Option 1 envisions a strengthened status quo Free Zone structure


Option 2 | Deliver a transformed zone structure offering incentivised activity in new sectors

This option considers how zone structures can be used to diversify economic activity in the region. By building on a strengthened retail focussed zone to incorporate related tourism opportunities, this option aims to take advantage of existing infrastructure while developing a new agroprocessing zone (as a Designated Processing Area) next to the tourism-focussed free zone.

This option combines local strengths in the wider district with the export and infrastructure benefits of the border zone. In the short-term, the tourism and agroprocessing zones strengthen current export flows to Mexico while in the long-term developing robust supply chains in Corozal District and neighbouring markets.

The development of a new agroprocessing DPA may require significant investment in infrastructure and business development. Further, the reapportionment of land parcels currently within the Corozal Free Zone for the development of these two zones may require complex land acquisition and distribution activities, which can be politically and logistically challenging. A zone-based export play focussed on Mexico necessitates a comprehensive trade and investment framework to be negotiated and finalised with Mexico at the national level.


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Figure 29 Option 2 requires infrastructure investment to support significant new activity


Option 3 | Draw down Free Zone activity and focus on economic activity in the broader district

A final option is to close the Corozal Free Zone in an effort to manage risks associated with the zone. The perception of illegal activities including potential money laundering, smuggling and the sale of counterfeit goods in the Free Zone have fostered a negative perception of the zone, the region and Belize as a whole. In the absence of any realistic redevelopment options, shutting down the Free Zone may provide benefits related to the perception of good practice in other areas of the economy.

Any move to abandon the Corozal Free Zone could cause significant, negative economic impacts. Though revenues have fallen over recent years, the Free Zone remains a significant source of revenue and employment in the region. Activity in the wider district could be developed in the agricultural and tourism sectors, but exports would likely be processed through Belize City. Qualifying businesses operating in a former Free Zone area may be able to receive incentives through the EPZ mechanism, or its successor. However, given the physical structure of the border and immigration rules for Mexican visitors to Belize, it is unlikely that any businesses dependent on customer foot traffic would be sustainable in the absence of a border Free Zone.

Figure 30 Option 3 assumes the Free Zone is shut down to mitigate associated risks



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5 Priority investment opportunities

This chapter identifies priority investment opportunities for economic development in the Corozal Free Zone and Corozal District. It describes the sector-selection process, a quantitative and qualitative analysis used to short-list sectors based on their potential for export-led development. Based on the sector short-list, the chapter reviews key opportunities within four priority clusters (related to the selected sectors). The structure of the chapter is as follows:

Section 5.1 outlines the approach to the sector selection process;

Section 5.2 sets out the sector selection methodology and the step-by-step process used to analyse sector performance in Corozal and Belize;

Section 5.3 describes the outcome of the sector selection exercise, including emerging priority clusters; and,

Sections 5.4 – 5.7 detail specific economic development opportunities within each of the four clusters.

5.1 Sector selection approach

To identify specific opportunities for export-led development in Corozal, a quantitative sector selection process is combined with qualitative cluster deep-dives, as shown in Figure 31. The approach to identifying priority sectors and opportunities in Corozal and CFZ is conducted through a four-step method. In steps one and two, a data-driven assessment of sectors results in a set of sectors that can help Belize achieve export-led development. In steps three and four, qualitative research helps to identify specific opportunities relevant for the CFZ and Corozal district.

Figure 31 A four-step methodology was applied to identify priority opportunities


Data driven analysis of a long-list of good and services sectors

Sensitivity analysis to identify consistently top performing sectors

Deep dive research on four clustersFood and Beverages ― Light Manufacturing

Tourism ― Professional Services

Recommendation of priority opportunities in each deep-dive cluster

STEP 1

STEP 2

STEP 3

STEP 4

110 sectors

10 top-ranked sectors

4 broad clusters reflecting top ranked sectors

13 key recommendations across selected clusters


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A combination of quantitative and qualitative research methods was applied to identify four priority clusters. The results from the quantitative sector selection process are used to construct four clusters of economic activity that Belize and Corozal ought to prioritise: Food and Beverages, Light Manufacturing, Tourism and Professional Services. Clusters can be used to highlight key opportunities for market linkages, infrastructure needs and investment promotion material.

5.2 Sector selection method

The sector selection exercise first defined a longlist of 110 sectors to be analysed based on international export classification systems. The long-list of sectors included 99 good sectors and 11 services sectors, based on international classifications of goods and services.127 Each long-listed sector is assessed against five key quantitative ‘indicators of success’, which measure different elements of a sector’s potential impact. These criteria reflect a sector’s ability to contribute to the objective of export-led development in the Corozal district. Indicators were chosen to show:

Belize’s current and potential competitiveness in the sector,

demand for imports and investment opportunities in relevant markets,

supply-side viability of the sector (based on input-intensity), and

performance against developmental impacts (specifically labour intensity and economic diversification).

A sector’s performance is evaluated relative to others against each indicator of success, described in Table 12.

Table 12 Sectors were evaluated against a range of economic criteria to develop a short list

Criteria Sub-criteria Explanation Interpretation Source

Relative export strength

Revealed Comparative Advantage (RCA)

The share of the sector in Belize’s export basket relative to the share of the sector in the world’s export basket

An RCA of >1 implies that Belize currently has a relative comparative advantage in the sector

UN COMTRADE data

Proximity

Measures the likelihood of success in a sector in a country based on the country’s existing capabilities and production structure

A higher rating implies that Belize could more easily move into production in that sector

UN COMTRADE data

Market demand

Mexico’s imports (net of NAFTA)

Mexico’s total imports (USD) in the sector, net of imports from US and Canada

Demonstrates which sectors Corozal district and CFZ can competitively supply without competing with duty-free NAFTA imports

UN COMTRADE data

UK and USA imports

UK and USA (USD) total imports in the sector

Demonstrates demand in countries which are currently Belize’s largest export markets

UN COMTRADE data

EU imports (including UK)

EU total imports (USD) in the sector

Demonstrates market size from countries where Belize has duty-free access

UN COMTRADE data

127 Categories of traded goods were developed from the UN COMTRADE database’s HS2 level aggregation of trade in goods, categories of trade in services were derived from the EBOPS database’s most aggregated level of trade in services


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Criteria Sub-criteria Explanation Interpretation Source

CARICOM imports

CARICOM total imports (USD) in the sector

Demonstrates market size from countries where Belize has a preferential trade relationship

UN COMTRADE data

Regional foreign direct investment (FDI) activity

Total FDI inflows (USD) into the sector in the CARICOM and Central America region

High regional FDI inflows imply the sector is attractive to foreign investors

fDi Markets database

Input intensity

Skilled to unskilled labour

Proportion of skilled workers to unskilled workers in the sector

Low skilled labour intensity implies greater economic viability for Corozal

Belize Social Accounting Matrix (IDB)

Energy intensity Proportion of energy costs to total spend in the sector

Low energy intensity implies greater economic viability for Corozal


Capital intensity Proportion of spend on capital to total sector spend in the sector

Low capital intensity implies a sector which is more viable to develop in the short to medium term in Corozal


Import intensity Proportion of imported input costs to total input costs in the sector

Low import intensity implies greater positive spillover effects on economic activity in Corozal and Belize


Development impact

Labour intensity Proportion of labour costs to total sector spend

High labour intensity implies higher rate of job creation


Opportunity gain

Measures each sector by its likelihood to facilitate future diversification into more complex products

High opportunity gain reveals sectors which promote economic complexity and diversification, which can be used as a proxy for sustainable growth

UN COMTRADE data

Note: Opportunity gain was not included as an indicator of sector performance for service sectors, as a result of limited data


A sector’s overall performance is assessed based on its weighted performance across indicators. To identify priority sectors, a sector ranking is created based on the sector’s overall performance score. This score is calculated by weighting and aggregating a sector’s performance in each indicator. The weights are determined by the relative importance of the indicator. Different weighting scenarios are used to conduct a sensitivity analysis of sector performance based on the relative importance of each key indicator. The overall score and ranking of sectors can vary depending on the weights, or relative importance, assigned to each indicator. To show how top-performing sectors can vary depending on assumptions about what makes a sector ‘high-performing’, three different weighting scenarios are constructed, as detailed in Table 13. Each scenario reflects different assumptions on sector success. Scenarios are set out below:

Scenario 1: Belize competitiveness scenario, which emphasises the current and potential strengths of Belize;

Scenario 2: market attractiveness scenario, which highlights demand factors such as addressable market size and FDI flows; and,


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Scenario 3: development impact scenario, which prioritises the sector’s impact on job creation and diversification.

Table 13 Three distinct scenarios demonstrate the ‘sensitivity’ of top-performing sectors to different weighting systems

Sub-criteria Scenario 1 weighting Scenario 2 weighting Scenario 3 weighting

Current - RCA 25% 12.5% 12.5%

Future - Distance 25% 12.5% 12.5%

Mexico (net of NAFTA) 7% 15% 10%

UK and USA 2% 5% 1%

EU 2% 5% 1%

CARICOM 2% 5% 1%

Weight for FDI inflows 5% 14% 10%

Skilled to unskilled labour 3% 3% 3%

Energy intensity 3% 3% 3%

Capital intensity 3% 3% 3%

Import intensity 3% 3% 3%

Labour intensity 15% 15% 30%

Opportunity gain 5% 4% 10%

Note: The weighting scenario shown in the table is applied to all good sectors; for service sectors there is no available data on the ‘Opportunity gain’ indicator, so this criteria is excluded and weightings for all other criteria are slightly adjusted.


Sectors were assigned a final score and ranked relative to one another based on the above three weighting scenarios. An approach using three distinct weighting systems that emphasised different indicators of success highlighted and eliminated outliers and statistical anomalies.

5.3 Cluster identification

The results of the sector selection exercise highlight several sectors that are consistently high performing across all weightings. Sectors that performed across all three weighting scenarios were, for goods:

food and agribusiness sectors, where Belize’s existing and potential competitiveness in the sector speaks to the economic viability of production there;

light manufacturing sectors, where high end market demand and perceived developmental impacts make the sector attractive despite low existing competitiveness;

and, for services:

travel and tourism services, due to significant competitive advantage and alignment with the skill level of the Belizean workforce; and,

business services, owing to high demand in end markets with whom Belize has a free trade agreement.


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The four priority clusters are the basis of further analysis and are defined in Figure 32.128 Figure 32 Four priority clusters were identified for qualitative deep-dives


5.4 Food and beverage deep dive

5.4.1 Cluster background

In Corozal, the main crops grown are sugarcane, onion, sweet pepper, corn, beans, sorghum, and soybeans (Ministry of Agriculture of Belize, 2017). This contrasts with the rest of the country, where citrus and bananas are the main employers alongside sugarcane. The Corozal District’s economic well-being is closely tied to sugarcane in particular, as it accounts for a majority of agricultural production in the region and the loss of preferential pricing in the EU market is expected to have a disproportionate impact on the economy in the north (ASR Group/BSI, 2014). Production of onions is also notable in Corozal, as it is responsible for 70% of the entire country’s production (FAO, 2011).

In Belize, while export-focussed sectors such as bananas and sugarcane tend to be relatively commercialised and well-organised, farmers of many other crops produce inefficiently at a very small scale (The World Bank Group, 2016). A 2010 census showed that 57% of all farms in the country were less than 20 acres in size, and 24% less than five acres (FAO, 2011). Despite an abundance of arable land, lack of scale restricts growth in some agricultural markets. The current crop profile in Belize is dependent on preferential market access and pricing to be competitive; for example, the Belize sugar market is facing pressure from changes in the European sugar market (ASR Group/BSI, 2014). Farms in other sectors primarily produce for the domestic market.

128 Some of the high-performing sectors from the quantitative analysis are not considered feasible in Belize or Corozal. For example, HS code 84

‘nuclear reactors, boilers, machinery, and mechanical appliances’ makes up a negligible share of Belize’s current export basket, and there is little evidence to suggest such manufacturing would be feasible in Corozal due to the lack of skilled labour force and technical infrastructure. Nevertheless, the sector scored highly in two of our three weighting scenarios above due to significant end market demand and high perceived development impacts owing to complex production. In such cases, qualitative analysis and expert judgement was wholly necessary to supplement data-driven analysis.


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Farms in Belize experience low productivity per hectare relative to world averages, which significantly reduces their export competitiveness. For example, sugar cane yield is thought to be at less than half the world average of 100 tonnes per hectare (ASR Group/BSI, 2014). Causes for low productivity include:

lack of locally-available inputs, such as seeds, animal feeds, and chemicals;

lack of mechanisation and technological innovation to increase labour productivity (FAO, 2011);

limited uptake of best practices in farming, such as fertiliser use and agricultural machinery (export.gov, 2018);

limited access to agricultural technology and informatics, which leads to value-creating opportunities in less-developed agricultural sectors (Mckinsey&Company, 2015);

limited logistical pathways to regional and global value chains; and,

constrained access to credit and other financial services for agriculture.

Access to credit and other financial services remains constrained in the Belizean agricultural sector. Belize has high production costs relative to its neighbours, requiring access to lending to cover up front costs for agricultural production. Belize’s land costs are so high that agriculture is ceasing to be profitable for many, and labour costs can be as much as three times higher than in Mexico and other Central American countries (FAO, 2011). Agricultural smallholders in Belize are less likely to meet collateral and other creditworthiness requirements necessary in the country’s limited banking system (The World Bank Group, 2016). Insurance services in the agricultural sector are also notably lacking (The World Bank Group, 2016).

5.4.2 Cluster alignment with national and regional development objectives

Agricultural intensification, diversification, and processing can deliver against core development objectives for Belize and Corozal, namely:

diversification improves climate resilience - a diversified crop basket provides economic resilience to fluctuations in crop yield, market prices, and plant pests and diseases (Mango et. al, 2018);

agricultural intensification improves rural incomes and creates additional employment opportunity - the poverty rate in Corozal more than doubled from 26% to 56%, and extreme poverty increased more than threefold from 6% to 21% (The World Bank Group, 2016). Investment at the farm level aimed at commercialisation and scaling could not only lead to improved productivity and direct job creation, but also indirect job creation further down the value chain in value-add activities such as agroprocessing or packaging; and

increasing the export profile of the agricultural sector in Corozal will generate foreign exchange for Belize - agricultural exports are responsible for 76% of foreign exchange inflows into Belize (FAO, 2011).

Integrating smallholder farms in less-developed agrarian economies into regional and global agricultural value chains is a promising strategy for Corozal’s economic development. Smallholders are a vital component of agribusiness in developing countries (Najera, 2017). However, as the global agricultural value chain becomes increasingly vertically and horizontally integrated, smallholders in many geographies have found themselves unable to participate (Miller & Jones, 2010). Corozal is strategically located to access a number of high value agricultural value chains, including in Mexico and amongst tourists from around the world.


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5.4.3 Investment opportunities for CFZ and Corozal District

Table 14 Food and beverage opportunities for Corozal and the CFZ

Opportunity Location Relevant goods and services

Relevant markets

Facilitate regional and global market linkages through investment and capacity building at the farm level aimed at commercialisation and increasing productivity

Corozal district

Sugarcane, onions,

soybeans,

tomatoes, sorghum,

corn

US, EU, Mexico, CARICOM

Diversify crops to improve agricultural productivity and economic resilience, specifically targeting markets in Quintana Roo and San Pedro

Corozal district

For example:

Cocoa beans

Other fruits

(pineapples,

avocadoes,

mangoes)

Coffee


Domestic tourism sector

Develop aquaculture for reliable supply for both raw exports and input for fish processing

Corozal district

Fish and crustaceans Preparation of fish and crustaceans (e.g. shrimp)

US, EU, Mexico, CARICOM Domestic tourism sector

Develop agroprocessing for value add to crops when intensification leads to reliable supply

Corozal Free Zone

For example: Soybean oil Pickled onions Preparations of tomatoes (peeled, plum, diced, sundried, juice) Gluten-free food from sorghum Packaged sweet corn



Opportunity 1.1. Increase productivity amongst sugar cane growers in Corozal through a focussed agricultural extension service in the region aimed at capacity-building.

Investment at the farm level to overcome barriers to productivity and market linkages is an integral first step in facilitating development through increased exports. Investment to address the above-mentioned bottlenecks in primary agriculture is necessary to ensure Belizean smallholders’ participation in ever globalising and integrated agricultural value chains, and will lead to direct and indirect job creation. One way of achieving this could be through attracting private investors. In Sri Lanka, for example, the government has launched the Matching Grants Scheme, for which they have accepted proposals from over 1,000 entrepreneurs. Investors who are chosen will be linked with smallholder farmers in order to offer technical assistance and market expertise to increase productivity, solve bottlenecks, make farms commercially-oriented, and link them into regional and global value chains (The World Bank Group, 2018). Increasing productivity and efficiency in the primary agricultural sector is a vital step in unlocking the agricultural value chain and creating opportunities further down in agroprocessing.


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Plans to increase productivity in sugar cane farms in Corozal provide a model for intensification of existing crops in the region. The local sugar mill is leading efforts, supported by the IDB, to double sugar cane production on a third of land currently farmed by applying best practices, behaviour change and agricultural technology. Specific initiatives include (ASR Group/BSI, 2014):

a purchase agreement between sugarcane farmers and Belize Sugar industry;

improved harvesting mechanisms;

establishment of a credit facility and guaranteed interest rates to improve access to credit;

provision of information and technical capacity services; and,

USD 100-150 million investment in mill capacity.

Increased revenue brought about by intensification is expected to increase economic resilience and farmers’ volatility to price shocks in the global market (ASR Group/BSI, 2014), thus proving the pertinence of such a model for other crops.

Opportunity 1.1.a. Establish a working group of producers, researchers and processors to collect and share best practices and technologies for sustainably intensifying sugar production in Belize’s northern regions.

Opportunity 1.2. Develop knowledge sharing facilities for new crops in Corozal to supply value chains in Quintana Roo and San Pedro.

The production of new cash crops represents a key opportunity for export-led growth. As mentioned above, crop diversification can have significant impacts on living standards. Cash-crops such as onion, sugarcane, sweet pepper, corn, tomato, sorghum, and soybeans are currently grown in Corozal (Ministry of Agriculture of Belize, 2017). In addition to scaling the production of these crops up, farmers can move into other crops that have high demand in relevant end markets.

Specific market opportunities include supplying agroprocessors in Mexico and domestic tourism markets. According to stakeholders, agroprocessors in Quintana Roo receive insufficient raw material supply from the domestic agricultural sector. Potential opportunities to supply agroprocessors in Quintana Roo include raw pineapples, mangoes, farmed alligators. These sectors therefore represent particularly pertinent opportunities for crop diversification in Corozal given existing demand, stakeholder interest, and competitive advantage afforded by geographic proximity.129

The development of locally relevant agricultural knowledge can be bolstered through partnerships with regional research organisations. The University of the West Indies is currently supporting innovative approaches to sugar cane cultivation in Corozal.130 Quintana Roo’s agriculture ministry is also engaged in a robust research and development programme on sustainable agriculture in the region.131

Opportunity 1.2.a. Establish a partnership between regional agricultural research organisations and Corozal institutions to develop and disseminate knowledge on non-sugar crop production.

129 Consultant interview Quintana Roo Secretary of Agricultural Development staff, 7 December 2018 130 Consultant interview with BSI/ASR staff, 5 December 2018 131 Consultant interview Quintana Roo Secretary of Agricultural Development staff, 7 December 2018


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Figure 33 There is significant demand for agribusiness products in markets in which Belize has preferential trade access

Note: Sectors are weighted relative to others in the same region, with green indicating high end market demand; Mexico is included in the analysis due to the pending Partial Scope Agreement.


