## Conclusion

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---

### Social returns
- Human capital
  - School attainment is rather low in Belize.
  - Emigration, including skilled emigration, is relatively low compared to other Caribbean economies.
  - The indicator “education” (years of schooling scaled by assumed rate of return to education based on Mincer equation estimates (Psacharopoulos 1994)) shows Belize scores very well.
  - Naslund-Hadley et al. (2013) found returns are higher for higher education in Belize.
  - The Global Competitiveness Index shows gaps in higher education and training in Belize, while education outcomes in primary education compare favorably with peers.
  - A deficit of employees with higher education is consistent with anecdotal evidence that the lack of educated labor force constrained foreign investments.

- Crime
  - Homicide rate: 34.4 per 100,000 population (as of 2015).
  - Social costs from violent crime are significant; crime discourages tourism and investments and increases security spending.
  - Firm-level crime impacts:
    - 8 percent of firms in Belize experienced losses due to theft, vandalism, or arson.
    - 33 percent of firms in Guyana experienced such losses (comparison).
  - Security spending by firms:
    - Companies in Belize paid 1.3 percent of annual sales for security (2010 World Bank Enterprise Survey).
    - Comparators: 2.4 percent in Latin America and Caribbean; 3.5 percent in the world.

- Natural disasters and climate change vulnerability
  - Belize is among the most vulnerable countries in the world to natural disasters and climate change (IMF, 2016).
  - Losses from natural disasters average above 1 percent of GDP per year.
  - Estimated probable maximum loss from natural disasters: 50 percent of GDP (250-year horizon) (World Bank, 2017).
  - Rising temperature risks severely reducing Belize’s growth (Burke, Hsiang, and Miguel, 2015).
  - IMF October 2017 World Economic Outlook indicates Belize is among the countries most negatively affected by global climate change.
  - An estimated one-third of budget investment already goes to resilience-building projects.
  - IMF (2018) proposes relevant recommendations for resilience and climate policy.

### Infrastructure and market failures
- Infrastructure
  - The quality of infrastructure in Belize has been weaker than in peer countries (2012 Global Competitiveness Index).
  - Expanding airlift and initiated construction of the sea port are set to ease some infrastructure bottlenecks.
  - Investments in resilient infrastructure (roads and bridges) are necessary to reduce climate vulnerabilities; strengthening resilience was flagged as the most urgent priority.

- Market failures and business environment
  - Belize performs relatively favorably in exports diversity, complexity, and functioning of markets compared with peers.
  - Goods market indicator (2012 Global Competitiveness Index) supports that business climate regulatory reforms should stimulate growth.
  - Labor market indicators look relatively well: labor market participation is above peer economies and the informal sector seems smaller than in peers.

### Growth opportunities (Section IV highlights)
- Diversification toward more complex products
  - Belize’s goods exports remain dominated by vegetables, foodstuffs and wood; diversification indexes show no change.
  - Feasibility analysis indicates opportunities within reach to increase export complexity by producing furniture, chemicals and plastics.
  - Examples of targeted products include:
    - Chemicals and plastics: other plastic plates, sheets, etc.; paints and varnishes, aqueous; paints and varnishes, non-aqueous; other plates of plastics, noncellular and not reinforced; toiletries; plastic builders’ ware.
    - Metals: structures and their parts, of iron or steel; stoppers, caps and lids of metal; tanks, etc. > 300 liters, iron, or steel; aluminum containers, <300 liters; aluminum structures (bridges, towers, etc.).
    - Prefabricated buildings; other furniture and parts.
    - Vegetables, foodstuffs and wood: other printed matter; letterstock; toilet paper; sausages; packing boxes; fermented milk products; other fermented beverages; other prepared and preserved meat; milk; food preparation not elsewhere specified.

- Tourism
  - Tourism has been a strong source of growth; the share of tourism in services exports has increased.
  - Belize’s tourism industry is set to benefit from FDI by major international hotels announcing expansion plans.

### Policies for reinvigorating growth (Section V recommendations)
- Strategic framework
  - Belize’s Growth and Sustainable Development Strategy (GSDS) (endorsed April 2016) seeks to achieve growth of 5 percent annually over the medium term.
  - GSDS projects should be carefully prioritized and financed in close collaboration with development partners given limited fiscal space.

