Central Bank: Economy must slow down
The average Belizean doesn’t need an economist to tell her that U.S. dollars are scarce. But what should the average Belizean think when the government’s own Central Bankers say their advice on how to solve the problem is not being heeded? As News 5’s Janelle Chanona discovered…the questions are easier than the answers.
Janelle Chanona, Reporting
With most of the business community grappling with the reality that foreign currency, specifically U.S. dollars, is a scarce commodity, today members of the Chamber of Commerce met with officials of the Central Bank to discuss the situation. The hot topic on the table was the soon to be established casas de cambio.
Keith Arnold, Central Bank Governor
“It will take a great deal of effort to monitor it to making sure that in effect we are accomplishing what we are trying to do, that is making sure that we can track the inflows and outflows of foreign currency within the Belizean economy.”
But because so much money is changing hands on the illegal market, banks, have little to buy or sell. Governor of the Central Bank, Keith Arnold says only certain sectors of the community will be sold U.S.
Keith Arnold
“And those priorities are our export earners, certainly for other kinds of things such as fuel, energy, water and that sort of thing, those are very important areas. But we don’t put a high priority on mere consumption, and so if the businessman is engaging in consumption, he may have some difficulty, because we consider…If you’re going to buy foreign currency to import water for instance or some kind of thing, not a priority, we are not going to readily facilitate the commercial banks. We do, but we put them in a queue and it’s not to the top of our priority.”
Enter the idea of the casa the cambio, which would serve those left out but…
Keith Arnold
“A casa de cambio operates efficiently in a floating exchange system.”
So since Belize has a fixed exchange rate, just how will it work?
Keith Arnold
“A lot of people forget that the Central Bank doesn’t manufacture foreign currency, we earn it, and we earn it from our export earnings. Whether it be tourism, export crops, traditional export, or non-traditional exports, but we have to earn it, that is the emphasis. That is where we need to, rather than to concentrate just on mere consumption.”
But the business people in the room weren’t convinced…
Businessman #1
“You all cannot show us it will work. Then we have a moral obligation that we will take it then to the general populace, to take a fiscal position on this cambio business. If not, we’ll come here over and over…Argentina changed nine presidents in three days for foolishness. People were running one day great on a track, the next morning they found out that there’s catastrophe. We should take history and use it, and if we have the moral obligation to deal with it, then let’s act responsibly.”
Businessman #2
“I don’t think it’s going to work, Mr. Luke Espat don’t think it’s going to work, and I would like to phrase the same question back to you, you can answer it if you can. Whose idiotic idea was this?”
Yvette Alvarez, Deputy Governor, Central Bank
“I don’t have a clue.
Businessman #2
“So then how is the Central Bank…
Yvette Alvarez, Deputy Governor, Central Bank
“Because the exchange regulations, which is a piece of regulation that we got from our colonial masters, it is the Central Bank that is responsible for the exchange control regulations and therefore it is the Central Bank that will have to administer it, that is how we got involved.”
Yvette Alvarez, a deputy governor of the Central Bank says that attitude has contributed to a lack of confidence in the Belizean economy. And as long as psychology plays such a large role, appeals to patriotism will likely fall on deaf ears.
Yvette Alvarez, Deputy Governor, Central Bank
“We are aware that large players in the system, these people who earn foreign exchange in these sectors, that as a result of the tightening foreign currency situation, these players have taken individual decisions that have resulted in lower flows into the economy. In other words, people have been holding their foreign currency offshore. Mr. Arnold calls that a lack of confidence, and it is an indication that these people who earn significant foreign exchange really want to hedge their bets, if you may. And so while my short answer to your question with regards to bananas, is that yes, the funds continue to come in. But with regards the question which you did not ask, but which was implied, the other traditional sectors, we have seen some reduction in foreign currency flow and that has contributed to the further tightening.
The short-term solution requires, an adjustment in the fiscal and monetary policies. This is not going to be easy. It means that we have to slow the pace of growth down a little bit, not entirely, just slow it down a little bit, because we have too much Belize dollars out there. This is not the American economy, this is a Belizean economy with a very small productive base. Hence the long-term solution, to expand the productive base, to have industries that earn foreign currencies, not consume, earn foreign currency, and that takes a lot of doing. I’m not saying that the decision is easy. I’m not saying that the political…it’s a political decision, don’t get me wrong, and I don’t go to the constituents for vote, I don’t go. It’s a political decision and not an easy one and I don’t envy the government.”
Reporting for News 5, I am Janelle Chanona.
While 2003 is supposed to see a strong upturn in the export economy, a combination of factors in the sugar, citrus, banana, shrimp and tourism industries will mean that the amount of incoming foreign exchange over the next eight to twelve months will remain below expectations.
