Background Note: Bermuda

Background Note: Bermuda

July 2009

Bureau of European and Eurasian Affairs

PROFILE

OFFICIAL NAME:
Bermuda

Geography
Area: 58.8 sq. km. (22.7 sq. mi.).
Cities (2000 census): Capital--Hamilton (pop. 3,461) Other city--St. George (pop. 3,306).
Terrain: Hilly islands.
Climate: Semi-tropical.

People
Nationality: Noun and adjective--Bermudian(s).
Population (2009 est.): 64,395.
Annual growth rate (2009 est.): 0.31%.
Ethnic groups: Black 54.8%, white 34%, mixed and other 11.1%.
Religions (2000): Anglican 23%, Roman Catholic 15%, African Methodist Episcopal 11%, 7th Day Adventist 7%, Methodist 4%, other 40% (none or not stated).
Language: English.
Education: Years compulsory--to age 18. Bermuda placed third overall of six developed nations (including the U.S.) in the 2005 Adult Literacy and Life Skills Survey
Health (2007 est.): Infant mortality rate--4.7 per thousand. Life expectancy--men 76 yrs., women 80 yrs.
Work force (2007 est.): Sales--6%; services--18%; clerical--19%; professional and technical 21%; administrative and managerial--15%; agriculture and fishing--2%; laborers--3%, production, transport and related 19%.

Government
Type: British Overseas Territory with significant autonomy.
Constitution: June 8, 1968; amended 1989 and 2003.
Branches: Chief of State--Queen Elizabeth II, British monarch (head of state, represented by a governor). Head of Government--Premier, Ewart Brown. Legislative--Senate (upper house, 11 members appointed by the governor, the premier, and the opposition); House of Assembly (lower house; 36 seats elected by popular vote). Judicial--Supreme Court.
Subdivisions: Nine parishes.
Political parties: Progressive Labor Party (PLP), United Bermuda Party (UBP).
Suffrage: Universal at 18.

Economy
GDP (nominal, 2007): $5.8 billion. Sectors--27.2% ($1.593 billion) from international companies; 14% ($821.7 million) from real estate and rental; 14.1% ($823.0 million) from financial intermediation; 72% ($424 million) from wholesale, retail trade, and repair services; 5.4% ($316.0 million) from the hotel and restaurant sector; 5.5% ($322.5 million) from construction; and 26.6% ($1.6 billion) from other sectors.
GDP growth rate (2007 provisional): 4.6%.
Per capita nominal GDP (2007 provisional): $91,477.
Annual inflation rate (2009): 2.0%.
Natural resource: Limestone, used primarily for building.
Agriculture: Products--semitropical produce, dairy products, flowers, honey.
Industry: Types--re/insurance finance, tourism, structural concrete products, paints, perfumes, furniture.
Trade: Exports (2007, includes re-exports)--$27 million: semitropical produce, light manufactures. Imports (2007)--$1.15 billion: food, clothing, household goods, chemicals, live animals, machinery, transport, and miscellaneous manufactures. Major suppliers--U.S. ($828.6 million), United Kingdom, Canada, Caribbean countries (mostly oil from Netherlands Antilles).

HISTORICAL HIGHLIGHTS
Bermuda is an archipelago consisting of seven main islands and many smaller islands and islets lying about 1,050 kilometers (650 mi.) east of North Carolina. The main islands--with hilly terrain and subtropical climate--are clustered together, connected by bridges, and are considered to be a geographic unit, referred to as the Island of Bermuda.

Bermuda was discovered in 1503 by a Spanish explorer, Juan de Bermudez, who made no attempt to land because of the treacherous reef surrounding the uninhabited islands.

In 1609, a group of British colonists led by Sir George Somers was shipwrecked and stranded on the islands for 10 months. Their reports aroused great interest about the islands in England, and in 1612 King James extended the Charter of the Virginia Company to include them. Later that year, about 60 British colonists arrived and founded the town of St. George, the oldest continuously inhabited English-speaking settlement in the Western Hemisphere. When representative government was introduced to Bermuda in 1620, it became a self-governing colony.

