Public Disclosure Authorized BELIZERIGHT CHOICES BRIGHT FUTURE Systematic Country Diagnostic Francisco Carneiro Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized BELIZERIGHT CHOICES BRIGHT FUTURE Systematic Country Diagnostic Francisco Carneiro January 2016 2 Belize—Right Choices Bright Future ABBREVIATIONS AND ACRONYMS ACP Africa Caribbean Pacific CZMAI Coastal Zone Management Authority and Institute AML/CFT Anti-Money Laundering and Combating the Financing of Terrorism DMSP-OLS Operational Lines scan System ANS Adjusted Net Savings DRM Disaster Risk Management API American Petroleum Industry ECLAC Economic Commission for Latin America and the Caribbean ASR American Sugar Refining Eastern Caribbean Currency Union BOOST Building Opportunities for Our Social ECCU Transformation EIRR Economic Internal Rate of Return BPO Business Process Outsourcing EMBI Emerging Market Bond Index BNE Belize Natural Energy EM-DAT International Emergency Disasters Database BCRIP Belize Climate Resilience Infrastructure Project EPI Environmental Performance Index BZ$ Belize Dollar EPPR Emergency Prevention, Preparedness and Response CAGR Compound Annual Growth Rate European Union CCT Conditional Cash Transfer EU Financial Action Task Force CEDLAS/ Centro de Estudios Distributivos FATF SEDLAC Laborales y Sociales / Socio-Economic FDI Foreign Direct Investment Database for Latin America and the GDP Gross Domestic Product Caribbean GFDRR Global Facility for Disaster Recovery CIA Central Intelligence Agency and Reconstruction Center for International Development CID GIS Geographic Information System Systematic Country Diagnostic 3 GNI Gross National Income NGO Non-Governmental Organization GNS Gross National Saving NTL Night Time Lights GTAP Global Trade Analysis Project NPLs Non-performing Loans GVC Global Value Chain NRCP National climate Resilient Investment Plan HBS Household Budget Survey Organization for Economic Co-operation HHI Hirshman-Herfindhal Index OECD and Development HRV The Hausmann-Rodrik-Velasco Framework POVCALNET Online Poverty Analysis Tool Social Accounting Matrix HS Harmonized System SAM Punta Gorda Belize Non-Profit IADB Inter-American Development Bank SATIIM Organisation IBRD International Bank for Reconstruction and Development SCD Systematic Country Diagnostic Small Island Developing States ICT Information Communication Technology SIDS Small and Medium Enterprises ICHR Inter-American Commission on SMEs Human Rights SNA Standard National Accounts IDB International Development Bank SEDLAS Socio-Economic Database for Latin America and the Caribbean IFC International Finance Cooperation System Generalized Method-of- IFS International Financial Statistics System- GMM Moment IMF International Monetary Fund UN- United Nations Commodity Trade ISIC International Standard Industrial COMTRADE Statistics Database Classification UNDP United Nations Development Program LAC Latin American and the Caribbean UN-ECLACC United Nations Economic Commission for LACEX Labor Content of Exports Latin America and the Caribbean LDC Least Developed Countries UNFCCC United Nations Framework Convention LMI Low and Middle income Countries on Climate Change LFS Labor Force Survey UNODC United Nations Office on Drugs and Crime MCE Multi-criteria Evaluation UNSD United Nations Statistics Division MDGs Millennium Development Goals UNICEF United Nations Children’s Fund MIC Middle Income Countries UNWTO United Nations World Tourism Organization MICS Multiple Indicator Cluster Survey USA United States of America MIGA Multilateral Investment Guarantee Agency WDI World Development Indicators NCRIP National Climate Resilient Investment WEF World Economic Forum Plan WHO World Health Organization NBB National Bank of Belize WITS World Integrated Trade Solution NEMO National Emergency Management WWF World Wildlife Fund Organization (Belize) 4 Belize—Right Choices Bright Future CONTENTS Acknowledgments 6 Boxes Overview 7 Box 1: Knowledge and Data Gaps on Poverty Limit The Process 11 a More Thorough Analysis of Poverty Dynamics 23 A Caveat 12 Box 2: Knowledge Gap—Limited Availability of Labor Force Data to Measure Public-private Country Context 13 Wage Differentials 43 Poverty and Shared Prosperity 19 Box 3: Knowledge Gap—The Effect of Remittances Growth Performance—Stop and Go 22 on Reservation Wages 44 Growth Determinants 32 Box 4: Potential Responses to Migration and Emerging Focus Areas from the Unemployment Phenomenon 46 Comparative Methods 36 Box 5: The World Bank’s Adjustment Net Savings Policy Areas that Could Boost Growth 37 Indicator 60 Inclusiveness 39 Box 6: Indigenous Peoples in Belize Have Used Labor Market Outcomes Vary by the Court System to Assert their Land Rights 68 Gender and Ethnicity 40 Unemployment: Frictional and Structural 40 Tables Are Workers Cueing for Jobs in the Public Sector? 