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Belize Mexico Border into the Corozal Free Zone

The Fiesta Inn in Chetumal charges a little over USD $50 per night as a Belizean special rate on weekends, not bad for a 3+ star hotel.  Northbound cars are waved by at the Chectemal Bridge with hardly a cursory check of the occupants and their travel documents. The Mall of the Americas employees are all becoming bilingual, (and if you count Creole, trilingual).

Service to Belizean shoppers by Mexican retailers, hotels and restaurants is becoming a boom business. Belize Immigration estimates that approximately 7,000 Belizeans travel to Chetumal each weekend, with numbers climbing to as much as 12,000 on special occasions, while an equal or greater amount of Mexicans travel daily into the Corozal Free Zone to shop for cheap counterfeit fashions, cigarettes perfumes, and liquor for further trade or consumption.

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Belizean Cars at Fiesta

The asymmetry of our interaction is one of the root causes of the stark difference in development between Belize and Chetumal; Belizeans buy higher-priced taxed goods and services in a welcoming mainstream municipal economy, while Mexicans buy low cost and untaxed goods and services in an ad hoc zone, isolated from our mainstream economy.

On this backdrop, many current factors seem to indicate that Belize’s future as a trading partner with Mexico could ether brighten or disappear.   With a weak peso against the US dollar, demand for goods and services in Chetumal will grow, while an uncertain trade future under NAFTA, along with our physical, cultural and political links into CARICOM and Central America should make us a pertinent target for Mexico’s foreign trade relations. While this may seem like a cornucopia of opportunity for both economies, there are many side effects of our long relationship with Chetumal that can impact our future in a negative manner.

A bit of Chetumal’s history with Belize may shed some light on how this great love story between us came to be what it is today.

Chetumal, formally known as Payo Obispo, was established by Naval officer, Lt. Orthon P. Blanco in 1898. The small settlement was hacked out using machetes purchased in British Honduras, by Mexican Navy men that were granted safe passage through the waters of British Honduras under a long-standing maritime treaty with Great Britain.   This treaty, which guaranteed safe passage of merchant vessels and goods, eventually evolved into Chetumal’s role as a Free Port, using Belize’s deep-water facilities and roadways to feed into the southern gateway of Mexico. Together, interests in Belize and Chetumal established the backdoor into Mexico, so to speak.

In the second half of the 20th Century, Belize and Mexico’s role was amplified as an informal trading route for restricted Asian and European goods that were trade-banned by the Federal Government in an effort to grow Mexico’s manufacturing base. Loose border regulations and Chetumal’s federal designation as a free port allowed the rise of an elite merchant class that controlled significant trading houses in the growing State capital; closely linked with Belizean trading and transport counterparts in a cozy smugglers embrace. Under the Free Port designation, all goods and services imported into the economic zone of Chetumal, delineated in a radius of about 30 km from the coast, could be imported free of duties, tariffs or restrictions. Along with this, personal allowances to outside buyers permitted a large amount of those exports to trickle into the rest of Mexico. This led to the rise of the “fayuqueros”; casual traders that use any means necessary to move contraband goods into Mexico. This thriving trade of Chinese made knockoff brands, European delicacies, liquor and cigarettes; all transited via Belize, fuelled the economy of Chetumal well into the late 1980s.

The centrally planned city of Cancun was established with federal funds in the early 1970’s and grew as an epicenter of mass Mexican tourism along the Mexican Riviera encompassing much of Quintana Roo. This, along with a general liberalization of trade between Mexico and the world, meant that the commercial power of Q. Roo would shift from the State Capital. In its place, the government seat of political power and influence, flush with increased taxation revenue, exploded in the Chetumal bay, and with it, the population and economy of this isolated Southern outpost.

As gentrification came to Chetumal, in the looming shadow of growing liberalization of Mexican trade that would eventually lead to NAFTA, with it came an imperative that it clean up its act. As part of those cleanup efforts, corrupt customs officials were dismissed, and highways and infrastructure improved, along with a general introduction of improved law and order, and organised commerce under national and global brands. At the same time, neighboring Mexican states increased their vigilance against smuggled goods; favoring trade with conglomerates from the North, which brought more state tax revenue in an improving and better regulated fiscal climate, but less of the traditional informal trade of the previous few decades.

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Rickshaw in CFZ

The demise of informal trade, replaced by tougher enforcement, meant that traditional merchants had to refocus their investments into more legitimate activities. Large trading families that had made small fortunes in the free port era, reinvested in hotels, restaurants and in brand name retail establishments in the Capital and statewide, while others joined forces with a few Belizean traders and developers to move their trading activities into the newly established Corozal Free Zone, the CFZ.