Due to the islands' isolation, for many years Bermuda remained an outpost of 17th-century British civilization, with an economy based on the use of the islands' endemic cedar trees for shipbuilding and the salt trade. Hamilton, a centrally located port founded in 1790, became the seat of government in 1815.

Slaves from Africa were brought to Bermuda soon after the colony was established. The slave trade was outlawed in Bermuda in 1807, and all slaves were freed in 1834. Today, about 61% of Bermudians are of African descent.

The establishment of a formal constitution in 1968 bolstered internal self-government; debate about independence ensued, although a 1995 independence referendum was defeated. The government re-opened the independence debate in 2004.

GOVERNMENT AND POLITICAL CONDITIONS
Bermuda is the oldest self-governing overseas territory in the British Commonwealth. Its 1968 constitution provides the island with formal responsibility for internal self-government, while the British Government retains responsibility for external affairs, defense, and security. The Bermudian Government is consulted on any international negotiations affecting the territory. Bermuda participates, through British delegations, in the UN and some of its specialized and related agencies.

Government Structure
Queen Elizabeth II is head of state and is represented in Bermuda by a governor, whom she appoints. Internally, Bermuda has a parliamentary system of government.

The premier is head of government and leader of the majority party in the House of Assembly. The cabinet is composed of ministers selected by the premier from among members of the House of Assembly and the Senate.

The 36-member House is elected from 36 electoral districts (one representative from each district) for a term not to exceed 5 years. The Senate, or reviewing house, serves concurrently with the House and has 11 members--five appointed by the governor in consultation with the premier, three by the opposition leader, and three at the governor's discretion.

The judiciary is composed of a chief justice and associate judges appointed by the governor. For administrative purposes, Bermuda is divided into nine parishes, with Hamilton and St. George considered autonomous corporations.

Political Conditions
Bermuda's first political party, the Progressive Labor Party (PLP), was formed in May 1963 with predominantly black adherents. In 1965, the two-party system was launched with the formation of the United Bermuda Party (UBP), which had the support of the majority of white voters and of some black voters. A third party, the Bermuda Democratic Party (BDP), was formed in the summer of 1967 with a splinter group from the PLP as a nucleus; it disbanded in 1970. It was later replaced by the National Liberal Party (NLP).

Bermuda's first election held on the basis of universal adult suffrage and equal voting took place on May 22, 1968; previously, the franchise had been limited to property owners. In the 1968 election, the UBP won 30 House of Assembly seats, while the PLP won 10 seats and the BDP lost the 3 seats it had previously held. The UBP continued to maintain control of the government, although by decreasing margins in the Assembly, until 1998 when the PLP won the general election for the first time.

Unsatisfied aspirations, particularly among young blacks, led to a brief civil disturbance in December 1977, following the execution of two men found guilty of the 1972-73 assassinations of Governor Sir Richard Sharples and four others. In the 1980s, the increasing prosperity of Bermudians, combined with limited land area, caused a housing shortage. Despite a general strike in 1981 and economic downturn in the early 1980s, Bermuda's social, political, and economic institutions remained stable.

Both political parties have discussed the possibility of complete independence. An independence referendum called by a sharply divided UBP in the summer of 1995 was resoundingly defeated and resulted in the resignation of the premier and UBP leader, Sir John Swan. Just over 58% of the electorate voted in the independence referendum, which had to be postponed one day due to disruptions caused by Hurricane Felix. Of those voting, over 73% voted against independence, while only 25% voted in favor. Vote results may have been distorted by the Progressive Labor Party (PLP) call to boycott the referendum.