Opportunity 1.3. Develop the aquaculture and fisheries sector to ensure sustainable, resilient export supply to Quintana Roo.

Given the prominent role played by fish products in Belize’s export basket, developing a well-managed aquaculture sector to ensure a sustainable supply of fish could increase fish exports and create jobs. Fish are one of the most highly-demanded imports in all relevant markets, and there is a particularly large markets for fish imports in Mexico and the EU. Investment into a well-managed aquaculture sector could contribute significantly to development goals, such as (World Resources Institute, 2014):

poverty alleviation through direct and indirect job creation throughout the fish value chain;

sustainable development owing to improved fish production per unit of land and energy,

potential to reduce water pollution through good wastewater management;

reducing pressure on environmental concerns exacerbated by trawl-fishing, such as overfishing and damaging marine ecosystems;

food security; and,

gender-specific benefits, such as jobs for women and macronutrients vital to maternal health.


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Shrimp farms are a particular area of interest given Belize’s existing competitiveness in the sector. Geographic proximity to Chetumal could offer farms in Corozal a significant competitive advantage in particular, as logistical challenges arise due to the country’s poor road infrastructure when farms are not close to a port or processor (Daly & Fernandez-stark, 2018).

Opportunity 1.4. Identify longer-term opportunities in agroprocessing where raw crops can be supplied domestically.

Agroprocessing presents an opportunity to move up the agricultural value chain in the medium-to-long term. Moving from primary agriculture to light manufacturing would have significant developmental impacts on Corozal’s economy, namely increased employment and improved incomes owing to value-added exports, further discussed below. In light of Belize’s relative strengths in crop production, a number of opportunities to move into agroprocessing have been identified by government stakeholders, multilateral development partners, and private-sector entrepreneurs. Nevertheless, it is unlikely that agroprocessing in Belize could prove competitive in the immediate term due to lack of scale, uncompetitive labour costs, and high regional competition. Agroprocessing is expected to become a much more attractive sector for investment once bottlenecks in productivity are solved at the farm level and a reliable flow of crop input can be guaranteed.

Figure 34 Export opportunities for the food and beverage sector in the Corozal District


5.5 Light manufacturing deep dive


Belize’s light manufacturing sector is currently comprised predominantly of agroprocessing activities. The sector is limited primarily to value addition through processing spices and sauces, although multilateral development banks and private-sector investors alike have identified a number of further opportunities based on Belize’s primary agricultural production (The World Bank Group, 2016). Though experience with light manufacturing based on labour input has proven uncompetitive in Corozal, value addition to raw agricultural products,


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namely cash crops, organic fibres, and fabrics, presents an opportunity leverage Corozal’s current resource base for manufacturing outputs in the short term.

Belize is faced with a number of challenges that make large-scale manufacturing operations unlikely in the short-to-medium term. Most prominent among these is the constraints to scaling manufacturing activities presented by Belize’s relatively small labour force. Low population density hinders both manpower as well as opportunities for agglomeration due to low population density (The Inter-American Development Bank, 2013).

Corozal may have strategic or competitive advantages over its neighbours in a select set of manufacturing opportunities. The district’s advantages include:

brand or image improvement by means of sustainable production practices;

cultural significance related to Maya traditions; and

proximity to the Mexican market.


Manufacturing sectors can contribute significantly to meeting development objectives that will ultimately improve living standards in Corozal.

Employment creation in the manufacturing sector can reduce poverty. Developing a small-scale manufacturing sector in the Corozal district can improve incomes and overall quality of life, as the manufacturing sector is likely unrivalled in its potential to improve incomes for rural individuals (McKinsey Global Institute, 2016). The Corozal District has a significantly higher poverty rate than the national average; hence, targeting labour-intensive sectors to create low-skill job opportunities in Corozal may be a viable strategy to meet development goals. Nevertheless, the high cost of labour in Belize relative to its neighbours remains a significant barrier.

The transition from primary sectors to manufacturing traditionally plays an integral role the economic development of less-developed countries. Most economies follow a development trajectory that involves an increasing share of the manufacturing sector in GDP until they reach middle or upper-middle income status, peaking at 20%-35% of GDP before declining in favour of high-skilled services (McKinsey Global Institute, 2012). Belize’s share of manufacturing in GDP was 6.5% in 2016, down from 13.5% in 2011. By considering opportunities for manufacturing in Belize, the threat of ‘premature deindustrialisation’ experienced elsewhere in Latin America (Rodrik, 2015) can be mitigated to deliver developmental benefits associated with manufacturing, namely widespread employment, skill development, and export-led growth.


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Figure 35 Manufacturing as a share of GDP has been declining in Belize since 2011

Source: Vivid Economics, based on data from The World Bank

Belize should not try to ‘leapfrog’ into global services trade. While some economies have been able to leapfrog manufacturing and move directly into high-skilled services, this is likely not viable in the short term in Corozal due to a lack of technological infrastructure and skilled labour force. Even India, who has to some degree successfully leapfrogged into global services trade, is heavily promoting the development of its manufacturing sector in order to improve living standards in rural areas (McKinsey Global Institute, 2012).

Incentivising sustainable production practices is both an opportunity to meet development goals as well as a feasible investment promotion opportunity. Not only has the cost of clean technology has fallen drastically in recent years, but manufacturers are also beginning to understand the importance of sustainable production practices for their brand image. The Belizean Government could therefore seek to attract a large player looking to improve their image by offering incentives for sustainable manufacturing, thus simultaneously pursuing development goals in sustainable growth.

Figure 36 Examples of manufacturing sectors with high labour intensity and low skill requirements, suggesting significant potential for poverty reduction through employment creation

Source: Vivid Economics, based on data from the McKinsey Global Institute


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Table 15 Light manufacturing opportunities for Corozal

Opportunity Location

Relevant goods and service sectors (HS2 product classification and code)

Relevant markets

Develop simple consumer packaging from organic products, e.g. corn starch

Corozal Free Zone Consumer packaging for food, skincare, edible and inedible oils, etc

Mexico, US, EU, CARICOM Tourism service exports

Develop CTA value chain Corozal free zone

Cotton Wool Textiles Apparel articles

US, Canada, EU Domestic tourist market

Expand electricity generation from biomass agricultural residues, with potential future diversification into biofuels

Corozal district Electricity Domestic energy grid

Look to further develop labour-intensive manufacturing sectors for poverty reduction in the medium-to-long-term

Corozal

Agroprocessing Leather Wood products Paper and pulp

Mexico, US, EU, CARICOM Tourism service exports


Opportunity 2.1. Consider potential to develop a cotton, textiles, and apparel value chain that capitalises on Belize’s competitive strengths, namely locally-available raw material inputs such as cotton or wool.

Belize should seek to develop its Cotton, Textile and Apparel (CTA) value chain to add value to its high-value cotton and supply regional textile mills. Belize’s high-value sea-island cotton affords it a competitive in CTA; thus, it should seek to develop the labour-intensive aspects of value addition to cotton further back in the value chain, namely ginning and spinning. Value-added cotton exports could significantly improve livelihoods in Corozal owing to their labour-intensive nature and demand from regional textile mills in Central America. Investment opportunities in these parts of the value chain should appear as the cultivation of cotton benefits from crop intensification initiatives in the agricultural sector.

In the long run, Belize may be able to move into labour-intensive ‘cut, make, and trim’ textiles production by emphasising sustainable production. Owing to the United States withdrawal from the Trans-Pacific Partnership and the general desire among apparel sourcing executives to move production geographically closer to their headquarters, many US-based apparel companies are examining opportunities in relocating apparel sourcing to Central America (Berg & Hedrich, 2016). Although Belize is unlikely to compete in terms of scale and labour costs in textiles, there are ways in which they could market themselves as an attractive destination for FDI. For example, in Guatemala large textile manufacturers are attracting sourcing business from some of the largest global apparel players such as Nike, Puma, and Adidas by emphasising eco-friendly production, such as recycling up to 80% of wastewater in a highly water-intensive industries (Apparel News Group, 2017). The desire to improve brand image through sustainable production, the development of the CTA value chain to guarantee local input supply, and potential free zone incentives could make Belize a legitimately attractive destination for textile sourcing.


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Corozal can capitalise on opportunities to develop the sheep value chain in northern Belize and seek to tap niche export markets for fine wool. According to the FAO, there are significant market opportunities for Corozal and Orange Walk’s sheep farmers to expand production, despite evident cross-cutting constraints experienced in the agricultural sector (FAO, 2016). Small-scale production targeting niche wool markets, where wool can sell at significantly higher rates than in commercial wool production, may prove viable. However, wool of sufficient quality must be produced in order to target niche markets; this is heavily dependent on a number of factors that significantly raise the cost of production.

Opportunity 2.2. Develop manufacturing of sustainable consumer and industrial packaging made from by-products of agricultural production.

Corozal should capitalise on by-products from its crop intensification initiatives and manufacture sustainable packaging from natural agricultural by-products and waste. Cornstarch, for example, can be formed into a number of sustainable packaging solutions, including substitutes to oil-based plastics, biodegradable styrofoam, and paper. Other opportunities to produce packaging from agricultural waste include biodegradable paper- and board-based packaging from fibrous agricultural residue – virtually any type of fibrous crop residue can be transformed into packaging solutions; some prominent examples are from wheat, maize, and rice straws (Sustainability Matters, 2015). Packaging from agricultural waste can therefore complement Corozal’s export-led development in the agribusiness sector; in fact, waste from crop production can be used to package the crop itself and potentially reduce costs. Packaging produced from these residues, moreover, can contribute Belize’s attainment of its sustainable development goals in that it not only provides a sustainable agricultural waste management solution, but is also biodegradable.

Opportunity 2.3. Consider potential for scaling up electric energy production from biomass residue from crop waste, particularly bagasse, while seeking opportunities to move into biofuel production as sugarcane yield intensifies.

Intensified sugarcane production will create opportunities for further investment into renewable electricity generation that will bring about numerous benefits. Sales of clean electricity generated by Belize Sugar’s co-generation energy facility, Belcogen, to Belize Electricity Limited currently account for around 15% of electricity supplied to the national grid (ASR Group/BSI, 2014). However, Belize still relies significantly on fossil-fuel energy imports from Mexico, which not only drives up energy costs in the Belizean economy in general, but also leads to greater greenhouse gas emissions. Increased productivity and efficiency in sugarcane production in Corozal will therefore justify investment in the expansion of electricity co-generation, as there will be a sustainable flow of bagasse to be converted. Benefits of scaling up the co-generation of electricity include:

reducing reliance on imported energy, leading to economy-wide reductions in energy costs;

contribution to meeting sustainable development goals, including a potential offsetting of 34,000 tonnes of CO2 emissions (ASR Group/BSI, 2014); and,

improved profitability, competitiveness, and self-sufficiency in the sugar industry, reducing the need for government subsidies.

Biofuels present an opportunity in the Belizean sugar industry. Diversification into production of ethanol from bagasse would not only further contribute to Belize’s sustainable development goals, but also diversify revenue streams and thus facilitate economic resilience to exogenous shocks in the global sugar market. Bio-ethanol already plays a notable role in the energy matrix of large economies around the globe, including the United States.


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5.6 Tourism deep dive


The travel and tourism sector is one of the world’s largest economic sectors, covering all activities of people traveling outside of their home. The World Tourism Organisation defines tourism as all activities of travellers when outside of their country of residence. Activities include the consumption of goods, such as food and retail, and services, such as accommodation or domestic travel. The sector also supports the consumption of other industries, such as construction or business services. The sector contributed 10% to global GDP and accounted for 30% of total global service sector exports in 2017, considering both direct and indirect effects (World Travel & Tourism Council, 2018).

In Belize, the tourism sector is already an engine of economic growth and export-led development, contributing to 38% of GDP in 2016 (World Travel and Tourism Council, 2018). Tourism is a well-established sector in Belize, directly accounting for 14% of GDP in 2016. The sector’s relative importance is higher than average in Latin American, ranking 12th largest in terms of its size relative to national GDP in 2017 and contributing 34% to employment.

Tourism in Corozal district captures only a small share of national activity however, with both CFZ and Corozal district experiencing a decline in activity in recent years. Corozal’s tourism industry suffers from a lack of access to Belize’s large cruise market and has low levels of overnight tourism relative to the rest of the country (Ministry of Tourism and Civil Aviation & IDB, 2015). Only 4% of tourist surveyed in 2017 reported a visit to Corozal and arrivals have declined by an average 3.6% per annum between 2006 and 2014 in the district (Belize Tourism Board, 2017; Ministry of Tourism and Civil Aviation & IDB, 2015). In the CFZ, expenditure by Mexican tourists on short-duration trips has also experienced a decline. The zone’s retail and leisure focused tourism has suffered due to the Mexican Peso’s depreciation and competition from the city of Chetumal, in nearby Quintana Roo (Ministry of Tourism and Civil Aviation & IDB, 2015).

Key sectoral challenges are the low daily expenditure and short trip duration of Belize’s and Corozal’s visitors, which reduce the sector’s potential economic impact. The main challenge of Belize’s tourism’s sector is to increase total expenditure per tourist arrival. Expenditure per visit is currently not maximised because most of Belize’s visitors arrive by cruise ship and do not stay overnight. In 2017, visitors arriving by cruise were three times the number arriving via air travel, shown in Figure 37 (Belize Tourism Board, 2017). Overnight visits are characterised by their short duration and limited domestic travel, with approximately 50% of visits concentrated in the Northern islands and Central Coastline (Belize Tourism Board, 2012).


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Figure 37 Cruise ships are the most common mode of arrival for visitors to Belize, with over three times the number of airport arrivals

Note: The figure does not reflect total visitors in Belize, as it does not include other modes of arrival Source: Vivid Economics, based on Belize Tourism Board, 2017


The development of the tourism sector is consistently supported in Belize’s development plans, which target an increase in tourism’s ‘value-add’ and the extension of tourism’s benefits to rural areas. Belize’s Horizon 2030 and Growth and Sustainable Development Strategy both target tourism as key to improved economic resilience.

The tourism industry can also help to achieve all of Corozal’s core development objectives, shown by its success in the rest of Belize. For instance:

promote (foreign) investment: the tourism industry attracts large flows of FDI, accounting for 7% and 15% of total FDI flows in Central America and CARICOM region respectively, between 2012 and 2018 (fDi Markets, 2018);

achieve export-led development: the tourism sector already contributes to the majority of Belize's service exports. It can increase its contribution to export-led development through diversification and upgrading of the service offering; and,

increase employment, both directly and indirectly: the travel industry already supports 34% of jobs in Belize, due to the sector’s high labour intensity (World Travel and Tourism Council, 2018). Job creation opportunities are particularly high, because of the demand tourism creates for other economic activities, including agriculture and construction.

0

200

400

600

800

1,000

1,200

2013 2014 2015 2016 2017

Tou

rist

arr

ivals

(th

ou

san

ds)

Airport arrivals Cruise arrivals


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5.6.3 Investment for CFZ and Corozal District

Table 5 Tourism opportunities for Corozal and CFZ



Relevant markets

Develop a cross-border tourism offer between Corozal and Quintana Roo

Corozal Travel (supported by construction)

Mexican, European, American travellers

Promote Belizean tourist excursions to Corozal through information and support for transport networks

Corozal Travel (supported by construction)

Mexican, European, American travellers

Upgrade the CFZ’s leisure and entertainment offering

CFZ Travel (supported by construction)

Mexican and Belizean travellers

Provide goods and services for the local tourism supply chain

CFZ

Sugar and sugar confectionery; edible fruits and nuts; preparations of vegetables, fruits, nuts; fish and crustaceans; preparation of meat, fish or of crustaceans; beverages, spirits and vinegars

Hotels, restaurants and tourist shops in Belize


Opportunity 3.1. Develop a cross border tourism offer between Corozal and Quintana Roo, facilitated by simplified border crossing

Corozal can leverage its unique border location to capture tourists entering Belize from Mexico. Tourism at the Mexican Belizean border currently does not reach Corozal, with tourist arrivals either staying at the CFZ or bypassing the district for more popular destinations. Large flows of tourists go between Cancun and San Pedro for instance via sea transport. These tourists typically show a desire for greater variety and a willingness to travel during their trips.132 Corozal’s integration into a cross-border tourism offer could capture existing flows of cross-border tourists.

To facilitate the cross-border tourism offer, a simplified border-crossing and the promotion of local tourist sites across the Mexican border are essential. To encourage tourists arriving from Mexico to pass through Corozal, there must be:

132 Based on information from stakeholder engagement in Quintana Roo


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a simplified border crossing with improved transport infrastructure to support the arrival of tourists, and their onwards travel;

promotion of the region’s natural and cultural sites of interest and investment into the infrastructure supporting these sites. For instance, information centres at the Mayan sites of Cerros and Santa Rita and at Corozal bay wildlife sanctuary can increase their attractiveness; and,

collaboration with stakeholders in Chetumal’s and San Pedro’s tourist industry to help advertise Corozal’s within the cross-border tourism offer.

The district should also consider the removal of the border charge for short-term visits, to incentivise overnight Mexican visits to Corozal. Belize’s exit fee currently applies to all visitors leaving Belize and can act as a significant barrier to Mexicans, or other tourists, travelling from the CFZ to Corozal. The result is shorter length of stay for visitors, and limited spillover benefits from CFZ activity. Removal of the exit fee or extension of the period in which tourists can enter and leave without being charged133 would decrease national tax revenue, but this may be compensated by inflows of tourists from the zone.134

Opportunity 3.2. Promote Belizean tourist excursions to Corozal through information and support for transport networks

Corozal can capture nearby tourism through offering short-term excursions for travellers in other parts of Belize. Tourism in Belize is currently concentrated in a few hotspots and faces threats of unsustainable visitor growth and overcrowding. Short-term excursions from more popular sites are demanded not only to alleviate congestion, but also to increase length of stay and appeal to travellers’ desire for diversity. As these pressures grow, tourist providers in the rest of Belize will continue to actively seek new domestic excursions. Corozal region’s existing strengths- its Mayan sites, marine landscape and local agricultural produce- could make it an attractive location for tourists in nearby hotspots, such as San Pedro.

Improved information on Corozal’s existing attractions and supporting transport links will help to attract increased flows of excursion tourists. Despite being easily accessible by sea from nearby San Pedro, Corozal attracts few excursion tourists. There are two major constraints:

a lack of advertising or information on excursion opportunities in Corozal, both by tourists and international and national tour providers; and,

limited transport connectivity between Corozal’s sites of interest and nearby tourist destinations.

Corozal must collaborate with local tourism agencies, particularly in San Pedro, to highlight attractive excursions. One example is the fishing village of Sarteneja. It must also increase transport links to the rest of Belize, working with water taxi companies to help make Corozal a more convenient short-term trip.

Opportunity 3.3. Upgrade the CFZ’s leisure and entertainment offering

Corozal Free Zone can increase tourism exports through the development of a shopping and entertainment area which attracts both Belizean and Mexican tourists. Given CFZ’s border with Mexico, there is a strong potential to supply goods to this market. Mexican tourists state a preference for leisure and entertainment destinations, with 35% reporting these as their preferred holiday (Global Strategy & OnTarget, 2018). Casinos nearby the CFZ are already a strong attraction and will favour moving into the Free Zone once their EPZ status has been

133 Short-term visitors, visiting for less than three days, are exempt from the fee 134 Supported by stakeholder engagement during the Consultant team’s interim mission in Belize


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terminated.135 These casinos could be complemented with cafes, restaurants, bars and spas to entice Mexicans from Quintana Roo.

Opening the zone to Belizeans will be essential to maximise market demand for the CFZ, and therefore the attractiveness of the zone to investors. To encourage FDI into the CFZ will require significantly boosting the market that it caters to. An immediate step is to allow Belizeans to enter the zone, some of whom currently go to nearby Chetumal for their leisure activities. Increasing and diversifying the zone’s clientele can help in rebranding the zone to investors and local Belizeans.

