The Bahamas maintains a stable environment for investment and demonstrates a long tradition of parliamentary democracy, respect for the rule of law and a well-developed legal system, and security of life and personal property. U.S. companies find that The Bahamas' proximity to the United States, common English language, and the exposure to U.S. media and culture contribute to Bahamian consumers having general familiarity and positive attitudes towards U.S. goods and services. The Bahamas conducts approximately 85% of its international trade with the United States.
The Bahamian economy remains heavily dependent on tourism and financial services, although the government has made efforts to encourage diversification, particularly in agriculture and light manufacturing. The Bahamas relies primarily on imports from the United States to satisfy its food needs for local and tourist consumption. More than six million tourists visit the country annually.
In the financial services sector, The Bahamas is experiencing growth in investment funds and has seen significant increases in investments from Brazil in particular. According to the Bahamas Securities Commission, the increase is due to the development and approval of SMART Funds -- risk-adjusted, low-cost investment structures.
The Bahamas Investment Authority actively promotes The Bahamas' liberal tax environment and freedom from many types of taxes, including capital gains, inheritance, and corporate or personal income taxes. The Bahamas continues to attract significant foreign direct investment (FDI) from various parts of the world. These investments are primarily in the tourism sector and range from multi-billion dollar resort developments to millon dollar homes on the major islands of the archipelago.
The major challenges to investment in the country include the relatively high cost and uncertain reliability of electricity, high unemployment combined with a limited pool of skilled labor, cumbersome and sometimes opaque administrative requirements, and an escalating crime rate. In addition, certain sectors of the economy are reserved under the National Investment Policy for Bahamian only investment.
U.S. and Bahamian companies alike report that the resolution of business disputes often takes years, and collection of amounts due can be difficult even after court judgments. Companies also report that the approval process for foreign direct investments and work permits can be cumbersome and time-consuming. The government of the Commonwealth of The Bahamas (GCOB or the Government) asserts that the majority of foreign investment applications are processed quickly and without significant issues. Applications that are subject to more extensive review, or those that do not fall within the National Investment Policy, may take longer to approve given the Government’s desire to balance local versus foreign investment interests. Some U.S. and Bahamian companies also complain that the tender process for public contracts is not consistent and that it is difficult to obtain information on the status of bids. GCOB officials have told the Embassy that the Government is preparing legislation to address concerns related to its investment policy and Public Procurement Regime.
On January 1, 2015, the Government introduced a 7.5% Value Added Tax (VAT) on most goods and services, a measure designed to strengthen the fiscal balance sheet. Implementation of the tax and other fiscal measures including efforts to enhance revenue administration has yielded positive results and the Government has reduced its deficit from $539M three years ago to $141M in this fiscal year (2016). The Government continues its efforts to develop a central revenue agency and modernize its fiscal administration.
In March 2016, Moody’s Investor Service confirmed The Bahamas’ issuer and senior unsecured ratings at Baa2 with a stable outlook. (https://www.moodys.com) In its January 2016 report, Standard and Poor’s (S&P) (http://standardandpoors.com) affirmed the country as investment grade and maintained the sovereign credit rating at BBB-/A-3. (http://standardandpoors.com) In its April 15, 2016 update on The Bahamas, S&P continued its negative outlook but maintained the country’s investment grade credit rating.
With over a billion USD in new resort development committed and the potential for over 5,000 permanent jobs, the Bahamian government continues to assert that benefits from foreign investment-led activities are imminent. The Bahamas Central Bank, in its January-June 2015 Financial Stability report estimated the 2015 GDP growth rate at 1.2%.
The Bahamas remains the only country in the Western Hemisphere that is not a member of the World Trade Organization (WTO). The government has committed to accelerating its efforts to become a member and has taken steps to remove barriers to international trade and facilitate foreign trade and investment. In 2015, the Government enacted new and amended existing laws to provide enhanced protection of intellectual property rights. The new laws are comprehensive but have not been implemented and still require the approval of supporting regulations. While these are vital to economic growth, the government likely will face internal and external challenges to successfully implementing its plans to become more fully integrated into the the global trading system.