The CFZ, in its initial incarnation, gave an outlet for trade to continue. In a convenient coincidence, the Mexican fuel monopoly, Pemex, in an effort to normalize fuel prices, and to become more market driven in preparation for NAFTA, raised fuel prices beyond their traditional subsidized rates. This move brought great opportunity to the CFZ; where duty free sales of fuel to Mexicans skyrocketed, creating a huge influx of buyers into the dusty community of gas stations and tin-shed warehouses; now chock full of the same cheap knockoffs that could no longer legally enter Mexico as formal trade without high tariffs.

The CFZ brought an instant boom to the early movers. Belizean and Mexican investors became overnight real estate moguls, building shoddy warehouses and storefronts as quickly as they can, and earning huge rents for quick payback. This grungy zone, short on infrastructure, but long on commercial activities, expanded to its highest point with over 800 registered businesses and millions of Mexican visitors that required no formal travel documentation to enter and who benefitted from the same personal allowance for purchased goods once returning home. This new outlet for informal trade also meant that the fayuqueros could continue business as usual.

The sheer volume of visitors into the CFZ eventually caught the attention of another informal sector that faced prohibition in Mexico, gambling. In an unorthodox arrangement, the PUP administration licensed three casinos under the Export Processing Zone regime in the customs free area between the Rio Hondo and the border checkpoint, outside the CFZ. These tax-free entities successfully marketed their business in Mexico where casino gambling is technically illegal, leading to excursions from as far as Mexico City for gamblers seeking the thrill of easy winnings.

With informal trade and gambling came a great deal of cash, and doors opened for illicit activity to thrive on their backs. It wasn’t long before the Zone came on the radar for those that saw opportunity in moving cash and its surrogates; cigarettes, liquor and gambling, into the mainstream Mexican consumer markets. The free movement of goods and money meant that few regulations existed to hamper commerce of all kinds. While the fayuqueros continued their small scale trading, soon truckloads of counterfeit cigarettes and possibly other contraband in wholesale form, found their way across the bridge, bound to markets throughout Mexico.

This is what the zone is facing today, and indeed the cause of a great big black eye to our banking system, and its effects are leaking into the rest of the national economy. Banks, forced to follow strict compliance rules, or else risk losing their corresponding arrangements have jettisoned their free zone business; leaving the zone dependent on cash in large quantities. Even the Casinos are affected as they face great difficulty in depositing cash, and instead rely on other ways to cover their expenses and keep their doors open.

This latest chapter in Belize-Chetumal relations is still being written, as zone businesses continue to operate under difficult circumstances. The zone’s importance as a large source of employment in the otherwise depressed Corozal district means that policy makers must balance that reality against the impact on the economy as a result of banking and security challenges, not to mention the damage on our relationships with Mexico. As pressures mount, it is only a matter of time before the dam will break.

Early talks are underway to look at ways in which the CFZ can be converted to economic activities that are more palatable, and that can retain the employment benefits for the North. The recent infrastructural works at the border, and the new move to facilitate the processing of travellers and goods at the checkpoints is a first step in regulating the inbound movement of goods into Belize from Mexico. Certainly, the growing pressure on the Mexican side will compel greater scrutiny of movements from the CFZ, as was evident in the recent clash between customs and the fayuqueros on the border.

As uncertain as the future is for the CFZ, it is incumbent upon us as Belizeans to do what we can, just like Chetumal did, to clean up our act in the North, and to look for opportunities for economic development for our people.   We need to take stock of what we have and use it to our advantage.   Corozal is on the border with the third wealthiest state in Mexico. In that mono-culture, anything Belizean is interesting and exciting. I have had conversations with Mexicans that dream of visiting our cayes, reefs, rivers and forest. They love rice and beans and Supa G. Their radio stations play Lova Boy and Andy Palacio. Bern Velasquez has found a market selling his CDs throughout the peninsula, and our Belizean-Chinese fried chicken is a hit to the few that visits.

There is no reason why, like Las Vegas, or New Orleans, we cannot become a mecca for leisure and entertainment to this huge market of middle class Mexicans and tens of millions of visitors. Both of those cities came from similar beginnings as Belize, and look where they are now.

It will take some planning and investment, and it will take dedication and bipartisan support, as well as buy in from our business community. Divisions along ethnic lines in business will have to be overcome and government will need to expand its investment in infrastructure, but it can be done. Belizeans go to Chetumal to get what they cannot get in Belize: current movies, restaurants and shopping, and we pay full taxes for those treats. We must find a way to give the Mexicans and their tourists that which they don’t have and how to make it easy for them to travel to get it, and we don’t need a Free Zone to do it.

We need to stop selling ourselves short and like the citizens of Chetumal, we need to distance ourselves from the old world of contraband trade.

Now, on this Valentine’s Day 2017 is the time to start to write the next chapter in our long love affair with Chetumal.