Hot spots: Cayman Islands. (International Insight).(Industry Overview)(Statistical Data Included)

The economy of the Caymans rests on two industries that are not only its primary pillars but, in fact, its only pillars; namely tourism and financial services. The tiny archipelago in the Western Caribbean (capital: George Town) funds itself from license fees and import duties, since there are no income, capital gains, corporation, inheritance, or sales taxes. More than 90% of the economy is service-based. Agriculture (growing mangoes, bananas, citrus fruit, yams, cassava, breadfruit, tomatoes, honey, beef, pork and goat meat) and fishing (with an annual catch of only about 300,000 tons) operate mainly for local needs and for the tourist industry. Even so, people in the territory have one of the world's highest standards of living, with a per capita GDP well in excess of USD 27,000.

Back in the 1960s, the Islands were primarily a tax haven offering its services to anyone with a suitcase of cash to deposit. They have long since developed into a sophisticated financial center that is home to 47 of the world's top 50 banks. The financial services industry has been growing strongly and there are today close to 600 banks and trusts registered in the territory. Insurance assets are said to be near USD 15 billion. The number of locally registered companies has surpassed 60,000 (that is 1; companies per inhabitant). There is every indication that this segment of the economy will continue to do very well; the more so as e-commerce now allows companies to do business just about anywhere in the world.

The biggest challenge for the finance sector is that there are, even in slow times, more jobs available than qualified people to fill them, This is true also for the tourist industry, which is the Islands' main foreign exchange earner. The number of "stayover" visitors has tended to surpass 300,000 annually in recent years. Moreover, the territory has been visited by in excess of 1 million cruise tourists yearly. Eight out of ten of the tourists come from the United States, so any slow-down in the U.S. economy hurts that of the Cayman Islands.

With the U.S. recovery this year, the Caymanian economy is picking up as well, and we would not be surprised to see it rack up a real GDP gain of 4.0-5.0% for 2002 as a whole (with most of the advance being registered in the second semester). Consumer price inflation has been running at between 3.0% and 4.0% per annum, and we do not expect a major acceleration for the remainder of this year.

While the Financial Action Task Force (FATF) of the G-7 Group of industrial nations, in its efforts to fight money laundering and tax evasion, had the Cayman Islands on its black list as "non-cooperative" from mid-2000 to mid-2001, the heat is now off the territory. Most of the changes made by the Caymans were more cosmetic than real, involving, primarily, the legalization of what previously was "best practice." But some practical changes were made as well. For instance, whereas previously a court order was required for outsiders to access confidential bank information, the local Monetary Authority now can provide information to other agencies (such as the Securities and Exchange Commission in the U.S.) without such a formality. The territory's administration has also taken action against shell ...