BELIZE: COUNTRY AND FOREIGN INVESTMENT REGIME

Belize Geography

Belize, previously known as British Honduras, lies on the East coast of Central America in the heart of the Caribbean Basin, bordering on Mexico to the North, Guatemala to the West and South, and flanked by the Caribbean Sea to the East. The size of Belize is 23,000 sq km. The northern half of the mainland of Belize is a plain with thin soil that supports scrub vegetation and dense hardwood tropical forest. The coastal area is neither land nor sea, but a sodden, swampy transition between the two. The central part of the country consists of sandy soil that supports large savannas, with a mountainous region southwest of Belize City. The southern part of Belize, with an annual rainfall of some 170 inches, has a true tropical rain forest that is rich with ferns, palms, lianas, and tropical hardwoods.

The climate is subtropical, with a brisk prevailing wind from the Caribbean Sea. The country has an annual mean temperature of 79 degrees Fahrenheit, and the humidity is nicely tempered by sea breezes. However there are frequent, devastating hurricanes from September to December. The cayes (pronounced keys), the offshore atolls, and the barrier reef are the main tourist attraction in Belize. The barrier reef, which is 185 miles long, is the longest barrier reef in the Western Hemisphere. The cayes are islands and/or mangroves, that are located between the mainland and the barrier reef, on the barrier reef, and on or within the barrier reef perimeters of the offshore atolls.

The island cayes, which are distinguishable by their palm trees, provide superior opportunity for SCUBA diving, snorkeling, fishing, boating, sailing, sailboarding, and sea kayaking, as well as habitat for both nesting birds and turtles. The time zone is GMT - 6, which is the same as United States Central Standard Time. Daylight Saving Time is not observed in Belize.

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Belize Population, Language and Culture

The population was estimated at 331,000 in July 2009, with a growth rate of 2.1% annually. The ethnic make-up is: mestizo 48.7%, Creole 24.9%, Maya 10.6%, Garifuna 6.1%, other 9.7%. Due to racial harmony and religious tolerance, the many different racial elements in Belize have mixed and blended successfully, and Belize has gained a widespread reputation for its friendly people. English is the official language although Spanish, Creole, Garifuna and Mayan are widely spoken throughout the country. The religion is mainly Christianity - both Roman Catholic and Protestant. Small groups practice Islam, Hinduism and Bahai. The British began to settle Belize in the seventeenth century, largely in order to fell and export tropical hardwoods, particularly mahogany. After a long period of disputed ownership between Spain and England, marked as well by slave revolts, Belize became the British Colony of "British Honduras" in 1871.

Universal suffrage was introduced in 1954, and self-government followed in 1964. The country's name was changed to Belize in 1973 and in 1975 the UN ruled over a long-standing territorial dispute with Guatemala in Belize's favour. The country became independent within the Commonwealth in 1981.

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Belize Government

Belize has a democratic, bi-cameral legislature based on the Westminster system. Queen Elizabeth II of Great Britain is the titular Head of State, represented by Governor General Sir Colville Young since 1993.

The 29-member House of Representatives is elected by direct popular vote to serve a 5-year term. The Governor-General appoints the member of the House of Representatives who is leader of the majority party to be prime minister. The Governor-General appoints the 12-member Senate from six members on the advice of the prime minister, three on the advice of the leader of the opposition, and one each on the advice of the Belize Council of Churches and Evangelical Association of Churches, the Belize Chamber of Commerce and Industry and the Belize Better Business Bureau, and the National Trade Union Congress and the Civil Society Steering Committee. The two main political parties are the People's United Party or PUP and the United Democratic Party or UDP (leader Dean Barrow). Elections were last held on 6 February, 2008, and gave 21 seats to UDP with 6 seats to PUP. Dean Barrow is Prime Minister.

Belize has a legal system based on common law. There is a Supreme Court, and the chief justice is appointed by the Governor-General on the advice of the prime minister. The Caribbean Court of Justice (CCJ) has replaced the Judicial Committee of the Privy Council as the court of last instance for members of the Caribbean Community (Caricom) and also serves as an appeal court in both civil and criminal cases from common law courts in these member states.

