Bahamas, The (12/05)

For the most current version of this Note, see Background Notes A-Z.

PROFILE

OFFICIAL NAME:
Commonwealth of The Bahamas

Geography
Area: 13,939 sq. km. (5,382 sq. mi.); slightly larger than Connecticut and Rhode Island combined.
Cities: Capital--Nassau, New Providence. Second-largest city--Freeport, Grand Bahama.
Terrain: Low and flat.
Climate: Semitropical.

People
Nationality: Noun and adjective--Bahamian(s).
Population (2003): 317,000.
Annual growth rate (2003): 1.1%.
Ethnic groups: African 85%, European 12%, Asian and Hispanic 3%.
Religions: Baptist (32%), Roman Catholic, Anglican, Evangelical Protestants, Methodist, Church of God, Rastafarian, Traditional African.
Language: English (official); Creole.
Education (2003): Years compulsory--through age 16. Attendance--92%. Literacy--95.5%.
Health (2003): Infant mortality rate--11.0/1,000. Life expectancy--69.8 years.
Work force (2004): 176,330; majority employed in the tourism, government, and financial services sectors.

Government
Type: Constitutional parliamentary democracy.
Independence: July 10, 1973.
Branches: Executive--British monarch (nominal head of state), governor general (representative of the British monarch), prime minister (head of government), and cabinet. Legislative--bicameral Parliament (40-member elected House of Assembly, 16-member appointed Senate). Judicial--Privy Council in U.K., Court of Appeal, Supreme Court, and magistrates' courts.
Political parties: Free National Movement (FNM), Progressive Liberal Party (PLP), Coalition for Democratic Reform (CDR).
Suffrage (2002): Universal over 18; 144,758 registered voters.

Economy
GDP (2004): $5.7 billion.
Growth rate (2004): 3%.
Per capita GDP (2004): $17,883.
Natural resources: Salt, aragonite, timber.
Tourism (2004): 40% of GDP.
Government spending (2004): 20% of GDP.
Financial services (2004): 15% of GDP.
Construction (2004; 10% of GDP): Products--largely tourism related.
Manufacturing (2004; 8% of GDP): Products--pharmaceuticals, rum.
Agriculture and fisheries (2004; 3% of GDP): Products--fruits, vegetables, lobster, fish.
Trade (2004): Exports ($469.3 million)--salt, aragonite, chemicals, fishing, fruits, vegetables, beverages. Markets by main destination--U.S. (77.5%), E.U. (17.8%), Canada (1.6%), Mexico (0.4%). Imports ($1.82 billion)--foodstuffs and manufactured goods; vehicles and automobile parts; hotel, restaurant, and medical supplies; computers and electronics. Suppliers by main origin--U.S. (83.3%), Venezuela (5.5%), Netherlands Antilles (2.6%), E.U. (2.1%), Japan (1.2%).

PEOPLE
Eighty-five percent of the Bahamian population is of African heritage. About two-thirds of the population reside on New Providence Island (the location of Nassau). Many ancestors arrived in the Bahama Islands when the islands served as a staging area for the slave trade in the early 1800s. Others accompanied thousands of British loyalists who fled the American colonies during the Revolutionary War.

Haitians form the largest immigrant community in The Bahamas. 30,000 - 50,000 are estimated to be resident legally or illegally, concentrated on New Providence, Abaco and Eleuthera islands.

School attendance is compulsory between the ages of 5 and 16. The government fully operates 158 of the 210 primary and secondary schools in The Bahamas. The other 52 schools are privately operated. Enrollment for state primary and secondary schools is 50,332, with more than 16,000 students attending private schools. The College of The Bahamas, established in Nassau in 1974, provides programs leading to bachelors and associates degrees. Several non-Bahamian colleges also offer higher education programs in The Bahamas.

