RESPONSE TO BIENNIAL CARIBBEAN BASIN INVESTMENT SURVEY

UNCLAS BELMOPAN 000277 SIPDIS DEPARTMENT FOR WHA/CEN (JENNIFER VANTRUMP); USITC (LYN SCHLITT) E.O. 12958: N/A TAGS: ETRD EINV ECON OTRA BH SUBJECT: RESPONSE TO BIENNIAL CARIBBEAN BASIN INVESTMENT SURVEY REF: STATE 060543 ¶1. Post has relied on the Statistical Institute of Belize and the quasi-governmental Belize Trade and Investment Development Service (BELTRAIDE) for information related to investment incentives granted to Belizean exporters under the Caribbean Basin Initiative. ¶2. The Belize Fiscal Incentive Act (BFIA),which encourages local and foreign investment, is one of the best-known incentive programs in Belize. Information provided by BELTRAIDE indicates that for the period 2007-2008 only four firms exporting to the U.S. benefitted from the BFIA. All of these firms are involved in the production of papaya for the U.S. market, and as such were identified as Caribbean Basin Economic Recovery Act (CBERA) related. Two Belize dollars equal one U.S. dollar. ¶3. Maya Papaya Limited: This represents an existing investment which is granted fiscal incentives. In March 2006, the company invested USD 550,000 in the establishment of a papaya production-export operation for the U.S. market. It is currently one of the top two exporters of papaya to the U.S. from Belize. BELTRAIDE reports that in 2007 the company benefitted under BFIA to an estimated amount of BZ$117,000. The company did not receive any benefits under the program in 2008. In July 2008, the Company temporarily halted production and closed its operations due to an estimated BZ$2 million damages resulting from the effects of Hurricane Dean. It has recently reopened under new management. ¶4. Fruta Bomba Limited: This represents an existing investment which is granted fiscal incentives. This company is a subsidiary of Brooks Tropicals of Homestead, Florida, and has been in operation in Belize since 1995. The company is financed by U.S. investors and in 2006 invested USD800,000 to expand its export operation. To date the company has invested approximately US$9 million. It is currently one of the top two exporters of papaya to the U.S. from Belize. BELTRAIDE reports that the company benefitted under BFIA approximately BZ$166,000 in 2007 and BZ$227,000 in 2008, respectively. Currently Fruta Bomba is largest Belizean exporter of papaya to the U.S. ¶5. Singh Tut/Belize River Farm Ltd: This represents an existing investment which is granted fiscal incentives. However, it only benefitted from BFIA in 2008 to an estimated amount of BZ$43,000. ¶6. K&D Farms Company Ltd: This company is a new investment, financed by U.S. investors for approximately BZ$300,000. BELTRAIDE reports that the company benefitted under BFIA approximately BZ$250,000 in 2008. Exportation is expected to commence in March 2010, as production was delayed due to flood damage in 2008. ¶7. BELTRAIDE reports that despite a fall in production due to inclement weather conditions and flooding, Maya Papaya Limited and Fruta Bomba Ltd. remain the major producers. Furthermore, all four companies would have been established in the absence of CBERA/CBTPA and none operate in a free-trade zone. ¶8. The papaya industry sustained significant damages as a result of Hurricane Dean which affected northern Belize in August 2007. The loss of revenues from papaya exports in 2007 were exacerbated by both a 4% decrease in production, and by 12.2% fall of the average price of papaya. Exports in 2007 amounted to BZ$26.1 million which represented a 15.9% decrease over the previous year. The industry's recovery was hampered as a result of excessive rainfall, flooding, and disease in papaya plantations in 2008. The industry once again faced both a fall in production, 12.7%, and a decrease of 1.5% in the average price per pound of papaya. This resulted in a decrease in the exports to BZ$22.4 million which represented a decrease of 13.9% in revenues. ¶9. Exports from the garment industry suffered from the effects of global competition and preference erosion when Belize's only remaining garment manufacturer, Williamson Industries, closed its operations in early 2008. Exports from this sector fell from BZ$18.8 million in 2007 to BZ$300,000 in 2008. The closure of the company resulted in the layoff of 700 workers over a 9-month period, many of whom are single mothers. ¶10. Comment: While CBERA may have provided assistance to the papaya industry in 2007 and 2008, we have not observed a diversification away from traditional agricultural products for export from Belize. Further, since all four companies benefiting over the period from 2007-2008 would have been established in the absence of CBERA/CBTPA, these initiatives are not believed to have had an impact on generating employment. End Comment. DIFFILY