- Priority policy actions (largely low fiscal cost / self-reinforcing effects)
  - Facilitating access to credit
    - Establish a Credit Bureau and a credit collateral registry; broaden types of eligible collateral (authorities have drafted relevant legislation).
    - Medium-term: develop micro-financing instruments and financial literacy programs to promote financial inclusion.
  - Streamlining regulations
    - Accelerate and modernize procedures for starting a business to support investment, especially by SMEs.
  - Addressing skill gaps
    - Ensure primary and secondary education access for all children and expand technical training over the medium term.
  - Reducing crime
    - Strengthen prevention and juvenile rehabilitation initiatives, such as Belize’s Community Action for Public Safety Program (CAPS).
    - Amplify support for multi-faceted interventions targeting “at-risk” youth to strengthen safety and formal economy participation at a manageable fiscal cost.
    - Direct cost of the authorities’ first CAPS program (2012-15): US$5 million (IDB, 2017); authorities estimate it significantly reduced youth crime and recidivism rates.
  - Diversifying exports
    - Implement specific industrial policies consistent with GSDS to support diversification toward identified higher-complexity products.

### Quantified growth implications and diagnostic takeaway
- HRV framework findings
  - Identified growth constraints: cost of finance, public debt/high taxes, crime, skill gaps, distortionary regulation.
  - These constraints help explain negative total factor productivity growth after 2000.
  - Among constraints, crime and education are not the most binding for growth.

- Illustrative medium-term growth gains
  - IMF (2017) estimates that addressing structural bottlenecks (cost of finance, crime, public debt, business climate) and improving indicators toward the level of best-performing small states could increase per-capita growth by 1-2 percentage points (to about 3-4 percent) over the medium term.
  - Simulations / assumptions used in illustrative estimates:
    - For crime and disaster damage limitation, the simulations assume a reduction by one-half from the current level.
    - For trade integration, simulations assume an increase to the top quartile of small states.
    - For government debt, a reduction to 60 percent of GDP is assumed.
    - Estimates are based on coefficients in IMF (2017; Table 2.3 column 4) and IMF staff estimates.
  - The illustrative growth gain should not be interpreted as an overnight outcome; it could take years or decades to achieve.

- Sectoral outlook
  - Tourism is expanding especially rapidly.
  - Feasibility charts identified manufacturing opportunities that can increase economic diversification and long-term growth.

### Annex Table: Data Sources
- High costs of finance
  - Financial constraints (WBES): WBES; percent of firms identifying access to finance as a major constraint
  - Getting credit (DB): World Bank Ease of Doing Business Index distance to frontier (0-100)
  - Financial development (GCI): Global Competitiveness Index 8th pillar: financial market development (1-7)
  - NPLs: WDI, augmented by data collected for (IMF, 2017, Chapter 11)
  - Bank spread: WDI; interest rate spread (lending rate minus deposit rate, %)
  - Gross saving: WDI; gross savings (% of GDP)
  - Investment: WDI; gross capital formation (% of GDP)
  - Credit-to-GDP ratio: WDI; domestic credit to private sector (% of GDP)
  - Crowding out: WDI, IMF WEO; public debt/domestic credit to private sector

- Low social returns
  - Violent crime: WDI; homicides per 100,000 inhabitants
  - Natural disaster vulnerability: EM-DAT; damage from natural disasters (% of GDP)
  - Skilled emigration: IAB brain-drain data set; share of nationals with tertiary education living abroad
  - Education: PWT, Barro-Lee (2013) data set; years of schooling scaled by assumed rate of return to education based on Mincer education estimates (Psacharopoulos 1994)
  - Health and primary education (GCI): Global Competitiveness Index 4th pillar: health and primary education (1-7)
  - Higher education and training (GCI): Global Competitiveness Index 5th pillar: higher education and training (1-7)
  - Infrastructure (GCI): Global Competitiveness Index 2nd pillar: infrastructure (1-7)
  - Poverty: WDI, augmented by data collected for IMF Article IV staff reports

