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The Bahamian government hopes this new legislation will stimulate the second home/vacation home market and revive the once-vibrant real estate sector. The new law also provides for a two-year real property tax exemption for foreign persons acquiring undeveloped land in The Bahamas for development purposes, provided that substantial development occurs during those two years. Following protests by for. eign property owners, the Bahamian government has revised plans for the proposed ? percent increase on the assessed value of undeveloped property owned by non-Bahamians. The new tax structure as of January, 1994 follows:

$ 1-$3,000: the standard property tax is $30.00.
$3,001-$100,000: the property tax is 1 percent of the assessed value.

-Over $100,000: the property tax is 142 percent of the assessed value. A gambling tax is also levied. To increase revenues, the airport departure tax was raised from $7 to $13 per person in 1991 and from $13 to $15 per person in 1993. The government raised the harbor departure tax from $7 to $20 per person in 1991. Following protests from cruise ship operators, the harbor departure tax was later lowered to $15, effective April 1, 1992.

Although The Bahamas encourages foreign investment, the government reserves certain businesses exclusively for Bahamians, including restaurants, most construction projects, most retail outlets, and small hotels. Other categories of businesses are designated for possible joint ventures involving Bahamians and foreigners.

A new “One-Stop Shop' for investment established in 1992, the Bahamas Investment Authority (BIA), consolidated the Investment Promotion Division of The Bahamas Agricultural and Industrial Corporation (BAIC) and the Financial Services Secretariat (FSS). The Authority planned to facilitate and coordinate local and international investment and to provide overall guidance to the Government on all aspects of investment policy.

Other trade and investment incentives include the International Business Companies Act, the Industries Encouragement Act, the Hotels Encouragement Act, the Ag. ricultural Manufactories Act, the Spirit and Beer Manufacture Act, and the Tariff Act. The International Business Companies Act simplifies procedures and reduces costs for incorporating companies. The Industries Encouragement Act provides duty exemption on machinery, equipment, and raw materials used for manufacturing purposes. The Hotels Encouragement Act grants refunds of duty on materials, equipment, and furniture required in construction or furnishing of hotels.

The Agricultural Manufactories Act provides exemption for farmers from duties on agricultural imports and machinery necessary for food production. The Spirit and Beer Manufacture Act grants duty exemptions for producers of beer or distilled spirits on imported raw materials, machinery, tools, equipment, and supplies used in productions. The Tariff Act grants one-time relief from duties on imports of selected products deemed to be of national interest.

The Hawksbill Creek Agreement of 1954 granted certain tax and duty exemptions on business license fees, real property taxes, and duties on building materials and supplies in the town of Freeport on Grand Bahama Island. In July 1993, the Gov. ernment enacted legislation extending most Hawksbill Creek tax and duty exemptions through 2054, while withdrawing exemptions on real property tax for foreign individuals and corporations. The Prime Minister declared, however, that property tax exemptions might still be granted to particular investors on a case-by-case basis.

The Bahamas is a beneficiary of the United States' Caribbean Basin Initiative (CBI) trade program, permitting the country to export most goods duty-free to the United States. 4. Debt Management Policies

The Bahamas' national debt reached $1.41 billion in 1993, with debt service of $74.0 million accounting for 8.6 percent of total government revenues. 5. Significant Barriers To U.S. Exports

The Bahamas is a $700 million market for U.S. companies. There are no barriers to the import of U.S. goods, although a substantial duty applies to most imports. Deviations from the average duty rate often reflect policies aimed at import substitution. Tariffs on items which are also produced locally are at a rate designed to provide protection to local industries. The Ministry of Agriculture occasionally issues temporary bans on the import of certain agricultural products when it determines that a sufficient supply of locally grown items exists. The government's quality standards for imported goods are similar to those of the United States. 6. Export Subsidies Policies

The Bahamian Government does not provide direct subsidies to industry. The Ex. port Manufacturing Industries Encouragement Act provides exemptions to approved

export manufacturers from duty for raw materials, machinery, and equipment. The approved product is not subject to any export tax. 7. Protection of U.S. Intellectual Property

The Bahamas is a member of the World Intellectual Property Organization (WIPO), and is a party to the Paris Convention for the Protection of Industrial Property and the Berne Convention for the Protection of Literary and Artistic Works (older versions for some articles of the latter are used). It is also a member of the Universal Copyright Convention. 8. Worker Rights

a. Right of Association. The Constitution specisically grants labor unions the rights of free assembly and association. Unions operate without restriction or Gov. ernment control, and are guaranteed The right to strike and to maintain affiliations with international trade union organizations.

b. Right to Organize and Bargain Collectively.-Workers are free to organize and collective bargaining is extensive for the 34,225 workers (25 percent of the work force) who are unionized. Collective bargaining is protected by law and the Ministry of Labor is responsible for mediating disputes. The Industrial Relations Act requires employers to recognize trade unions.

c. Prohibition of Forced or Compulsory Labor.-Forced or compulsory labor is prohibited by the Constitution and does not exist in practice.

d. Minimum Age for Employment of Children.-While there are no laws prohibiting the employment of children below a certain age, compulsory education for children up to the age of 14 years and high unemployment rates among adult workers effectively discourage child employment. Nevertheless, some children sell newspapers along major thoroughfares and work at grocery stores and gasoline stations. Children are not employed to do industrial work in The Bahamas.

e. Acceptable Conditions of Work.—The Fair Labor Standards Act limits the regu. lar workweek to 48 hours and provides for at least one 24-hour rest period. The Act requires overtime payment (time and a hall) for hours in excess of the standard. The Act permits the formation of a Wages Council to determine a minimum wage; to date, no such Council has been established.