Opportunity 3.4. Provide goods and services for the local tourism supply chain

Corozal can also capture increased benefits from the local tourism industry, by supplying value-add products for tourists in the rest of the country. Despite tourism’s significant contribution to the Belizean economy, the potential impact is currently not maximised due to the low levels of daily expenditure and limited local procurement in the tourism supply chain. This trend could be reversed with the emergence of a local eco-tourism market, which seeks to promote locally and sustainably produced and processed goods. Projects include Mahogany Bay in Ambergris Caye, the Four Seasons Caye Chapel and Backladore Caye. Corozal’s developing food and beverages industry can be more closely linked to demand from this the tourism industry throughout Belize, reducing leakages in the tourism sector and distributing benefits to local businesses.

To increase the value-add of the tourism industry, Corozal will need to collaborate closely with tourism industry stakeholders to understand local demand and promote the Corozal brand. To increase levels of local procurement, Corozal district must seek an increased understanding of the needs of local restaurants and hotels. To ensure local producers, suppliers and key decision makers in the tourism industry are connected, will also require increasing information on market opportunities (IFC, 2018).

135 Casinos will not be eligible to receive incentives under the proposed DPA bill, to replace the current EPZ law


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Figure 38 Export opportunities for the tourism sector in the Corozal District


5.7 Professional services deep dive


Professional services are diverse, covering four core functions that businesses and professionals demand: business processes, information technology (IT), knowledge processes, and workforce development. The professional services sector can be classified under four categories:

business process outsourcing (BPO), the sub-contracting of specific business processes to a third party, including billing, purchasing, marketing, customer relations;

IT outsourcing, the production and use of software, including, applications development, IT

consulting, and software research and development;

knowledge process outsourcing (KPO), the outsourcing to highly skilled and specialized professionals, including market intelligence, business analytics, and legal services; and,

workforce development, the education and training of workers, including skills and language-based courses.

The BPO, IT and KPO functions are often classified as ‘Global Services’ due to the ability to perform these services at a distance from the core business operations (IDB, 2018b), or under the Extended Balance of Payments and Services IT and Other Business Services classification (UN Department of Economic and Social Affairs, 2010). Workforce development services can be classified as both Other Business Services or Travel


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services.136 They are grouped with Professional Services due to their role in enabling businesses function by supplying skilled labour.

Professional services in Belize are currently focused on low-value low-complexity activities, concentrated in Belize city. In recent years, Belize has emerged as a BPO location due to its unique advantage as a native English-speaking Central American country, with proximity to the US market and relatively low wages (BELTRAIDE & IDB, 2018; IDB, 2018a).The sector is largely focused on less mature BPO services, such as voice-based customer support and telemarketing services, and requires limited industry specific expertise. Over 80% of BPO activity is concentrated in Belize City with three large providers accounting for 80% of the sector’s revenue generation (IDB, 2018a).

Despite Belize’s bilingual heritage, there are few workforce development services targeted at English language training. There is scarce supply of English language centres in Belize which target the regional market demand for English language training. The Regional Language Center, located at the University of Belize, offers an English as Second Language (ESL) programme, but has limited focus on attracting international customers.

5.7.2 Cluster alignment with national and regional development goals

Professional services are prioritised in Belize’s development strategy, which explicitly target strengthening Belize’s BPO and ICT sector exports. Belize’s NES aims to achieve an increase in exports of professional services. To achieve this vision, it aims to build the capacity of providers to access foreign markets; improve ICT access and affordability; and, increase quantity and quality of relevant training programmes (BELTRAIDE, 2015).

All of Corozal’s core development objectives can be delivered through growth in regional Professional services. For instance:

● promote (foreign) investment – rising costs in the onshore professional services industry are leading to a higher level of global sourcing and increased levels of offshore investments (IDB, 2018a). The sector already contributes significantly to foreign investment in the region, accounting for 17% of FDI inflows to Central America between 2012 and 2018 (fDi Markets, 2018);

● achieve export-led development – the professional services industry is an increasingly large export sector for developing economies, with global sourcing of BPO, IT and KPO driven by competitive pressures and digital technology; and,

● promote employment – the human resources and Customer Care segments of BPO industry can offer significant job creation opportunities, whilst more complex KPO and IT services can provide higher value employment.


Table 6 Professional Service opportunities for Corozal and CFZ



Relevant markets

Provide bilingual support to Global

Corozal Other business services BPO businesses in Belize City, Quintana Roo BPO hubs in Latin America

136 Classified under travel services when they are consumed by non-residents travelling to Belize


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Relevant markets

Service industry in Belize and Quintana Roo

Provide English language training services, targeted to the Mexican market

CFZ Education spending in Travel services

Mexican students, professionals and businesses

Develop cross-border innovation centres in agriculture and tourism

Corozal Other business services CARICOM and Central American economies


Opportunity 4.1. Leverage bilingual skills to support the Global Service industry in Belize and Quintana Roo

Corozal’s bilingual workforce is well-placed to serve the growing regional BPO industry through English-specific services. The Latin American and Caribbean region is the fastest growing outsourcing cluster, accounting for over 10% of the global industry and growing at a faster rate than competitor regions at 7% annually (IDB, 2018a). Strong growth of the nearshore professional service industry in Spanish speaking countries such as Mexico is increasing demand for English language BPO services. Belize already has a unique advantage to supply these services to nearshore professional service hubs, with the only native bilingual workforce in Central America (Compete Caribbean, 2013). Stakeholder engagement reveals Corozal as a particularly attractive location to develop Belize’s English service offering, due to the higher share of bilingual labour and lower rents relative to Belize City. The opportunity to connect to Mexico’s high-speed internet cable further increases the attractiveness of Corozal.

Corozal’s BPO offer can cater to the BPO industry in Belize City and Quintana Roo in the short term, with the potential to capture the broader Latin American market in the future. Investors in Belize’s BPO industry are already interested in developing satellite offices in Corozal due to the region’s strengths. In the immediate term, the national BPO industry can help to develop Corozal’s BPO offering. Provision of incubators with plug and play infrastructure and training schemes for the local workforce will be necessary to catalyse investment and achieve these aims (IDB, 2018a). There is already evidence of several small independent BPO operators in business in adjacent Orange Walk. Furthermore, southern Mexico’s established BPO industry and growing Technology sector provide promising demand centres that Corozal is best-placed to serve in the next two to five years.

To remain competitive in the changing industry, Corozal should also aim to develop higher value services dependent on bilingual skills. As the professional service sector continues to evolve towards a value-focused model with high levels of automation, Belize’s industry is threatened by low growth and diminishing returns. The global share of BPO spending on HR and customer care declined by 33% and 31% respectively in 2016, highlighting the industry’s changing value proposition (NASSCOM, 2017). These trends have resulted in a difficult business environment for local call centres. Since 2010, only a few large service providers have achieved stable growth whilst many new entrants have ceased operations (IDB, 2018a). To achieve high returns and growth in the future, Corozal should aim to build skills in higher value services, such as accounting, finance or legal KPO services.


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Opportunity 4.2. Develop an offer for English language training services, targeted to the Mexican market

A large, regional market for English language training can be readily captured by Corozal’s relatively educated, and bilingual workforce. There is a large market for English language training across Latin America due to the importance of English skills for employability and the insufficient public education in Latin American countries. In Mexico, 58% of people view English as a skill for greater employability and nearly 70% of employers feel it is an essential skill for staff (British Council, 2015). Mexicans report speaking as their weakest skill, resulting in a particularly high demand for speaking opportunities (British Council, 2015). Corozal is already qualified to capture this demand due to the high supply of trained teachers, the bilingual labour force, and proximity to the large market demand in Quintana Roo. The region is equipped with one of the highest share of trained teachers in Belize (more than double the rate in Southern districts) (IDB, 2013).

To be competitive with Mexican service providers, Corozal’s offer must be cost-competitive and, or, tailored to the needs of Quintana Roo’s Tourism and BPO industries. To attract Mexicans, English language training services must compete on price or on quality with Mexican chains, such as Berlitz, Harmon Hall, International and The Anglo.137 Cost-competitive face-to-face classes can be provided given the supply of bilingual labour and minimal infrastructure needs. At the same time, Corozal can capture higher value exports by offering a unique English learning product focused on the Tourism and BPO industries. Belize’s recognised tourism brand and growing presence in Latin America’s BPO industry can be leveraged to meet the workforce development needs of both industries in Quintana Roo.

In the long term, an English training hub in Corozal will also strengthen Belize’s capacity to export higher value KPO services. The development of English language centres in Corozal can serve multiple objectives, by developing local human resources and enabling higher value exports. Investment in English language education can equip the Belizean workforce to export complex KPO services for instance, such as Legal Process Outsourcing services (Compete Caribbean, 2013).

Opportunity 4.3. Develop cross-border innovation and tourism, which provide vocational training and sector-oriented research

Corozal’s growing expertise in efficient agricultural production and tourism provides opportunities to lead skills development and research in these areas, catering to local and regional demand. Corozal’s own development of tourism and agriculture will increasingly create demand for research on sector-specific challenges and opportunities, such as the intensification of sugar production. This demand for better information is couple with growing expertise and know-how that is applicable to nearby countries, including Mexico and CARICOM member states. The development of a research and vocational training centre could therefore be beneficial both to increase employment, promote Corozal’s deployment of better agricultural or tourism practices, and diversify exports of professional services. Research on efficiency improvement in sugar production are particularly promising area for Corozal to promote, given the applicability to the Caribbean and Central American region.

Partnerships with local schools, universities and research institutes are an important first step, alongside government support. Partnerships can ensure that existing local knowledge is being utilised, with potential partners including companies involved in research and development, such as Belize Sugar Industries, and education institutes, such as the Escuela Mexico and nearby Technical and Vocational Education and Training (TVET) colleges. To catalyse investment by the private sector, fiscal and non-fiscal government support is important to ensure a supply of skilled labour.

137 Costs at well-known Mexican schools vary between 80 to 150 pesos per hour, British Council. 2015. ‘English in Mexico’


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Figure 39 Export opportunities for the professional services sector in the Corozal District


5.8 Synergies between clusters

While there is a strong rationale for each of the four priority clusters independently, it is clear that there are also potential synergies between each of these. A more robust and productive agricultural supply chain can supply a growing domestic tourism market, for example. Similarly there may be opportunities for vertical integration of new service sectors, such as BPO, into areas where the region is already strong or has significant potential, such as tourism. There is already evidence of small scale BPO and remote working facilities in tourism centres such as San Pedro.

There are also opportunities for forwards and backwards linkages associated with enhanced training throughout Corozal District. For example, greater English language proficiency is likely to help in the development of services activities. An enhanced services sector ca then play a role in product branding based on a demand for such services. In terms of products, there may be similar linkages between the demand for cultural or Mayan textiles produced within the region and the volume of overnight tourism arrivals.

It will therefore be important to consider the phasing of cluster development across the region to ensure that opportunities are maximised and interlinkages recognised. Targeting investment opportunities which positively impact more than one cluster can increase the effectiveness of investments. outlines how some of these sector approaches may interact.

TRAINING

OFFERED IN

TOURISM FREE

ZONE

DEMAND FOR

ENGLISH LANGUAGE

TRAINING FROM

MEXICO

SERVICE SUPPORT REGIONAL

MODEL

• LINK TO SUBMARINE INTERNET

CABLE AT CHETUMMAL

• PROVIDE BILINGUAL SERVICES

TO GLOBAL SERVICE SECTOR

INCLUDING

• REMOTE WORKING

COMMUNITIES IN

QUINTANA ROO

• BPO COMPANIES IN

BELIZE CITY

• OFFER ENGLISH LANGUAGE

TRAINING IN ‘NEW’ COROZAL

TOURISM FREE ZONE

• SUPPORT OTHER PLAYS WITH

CROSS-BORDER RESEARCH,

TRAINING AND PRODUCT

DEVELOPMENT INSTITUTES

Chetumal

Corozal

LINK BTL NETWORK TO

MEXICO HIGH SPEED

INTERNET AND FIBERISE

FREE ZONE AREA

GSS BUSINESSES

PROVIDE BILNGUAL

SUPPORT TO TECH

SUPPLY CHAIN

C

BPO DEMAND FROM

EXISTING BELIZE CITY

EPZs

CFZ Area


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Figure 40. Cluster synergies promote positive spillover effects from investment


Incubation centres providing vocational training can improve the quality of the regional Tourism industry.

Exports of Food and Beverages increase the demand for manufacturing of packaging solutions, which can

even use the by-products of food production.

A growing Tourism market can spark demand for a productive, local Food and Beverages supply chain.

Production of Mayan textiles and handicrafts can increase the impact of arrivals in the Tourism market.

Expertise in Tourism can be leveraged to supply BPO services and English language training tailored to

the regional Tourism market.


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6 Investment and trade promotion

This chapter provides recommendations for improving the investment and trade climate in Corozal Free Zone

and Corozal district to deliver those opportunities identified in Chapter 5. The chapter also analyses current

practices related to trade and investment and implications for priority sectors and key trading partners.

6.1 Belize’s trade and investment landscape

Table 7 summaries the government and private sector stakeholders that are important to engage for trade and investment promotion activities related to developing the Corozal District.

Table 7 Government and private stakeholders within trade and investment promotion in Belize and Mexico

Government/Private Stakeholders

Jurisdiction Roles and Responsibilities

Ministry of Economic Development, Petroleum, Investment, Trade and Commerce

National

Focuses on planning and integration across all economic sectors, including responsibility for foreign trade and international trade negotiations and regulation of the export processing and commercial free zones

Belize Trade and Investment Development Service (BELTRAIDE)

National Recommends to the Ministry on the formulation of appropriate policies to guide trade and investment

Directorate General for Foreign Trade

National Represents Belize in international trade negotiations

Ministry of Tourism National Develops comprehensive policies for the tourism industry

Belize Tourism Board (BTB) National Markets the Belizean tourism product, develops tourism initiatives and programs and implements policies

Belize Chamber of Commerce and Industry

National Advocates for private enterprises, with a membership of more than 300 Belizean businesses from agriculture, service and industrial sectors

National Free Zone Authority National Secretariat located within the Ministry with responsibility for Investment, Trade and Commerce, charged with regulating all Free Zones in Belize; works with a national Free Zones board

Belize Tourism Industry Association

National Advocates on behalf of its members for the benefit of the tourism industry

Corozal Free Zone Board of Directors

Corozal Free Zone Develops policies and regulations for the Corozal Free Zone

Corozal Free Zone Management Authority (CFZMA)

Corozal Free Zone Implements the free zone policies introduced by the Corozal Board of Directors

Free Zone Chamber of Commerce and other investors

Corozal Free Zone Represents businesses active in the zone to Free Zone board, including on devolved issues such as user fees, zone operation and infrastructure development

Corozal Town Council Corozal Town Locally elected mayor and council, authority over business license revenue

Corozal Local Tourism Committee Corozal District Develops and implements local tourism priorities, with support from national ministry

Agriculture sector investors in Corozal

Corozal District Smallholders and commercial enterprises develop agriculture sector for export, including in Corozal BSR/ASI and sugar cane growers


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Pro Quintana Roo Investment Promotion Agency (IDEFIN)

State (Mexico) State investment promotion agency in Quintana Roo; develops investor interest in infrastructure and investment opportunities

Quintana Roo Secretary of Tourism (SEDETUR)

State (Mexico) Develops and markets tourism product in Quintana Roo, including Maya coast and Chetumal offer focussed on Belizean traffic

Quintana Roo Secretary of Agriculture (SEDARPE)

State (Mexico) State agency responsible for agriculture, rural and fishery development in Quintana Roo; oversees a number of programmes targeting sustainable agricultural development


The current investment proposition of Belize revolves around a number of features. Firstly, Belize offers a strategic location which is in proximity to the US market and shares cultural affinity with the US, Canada and Latin American nationals due to its bilingual population. Secondly, the country is seen as a strategic hub for logistics in the region, having both land and sea access and contiguity to key markets. Thirdly, Belize has traditionally demonstrated one of the most stable political environments in the region, having had peaceful and transparent elections since its independence in 1981 and is currently led by a government with pro-business credentials. Finally, Belize is the only Central American country which is part of the wider regional trade blocs in CARICOM with the access to the US market.

Belize’s National Investment Promotion Agency, BELTRAIDE, is responsible for investment generation, trade promotion and export development in Belize. On the investment side, BELTRAIDE promotes investment opportunities in priority areas138 by connecting potential investors with key public and private sector organisations, helping build long-term collaborative business relationships and enhancing business competitiveness through workforce training programmes. On the trade side, the agency is responsible for promoting Belizean products and services in international markets and identifying viable export opportunities. Furthermore, BELTRAIDE provides training and technical assistance to build export readiness at home.

The INVEST Belize Magazine, created by BELTRAIDE, is published annually both nationally and internationally and is the country’s only business and investment publication. The magazine serves an important platform for local businesses to showcase their products and services on an international platform to potential clients and investors. More specifically, the magazine is circulated to Belize’s government and diplomatic offices, local private sector enterprises and hotels and regional and international trade and investment forums.

Belize has a select few free and preferential trade agreements in place, which cover the bulk of its trade flows, as shown in Figure 41. As a member of the CARICOM Single Market & Economy (CSME), Belizean originating goods are granted duty-free access to the region. Similarly, the country benefits from CARICOM Bilateral Agreements with Cuba, Dominican Republic, Venezuela, and Costa Rica. This also includes the Belize-Guatemala Partial Scope Agreement allowing for preferential reciprocal trade between the two countries on a small number of goods. Trade agreements with Canada (CaribCan), the US (Caribbean Basin Trade Partnership Act) and the EU (CARIFORUM-EU Economic Partnership Agreement) also offer preferential trade terms with these regions. However, not all of these agreements offer duty-free access for service exports.

Surprisingly, no official trade agreements exist with Mexico yet, however negotiations on a Partial Scope Agreement are underway. Mexico is a member of the Trans-Pacific Partnership Agreement and has signed nine bilateral trade agreements, including Economic Complementation and Partial Scope Agreements, within the framework of the Latin American Integration Association. Mexico is also a member of the 2013 Central American FTA, a member of the ‘UNIQUE Trade Agreement’, the Pacific Alliance, as well as a signatory of

138 Priority areas for Belize include agroprocessing, agriculture, offshore services, sustainable energy, and light manufacturing and logistics (Government of Belize, 2017)


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MERCOSUR’s ‘ECA 54’ (Economic Complementary Agreement) and ‘ECA 55’ Agreements. Belize and Mexico therefore share no regional integration, bilateral or free trade arrangements (ProMexico, 2018).

Figure 41 Map showing Belize’s current and planned trade agreements

Note: Future trade opportunities relate to the potential trading opportunities identified by the Belize’s National Trade Policy Framework (2016-2026)


Belize’s National Trade Policy Framework (2016-2026) is the first step to develop a comprehensive National Trade Policy for the next decade. The framework, published by the Directorate General for Foreign Trade, lays a set of policy commitments to be adopted by the national government (Directorate General for Foreign Trade, 2016). The framework is organized across four pillars:

the ‘institutional capacity’ pillar puts in place the legislative mandate, technical and administrative capacity to enhance Belize’s international negotiating profile, including reform of the Trade Technical and Negotiating Teams and creation of a public-private foreign trade forum;

the ‘supply capacity’ pillar seeks to converge policies to support diversifying the export basket, foster innovation and entrepreneurship to enhance Belize’s investment profile and develop a National Development Plan for this purpose;

the ‘market access’ pillar focuses on expanding trading opportunities, such as assessing Belize’s productive capacity to export, improving access and entry to markets, including negotiating PSAs with Mexico, El Salvador, Nicaragua and Honduras and conducting market studies of Panama, Brazil, Chile, Japan, Taiwan and the US, and positioning Belize as a regional hub between the Caribbean and Central America; and

the ‘trade facilitation’ pillar seeks to enhance procedures and documentations for exports, imports and transit for greater facilitation for the formal trade and payment flows and improve transportation of goods to Central America through their International Transit of Goods System.


