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Economist: 'Export Tax' could help ease Belize’s Sugar Shortage

Belize City, Belize — To remedy the sugar shortage caused by persons or businesses taking advantage of the price differential between Belize and neighbouring countries, an export tax, among other things, might help, Economist Dr. Phillip Castillo told The Reporter Thursday.

Dr. Castillo, an economics professor at the University of Belize, emphasized that an export tax could reduce the incentive for business persons to sell sugar across the border while providing added revenue to the government and formalizing trade, and simultaneously keeping domestic prices for sugar unchanged.

Economist Dr. Phillip Castillo

He ranked his recommendations in descending order of preference. The Export Tax, Castillo highlighted, would discourage illicit cross-border trade, boost government revenue on a tax that is paid by the Guatemalan or Mexican buyer, and ensure that sugar trade becomes part of the formal economy, contributing to the increase in Belize's official export statistics.

He also suggested that the second mill, Santander Sugars, should be allowed to supply the domestic market to fill the gaps in sugar availability.

Castillo, however, strongly opposed the idea increasing domestic sugar prices, underscoring the significant impact such a measure would have on lower-income households.

He also opined that the border-security option may not yield much fruit. “Our security forces are already stretched thin, so adding policing sugar may not be the best route,” Castillo noted, stressing the inefficacy of increased border management.

Regarding the idea of increasing domestic prices for sugar, the inflationary backdrop remains relevant. Recent data from the International Monetary Fund (IMF) shows that Belize's consumer price index (CPI) rose from 100 in 2020 to 114.53 in December 2023, indicating an average increase in headline inflation of approximately 15%. Although the inflation rate is decelerating, prices remain high, and any increase in sugar prices would exacerbate the financial burden on Belizeans.

Belize Sugar Industries Limited (BSI) has also been vocal about the sugar shortage, urging the government to address the pricing disparity between domestic and regional markets. The company, via release, informed the Belizean public that while Belize's brown sugar retails for about $0.40, in Guatemala it sells for close to $0.72 and almost $1.60 in Mexico.

BSI's attempts to bolster domestic supply have been undermined by rampant smuggling, fueled by higher sugar prices in neighboring regions and Mexico's production shortages. The company has warned its customers that sugar meant for domestic use must stay within Belize, threatening to cease supply to violators.

BSI has called for a review and potential increase in domestic sugar prices, noting that the last adjustments occurred 23 years ago for brown sugar and 9 years ago for white sugar. If price adjustments are not feasible, BSI advocates for stronger border controls to safeguard the national sugar supply.

The company's appeal underscores the urgent need for government intervention to stabilize the market and ensure Belizeans have consistent access to sugar.

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