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Belize Economy and Currency

The Belize Dollar (BZ$) has a fixed rate of exchange of BZ$2 to US$1. Most hotels, resorts, restaurants, and tour operators will accept US currency, traveler's checks, or credit cards. In Belize, be sure which dollar you are paying in!

After 1986 the Belizean economy improved dramatically, in part because of the adjustment program implemented by the government. Tourism became a major contributor to growth. Internal reform coincided with the recovery of the world economy, in particular the revival of the sugar market. Between 1986 and 1990, the Belizean economy grew at an average annual rate of more than 10%, inflation averaging only 2.8%. In the early 1990s, regional economic problems and the world-wide recession combined to undermine the economy. A tough austerity program in 1997 resulted in an economic slowdown that continued in 1998. The trade deficit grew, mostly as a result of low export prices for sugar and bananas. But the government's expansionary monetary and fiscal policies, initiated in September 1998, led to sturdy GDP growth averaging nearly 4% in 1999-2006. In August 2006, then Prime Minister Said Musa announced that the servicing of the country's debt, which accounts for 90% of its GDP, was "no longer a viable option" on existing terms. Consequently, the government has rearranged its debt, and announced in February 2007 that it had successfully closed the exchange of its commercial external debt for new bonds due in 2029. The new bonds are denominated in US dollars, and provide for step-up coupons that have been set at 4.25% per annum for the first three years after issuance.

Sugar makes up nearly half of exports, while the banana industry is the country's largest employer. Growth slipped to 3.8% in 2008 as a result of the global slowdown, natural disasters, and the drop in the price of oil. In 2009, no growth was recorded.

Estimated GDP per capita in 2008 was $8,600 and estimated to fall to $8,100 in 2009. Unemployment stood at 8.2% in 2008 and 13.1% in 2009.

To tackle the country's deficit, Prime Minister Dean Barrow announced in his 2010/11 budget an increase of 2.5% in the General Sales Tax to 12.5% and introduced a 1.5% 'social tax' for all goods in the Economic Processing Zone (EPZ). At the same time the exempted personal income threshold is increased to BZ$24,000.

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Belize Entry and Residence

The following information was correct at the time of writing, but travellers to Belize should check with their local embassy or Belize Immigration Department prior to travel since visa requirements are subject to change.

United States citizens and citizens from the European Community do not require visas for travel to Belize; citizens of Bangladesh, Bolivia, Columbia, China, Angola, Brazil, Afghanistan, Lebanon, Cuba, India, Libya, Pakistan, Peru, South Africa and nationals of the former USSR require previous approval for a visa from the Ministry of Human Resources, Department of Immigration. Visitors are permitted to stay in Belize for a period not to exceed thirty (30) days. Extensions may be granted upon application to the Immigration Office, Corner Pickstock and North Front Streets, Belize City, at a cost of BZ$25.00. Travelers should show that they have sufficient funds for their visit (US$50.00 per person per day), as well as a ticket to their onward destination. Any individual can apply for permanent residence after one year of legal residence in Belize on a continuous basis. The permanent residence fee is $100.00 and a deposit is needed which can range from $100.00 to $1,200.00 depending on the nationality of the applicant. This deposit may be refunded three (3) years after residency is granted. The application form is to be accompanied by two passport photographs of each member of the family wishing to travel to Belize, and the back of a photograph should be endorsed with his or her name and signed by a Justice of the Peace. Applicants should also attach to the petition personal bank statements and current Medical and Police Records.

To acquire nationality status an applicant should have permanent residence or have resided legally in Belize for at least 5 years. For additional information contact:

The Immigration and Nationality Department
Belmopan, Cayo District
Belize
Phone: 011-501-822-2423
Fax: 011-501-822-2662

The Retired Persons' Incentive Act

The Retired Persons Incentive Act passed by the Belize legislature in early 1999 resembles the formerly popular but now defunct pensionado program in Costa Rica, and is designed to attract more retirees to Belize. Qualified retirees are able to live full time tax-free in Belize and bank there, under a 'permanent' tourist visa. To be designated a Qualified retired person under the program, applicants must receive a monthly income of not less than US $2,000 through a pension or annuity that has been generated outside of Belize.