42 Table 1: Select Socio-Economic Indicators for Belize Migrants Are Not to Blame 43 and LAC 14 Labor Content of Exports and Sector Linkages 47 Table 2: Where is the Wealth of Belize? 17 Export Growth Could Boost Share Prosperity 48 Table 3: Urban and Rural Poverty rates (% poor), 2002–2009 21 Policy Areas to Boost Inclusion 51 Table 4: Poverty by Ethnicity, 2002–2009 22 Sustainability Challenges 54 Table 5: Poverty by Gender, 2009 (% of Age Group) 22 Factors that May Affect the Sustainability of Growth 54 Table 6: Emerging Focus Areas to Enhance Growth 37 Factors that May Affect Environmental Table 7: Macroeconomic Trends and Projections 55 Sustainability 60 Table 8: Housing characteristics in 2009 66 Factors that May Affect Social Sustainability 66 Table 9: Benefit Levels (Bz$) for Compliance with Synthesis and Priorities 73 Education co-responsibility, differentiated by Grade and Sex 72 Why Hasn’t Belize Developed Faster? 73 Exogenous Factors 73 Endogenous Factors 75 Figures Trade Openness/GDP per capita: Prioritization Approach 76 Figure 1: Belize vs. Comparators 15 Conclusion 80 Figure 2: Belize Age and Sex structure, 2010 15 Bibliography 102 Figure 3: Belize Population, Census, 1946 to 2010 15 Annexes 108 Figure 4: Belize Population distribution, Bayesian estimation, April 2014 16 Figure 5: NTL Comparison of Belize (left panel) and Belgium (right panel) 16 Figure 6: Evolution of Moderate Poverty in LAC and Figure 38: Direct and total labor value added in Belize, 2000-2012 19 exports in 2011, forward linkages ($ million) 49 Figure 7: Evolution of Moderate and Extreme Poverty Figure 39: Total labor content in gross exports across (% headcount) and Gini coefficient in Belize 2002 sectors and countries 49 and 2009 20 Figure 40: Direct and indirect labor value added in Figure 8: Shared Prosperity in Central America 20 each $100 of exports (including backward linkages) 50 Figure 9: Moderate Poverty rates across Districts Figure 41: Skilled and unskilled labor content in (% households, 2002 and 2009) 21 gross exports 51 Figure 10: Extreme Poverty rates across Districts Figure 42: Skilled and unskilled total labor value (% households, 2002 and 2009) 21 added in exports in 2011 ($ million) 51 Figure 11: Per capita GDP growth: Belize vs. LAC and Figure 43: Proportion of Employed and Unemployed Upper Middle Income Countries 1980–2012 24 with No Education Attainment, by District 52 Figure 12: Stop and go policies in Belize (US$ lhs Figure 44: Overall Government Debt under Different and % rhs) 24 Financing Scenarios 56 Figure 13: Growth since 2000 compared to the Figure 45: Standard deviation of output growth: previous period 26 Belize vs. LAC Caribbean Small States 1970–2009 58 Figure 14: Structural and Stabilization Index Figure 46: Standard deviation of output growth: Belize (2005–2010) 26 vs. Low and Middle Income countries 1970–2009 58 Figure 15: Cyclicality: 1990–2005 vs 2005–2013 27 Figure 47: Calculating Adjusted Net Saving for Figure 16: What did Belize export? 28 Belize in 2013 59 Figure 17: Product Space Map for Belize: 1990–2012 28 Figure 48: Belize’s Adjusted Net Saving, 1990–2013 59 Figure 18: Tariff rate, applied, weighted mean, all Figure 49: Adjusted Net Saving: Belize, Latin America products (%), 2013 29 & Caribbean, Upper middle income 60 Figure 19: Export Concentration of Market in 2003 Figure 50: Environmental Performance Index 60 and 2013 30 Figure 51: Estimated annual losses due to Extreme Figure 20: Technological Classification of Belize’s Climate events, % of GDP, 1993-2012 (left panel); Export: 2003 and 2013 30 Damage from Disasters in US$ million in Belize (right panel) 62 Figure 21: General Government Expenditure/GDP vs. Economic Size, avg. 2000–2013 31 Figure 52: Criticality and Flood Susceptibility of Belizean Roads 63 Figure 22: Savings/GDP, avg 2000–2013 31 Figure 53: Prevalence of low-birth weight for Figure 23: Net Capital Flows/GDP, avg. 2005–2012 31 last-born children 67 Figure 24: Repatriated and Reinvested FDI income, Figure 54: Percentage of children under age five avg. 2006–2011 32 that are stunted 67 Figure 25: Financial Indicators in Belize 33 Figure 55: Primary and secondary school net Figure 26: Financial Intermediation in Belize 33 attendance rate by 69 Figure 27: Increase in Belize’s GDP per capita based Figure 56: Child labor by wealth index and mother’s on counterfactual exercise 35 education (2011) 70 Figure 28: Major obstacles to business operations, Figure 57: Child labor by ethnicity and mother’s 2010 (% firms) 35 education (2011) 70 Figure 29: Growth Accounting in Belize 36 Figure 58: Education levels of employed population Figure 30: Backward and Forward Linkages 36 by gender and