Bermuda Offshore Banking
If recent times are anything to go by, every good Bermudan should
be able to sense a storm coming from the first gentle breeze on
his cheek. Down the years the Island, as it’s known, has seen
more than its share of tempests destroying both land and property.
And, although this archipelago in the middle of the Atlantic
maintains its status as one of the world’s most elite
and reputable offshore financial centres, a blast of hot air
could be on its way from across the water.
Bermuda Offshore Banking & The Economy
For decades, Bermuda’s economy has been inextricably linked
to that of the United States. The Bermudan dollar is equivalent to
the US dollar. Tourism, particularly in the form of well-heeled Americans
from New England, has long been an important part of the Bermudan
economy. And whether or not the American economy bottoms out gently
or not, almost every commentator agrees that it will flatten. This,
in turn, will mean fewer New Englanders (and Americans generally)
coming to the isles. While tourism may appear to be a side
issue to Bermuda’s global financial services economy, it is,
in fact, essential to the island’s overall prosperity. This
is because of the pressure a failing tourism sector places on the
country’s young government. ©
For several years, Bermuda has faced the paradox of a hugely successful
financial services sector while tourism stutters. Powerful Bermudan
financial organisations want the world’s best actuaries, underwriters
and bankers. But equally, Bermudans believe local people should
be given opportunities to do these high-powered and well-paid jobs.
So, when there is a squeeze on tourism, the people issues become
more pronounced.
Bermuda Offshore Banking Regarding Jobs
When arguing for more jobs for local people, Bermudans are swift
to point to the country’s education system which has produced
a literacy rate among the population of 98 per cent.
The problem of tourism versus finance has been growing steadily
in Bermuda. In 1989 a record number of people visited the isles.
Since then the numbers have diminished. In 1999, Bermuda recorded
a 10,000 fall in tourist numbers. Bermuda has undertaken various
advertising campaigns to arrest the decline, but visitor numbers
have continued to dwindle. Two years ago, the islands’ biggest
hotel, the Marriott Castle Harbour shut down, taking 200 Bermudan
jobs with it.
At the same time, the finance community has surged forward. Reinsurance
group XL Re recently posted profits that equate to US$2m per day
for an entire financial quarter. Similarly NT Butterfield, one of
the island’s three banks, has just delivered record profit
of US$14.28m and paid higher-than-expected dividends to shareholders.
Bermuda Offshore Banking & Work Permits
“Work permits are an extremely sensitive issue in Bermuda,”
says Inside Bermuda publisher David Marchant. “Many Bermudans
are resentful towards foreigners working on their island. The collapse
of Bermuda’s tourism industry since 1989 has not helped.”
The thing that has probably troubled Bermuda’s power brokers
more than anything in recent times was the election of the Progressive
Labour Party in 1998. The political pendulum had finally swung from
right to left. It was the first time in the country’s history
that the PLP wrested power from the right-wing United Bermuda Party.
The finance sectors were nervous, not least because of their lost
links with the ruling administration and the uncertainty of a new
regime.
Bermuda Offshore Banking And The Fledgling Government
So far though, the fledgling government has done nothing to
concern the financial world. During the last budget, the only thing
the opposition party really tried to attack was a 25 per cent increase
in land taxes. The UBP’s finance minister, Dr Grant Gibbons,
criticised the increase, claiming much of the extra revenue had gone
on “first-class travel, entertainment, cars, roadshows and self-congratulatory
magazine inserts”.
But Bermudans from both ends of the political spectrum seem unfazed
by the hike. “Imagine your council tax went up by a quarter.
It’s hardly the same thing as a twenty per cent increase in
income tax,” says one long-standing resident.
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