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Belize Business Environment

The Philip Goldson International Airport is 2 hours' flying time (daily flights) from Miami, New Orleans or Houston. There are reliable shipping and air cargo services to and from Europe, United States of America, Central America and the Caribbean. The departure tax at the International Airport is USD36 per person plus USD3.25 security tax. There is a Tourist Departure Tax of USD18.75 per person when departing Belize at either of the land border crossings.

There is a favorable business environment, with few regulatory restrictions and minimum of red tape. Government hours are from 8 am to 12 noon and 1 pm to 5 pm Monday to Friday. BTL provides telephone communication between Belize and the United States and Canada. Direct dial service is available worldwide. The Belize telephone system is one of the best in the region, with a modern fibre-optics network. Cellular and paging services available. International calls are expensive. Direct Internet access is available from BTL.

Mail service is generally reliable. Letters (at the time of writing USD30 cents for a one-half ounce airmail letter) to the US from Belize City take about a week, longer from more remote areas. Belize is a very informal country, with a casual life-style. Formal attire is seldom necessary.

There are controls on land ownership by foreigners in excess of 0.5 acre in a town or 10 acres in the country. The Minister of Natural Resources issues licenses if a satisfactory development plan is presented or is in existence. If a property is being sub-divided for sale, a subdivision permit must be obtained from the Minister of Natural Resources. Land can be leased from the Government of Belize with an option to buy if the planned development indicated at the time of the application is carried out. Land in general has a (1%) tax on the unimproved value of the land. The cost for transfer of title to real property is 10% of value for Stamp Duty (usually shared between buyer and seller) and a token fee for registration. Attorney fees are additional.

Belize has preferential market access for many products to Europe, Canada, USA and the Caribbean:

In August 2004, the government announced plans to establish a new organisation that will be dedicated to facilitating the country’s participation in the Caricom Single Market and Economy (CSME), known as the National Accreditation Council of Belize.

The bill gives effect to Belize's obligations under the Caribbean Community Act to facilitate the movement of skills in the Caricom Single Market and Economy (CSME), with particular reference to the certification of professional qualifications. The bill was passed in 2005, but five years on the National Accreditation Council has not been set up.

The professional infrastructure is reasonably good. Belize ranks high in terms of efficiency, low cost and lack of legal mumbo-jumbo. The jurisdiction still lags behind the most sophisticated venues, such as the Cayman Islands, in terms of the availability of offshore financial products and in-country support professionals. However, that is rapidly changing.

Although most of the electricity is provided by diesel/generator sets, power is a stable 110 Volts A.C., as in the United States.

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Belize Import of Foreign Capital

Under the Exchange Control Regulations, only the Central Bank, authorized dealers and authorized depositories may deal in foreign currency, and a foreign exchange permit must be obtained from an authorized dealer or the Central Bank. The permission of the Central Bank is also required in order to secure a loan from outside Belize which involves a foreign currency, and also to service repayment of foreign debt.

The necessary approvals, however, can be easily secured in the case of genuine, approved enterprises. Foreign investors are required to register any investments made in Belize with the Central Bank to facilitate the repatriation of profits, dividends, etc.

No person, other than authorized dealers and authorized depositories, may retain any foreign currency in their possession without the consent of the Central Bank.

Foreign exchange accounts can be opened at local banks with the consent of the Central Bank.

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Belize Foreign Investment Regime

The Government of Belize lists the following criteria according to which it judges foreign investment:

• creates employment opportunities;
  
• makes maximum use of indigenous raw materials;
  
• earns foreign exchange;
  
• results in increased production;
  
• introduces state-of-the-art technology;
  
• enhances local management skills;
  
• promotes greater efficiency through competition;

• diversifies the economic base;

• facilitates access to foreign markets;
  
• is environmentally friendly.