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The National Investment Policy and Strategy (NIPS) is currently being developed in alignment with the objectives laid out in the National Trade Policy Framework. The NIPS aims to simplify the process of doing business in Belize by harmonising the varying policies and procedures, leading to increase in confidence in the investment climate, heighten competitiveness and greater inter-ministerial and inter-agency coordination. Once finalized, the policy strategy will provide a clear guide on strategic investment areas for both domestic and foreign investments and determine the overall direction of economic development in Belize.

While investment and trade promotion efforts take place at the national level, there is no clear strategy specifying the role of Corozal District or the Corozal Free Zone in delivering these plans. The activities of BELTRAIDE, the invest magazine and the national trade policy framework and strategy relevance for Corozal are not clearly disaggregated to the district level, and therefore requires additional analysis to identify specific actions related to trade and investment promotion in Corozal District. As discussed in Chapter 4, national objectives relevant for Corozal district include:

prioritise exports in value added products and services and develop human and institutional capital to support exporting businesses, including increased agricultural production and agroprocessing value add (BELTRAIDE, 2015);

double overnight stays and grow tourism contribution to GDP by 500% in 2030 (BTB & MTCAC, 2011); and

increase the ease of doing business in Belize to promote foreign investment in the country (Government of Belize, 2017).

In addition, Belize’s Free Zones face fierce competition, as globally there are over 4,300 Special Economic Zones competing for investments (Oliver Wyman, 2018). Belize is also in a very competitive Latin American and the Caribbean investment market, however, ProMexico, responsible for promoting trade and investment in Mexico, is closing down all of its overseas offices by the end of February 2019 (Eurofruit, 2019), and therefore an opportunity exists for Belize to accelerate its international investment promotional efforts.

The following sections detail recommendations for delivering these objectives through export-led development in Corozal District.

6.2 Recommendations to improve trade and investment in the Corozal Free Zone and Corozal District

6.2.1 Cross-cutting recommendations

Recommendation 1. Identify the strategic focus of the Corozal Free Zone (and its successor(s)) and alternative incentive mechanisms to focus investment in target sectors near the border.

Belize can simplify the strategic focus of the Corozal Free Zone by splitting the zone and the surrounding land into two separate areas each with a distinct sector focus. Currently, there is a substantial overlap between the two incentive regimes of the Free Zone and the EPZs, implying unclear incentives and advantages offered to the investors, as detailed in Chapter 7. The strategic focus of the Corozal Free Zone could be clarified by designating two spatial areas, one as a reformed Free Zone focused on tourism and another as a Designated Processing Area focused on agroprocessing sector, in line with Belize’s international competitiveness. The clearly defined identity of each park would assist the formulation of effective investment and trade promotion strategies. For example, promotion initiatives such as information dissemination, policy advocacy and servicing clients targeted to a specific sector will be more effective.

Action 1.1. Clarify the strategic focus on the Corozal Free Zone by designating two spatial areas focused on tourism and the agroprocessing sector, respectively.


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Recommendation 2. Develop a new positioning strategy and brand architecture for the Corozal Free Zone and the Designated Processing Area that signals a departure from perceptions of risk and lack of oversight in the past.

Belize’s current national brand narrative is largely focused on its tourism product offer.139 There is a clear need to identify and promote specific ’shovel-ready’ business opportunities to investors within the overall branding message of Belize. However, the success of the investment promotion strategy for Belize is underpinned by a number of critical factors that must be addressed, which include:

effective positioning of the Free Zones and the DPA relative to each other and nationally;

clear statement of the ‘offerings’ of each Free Zone and the DPA, especially the financial and non-financial government support to potential and current investors;

clear understanding of how the Belize government is de-risking the Free Zone region for potential investors;

clear collaborative partnership between the Zones/DPAs and the government in the management of the FDI and related enquiries; and,

clear and consistent communication of opportunities, supported by the national promotion initiatives, where appropriate.

The nature of the Corozal product offering and the lifecycle of the zone or the DPA are likely to have a significant impact upon the shaping of the future Corozal Investment Promotion Strategy. As a ‘new’ offering, the proposed strategy for Corozal could align itself to the marketing emphasis of an embryonic zones strategy, as indicated in Figure 42. This is possible because of limited developed business activity in the CFZ to date. Figure 42 shows that this ‘embryonic’ lifecycle stage aligns with a marketing strategy that raises awareness of the zone’s location and outlines what the geographical area has to offer, as opposed to focusing solely on the zone’s offering. The corresponding marketing and promotions efforts for this lifecycle stage ought to highlight the potential of the CFZ in terms of sectoral mix and project potential, rather than historic business activity. As part of this stage in the zone lifecycle, outreach initiatives by the zone management are crucial.

Figure 42 Lifecycle stage and marketing focus of across the Zone Marketing Strategy development spectrum

Source: Vivid Economics and Gareth John Consulting

139 Stakeholder engagement with BELTRAIDE officials on 07 January 2018


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The competitive advantage of a tourism Free Zone and agroprocessing DPA will shape the positioning of Corozal in Belize, and therefore is a good starting point for the marketing strategy As a new product offering, Corozal should consider a ‘Challenger’ brand, which will not only allow it to reposition itself away from previous perceptions, but also require a fundamental change in the way Corozal is promoted. However, this is complicated by the fact that there is little to offer in terms of the developed infrastructure or legitimate economic activity occurring presently. The future positioning must therefore address this directly, by shifting the emphasis onto factors that will resonate with the potential investors, including creation of a level of interest, excitement and differentiation to stand-out and commitment of the government in a strategy of financial de-risking.

Belize has made good progress with de-risking, however, is still considered very risky and the Corozal Free Zone particularly is seen as an area of especially high risk. Reforming the Free Zone has potential to counter these negative views, if changes are communicated effectively. Outside of the Free Zone, the FIU, with support from the World bank, is conducting a National Risk Assessment. The results of this assessment and the actions taken to mitigate the remaining areas of risk will be important in shaping opinions of the financial sector. Therefore, a comprehensive message around areas of risk, changes to mitigate them and new status quo is key to reach out to the financial community and money laundering rating agencies like Refinitiv or the Basel Institute. There is an opportunity for Belize to demonstrate successful de-risking in the 4th Caribbean Financial Action Task Force’s Mutual Evaluation Report, planned for 2022.


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Belize should further develop an appropriate brand architecture to help communicate the new positioning of Corozal’s Free Zones and the DPA. The selection of the branding architecture will have a material impact upon how the zones are positioned in terms of their marketing and communications, in support of the Investment Promotion programme. The ‘Sub-brands’ approach is recommended to be utilised to develop the marketing strategy for Corozal, for the following reasons:

this approach provides a much stronger link between the umbrella brand (Belize Free Zones) and the sub-brands (Corozal Free Zones), allowing for real focus and differentiation to be achieved in positioning;

it allows each sub-brand (or zone) to be targeted to a single catalyst sector to enable effective market targeting and positioning;

it allows for more emphasis upon developing the place brand of Belize alongside the Zones, which will enable the development of a positive identity premium for the Zones; and,

Box 8 Vision, Positioning and Branding in the context of Free Zones

‘Zone Positioning’ is a term used to describe the aggregate perception in the minds of investors and typically emanates from the product offering and a competitive analysis. While ‘vision’ is something formulated at a conceptual stage that drives the brand positioning; a ‘brand’ is what communicates this positioning to the target market.

The unique Corozal ‘position’ proposition should aim to:

• deliver clear points of differentiation;

• support individual positioning for all key sectors;

• challenge perceptions, but base upon the truth;

• support overall Belize brand identity with relevant sub-identities tailored for specific investors.

It is essential for the positioning of the zone and the DPA to align itself with the selected branding architecture (both at the national and district level) to deliver on the proposition promise. The following three example branding structures offer differing emphases on how this might be achieved, by either leading with:

• House of Brands - a place-based zone strategy;

• Branded House - a sector-led approach; and,

• Sub-brands approach - a collective zone strategy.

The House of Brands structure would imply no discrete SEZ brand, but a combined national and Corozal brand representing a set of diverse sectors. While this allows flexibility to promote multi-sector environments, it does not build strong and sustainable brand equity, focus or differentiation.

The Branded House would imply a sector becoming the dominant driver, and the zone becoming a component part of the wider sector offer in Belize. This allows for the development of powerful positioning statements around a sector in Belize and could be feasible for Corozal.

The ‘Sub-brands’ approach would imply a much stronger link between the umbrella brand of the ‘Belize Economic Zones’ and the individual zones, allowing for real focus and differentiation to be achieved in positioning. This approach is the most beneficial and feasible for Corozal, as noted under Recommendation 2. However, a drawback could include losing the sectoral focus while the brand is being built.


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it allows for development of individual Zones brands as they develop into more recognisable clusters.

This recommended approach will require significant collaboration at the national and the district level with regards to marketing initiatives. Thus, the overall branding structure needs to be clearly agreed upon and managed to create a strong positioning for both a tourism Free Zone and an agroprocessing DPA.

Action 2.1. Identify the ‘positioning’ for both a tourism Free Zone and agroprocessing DPA in a branding white paper, including clarity on their competitive advantage, product offering and both commitments to and results from de-risking.

Action 2.2. Initiate discussions between the national and the district stakeholders to develop a national and district (Corozal) branding architecture, following the sub-brands approach.

Action 2.3. Develop a Zones Marketing Strategy for the tourism Free Zone and the agroprocessing DPA, following the agreed ‘positioning’ and ‘branding architecture’ for each.

Recommendation 3. Develop a portfolio of market opportunities in Corozal, packaged as specific Investor Value Propositions based around the Free Zone and the DPA.

Belize should develop a distinctive portfolio of Belize Market opportunities, expressed through Investor Value Propositions based around the Free Zone and the DPA. The model in Figure 43 gives a general structure of an Investor Value Proposition approach and it is recommended that these opportunities are developed utilising the zones and DPAs as evidence of improved ease of doing business in the region and a positive business ecosystem, which is going to be key in initiating engagement with the target investors. Based on the opportunities discussed in Chapter 5, three areas can be developed into specific value propositions for potential investors, as set out below.

‘Made in Belize’ campaign for agroprocessing products

Developing a place of origin and quality mark for locally produced products is one of the core elements of any National Branding Strategy. This approach allows:

the promotion of products with specific characteristics, particularly those coming from less-favoured or rural areas;

the improvement of the income of farmers;

the retention of population in rural areas; and,

the provision of clear and succinct information to consumers regarding product origin.

Many developing economies have introduced this principle, for example, ‘Made in Africa’ and ‘Made in India’ initiatives. Another example is the initiative of the European Union to recognise and protect the diversity of products emerging from Member States (European Commission, 2018a). Similarly, a ‘Made in Belize’ campaign could offer a range of market and promotional opportunities, particularly in the agroprocessing sector.

Supply chain development for global businesses

Given the nature of the primary agricultural production and the fairly unstructured processing facilities, there is an opportunity for Corozal region to develop initiatives to support local production whilst also developing structure and increasing scale to the agroprocessing operations that would be of interest to the investors.

A Supplier Development Programme would typically help global businesses to create linkages with the local suppliers through a facilitation and concierge service, along with developing a positive brand association with


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Corozal. A good example of this in action is Unilever’s Sustainable Living Plan which is a framework to develop ethical, sustainable and environmentally friendly supply chains for the company (Unilever, 2018). This has been trialled in Kenya and Tanzania to encourage small-holder outgrower programmes.

Corozal could do the following to promote global supply chain development involving local businesses:

identify the key sectors of importance to the region;

identify key local supply requirements of existing and potential investors;

match these identified needs to the local suppliers, working with them to raise capacity; and,

arrange meetings between the investors and the local suppliers.

Leverage the business of cultural awareness

Being associated with a country or culture marks a strong differentiator for brands, as many investors site productions in location which gives them an identity premium. The Mayan Culture has a strong global recognition and can be developed further in partnership with contiguous countries. This could mean supporting place-based production locations, for instance hand craft villages are highly successful in Kenya (Akamba Handicraft Cooperative Society, 2018),or driving significant tourism.

Figure 43 Approach to developing Investor Value Propositions

Source: Vivid Economics and UKTI 2014

The latest edition of INVEST Belize, for instance, focuses on the Belizean Green Economy to attract high-quality investors (Beltraide, 2018). The edition establishes the country’s plans to ensure that the key investment decisions strategically integrate the social, economic and environmental issues and that proper policies and assistance are in place for investors to achieve these outcomes. The government’s commitment to sustainable development is seen as a key area of comparative advantage for investment promotion in the region.140

Action 3.1 Establish a ‘Made in Belize’ label for increased awareness on the Belize’s capabilities in the agroprocessing sector in the overseas markets.

140 Videoconference with BELTRAIDE staff 07 January 2019


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Action 3.2. Engage prospective investors in supply chain mapping exercises to highlight opportunities for local supply.

Action 3.3. Bring together local suppliers and potential investors, by arranging meetings for suppliers and investors.

Action 3.4. Explore with Governments of Mexico and Guatemala opportunities to co-brand products relevant to Maya culture.

Recommendation 4. Fast track a trade and investment agreement with Mexico that facilitates priority areas for trade and investment between Corozal District and Quintana Roo.

Belize has an opportunity to collaborate with the Quintana Roo initiatives in agriculture, tourism and ICT markets. The ‘digital nomad’ market in Quintana Roo could be supported by the bilingual staff in Corozal, and therefore regulations such as fast immigration processes for ‘digital nomads’ from the US would allow their access to Corozal businesses. Similarly, there is an opportunity to cooperate in the alligator farming which makes for a big export industry in Quintana Roo. Furthermore, the Mexican state often suffers from undersupply in agricultural products and fresh seafood for the tourists, which again could be filled by the Belizeans. Significant export opportunities are stymied by the lack of a preferential trade agreement with Mexico, as evidenced by the low value of trade in goods between the two countries. The opportunities not recognised in the Partial Scope Agreement should be furthered through parallel negotiations to reach beneficial agreements on both sides.

Partial Scope Agreements with Mexico and other Central American countries are key to unlocking Belize’s opportunity to serve as a regional link between CARICOM and Central America/Mexico. Long-term opportunities that require broader coverage in trade agreements include distribution of food and beverages produced in the Caribbean to Central American markets as well as trade in services for e-logistics and English-speaking companies to service Latin American markets. Trade negotiations should be conducted with these future opportunities in mind, and once in place, promoted to relevant investors.

Action 4.1. If not included in current partial scope agreement negotiations, open parallel negotiations to reach agreement on investment, taxation, customs processes, requirements and information sharing. Negotiations should aim to enhance opportunities created by border DPAs and Free Zones, rather than restrict potential activities in these special zones.

Action 4.2. Develop capacity of Belize’s Trade Technical and Negotiating Teams in reference to ongoing negotiations with Mexico in order to agree a robust and expedient Partial Scope Agreement, prioritizing agricultural trade where possible.

Recommendation 5. Establish both formal and informal dialogues between the government of Belize and Quintana Roo and the relevant stakeholders.

There is a clear opportunity for cross-border collaboration on the trade offer in goods and services between Corozal district and the Mexican state Quintana Roo. The proximity of Corozal to Quintana Roo opens up the opportunity to fill in the supply chain gaps, collaborate on processing facilities and technologies to increase efficiency and introduce cross-border tourist offers to increase tourism viability. For instance, the recently launched Destination Kvarken project is a cross-border national cooperation initiative between Sweden and Finland offering cross-border product packages to improve visibility and attract more tourists to the region (European Regional Development Fund, 2018). Similarly, the Border Trade Alliance is a cross-border public and private sector cooperation between Canada, Mexico and the United States, serving as a premier authority on issues affecting the border (Border Trade Alliance, 2018). Following from these international initiatives, Belize authorities could develop a similar ‘border partnership’ with Quintana Roo that includes both the government


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and the private sector on both sides. The partnership could have two focused working groups, one on trade in agriculture and agroprocessing and one on cross-border tourism, which meets every quarter.

Action 5.1. Develop a white paper setting out structure and operations of ‘Border Partnership’ between governments and private sectors of Belize and the Mexican State of Quintana Roo, highlighting key areas of opportunity for collaboration and strategies to engage parties on both sides of the border productively.

Action 5.2. Based on the ministry Border Partnership white paper, open discussions on a Memorandum of Understanding with the Mexican State of Quintana Roo to operationalize the Border Partnership.

Recommendation 6. Improve the ease of doing business within the Free Zone (and its successor(s)) by consolidating regulatory requirements and information in an accessible format for both current and potential investors.

A one-stop-shop for providing easy access to information and resources to potential investors in the Free Zone is an essential step to improving the ease of doing business in the district. Similar to INVEST Magazine and BELTRAIDE activities at the national level, Belize should develop a one-stop-shop for information and expedition processes to attract investors to Corozal. For instance, stakeholder engagements have revealed lack of clarity on the zone fees and charges, which could be resolved by introducing a one-stop-shop. This could mean developing a user-friendly website, appointment of an in person contact in the free zone or the responsibility could be devolved to the CFZMA, with appropriate training. Furthermore, the lack of terminological uniformity in the Free Zone legal instruments leads to unstructured compliance and reporting processes. Belize should therefore strive to align terminology between the FIU and the National Free Zones Authority in communications to businesses and investors.

An excellent international guide in this regard includes the website of the Jebel Ali Free Zone in the United Arab Emirates (Jafza, 2018). The website is truly a one-stop-shop for investors with tremendous amount of information on all crucial investment aspects, from webpages on how to set up a business and available license types, to products offered, details on rules and regulations and extensive FAQs for customers. Furthermore, the website’s media center is highly active with the latest news, blogs and annual publications on the Jebel Ali free zone offer.

Moreover, the centralised governance system should be improved for streamline regulatory processes by developing a one-stop-shop (OSS) accessible to all potential and existing businesses in the zone. A number of regulations have been cited as obstacles in the way of doing business in Belize, including business registration process, buying or transferring land, opening a bank account and registration with the FIU by potential businesses and process of securing credit, health inspections and importing or exporting activities by current businesses (World Bank Group, 2018). The OSS should provide comprehensive support to businesses, serving as an important bridge between them and the government agencies. These should aim to improve the overall operational efficiency by providing information, clarification and expediting approval on services and procedures like registration and licenses.

Action 6.1. Redesign the Corozal Free Zone website into a one-stop-shop for investors, drawing inspiration from international examples.

Action 6.2. Prepare a series of agreements to be negotiated and signed between the Belizean government and the OSS provider to offer streamlined and expedited business procedures.


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6.3 Recommendations to improve trade and investment in priority sectors

6.3.1 Agribusiness play

Recommendation 7. Conduct a supply chain mapping exercise to identify market opportunities for Belizean fresh produce, including demand profile, current barriers to trade and mitigating actions to facilitate trade in these areas.

Belize should map the agriculture supply chains through market intelligence and logistics network to help better understand the demand and supply dynamics in the region, including in Mexico. This should include domestic demand from the San Pedro tourism market, Mexican demand for agroprocessing inputs in Quintana Roo and the export demand in CARICOM and Mexico trading partners. For instance, the firms in Chetumal are often unable to meet local demand for tomatoes, avocados, fresh seafood, etc. and the raw produce from Corozal could fulfill this demand undersupply through cross-border trade. Similarly, there is cross-border demand for products like the pineapple, organic sugar and chicken.141 Product specific value chain studies have already been conducted for sheep raising, honey and onions (Carballo, 2016; Harrison, 2016; Palacio, 2016). Synthesis is required to identify where these opportunities intersect with Mexican demand and zone infrastructure for prioritization in an agroprocessing-focused DPA.

