Belize economy in crisis

An international tribunal at the end of June ruled that the government of Belize has to pay Lord Ashcroft more than 12% of the country’s GDP as compensation for nationalising his telecommunications company. What’s more, His Lordship is still in dispute over more details, to squeeze the last drop of blood out of the Belizean economy, which already has a 40% poverty rate and which he risks pushing over the edge into recession.

In August of 2009, the government of Belize nationalized the Belize Telemedia Limited (BTL) from a group of companies controlled by British billionaire and former Chairman of the Tory Party Michael Ashcroft. Immediately, a foreign arbitration claim was filed against Belize claiming US$200 million. This led to seven years of litigation and court battles that for the most part favoured Lord Ashcroft. As a result the economy of the country is now being threatened, as Ashcroft has demanded that Belize must pay $35 million in US currency towards settlement of the BTL acquisition. However, the Central Bank of Belize has warned that if such request is approved, the country faces devaluation of the Belize dollar.

The International Monetary Fund report for this year on Belize came with a warning. It indicated that international reserves could decline to uncomfortable levels, especially if compensation for the nationalized utilities is paid and repatriated.

Belize’s economy grew by only 1% last year and shrank by 2% during the first quarter of this year. These recent figures in the Belizean economy are a clear indication that meeting the demands of the Ashcroft group would put Belize’s economy at great risks

The first payment, as part of the arbitration award towards the nationalization of BTL, was made on 13 July. The payment consisted of US$29.5 million and BZD$134.9 million for compensation, plus £827,000 in legal fees, and 33,000 Euros in arbitration costs. However, the Ashcroft group has now indicated that the payment made in Belize dollars, must now be in US currency instead. According to the Central bank, this is a demand that the government cannot afford.

“The Central Bank would not be able to provide the additional US$70 million and to do so would mean that Belize’s US dollar position would shrink from US$422 million to US$159 million. That is the same as 1.5 months of imports, which is half the international benchmark of three months and this will be catastrophic to our economy,” said the governor of the Belize Central Bank.

This is an unacceptable state of affairs in a country which has 40% poverty rate. “In the absence of foreign exchange, our economy suffocates, resulting in increased poverty, and risk that we won’t be able to meet obligations to other creditors and trading partners,” he said.

Meanwhile the value of deposits in Ashcroft’s Belize Bank International fell by 75% in six months as it got caught in a US tax-evasion crackdown. Ashcroft’s political links in Belize are with the People’s United Party (PUP), which lost control in 2008 to the United Democratic Party (UDP). He has a fortune estimated at £1.34bn after decades as an investor and deal-maker in businesses ranging from car auctions to cleaning services and offshore banking. He is best known in the UK as the former Conservative Party deputy chairman who fell out with David Cameron last year, when he co-wrote a biography of the former prime minister notable for its allegations of debauched student years, in particular an incident involving a pig’s head.