Longer term incentives are offered for the location of industries in the less-developed rural areas of the country and for export-oriented projects or projects utilizing technology not previously introduced into Belize. The government prefers joint venture and partnership investments, but does permit one hundred percent foreign ownership of an enterprise.

THE DEVELOPMENT FINANCE CORPORATION

The Development Finance Corporation (DFC) exists: "to strengthen and expand the Belizean economy consistent with the macro-economic policies of the Government of Belize, by providing high quality, efficient implementation and management of Development Financing and related services on a financially viable or agency basis ensuring self-sustainability".

The DFC's primary objective is to invest in Belizean companies, through the purchase of shares and the provision of loans. It is interested primarily in companies majority-controlled by Belizeans, but also lends to foreign-owned Belizean companies. The DFC also offers factory shells for rent at its Industrial Estates at Ladyville (Belize District) and San Andres (Corozal District).

In recent years, the DFC has been mired in political controversy and was accused of losing sight of its original objective by becoming a source of cheap government-backed loans for well-connected investors. The DFC was declared insolvent in 2004 after making a series of bad loans, but the institution reopened its doors in July 2009 following a clean-up operation by the Barrow administration, with its original mission of giving aspiring Belizean businessmen a leg up restored.

INVESTMENT INCENTIVES

Investment incentives are contained in the following legislation:

The Fiscal Incentives Act (No.6) offers tax holidays and duty exemptions.

Tax holidays are normally offered for 5 years, extensible for up to a further 10 years; but in the case of agricultural investment may be for up to 25 years. However, there is a provision that the Minister for Economic Development, on application made by the company in a fit and proper case, can review the company's operations and renew the tax-holiday period for a further term not exceeding ten years.

Duty exemptions are offered to every company which has been granted an Approved Enterprise Order (Development Concession) to import into Belize, free of import duty, and revenue replacement duty, a wide range of industrial machinery, construction materials and raw materials. Exemption is normally given for 15 years, with a 10-year extension.

The terms of incentives are decided at Cabinet level. Companies applying under the Act need to be incorporated in Belize and applications have to be accompanied by:

• a copy of Memorandum and Articles of Association;
  
• copy of Certificate of Incorporation;
  
• banker's reference on the bank's official letter-head;
  
• land tenure deed;
  
• proforma profitability statement up to the second year of full production;
  
• list of items requested for duty exemptions;
  
• details of local inputs.
  

Application fees depend on the level of proposed investment, and at the time of writing, are as follows:

For further information, contact:

Permanent Secretary
Ministry of Economic Development
Belmopan, BELIZE C.A.
Tel. No.: (501)-8-22526
Fax No.: (501)-8-23111

In 2008, the Belize Trade and Investment Development Service (BELTRAIDE) announced that its focus will be trained on three strategic areas: Investment Promotion, Entrepreneurial Development, and Marketing.

As part of its strategy on investment promotion, BELTRAIDE is compiling a National Export Strategy which contains details on five priority investment sectors which possess a greater level of competitive advantage for Belize.

A Belize Marketing Study has been carried out, which identifies the potential of markets for niche-non-traditional products. This study will be an essential tool for Belizean producers to take advantage of trade opportunities in Central America, the United States, CARICOM and European Union.

To create a more conducive environment that stimulates growth in entrepreneurial development for small and medium-sized businesses, BELTRAIDE, in collaboration with the Commonwealth Secretariat, is working on a National SME Policy to address the issues and challenges affecting the development of micro, small and medium sized enterprises.

BELTRAIDE’s Executive Chairperson, Lourdes Smith announced in early 2008 that the organisation had another active and successful year in 2007. It interacted with 2,500 clients who were interested in trade and investment information on Belize, assisted in the development of twelve business plans, and conducted a series of business match-making undertakings with 41 furniture makers to improve their capacities.

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Belize Free Zones

The Commercial Free Zone Act 1994 established a Commercial Free Zone at Corozal to attract foreign investment. The Zone provides facilities for various activities including manufacturing, processing, packaging, warehousing and distribution of goods and services.

Businesses established in the Free Zone are free of foreign exchange restrictions and receive a range of other benefits including duty exemptions and tax holidays.

