AMLO to Belize: “Consider the proposals”

Mexican President Andrés Manuel López Obrador (AMLO)’s visit to Belize was certainly one of the shorter state visits to Belize by any Head of State with the itinerary allocating approximately five hours in the country before leaving for the last stop of the President’s regional tour, Cuba. A visit by Belize’s neighbor to the north is not uncommon, with the last one being as recent as 2017 by then President of Mexico Enrique Pena Nieto.

AMLO’s message in his address to Belize on the steps of the Edward Laing Building in Belize City conveyed Mexico’s plan to strengthen the bilateral relations between the neighboring countries but also included an insight into his ambition to integrate the countries of the Americas into an economic union, drawing a comparison with the European Union.

No Tariffs on Belizean Goods

One of the first announcements made by the Mexican President was the suspension of tariffs on Belizeans goods entering Mexico. In his speech, the President said, “We have recently come to an agreement with the Prime Minister [of Belize] for Mexico to suspend its tariffs on Belizean products.”

At face value, this may seem like a big move. According to the Statistical Institute of Belize (SIB), in 2020, Belize officially exported BZ $2.85 million in goods to Mexico. The SIB’s data likewise place the top export product as “pure-bred breeding animals” (HS01029). In 2020, this accounted for approximately 25% of Belize’s exports to our northern neighbor. In March this year, Prime Minister John Briceño noted that cattle exports to Mexico are at around 800 heads of cattle weekly with a value of close to $1 million dollars.

Certainly, the news of the suspension of tariffs for Belizean goods entering Mexico comes to the satisfaction of cattle farmers and other current exporters to Mexico, but the question that must be asked is “Why would Mexico do this?” Could this be an olive branch from the Mexican Republic to Belize as a sign of goodwill to strengthen bilateral relations? Perhaps. Or is it the fruit of effective diplomacy on the part of Belize? Sure, it is possible. But one factor in all this that stands out the most is the size of the trade between Mexico and Belize.

According to the International Trade Center (ITC), Mexico’s total imports are approximately US $382 billion (BZ$ 764 billion). These numbers show that Belize’s exports to Mexico account for well below one percent of its total imports. Belize’s trade deficit with Mexico is about BZ$200 million.

When you consider, then, the relatively small amount of revenue generated by Mexico from tariffs imposed on imports from Belize, it would make sense why Mexico has so “generously” suspended its tariffs.

It is not to say that the decision is not a good one. It could lay the foundation for more Belizean producers to find markets in Mexico for their goods and follow in the seemingly growing success of the cattle industry. But for the moment, the context around the suspension of tariffs does make the occasion a little less sweet.

Integrating Central America and Cuba?

In another portion of his address, AMLO remarked, “I submit that it is necessary to move towards an integration of the continent, including all of the Americas… a model similar to the European Economic Community.”

This position is not entirely new to Mexico’s foreign policy. Over the last two decades, Mexico has concluded Free Trade Agreements (FTAs) with almost all Central American countries, except Belize. The Mexico-Panama FTA is among the more recent, having entered into force in 2015.

Along these lines, the Mexican president’s vision is for the region to integrate so that extraneous shocks like global economic turndowns and supply shortages can be better weathered. A noble cause, of course, especially when we consider the disastrous effects of the COVID-19 pandemic and Russian invasion of Ukraine on our barely recovering regional economies.

But how close is too close? It is the question being asked by countries involved in economic communities and trading blocs. Economists continue to assess the effects of the Brexit vote on the British economy. Closer to home, the challenges of operating in CARICOM have manifested on numerous occasions, with the recent legal action taken by the Government of Belize against the Government of Trinidad & Tobago over the importation of sugar in 2021.

In this light, history would seem to demonstrate a need for greater scrutiny of trade agreements especially when it’s an LDCs treating with more developed counterparts.

Belize/Mexico Free Trade Agreement

Accompanying President Obrador’s announcement of the suspension of tariffs was an indication of an intention to bring into effect “genuine free trade.”

Mexico has been negotiating with Belize the conclusion of a Free Trade Agreement for almost 14 years. Resistance to the FTA has come largely from the private sector, citing the dangers of allowing an influx of Mexican products and services to come into Belize with an already wide trade deficit. But the issue has come to the forefront in recent months, and the visit by the Mexican President is sure to keep the spotlight on the subject.

The natural question to be asked is if there still a need for a Belize-Mexico FTA? Mexico has committed to suspending its tariffs on goods produced in Belize. Granted, the extent of the suspension is seemingly limited to agricultural products, beef, and other foodstuffs, but it still encompasses a large portion of what is considered as Belize’s priority areas.

An FTA, using the term in its usual meaning where all trade in goods and services are liberalized, would allow Mexican products to enter Belize without tariffs. This would present two problems. First, Belizean producers (beverage, agriculture, food items) could be placed at risk as the market could be flooded by cheaper goods manufactured in Mexico. For the consumer it may mean cheaper alternatives, but it would come at the cost of Belize’s already volatile productive sector. If it is the productive sector cannot compete in the domestic and Mexican market, it could lead to deleterious economic effects on businesses and, by extension, employment.

“No FTA” does not mean no trade agreement. There are alternatives. If, for sound trade policy reasons, it is desirable to enter into a trade agreement with Mexico, then it should be on the basis of thorough research and for the promotion of national economic and social development. This should not have to be explained. In the past, Belize has concluded a Partial Scope Agreement with Guatemala, liberalizing specific goods without posing a detrimental impact on Belizean producers.

But, if Belize’s goods have been granted preferential treatment when entering Mexico, then it is worth asking if there is still the same urgency for an FTA with Mexico at this time.

Conclusion

Belize was just a small stop on AMLO’s tour of Central American and Cuba but clearly his aspiration for integrating the region is much bigger. How Belize fits into the grander scheme of things is yet to be realized.

In many ways, the Belizean government has articulated openness to embracing Central American economic integration, while expressing disillusionment CARICOM. The former, at least, could be deduced from Prime Minister Briceño’s speech, which followed AMLO’s, where he said, in Spanish, “The future of Belize is in Central America and with Mexico.”