State structure
Formerly a British colony that became independent, the Bahamas remains a Commonwealth state. As such, Queen Elizabeth II remains the head of state, a title acquired on February 6, 1952, and is represented locally by a Governor General, The Honourable Cornelius A. Smith since June 28, 2019. The legal system is based on English law.
While the monarchy is hereditary, the governor is appointed by the English sovereign. The third head of government is Prime Minister Philip Davos (since September 2021), who is appointed by the Governor General following the general election. The Cabinet is appointed by the Governor General on the recommendation of the Prime Minister.
Legislative power is divided between two houses. The Parliament has a Senate (upper house) of 16 members appointed by the Governor General on the recommendation of the Prime Minister for a term of five years. The Assembly (lower house) has 40 representatives elected directly by the people for a five-year term. The last elections were held in September 2021 and the PLP - Liberal Progressive Party - won back power from Hubert Minnis' FNM - Free National Movement.Tourism, the mother of the economy
With few natural resources and a weak industrial sector, the country is totally dependent on the tourism industry, which alone generates the bulk of foreign exchange. Tourism and its related services represent more than 60% of the GDP and the sector directly or indirectly employs half of the country's working population
More than 7 million tourists set foot in the Bahamas in 2019 (sea and land arrivals combined). While the United States is still the main source of the islands' tourist population, Canada and Europe are increasingly attracted to the archipelago and its crystal clear waters. Air Caraïbes opened its seat reservations in early 2018 for a weekly Paris-San Salvador-Nassau crossing (with Bahamasair transfer for the end of the journey); British Airways, for its part, operates 5 flights per week Paris-London-Nassau, with direct connections from Paris, Lyon, Nice, Marseille, Toulouse, Brussels and Geneva ; American Airlines also continues its daily rotations from Paris to Nassau, Freeport (Grand Bahama), George Town (Exuma) or North Eleuthera; and Air France, in partnership with Delta Airlines, also operates daily flights from Paris-Atlanta-Nassau, George Town or North Eleuthera. With nearly 19,000 visitors in 2019 (+8.4% compared to 2018), the French are the second largest outbound market in Europe (excluding cruises and groups) after the UK. A positive response to the national tourism office's strategy to promote all sixteen destinations, the tourism rollout affects all the islands of the archipelago.
The construction of hotels, resorts and residences is an important factor in the growth of GDP. Boat registration is also a significant source of revenue as only 0.2% of boats registered in the Bahamas are locally owned.
2021 saw only 2 million visitors enter the Bahamas, but this figure is attributable to the Covid-19 pandemic. 2022 was shaping up to be an excellent year for tourism in the Bahamas; by the end of May 2022, more than 2.5 million visitors had been recorded.
Finance, an active sector
Although the requirement for physical representation in the Bahamas was introduced by the Central Bank in 2001, reducing the number of offshore banks or trust companies to 230, the Bahamas remains one of the world's leading offshore financial centers. The offshore banking sector has grown since independence and banks here are thriving. The U.S. authorities estimate that there are 115,000 IBCs (International Business Companies) registered in the Bahamas, of which approximately 40,000 are active. Finance is the second largest sector of the local economy after tourism and accounts for about 20% of GDP. The country is a tax haven and a banking center for non-residents. Insurance companies are also very present, as well as mutual funds and investment companies. Today, the Bahamas is also becoming the cradle of major companies in the world of cryptocurrencies, as evidenced by the installation in 2021, of the headquarters of FTX, one of the largest players in this sector, previously located in Hong Kong.
In April 2010, the Bahamas was removed from the OECD's "grey list" of non-cooperative jurisdictions, and despite the Foreign Accounts Tax Compliance Act (FATCA) coming into force in the Bahamas the same year, requiring US financial firms operating in the country to register with the US Internal Revenue Service (IRS) and declare their clients under penalty of heavy fines, the sector does not seem to be too affected.Industry and agriculture lagging behind
Agriculture and industry (cement, salt, rum, oil refining, product processing, pharmaceuticals) account for only 2.3% and 7.7% of GDP respectively. Lobsters and fish are exported, but are not farmed industrially. Agriculture, which mainly produces vegetables and poultry, is carried out by smallholders. Food crops or tiny plantations seek to make the most of water-poor soil, but the bulk of agricultural produce is consumed locally.