Cross-border food processing opportunities should also be identified, as the Designated Processing Area for agroprocessing and exports is developed. The DPA should focus on downstream sugar cane products and other goods by cross-border collaboration on processing capacity and technologies with Quintana Roo. Another agroprocessing opportunity for the Belizeans includes taking up alligator farming, which is currently a significant export industry in Quintana Roo. The shared marsh land between Belize and Mexico could be used for this purpose. Engagement between Belize and Quintana Roo Agriculture Ministries is key to build capacity and offer for new agricultural products.

The full range of opportunities related to agricultural and aquacultural products in Corozal should be considered, with alternative production profiles evaluated against each other. As set out in Section 5, potential opportunities include agricultural and aquacultural products, organic packaging materials, textiles, leather and energy products.

Action 7.1. Commission a market study on Corozal agricultural and aquacultural raw produce and processed goods supply chains, with a focus on primary and secondary demand-based trade opportunities in Quintana Roo and San Pedro.

Recommendation 8. Advertise supply opportunities for new raw products as inputs into agroprocessing production and for tourism consumer markets.

Belizean government should collaborate with the Belize Sugar Cane Farmers Association (BSCFA) and businesses involved in sugar refining to communicate regarding the new supply opportunities in the agricultural sector. The sophisticated sugar industry in Belize provides for organized farmer association of more than 5,000 cane growers, of which 94% of the cane farmers are small farmers. The association can be used not only to raise awareness regarding the new supply opportunities covering raw products for inputs into the agroprocessing production and tourist markets, but also for its efficient supply chain management practices for new production.

Action 8.1. Collaborate with the Board of Directors under the Corozal Division of the BSCFA to advertise the new agricultural opportunities to the association’s farmers.

141 Stakeholder engagement with Quintana Roo Secretary of Agriculture staff on 7 December 2018


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Action 8.2. Develop roadshow programme to link investors to agricultural product supply, targeting investors in Quintana Roo and foreign investors already doing business in Southern Mexico.

6.3.2 Tourism play

Recommendation 9. Develop a cross-border tourism offer with Quintana Roo and engage with tourism operators (BTIA) to update and expand information around Corozal excursions.

The cross-border tourism offers between Corozal and Chetumal could be packaged together, as both areas are often overlooked by tourists bound for Cancun and Belize’s island destinations. A dialogue between the Quintana Roo Secretary of Tourism and the Belize Tourism Board regarding customs, immigration and tourist promotion can be initiated to develop a combined offer that benefits both economies. Tourism operators in Belize can explore one-day packaged excursions that combine adventure and ecotourism and ensure these are supported by transport networks. One-day excursions are often popular among tourists, which includes visits to two or three tourist or historical sites in a day.142 An example of a one-day excursion from Cancun includes visiting the archaeological site Chichen Itza, combined with a cenote143 and the colonial town of Valladolid on a 12-hour tour (Viator, 2018). Corozal has many good tourist attractions, including the Sarteneja Village and the Wild Tracks Animal Rescue that can be offered as a one-day package to make the visit to Corozal viable. Furthermore, hotels in San Pedro could sell excursions to Corozal sites including Cerros and Santa Rita Maya that sit on the outskirts of the district. While unmaintained roads accessing many of Corozal’s tourist sites discourages visitors from Corozal, sea access from San Pedro represents a viable alternative. Action 9.1. Engage with the Quintana Roo Secretary of Tourism to explore cross-border tourism offer.

Action 9.2. Develop 1-day excursion packages with BTIA through combining attractions throughout Corozal.

Action 9.3. Develop market-specific promotional material including for 1) locals in Quintana Roo, 2) foreigners in Quintana Roo, 3) operators in San Pedro and 4) foreign travel package operators/sellers.

Action 9.4. Coordinate with governments of Mexico and Guatemala to develop a regional Mayan trail including sites in Corozal; explore UNESCO designation for regional Maya sites as a whole.

Recommendation 10. Develop information platform for Corozal products for 1) food and beverage operators in the tourism sector and 2) retailers serving tourist populations around Belize.

As the tourism offer expands in Corozal, there is an opportunity to link goods supplied such as the agricultural produce to the tourism offer. Currently, the food supply chains in San Pedro link to Belize City, which comes at a high cost as transport costs account for around 49% of the total costs of final goods.144 Similarly, the weekly barge of ten boats containing agricultural products, such as fruits, vegetables and meat, from the Mennonite farmers is insufficient for San Pedro hotels and trade with Mexico is limited by duties and taxes. An information platform will be key for the San Pedro and other tourists markets to be able to access the Corozal supply chains in the food, beverage and retail sectors. Action 10.1. Develop online directory for producers and tourism-focused businesses to connect.

Action 10.2. Publish an annual ‘Made in Belize’ almanac advertising local products to tourism operators throughout the region.

142 Stakeholder engagement with tourism operators in San Pedro, Belize on 8 December 2018 143 sinkhole 144 Stakeholder engagement with tourism operators in San Pedro, Belize on 8 December 2018


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6.3.3 Services play

Recommendation 11. Develop and provide English language training programmes in the new tourism focused Free Zone.

Belize has an opportunity to take advantage of the bilingual skills present in Corozal to be offered as English language training programmes for the Mexican tourists. The region is equipped with one of the highest share of trained teachers in Belize (more than double the rate in Southern districts) (IDB, 2013). The Free Zone Authority should work with the bilingual Corozal teachers and education facilities to offer such services in the free zone, leveraging BELTRAIDE’s experience in providing workforce training in other sectors.

Action 11.1. Develop and provide English language training programmes in the new tourism focused Free Zone.

Recommendation 12. Leverage Corozal District’s bilingual workforce to supplement Business Process Outsourcing businesses in Belize City and Quintana Roo.

BPO businesses in Belize City cite Corozal as an attractive area to expand into, given the high level of bilingual skills amongst the district’s workforce.145 Similarly, the bilingual staff in Corozal could support the growing ‘digital nomad’ market in Quintana Roo, which includes the telecommuters from the US East Coast that calls for English speaking staff.

Action 12.1. Develop a business plan on the feasibility of providing BPO services to Belize City and Quintana Roo

from Corozal District.

Recommendation 13. Explore organic opportunities to develop capacity around innovation and skills development in the growing sectors in Corozal.

Corozal’s priority sectors would benefit from the increase in capacity around innovation and skills development,

from resulting productivity enhancement and cost reductions. The Centro Escolar Mexico Junior College in

Corozal district could build an innovation branch out of the existing agroprocessing programs, as it offers

courses in agriculture business and is supported and funded by the Belizean and the Mexican governments.

Similarly, the American Sugar Refining and the Belize Sugar Industries collaboration has been piloting new

technologies such as use of GIS and drone technology for sugar intensification and sugar mills upgrade to make

higher grade products. They are also exploring ways to recycle their sugar waste for producing biomass energy.

Furthermore, Corozal Community College is popular for its tech-knowledge and softwares and could provide

useful materials and applications (such as mobile apps) and offer skills development in priority sectors. Corozal

could also explore a cross-border collaboration with the Quintana Roo Institute of Innovation and Technology,

which is planning to develop innovation centres throughout the Mexican state in schools, universities and

public facilities.

Action 13.1. Initiate a working group for developing innovation and skills development capacity, bringing

together officials, researchers and university students from the educational institutions in Corozal and Quintana

Roo.

145 Stakeholder engagement with BPO businesses in Belize City, 5 December 2018


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6.4 Implications for development options in Corozal District

Box 9 Considerations related to Trade and Investment for development options laid out for Corozal

Note: recommendations presented in Chapter 6 above are developed under a ‘zone redevelopment’ option (Option 2 presented in Chapter 4). Implications for recommendations presented above are discussed for alternative options below.

● Option 1 | Strengthen current retail offer to Free Zone-driven growth

Under a ‘strengthened status quo’ zone development option, targeted branding for the zone and investor servicing interventions remain a priority. In order to reverse recent trends in businesses exiting the zone, the NFZA and delegated zone managers must take action to improve the ease of doing business in the zone and attract additional investment.

Efforts to collaborate with partners in Mexico and further negotiations on a Partial Scope Trade Agreement between Mexico and Belize remain a priority for development in Corozal District, where agriculture exports remain a promising opportunity

● Option 3 | Draw down zone activity and focus on economic activity in the broader district

Under a ‘fresh start’ zone development option, branding efforts should focus on resetting Corozal’s image from one associated with the retail-focussed free zone to one focussed on agricultural development and nature-based tourism.

Efforts to collaborate with partners in Mexico and further negotiations on a Partial Scope Trade Agreement between Mexico and Belize remain a priority for development in Corozal District, where agriculture exports remain a promising opportunity


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7 Policy and regulation

This chapter provides recommendations for improving the policy and regulatory framework in the Corozal Free Zone. The chapter identifies reforms to CFZ’s regulatory framework, considering the zone objectives and the international best practice. The chapter highlights key policies to achieve additional investment in priority sectors through reformed policies and regulatory measures. The chapter also reviews measures to minimise risks associated with AML-CFT in Corozal Free Zone and Corozal District.

7.1 Belize’s policy and regulation landscape

Table 8 summarises the government and private stakeholders responsible for formulating policy and regulation to foster export-led development in the Corozal district.

Table 8 Government and private stakeholders within policy and regulation in Belize



Ministry of Economic Development, Petroleum, Investment, Trade and Commerce

National Focuses on planning and integration across all economic sectors, including formulating and recommending national development policies, strategies and programmes

Ministry of Finance National Manages and controls allocation of resources in the public sector, coordinates and implements economic and fiscal policies and programs

Directorate General for Foreign Trade

National Represents Belize in international trade negotiations

Financial Intelligence Unit National Implements and supervises the AML and CFT regulations

The Central Bank of Belize National Regulates Belize’s financial systems, provides services to the government and financial institutions and issues Belize’s currency

Belize Customs and Excise Department

National Develops and implements policies and procedures that ensure increased safety and security and develops platform to promote trade facilitation and revenue collection

Belize Immigration and Nationality Services

National Sets and enforces policies around immigration, including visitor exemptions

Border Management Authority National Manages Belize’s port of entry in the West, Guatemalan border, in the north, Mexican border and the maritime port of entry

Ministry of Transport National Regulates the exit and entry of vehicles at the border, provides licensing for commercial vehicles to operate

Belize Tourism Board (BTB) National Markets the Belizean tourism product, develops tourism initiatives and programs and implements policies, and regulates the services provided within the sector

Belize Agricultural Health Authority (BAHA)

National Regulatory agency responsible for sanitary and phytosanitary processes for agricultural and agricultural goods coming in or out of Belize

National Free Zones Authority National Governs Belize’s free zones with the power to issue regulations

Designated Processing Area Committee (DPAC)

National Committee established by the DPA law to oversee and regulate DPAs in Belize, including representatives from government and private sector


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Retail banks National/international Communicate requirements to establish compliance with de-risking efforts; participate in efforts to bring up the level of compliance amongst businesses in the Free Zone and the wider district


Corozal Free Zone Develops policies and regulations for the Corozal Free Zone

Administracion General de Aduanas

National (Mexico) Manages customs at Mexico’s port of entry in Quintana Roo


The current economic structure of Corozal district include businesses operating in the Corozal Free Zone, businesses designated as Export-Processing Zones, the domestic customs territory and the no man’s land, and is currently under review. The differences in the incentive regimes for the Free Zone and the EPZs include:

general tourism-related and hotel activity are allowed in the Free Zones but not in the EPZs;

general telecommunications services (subject to ordinary regulatory restrictions) are allowed in the Free Zones, whereas only data processing activity is allowed in the EPZs; and,

companies located in Free Zones may only ever sell 25% of the goods they manufacture into the domestic market, whereas the level of possible waivers for domestic sales available to EPZ companies is subject to a degree of negotiation.

However, there is a substantial overlap between the two in terms of eligibility and unless one is thus providing tourism, hotel or telecommunications service, there is no particular activity eligibility reason to opt for the Free Zone regime over the EPZ regime. Businesses not eligible for location within the Free Zone are permitted to operate within the ‘no man’s land’ customs area surrounding Corozal Free Zone outside of the Belize border, operational as EPZs providing leisure and entertainment to tourists visiting the CFZ. Consequently, the structure of the Free Zones and the EPZs are both under review and legislation has been introduced to restrict the activities permitted in the Free Zones and consolidate management under the National Free Zone Authority and to convert the EPZs to Designated Processing Areas linked to national priority sectors with reformed and targeted incentives.

Globally, the Corozal Free Zone is viewed as highly susceptible to risks from money laundering and other illegal activities. Belize created a Financial Intelligence Unit to implement and supervise its Anti-Money Laundering and Countering the Financing of Terrorism requirements in an effort to mitigate any risks or perceptions of risk. However, it is apparent that CFZ businesses are not currently complying with AML/CTF requirements due to lack of proper enforcement.146 Furthermore, no comprehensive or unified list of certificates of compliance issued by the FIU to businesses in the CFZ is maintained.

Due to an increased focus on anti-money laundering and countering the financing of terrorism, access to finance has become a binding constraint on investment in the Corozal Free Zone and the wider economy. The international focus on AML/CTF activities has led to the loss of many corresponding banking services in Belize. At present, only one bank operates in the CFZ and all businesses located in the zone are required to bank within the zone. Due to the low levels of compliance with the FIU requirements, the bank (and others across Belize) has put caps on foreign currency deposits and only accepts US Dollars, but nearly all business in the zone is conducted in Mexican Pesos. This has led to a parallel market of money changers (‘peseros’),

146 Communication to consultant team from FIU staff


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undermining reporting systems set up to reduce risks of legitimate business in the zone, an issue persistent in the wider Corozal District also.

Moreover, customs and immigration facilities are provided for pedestrian foot traffic entering the Belizean customs area from the CFZ, but not for traffic returning to Mexico. Mexican customs and border officers patrol the inflow of goods and people returning from the zone, but stakeholders report little confidence in their ability to conduct due diligence on goods returning the country from the Free Zone. Belize customs and immigration staff monitor goods and currency imports from the zone into the Belizean customs area as well as work permits for Belizeans entering the zone as employees of zone businesses. No permanent Belizean Customs or Immigration officers operate in the ‘no man’s land’ between the border and the Free Zone, or within the Free Zone. This gap in coverage has led to concerns of unchecked potential flows of both smuggled goods and unpermitted Mexican workers. No formal information exchange system is in place between Belizean and Mexican customs authorities, although informal channels exist.

The following sections details recommendations for improving the policy and regulatory framework in the Corozal Free Zone and the wider district.

7.2 Recommendations for improving the regulatory and policy framework of the Corozal Free Zone

7.2.1 Cross-cutting recommendations in policy and regulation

Recommendation 14. Strengthen the existing legal framework for Free Zones in the revised National Free Zones Law, by carefully considering policy and regulatory issues that inhibit their optimal function.

Belize should strive to strengthen the existing legal framework for Free Zones, by considering the recommendations below for the revised National Free Zone Law:

telecommunications, finance and gaming sectors are currently subject to ordinary national regulatory approvals.147 The licensing and regulatory requirements of these sectors could be made more flexible, in context of the Corozal Free Zone and delegated to the zone regulators, as is common in international practice;

the CBB, after consulting with the NFZA, may ‘prescribe’ currencies in which CFZ transactions (and salaries payments) occur, prescribe banks into which the proceeds of such transactions shall be deposited, and (along with the NFZA) receive related bank statements both monthly and on demand.148 These requirements are onerous relative to international practice, and potentially disadvantageous to the tourism industry, and therefore should be seriously contemplated;

the combination of income tax incentives and domestic sales quota represent a red-light (actionable) export subsidy under the WTO’s Subsidies and Countervailing Measures Agreement (Preville & Associates Consulting Group, 2015), and therefore the quotas should be eliminated;

the CFZ Developer may currently receive and review CFZ business applications, and issue and revoke both Certificates of Compliance and business licenses.149 These functions, along with the authority to inspect, should be vested with the NFZA, which is consistent with the protection of the public purpose. Furthermore, the Minister of Investment, Trade and Commerce could enquire into any import or

147 FZA, Secs. 19(10), 21(3) and 26(10) 148 FZA, Secs. 25(2), 26(2)-(3) and 28(1) 149 FZA, Secs. 10(4),11(1), 18 and 26(7)


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export transaction, under the current Free Zone Law.150 This could be deemed intrusive by investors and act as a deterrent to investment, and therefore could be left to Belize customs;

CFZ Developer reporting requirements should be strengthened to receive at least annual CFZ Developer progress reports rather than just biennial ones. Similarly, CFZ business inventory report should be filed on a monthly-basis, based on EDI technology systems.151 Furthermore, the current CFZ Operations Contract should be expanded from its current short, 4-page format, to 20-, 40- or even 200- page agreements based on international practices;

more data should be collected on applicant good standing, foreign jurisdiction records, shareholder details, criminal record checks, etc. Furthermore, such due diligence and the information that it produces should be updated at least biennially during the course of business operation; and,

terminological uniformity should be introduced in the CFZ legal instruments, as regards to expressions ‘CFZ Business’, ‘CFZ Occupier’, ‘CFZ Firm’ and ‘Company’, the terms ‘CFZ Developer’ and ‘CFZ’, and the expressions ‘CEO’ and ‘Chairman’.

Action 14.1. Consider flexibility in licensing and regulatory regulations for telecommunications, finance and gaming sectors, removal of prescribed currency or bank within the CFZ and removal of domestic sales quota. Delegate regulatory authority for these activities within the Free Zones to the NFZA Board, to be developed in consultation with respective national regulatory authorities.

Action 14.2. Delegate responsibility of receiving and reviewing business applications, issuing and revoking licenses and certificates and the authority to inspect to NFZA.

Action 14.3. Require CFZ Developer progress report to be submitted annually to the NFZA, CFZ business inventory report to be filed monthly and due-diligence of CFZ businesses to be conducted biennially through appropriate collection of information.

Action 14.4. Ensure uniformity in terminology in the CFZ legal instruments.

Recommendation 15. Allow for a geographical area that can be designated as a DPA with multiple businesses and include clear regulations on management responsibilities, exports to other countries and sale to domestic markets with the DPA bill.

The Designated Processing Bill as currently written defines DPA as any ‘geographic area’ where it is intended to be run primarily by private companies.152 The various provisions in the DPA bill set forth an intent to serve as platforms accommodating the activity of multiple businesses, with the implicit encouragement for export-oriented processing businesses. The bill also specifically authorises companies to supply goods and services to clients within the Domestic Customs Territory, subject to payment of all relevant taxes. Furthermore, the bill is designed to encourage and facilitate trade.

In order to maximise the potential of DPAs and economic development in Corozal, a number of adjustments to the current DPA bill are recommended:

make explicit the intent of facilitating investment in national priority areas, by clearly designating the criteria for DPAs within the bill;

specify that DPA developers are private companies registered with the Belize Companies Registry, to be consistent with international best practices;

150 FZA, Secs. 25(2), 26(2)-(3) and 28(1) 151 Item 7 of Annex 2 of Cabinet Memorandum No. 59 reflects the same concern. 152 The draft DPA bill shared with consultant on 04 December 2018


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empower SME location within DPAs by removing the set of minimum capital investment thresholds for DPA businesses (excluding DPA developers or Special DPAs), to effectively host and promote small businesses;

clarify the trade promotion mission of DPAs by i) including trade facilitation representation on the Designated Processing Area Committee (DPAC), (ii) allowing for adherence to national standards as well as standards requirements for export markets;

allow for supply chain inputs from the domestic market to DPA businesses to benefit from ‘constructive exports’ status for sales that result in exports from DPAs;

explicitly recognise agroprocessing exports as eligible activities in DPAs, in order to foster certainty amongst potential investors;

provide a unified tariff for any DPA products sold to the DCT, rather than a disaggregated number of charges as set out currently, for ease of investor comparison to alternative locations;

clarify that exports resulting from activity within DPAs will be exempt from any external tariffs covered by the CARICOM trading agreements, when the final good is being exported to a CARICOM country; and,

clarify that the stamp duty only applies to the sale of real estate and not to imported goods and services.

