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Diplomacy in Action

Bermuda (11/03)


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



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

Nationality: Noun and adjective--Bermudian(s).
Population: 62,059.
Annual growth rate: 0.66%.
Ethnic groups: Black 55%, white 34%, mixed 6%, other 4%.
Religions: Anglican 23%, Roman Catholic 15%, African Methodist Episcopal 11%, 7th Day Adventist 7%, other 30%, none or not stated 15%.
Language: English.
Education: Years compulsory--to age 16. There is no formal measure of literacy.
Health: Infant mortality rate--2.4 per thousand. Life expectancy--men 74.89 yrs., women 78.86 yrs.
Work force: Professional and technical--21%. Production, transport, and related--21%. Clerical--19%. Services--18%. Administrative and managerial--11%. Sales--8%. Agriculture and fishing--2%.

Type: British Overseas Territory with significant autonomy.
Constitution: June 8, 1968; amended 1989 and 2003.
Branches: Executive--British monarch (head of state, represented by a governor). Legislative--Senate (upper house), House of Assembly (lower house). Judicial--Supreme Court.
Subdivisions: Nine parishes.
Political parties: United Bermuda Party (UBP), Progressive Labor Party (PLP), National Liberal Party (NLP).
Suffrage: Universal at 18.

GDP (nominal): Provisional estimates for 2001, $3.57 billion. 13.8% ($495 million) from international companies, 11.8% from financial intermediation, 10.2% from wholesale, retail trade and repair services, and 7% ($220 million) from the hotel and restaurant sector.
GDP growth rate: Estimated 1.5% for 2002. Real GDP is expected to increase by 1.5% in 2003.
Per capita GDP: $54,291 (2001).
Inflation rate: 3.1% (July 2003).
Natural resource: Limestone, used primarily for building.
Agriculture: Products--semitropical produce, dairy products, flowers.
Industry: Types--finance, insurance, structural concrete products, paints, perfumes, furniture.
Trade: Exports (includes re-exports)--$41 million (provisional estimates 2002, quarters 1-3): semitropical produce, light manufactures. Imports--$745.5 million (2002): food, clothing, household goods, chemicals, live animals, machinery, transport, and miscellaneous manufactures. Major suppliers--U.S. 77%, United Kingdom (U.K.) 5%, Canada 7%, Caribbean countries 4% (mostly oil from Netherlands Antilles).

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 and 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 55% of Bermudians are of African descent.

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

Bermuda is the oldest self-governing overseas territory in the British Commonwealth and has a great degree of internal autonomy. Its 1968 constitution provided the island with formal responsibility for internal self-government, while the British Government retained 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 12 members 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), which currently holds no parliamentary seats.

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 severe pressure in housing. Despite a general strike in 1981 and poor economic conditions worldwide during 1981-83, Bermuda's social, political, and economic institutions showed resilience and stability.

Bermuda's positive experience with internal self-government has led to discussions of possible complete independence by both parties. However, 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. The vote may not have been a true test of support for independence, however, as the Progressive Labor Party (PLP) urged its membership to boycott the referendum.

That the PLP would boycott the independence referendum was out of character. Independence has been a plank in the platform of the PLP since the party's inception in 1963. Their 1968 platform promised, in fact, that, "No government can be either responsible or democratic while under the rule of another country. Colonialism is a cancer . . . therefore we shall return to London to examine with the British Government what arrangements can be made for our independence." Successive PLP election platforms reflected a continuing commitment to review Bermuda's constitutional framework preparatory to Bermuda's "inevitable independence."

It was ironic, therefore, that independence was absent from the PLP's 1998 general election platform, when the PLP first triumphed at the polls. In fact, then-Premier Jennifer Smith stated that while she would not pursue independence during her first term, she would systematically address the issues that are fundamental prerequisites for independence. The government very quickly enacted legislation providing for voter registration every 5 years instead of annually. Then in 2001, the government began taking steps to amend Bermuda's constitution in order to abolish the island's system of parish-based, dual-seat constituencies that favored voters in parishes of small, predominantly white populations. The constitution was amended in 2003, redrawing constituency boundary lines and providing for 36 single-seat constituencies.

