Culturally and economically Belize is more closely linked to the Caribbean than to its Central American neighbors. However, Belize's participation in Caribbean economic integration has not come about easily.
During the 1950s, British Honduras rejected repeated attempts by Britain to incorporate the colony into the proposed West Indies Federation. There were several reasons behind this resistance. One was the fear of being locked into a Caribbean arrangement at the expense of ties with the rest of Central America. Moreover, because wages in British Honduras were higher than in most other British Caribbean territories, the British Hondurans feared that participation in the West Indies Federation might trigger an influx of immigrants from other member states. Indeed, Britain was planning on such on influx.
In 1968, British Honduras began to see the merits of integration with the British Caribbean when the country's ongoing territorial dispute with Guatemala led to rejection of its application to join the Central American Common Market. In 1971 British Honduras joined the Caribbean Free Trade Association (Carifta), which in 1973 became the Caribbean Community and Common Market (Caricom--see Appendix C).
During the Great Depression of the 1930s, British grants were necessary to keep British Honduras economically viable. However, economic ties with Britain gradually were replaced by a growing trade relationship with the United States. This economic link to the United States was seriously weakened by the devaluation of the British pound sterling in September 1949. Respecting the wishes of the middle class, labor, and the colonial legislature, the governor at first refused to devalue the British Honduras dollar and instead kept it at par with the United States dollar. However, three months later, bowing to pressure from Britain and powerful economic interests in British Honduras, the governor overrode the Legislative Council and devalued the colony's currency (see The Genesis of Modern Politics, 1931-54. Imports from the United States then decreased sharply, and imports from Britain rose until they amounted to 35 percent of the total during 1952-54, exceeding the country's imports from the United States. Living costs increased dramatically as a result of the devaluation, and the colony was thrown into turmoil. Anti-British sentiment was widespread and fueled resistance to the British-sponsored West Indies Federation. Imports from the United States did not recover until the late 1950s.
During the 1960s and 1970s, the colony's economy grew rapidly, thanks in large part to the extraordinary success of the sugar sector. During the 1970s, sugar accounted for almost 70 percent of all export revenues. As a result of this high level of dependency, the Belizean economy, although prosperous, entered the 1980s insufficiently diversified and highly susceptible to external shocks.
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