BELIZE: PM MUSA OPTIMISTIC ABOUT 2007

UNCLAS SECTION 01 OF 02 BELMOPAN 000005 SIPDIS SIPDIS SENSITIVE DEPT FOR WHA/CEN (MACK, CRAIG) TREASURY FOR IA/WHA (LEVINE) E.O. 12958: N/A TAGS: PGOV ECON EFIN BH SUBJECT: BELIZE: PM MUSA OPTIMISTIC ABOUT 2007 Ref: 06 Belmopan 45 This cable is sensitive but unclassified. Please handle accordingly. -------------- Summary -------------- ¶1. (U) In his New Year's Message, published in the December 31 edition of The Reporter (one of Belize's weekly newspapers),Prime Minister and Minister of Finance Said Musa was optimistic about the country's future - particularly in the areas of the economy and the border dispute with Guatemala. End Summary. -------------- Belize's "Robust" Economy -------------- ¶2. (U) The message - which covered a full page and included a photo of a smiling Prime Minister Musa - began with a review of the high points of 2006. Namely, the country's celebration of 25 years of independence, its rich and diverse culture, and the fact that Belize avoided the damage and destruction brought on by natural disasters. End summary. ¶3. (U) Musa then moved on to his vision for the future, stating that "there is a strong feeling of optimism" in Belize. He applauded his government's "bold strategic decision" to restructure the public debt despite the "negative noise" from the critics. (Note: Belize's debt, which was close to 100 percent of GDP, had to be restructured in order to avoid a sovereign default. End note). Musa noted that the debt restructuring plan had been received positively by the international financial community and, as a result of this and other fiscal decisions, the country's deficit is down and there is a primary surplus of three percent of GDP. (Note: There has been no public announcement yet regarding acceptance of the proposed debt restructuring by existing creditors. End note.) ¶4. (U) Musa also touted the strength of the Belize dollar, which has been pegged to the U.S. dollar since 1976 (Note: The current rate of exchange is US $1 equals BZ $2. End note) and pointed to economic expansion and job creation as proof of his success in overcoming the nation's economic challenges. Specifically, Musa highlighted the agricultural industry - including citrus, sugar, livestock, and poultry - as strong performers, emphasized continued investment in the tourism sector, and stressed that prospects in the country's nascent oil industry are "very encouraging" and will provide additional growth to the economy. (Note: The GoB recently passed an amendment to the Income and Business Tax Act which imposes - retroactively to January 2006 - a 40 percent tax on income for companies engaged in petroleum operations in Belize [reftel]. End note). -------------- Belize vs. Guatemala -------------- ¶5. (U) Next, Musa turned to the border dispute between Belize and Guatemala, which has been going on for decades. Musa stated that Belizeans have been "anguished" by Guatemala's territorial claim but predicted that during 2007 the two nations would "likely reach agreement on a course that will bring an end to the Guatemalan claim" within a few years. He went on to say that Belize would soon be rid of a "problem" that has been a "thorn in our side for two decades." Musa said that all parties had agreed to resettle Guatemalan citizens living in the Belize-claimed town of Santa Rosa to a site within Guatemala, and he expected the resettlement to be complete in the first half of 2007. (Musa also mentioned the important role of the OAS, as well as the financial assistance of Mexico, the U.S., and the United Kingdom, in moving forward on this dispute). Although Musa stated that relations between the two countries are "better than they have ever been," he noted that he did not believe the border dispute would ever be resolved by negotiation. Instead, he expected that the issue would have to be addressed by an "independent international tribunal." -------------- Domestic Issues - An Afterthought? -------------- ¶6. (U) Although the economy and the border dispute were covered in more detail, Musa also touched on a few domestic issues such as BELMOPAN 00000005 002 OF 002 crime, education, poverty, and health care. He stated that education would continue to be top priority for the government, and pledged new investments in education that would focus on "character building and positive attitudes for productive living." He noted that the National Health Insurance program would expand to include the entire population during 2007 and sang the praises of ongoing rural development and poverty alleviation programs. Finally, Musa said that crime remains a "serious challenge" and that the community must provide the police and the Belize Defence Force with full cooperation in order to maintain the peace. Unfortunately, Musa's address made no mention of how his government would fund these programs or address the growing crime problem in Belize. -------------- Comment -------------- ¶7. (SBU) While the PM was trumpeting his success in avoiding a sovereign default, he failed to mention that he did so by borrowing more money from Venezuela (US $50 million),the Inter-American Development Bank (US $25 million),and the Caribbean Development Bank (US $25 million) and imposing a retroactive tax that could discourage future oil exploration as well as other foreign direct investment. In addition, in his review of the Belize-Guatemala border dispute, Musa fails to address the potentially negative effect of his government's support (and active campaigning) for Venezuela during the recent UNSC vote. ¶8. (SBU) Comment continued. During 2006, Musa's government faced a number of financial scandals, including the collapse of the country's housing and agricultural development bank and the suspect dealings of the Social Security Board. Musa makes no mention of these issues in his message nor does he offer any explanation as to how he will fund his domestic agenda. Elections must be held by March 2008 (although there have been some rumblings from the opposition to call early elections) and Musa's promises to invest heavily in education, health care, and poverty reduction are likely part of the pre-election promises. End comment. DIETER