El Desarrollo en Centroamérica: Inversión y Cooperación Regional como Estrategias de Recuperación Económica

Free Trade Agreement between Belize and Central America can benefit exportations

Janina Choj Galen University

1 Glossary CACM Central American Common Market DGFT Directorate-General for Foreign Trade Belize FTA Free Trade Agreement

PSA Partial Scope Agreement SICA Sistema de la Integración Centroamericana (The Central American Integration System) SIECA Secretaría de Integración Económica Centroamericana Secretariat of Central American Economic Integration The economic subsystem of SICA

2 Introduction

• Belize is an independent country, located on the Caribbean coast of Central America (Bolland & Griffith, 2020). • Bordered to the south of Mexico, to the north and west of Guatemala and by the Caribbean Sea to the east (Bolland & Griffith, 2020). • Belize has a bilateral relationship because of its strategic geographical location (Bolland & Griffith, 2020). • Belize is the only Latin American country where English is the official language (Bolland & Griffith, 2020).

3 Continued • Estimated population as of July 2020 is 399,598 (The World Factbook, 2020). • The Gross Domestic Product (GDP) in Belize was worth 1.88 billion US dollars in 2019 (The World Factbook, 2020). • Belize has a developing free-market economy (Bolland& Griffith, 2020). • Historical trade links to the Caribbean. Member of CARICOM with participation in the CSME (DGFT, 2019). • Member of the Central American Integration System (SICA). • Strategic location next to large markets: Guatemala, Mexico and the USA (Thomas, 2013).

4 Continued

• The country has an open, private sector led economy based primarily on tourism, agriculture, and services (Bolland & Griffith, 2020). • Tourism is the number one foreign exchange earner (The World Factbook, 2020). • Second foreign exchange earner are exports of sugar, bananas, citrus, marine products, and crude oil (The World Factbook, 2020). • Imports: machinery and transport equipment, manufactured goods; fuels, chemicals, pharmaceuticals; food, beverages, tobacco (The World Factbook, 2020).

5 Central America

• Lies between Mexico and South America (Bolland & Griffith, 2020). • Consists of 7 countries: Panama, Costa Rica, Nicaragua, Honduras, El Salvador, Guatemala, and Belize. • Central American countries are relatively small but quite large as a group and face many common policy challenges (Rodlauer & Schipke, 2005). • Central America population is equivalent to 2.31% of the total world population (Worldometer, 2020). • Guatemala - highest GDP over the years (Worldometer, 2020). • Nicaragua - lowest GDP over the years (Worldometer, 2020). • Main recipient of Central American exports – USA (DGFT, 2019).

6 Sistema de la Integración Centroamericana –SICA

• Constituted under the Protocol of Tegucigalpa in 1991. • SICA Member States are Belize, Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua, Panama, and the Dominican Republic as Associated Member State. • Aims at establishing a region of peace, freedom, liberty, democracy and development through political, economic, social, cultural and environmental integration processes (SICA, 2020). • Main objective is to encourage regional integration in the Central America region (SICA, 2020).

7 Belize’s relationship with SICA

• Belize was accepted as a full member of SICA in 2000 (Thomas, 2013). • Joined SICA at a political level in 2013 (Thomas, 2013). • Belize is a member of SICA at a political level. Not a part of SIECA that supports economic integration of Central America (Herzog, Oseni, Solotaroff, & Knippenberg, 2020). • Belize only participates in the General Secretariat and its institutions (DGFT, 2019).

8 Case Summary • The ongoing Pandemic, COVID-19, has induced chaos and disruptions by exerting significant effects on a country’s economy. • Policymakers must recognize the important role that trade can play in a country’s economy. • Belize is strengthening its links with its Central American neighbors through its membership of SICA. • Belize was outside of CACM. Tariffs were still applied to trade between Belize and all other SICA countries. • Belize was not eligible to join any FTA that Common Market members might sign with other countries or regions.