HISTORY
In 1492, Christopher Columbus made his first landfall in the Western Hemisphere in The Bahamas. Spanish slave traders later captured native Lucayan Indians to work in gold mines in Hispaniola, and within 25 years, all Lucayans perished. In 1647, a group of English and Bermudan religious refugees, the Eleutheran Adventurers, founded the first permanent European settlement in The Bahamas and gave Eleuthera Island its name. Similar groups of settlers formed governments in The Bahamas until the islands became a British Crown Colony in 1717.

The late 1600s to the early 1700s were the golden age for pirates and privateers. Many famous pirates--including Sir Francis Drake and Blackbeard--used the islands of The Bahamas as a base. The numerous islands and islets with their complex shoals and channels provided excellent hiding places for the plundering ships near well-traveled shipping lanes. The first Royal Governor, a former pirate named Woodes Rogers, brought law and order to The Bahamas in 1718 when he expelled the buccaneers.

During the American Revolution, American colonists loyal to the British flag settled in The Bahamas. These Loyalists and new settlers from Britain brought Colonial building skills and agricultural expertise. Until 1834, when Britain abolished slavery, they also brought slaves, importing the ancestors of many modern Bahamians from Western Africa.

Proximity to the U.S. continued to provide opportunity for illegal shipping activity. In the course of the American Civil War, The Bahamas prospered as a center of Confederate blockade-running. During Prohibition, the islands served as a base for American rumrunners. Today, the Bahamas is a major transshipment point for narcotics on the way to the U.S.

Bahamians achieved self-government through a series of constitutional and political steps, attaining internal self-government in 1964 and full independence within the Commonwealth on July 10, 1973. Since independence, The Bahamas has continued to develop into a major tourist and financial services center.

GOVERNMENT AND POLITICAL CONDITIONS
The Bahamas is an independent member of the Commonwealth of Nations. It is a parliamentary democracy with regular elections. As a Commonwealth country, its political and legal traditions closely follow those of the United Kingdom. The Bahamas recognizes the British monarch as its formal head of state, while an appointed Governor General serves as the Queen's representative in The Bahamas. A bicameral legislature enacts laws under the 1973 constitution.

The House of Assembly consists of 40 members, elected from individual constituencies for 5-year terms. As under the Westminster system, the government may dissolve the Parliament and call elections at any time. The House of Assembly performs all major legislative functions. The leader of the majority party serves as prime minister and head of government. The Cabinet consists of at least nine members, including the prime minister and ministers of executive departments. They answer politically to the House of Assembly.

The Senate consists of 16 members appointed by the Governor General, including nine on the advice of the prime minister, four on the advice of the Leader of the Opposition, and three on the advice of the prime minister after consultation with the Leader of the Opposition.

The Governor General appoints the Chief Justice of the Supreme Court on the advice of the prime minister and the Leader of the Opposition. The Governor General appoints the other justices with the advice of a judicial commission. The Privy Council of the United Kingdom serves as the highest appellate court.

Local government districts elect councils for town planning, business licenses, traffic issues and maintaining government buildings. In some large districts, lower level town councils also have minor responsibilities.

For decades, the white-dominated United Bahamian Party (UBP) ruled The Bahamas, then a dependency of the United Kingdom, while a group of influential white merchants, known as the "Bay Street Boys," dominated the local economy. In 1953, Bahamians dissatisfied with UBP rule formed the opposition Progressive Liberal Party (PLP). Under the leadership of Lynden Pindling, the PLP won control of the government in 1967 and led The Bahamas to full independence in 1973.

A coalition of PLP dissidents and former UBP members formed the Free National Movement (FNM) in 1971. Former PLP cabinet minister and member of Parliament Hubert Ingraham became leader of the FNM in 1990, upon the death of Sir Cecil Wallace-Whitfield. Under the leadership of Ingraham, the FNM won control of the government from the PLP in the August 1992 general elections. The FNM won again in March 1997. In the general elections held in May 2002 the FNM was turned out of power by the PLP, led by Perry Christie, which won 29 of the 40 seats in the House of Assembly.