Action 15.1. Clearly state the intention of facilitating investment in national priority areas within DPAs, recognising agroprocessing exports as eligible activities.

Action 15.2. Specify that DPA developers are private companies and remove the minimum capital investment threshold for DPA businesses.

Action 15.3. Include representatives of government agencies with responsibility for trade facilitation on the DPAC, allow for adherence to national as well as exporting standards and limit stamp duty to the sale of real estate.

Action 15.4. Allow supply chain inputs from domestic markets to DPA businesses to be ‘constructive exports’ and provide a unified tariff for any DPA products sold to the DCT.

Action 15.5. Clarify that exports from a DPA to a CARICOM country receive the same exemptions from CARICOM’s external tariffs as exports from the rest of Belize to a CARICOM country, with tariffs detailed under CARICOM’s trade agreements with Belize.

Recommendation 16. Develop a cross-border customs enforcement policy with Mexico and introduce export certificates to allow goods purchased in the zone to be verified at the border.

Belizean and Mexican border management agencies should strive to coordinate their customs and border procedures to improve transparency in the movement across border. This entails safely sharing customer information by utilising compatible technology systems for storing information and shared border enforcement policies and regulation coordinated by regular communication between the two border agencies.


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Figure 44 Imports and exports verification process recommended for Free Zones/DPAs


Furthermore, the Free Zone businesses should be required to issue export certificates or detailed digital receipts of purchases made in the zone to be verified at the border, as shown in Figure 44. These certificates should include information on the value and the quantity of goods sold, along with the seller’s information. Globally, most free zones are required to issue an export invoice and export declaration for exports from the zone. This ensures that all purchases are declared when crossing the border, reducing the occurrences of illegal trade and providing for consistent trade flow data from the trading economies.

Action 16.1. Open dialogue between the Belizean and the Mexican border agencies to establish rules of engagement and cooperation for customs purposes.

Action 16.2. Develop and implement a shared technology system that includes data storage and communication capability.

Action 16.3. Introduce a mandatory issuance of export certificates or digital receipts in the revised free zone law.

Recommendation 17. Facilitate cross-border dialogue to facilitate currency exchange between banks in Mexico and Belize, supported by the enforcement of electronic mode of payments for purchases made in the Free Zone.

The engagement between the Belizean and the Mexican banks needs to be facilitated by the Belizean government for cross-border currency exchange mechanisms. Currently, the Mexicans and the Belizeans spend their respective currencies when making transactions across the border. However, the foreign currency bank account and transactions restrictions in the Free Zone prevent businesses to open bank accounts in the zone. The government of Belize, along with the Central Bank of Belize, need to engage with the corresponding authorities on the Mexican side to open discussions on a memorandum of understanding to facilitate cross-border currency exchanges between the banks. E-money providers such as PayPal, Apple, Google, Amazon have been popular with central banks globally and could be explored as platforms to facilitate such transactions.

The free zone authorities should enforce the electronic mode of payment beyond a certain amount for transactions in the free zone to help the banks with their due diligence procedures. In the EU, most Eastern and


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Southern European Countries have limited maximum amount of cash payments among businesses and between consumers and businesses, ranging from EUR 420 (Slovenia – business to business) to EUR 15,000 (Slovakia – business to consumer) (Andreatta et al., 2018). Businesses could also offer a 5-10% discount if the payments are made by card to encourage electronic transactions, as currently happens at certain stores within the CFZ. Other possible measures could include the FIU or some other central authority to issue free zone-specific electronic cards in exchange for Mexican Pesos and a copy of the photo identification of the Mexican tourists. This would move the due diligence to the government authorities which can further assist the Belizeans banks in cross-border currency exchange.

Action 17.1. Open discussions on a Memorandum of Understanding (MoU) between the national banks and/or financial regulatory agencies to promote cross-border currency exchange mechanisms.

Action 17.2. Encourage increased uptake of electronic payments in border zones, by providing suppliers with the technology and regulatory infrastructure and incentivizing customers with discounts for electronic payments.

Action 17.3. Enforce the electronic mode of payments beyond a certain amount for transactions made in the zone.

Recommendation 18. Increase compliance of the Corozal Free Zone businesses with the Anti-Money Laundering/Countering the Financing of Terrorism regulations by building compliance and monitoring capacity.

Belize should provide on-site support to free zone businesses to build capacity and comply with the AML/CFT requirements either with the FIU or through delegated responsibility to the Corozal Free Zone Authority (and successor managers). A dedicated FIU or CFZA official will help build the capacity of businesses to comply by ensuring timely registrations and annual updates, help better monitor the compliance or suspicious transactions and implement fines and sanctions against any non-compliant businesses in the free zone.

The FIU has established formal relationships with the Belize Police Department, Customs and Excise Department and Tax Department to facilitate cooperation on Anti-Money Laundering enforcement (Know Your Country, 2017). A similar approach with the NFZA Board of Directors can facilitate FIU support for compliance within Belize Free Zones, though the Corozal Free Zone should be given priority.

Action 18.1. Appoint an on-site office/officer to support businesses in building capacity and compliance with the AML/CFT requirements, including through the implementation of a management information system capturing financial data from Free Zone and DPA businesses.

Action 18.2. Establish an MoU between the FIU and the NFZA Board of Directors to outline activity of onsite FIU office in the tourism Free Zone.

7.3 Sector-specific policy and regulation landscape


Recommendation 19. Prioritise negotiations on a Partial Scope Trade Agreement for agricultural products between Belize and Mexico, including alignment on sanitary standards and labelling.

In order to facilitate fair trade and increase cross-border flow of agricultural goods between Belize and Mexico, several agricultural policies could be revised or eliminated in coordination with Mexico. As parties to the WTO Agreement on Agriculture (World Trade Organization, 2018), Belize and Mexico have undertaken commitments to act transparently and work towards the elimination of agricultural non-tariff barriers, including quotas, technical barriers to trade and trade-related investment and intellectually property measures. However, Belize’s tariffs, the revenue replacement duty (RRD) and an ‘environmental tax’ on


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imported goods lead to higher effective tariff rates faced by imports that compete with domestic products. In 2012, the average implicit tariff across imported agriculture and food-related product lines was 34% (excluding the GST) (Valdés et al., 2017). Moreover, the imports of products competing with strong national sectors, such as poultry and maize, are protected particularly stringently. Apart from tariffs and GST, other policies that may ultimately be found to be trade distortive include: input subsidies (including on machinery, pesticides, power, fertilizers), credit subsidies, export subsidies, output and/or consumer subsidies (such as price controls), irrigation subsidies, state-owned agricultural enterprises, land taxes, as well as the activities of the Belize Marketing and Development Corporation. OECD Producer Support Estimate (PSE) for Mexico’s agricultural sector is estimated as at 12.3 percent and Belize’s as at only 10.8 percent, suggesting that more such subsidies and protective policy barriers may exist in Mexico than in Belize (Valdés et al., 2017). Therefore, there is a need for both country governments to work in collaboration to reduce or remove these trade barriers so that they are not in excess of 5% of total product output value (WTO threshold), which could be addressed during the PSA negotiations. Belize Agriculture Health Authority (BAHA) and the Mexican Secretary for Agricultural and Rural Development (SAGARPA) should make coordinated efforts on food sanitation standards. In addition to the WTO Agreement on Agriculture, Belize and Mexico have also signed the WTO Agreement on the Application of Sanitary and Phytosanitary Measures, aimed at ensuring that the health and safety regulations do not result in arbitrary trade barriers and encouraging the use of common international standards (World Trade Organization, 2018). Currently, the lack of certification and standards in Belize, for example of meat products, discourages tourist dining and trade with Mexico. The Codex Alimentarius is an international collection of food standards, guidelines and codes of practice adopted by the Codex Alimentarius Commission, an intergovernmental body of the Food and Agriculture Organisation of the United Nations (FAO) and WHO (Codex Alimentarius Commission, 2018). This could serve as a starting point to draw up an agreement on sanitation standards and product labelling with the Mexican government which will facilitate trade and encourage tourism. Furthermore, the CARICOM ‘Community Agricultural Policy’ will closely need to be considered in the PSA negotiations with Mexico. Belize’s agricultural tariffs are set by the CARICOM Common External Tariff (CET) (Caribbean Community Secretariat, 2018), implying Belize will not be able to modify these tariffs in any bilateral agreement with Mexico. Belize’s specific support from the Caribbean Agricultural Research and Development Institute, the Council for Trade and Economic Development and the Council for Finance and Planning may also need consideration. The PSA could also include the following agricultural trade matters that are not adequately covered under the current WTO and CARICOM rules applying to Belize: Genetically Modified Organisms, Geographic Designations; Plant Varietal Protections; Movement of Seasonal Workers; and Inputs supplies and extension services. These sector-critical issues, amongst others, may also need to be taken into account in any comprehensive negotiations around harmonised trade rules in the agricultural sectors of the two countries. Action 19.1. Commission a position paper to reduce, eliminate or harmonise agricultural trade policies that are trade distortive, as part of the PSA negotiations with Mexico and in line with CARICOM External Tariff levels.

Action 19.2. Develop a white paper for a sanitation and product labelling agreement between the BAHA and Mexican authorities with responsibility for sanitary/phytosanitary standards, for use in PSA negotiations.

7.3.2 Tourism play

Recommendation 20. Empower the NFZA to allow tourism, retail, leisure and entertainment activities in the Corozal Free Zone (successor) and grant access rights to Belizeans.


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The Corozal Free Zone is recommended to be repurposed into a new tourism-focussed Free Zone, focusing on hospitality, retail, entertainment and leisure. While the proposed revisions to the Free Zone Law include a longer list of allowable activities in Free Zones, the National Free Zone Authority should be empowered in this legislation to restrict allowable activities in specific free zones.153 In this case, the NFZA would limit activities in the tourism focused free zone to retail, hospitality, leisure and entertainment. Moreover, tourism-specific policy measures should make a core part of its Investor Value Proposition. Policies on hotel licensing and grading, streamlined border crossing, zone access formalities and fees, duty-free consumption, shopping hours, traffic regulation, depreciation on tourism sector capital equipment, education and research incentives and regulatory issues of imports to the zone should be addressed under Belize’s Free Zone regime.

The repurposed tourism Free Zone should allow domestic access and purchases with proper duties and taxes paid to the Belizeans customs area. Belizeans are currently not legally allowed in the Free Zone, however, as the current Free Zone splits into two focused areas, a repurposed tourism Free Zone can generate significant revenue if Belizeans were also allowed to make purchases in the zone. Similar to the Mexican tourists, the domestic tourists can eventually be given a duty-free allowance for goods up to a certain value and payment of proper taxes beyond that value to the Belizeans customs point.

Action 20.1. Empower the National Free Zone Authority to authorize a restricted set of activities to include tourism, retail, hospitality and entertainment in the Corozal Free Zone (successor) focused on tourism, through the revised National Free Zone Law.

Action 20.2. Develop tourism-specific policies and incentives as part of the Investor Value Proposition for the tourism focus of the Corozal Free Zone.

Action 20.3. Allow access to Belizeans in the revised Free Zone law and include regulations on duties and taxes for the Belizeans reentering the customs territory.

Recommendation 21. Align the visitor privileges for the Quintana Roo tourists visiting Belize with the allowance for Belizeans traveling to Quintana Roo.

Belizean government should consider a revised visitor card programme for the Quintana Roo tourists that reciprocates privileges for Belizeans travelling to Quintana Roo. Currently, Mexicans can enter Belize by car for up to three days without paying the exit fee upon re-entry into Mexico. This is recommended to be increased to seven days, in line with the benefits enjoyed by the Belizeans when visiting Quintana Roo. Furthermore, this should be integrated across all forms of travel, including boat visitors. There is a also a need for a formal consulate in Quintana Roo, additional to the current honorary consulate active in the state.

Action 21.1. Revise the visitor card programme for the Quintana Roo tourists for entry without payment of exit fees for up to seven days.

Action 21.2. Formalise the Belizean Consulate role in Chetumal as a representative of the Belize in the Quintana Roo.

Action 21.3. Expand the visitor card programme for Mexican visitors to Belize to include all forms of travel (especially water transport), rather than restricted to automobile visitors.

153 According to draft revised free zone bill shared with consultant team by the Ministry with responsibility for Investment, Trade and Commerce.


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Box 10 Considerations related to Policy and Regulation for development options laid out for Corozal

Note: recommendations presented in Chapter 7 above are developed under a ‘zone redevelopment’ option (Option 2 presented in Chapter 4). Implications for recommendations presented above are discussed for alternative options below.


Under a ‘strengthened status quo’ zone development option, policy and regulatory reforms must be focused on strengthening capacity amongst zone managers and investors to comply with AML and other requirements to reduce the risk of doing business in the zone.

Further development of electronic payments systems in the zone, including threshold-based requirements for electronic payments remain a priority under this option. Collaboration with Mexican authorities on exports leaving the Free Zone remain a relevant strategy for controlling the risk associated with the current zone operations.


Under a ‘fresh start’ zone development option, reforms to improve the attractiveness of Corozal (and Belize) for Mexican and foreign tourists will take priority.

If the Corozal Free Zone is eliminated, a transition strategy setting out actions to ensure the security and management of the former zone area will be required, including establishment of jurisdiction and responsibilities of the various government agencies active in the border area so as to avoid an expanded ‘no man’s land’.


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8 Infrastructure and spatial planning

This chapter reviews Corozal Free Zone’s infrastructure requirements and provide detailed recommendations for zone infrastructure and spatial planning. The chapter considers how the spatial planning of infrastructure can maximise regional productivity, increase trade and help to create economic clusters in Corozal District.

8.1 Belize’s infrastructure and spatial planning landscape

Table 9 Government and private bodies stakeholders within infrastructure and spatial planning in Belize



Ministry of Transport National Manages and establishes policies and guidelines for road users

National Transport Board National Advises the transport ministry on all policy matters pertaining to road transport, traffic, transport rates, fares, tolls, dues or other charges

Belize Port Authority National Regulates the maritime sector and oversees maritime safety, port security, licensing, registration and port state control

Ministry of Tourism National Oversees the implementation of the Sustainable Tourism Master Plan

Corozal Tourism Committee Corozal District Provides input to local needs from the Sustainable Tourism Master Plan

Inter-American Development Bank

Regional Provides loan funding and technical assistance (through grants) for the Sustainable Tourism Master Plan and other infrastructure projects

Border Management Authority National Manages Belize’s port of entry in the West, Guatemalan border, in the north, Mexican border and the maritime port of entry


Corozal Free Zone Responsible for infrastructure decisions in the free zone

Corozal Free Zone Management Authority

Corozal Free Zone Implements the free zone policies introduced by the Corozal Board of Directors, oversees collective investments in infrastructure within the zone

Corozal Free Zone Landowners Corozal Free Zone Collect rents from the tenants for renting privately held land parcels

Free Zone Chamber of Commerce and other investors

Corozal Free Zone Represents business active in the zone to the Free Zone board


High quality, low-cost infrastructure is a key facilitator of trade, contributing to overall economic growth. Transport, logistics and telecommunication services play a crucial role for trade. Steep transport costs, border delays or transport coordination problems can stymie the flow of goods and services across borders. This leads to comparative advantages in different sectors based on the type and the intensity of the infrastructure used. Furthermore, financial and business services are important intermediaries that facilitate transactions between businesses. Ensuring that infrastructure and related services are efficient and effective is the key to facilitating economic development in Corozal.

Tourism has been identified as a major opportunity for Corozal district, however poorly managed infrastructure presents a barrier to attracting tourists. The vision laid out for Corozal in the National Sustainable Tourism Master Plan includes both a leisure and entertainment focus as well as a culture and


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nature-based tourism offer (Belize Tourism Board, 2012). However, low levels of road maintenance are an obstacle to development in the region and undermine the potential for remote architectural sites to stoke demand amongst tourists. Furthermore, although BTL network provides customers with DigiNet service that offers internet speeds from 5MBps to 130MBps in Corozal Town, it has only connected 1,930 homes (35% of the total homes passed) to date and is not currently planned for expansion to other settlements throughout the district or the Free Zone.154 Other infrastructure needs identified for the tourism sector in Corozal include a comprehensive waste management system including transport to collection facilities and sorting of waste and a sewage system for Corozal Town, given groundwater contamination concerns related to the existing septic tank system (Belize Tourism Board, 2012). The district’s beaches and parks also lack the infrastructure (e.g. sandy beaches, community centres) to attract tourists.

Furthermore, poorly managed infrastructure in and around the Corozal Free Zone discourages investment and foot traffic in the zone. The road leading to the Free Zone from the Belizean border station has fallen into disrepair, acting as a barrier to attracting customers for businesses. Also, the physical separation of the border station and the area around the zone allows for only partial security and enforcement. Moreover, telecommunications infrastructure remains costly and of low quality (IDB, 2018a), electrical blackouts continue to affect businesses in the area surrounding the zone and the approval processes for installing affordable forms of electricity generation are perceived as a major source of delay to improving electricity generation in the area.155

The Government of Belize has developed a Comprehensive National Transport Master Plan (CNTMP), coordinated by the Department of Public/Private sector Dialogue in the Office of the Prime Minister (Government of Belize, 2018). Based on the current and future transport demand and Belize’s vision for the transport system, the plan recommends a range of short, medium and long-term action plans in roads, public transport, ports and inland waterways, air transport, logistics and trade facilitation. These infrastructure efforts will take place at the national level, thus a clear strategy to build high-quality infrastructure is needed at the Corozal District level, which is in line with the proposed recommendations.

The following sections detail recommendations for improving infrastructure and spatial planning in Corozal District.

8.2 Recommendations for improving infrastructure

8.2.1 Cross-cutting recommendations in infrastructure and spatial planning

Recommendation 22. Resize the current Corozal Free Zone around a focused retail area on the Western side, including casinos currently in the customs area and all land to the manned border.

The current spatial landscape of the Corozal Free Zone should be redrawn on the Western Side to be referred to as a tourism Free Zone. The redrawn Tourism Free Zone should also include the tourism focused infrastructure around the existing CFZ, for example the casinos in the no man’s land. This new spatially defined tourism Free Zone should focus on retail, leisure and entertainment, as detailed in Chapter 6.

Action 22.1. Redefine the Western Side of the current Corozal Free Zone as a tourism Free Zone, including the casinos in the no man’s land, with fences and official access points.

Recommendation 23. Convert the Eastern side of the current Corozal Free Zone into an agroprocessing park/DPA.

154 Information provided to consultant team by International Environments on 09 January 2019 155 Feedback provided to consultant following the initial mission


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Adjacent to the Tourism Free Zone, Belize should designate an agroprocessing park on the Eastern side of the current Corozal Free Zone. A well-defined industry platform where agro-industries and other related activities are concentrated will facilitate localized competitiveness and growth through backward and forward commercial linkages. The dedicated production and processing of agricultural products could also enter into a joint venture with processing facilities in Quintana Roo. Infrastructure, including access and connectivity will be essential to the success of the park.

Action 23.1. Build a fence around the newly defined agroprocessing park, ensuring provisions for customs point and connectivity with Mexico and the Hondo River.