9 Methodology

• Descriptive case study • Mixed method approach: I. Quantitative method design Data on Belize’s Trade Status (2017-2019) II. Qualitative Method design Secondary data to analyze the problem (World Bank, DGFT, The World Factbook)

10 Research Objectives

• To determine the potential exportation benefits from integrating Belize’s economy with Central America through SIECA and a free trade agreement to enjoy bilateral exportation. • To identify ways in which Belize can enhance participation in the Central American region.

11 Case Study Problem

• Export trade between Belize and Central American region has been minimal despite trade opportunities. • There are barriers that prohibit or interfere with free trade between Belize and Central America. • The gap for imports and exports is increasing. • Central American economy can contract this year due to restrictions on movement, decline in remittances, tourism, and a drop in agricultural prices. • Goods should be allowed to transit freely between countries of a similar region. • Countries should focus on exploring new markets and innovation.

12 Literature Review

Benefits of a Free Trade Agreement • Elimination of tariff and non-tariff barriers between or among countries (Jisoo Yi, 2015). • Free trade gives liberty to buy from a worldwide market, greater choices, lower prices, high quality in available goods and fosters economic development in developing countries (Dzaleva & Lazaroski, 2007). • Improvement in efficiency due to the effect of economies of scale that induce an increase in the size of the market (Pettinger, 2019). • Firms reduce unit fixed costs of production by being able to produce a higher number of units (Pettinger, 2019).

13 Literature Review

Benefits of a Free Trade Agreement • Foreign competition forces local firms to offer competitive prices, to be productive and innovative, while free trade gives them opportunity to expand their market and stimulate domestic growth (Lamaja, 2015). • Contribute to greater economic activity, job creation, and deliver opportunities for big and small businesses to benefit from greater trade and investment (Department of Foreign Affairs and Trade, 2019).

14 Literature Review

Impact of free trade agreements on a country’s economy • Helps to address behind-the-border barriers that would impede the flow of goods and services (Department of Foreign Affairs and Trade, 2019). • Promotes regional economic integration and build shared approaches to trade and investment between a country and its trading partners (Department of Foreign Affairs and Trade, 2019). • Can contribute to the economic growth of less-developed economies (Stevens, Irfan, Massa, & Kennan 2015).

15 Literature Review

Benefits of Central America Integration with Belize • The relatively small size of Central American economies makes regional integration even more important (Thomas, 2013). • An integrated Central America would represent a market potential of 46.8 million people, which can facilitate trade with strategic partners like Mexico, Colombia, Caribbean countries, and the United States (Clavijo, 2015). • Having an image of an economically integrated region stimulates interest from large groups that want to invest in the region as a single market (Clavijo, 2015).

16 Data Analysis

• Looking at Belize’s Trade Status • Belize’s total exports (2017-2019) • Belize’s total imports in (2017-2019) • Principal export destinations • Principal import destinations • Top exported products • Trade with Central American Countries (2017-2019)

17 Belize’s Exports 2017-2019 Exports 2017-2019 (USD)

Exports (USD) 2017 Exports (USD) 2018 Exports (USD) 2019

$80,000,000.00 $70,000,000.00 $60,000,000.00 $50,000,000.00 $40,000,000.00 $30,000,000.00 $20,000,000.00 $10,000,000.00 $0.00

Country

Source: Computed from Directorate General for Foreign Trade (DGFT), 2019. Figure 1. Belize’s Exports (2017-2019).

18 Principal Exports Destinations 2019 (USD)

1% Exports 2019 (USD) United Kingdom 1% 1% 1% 1% United States 1% 1% Ireland 1% Jamaica 1% 1% 4% Trinidad and Tobago 2% Barbados 3% Guatemala 39% Netherlands 5% Bahamas Spain 5% Germany Japan 7% United Arab Emirates St. Lucia 8% France 18% Belgium Guyana Portugal Rest of the World Source: Computed from Directorate General for Foreign Trade (DGFT), 2019. Figure 2. Belize’s Export Destinations (2019).