Principal Government Officials
Governor General--Paul Adderley (Acting)
Prime Minister--Perry Christie
Deputy Prime Minister and Minister of National Security--Cynthia Pratt
Minister of Foreign Affairs and the Public Service--Fred Mitchell
Ambassador to the United States and to the OAS--Joshua Sears
Ambassador to the United Nations--Paulette Bethel
Consul General, Miami--Alma Adams
Consul General, New York--Eldred Bethel

The Bahamas maintains an embassy in the United States at 2220 Massachusetts Ave., NW, Washington, DC 20008 (tel: 202-319-2660/7) and Consulates General in New York at 231 East 46^th Street, New York, NY 10017 (tel: 212-421-6925/6420), and in Miami at Suite 818, Ingraham Building, 25 SE Second Ave., Miami, FL 33131 (tel: 305-373-6295/96).

ECONOMY
The Bahamas is driven by tourism and financial services. Tourism provides an estimated 40% of the gross domestic product (GDP), with an additional 10% of GDP resulting from tourist-driven construction. Tourism employs about half the Bahamian work force. In 2004, more than 5 million tourists visited The Bahamas, 87% from the United States. There are about 110 U.S.-affiliated businesses operating in The Bahamas, and most are associated with tourism and banking. With few domestic resources and little industry, The Bahamas imports nearly all its food and manufactured goods from the United States. American goods and services tend to be favored by Bahamians due to cultural similarities and heavy exposure to American advertising. The Bahamian economy, due to its heavy dependence on U.S. tourism and trade, is deeply affected by U.S. economic performance.

Following economic struggles in 2001-02 fueled by a drop in tourism after September 11, 2001, the current government has presided over a period of economic recovery and an upturn in large-scale private sector investments in tourism, which will boost construction and provide long-term employment. Future goals include developing tourism properties on the Family Islands, expanding of ship-repair facilities and encouraging film production facilities on Grand Bahama Island.

Economic challenges facing the Bahamas include meeting continued employment demands, jumpstarting a lagging privatization process, and monitoring increasing levels of government debt. Another major challenge for Bahamians will be to prepare for hemispheric free trade. Currently, Bahamians do not pay income or sales taxes. Most government revenue is derived from high tariffs and import fees. Reduction of trade barriers will probably require some form of taxation to replace revenues when the country becomes a part of the Free Trade Area of the Americas (FTAA). As evident by domestic opposition to the Caribbean Single Market Economy (CSME), the advantages of free trade may be hard for the government to sell.

Two major hotel projects promise to increase economic growth and create short- and long-term employment. The Atlantis Resort and Casino on Paradise Island is in the third phase of a billion-dollar expansion expected to create 3,000 new jobs. A second $1.2 billion hotel resort development project is planned for the Cable Beach area of Nassau. The Baha Mar Company has negotiated purchase of three major hotels and a development site, including the last assets of the state-owned Hotel Corporation. As a condition of these large-scale investments, the government promises to expand Nassau International Airport. The Bahamian Government also has adopted a proactive approach to courting foreign investors and has conducted major investment missions to the Far East, Europe, Latin America, and Canada. The government paid particular attention to China in 2004-05, making multiple trips to China to encourage tourism and investment.

Financial services constitute the second-most important sector of the Bahamian economy, accounting for up to 15% of GDP, due to the country's status as a tax haven and offshore banking center. As of 2005, the government had licensed 262 banks and trust companies in The Bahamas. The Bahamas promulgated the International Business Companies (IBC) Act in January 1990 to enhance the country's status as a leading financial center. The act served to simplify and reduce the cost of incorporating offshore companies in The Bahamas. Within 9 years, more than 84,000 IBC-type companies had been established. In February 1991, the government also legalized the establishment of Asset Protection Trusts in The Bahamas. In 2000, in response to multilateral organizations' concerns, the government passed a legislative package of stronger measures to better regulate the financial sector and prevent money laundering in the country's banking sector, including creation of a Financial Intelligence Unit and enforcement of "know-your-customer" rules. Some of these measures have been challenged in Bahamian courts, and the number of offshore banks registered in the Bahamas has declined by 50 since 2002. As many as half of the IBCs have also closed shop. As a result, the government is considering additional legislation to keep the industry competitive while complying with international standards, including possible reform of the regulatory structure.