Figure 7 Map showing recommended changes to the Corozal Free Zone and the surrounding area


Recommendation 24. Evaluate the required changes in the infrastructure and spatial planning relevant to the Free Zone area to implement this Regional Economic Development Master Plan.

An in-depth Infrastructure Diagnostic Study will be required to determine the required changes to the Corozal Free Zone in terms of its infrastructure provisions. Major infrastructure provisions such as fences, access points, access roads and utilities like water will have to be oriented towards the new two-zone regime. Moreover, the imports and exports of goods to and from the zone will require a more formalised system of delivery facilities and the centralised energy infrastructure will need to be reviewed for clean and accessible energy. A detailed diagnostic study is needed to provide a clear framework guiding the execution of the required infrastructure changes for both the zones.


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In addition to the infrastructure provisions, the 2010 Border Management Agency Strategic Plan proposes relocating border processing facilities from current location west of the Free Zone to the Hondo River bridge (International Environments, 2010). This would allow for drive through crossings between Belize and Mexico and can be optimised for access to the tourism Free Zone and the DPA. Furthermore, the access to the tourism Free Zone for Mexicans by the pedestrian bridge will require a small border checkpoint. The Belizean border will need to be re-routed between the tourism Free Zone and the DPA, with consideration of a bonded transport corridor for exports leaving the DPA to Mexico.

The Government of Belize should also seek to open discussions with the landowners in the current Corozal Free Zone to consider implications of the zone realignment and establishment of an agroprocessing park on land currently included in the CFZ. Currently, the Corozal Free Zone is divided into over 900 land parcels owned by different proprietors.156 A land acquisition and management plan for the Free Zone region should be developed beforehand to avoid conflicts and plan for arrangements or settlements, which could include long-term leases, incentives such as compensation and other rental or ownership agreements.

Action 24.1. Commission an Infrastructure Diagnostic Study to determine the changes in the infrastructure and spatial planning and provisions in the Free Zone area.

Action 24.2. Construct a new border control building at the Hondo River bridge to facilitate crossings between Belize and Mexico and the access to the tourism Free Zone and the DPA.

Action 24.3. Convene negotiations with the landowners of the current Corozal Free Zone to allow access to build the agroprocessing park.

8.3 Sector-specific infrastructure and spatial planning recommendations


Recommendation 25. Develop appropriate transport links to facilitate access to raw and agroprocessing markets in Mexico and San Pedro.

To take full advantage of the specialized infrastructure and agglomeration economies in the agroprocessing Park, it will have to supported by strong transport links facilitating trade. Firstly, access to the Mexico’s raw agricultural produce and agroprocessing markets in Quintana Roo will require linkages to the vehicle bridge which is currently used for access to the Corozal Free Zone, which could be facilitated by a bonded road running adjacent to the Belizean border. Secondly, access to the San Pedro agricultural market will require a domestic port facilitating river barges for shipment of goods to these coastal and island markets. Thirdly, access to the Belizean market will require access roads and customs point for entry into Belize. Moreover, Belize should follow the construction of the Maya train in Quintana Roo to ensure the southern-most point connected by the train in Mexico has efficient transport links to Belize for the transport of both goods and tourist travellers.

Action 25.1. Link the vehicle bridge connecting the current Corozal Free Zone and Mexico to the agroprocessing park to facilitate trade and also ensure access to the Belizean market.

Action 25.2. Assess the feasibility of a domestic port in Corozal on the Hondo River in collaboration with the Belize Port Authority, including the potential to receive imports by river port (e.g. from Mexico) and necessary infrastructure.

156 Information provided to consultant team by Ministry of Economic Development, Petroleum, Investment, Trade and Commerce on 22 February 2019


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Figure 8 Map showing transport links required for the agroprocessing park and tourism Free Zone


Recommendation 26. Develop an Agroprocessing Park Infrastructure Plan within the Infrastructure Diagnostic Study and update iterations of the plan every few years to ensure it supports the long-term development of the manufacturing and processing facilities.

The development of the agroprocessing park into a fully developed manufacturing and processing facility will be long-term and the infrastructure planning should reflect this process. The agroprocessing park will undergo a number of stages of development before its fully operational, from attracting investment, linking farmer clusters to providing forward linkages to the processed produce. The corresponding infrastructure stages will also vary from common basic infrastructure such as energy, roads, sewage and water supply, common support infrastructure like information center, quality control and R&D center, to specialised infrastructure such as distilling, cold storages and other preservation infrastructure. Therefore, an Agroprocessing Park Master Plan, updated every few years, will be critical in ensuring the smooth development of the park.

Action 26.1. Develop the first phase of the Agroprocessing Park Master Plan within the Infrastructure Diagnostic Study, and update iterations based on the evolution of the agroprocessing park over time.

8.3.2 Tourism play

Recommendation 27. Improve access for tourists to the new tourism Free Zone, including improved access roads and water transport services.


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The access road from the Belize border to the Corozal Free Zone is currently in disrepair and no institution holds responsibility for maintaining the road. To increase attractiveness of the tourism Free Zone, the access road needs urgent repair and maintenance. As per recommendation 22, the new tourism free zone will cover all land to the manned border and will therefore include the access road. As a result, the Corozal Free Zone Board of Directors should be responsible for coordinating the maintenance on the road. Furthermore, outside the zone, the tourism attractions in the Corozal District should be made accessible by sea for tourists coming over via boats on the islands. Corozal has the potential to be a logistics centre for maritime travel and transport, for example, transportation from Mexico to Belize via water taxis is considered highly viable.

Action 27.1. Undertake urgent repair of the access road to the Corozal Zone, noting the responsibility falls under the Free Zone Board of Directors in the expanded tourism Free Zone.

Action 27.2 Assess the additional feasibility of making Corozal district accessible by sea for tourists, along with considerations of a domestic port as stated in Action 25.2.

Recommendation 28. Include important elements of a tourism Free Zone, such as the retail space, storage and consumer amenities in infrastructure planning activities for the tourism Free Zone.

The infrastructure planning for the tourism Free Zone should be a holistic plan with proper provisions of retail space, such as shopping malls, leisure centres and entertaining services like the casinos and storage services for operational facilities. The consumer amenities such as roads, parking services and information centres will also be critical in ensuring tourists have a pleasant experience visiting the zone.

Action 28.1. Devise a tourism Free Zone Infrastructure Plan within the Infrastructure Diagnostic Study.

8.3.3 Services play

Recommendation 29. Develop the infrastructure necessary to support the proposed electronic transactions, trade inventories and financial reporting within the Tourism Free Zone.

Belize should improve its technology infrastructure to facilitate tracking of sales of goods and services. A more robust electronic point of sale system is needed in the Tourism Free Zone to track purchases, which could either imply provision of card payment machines to suppliers or a physical shop where tourists could exchange their cash with digital coupons valid in the zone. These electronic transactions should be linked to an inventory system based on EDI technology,157 including digital receipts for buyers and sellers, that tracks imports and exports into the zone, a financial reporting system based on the FIU and banking requirements and an export certificate system for handing off goods between customs authorities. Furthermore, due diligence on CFZ businesses, as recommended in Chapter 7, should be collected and regularly updated on a management information systems software.

The Central Bank of Belize has developed an automated payments and securities settlements system for domestic payments with the support of the World Bank. This system may serve as an informative model for developing a Free Zone transactions management tool.

Action 29.1. Engage Free Zone stakeholders to develop a technology infrastructure plan for both the zones.

Action 29.2. Commission the design of a financial transactions database for all electronic transactions in the Free Zone, as well as financial compliance reporting from Free Zone businesses. Ensure compatibility with

157 EDI technology stands for “Electronic Data Interchange”, also known as “automated data transfer”. Anytime a form field is filled, or a record created online and data is then received by another party, terminal or server remotely (whether or not encrypted and/or bearing a certificate), one is using EDI. It has become standard practice to use EDI-based technology in customs control and management, for instance all automated customs systems (including UNCTAD's ASYCUDA) are EDI-based.


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export certification database recommended in action 16.3 and ensure proper training of Free Zone management staff and businesses to keep database current.

Recommendation 30. Link Corozal District to the high-speed internet line available to the Mexico border and expand infrastructure to connect zone businesses to high-speed internet.

Belize could benefit from the new submarine high-speed internet cable available to the Mexican border, which can be expanded throughout Corozal District. Currently, BTL has installed high-speed internet fibre throughout Corozal Town providing customers with the DigiNet service that offers internet speeds from 5MBps to 130MBps.158 Moreover, the national telecoms operator, BTL, provides its mobile network services to approximately over 29,000 customers. However, extending the internet coverage to the rest of the district, including the free zone and the DPA, will be beneficial for the development of the global BPO services in the district. Moreover, the office space in Corozal could be extended to the support and supplement the BPO operations active in Belize City.

Action 30.1. Explore the feasibility of extending the high-speed internet coverage from Corozal town to the rest of the district, including the Free Zone and APP.


158 Information provided to consultant team by International Environments on 09 January 2019

Box 11 Considerations related to Infrastructure and Spatial Planning for development options laid out for Corozal

Note: recommendations presented in Chapter 8above are developed under a ‘zone redevelopment’ option (Option 2 presented in Chapter 4). Implications for recommendations presented above are discussed for alternative options below.


Under a ‘strengthened status quo’ zone development option, many of the infrastructure reforms identified above remain relevant, including:

o agreeing management and maintenance responsibility for the road leading to Corozal Free Zone from Belize; and

o developing a comprehensive management information system for businesses operating within the zone, with capacity to capture financial reporting information, imports and exports, and sales for all businesses.


Under a ‘fresh start’ zone development option, management of the infrastructure and facilities formerly in the Corozal Free Zone will require a transition plan, involving government agencies involved in border activity. Landholders and stakeholders throughout the district should be engaged in developing this plan in order to come up with the best way forward for managing and transitioning the area for productive use.


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9 Action plan

9.1 Action Plan for regional economic development in Corozal

This section sets out a detailed action plan for economic development in Corozal District, consolidating recommendations in the Regional Economic Development Master Plan.

Individual actions for each recommendation presented in Sections 6-8 have been prioritised across red, yellow and green priority categories to present a sequential action plan for delivering regional economic development in Corozal district. These categories should be interpreted as follows:

red category actions are ‘upstream actions’ that focus on improving the fundamental elements critical to the success of economic development in Corozal district and impact the delivery of medium and low priority actions. These actions must be undertaken before all other actions;

yellow category actions are ‘downstream actions’ that are feasible only after the high priority actions are dealt with due to their dependency on these actions. These actions must be undertaken after the high priority actions; and

green category actions are non-urgent but still important to deliver a the regional economic development strategy presented in this report. Therefore, these must be undertaken after all other actions have been acted upon.

In the action plan presented in Table 16, ‘duration’ indicates the number of months or years an action is expected to take to from inception to completion. The assessment categorises expected duration of each action into three groups: under 6 months; 6 months to a year; 1 to 3 years.

Financial requirements are estimated for each action. The action plan categorises action-level financial estimates into three values: less than USD 500,000; USD 500,000 – USD 2,000,000; more than USD 2,000,000. Where no costs are expected to be incurred from delivering an action, a financial requirement of ‘none’ is indicated.

Stakeholders are identified for each action in the following roles:

‘Lead’ stakeholder is expected to organise project delivery and ultimately be responsible for the action; and

‘Partner’ stakeholders are institutions or organisations that are important to engage with to ensure maximum benefits and effective delivery for each action plan, including suggested sources of finance.


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Table 16 An action plan to deliver this Regional Economic Development Master Plan in Corozal District

Activity Priority Duration Finance Stakeholders

Investment and Trade Promotion

Recommendation 1. Identify the strategic focus of the Corozal Free Zone (and its successor(s)) and alternative incentive mechanisms to focus investment in target sectors near the border

Action 1.1 Clarify the strategic focus on the Corozal Free Zone by designating two spatial areas focused on tourism and the agroprocessing sector, respectively.

<6 months none Lead: MITC Partner: NFZA, DPAC, Corozal Free Zone Board of Directors, CFZMA

Recommendation 2. Develop a new positioning strategy and brand architecture for the Corozal Free Zone and the Designated Processing Area that signals a departure from perceptions of risk and lack of oversight in the past

Action 2.1 Identify the ‘positioning’ for both a tourism Free Zone and agroprocessing DPA in a branding white paper, including clarity on their competitive advantage, product offering and both commitments to and results from de-risking.

6 months – 1 year

<USD 500k Lead: BELTRAIDE Partner: NFZA, DPAC, MITC, Corozal Free Zone Board of Directors, CFZMA, BTB, BTIA

Action 2.2 Initiate discussions between national and the district stakeholders to develop a national and district (Corozal) branding architecture, following the sub-brands approach.

<6 months none Lead: BELTRAIDE Partner: NFZA, DPAC, MITC, Corozal Free Zone Board of Directors, CFZMA, BTB, BTIA, Corozal Local Tourism Committee

Action 2.3 Develop a Zones Marketing Strategy for the tourism Free Zone and the agroprocessing DPA, following the agreed ‘positioning’ and ‘branding architecture’ for each.

6 months – 1 year

<USD 500k Lead: BELTRAIDE Partner: NFZA, DPAC, MITC, Corozal Free Zone


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Board of Directors, CFZMA, BTB, Ministry of Agriculture

Recommendation 3. Develop a portfolio of market opportunities in Corozal, packaged as specific Investor Value Propositions based around the Free Zone and the DPA

Action 3.1 Establish a ‘Made in Belize’ label for increased awareness on the Belize’s capabilities in the agroprocessing sector in the overseas markets.

6 months – 1 year

<USD 500k Lead: BELTRAIDE Partner: Agricultural sector investors in Corozal, Ministry of Agriculture

Action 3.2 Engage prospective investors in supply chain mapping exercises to highlight opportunities for local supply.

<6 months <USD 500k Lead: BELTRAIDE Partner: Agricultural sector investors in Corozal, MITC, Ministry of Agriculture, Belize Chamber of Commerce and Industry

Action 3.3 Bring together local suppliers and potential investors, by arranging meetings for suppliers and investors.

6 months – 1 year

none Lead: BELTRAIDE Partner: Agricultural sector investors in Corozal, MITC, Belize Chamber of Commerce and Industry, Ministry of Agriculture,


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Action 3.4 Explore with Governments of Mexico and Guatemala opportunities to co-brand products relevant to Maya culture.

1-3 years none Lead: Ministry of Tourism Partner: BTB, Corozal Local Tourism Committee, BTIA, Ministry of Foreign Affairs, SEDETUR

Recommendation 4. Fast track a trade and investment agreement with Mexico that facilitates priority areas for trade and investment between Corozal District and Quintana Roo

Action 4.1 If not included in current partial scope agreement negotiations, open parallel negotiations to reach agreement on investment, taxation, customs processes, requirements and information sharing. Negotiations should aim to enhance opportunities created by border DPAs and Free Zones, rather than restrict potential activities in these special zones.

1-3 years none Lead: Directorate General for Foreign Trade Partner: MITC, NFZA, BELTRAIDE, Corozal Free Zone Board of Directors, Ministry of Foreign Affairs

Action 4.2 Develop capacity of Belize’s Trade Technical and Negotiating Teams in reference to ongoing negotiations with Mexico in order to agree a robust and expedient Partial Scope Agreement, prioritizing agricultural trade where possible.

6 months – 1 year

<USD 500k Lead: MITC Partner: Directorate General for Foreign Trade, BELTRAIDE, Ministry of Foreign Affairs

Recommendation 5. Establish both formal and informal dialogues between the government of Belize and Quintana Roo and the relevant stakeholders

Action 5.1 Develop a white paper setting out structure and operations of ‘Border Partnership’ between governments and private sectors of Belize and the Mexican State of Quintana Roo, highlighting key areas of

6 months – 1 year

<USD 500k Lead: Office of the Prime Minister Partner:


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opportunity for collaboration and strategies to engage parties on both sides of the border productively.

Belize Customs and Excise Department, Belize Immigration and Nationality Services, Border Management Agency, NFZA, DPAC, Ministry of Tourism, Ministry of Foreign Affairs, Corozal Free Zone Board of Directors, IDEFIN

Action 5.2 Based on the ministry Border Partnership white paper, open discussions on a Memorandum of Understanding with the Mexican State of Quintana Roo to operationalize the Border Partnership.

1-3 years none Lead: Office of the Prime Minister Partner: Belize Customs and Excise Department, Belize Immigration and Nationality Services, Border Management Agency, NFZA, DPAC, Ministry of Tourism, Ministry of Foreign Affairs, Corozal Free Zone Board of Directors, IDEFIN

Recommendation 6. Improve the ease of doing business within the Free Zone (and its successor(s)) by consolidating regulatory requirements and information in an accessible format for both current and potential investors


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Action 6.1 Redesign the Corozal Free Zone website into a one-stop-shop for investors, drawing inspiration from international examples.

6 months – 1 year

<USD 500k Lead: Corozal Free Zone Board of Directors Partner: BELTRAIDE, NFZA, CFZMA, Free Zone Chamber of Commerce and other investors, BTB

Action 6.2 Prepare a series of agreements to be negotiated and signed between the Belizean government and the OSS provider to offer streamlined and expedited business procedures.

<6 months <USD 500k Lead: Corozal Free Zone Board of Directors Partner: CFZMA, NFZA, MITC

Recommendation 7. Conduct a supply chain mapping exercise to identify market opportunities for Belizean fresh produce, including demand profile, current barriers to trade and mitigating actions to facilitate trade in these areas

Action 7.1 Commission a market study on Corozal agricultural and aquacultural raw produce and processed goods supply chains, with a focus on primary and secondary demand-based trade opportunities in Quintana Roo and San Pedro.

<6 months <USD 500k Lead: BELTRAIDE Partner: Agriculture sector investors in Corozal, MITC, Ministry of Agriculture, BAHA, Belize Chamber of Commerce and Industry, SEDARPE, Maya communities

Recommendation 8. Advertise supply opportunities for new raw products as inputs into agroprocessing production and for tourism consumer markets


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Action 8.1 Collaborate with the Board of Directors under the Corozal Division of the BSCFA to advertise the new agricultural opportunities to the association’s farmers.

<6 months <USD 500k Lead: BELTRAIDE Partner: Agriculture sector investors in Corozal, BSCFA, Ministry of Agriculture, Maya communities

Action 8.2 Develop roadshow programme to link investors to agricultural product supply, targeting investors in Quintana Roo and foreign investors already doing business in Southern Mexico.

6 months – 1 year

<USD 500k Lead: BELTRAIDE Partner: Agriculture sector investors in Corozal, BSCFA, SEDARPE, IDEFIN

Recommendation 9. Develop a cross-border tourism offer with Quintana Roo and engage with tourism operators (BTIA) to update and expand information around Corozal excursions

Action 9.1 Engage with the Quintana Roo Secretary of Tourism (SEDETUR) to explore cross-border tourism offer.

6 months – 1 year

none Lead: Ministry of Tourism Partner: Corozal Local Tourism Committee, BTB, BTIA, SEDETUR, Border Management Agency, Belize Immigration and Nationality Services

Action 9.2 Develop 1-day excursion packages with BTIA through combining attractions throughout Corozal.

<6 months <USD 500k Lead: BTB Partner:


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Corozal Local Tourism Committee, SEDETUR, BTIA

Action 9.3 Develop market-specific promotional material including for 1) locals in Quintana Roo, 2) foreigners in Quintana Roo, 3) operators in San Pedro and 4) foreign travel package operators/sellers.

<6 months <USD 500k Lead: BELTRAIDE Partner: BTB Corozal Local Tourism Committee, BTIA, SEDETUR

Action 9.4 Coordinate with governments of Mexico and Guatemala to develop a regional Mayan trail including sites in Corozal; explore UNESCO designation for regional Maya sites as a whole.