- Government failures
  - Public debt: WEO; general government debt in percent of GDP
  - Taxation: WEO; general government tax revenue divided by nominal GDP
  - Labor tax and contributions: WDI; labor tax and contributions (% of commercial profits)
  - Trade tariff: WDI; average trade tariff (percent)
  - Institutions (GCI): Global Competitiveness Index 1st pillar: institutions (1-7)
  - Bureaucracy (WGI): Worldwide Governance Indicators; score
  - Regulations (WGI): Worldwide Governance Indicators; score
  - Doing business: World Bank Ease of Doing Business Index distance to frontier (0-100)
  - Starting a business (DB): World Bank Ease of Doing Business Index distance to frontier (0-100)
  - Construction permits (DB): World Bank Ease of Doing Business Index distance to frontier (0-100)
  - Getting electricity (DB): World Bank Ease of Doing Business Index distance to frontier (0-100)
  - Registering property (DB): World Bank Ease of Doing Business Index distance to frontier (0-100)
  - Protecting minority investors (DB): World Bank Ease of Doing Business Index distance to frontier (0-100)
  - Paying taxes (DB): World Bank Ease of Doing Business Index distance to frontier (0-100)
  - Trading across borders (DB): World Bank Ease of Doing Business Index distance to frontier (0-100)
  - Enforcing contracts (DB): World Bank Ease of Doing Business Index distance to frontier (0-100)
  - Resolving insolvency (DB): World Bank Ease of Doing Business Index distance to frontier (0-100)

- Market failures
  - Trade openness: WDI; imports + exports (% of GDP)
  - Trade connectivity: IMF (2017)
  - GVC participation: IMF (2017)
  - High-tech export share: WDI, percent
  - Export diversification: IMF Diversification database; index
  - Goods markets (GCI): Global Competitiveness Index 6th pillar: goods market efficiency (1-7)
  - Labor market (GCI): Global Competitiveness Index 7th pillar: labor market efficiency (1-7)
  - Labor participation (male): WDI; Labor force participation rate, male (% of male population ages 15+)
  - Labor participation (female): WDI; Labor force participation rate, female (% of female population ages 15+)

- Growth decomposition
  - Real PPP GDP: PWT, extended based on WEO
  - Population: WEO
  - Capital Stock: PWT, extended based on WEO
  - Labor: PWT, extended based on WEO

- Notes
  - Data are 2017 or latest available. For natural disasters, distribution for 2010-15 is used.
  - EM-DAT = International Disasters Database; GVC = global value chain; IAB = Institute for Employment Research (Brücker, Capuano, and Marfouk 2013); NPLs = nonperforming loans; PPP = purchasing power parity; PWT = Penn World Tables; WBES = World Bank Enterprise Survey; WEO = IMF, World Economic Outlook; WDI = World Bank, World Development Indicators.

*Source: IMF working paper wp1924 — Conclusion (pdf content provided).*

### conclusion.

### Conclusion

### Social returns
- Human capital
  - School attainment is rather low in Belize.
  - Emigration, including skilled emigration, is relatively low compared to other Caribbean economies.
  - The indicator “education” (years of schooling scaled by assumed rate of return to education based on Mincer equation estimates (Psacharopoulos 1994)) shows Belize scores very well.
  - Naslund-Hadley et al. (2013) found returns are higher for higher education in Belize.
  - The Global Competitiveness Index shows gaps in higher education and training in Belize, while education outcomes in primary education compare favorably with peers.
  - A deficit of employees with higher education is consistent with anecdotal evidence that the lack of educated labor force constrained foreign investments.

- Crime
  - Homicide rate: 34.4 per 100,000 population (as of 2015).
  - Social costs from violent crime are significant; crime discourages tourism and investments and increases security spending.
  - Firm-level crime impacts:
    - 8 percent of firms in Belize experienced losses due to theft, vandalism, or arson.
    - 33 percent of firms in Guyana experienced such losses (comparison).
  - Security spending by firms:
    - Companies in Belize paid 1.3 percent of annual sales for security (2010 World Bank Enterprise Survey).
    - Comparators: 2.4 percent in Latin America and Caribbean; 3.5 percent in the world.

- Natural disasters and climate change vulnerability
  - Belize is among the most vulnerable countries in the world to natural disasters and climate change (IMF, 2016).
  - Losses from natural disasters average above 1 percent of GDP per year.
  - Estimated probable maximum loss from natural disasters: 50 percent of GDP (250-year horizon) (World Bank, 2017).
  - Rising temperature risks severely reducing Belize’s growth (Burke, Hsiang, and Miguel, 2015).
  - IMF October 2017 World Economic Outlook indicates Belize is among the countries most negatively affected by global climate change.
  - An estimated one-third of budget investment already goes to resilience-building projects.
  - IMF (2018) proposes relevant recommendations for resilience and climate policy.

### Infrastructure and market failures
- Infrastructure
  - The quality of infrastructure in Belize has been weaker than in peer countries (2012 Global Competitiveness Index).
  - Expanding airlift and initiated construction of the sea port are set to ease some infrastructure bottlenecks.
  - Investments in resilient infrastructure (roads and bridges) are necessary to reduce climate vulnerabilities; strengthening resilience was flagged as the most urgent priority.

