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MICHELE NORRIS, host:

From NPR News, this is ALL THINGS CONSIDERED. I'm Michele Norris.

Belize is a sliver of a country wedged between Mexico, Guatemala and the Caribbean, and it's the world's newest oil exporter. With prices still close to $60 a barrel, oil revenue has big potential to help this tiny, underdeveloped Central American nation.

And as NPR's John Burnett reports, there are also worries that oil will spoil a tropical paradise.

JOHN BURNETT: This is where it happened early the morning of August 1, 2005, in a clearing amid undulating green hills about an hour's drive from the capitol of Belmopan. Sheila McCaffrey, director of Belize Natural Energy, or BNE, will never forget the moment.

Ms. SHEILA McCAFFREY (Belize Natural Energy): Suddenly, to see that pressure building and just to see the magnitude of God's creation, really, underneath the earth to really come onto the surface, and oh - it was just unbelievable, really. I've never seen - there must've been about 40 guys on the site here and myself, and I witnessed 40 guys weep openly with tears of joy.

BURNETT: After 50 dry holes over 50 years, major oil companies had written off Belize. And then along came BNE, backed mainly by Irish investors, drilling five successful wells. Today, combined production is almost 3,000 barrels a day of sweet crude so low in sulfur that some farmers pump it directly into their tractors.

Of course, it's dwarfed by its northern neighbor, Mexico, which produces more than three million barrels a day. Still, any oil strike is huge news in a country smaller than Massachusetts with fewer than 300,000 people and three stoplights, and where a funeral in Belize City brings the nation's largest city to a halt.

(Soundbite of marching band)

BURNETT: The oil strike is also worrisome. Tourists flock to Belize to see Mayan ruins, hike rainforests and snorkel the largest barrier reef in the hemisphere. The fight to protect the nation's natural beauty has already begun. Last month, the Belize Supreme Court halted a U.S. oil company from doing seismic testing in a national park after nearby Mayan farmers complained. Johnny Briceno is Belizean minister of natural resources.

Mr. JOHNNY BRICENO (Minister of Natural Resources, Belize): We recognize we are never going to be a major producer of oil, in Belize. But whatever we find, we have to make sure that one, we get our fair share and that we use it wisely to assist us in development. At no point in time are we talking about let's forget agriculture, let's forget ecotourism and let's go and dig all over the place and get it out as quickly as possible.

BURNETT: The government of Belize claims it will try and avoid the corruption and environmental damage that have followed the discovery of oil in other countries, such as Nigeria. Belize has earned a little more than $2 million in oil revenues in the first year and that's expected to rise, but where to spend it? Expensive gasoline needs to be subsidized, the foreign debt needs to be paid down, schools need more teachers, villages need more rural water systems. Dean Barrow is an opposition congressman from Belize City.

Congressman DEAN BARROW (Belize): There's so much to choose from, so you won't be able to fix it all. But if you choose a half a dozen areas and the moneys can be seen to be targeted at those areas, people would, I think, be extremely happy.

BURNETT: As it happens, the region called Spanish Lookout, where oil was discovered, is owned by Mennonites, a society of devout Christians who trace their roots to Germany. These industrious, fair skinned, blue eyed farmers sell most of the dairy products and chicken in Belize.

(Soundbite of chickens)

BURNETT: Their hen houses are everywhere in Spanish Lookout. Edwin Teasin(ph), a Mennonite leader, knows the oil discovery brings income to his already prosperous community in the form of mineral royalties, grocery sales and truck driving, but he worries about the modernity that comes with it.

Mr. EDWIN TEASIN: Honestly, for the best of the community, I wish the oil was somewhere found besides the community. I think it's certainly that there's a change that it will change our lifestyle very much.

BURNETT: After last year's discovery, foreign oil companies were lining up to explore for additional mineral deposits in Belize, but now they're dismayed the boom may go bust before it gets started. Responding to popular pressure that the government was giving away the store, the Belizean Parliament is close to slapping a 40 percent income tax on oil companies.

One Texas oilman says this would push the government's take to more than 60 percent of net production. And so today, all the wildcat drilling projects are on hold. Larry Jones, president of Spartan Petroleum in Houston, was one of the oilmen who drilled dry holes in Belize in the past, and he was excited about the prospect of trying again.

Mr. LARRY JONES (Spartan Petroleum): I'm very disappointed. Belize is scaring off potential well funded operators. If things stay the same as we are presently faced with, we will probably go somewhere else.

BURNETT: And if that's the case, Belize's pristine wilderness may remain undisturbed, but the country may see little of the oil revenue it desperately needs. As Belize is learning, windfalls also bring hard choices.

John Burnett, NPR News.

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