AmbergrisCaye.com Home Forums About Belize Nation Currency

Can someone please "dumb this conversation down" for my sake...
What does all this currency talk mean to a person actively researching Real Estate to purchase on AC...? How will devaluating the currency / changing to the US dollar effect Real Estate values or the prospect of reselling..

Hard assets including real estate typically increase in price as a currency devalues. So if a house costs $100,000 Belizean and the currency devalues 10% the price of the house would typically increase to $110,000 Belizean.

Sometime there is a delay between the devaluation and the repricing of hard assets. This can be a good buying opportunity. I don't think this delay is possible in Belize as houses are priced in US dollars.

So the devaluation itself should have little impact on tourist type housing. However, fallout from the devaluation might have an impact if it causes political unrest or other problems that would make Belize a less desirable place to live.

Here are some questions to ask yourself when wondering if tourist type housing is going to rise or fall in value are "Given current foriegn economic conditions, how many foreigners are currently able to buy a house in Belize?" and "Given the local conditions in Belize, is the desirability of owning a home there rising or falling?"

There is no simple answer to the question. ChrisW brings to questions some very valid concerns ie. most property is priced in US $ and how stable is Belize. Belize in the past has marketed its self as a stable democracy. IF the country goes brook ie. Argentina, how stable will it remain and will it be able to attract foreign tourists and investment. I think that is a very important question because for Belize to survive it must get it's financial house in order. It does not have the natural resources to survive without tourism and foreign investment. So the first question I would ask myself, is Belize a stable, well run democracy or is it a poorly run goverment that is bankrupting the country thru coruption, over development and wasteful spending?

Thanks very much ChrisW and bywarren for your explanation....

Cambio owners meet to plan co-operation


Foreign exchange--or the lack of it--continues to
plague both the private sector and by extension, the
government that rations it. Today, in an effort to lay
the groundwork for the new system of casas de
cambio, ten license holders and four applicants met to
form an association and elect officers. While members
of that body this morning declined to speak to the
media, a press release issued Monday by the
government sheds some light on the situation, as well
as raising a few questions. According to the release,
cambio license holders will work together, much like a
cartel, to set exchange rates, which are "reasonable
and internationally accepted." While the Belize dollar
will remain technically pegged to the U.S. dollar at the
traditional two to one ratio, the exchange houses will
be able to charge a flexible "service fee". This fee,
which looks suspiciously like a floating exchange rate,
would be set beneath a ceiling agreed to every two
weeks after consultation with the Central Bank. It
appears that dealers will be asked to exercise
restraint in their mark-ups in exchange for Central
Bank enforcement of their exclusive status as
moneychangers. The association meets with Budget
Minster Ralph Fonseca next Wednesday and at that
time the public may learn more about the latest
attempt to confound the basic laws of supply and
demand.


===========

Businesses "beyond desperate" for
greenbacks


While authorities try to bring the
currency situation back into
equilibrium, hard pressed
merchants are resorting to new
methods to find the U.S. dollars
to pay for imports. Since last
week the big Hofius store on
Albert Street has posted a sign in
its window offering a twenty percent discount to those
customers who pay for their purchases in U.S. dollars.
While Central Bank authorities told News 5 the
practice lies somewhere in a grey area of the law,
Hofius boss John Crump assures us it's on the up and
up. According to Crump, his company was allowed by
the Central bank to open a U.S. dollar account and can
use it to hold the proceeds of any sales made in
greenbacks. Those funds can then be used to purchase
imports to restock the shelves. While the policy has
yet to raise many Yankee dollars, the company had
few options. "We are beyond desperation," says
Crump, who reports a backlog of over a quarter million
U.S. dollars owed to foreign suppliers. At this rate, the
veteran businessman says he and other merchants
may be forced to go under if the situation does not
improve in the next few months. Although he has a
longstanding relationship with two local banks, one is
able to supply less than ten percent of the dollars he
needs, while the other has not given him one U.S.
cent for over four months. Unfortunately, the U.S.
dollar shortage is only part of the problem. Many of
those blue notes waiting in line patiently in local
accounts are earning little or no interest, as many
banks are already so overloaded with Belize dollars
that they are not even accepting certificates of
deposit. And with loan money so easy to obtain from
the overstocked banks, the demand for expensive
imports like cars and home appliances only makes the
situation worse. While government continues to bear
the brunt of criticism for the problem, at this point
there is little Belmopan can do except what it is
already doing: encourage the productive export sector,
which is expected to see a turnaround is the next six
months, and in the meanwhile continue to defend the
dollar against devaluation.