- Market failures and business environment
  - Belize performs relatively favorably in exports diversity, complexity, and functioning of markets compared with peers.
  - Goods market indicator (2012 Global Competitiveness Index) supports that business climate regulatory reforms should stimulate growth.
  - Labor market indicators look relatively well: labor market participation is above peer economies and the informal sector seems smaller than in peers.

### Growth opportunities (Section IV highlights)
- Diversification toward more complex products
  - Belize’s goods exports remain dominated by vegetables, foodstuffs and wood; diversification indexes show no change.
  - Feasibility analysis indicates opportunities within reach to increase export complexity by producing furniture, chemicals and plastics.
  - Examples of targeted products include:
    - Chemicals and plastics: other plastic plates, sheets, etc.; paints and varnishes, aqueous; paints and varnishes, non-aqueous; other plates of plastics, noncellular and not reinforced; toiletries; plastic builders’ ware.
    - Metals: structures and their parts, of iron or steel; stoppers, caps and lids of metal; tanks, etc. > 300 liters, iron, or steel; aluminum containers, <300 liters; aluminum structures (bridges, towers, etc.).
    - Prefabricated buildings; other furniture and parts.
    - Vegetables, foodstuffs and wood: other printed matter; letterstock; toilet paper; sausages; packing boxes; fermented milk products; other fermented beverages; other prepared and preserved meat; milk; food preparation not elsewhere specified.

- Tourism
  - Tourism has been a strong source of growth; the share of tourism in services exports has increased.
  - Belize’s tourism industry is set to benefit from FDI by major international hotels announcing expansion plans.

### Policies for reinvigorating growth (Section V recommendations)
- Strategic framework
  - Belize’s Growth and Sustainable Development Strategy (GSDS) (endorsed April 2016) seeks to achieve growth of 5 percent annually over the medium term.
  - GSDS projects should be carefully prioritized and financed in close collaboration with development partners given limited fiscal space.

- Priority policy actions (largely low fiscal cost / self-reinforcing effects)
  - Facilitating access to credit
    - Establish a Credit Bureau and a credit collateral registry; broaden types of eligible collateral (authorities have drafted relevant legislation).
    - Medium-term: develop micro-financing instruments and financial literacy programs to promote financial inclusion.
  - Streamlining regulations
    - Accelerate and modernize procedures for starting a business to support investment, especially by SMEs.
  - Addressing skill gaps
    - Ensure primary and secondary education access for all children and expand technical training over the medium term.
  - Reducing crime
    - Strengthen prevention and juvenile rehabilitation initiatives, such as Belize’s Community Action for Public Safety Program (CAPS).
    - Amplify support for multi-faceted interventions targeting “at-risk” youth to strengthen safety and formal economy participation at a manageable fiscal cost.
    - Direct cost of the authorities’ first CAPS program (2012-15): US$5 million (IDB, 2017); authorities estimate it significantly reduced youth crime and recidivism rates.
  - Diversifying exports
    - Implement specific industrial policies consistent with GSDS to support diversification toward identified higher-complexity products.

### Quantified growth implications and diagnostic takeaway
- HRV framework findings
  - Identified growth constraints: cost of finance, public debt/high taxes, crime, skill gaps, distortionary regulation.
  - These constraints help explain negative total factor productivity growth after 2000.
  - Among constraints, crime and education are not the most binding for growth.

- Illustrative medium-term growth gains
  - IMF (2017) estimates that addressing structural bottlenecks (cost of finance, crime, public debt, business climate) and improving indicators toward the level of best-performing small states could increase per-capita growth by 1-2 percentage points (to about 3-4 percent) over the medium term.
  - Simulations / assumptions used in illustrative estimates:
    - For crime and disaster damage limitation, the simulations assume a reduction by one-half from the current level.
    - For trade integration, simulations assume an increase to the top quartile of small states.
    - For government debt, a reduction to 60 percent of GDP is assumed.
    - Estimates are based on coefficients in IMF (2017; Table 2.3 column 4) and IMF staff estimates.
  - The illustrative growth gain should not be interpreted as an overnight outcome; it could take years or decades to achieve.

- Sectoral outlook
  - Tourism is expanding especially rapidly.
  - Feasibility charts identified manufacturing opportunities that can increase economic diversification and long-term growth.

