Diplomatic Pouch / June 16, 2009
By Larry Luxner
This year, Bermuda celebrates its 400th anniversary as a colony of England. And judging from the festive mood at a May 20 reception here, that happy status isn't going to change anytime soon — despite threats to its all-important tourism and reinsurance sectors.
"Bermuda is the most populous and the wealthiest of Britain's remaining territories," declared the party's host, Dominick Chilcott, deputy head of mission at the British Embassy.
"Many [former British colonies] have robust democratic institutions, good educational systems and investment levels they would not otherwise have had, while others are places in conflict or contain too many poor people," he mused. "If only the whole empire could have turned out like Bermuda."
Although Bermuda has observer status in the 15-member Caribbean Community (Caricom) due to long-standing cultural ties, it is geographically not a part of the Caribbean at all. The prosperous colony sits out in the middle of the Atlantic — 650 miles due east of North Carolina, and a two-hour flight from Washington.
The island's 67,000 inhabitants are squeezed onto just 21 square miles of land, translating into nearly 3,200 people per square mile — and making Bermuda even more densely populated than Bangladesh.
But with average per-capita GDP approaching $90,000 a year, people live extremely well, and the colony enjoys excellent relations with both London and Washington. Next month, it will mark the 400th anniversary of Bermuda's settlement by shipwrecked English colonists in 1609 with a flotilla of tall ships docking in picturesque Hamilton harbor.
The event is aimed at boosting tourism, which at the moment is taking a beating.
"This party is an occasion to celebrate the close ties between Bermuda and teh U.S., as well as those between Bermuda and Britain," said Chilcott, as guests raised their glasses in a toast to Queen Elizabeth II. "These three territories of very different dimensions share a rich, common history, and this close triangular relationship is now 400 years old.
"Yet its location, which has made Bermuda a great place for summits, has not made for easy politics on the occasions when Britain and the United States were at each other's throats," Chilcott noted wryly.
"Some Bermudians helped American forces steal 100 barrels of British gunpowder, which was then smuggled to the American colonies. And during the War of 1812, it was from Bermuda that a British force set sail to attack Washington, D.C., and burn down their public buildings. But I hope we can let bygones be bygones."
That was fine with Chilcott's guests, which included Gregory W. Slayton, the U.S. consul general in Hamilton, as well as three top Bermudian officials: Premier Dr. Ewart Brown, Deputy Premier Paula Cox and Finance Minister Donald Scott.
The three were in town to hold annual bilateral talks in Washington, as some lawmakers take aim at the global reinsurance industry — which just happens to be the largest sector of Bermuda's economy.
"Our timing is critical," said Brown in a prepared statement. "It is abundantly clear that members [of Congress] know these issues are coming down the pike and they want to be ready. They want to know what is in the best interest of their constituents and they are asking us to educate them. They want hard data so they can make informed votes should the time come."
The Bermuda delegation argues that a discriminatory tax proposal on the industry would drive up prices for average Americans. A recently completed economic analysis by the Brattle Group noted the impact of proposed legislation will increase U.S. consumers' insurance bills by up to $12 billion annually.
Cox, insisting that "it is important we continue to tell the Bermuda story on Capitol Hill," said tourism is down significantly as a result of the U.S. economic slowdown.
That's not the only bad news. Last month, Moody's Investor Service cut its long-term foreign currency credit rating on Bermuda to 'Aa2' from 'Aa1,' citing vulnerability to external shocks because of its small size and lack of diversity.
"The current global credit crisis and recession are affecting the outlook for Bermuda's most important industry, insurance and reinsurance," said Steven Hess, sovereign credit analyst at Moody's. "While we do not see a major threat to the viability of the industry, the dynamism experienced over the past decade in this industry could be considerably lessened."
Even so, Bermuda's government debt ratios are still low by international standards, and its long track record of prudent fiscal management justifies the high 'Aa2' government debt rating.
Cox, for one, is decidedly upbeat.
"We are going through challenging times, but Bermuda has shown a resilience and a robustness which will see us weather this storm as well," she said. "I have no doubt that, as a result of our ongoing ties with the United States — and the nature of our colonial relationship with the U.K. — Bermuda will be well-positioned until she chooses to take the ultimate step of independence."