Belize’s Emerging Securities Market Is an Economic Game Changer 

What if there was a way for your money to earn interest or dividends outside of a traditional savings account? Many Belizeans place their hard-earned money in savings accounts, earning up to two percent annually at banks or up to four percent at credit unions. However, those savings could also be invested in securities that offer competitive, often higher, interest rates. In this week’s installment of Five Point Breakdown, News Five’s Paul Lopez explores Belize’s securities industry in detail.

 

Paul Lopez

Let’s talk about securities. And no, we are not talking about home security or business security. We are talking about a financial instrument that has monetary value and can be traded. Let’s look at how this industry is reshaping the financial sector in Belize.

 

1). What are Securities?

We sat down with Economic Consultant Rumel Arana for an explanation of the securities industry.

 

Rumel Arana, Economic and Financial Consultant

“Securities are generally of two types; you have debt securities and equity securities. Equity securities represent an ownership stake in a business or however is giving that security. People of Belize might recognize that in the form of shares or stocks.  The return people get from those comes in the form of dividends. So, when dividends are declared by the business at the end of the year, you as the shareholder receive and amount depending on the percentage or the amount of shares that you own.”

 

The Belize Telemedia Limited is one entity that deals in equity securities. Recently the telecome giant issued a public notice informing shareholders that the company will begin to pay final dividends for the 2023/2024 fiscal year. And then there is debt securities.

 

2). What are Debt Securities

It is called debt security, because the issuer is essentially a borrower. The investor does not receive shares in return but rather a stream of annual interest payments. For further explanation, we turned to the Belize City Council. They have issued bonds in the past to advance their development operations.

 

Bernard Wagner, Mayor, Belize City

“It empowers you as a municipality that you are now able to access funding outside of the traditional way of how municipalities use to access finance. They would either do an overdraft. They would either do loans. But what we found out is that the Belize City investment climate is ripe for issuing securities. We have close to eight hundred million in excess liquidity in the banking system. For Belize City we offer interest rates on our bonds, between four-point five percent and five and a half percent. That is competitive compared to the market. It helps us fund roads, streets, bridges. That is what it does for municipalities.”

 

3). Regulating Belize’s Securities Industry

And every effective securities industry needs a regulatory body. That is where the Financial Services Commission (FSC) comes into play. At its core, the FSC is mandated to protect and enhance the reputation of Belize as a financial centre while protecting investors from unfair and fraudulent practices. Guided by the Financial Services Commission Act, the Securities Commission Act, and the Municipal Securities Act, FSC’s Securities Policy Analyst, Shawn Gordon, further explained the role of the FSC.

 

Shawn Gordon, Securities Policy Analyst, FSC

“A large part of our mandate as the securities regulator is to ensure that investors are well protected at all times. So really, if you have an entity or a company that wants to conduct securities business, they must be registered to do so within our jurisdiction. We need to ensure that one, the company and also the personnel involved are fit and proper or even qualified to do so in our jurisdiction. We also regulate offerings, so for example, the Belize City Council bonds. Typically, when an officer wants to put something to the market, the have to get the approval from the commission, the security regulator. So, typically how that works they have to submit a prospectus, a document that has all the material you as an investor need to make an informed decision.”

 

4). The Future of the Securities Industry

Belize has the components necessary to expand the market for securities to be issued, which is also known as a primary securities market. But there is a next step in the process where these previously issued securities can be bought and sold by investors. This is referred to as a secondary market. The stock exchange market is an example that does not currently exist in Belize.

 

Rumel Arana

“At the stock exchange, you need several things that happen before that. You need underwriters, investors, what we call a central securities deposit. We can’t hold them all in terms of the physical certificate. If I want to trade, that would be harder. I would have to walk with my certificate to you and say here this is worth ten thousand dollars, purchase this from me and you hand me ten thousand dollars, you know the risk involved in that. So you need central security, institutions and an economy that is ready for it. If you are being honest the average Belizean household is making ten thousand dollars or less, so that doesn’t give them disposable income to make that purchase.”

 

5). Become A Smart Investor

So, until then, the key takeaway for potential investors is that opportunities exist to earn passive income outside of the banking system through securities investments. But, as FSC’s Securities Policy Analyst, Shawn Gordon, explained, every potential investor must always do his or her due diligence.

 

Shawn Gordon

“The key thing here is to ensure that investors are doing their part, their own due diligence. So, if you are seeing an advertisement from a firm, whoever it is, domestic or international, you must always doublecheck with the commission via our website or simply send us an email to ensure that entity is registered to carry out securities business.”

 

Reporting for News Five, I am Paul Lopez.