Eventual independence from the United Kingdom (U.K.) has been a goal of the PLP since the party's inception in 1963. In February 2004 then-Premier (and PLP party leader) Alex Scott announced his decision to commence an open and objective debate on the subject of independence. The government-appointed Bermuda Independence Commission held hearings island-wide where there was considerable focus on the mechanics of deciding independence, whether through an independence referendum, a general election, or some combination of the two. However, several recent polls indicated little support for independence. The international and local business communities continue to take a wait-and-see attitude.

Currently citizens of Britain's overseas territories, including Bermuda, are entitled to British citizenship. The British Overseas Territories Bill, passed in February 2002, provides automatic acquisition of British citizenship, including automatic transmission of citizenship to their children; the right of abode, including the right to live and work in the U.K. and the European Union (EU); the right not to exercise or to formally renounce British citizenship; and the right to use the fast track European Union/European Economic Area (EU/EEA) channel at the airport, free of U.K. immigration controls. The U.K. has said that citizens of an independent Bermuda would no longer be automatically entitled to British citizenship and the EU benefits that accrue to it.

There are no conditions attached to the grant of British citizenship to the overseas territories, a fact of particular importance to Bermuda where the issue of independence is being debated. A 1999 U.K. government White Paper states: "The new grant of British citizenship will not be a barrier, therefore, to those Overseas Territories choosing to become independent of Britain. Our Overseas Territories are British for as long as they wish to remain British. Britain has willingly granted independence where it has been requested; and we will continue to do so where this is an option."

Following a bitter and divisive general election on December 18, 2007--which many predicted would be very close--the Progressive Labor Party (PLP) under Premier Ewart Brown was returned to power with the same number of seats as it had going into the election.

The opposition United Bermuda Party (UBP) lost its third successive election, and opposition leader Michael Dunkley lost his seat in the House of Assembly. He was appointed opposition leader in the Senate. The UBP elected member of parliament Kim Swan as opposition leader and Cole Simons as deputy. Mr. Swan is a first-time member of parliament whose previous public service was as a UBP senator.

Principal Government Officials
Head of State--Her Majesty, Queen Elizabeth II
Governor--His Excellency, Sir Richard Gozney
Premier--The Honorable Ewart Brown

Bermuda's interests in the U.S. are represented by the United Kingdom, whose embassy is at 3100 Massachusetts Avenue, NW, Washington, DC 20008; tel: 202-588-6500; fax: 202-588-7870.

The Bermudian Government's Department of Tourism has offices in New York and Toronto.

ECONOMY
Bermuda has enjoyed steady economic prosperity since the end of World War II, although the island experienced a mild recession in 2001-2002, paralleling the recession in the U.S. Bermuda enjoys one of the highest per capita incomes in the world. Its economy is based primarily upon international business and tourism. In 2008, international business and tourism accounted for 57.4% of the total balance of payments current account receipts of foreign exchange. However, the role of international business in the economy is expanding, whereas that of tourism is generally contracting.

Bermuda is an offshore financial center with a robust financial regulatory system. The government cooperates with the United States and the international community to prevent money laundering and terrorist financing and continues to update its legislation and procedures in conformance with international standards. Bermuda first enacted specific money laundering legislation in 1997, passing the Proceeds of Crime Act (PCA) to apply money laundering controls to financial institutions such as banks, deposit companies, trust companies, and investment businesses, including broker-dealers and investment managers. Insurance companies were covered to the extent that they were judged susceptible to the risk of money laundering abuse. Amendments in 2000, effective June 1, 2001, expanded the scope of the legislation to cover the proceeds of all indictable offenses, including tax evasion, corruption, fraud, counterfeiting, theft, and forgery. The Bermuda Monetary Authority Amendment (No. 3) Act 2004 clarified the authority of the Bermuda Monetary Authority (BMA) to respond to requests from overseas regulators for information about clients.

