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Price Controls, Yes or No?


Albert Area Rep., Local Economist, and BCCI President speak on whether it’s time to revisit ‘price control’ policy for sugar


The time may have come to revisit the government’s price-control policies on commodities such as sugar, but any alternative—especially considering the administrative and political realities unique to Belize—must be carefully thought out, Albert Area Representative Hon. Tracey Panton said in a recent interview with The Reporter.


Panton explained there is value in keeping price controls, as they help to assist in making essential goods and services available for disadvantaged households. She advised that while economists often express preference for targeted subsidies financed by taxes charged on goods priced at the market level, the unfortunate reality is that the proper execution of those types of programs hinges on careful planning and several other factors that could result in the targeted households not benefitting as intended.


“We should always be open to revisiting policies from the vantage point of determining if they are having the desired effect,” Panton shared. “However, it would be premature to declare that price controls should be done away with in favor of some other policy tool, without very careful and detailed analysis of all relevant alternative options and the dynamics of Belizean politics and society.”


The Economic Perspective


The careful position expressed by the Albert Area representative was echoed by Economist and University of Belize lecturer Dr. Philip Castillo. While Castillo spoke to a preference for free-market-determined prices and the utility of targeted social programs, he admonished that the unfortunate truth is that the Consolidated Fund has too many demands bearing down on it and it is very easy for the money intended for poor households gets redirected elsewhere.


“On the face of it, I would agree that from a market perspective, it is always best that the market determine the prices on the market. However, the market prices may lean against the poor; therefore, you need a system to take care of the poor,” explained Castillo. “However, there are administrative challenges and political realities in Belize that would dilute and detract from the desired objectives of targeted social assistance policies.”


Castillo agreed, however, that the continued practice—the price control and virtual subsidization of sugar in Belize—makes the product attractive for Mexican and Guatemalan buyers.


The Belize Chamber of Commerce & Industry


The Reporter also spoke with the President of the Belize Chamber of Commerce & Industry (BCCI) Marcello Blake who spoke expressed more direct support for the moving away from price controls in favor of more “efficient” policy tools.


“We [BCCI] continue to advocate for the removal of price control, because we continue to say that it doesn’t work,” underscored Blake. “The sugar industry situation highlights exactly this issue. If we had allowed the market to set the price, we would not need to import the sugar. This importation is a temporary fix, but the underlying issue remains, and we continue to make the product attractive for sale across to our contiguous neighbours.”


Blake, like Panton and Castillo, conceded that structural weaknesses in Belize’s public-administrative apparatus and its political dynamics are an issue; however, he stressed that corrective measures must be taken.


“Those administrative weaknesses exist because we have consistently failed to address the shortcomings of the Contractor General’s Office, the Accountant General’s Office, and other oversight mechanism,” lamented Blake. He added that Belize is essentially settling for the less efficient price-control option because we have repeatedly failed to fix the oversight mechanisms required to ensure that tax revenues go to their intended target.

The Backdrop

Panton’s, Castillo’s, and Blake’s comments fit into the backdrop of the ongoing sugar shortage in Belize, a country that has two sugar mills and, since 2012 to present, exports an average of $120 million of the commodity. The bulk of those exports (more than 80%) go to the United Kingdom, United States, Europe and CARICOM.


 The shortage has been attributed to the fact that the current market price for sugar is essentially double the controlled price at which it is sold in Belize. This price differential has incentivized local actors to sell the product to Guatemalan and Mexican buyers, who in turn sell the sugar at or closer to the market price in those countries.


The recent impasse between the mill and the Belize Sugar Cane Farmers’ Association (BSCFA) had also impacted the supply of the commodity, but with the recent agreement between the parties, local production is expected to pick up the pace.

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