Goods and supplies entering and leaving the Free Zone for commercial purposes are exempt from import or export duties, quotas, stamp duties and revenue replacement duties.

Income tax is charged at between 2% and 8% on Free Zone businesses, but these rates can be reduced by up to 2% through tax credits earned by the employment of Belizean workers.

A fuller statement of the Free Zone Act can be found in Law of Offshore, and details of tax treatment in Offshore Legal and Tax Regimes.

For further information contact:

Corozal Free Zone Management Agency
Santa Elena, Corozal, Belize
Tel.No: (501)-4-23643
Fax.No: (501)-4-22341

EXPORT PROCESSING ZONES (EPZ)

Three locations have been designated as EPZs under the Export Processing Zone Act. The San Andres EPZ occupies 28.5 acres of land in the northern section of the country, only 8 miles away from the Mexican border, right next door to NAFTA. The other two Zones are both located approximately 9 miles from Belize City, the country's commercial capital. The EPZ adjacent to the Philip Goldson International Airport covers 4 acres, while the Price Barracks EPZ covers 14 acres.

In the EPZ, facilities are provided for activities in manufacturing, processing, packaging, warehousing and the distribution of goods and services. In fact, amendments made to the legislation in 1994 provide investors with the added option of constructing their own facilities and developing infrastructure within an EPZ, including independent utility installations. This option enables an EPZ to enhance its economic development, since it does not necessarily have to use the electricity or telephone facilities provided by the two local monopolies, The Belize Electricity Limited and The Belize Telecommunications Limited (now known as Belize Telemedia Limited, or BTL) respectively.

While new applications have been approved for ICT companies, the government continues to streamline the EPZ programme. In 2006, only 8 new EPZ companies were approved, bringing the total number of EPZ companies operating in Belize at the end of 2006 to 73.

However, the Minister of National Development has subsequently signed a statutory order revoking EPZ status for 18 non-performing companies, reducing the total number of EPZ companies currently operating in Belize to 55. Despite the lower number of EPZs, employment by EPZ companies was up from 3,746 in 2005 to 4,204 in 2006 and exports were also up from US$148m in 2005 to US$160m in 2006.

In April 2007, the Ministry of National Development, Investment and Culture announced the signature of an agreement with Pinnacle BST Company granting them Export Processing Zone status to establish a state of the art Information and Communications Technology (ICT) operations in Belize. Under the investment plan, Pinnacle BST will provide technical application services and call centre support in software consulting to its parent company, Pinnacle Group Worldwide of the United States. Operations for the company will be conducted from the EPZ park managed by International Communication Services Ltd. (ICSL) at the Burrell Boom junction in Ladyville. At maximum capacity, Pinnacle plans to employ 100 programmers and software technicians, creating much needed high end employment for residents in the Belize City area.

The approval for Pinnacle BST to operate in Belize is part of a new thrust by the government of Belize to expand the EPZ programme to include ICT companies, especially since they create higher income jobs for Belizeans. A total of four ICT companies were operating as EPZs in Belize in the first half of 2007, the largest of which was Ready Call Centre. It relocated to larger premises in September 2009, employing 650 people at the time and declaring its intention of doubling that number over the next few years.

An EPZ business in Belize receives a guaranteed tax holiday of 20 years, being exempt from income tax, withholding tax, capital gains tax or any new corporate tax. Other benefits include:

• an option to extend the tax holiday period;
  
• losses incurred during the tax holiday period may be carried forward and deducted against any future profits;

• any dividend paid by an EPZ business is exempted from tax in perpetuity;
  
• exemption from currency export taxes or foreign exchange taxes on all purchases or sales of foreign currency;
  
• exemption from customs duties, value-added taxes, sales taxes, excise taxes, trade turnover taxes, tonnage taxes, consumption taxes or other taxes for all imports and exports of an EPZ business;
  
• exemption from capital gains tax on the sale of stock or other partial or complete ownership interest in an EPZ business;
  
• exemption from property or land tax and property transfer tax. The Land Tax Act does not apply to EPZ property.