However, with hundreds of thousands of tourists to feed, neither fishing nor local agriculture is sufficient to cover the archipelago's needs, and the Bahamas must import agricultural products such as fish and other seafood. Both of these areas are progressing with the ongoing development on Andros Island.Tax ? I don't know..
In the Bahamas, neither businesses nor individuals are taxed directly. Government revenue is derived from import taxes (50%), air traffic fees, and licensing fees. The lack of taxation attracts foreign investors who are welcomed with open arms, especially in the areas of tourism, shrimp farming, dairy and fruit and vegetable production. Since January 2015, however, it is worth noting the arrival of the value-added tax, now set at 10% since December 2021 after having previously reached 12%.
The phenomenon of islands for sale or rent
More and more private villas and luxury home packages are available for rent or sale on private islands or islets. Musha Cay, owned by illusionist David Copperfield, rents for up to $40,000 per day for up to 12 people, and can be booked for a minimum of 4 nights! John Travolta once stayed there and Google co-founder Sergey Brin got married there. We can also imitate Johnny Depp who bought in 2004 the island of Little Hall's Pond Cay in the protected area of the Exumas, paying the modest sum of 3 million dollars! A real source of income for the agencies that are well established, these rentals and acquisitions are intended for the most fortunate. The German broker Farhad Vladi, one of the most important brokers in the world in this domain, sold Leaf Cay in 2006, also located in the Exumas, to the American actor Nicolas Cage for 3 million dollars. Leaf Cay is now for sale for 7.5 million dollars. The capital gains realized on these acquisitions by the richest inhabitants of our planet are impressive, and they are often investments for profit - some of these islands being developed accordingly to attract visitors.
The economic partners
The Bahamas' import/export balance is now nearly in balance. In 2019, imports accounted for $4.98 billion, compared to $5.13 billion in exports. The Bahamas' major economic partners for exports are the United States, France, Ireland, Canada and Ghana. As for imports, the main suppliers are the United States, Barbados, Trinidad and Tobago and Japan. France, for its part, imports up to 27 million euros per year from the Bahamas, and exports around 85 million euros to the archipelago. Given its proximity to the United States and its complexity, the Bahamian territory is also used as a platform for illegal immigration to the United States. Inflation is expected to remain low at about 4% per year in 2021.
International Relations
The Bahamas is a member of the United Nations, the International Labour Organization, the Caribbean Community (Caricom), the Association of Caribbean States (ACS) and the Non-Aligned Movement. The Bahamas is also an observer to the World Trade Organization and is now seeking full membership. The working group on the territory's accession as a state party to the WTO held its fourth meeting in April 2019. The Covid-19 pandemic slowed the process but it is slowly resuming.
Finally, since the establishment of diplomatic relations with Beijing in 1997, Chinese investment has been on the rise in the Bahamas: the Hong Kong-based company Wampoa Hutchinson manages the Freeport Free Trade Zone, while the Baha Mar luxury hotel in Cable Beach, New Providence, with an estimated construction cost of $4.2 billion, was two-thirds financed by Eximbank loans.Current issues
While tourism accounts for more than 60 percent of the nation's GDP, the Bahamas has had to deal with two very different disasters. Hurricane Dorian in September 2019, whose damage is now largely erased, was indeed followed by the Covid-19 pandemic that brought the tourism industry to its knees. The year 2022, however, shows that this was just a passing fad and that visitors are once again flocking to the gates of this traveler's paradise.
In addition to tourism, which is constantly on the rise despite the low tax revenues generated, the Bahamas must find other sources of revenue. Customs duties are one of them, as well as the industrial and agricultural sectors, which together account for one tenth of the GDP, which are not left out. The government is working to develop markets with potential that the country can rely on, such as pharmaceutical production, salt, rum, fishing, transshipment and oil refining.