19 Top Exported Products 2019

Exported Products 2019 (BZE) 1% 1% 11% Sugar 1% Fresh Banana 2% 1% 2% 33% Frozen Orange Juice Concentrate 2% Petroleum Oils 3% Frozen Rock Lobster and Other Sea 4% Crawfish Conch 5% Red Kidney Beans 5% Molasses

10% 19% Brans, sharps and other residues, of maize (corn).

Source: Computed from Directorate General for Foreign Trade (DGFT), 2019. Figure 3. Belize’s Top Exported Products (2019).

20 Belize’s Imports 2017-2019

Imports (USD) 2017-2019 2017 2018 2019 $450,000,000.00 $400,000,000.00 $350,000,000.00 $300,000,000.00 $250,000,000.00 $200,000,000.00 $150,000,000.00 $100,000,000.00 $50,000,000.00 $0.00

Country

Source: Computed from Directorate General for Foreign Trade (DGFT), 2019. Figure 4. Belize’s Imports (2017-2019).

21 Principal Import Destinations 2019 (USD)

Imports 2019 (USD) United States

13% China 1% 1% Mexico 2% 2% Guatemala 2% Panama 3% 44% Hong Kong

8% Honduras India Trinidad & Tobago 11% El Salvador

13% Rest of the World

Source: Computed from Directorate General for Foreign Trade (DGFT), 2019. Figure 5. Belize’s Import Destinations (2019).

22 Belize’s External Trade with Central America

Belize’s Exports to Central America 2017-2019 9,000,000.00 8,000,000.00 7,000,000.00 6,000,000.00 2017 5,000,000.00 4,000,000.00 2018 3,000,000.00 2019 2,000,000.00 1,000,000.00 0.00 Costa Rica El Salvador Guatemala Honduras Nicaragua Panama 2017 16,542.00 1,570,022 6,565,483 8,159,278 71,784 3,789,225 2018 287,481 113,956 8,596,041 5,061,719 8,951 709,182 2019 117,351 195,132 7,349,530 5,092,016 1,483 825,440

Source: Computed from Trend-Economy, 2020. Figure 6. Belize’s Exports to Central America (2017-2019).

23 Belize’s External Trade with Central America

Belize’s Imports from Central America 2017-2019 80,000,000 70,000,000 60,000,000 50,000,000 40,000,000 2017 30,000,000 2018 20,000,000 2019 10,000,000 0 Costa Rica El Salvador Guatemala Honduras Nicaragua Panama 2017 11,100,939 12,179,006 63,426,193 21,389,362 317,398 29,887,042 2018 9,433,388 13,378,104 71,254,207 21,809,155 643,315 29,756,945 2019 9,463,079 11,585,856 75,552,236 16,921,580 506,807 28,496,115

Source: Computed from Trend-Economy, 2020. Figure 7. Belize’s Imports from Central America (2017-2019).

24 Results and Discussion

• Belize belongs to three regions – the Caribbean, Central America and Mexico – but is not currently fully integrated into any of them. • Central American nations represent markets whose average size is about 7.8 million people. Integrated Central America would represent a market potential of 46.8 million people. • Central American economies are relatively small in size which makes regional integration even more important. • Belize’s trade with SICA has been minimal despite its proximity to the region and the fact that these markets represent tremendous trade opportunities. • There is a conspicuously wide trade deficit between Belize and its neighbors. • Trade pattern can be attributed to: limited or non-existent preferential market access in the region, lack of in-transit agreements, cumbersome customs and border requirements.

25 Conclusion

• Belize must see the ongoing COVID-19 pandemic as an opportunity to expand on its sectors and not only focus on its tourism sector. • Available evidence suggests that there is strong potential for growth, new markets and diversification. • Export - led growth is the most sustainable way for Belize to raise its long - run rate of growth of GDP. • The country must conduct a re-evaluation of regional integration with its Central American neighbors. • Improving trade relations with Central America through the expansion of existing agreements, and the negotiation of new relationships, can enhance Belize’s export opportunities.