Agriculture and fisheries together account for 3% of GDP. The Bahamas exports lobster and some fish but does not raise these items commercially. There is no large-scale agriculture, and most agricultural products are consumed domestically. Following an outbreak of citrus canker on Abaco in 2005, The Bahamas lost a main agricultural export, and the Ministry of Agriculture banned the export of plant materials from Abaco. The Bahamas imports more than $250 million in foodstuffs per year, representing about 80% of its food consumption. The government aims to expand food production to reduce imports and generate foreign exchange. It actively seeks foreign investment aimed at increasing agricultural exports, particularly specialty food items. The government officially lists beef and pork production and processing, fruits and nuts, dairy production, winter vegetables, and mariculture (shrimp farming) as the areas in which it wishes to encourage foreign investment.

The Bahamian Government maintains the value of the Bahamian dollar on a par with the U.S. dollar. The Bahamas is a beneficiary of the U.S.-Caribbean Basin Trade Partnership Act (CBTPA), Canada's CARIBCAN program, and the European Union's Lome IV Agreement. Although The Bahamas participates in the political aspects of the Caribbean Community (CARICOM), it has not entered into joint economic initiatives, like the CSME, with other Caribbean states.

The Bahamas has a few notable industrial firms: the Freeport pharmaceutical firm, PFC Bahamas (formerly Syntex), which recently streamlined its production and was purchased by the Swiss pharmaceutical firm Roche; the BORCO oil facility, also in Freeport, which transships oil in the region; the Commonwealth Brewery in Nassau, which produces Heineken, Guinness, and Kalik beers; and Bacardi Corp., which distills rum in Nassau for shipment to U.S. and European markets. Other industries include sun-dried sea salt in Great Inagua, a wet dock facility in Freeport for repair of cruise ships, and mining of aragonite--a type of limestone with several industrial uses--from the sea floor at Ocean Cay.

The Hawksbill Creek Agreement established a duty-free zone in Freeport, The Bahamas' second-largest city, with a nearby industrial park to encourage foreign industrial investment. The Hong Kong-based firm Hutchison Whampoa has opened a container port in Freeport. The Bahamian Parliament approved legislation in 1993 that extended most Freeport tax and duty exemptions through 2054.

Business Environment
The Bahamas offers attractive features to the potential investor: a stable democratic environment, relief from personal and corporate income taxes, timely repatriation of corporate profits, proximity to the United States with extensive air and telecommunications links, and a good pool of skilled professional workers. The Government of The Bahamas welcomes foreign investment in tourism and banking and has declared an interest in agricultural and industrial investments to generate local employment, particularly in white-collar or skilled jobs. Despite its interest in foreign investment to diversify the economy, the Bahamian Government responds to local concerns about foreign competition and tends to protect Bahamian business and labor interests. As a result of domestic resistance to foreign investment and high labor costs, growth can stagnate in sectors which the government wishes to diversify.

The country's infrastructure is best developed in the principal cities of Nassau and Freeport, where there are relatively good paved roads and international airports. Electricity is generally reliable, although many businesses have their own backup generators. In Nassau, there are two daily newspapers, three weeklies, and several international newspapers available for sale. There also are six radio stations. Both Nassau and Freeport have a television station. Cable TV and satellite also are available locally and provide most American programs with some Canadian and European channels.

