What do the Caymans have over Belize?

For a Friday puzzler consider the following two countries and then try to determine which is more prosperous:

Belize and the Cayman Islands are both small former English-speaking British colonies located in the Caribbean with similar climates and roughly the same mixed racial heritage.

Belize has a population about six times greater than that of the Caymans, and has a much larger and more varied land area, with many more natural resources, including gas and oil, and some rich agricultural land that the Caymans lacks.

Both have nice beaches, but Belize boasts the second-largest barrier reef in the world and also has the tourist appeal of Mayan ruins.

So, which is the richer country? If you said Belize, which has been fully independent for more than 30 years, you’d be wrong.

The Caymans may not be fully independent but is self-governing at the local level, with its own currency, laws and regulations. It also has about six times the real per capita income of Belize, according to Richard W. Rahn, a senior fellow at the Cato Institute.

So how have the Caymans succeeded where Belize has not?

“Perhaps most important is that Cayman had and maintained a competent and honest judicial system, which gave foreign investors’ confidence that their property would be protected,” wrote Rahn, who is also chairman of the Institute for Global Economic Growth.

The Caymans have a very low crime rate, which cannot be said for many parts of Belize.

Many judges in Belize are poorly trained, incompetent and, in some cases, corrupt, all of which makes investors think twice before considering pouring money into Belize.

“It is obvious why Cayman is rich and Belize is poor, and it comes down to one word: governance,” Rahn writes. “If Belize would clean up its courts, fully protect property rights and adopt the best economic practices of its competitors, it could quickly become rich.

“For instance, it takes an average of 44 days to get all of the required permits to open a new business. In some countries, such as Estonia, Singapore and even the Commonwealth of Virginia in the US, the required paperwork to open a business can be done online. Thus, days have been reduced to just a few hours.”

Rahn rightly points out that there is no inherent reason for any country to remain poor over the long haul, citing Singapore, Mauritius, Korea, Chile, Estonia and the Caymans as diverse examples of nations that have become relatively rich over the past few decades.

“Those countries that are still relatively poor are poor because they have not put in place the necessary institutions, political structures and policies,” he said.

Rahn sounded a somber note for the most developed countries of the world when he added that the United States and a number of other wealthy nations are becoming less free and thus, not surprisingly, are growing more slowly.

“Belize could become rich and the US and Cayman could become poor,” he said. “It all depends on whether the political entities elect wise and courageous leaders.”

(HT: Cafe Hayek)


4 thoughts on “What do the Caymans have over Belize?

  1. “It all depends on whether the political entities elect wise and courageous leaders.”

    Like Mitt Romney! See how he has made the Cayman Islands prosperous?

  2. British rule of the Caymans protected the islands from big businesses overrunning the government and seizing control of vital natural resources, Banana Republic style.

    On the other hand, British misrule of British Honduras (as Belize was formerly known) promoted big foreign businesses at the expense of local laborers — suppression of fair labor standards, and the preventing of natives and other non-corporate interests from owning land, did severe damage to local governance. Institutional corruption is difficult to overcome.

    In short, it was government regulation which made the Caymans more prosperous than Belize, while corporate mismanagement, ironically with the blessings of that same government, which crippled opportunity in Belize.

    Cafe Hayek said that, didn’t they?

  3. You obviously know more about this region than I do, but I gather from your comment that the British interfered in the workings of both areas, just in different degrees.

    While one could argue, as you have, that government regulation made the Caymans more prosperous than Belize, one could also argue that government intervention resulted in the problems of Belize. I’m sure that British promotion of big foreign businesses at the expense of local laborers involved legislative and procedural maneuvering, rather than it happening purely on its own.

    Unfortunately, the British had a history of mucking things up in its colonies. The US, of course, has had a similar track record.

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