Economy will soon begin moving, says Minister
Less than two months ago the then opposition People’s United Party campaigned hard on the promise that, if elected, they would get Belize’s economic train on the move once again. Now that the P.U.P. owns the railroad, everyone from the unemployed Belizean on the street to the millionaire potential investor wants to know when the train will leave the station and exactly where it will be headed. This morning News Five’s Stewart Krohn sat down with Ralph Fonseca, the man who has been given the job as the economy’s chief engineer, fireman and conductor all rolled into one. Fonseca was first asked to comment on the state of the economy his government inherited.
Ralph Fonseca, Minister of Economic Development
“On the economy we’re cautiously optimistic that there has been a serious injection of confidence in the economy and a breathe in of real optimism since August twenty-seventh. We’ve been consulting with the private sector; we’ve worked with the primary sectors, with citrus, with the C.D.C. people who are putting in some forty million U.S. dollars into citrus. We’ve funded the banana industry so that they can replant their 25% of their plantations that they just recently cut down last year. We are working with B.S.I. to get their new transportation project going. We’ve worked with the shrimp farms; we’re working on securitization of our mortgages to get our construction industry driven. So we are very, very optimistic that we will get back to achieving the growth rates that we experienced during our last administration very, very quickly. We are certainly getting good cooperation from the private sector, from inside Belize and from outside of Belize.
In the case of the fiscal position of government, as you know we met a nightmare; we met a negative sixteen million dollar position which we have been working on very, very hard. Our target is to remove the recurrent deficit completely during this particular year and within the next three years to remove also the domestic capital deficit and to bring down the overall deficit to a position where we can bring our external debt down to about 30%. Right now it’s at 39% of GDP.”
Q: “Mr. Fonseca how does your strategy for developing the economy differ from the previous government?”
Ralph Fonseca
“Well economic policy covers a few things but let’s look at the monetary policy, aspect of it, which I haven’t talked to yet. Over the first forty-five days we believe that we have put some thirty million dollars more into the market of hard currency because we met with the banks and we negotiated with them to buy treasury notes that could not be sold in U.S. dollars during the last administration, so the Belize dollar is stronger. We’ve also negotiated with them to increase the treasury bill rates from 3.4%, which the last administration had driven it down to in trying to save themselves because of their fiscal deficit; we’re driving that back up to almost 6% which will cover quite a bit of the bank’s operational costs and have them be able to afford to bring down their interest rates.
We’re also working very, very quickly to have mortgage paper and construction financing paper be considered a part of their reserve position which would again be bringing down their rates considerably. You may have mortgages around 12%, maximum 13% and this would be freeing up some thirty two million dollars in the banking system just for mortgage financing. So that is a good example where our government is not revenue driven; we’re growth orientated. We’re not worried about trying to save $1.8 million in interest fees for $70 million in treasury bills; we’re more interested in bringing down the interest rates from 17% to some 14% where we left it the last time.”
Q: “When your party was in opposition, one of your key criticisms of the Esquivel administration was its over dependence on the government of Taiwan for its economic program, yet having been elected to office it doesn’t seem that your government is going to be any less reliant. What is the future of relations with Taiwan?”
Ralph Fonseca
“Well there’s a big difference to more positive areas as it relates to our relationship which we think we have some priorityship on, since we put it in place initially, and it would be silly of us to try to turn our backs on it at this point. But there is a big difference between that and depending completely on funding from Taiwan. Again it’s now verifiable that in fact over a hundred million dollars came in from Taiwan in order to try to prop up the last government or trying to assist them, but because of the lack of confidence that went out the door. But it also means that our external debt has increased by over a hundred million dollars, because of debt that we owe Taiwan. So in particular now we have to have a good relationship with Taiwan as we sit down to talk with them in the context of our debt restructuring which has got to be done. We’ve got a situation now where our external debt is 39% of GDP. Once you reach 40% all the red lights go off internationally so we have to bring it down to 30% where we were the last time.”
Q: “Does this mean refinancing?”
Ralph Fonseca
“Taiwan now is the largest creditor. We have to sit down with them and do some restructuring. It may not necessarily be refinancing and whatever we do would not affect our international credit rate.”
Q: “Both your government and the previous one have gone on record as being in favor of expanding the hydro-electric system of Belize, what are your immediate plans to get this project on stream?”
Ralph Fonseca
“We still believe that the hydro project was one of the most farsighted projects that has ever been accomplished here in Belize. As a matter of fact we have met; we have had a first meeting with Dominion Energy on the way up to Washington and there was a study that was done to expand the hydro facility with the reservoir and we have started conversations with them as to how they intend to carry out that project, either doing it themselves or coming in with B.E.L. as the privatization effort continues forward. But one way or the other the reservoir will be built as long as this administration is here and it will be built very quickly which will bring down the overall cost of electricity.
Today as we’re talking we have got the hydro facility producing over 25 megawatts of power. Every diesel engine in Belize City is turned off. It is not costing us a penny in diesel fuel to keep on your lights or to run your camera right now. That same hydro project that was so vilified. So if we have a reservoir in front of it, especially if we have some turbines in it the tow of that reservoir then we will be able to produce maybe over 40 megawatts from that facility when we have the water. And certainly during the dry season instead of producing only 4 megawatts, it would be producing a lot more because of the reservoir, which was the way it was originally intended and it should have been done five years ago.”
Q: “Finally Mr. Fonseca, could you address two separate constituencies: one the bulk of Belize who are waiting for something to happen economically and the group of investors who are waiting to put their money in Belize, what would you have to say to these two groups?”
Ralph Fonseca
“Well first of all for those Belizeans that have been tolerant of us over the last forty-five days, in my case my particular constituents have given me sixty days to start performing, after that they will probably choke me if I don’t, thanks for being tolerant. Everything is on track; the economic train is about to seriously take off. We had to spend at least a month finding out exactly where we were; we’re not complaining but we met a mess and we’ve now begun to put things in order. We will accomplish with our 10,000 homes, our 15,000 jobs and we are going back to those days of 8 to 10 percent growth very, very quickly.
In the case of investors that are there and the business community in general, we will continue the consultation process. We’ve only been here forty-five days; we’ve met with all the banks, representatives of the entire private sector, with all the insurance companies. We’ve met with the American Business Council; we’ve tried to deal with all the lack of confidence problems, the land acquisition problems; we settled the north Ambergris Caye problem this week, the acquisition of north Ambergris Caye at one third the price that Esquivel and Barrow had originally attempted to settle that. We thank them very much for their confidence in our new administration and we ask them to continue working with us. We will find a way forward together.”
According to Fonseca, private sector investment projects either planned or already under way include the expansion of the Belikin Brewery and construction of a milk factory, a major housing project and establishment of a cement plant. Regarding tax reform and the abolition of VAT a committee’s recommendation is due within two months.