What a crock!!!!

If the central bank has sufficient USD on hand to be able to supply the casio's with money to exchange why can't they just distribute the money to the other banks to use in normal exchange business.

The answer: Someone stands to make a lot of money with the "service charges" that the casio's will be allowed to charge and which can "float". I bet they float upwards at an ever increasing rate.

Holfius is right. Take the 20% devaluation and accept USD. Works better for everyone, except the casio's.

Sussangg, what say you?

My take on all this has not changed (see my prior messages on this topic).
What the "casas de cambios" appear to represent yet another opportunity for the top honchos to impose yet another tax on everybody who is forced to use this newly invented institution, with said tax money to go the way of all the other money that has been extorted from Belizeans and those who do business in Belize...just another way of transferring money from the pockets of those who earn it to those who have the power to take it away from them. Too bad.
On AC, it will be less onerous, simply because much of the economy has the capacity to simply ignore the government and do its own thing. So many dollars flow into the local economy and there is no way the government grabbers can control it...which means that the AC economy will chug along much better than the rest of the country.
People will have to tighten their belts but I think AC will survive, despite the government not because of it.

Oh, skeptical me. The press release uses the word "cartel". Yes the cambio owners are creating a cartel in a reverse way. The way the oil and drug cartels work are to keep the prices of their products as high as the market will bear thru supply and demand. The cambio owners are trying to get together to agree on what will be a lower than market price for US dollars. If they can stick toghether and set a price at lets say 2.20BZ to 1US when if as it is now the "demand price" ie. what must be paid on the "black" or open market is nearer to 2.50 to 1, then they make more money. And if they can get the government to make them the only legal source to exchange, then their monopoly remains. Their problem is that no matter how much they kick back to the government for this exclusive right, there will always be a black market until true supply and demand set the rate. One can argue now that for most purposes Belize's only really accepted money is US dollars, unless all you want to buy are some rice and beans or a joint. Once the merchants sell what inventory they have and are no longer able to restock because they have no US dollars, then the **** will hit the fan. The Belize dollar is history. It is just a matter of time.
PS: Keep in mind that controlling the US dollars as to who gets how much is another way of having control over the people. If the country were to go to another from of currency that is accepted world wide and readily available based on true supply and demand then the politicians would lose that control and be forced to take the measures that they are so avidly fighting against now. The fiscally responsible measures.

[This message has been edited by bywarren (edited 03-07-2002).]

It looks to me as if Belize is trying to set up two exchange rates. One for the tourists and one for import businesses.

The import businesses are getting burned because they have to buy things in US dollars and sell them in Belize dollars. When nobody will change their Belize dollars back to US dollars they have no way to buy more goods to sell (except by getting loans in US dollars). This has progressed to a critical point where many importers are on the verge of going out of business.

The government is letting the money changers charge more to try and make it easier (or possible) for businesses to exchange Belize dollars into US dollars.

At the same time, they are maintaining the official exchange rate so that the number of US dollars entering the system via tourism does not decrease.

In any case as bywarren said, they are trying to avoid the laws of supply and demand and they will eventually fail. History has shown that a currency will eventually find its correct value no matter the efforts of governments.



[This message has been edited by ChrisW (edited 03-07-2002).]

Oh so true. The big question is HOW LONG WILL IT TAKE ?

The longer this situation continues the more people and businesses suffer and in the end the longer the process takes to shake out the greater the overall disaster.