*Source: IMF working paper wp1924 — Conclusion (pdf content provided).*

### Annex Table: Data Sources

### Annex Table: Data Sources

### High costs of finance
- Financial constraints (WBES): WBES; percent of firms identifying access to finance as a major constraint
- Getting credit (DB): World Bank Ease of Doing Business Index distance to frontier (0-100)
- Financial development (GCI): Global Competitiveness Index 8th pillar: financial market development (1-7)
- NPLs: WDI, augmented by data collected for (IMF, 2017, Chapter 11)
- Bank spread: WDI; interest rate spread (lending rate minus deposit rate, %)
- Gross saving: WDI; gross savings (% of GDP)
- Investment: WDI; gross capital formation (% of GDP)
- Credit-to-GDP ratio: WDI; domestic credit to private sector (% of GDP)
- Crowding out: WDI, IMF WEO; public debt/domestic credit to private sector

### Low social returns
- Violent crime: WDI; homicides per 100,000 inhabitants
- Natural disaster vulnerability: EM-DAT; damage from natural disasters (% of GDP)
- Skilled emigration: IAB brain-drain data set; share of nationals with tertiary education living abroad
- Education: PWT, Barro-Lee (2013) data set; years of schooling scaled by assumed rate of return to education based on Mincer education estimates (Psacharopoulos 1994)
- Health and primary education (GCI): Global Competitiveness Index 4th pillar: health and primary education (1-7)
- Higher education and training (GCI): Global Competitiveness Index 5th pillar: higher education and training (1-7)
- Infrastructure (GCI): Global Competitiveness Index 2nd pillar: infrastructure (1-7)
- Poverty: WDI, augmented by data collected for IMF Article IV staff reports

### Government failures
- Public debt: WEO; general government debt in percent of GDP
- Taxation: WEO; general government tax revenue divided by nominal GDP
- Labor tax and contributions: WDI; labor tax and contributions (% of commercial profits)
- Trade tariff: WDI; average trade tariff (percent)
- Institutions (GCI): Global Competitiveness Index 1st pillar: institutions (1-7)
- Bureaucracy (WGI): Worldwide Governance Indicators; score
- Regulations (WGI): Worldwide Governance Indicators; score
- Doing business: World Bank Ease of Doing Business Index distance to frontier (0-100)
- Starting a business (DB): World Bank Ease of Doing Business Index distance to frontier (0-100)
- Construction permits (DB): World Bank Ease of Doing Business Index distance to frontier (0-100)
- Getting electricity (DB): World Bank Ease of Doing Business Index distance to frontier (0-100)
- Registering property (DB): World Bank Ease of Doing Business Index distance to frontier (0-100)
- Protecting minority investors (DB): World Bank Ease of Doing Business Index distance to frontier (0-100)
- Paying taxes (DB): World Bank Ease of Doing Business Index distance to frontier (0-100)
- Trading across borders (DB): World Bank Ease of Doing Business Index distance to frontier (0-100)
- Enforcing contracts (DB): World Bank Ease of Doing Business Index distance to frontier (0-100)
- Resolving insolvency (DB): World Bank Ease of Doing Business Index distance to frontier (0-100)

### Market failures
- Trade openness: WDI; imports + exports (% of GDP)
- Trade connectivity: IMF (2017)
- GVC participation: IMF (2017)
- High-tech export share: WDI, percent
- Export diversification: IMF Diversification database; index
- Goods markets (GCI): Global Competitiveness Index 6th pillar: goods market efficiency (1-7)
- Labor market (GCI): Global Competitiveness Index 7th pillar: labor market efficiency (1-7)
- Labor participation (male): WDI; Labor force participation rate, male (% of male population ages 15+)
- Labor participation (female): WDI; Labor force participation rate, female (% of female population ages 15+)

### Growth decomposition
- Real PPP GDP: PWT, extended based on WEO
- Population: WEO
- Capital Stock: PWT, extended based on WEO
- Labor: PWT, extended based on WEO

### Notes
- Data are 2017 or latest available. For natural disasters, distribution for 2010-15 is used.
- EM-DAT = International Disasters Database; GVC = global value chain; IAB = Institute for Employment Research (Brücker, Capuano, and Marfouk 2013); NPLs = nonperforming loans; PPP = purchasing power parity; PWT = Penn World Tables; WBES = World Bank Enterprise Survey; WEO = IMF, World Economic Outlook; WDI = World Bank, World Development Indicators.

*Source: Annex Table: Data Sources (wp1924).*

---


_Source: https://www.imf.org/-/media/files/publications/wp/2019/wp1924.pdf_