The possibility of independence has relevance to U.K. legislation entitling citizens of Britain's overseas territories, including Bermuda, 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 EU; the right not to exercise or to formally renounce British citizenship; and the right to use the fast track EU/EEA channel at the airport, free of U.K. immigration controls.

A March 2002 poll conducted by the Bermuda Sun, a local semiweekly newspaper, showed support for British citizenship. Of the 356 persons surveyed, 66.9% were interested in accepting British citizenship and only 18% said that they would refuse 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 lies dormant. "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."

Bermuda's most recent general election was held in July 2003, when the PLP was re-elected to its second term. Jennifer Smith, however, did not survive a leadership challenge and was replaced as premier and party leader by the more moderate Alex Scott.

Principal Government Officials
Head of State--Queen Elizabeth II
Governor--Sir John Vereker
Premier--Alex Scott

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, Atlanta, Chicago, and Boston.

Bermuda has enjoyed steady economic prosperity since the end of World War II, although the island experienced a mild recession in 2001-02, 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. The Bermuda Monetary Authority (BMA) estimated that those two sectors represented 77.5% of the total balance of payments current account receipts of foreign exchange in the first three quarters of 2002. However, the role of international business in the economy is expanding, whereas that of tourism is contracting.

Bermuda is considered an offshore financial center and has a well-deserved reputation for the integrity of its financial regulatory system. An October 2000 KPMG report entitled "Review of Financial Regulation in the Caribbean Overseas Territories and Bermuda" states that the island's legislative framework is almost fully compliant with international standards, giving evidence of Bermuda's commitment to the prevention of money laundering and other financial crimes.

Aiming to meet or exceed international financial standards, the BMA has committed to being fairly transparent about its duties and responsibilities. For example, in response to the KPMG report on the U.K.'s Caribbean overseas territories, Bermuda enacted the Trust (Regulation of Trust Business) Act 2001. The legislation provides for the transfer of the finance minister's responsibilities to the independent BMA, with respect to granting and revoking trust company licenses. It also requires all individuals or companies operating trust companies to have a license unless they are exempt. Previously, only trust companies needed a license. Additionally, the legislation gives the BMA more comprehensive intervention powers. It can request more detailed documentation and, in the event of a problem, restrict a trust operator's license. Information is to be kept confidential, except in the event of a criminal investigation.

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 creates 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 has enhanced its reputation globally as an international standard-bearer. In return, international businesses registered in Bermuda are recognized as having met or surpassed the most stringent international criteria.

The effects of September 11 have had both positive and negative ramifications for Bermuda. On the positive side, a number of new re-insurance companies opened on the island, contributing to an already robust international business sector. On the negative side, Bermuda's already weakening tourism industry suffered as American tourists chose not to travel. The impact of Hurricane Fabian in September 2003 was yet another blow to the tourism industry.

By the end of 2002, there were 13,337 international companies registered in Bermuda, many U.S.-owned. They are an important source of foreign exchange for the island, and spent an estimated $986 million in Bermuda in 2001. The growing importance of international business is reflected in its increased share of GDP, up from 12.6% in 1996 to 13.8% in 2000. In 2002, international companies directly employed 3,592 persons, generated $395.5 million in employment income, and indirectly support or influence thousands of other jobs in Bermuda.

Tourism, Bermuda's second most important source of income, is an industry in trouble. In 1996, Bermuda welcomed 571,700 visitors to the island. By 2002, that figure had dropped to 483,622. Occupancy rates for 2002 averaged 55.1%, and were higher in the major hotels than at smaller properties. Visitors contributed an estimated $475 million to the economy in 1996, but that figure declined to $378.8 million in 2002. Although per capita spending by air visitors rose in 2001, direct employment in the tourism industry (5,700 jobs in 2000) and related industries is dropping in tandem with declining visitor numbers.

