Belize is one of the smallest consumer markets in Central America and the Caribbean, with a GDP only three percent the size of neighboring Guatemala. Belize’s high cost of inputs drive up the cost of goods, which has downstream impacts on market value and pricing of domestic goods.
The relatively high cost of doing business is due in large part to the expense of inputs like utilities and fuel. The high cost of electricity drives up input costs for all industries. In addition, the reliance on imports at short-term market prices creates uncertainty and thus lowers investor confidence. This limits the profitability of firms, preventing them from expanding and providing additional employment.
Inflation rose from 3.2 percent in 2021 to 6.3 percent in 2022, propelled in large part by Russia’s invasion of Ukraine and lingering COVID-19 related imbalances. Belize’s inflation rate peaked at nearly 10 percent in the first quarter of 2022 in the immediate aftermath of Russian attacks on Ukraine that led to fertilizer shortages for the agricultural sector.
Imported products are subject to a multitude of duties and tariffs that contribute to high costs for some product categories, in addition to a General Sales Tax of 12.5 percent for most retail goods, a rate which would rank higher than almost all U.S. states and localities. Furthermore, Belize applies different tariffs on different product groups. Most items that compete with domestic industries like fish and fruit face duties that average around 30 percent, with some products reaching as high as 70 to 120 percent. An Environmental Tax of three percent is applied where applicable on imports, excluding some medicines and food items. Automobiles, over half of which were imported from the United States in 2022, were charged an Environmental Tax of five percent.
Lengthy bureaucratic delays and corruption disincentivize foreign investments. Corruption is endemic within politics and government institutions, and uneven application the law deters investments in Belize, especially in the infrastructure and agriculture sectors. U.S. firms have identified challenges in participating and competing against well-connected domestic companies in areas related to the bidding, procurement, and dispute settlement processes. The courts are independent and impartial, but legal proceedings are often delayed for years due to significant case backlogs. While local courts are empowered to recognize and enforce foreign arbitration awards against the government, judgments are generally challenged up to the Caribbean Court of Justice, the country’s final appellate court. Investors are advised to perform due diligence when planning investments, as there have been highly publicized cases of fraud related to land title and other commercial ventures.