Areas of Opportunity
The best U.S. export opportunities remain in the traditional areas of foodstuffs and manufactured goods: vehicles and automobile parts; hotel, restaurant, and medical supplies; and computers and electronics. Bahamian tastes in consumer products roughly parallel those in the United States. Merchants in southern Florida have found it profitable to advertise in Bahamian publications. Most imports are subject to high but nondiscriminatory tariffs.

FOREIGN RELATIONS
The Bahamas has strong bilateral relationships with the United States and the United Kingdom, represented by an ambassador in Washington and High Commissioner in London. The Bahamas also associates closely with other nations of the Caribbean Community (CARICOM). The Bahamas has an ambassador to Haiti and works closely with the United States and CARICOM on political and migration issues related to Haiti. The Bahamas has diplomatic relations with Cuba, hosting a Cuban Ambassador and planning a Bahamian Consulate in Cuba. A repatriation agreement was signed with Cuba in 1996, and there are commercial and cultural contacts between the two countries. The Bahamas also enjoys a strengthening relationship with China. The Commonwealth of The Bahamas became a member of the United Nations in 1973 and the Organization of American States in 1982.

The Bahamas holds membership in a number of international organizations: the UN and some specialized and related agencies, including Food and Agriculture Organization (FAO), International Civil Aviation Organization (ICAO), and the International Labor Organization (ILO); International Monetary Fund (IMF); International Telecommunication Union (ITU); World Bank; World Meteorological Organization (WMO); World Health Organization (WHO); OAS and related agencies, including Inter-American Development Bank (IDB), Caribbean Development Bank (CDB), and Pan-American Health Organization (PAHO); the Caribbean Community (CARICOM), excluding its Common Market; the International Criminal Police Organization (INTERPOL); Universal Postal Union (UPU); International Maritime Organization (IMO); World Intellectual Property Organization (WIPO); and obtained observer status in the World Trade Organization (WTO) in 2001.

U.S.-BAHAMIAN RELATIONS
The United States historically has had close economic and commercial relations with The Bahamas. The countries share ethnic and cultural ties, especially in education, and The Bahamas is home to approximately 30,000 American residents. In addition, there are about 110 U.S.-related businesses in The Bahamas and, in 2004, 87% of the 5 million tourists visiting the country were American.

As a neighbor, The Bahamas and its political stability are especially important to the United States. The U.S. and the Bahamian Government have worked together on reducing crime and reforming the judiciary. With the closest island only 45 miles from the coast of Florida, The Bahamas often is used as a gateway for drugs and illegal aliens bound for the United States. The United States and The Bahamas cooperate closely to handle these threats. U.S. assistance and resources have been essential to Bahamian efforts to mitigate the persistent flow of illegal narcotics and migrants through the archipelago. The United States and The Bahamas also actively cooperate on law enforcement, civil aviation, marine research, meteorology, and agricultural issues. The U.S. Navy operates an underwater research facility on Andros Island.

The Department of Homeland Security’s Bureau of Customs and Border Protection maintains “preclearance” facilities at the airports in Nassau and Freeport. Travelers to the U.S. are interviewed and inspected before departure, allowing faster connection times in the U.S.

Principal U.S. Officials
Ambassador--John D. Rood
Deputy Chief of Mission--Brent Hardt
Management Officer--Kay Crawford
Consul--Abdelnour Zaiback
Political-Economic Section Chief--Michael Taylor
Public Affairs Officer--Michael Taylor

The U.S. Embassy is located at 42 Queen Street, Nassau (tel. 242-322-1181; telex 20-138); the local postal address is P.O. Box N-8197, Nassau, The Bahamas.

Other Contact Information
U.S. Department of Commerce
International Trade Administration
Office of Latin America and the Caribbean
14th and Constitution, NW
Washington, DC 20230
Tel: 202-482-0704; 800-USA-TRADE
Fax: 202-482-0464

Caribbean/Latin American Action
1818 N Street, NW, Suite 310
Washington, DC 20036
Tel: 202-466-7464
Fax: 202-822-0075