The 2000 census indicates a total of 36,878 filled jobs, with unemployment at 3%--down from 6% in 1991. Many Bermudians hold more than one job. In 2000, about 25% of workers were union members in one of the island's three primary unions: the blue-collar Bermuda Industrial Union, Bermuda's largest labor organization; the professional Bermuda Public Services Union, with a steadily increasing membership; and the Bermuda Union of Teachers.

Organized labor is high profile in Bermuda. Union action has been on the rise in recent years, but the second-term labor government has begun to take an increasingly hard-line stance in response to union action. The average annual days lost per worker as a result of labor actions dropped from a high of 65 in 1991 to a low of 0.8 in 1999. More recent figures, reflecting increased union action in the past four years, are not yet available.

Bermuda has little in the way of exports or manufacturing; almost all manufactured goods and foodstuffs must be imported. The value of imports has risen from $551 million in 1994 to $745.5 million in 2002. The U.S. is Bermuda's primary trading partner, with $567.5 million in U.S. imports in 2002. 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, which are subsequently re-exported, increased from $35 million in 1993 to almost $51 million in 1999. Provisional estimates for the first three quarters of 2002 indicate $41 million in exports.

Duty on imports is a major source of revenue for the Government of Bermuda. In 2001, the government obtained slightly more than $175.2 million, or 29%, 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. 2000 census data reveal that U.K. immigrants comprise 27% of the immigrant population; U.S., 19%; Canada, 14%; Caribbean, 12%; and Portugal/Azores, 10%. 79% of the population is Bermuda-born and 21% is foreign-born.

In February 1970, Bermuda converted from its former currency, the pound, to a decimal currency of dollars pegged to the U.S. dollar.

Bermuda has 150 miles of private paved roads; 130 miles of public paved roads; 25 miles of historic, unpaved railroad trail, used as scenic trails; three ports, including the former U.S. Naval Air Station and Naval Air Station Annex; and one airport, located at the former U.S. Naval Air Station. It has seven radio stations, three television stations, a small cable microwave system, three cellular services, three submarine cables, two satellite earth stations, and four Internet service providers.

Because Bermuda is a British overseas territory, 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 on the island. Unresolved issues concerning the withdrawal of U.S. forces--primarily related to environmental factors--delayed the formal return of the base lands to the Government of Bermuda until 2002.

Bermuda has collaborated with the U.S. in the wake of the September 11 terrorist attacks on New York and Washington, assuring the U.S. and the world that Bermuda offers neither physical nor financial hiding places for terrorism. The BMA searched its databases against a list of hundreds of names provided by the FBI, looking for any connection between the terrorists and companies that have incorporated in Bermuda, and no connections were found. Following through on their promise of full cooperation in any investigation, the BMA worked with the island's financial institutions looking for terrorism connections and also placed the listed individuals on a watch list.

The Government of Bermuda signed a cultural memorandum of understanding with Cuba in 2003. The island also joined the Caribbean Community (CARICOM) in 2003, and only accepted offers of assistance from Caribbean countries following the devastation of Hurricane Fabian in September 2003. There appears to be a growing tendency for Bermuda to align itself with other islands in the Caribbean while distancing itself somewhat from the U.K. and the U.S.

An estimated 7,500-8,000 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 figure are available. Despite the fact that American businesses are increasingly 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 very important to the island's tourism industry, the number of U.S. visitors to Bermuda is declining. Air arrivals from the U.S. declined by more than 30% between 1990 and 2000 and, in 2002, only 77% 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 (excluding private ship, air, and yacht passengers) in 2000. That number fell to 390,000 American passengers in 2001 due to a general decline in tourism and the events of September 11.

In 2002, 77% of Bermuda's imports came from the U.S., down from 84% in 2000. 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--Denis P. Coleman
Deputy PO/Management--Karen Emmerson
Consul--Jill M. Esposito

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.

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

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