1-3 years none Lead: Ministry of Tourism Partner: BTB, Corozal Local Tourism Committee, BTIA, Ministry of Foreign Affairs, SEDETUR

Recommendation 10. Develop information platform for Corozal products for 1) food and beverage operators in the tourism sector and 2) retailers serving tourist populations around Belize

Action 10.1 Develop online directory for producers and tourism-focused businesses to connect.

6 months – 1 year

<USD 500k Lead: BTB Partner: Corozal Local Tourism Committee, Free Zone Chamber of Commerce and Industry, Belize Chamber of Commerce and Industry, BTIA


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Action 10.2 Publish an annual ‘Made in Belize’ almanac advertising local products to tourism operators throughout the region.

<6 months <USD 500k Lead: BELTRAIDE Partner: BTB, Free Zone Chamber of Commerce and Industry, Belize Chamber of Commerce and Industry

Recommendation 11. Develop and provide English language training programmes in the new tourism focused Free Zone

Action 11.1 Develop and provide English language training programmes in the new tourism focused Free Zone.

6 months – 1 year

USD 0.5-2 million

Lead: Corozal TVET and junior colleges Partner: Corozal Local Tourism Committee, BTB, Corozal Free Zone Board of Directors, BELTRAIDE

Recommendation 12. Leverage Corozal District’s bilingual workforce to supplement Business Process Outsourcing businesses in Belize City and Quintana Roo

Action 12.1 Develop a business plan on the feasibility of providing BPO services to Belize City and Quintana Roo from Corozal District.

<6 months <USD 500k Lead: BELTRAIDE Partner: Economic Development Council, MITC, Belize Coalition of Service Providers, Belize Chamber of Commerce and Industry

Recommendation 13. Explore organic opportunities to develop capacity around innovation and skills development in the growing sectors in Corozal


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Action 13.1 Initiate a working group for developing innovation and skills development capacity, bringing together officials, researchers and university students from the educational institutions in Corozal and Quintana Roo.

6 months – 1 year

none Lead: BELTRAIDE Partner: The Centro Escolar Mexico Junior College, ASR/BSI, Corozal Community College, Ministry of Agriculture, Corozal Town Council

Policy and Regulation

Recommendation 14. Strengthen the existing legal framework for Free Zones in the revised National Free Zones Law, by carefully considering policy and regulatory issues that inhibit their optimal function

Action 14.1 Consider flexibility in licensing and regulatory regulations for telecommunications, finance and gaming sectors, removal of prescribed currency or bank within the FZ and removal of domestic sales quota. Delegate regulatory authority for these activities within the Free Zones to the NFZA Board, to be developed in consultation with respective national regulatory authorities.

<6 months

<USD 500k

Lead: MITC Partner: NFZA, Corozal Free Zone Board of Directors, Financial Intelligence Unit, Central Bank of Belize, Ministry of Finance, Office of Attorney General

Action 14.2 Delegate responsibility of receiving and reviewing business applications, issuing and revoking licenses and certificates and the authority to inspect to NFZA.

<6 months Lead: MITC Partner: NFZA, Office of Attorney General

Action 14.3 Require FZ Developer progress report to be submitted annually to the NFZA, FZ business inventory report to be filed monthly and due-diligence of FZ businesses to be conducted biennially through appropriate collection of information.

1-3 years Lead: MITC Partner: NFZA, Office of Attorney General


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Action 14.4 Ensure uniformity in terminology in the Free Zone legal instruments. <6 months Lead: MITC Partner: NFZA, Office of Attorney General

Recommendation 15. Allow for a geographical area that can be designated as a DPA with multiple businesses and include clear regulations on management responsibilities, exports to other countries and sale to domestic markets with the DPA bill

Action 15.1 Clearly state the intention of facilitating investment in national priority areas within DPAs, recognising agroprocessing exports as eligible activities.

<6 months

<USD 500k

Lead: MITC Partner: DPAC, Office of Attorney General

Action 15.2 Specify that DPA developers are private companies and remove the minimum capital investment threshold for DPA businesses.

<6 months Lead: MITC Partner: DPAC, Office of Attorney General

Action 15.3 Include representatives of government agencies with responsibility for trade facilitation on the DPAC, allow for adherence to national as well as exporting standards and limit stamp duty to the sale of real estate.


Action 15.4 Allow supply chain inputs from domestic markets to DPA businesses to be ‘constructive exports’ and provide a unified tariff for any DPA products sold to the DCT.


Action 15.5 Clarify that exports from a DPA to a CARICOM country receive the same exemptions from CARICOM’s external tariffs as exports from the rest of Belize to a CARICOM country, with tariffs detailed under CARICOM’s trade agreements with Belize.

<6 months Lead: MITC Partner: Directorate General for Foreign Trade, Office of Attorney General

Recommendation 16. Develop a cross-border customs enforcement policy with Mexico and introduce export certificates to allow goods purchased in the zone to be verified at the border


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Action 16.1 Open dialogue between the Belizean and the Mexican border agencies to establish rules of engagement and cooperation for customs purposes.

<6 months none Lead: Border Management Authority Partner: Belize Customs and Excise Department, BAHA, Corozal Free Zone Board of Directors, Financial Intelligence Unit, Central Bank of Belize, Ministry of Finance, Administracion General de Aduanas

Action 16.2 Develop and implement a shared technology system that includes data storage and communication capability.

6 months – 1 year

USD 0.5-2 million

Lead: Ministry of Finance Partner: Border Management Authority, Belize Customs and Excise Department, BAHA, Corozal Free Zone Board of Directors, Financial Intelligence Unit, Central Bank of Belize, Administracion General de Aduanas


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Action 16.3 Introduce a mandatory issuance of export certificates or digital receipts in the revised free zone law.

<6 months <USD 500k Lead: MITC Partner: NFZA, Office of Attorney General

Recommendation 17. Facilitate cross-border dialogue to facilitate currency exchange between banks in Mexico and Belize, supported by the enforcement of electronic mode of payments for purchases made in the Free Zone

Action 17.1 Open discussions on a Memorandum of Understanding between the national banks and/or financial regulatory agencies to promote cross-border currency exchange mechanisms.

6 months – 1 year

none Lead: Central Bank of Belize Partner: FIU, Retail banks, Banco de Mexico

Action 17.2 Encourage increased uptake of electronic payments in border zones, by providing suppliers with the technology and regulatory infrastructure and incentivizing customers with discounts for electronic payment.

1-3 years USD 0.5-2 million

Lead: NFZA Partner: Corozal Free Zone Board of Directors, CFZMA, FIU, Retail Banks, Free Zone Chamber of Commerce and other investors

Action 17.3 Enforce the electronic mode of payments beyond a certain amount for transactions made in the zone.

<6 months none Lead: NFZA, Partner: CFZMA, FIU, Retail banks

Recommendation 18. Increase compliance of the Corozal Free Zone businesses with the Anti-Money Laundering/Countering the Financing of Terrorism regulations by building compliance and monitoring capacity

Action 18.1 Appoint an on-site office/officer to support businesses in building capacity and compliance with the AML/CFT requirements, including through the implementation of a management information system capturing financial data from Free Zone and DPA businesses.

6 months – 1 year

USD 0.5-2 million

Lead: CFZMA Partner: IDB, NFZA, FIU, Corozal Chamber of


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Commerce and Industry

Action 18.2 Establish an MoU between the FIU and the NFZA Board of Directors to outline activity of onsite FIU office in the tourism Free Zone.

6 months – 1 year

none Lead: FIU Partner: NFZA, Corozal Free Zone Board of Directors

Recommendation 19. Prioritise negotiations on a Partial Scope Trade Agreement for agricultural products between Belize and Mexico, including alignment on sanitary standards and labelling

Action 19.1 Commission a position paper to reduce, eliminate or harmonise agricultural trade policies that are trade distortive, as part of the PSA negotiations with Mexico and in line with CARICOM External Tariff levels.

6 months – 1 year

<USD 500k Lead: MITC Partner: BELTRAIDE, Directorate General for Foreign Trade, Ministry of Finance

Action 19.2 Develop a white paper for a sanitation and product labelling agreement between the BAHA and Mexican authorities with responsibility for sanitary/phytosanitary standards, for use in PSA negotiations.

6 months – 1 year

<USD 500k Lead: MITC Partner: BELTRAIDE, BAHA

Recommendation 20. Empower the NFZA to allow tourism, retail, leisure and entertainment activities in the Corozal Free Zone (successor) and grant access rights to Belizeans

Action 20.1 Empower the National Free Zone Authority to authorize a restricted set of activities to include tourism, retail, hospitality and entertainment in the Corozal Free Zone (successor) focused on tourism, through the revised National Free Zone Law.

<6 months

<USD 500k

Lead: MITC Partner: NFZA, Office of Attorney General

Action 20.2 Develop tourism-specific policies and incentives as part of the Investor Value Proposition for the tourism focus of the Corozal Free Zone.

6 months – 1 year

Lead: Ministry of Tourism Partner: BELTRAIDE, BTB, Corozal Local Tourism Committee


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Action 20.3 Allow access to Belizeans in the revised Free Zone law and include regulations on duties and taxes for the Belizeans re-entering the customs territory.

<6 months Lead: MITC Partner: NFZA, Belize Immigration and Nationality Services, Belize Customs and Excise Department, Office of Attorney General

Recommendation 21. Align the visitor privileges for the Quintana Roo tourists visiting Belize with the allowance for Belizeans traveling to Quintana Roo

Action 21.1 Revise the visitor card programme for the Quintana Roo tourists for entry without payment of exit fees for up to seven days.

<6 months none Lead: Belize Immigration and Nationality Services Partner: Belize Customs and Excise Department, Ministry of Tourism, Border Management Agency

Action 21.2 Formalise the Belizean Consulate role in Chetumal as a representative of the Belize in the Quintana Roo.

6 months – 1 year

USD 0.5-2 million

Lead: Ministry of Foreign Affairs Partner: Ministry of Tourism, Belize Immigration and Nationality Services

Action 21.3 Expand the visitor card programme for Mexican visitors to Belize to include all forms of travel (especially water transport), rather than restricted to automobile visitors.

<6 months <USD 500k Lead: Belize Immigration and Nationality Services


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Partner: Belize Customs and Excise Department, Ministry of Tourism, Border Management Agency

Infrastructure and Spatial Planning

Recommendation 22. Resize the current Corozal Free Zone around a focused retail area on the Western side, including casinos currently in the customs area and all land to the manned border

Action 22.1 Redefine the Western Side of the current Corozal Free Zone as a tourism Free Zone, including the casinos in the no man’s land, with fences and official access points.

<6 months USD 0.5-2 million

Lead: Corozal Free Zone Board of Directors Partner: CFZMA, NFZA, MITC, Border Management Agency, DPAC, DPA developer

Recommendation 23. Convert the Eastern side of the current Corozal Free Zone into an Agroprocessing Park/DPA

Action 23.1 Build a fence around the newly defined agroprocessing park, ensuring provisions for customs point and connectivity with Mexico and the Hondo River.


Lead: DPA developer Partner: Corozal Free Zone Board of Directors, NFZA, MITC, Border Management Agency, DPAC

Recommendation 24. Evaluate the required changes in the infrastructure and spatial planning relevant to the Free Zone area to implement this Regional Economic Development Master Plan


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Action 24.1 Commission an Infrastructure Diagnostic Study to determine the changes in the infrastructure and spatial planning and provisions in the Free Zone area.

6 months – 1 year

<USD 500k Lead: MITC Partner: Corozal Free Zone Landowners, Free Zone Chamber of Commerce and other investors, CFZMA, NFZA, DPAC

Action 24.2 Construct a new border control building at the Hondo River bridge to facilitate crossings between Belize and Mexico and the access to the tourism Free Zone and the DPA.

6 months – 1 year

>USD 2 million

Lead: Border Management Authority Partner: Ministry of Transport, Belize Customs and Excise Department, Belize Immigration and Nationality Services, NFZA, DPAC, Corozal Free Zone Board of Directors, Administracion General de Aduanas

Action 24.3 Convene negotiations with the landowners of the current Corozal Free Zone to allow access to build the agroprocessing park.

<6 months none Lead: MITC Partner: Corozal Free Zone Board of Directors, Corozal Free Zone Landowners

Recommendation 25. Develop appropriate transport links to facilitate access to raw and agroprocessing markets in Mexico and San Pedro


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Action 25.1 Link the vehicle bridge connecting the current Corozal Free Zone and Mexico to the agroprocessing park to facilitate trade and also ensure access to the Belizean market.


Lead: Corozal Free Zone Board of Directors Partner: Border Management Agency, CFZMA, Ministry of Transport, Belize Customs and Excise Department, Belize Immigration and Nationality Services, NFZA, DPAC, Corozal Free Zone Board of Directors, Administracion General de Aduanas

Action 25.2 Assess the feasibility of a domestic port in Corozal on the Hondo River in collaboration with the Belize Port Authority, including the potential to receive imports by river port (e.g. from Mexico) and necessary infrastructure.

6 months – 1 year

<USD 500k Lead: Belize Port Authority Partner: Belize Customs and Excise Department, Ministry of Agriculture, Belize Port Authority, BAHA, DPAC, Administracion General de Aduanas


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Recommendation 26. Develop an Agroprocessing Park Infrastructure Plan within the Infrastructure Diagnostic Study and update iterations of the plan every few years to ensure it supports the long-term development of the manufacturing and processing facilities

Action 26.1 Develop the first phase of the Agroprocessing Park Infrastructure Plan within the Infrastructure Diagnostic Study, and update iterations based on the evolution of the agroprocessing park over time.

<6 months none Lead: MITC Partner: DPAC, Ministry of Agriculture, Ministry of Transport, Border Management Agency, Agriculture sector investors in Corozal

Recommendation 27. Improve access for tourists to the new tourism Free Zone, including improved access roads and water transport services

Action 27.1 Undertake urgent repair of the access road to the Corozal Zone, noting the responsibility falls under the Free Zone Board of Directors in the expanded tourism Free Zone.

6 months – 1 year

> USD 2 million

Lead: Corozal Free Zone Board of Directors Partner: CFZMA, NFZA, Border Management Agency

Action 27.2 Assess the additional feasibility of making Corozal district accessible by sea for tourists, along with considerations of a domestic port as stated in Action 25.2.

<6 months <USD 500k Lead: Belize Port Authority Partner: Border Management Authority, Belize Immigration and Nationality Services, Ministry of Tourism, BTB

Recommendation 28. Include important elements of a tourism Free Zone, such as the retail space, storage and consumer amenities in infrastructure planning activities for the tourism Free Zone


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Action 28.1 Devise a tourism Free Zone Infrastructure Plan within the Infrastructure Diagnostic Study.

<6 months none Lead: MITC Partner: Ministry of Tourism, NFZA, BTB, Corozal Free Zone Board of Directors, Corozal Local Tourism Committee

Recommendation 29. Develop the infrastructure necessary to support the proposed electronic transactions, trade inventories and financial reporting within the Tourism Free Zone

Action 29.1 Engage Free Zone stakeholders to develop a technology infrastructure plan for both the zones.

<6 months none Lead: Corozal Free Zone Board of Directors Partner: Free Zone Chamber of Commerce and Industry, CFZMA, FIU, Central Bank of Belize, NFZA, DPAC, Belize Customs and Excise Department, Administracion General de Aduanas

Action 29.2 Commission the design of a financial transactions database for all electronic transactions in the Free Zone, as well as financial compliance reporting from Free Zone businesses. Ensure compatibility with export certification database recommended in action 16.3 and ensure proper training of Free Zone management staff and businesses to keep database current.

1-3 years USD 0.5-2 million

Lead: Corozal Free Zone Board of Directors Partner: ree Zone Chamber of Commerce and Industry, CFZMA, FIU, Central Bank of


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Belize, NFZA, DPAC, Belize Customs and Excise Department, Administracion General de Aduanas

Recommendation 30. Link Corozal District to the high-speed ICT line available to the Mexico border and expand infrastructure to connect zone businesses to high-speed internet

Action 30.1 Explore the feasibility of extending the high-speed internet coverage from Corozal town to the rest of the district, including the Free Zone and agroprocessing DPA.

6 months – 1 year

<USD 500k Lead: MITC Partner: NFZA, DPAC, BTL, Public Utilities Commission


9.2 Action Plan Theory of Change

This section maps actions in different logical relationships demonstrating theories of change to achieve the economic development vision laid out in the master plan for Corozal district.

9.2.1 Logical Chain 1: Re-defining Strategic Focus and Marketing of the Corozal Free Zone and the regional economy

Figure 45 identifies actions that build a new identity for Corozal Free Zone and the surrounding district and further market this new identity to prospective investors. The logical relationship follows the below structure:

the first step involves ‘identifying’ the strategic focus of the Corozal region and the Free Zone;

the second step includes strengthening the existing ‘legislation’ for the Free Zone, the DPA and the wider economic region;

the third step ensures that the necessary ‘infrastructure’ is put in place which is in line with the new identity of the Free Zone and the wider district;

the fourth step establishes the ‘regulation’ guiding the standards of business conduct and cross-border exchange in the Free Zone and the wider district that is in line with the international norms; and


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the final step considers all the above actions to develop a ‘marketing’ strategy for the Corozal free zone region, including a new positioning strategy and a branding architecture, introducing a portfolio of opportunities that is attractive to investors and further opening parallel negotiations with Mexico to reach agreements on the opportunities in the wider Corozal district.

Figure 45 Logical Chain 1: Re-defining Strategic focus and Marketing of Corozal Free Zone and the regional economy



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9.2.2 Logical Chain 2: Developing and Marketing Agriculture Opportunities in the Free Zone region and the wider district

Figure 46 brings together action recommended that will enhance the existing and potential competitiveness of Corozal district in the agriculture sector. The logical relationship follows the below structure:

the first step involves ‘identifying’ the strategic focus of the agriculture sector in the Corozal region, by designating a dedicated spatial area to an Agroprocessing DPA;

the second step includes understanding the ‘demand’ opportunities for Corozal agricultural products by focusing on primary and secondary demand-based opportunities in Quintana Roo and San Pedro and understanding the ‘supply’ opportunities that could be provided by Corozal district farmers;

the third step prioritises ‘trade facilitation’ actions on a PSA for agricultural products between Belize and Mexico and parallel negotiations with Quintana Roo outside of a PSA, after demand and supply opportunities are understood;

the fourth step ensures that the necessary ‘infrastructure’ is put in place which is in line with the new identified agriculture opportunities of the DPA and the wider district;

the final step considers all the above actions to develop a ‘marketing’ strategy for the Corozal free zone region and the district, including a new positioning strategy and a branding architecture and introducing a portfolio of opportunities that is attractive to agriculture investors.


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Figure 46 Logical Chain 2: Developing and Marketing Agricultural Opportunities in the Free Zone region and the wider district



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9.2.3 Logical Chain 3: Developing and Marketing Tourism Opportunities in the Free Zone region and the wider district

Figure 47 brings together actions recommended that will increase Corozal’s competitive advantage in the tourism industry. The logical relationship follows the below structure:

the first step involves ‘identifying’ tourism, retail, leisure and entertainment activities to be allowed in the new Corozal free zone focused on tourism;

the second step includes exploring the ‘cross-border’ offer with Mexico, specifically Quintana Roo, and revisiting existing programmes that encourage tourism from Mexico;

the third step ensures that the necessary ‘infrastructure’ is put in place that encourages tourism with proper access; and

the final step considers all the above actions to develop a ‘marketing’ strategy for the Corozal free zone region and the district, including a new positioning strategy and a branding architecture and introducing a portfolio of opportunities such as 1-day excursion packages (including nature-based and cultural tourism excursions) that is attractive to tourists.


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Figure 47 Logical Chain 3: Developing and Marketing Tourism Opportunities in the Free Zone region and the wider district



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