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Local economist: ‘Inflation not political’

By Michelle Sutherland

“Inflation is not political. Much of what happens with the price rise in Belize is not political. That doesn't mean that the government is totally helpless; there are things that the government can do and should do to mitigate inflation, but that is all they will be to do—mitigate it. They cannot stop it completely,” said Dr. Phillip Castillo, a local economist, and lecturer at the University of Belize.

Castillo explained that it is “import inflation,” which simply means that because Belize imports the majority of the goods that you see on shelves in stores across the country, we are also importing the additional inflationary costs that these goods come with. That cost also trickles down to goods that Belize exports as those require materials that are also imported.

“Whatever inflation rate is occurring in our main trading partners, because we import a lot, we also import that. When commodities reach the port, you are charged Cost Insurance Freight (CIF) and if any of those go up, then obviously the price for Belizeans will go up as well. The CIF doesn't include the various tax and duties and impositions that Government may also add on.”

The driving force behind inflation in other parts of the world, Castillo explained, is due to several factors. First, the war between Ukraine and Russia, which apart from driving up the prices of oil, has also affected the price of food and agricultural staples as Russia is the largest wheat producer. It must be recalled that Belize also imports fertilizer. Apart from the ongoing war and the international price shocks that it has created worldwide, Castillo said that there are also the effects of freight cost which has also increased due to the recent port congestion.

The third factor which Castillo mentioned is the rippling effects of the pandemic, which at one point had brought services, business, and even life to a standstill. That notably led to the shortages in certain goods across the globe and then, interestingly, the price for those goods skyrocketed as demand later increased. When you add all those factors to what is happening locally, including the challenges that Belize's economy is facing, as well as the lack of competition, it pushes the prices of goods up, which is passed on from the producer to the consumer.

“Keep in mind,” Castillo reiterated, “Most of these factors are totally outside of our control. … I foresee the continued increase in prices.”

While the prices of goods are expected to continue to increase, Castillo said that we may see the government attempting to mitigate inflation in specific sectors such as what they did to issue fuel subsidiaries to tour guides, bus drivers, and even cane farmers in the north. According to Castillo, the government can also reduce some of its taxes to basically mitigate or offset some of these continued price increases in specific sectors.

That, however, will come at a very heavy price, as Castillo explained. dIt will result in a major loss of revenue for the government.

“Because much of our inflation is imported, I am not certain what any government can do. Politicians do what politicians do. So I am just going to ignore the noise that both of our political parties make because at the end of the day, the government is working within certain constraints that they cannot control for the most part. They cannot control the global matters that affect Belize and Belize is such a small player in those global market forces,” said Castillo.

Last week, the United Democratic Party (UDP) hosted a press conference, during which they took aim at the Briceño Administration for the high inflation rate in the country. UDP's Party Leader Moses “Shyne” Barrow said, “These are all people who grew up in wealthy, so, of course, they do not understand 69% increase in pigtail, and for rice, and flour and corn beef, they will never understand that they have no clue.”

Notably, the PUP, while in opposition, likewise utilized things such as the price of fuel as part of their campaign.

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