In December 2002, parliament passed the Bermuda Monetary Authority Amendment Act 2002, expanding the list of BMA objectives to include action to combat financial crime. It underpinned the BMA's role in checking systems and controls in financial institutions and paved the way for the BMA to expand its role in administering UN sanctions and other measures on a delegated basis. In order to implement provisions of relevant UN Security Council anti-terrorism resolutions, the act--among other provisions--prescribed the manner by which the finance minister may delegate to the BMA the power to block accounts.

Bermuda enacted the Investment Business Act (IBA) in 1998 to regulate the island's financial services industry. In response to international directives, the government passed the Investment Business Act 2003 to further refine its terms. The act created a balance between government regulation on the one hand and the competitive needs of Bermuda's most important industry--international business--on the other hand. By updating its regulatory framework, Bermuda enhanced its reputation globally as an international standard-bearer. In return, international businesses registered in Bermuda were recognized as having met or surpassed the most stringent international criteria.

In 2006, Bermuda considered additional legislation to further enhance its compliance with international financial standards. The Collective Investment Scheme Act, a plan to institute a formal licensing regime for investment schemes, was passed by parliament at the end of 2006 under the name of the Investment Funds Act 2006. The act was implemented in early March 2007.

Following a review of Bermuda’s anti-money laundering legislation by the International Monetary Fund in 2007, Bermuda introduced the following legislative initiatives to ensure it remains fully compliant with international standards in this complex and developing area:

The Proceeds of Crime (Anti-Money Laundering and Anti-Terrorist Financing) Regulations 2008. This updated the previous 1998 regulations and ensured Bermuda remained consistent with international standards. It also expanded the group of financial institutions affected by anti-money laundering and anti-terrorist financing (AML/ATF) legislation.

Anti-Terrorism (Financial and Other Measures) (Business in the Regulated Sector) Order 2008. This ensured that the entities affected by the AML legislation were also bound by ATF legislation.

Financial Intelligence Agency Act 2007. This established an independent agency responsible for the receipt and analysis of suspicious activity reports filed by financial entities.

Proceeds of Crime Regulations (Supervision and Enforcement) Act 2008. This appointed the Bermuda Monetary Authority as the authority responsible for ensuring compliance by the financial sector with the AML/ATF regulations. It provides for powers to obtain documents, conduct investigations and, in some cases, the capacity to impose civil penalties of up to $500,000 for failures to comply with the AML/ATF regulations. It also requires registration with the BMA for financial entities not already licensed under one of the BMA’s regulatory acts.

Bermuda has an ongoing program to ensure it remains internationally compliant with AML/ATF. Currently, legislation is under development to provide for the regulation of lawyers and accountants in relation to this area, and it is anticipated that other enterprises with a vulnerability to money laundering or terrorist financing activities will be the subject of legislation in the near future.

In 2008, 15,201 international companies were registered in Bermuda, many U.S.-owned. They are an important source of foreign exchange for the island, and spent an estimated $1.5 billion in Bermuda in 2008. The growing importance of international business is reflected in its increased share of GDP. This sector provided $1.593 billion in total output, which represents 27.2% of total GDP or a 22.4% increase compared to 2006. Additionally, it is now the island's largest employer, with 4,701 jobs in 2008.

Historically important for employment and tax revenue, Bermuda's tourism industry had been experiencing difficulties for many years. The travel industry was hit in 2008 amidst a recession, soaring gas prices, a weaker U.S. dollar, and reduced flights by airlines. A total of 555,162 visitors arrived in 2008, a decline of over 100,000 people for the year compared to the 663,767 visitors in 2007. Occupancy rates decreased in 2008 by eight percentage points, with hotel occupancy for the year rounding out at 59%, down from 67% in 2007. Visitors contributed an estimated $475 million to the economy in 1996, but that figure ranged from $318.5 million to $378.3 million in 2008, down from a range of $402.3 million to $473.4 million in 2007.