26 Recommendations

• Revise and expand the Partial Scope Agreement (PSA) with Guatemala, so as to stimulate exports between Belizean and Central America. • Gradually develop independent trade agreements with different Central American countries, one step at a time. • Integrate Central American universities to participate in student and staff exchange programs. • Minimize the disruption from the COVID-19 pandemic and to facilitate economic recovery by maintaining essential global links between Central America and Belize.

27 References Bolland, O., & Griffith, W. (2020, January 02). Belize. https://www.britannica.com/place/Belize

Department of Foreign Affairs and Trade. (2019). The Benefits of Free Trade Agreements https://www.dfat.gov.au/trade/about-ftas/Pages/the-benefits-of-free-trade-agreements

Directorate-General for Foreign Trade Belize (2019). Belize Export Basket. https://www.dgft.gov.bz/belize-export-basket/

Dzaleva, T., & Lazaroski,, S. (2007). Globalization, Trade and Business. https://core.ac.uk/download/pdf/35331351.pdf

Herzog, T., Oseni, G., Solotaroff, J., & Knippenberg, E. (2020, September 16). World Bank Open Data. https://data.worldbank.org/

Lamaj, J. (2015, May). The Impact of International Trade and Competition Market on Developing Countries. http://www.toknowpress.net/ISBN/978-961-6914-13-0/papers/ML15-306.pdf

28 References O’Keefe, T. (2001). (S.I.C.A.) at the Dawn of a New Century: Will the Central American Isthmus Finally Achieve Economic and Political Unity? http://ctrc.sice.oas.org/geograph/central/okeefe.asp

Pettinger, T. (2019, July). https://www.economicshelp.org/trade2/benefits_free_trade/

Rodlauer, M., & Schipke, A. (2005, July 01). Central America: Global Integration and Regional Cooperation. https://www.imf.org/external/pubs/ft/op/243/243ch1.pdf

Silajdzic, S., & Mehic, E. (2018, November 05). Trade Openness and Economic Growth: Empirical Evidence from Transition Economies. https://www.intechopen.com/books/trade-and-global-market/trade-openness-and-economic-growth- empirical-evidence-from-transition-economies

Sistema de la Integración Centroamericana. (n.d.). https://www.sica.int/

Stevens, C., Irfan, I., Massa, I. & Kennan, J. (2015) The Impact of Free Trade Agreements between Developed and Developing Countries on Economic Development in Developing Countries: A Rapid Evidence Assessment. London: Overseas Development Institute.

29 References

Sulaymonov, A. (2016, December). Privileges of Free Trade, Factors and Arguments towards Protectionism. https://www.researchgate.net/publication/317644598_Privileges_of_Free_Trade_Factors_and_Arguments_towards_Protectionism

The World Factbook: Belize. (2018, February 01). https://www.cia.gov/library/publications/the-world-factbook/geos/bh.html

Thomas, V. B. (2013, July). Belize’s Regional Integration Options. https://publications.iadb.org/publications/english/document/Belize-Regional-Integration-Options.pdf

Trend-Economy. (2020). Belize: Imports and Exports: World: ALL COMMODITIES: 2008 - 2019. https://trendeconomy.com/data/h2/Belize?time_period=2019%2C2018%2C2017%

Worldometer. (n.d.). Central America Population . (2020). https://www.worldometers.info/world-population/central-america-population/

Yi, J. (2015). Rules of origin and the use of free trade agreements: A literature review. https://worldcustomsjournal.org/Archives/Volume%209%2C%20Number%201%20(Mar- Apr%202015)/WCJ_V9N1%20Yi.pdf

30 Special Thanks Dr. L. Loskot Dr. O. Martinez Myron Pollard Sheneil Salazar

31 THANK YOU FOR YOUR ATTENTION!

32