Belize to be downgraded in yearly economic freedom and growth index

James Roberts

The B.E.L. nationalization has been picked up by several international organizations whose perceptions help investors decide whether or not the country is stable enough to pump cash. They also serve as advisories to lending agencies that can help the country in hard times. Currently, Moody’s Investors Service has marked Belize at B-three, a level lower than that given by Standard and Poor’s. How bad is it? Well Standard and Poor’s rates Belize as a B, which is already five places below investment grade. And all those negative ratings came before the B.E.L. takeover.  Standard and Poor’s indicated on Tuesday that in all likelihood the ratings could further dip to ‘B-minus’.  That is because the country is heavily debt burdened without the B.E.L. and Telemedia nationalizations. Another group sounded the alarm today; that is the Heritage Foundation. Heritage publishes the yearly Economic Freedom and Growth Index and its economic expert James Roberts told News Five today that it is likely the country will be downgraded in next year’s publication.

James Roberts, Heritage Foundation’s Research Fellow for Economic Freedom and Growth

“The heritage foundation is a think-tank; we do policy analysis from a conservative and a free market point of view. We’ve been around since 1973. We’re probably the largest conservative think-tank in the United States. We are up on Capitol Hill in Washington D.C. right near the U.S. Senator Officer Doors.”

Jose Sanchez

“I know you’ve been paying attention to the happenings in Belize before; we’ve read some reports about Belize once before. But the situation with Belize Electricity Limited and Fortis, what has the Heritage Foundation has to say about that?”

James Roberts

“Well it is disappointing and disturbing for us because this is a sign of a government that looks to be intent on nationalizing or expropriating assets that were privatized back ten or twenty years ago. We don’t think the government does the best job in operating commercial assets. We think the private sector does a better job in offering the lowest price/highest quality services to people and this would include electricity and telephone service and other services. And so it is disturbing to us. We do our index of economic freedom; we cover one hundred and seventy-nine countries on an annual basis and this will definitely have an adverse impact on our assessment of Belize in next year’s edition.”

Jose Sanchez

“Does this also include the nationalization of Telemedia from a couple years ago?”

James Roberts

“It does. It starts to have a cumulative effect. It starts to indicate that this is intentional; this is part of a policy of higher government or more government involved in the economy—a statist approach—turning away from free market capitalism that we think served the people of Belize better than the government operating these entities will do. So we have specific guidelines especially our investment freedom indicator and so expropriation by government of private assets especially without compensation which has so far been the case with the telephone company will have a very negative impact on our index for next year.”

Jose Sanchez

“Now the local Belize Chamber of Commerce, majority of the business sector, disagrees with this expropriation or nationalization, however many of the consumers they just want lower electricity rates in Belize. That is where their concern is. However what is the impact that we’ll share as a nation internationally?”

James Roberts

“Well it’s going to be harder to attract foreign investment. You’re going to have to pay more when you borrow money because Standard and Poors is lowering the rating for Belize; that means that when the government of Belize wants to borrow money in the world capital markets, they are going to have to pay higher interest rates, the people of Belize are going to have to pay higher taxes. They may have been getting lower than cost electricity for a while, but from what I read, it was because the government was setting up Belize electric company to fail by not letting them charge what they needed to charge to cover their costs. For example, when they imported power from Mexico, they were paying more to import the power than they were allowed to charge the costumers who were buying it from them. That’s a disastrous business model and it ended up in insolvency for B.E.L. But the larger picture is, this is bad news for all the people of Belize because they are going to have trouble convincing people—their foreign investors—that if they put their money in Belize, it is going to be safe and they are going to make a profit and run a business well. So it is going to hurt Belize all down the line as far as we can tell.”

The expropriation of B.E.L. is likely to draw more comment locally and internationally. We’ll keep posted on the developments.