Bermuda has little in the way of exports or manufacturing; almost all manufactured goods and foodstuffs must be imported. The value of imports rose from $551 million in 1994 to $1.15 billion in 2007. The U.S is Bermuda's primary trading partner, with $828.6 million in U.S. imports in 2007. The U.K., Canada, and the Caribbean countries (mainly the Netherlands Antilles) also are important trading partners. Exports from Bermuda, including imports into the small free port that are subsequently re-exported, decreased from $35 million in 1993 to $27 million in 2007.

Duty on imports is a major source of revenue for the Government of Bermuda. In 2006-2007, the government obtained $230.2 million, or 26 %, of its revenue base from imports. Heavy importation duties are reflected in retail prices. Even though import duties are high, wages have kept up for the most part with the cost of living, and poverty--by U.S. standards--appears to be practically nonexistent. Although Bermuda imposes no income, sales, or profit taxes, it does levy a real estate tax.

Bermuda is home to immigrants from other countries. According to the 2000 census, 79% of the population is Bermuda-born and 21% is foreign-born. U.K. immigrants comprise 28% of the immigrant population; U.S., 20% (although the U.S. Consulate estimates that the figure is closer to 40%); Canada, 15%; Caribbean, 12%; and Portugal/Azores, 10%. In February 1970, Bermuda converted from its former currency, the pound, to a decimal currency of dollars pegged to the U.S. dollar.

FOREIGN RELATIONS AND U.S.-BERMUDIAN RELATIONS
The United Kingdom is formally responsible for Bermuda's foreign and defense policy. U.S. policy toward the U.K. is the basis of U.S-Bermudian relations. In the early 20th century, as modern transportation and communication systems developed, Bermuda became a popular destination for wealthy U.S., British, and Canadian tourists. While the tariff enacted in 1930 by the U.S. against its trading partners ended Bermuda's once-thriving agricultural export trade--primarily fresh vegetables to the U.S.--it helped spur the overseas territory to develop its tourist industry, which is second only to international business in terms of economic importance to the island.

During World War II, Bermuda became a significant U.S. military site because of its location in the Atlantic Ocean. In 1941, the U.S signed a lend-lease agreement with the U.K. giving the British surplus U.S. Navy destroyers in exchange for 99-year lease rights to establish naval and air bases in Bermuda. The bases consisted of 5.8 square kilometers (2.25 sq. mi.) of land largely reclaimed from the sea. The U.S. Naval Air Station was on St. David's Island, while the U.S. Naval Air Station Annex was at the western end of the island in the Great Sound.

Both bases were closed in September 1995 (as were British and Canadian bases), and the lands were formally returned to the Government of Bermuda in 2002.

The Government of Bermuda has begun to pursue some international initiatives independent of the U.K. in recent years pursuant to a General Entrustment Agreement. Bermuda signed a cultural memorandum of understanding with Cuba in 2003. The island also joined the Caribbean Community (CARICOM) as an associate member in 2003. The U.S. Coast Guard (USCG) provided search and rescue assistance immediately following Hurricane Fabian in September 2003, but Bermuda declined subsequent offers of reconstruction assistance from the U.S. and U.K., preferring to accept assistance from its Caribbean neighbors. The USCG continues to provide search and rescue assistance as needed.

In 2009, however, the Government of Bermuda offered asylum to four former Uighur Guantanamo Bay detainees, without consulting the U.K., on the basis that the decision was an internal immigration matter. The U.K. countered that security is a matter for which it has jurisdiction. As a result, the U.K. is reviewing the General Entrustment Agreement.

An estimated 8,000 registered U.S. citizens live in Bermuda, many of them employed in the international business community. There also are a large number of American businesses incorporated in Bermuda, although no actual figures are available. Despite the trend of American businesses moving to Bermuda or other offshore jurisdictions to escape U.S. taxes, Bermuda maintains that the island is not a "tax haven" and that it taxes both local and foreign businesses equally.

While U.S. visitors to Bermuda are critical to the island's tourism industry, the number of U.S. visitors to Bermuda is declining. In 2008 only 72% of air arrivals originated from the U.S., compared to 83.9% in 1990. The number of air and cruise passengers from the U.S. totaled 464,000 in 2000. That number fell to 449,677 American passengers in 2008. Another 3,014 Americans sailed to the island via private yacht in 2008.

