PRESENTATION BY THE HON. GABRIEL MARTINEZ MINISTER OF LABOUR at the ILO TRIPARTITE CARIBBEAN CONFERENCE JAMAICA, 1-2 April 2009 “Promoting Human Prosperity beyond the Global Financial Crisis: Seeking Sustainable Solutions through Social Dialogue” THE CRISIS: IMPACT ON PEOPLE AND ORGANISATIONS 1. Introduction : Mr. Chairman, first of all please allow me to express my appreciation to the ILO Subregonal Office for the Caribbean and the sponsors of this Conference, for affording me the opportunity to participate in this timely and very important forum. My presentation will focus on two aspects of the global financial crisis in terms of its potential spillovers and their implications for Belize, a small, developing country. I will first give an overview of the key sectors of our economy that bear the most impact and the implications for our people and organisations. This will be followed by possible solutions and action for addressing the challenges identified. I will close my presentation with a brief conclusion. 2. Sectors of the Belizean Economy Impacted by the Global Crisis The global economy has been slowing down as a result of the financial and economic crisis, and there appears to be a heightened probability of a contraction (or further reduction) in 2009. While the fallout from this crisis is still emerging, it may impact Belize in several ways. This is combined with current challenges that Belize is experiencing from the damage suffered from two major floods in 2008. These two weather systems destroyed human life, agricultural crops and livestock, housing, bridges and road infrastructure, with damages estimated at $132 million Belize dollars. GDP growth is projected to decelerate from 3.8% in 2008 to 3.0% in 2009. The main growth dampeners will be: 1
a) Domestic Exports: � Negative GDP growth in North America and the European Union has caused reduced demand for main agricultural exports � The resulting over-supply of products in the global markets due to the global recession and the reduced prices will result in a decline in export earnings. � Forecasted petroleum receipts should fall by $108.3 million or 53.2%. � Due to sluggish consumer demand in the US dining-out-market, lobster prices have fallen by an average of 28.0% so far in 2009 and this will lower export receipts from this major marine export. � Farmed shrimp prices are assumed to decline due to a weakening in Mexican demand, caused by the depreciation in the Mexican Peso. The Mexican and European markets are the target markets for 2009. � Citrus juice earnings are dependent on the conditions in the US/EU markets. For 2009, a 24.0% reduction in the average unit export price for citrus juices is predicted; so receipts will fall substantially. � Cross border trade with Mexicans in the Commercial Free Zone will fall, causing imports and sales of the CFZ to weaken by around 5.0% � The result of the fall in commodity prices and weaker cross-border trade will be largely responsible for a 15.9% decline in total exports during 2009. b). Inflows from Tourism: � Inflows from tourism are expected to decline by $51.1 million or 2.7% in 2009. � Stay-over visitors in December 2008, which is the start of the peak season for Belize’s tourism was 4.8% lower than in December 2007. � A 3.7% decline in stay-over tourists is predicted in 2009 � The US Accounts for about 64% of total stay-over arrivals, while Europe accounts for 14%. c). Remittances: 2
� A decline in family remittances is expected in 2009, as the US unemployment rate rises and households make further cuts in their spending. Family remittances are projected to fall by 10% or $14.9 million in 2009, based on actual information already available from money transfer businesses. d). Foreign Direct Investment: � Foreign direct Investment is expected to decline by 48.8% in 2009 due to the global financial crisis; as the availability of credit and capital in the international market tightens, and investors become more risk averse. e). External Private Sector Loans: � A slowdown in external private sector borrowing is expected in 2009 due to the international credit crisis. One cause of this is the temporary shelving of expansion plans and the postponement of new investment projects due to global instability. 3. Impact of the crisis on People and Organisations: Mr. Chairman, the obvious effects of these fallouts from the global financial crisis are as follows: � Reduced prices for agricultural products result in reduced profits for industry; reduced income for farmers; reduced wages for workers; and an increasing incidence of poverty, particularly in respect of migrant workers; � There will be a contraction in construction due to the winding up or slowing down of tourist oriented developments; � A marginal contraction in wholesale/retail activity is expected due to an unexpected reduction in imports, a fall in tourist expenditures and the winding down of large, capital intensive projects during 2009; � A deceleration in real estate activities is expected; 3
� The reduction in arrivals of stay-over tourists may lead to some job losses in tourism and related businesses; � Disposable incomes are likely to fall with the decrease in tourism activity, remittance inflows and foreign direct investment; � Weakening prices for major export commodities are causing some producers to temporarily put expansion plans on hold; � Large retailers report that customers are shifting to lower cost, generic brands and business turnover has fallen; and � Demand should be lower for non-essential expenses such as telephone calls, eating out and so on. But all is certainly not gloom and doom Mr. Chairman. There is no evidence to date of lay-offs or shut downs in the agriculture, tourism and other sectors. Encouragingly, the Statistical Institute of Belize reports a contraction in the unemployment rate of 8.1% at April 2008, from 8.5 % in 2007; and is still projecting GDP growth to be between 2.5% and 3.0% for 2009. This is premised on higher production of banana, grains and papaya; maturing investments in farmed fish and shrimp and higher petroleum output. 4. Actions to Address the Challenges: To ensure the buoyancy of the economy, and the wellbeing of the Belizean people and organisations, the government is taking the following steps: � The launch of our version of a stimulus package with concessionary loans from multi-lateral institutions, amounting to around $200 million. This will be injected into: o The tourism development project; o A solid waste management project; o The Development Finance Corporation, to provide student and housing loans and loans to small and medium enterprises; o Infrastructure rehabilitation; and o Municipal urban renewal 4
� GST has been removed from medication and medical services; basic food items have been zero rated; and the rates of electricity have been lowered. � A positive effect of the fall in petroleum prices is the dramatic cut in fuel prices at the pump. 5. Conclusion In conclusion, Mr. Chairman, and in the interest of time, I would like to make brief mention of the Decent Work Country Programme for Belize which should come on stream a few months from now. We expect positive outcomes from the two aspects of this programme that focus on a strengthened tripartite partnership; and training and development and employment readiness for our women and youth. These are indeed timely initiatives considering the impacts of the global challenges Finally, a strong social partnership is an imperative if we are to capitalize on the opportunities arising from the global crisis – because there are opportunities available, as the Theme for this Conference implies. It is in this spirit that the Government of Belize endorsed a Committee with membership drawn from the Employers’ Representatives, Workers’ Representatives and NGOs to develop a multipartite process with Government. We remain optimistic and believe that with a strong social partnership approach and the proactive initiatives being undertaken by Regional institutions such as the Caribbean Development Bank, the CARICOM Secretariat, specifically the Council for Finance and Planning (COFAP), and the Regional Financial Task Force, our Caribbean Community will weather the storm fairly well. Thank you Mr. Chairman 5
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