In 2007, 72% of Bermuda's imports came from the U.S. Areas of opportunity for U.S. investment are principally in the re-insurance and financial services industries, although the former U.S. base lands also may present long-term investment opportunities.

Principal U.S. Officials
Consul General--Gregory W. Slayton
Consul--Margaret Pride

The U.S. Consulate General is located at "Crown Hill," 16 Middle Road, Devonshire, just outside the City of Hamilton; tel: 441-295-1342; fax: 441-295-1592; web site: http://hamilton.usconsulate.gov/.

TRAVEL AND BUSINESS INFORMATION
The U.S. Department of State's Consular Information Program advises Americans traveling and residing abroad through Country Specific Information, Travel Alerts, and Travel Warnings. Country Specific Information exists for all countries and includes information on entry and exit requirements, currency regulations, health conditions, safety and security, crime, political disturbances, and the addresses of the U.S. embassies and consulates abroad. Travel Alerts are issued to disseminate information quickly about terrorist threats and other relatively short-term conditions overseas that pose significant risks to the security of American travelers. Travel Warnings are issued when the State Department recommends that Americans avoid travel to a certain country because the situation is dangerous or unstable.

For the latest security information, Americans living and traveling abroad should regularly monitor the Department's Bureau of Consular Affairs Internet web site at http://www.travel.state.gov, where the current Worldwide Caution, Travel Alerts, and Travel Warnings can be found. Consular Affairs Publications, which contain information on obtaining passports and planning a safe trip abroad, are also available at http://www.travel.state.gov. For additional information on international travel, see http://www.usa.gov/Citizen/Topics/Travel/International.shtml.

The Department of State encourages all U.S. citizens traveling or residing abroad to register via the State Department's travel registration website or at the nearest U.S. embassy or consulate abroad. Registration will make your presence and whereabouts known in case it is necessary to contact you in an emergency and will enable you to receive up-to-date information on security conditions.

Emergency information concerning Americans traveling abroad may be obtained by calling 1-888-407-4747 toll free in the U.S. and Canada or the regular toll line 1-202-501-4444 for callers outside the U.S. and Canada.

The National Passport Information Center (NPIC) is the U.S. Department of State's single, centralized public contact center for U.S. passport information. Telephone: 1-877-4-USA-PPT (1-877-487-2778); TDD/TTY: 1-888-874-7793. Passport information is available 24 hours, 7 days a week You may speak with a representative Monday-Friday, 8 a.m. to 10 p.m., Eastern Time, excluding federal holidays.

Travelers can check the latest health information with the U.S. Centers for Disease Control and Prevention in Atlanta, Georgia. A hotline at 800-CDC-INFO (800-232-4636) and a web site at http://wwwn.cdc.gov/travel/default.aspx give the most recent health advisories, immunization recommendations or requirements, and advice on food and drinking water safety for regions and countries. The CDC publication "Health Information for International Travel" can be found at http://wwwn.cdc.gov/travel/contentYellowBook.aspx.

Further Electronic Information
Department of State Web Site. Available on the Internet at http://www.state.gov, the Department of State web site provides timely, global access to official U.S. foreign policy information, including Background Notes and daily press briefings along with the directory of key officers of Foreign Service posts and more. The Overseas Security Advisory Council (OSAC) provides security information and regional news that impact U.S. companies working abroad through its website http://www.osac.gov

Export.gov provides a portal to all export-related assistance and market information offered by the federal government and provides trade leads, free export counseling, help with the export process, and more.

STAT-USA/Internet, a service of the U.S. Department of Commerce, provides authoritative economic, business, and international trade information from the Federal government. The site includes current and historical trade-related releases, international market research, trade opportunities, and country analysis and provides access to the National Trade Data Bank

ENDS

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