The Ministry of Labor is responsible for enforcing labor laws and has a team of several inspectors who make on-site visits to ensorce occupational health and safety standards and investigate employee concerns and complaints. The Ministry normally announces these inspections ahead of time. Employers generally cooperate with the inspections in implementing safety standards. A 1988 law provides for maternity leave and the right to reemployment after childbirth. Worker rights legislation applies equally to all sectors of the economy.

f. Rights in Sectors with U.S. Investment.--Authorities enforce Labor laws and regulations uniformly for all sectors and throughout the country, including within the export processing zones.

Extent of U.S. Investment in Selected Industries.-U.S. Direct Investment Position Abroad on an Historical Cost Basis—1993

(Millions of U.S. dollars)

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Total Manufacturing

Food & Kindred Products
Chemicals and Allied Products
Metals, Primary & Fabricated
Machinery, except Electrical
Electric & Electronic Equipment
Transportation Equipment

Other Manufacturing
Wholesale Trade
Finance Insurance Real Estate
Other Industries


140 2,707 817 - 38 (1)

Extent of U.S. Investment in Selected Industries.-U.S. Direct
Investment Position Abroad on an Historical Cost Basis-1993Continued

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[Millions of U.S. dollars)





1 Suppressed to avoid disclosing data of individual companies
"Less than $500,000.
Source: U.S. Department of Commerce, Bureau of Economic Analysis.

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Income, Production and Employment:

Real GDP (1985 prices) ........
Nominal GDP (current prices)
Real GDP Growth Rate (pct.) ....
Sectoral Growth Rates: (pct.).


Retail Trade
Business/General Services

Government Services
Population (0008)
Nominal Per Cap. GDP (official$)
Nominal Per Cap. GDP (GDP/pop/$)
Labor Force (0008)

Unemployment Rate (pct.)
Money and Prices:

Growth in.
Money Supply (M2 pct.) ....
Prime Lending Rate (pct.)1
Retail Price Index (pct. change) ....
Average Annual Exchange Rate (USD/BDs).


Balance of Payments and Trade:
Total Exports (FOB)

Exports to U.S. ......
Total Imports (CIF) .......

Imports from U.S. ....
Trade Balance ........
Current Account Balance
Aid from U.S.
Aid from Other Countries
External Central Government Debt
Domestic Central Government Debt
Total Debt Service Payments (paid)

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62.3 1,048.5


NA 1,153.9

494.1 -982.5 - 29.9

0.7 N/A 393.8 556.8 393.8

377.3 - 665.9 -137.9

1.1 N/A 346.3 618.3 346.4

NA -789.9

58.7 NA NA 330.6 808.5 330.6

NA-Not available.

1 End of period. 1. General Policy Framework

Barbados is a British-style parliamentary democracy. As a result of the September 1994 general elections, the political party comprising the government is the Barbados Labour Party, headed by Prime Minister Owen Arthur. The official opposition is the Democratic Labour Party. Seated in Parliament also is a member of the National Democratic Party, as well as a few independent Members of Parliament.

As a country with a relatively narrow resource base and limited production structure, Barbados imports much of what it needs to survive, including energy, food, and most types of consumer products. Previous governments

have pursued policies including high tariffs, restrictions on entry into certain sectors of business activity (such as telecommunications and broadcasting), and laws which restrict the entry of subsidiaries or branches of foreign retail establishments—whose purpose was to protect local businesses from external competition. Those policies have had the unin. tended effects of making both manufacturing and many services sectors uncompetitive in terms of price (because inputs are so expensive) and contributing to the generally high-cost wage environment in Barbados. Early indications are, however, that in its efforts to reduce the high unemployment rate, the new Barbados Labor Party government will act to lower the costs of doing business here. In October 1994, the new government announced that businesses in the manufacturing, agricultural, and fishing sectors will be able to import all inputs free of all duties and taxes. The policy change should result in higher levels of goods imports, a development U.S. exporters well may be able to take advantage of.

In general, Barbados' trade policy seeks to stimulate exports of goods and services (tourism and offshore financial services), encourage domestic light manufacturing, maintain the government's revenue base through direct taxation, and actively man. age foreign exchange reserves. In 1993, the United States was the leading source of imports into Barbados, followed by CARICOM, the United Kingdom, and Canada. Barbadian attitudes toward the United States and toward U.S. business are also generally favorable, as evidenced by the approximately 26 percent of the import market commanded by goods from the United States. According to U.S. Department of Commerce figures, U.S. exports to Barbados grew about 13.9 percent in 1993, to U.S. $145.5 million.

Barbados ratified the Uruguay Round Agreements and became a founding member of the World Trade Organization (WTO) on January 1, 1995. 2. Exchange Rate Policy

Since 1975, the Barbadian dollar has been pegged to the United States dollar at a fixed rate of Bds. $2.00 to U.S. $1.00. Despite intermittent problems in maintaining adequate levels of international reserves, both of the major political parties have formed governments committed to avoiding a devaluation of the currency. Any impact of this policy on U.S. exports is probably positive, at least in the short term, since Barbadians can buy more United States goods and services than they would be able to if the currency were devalued. Some economists hypothesize, however, that the Barbadian currency is overvalued, which contributes to making Barbadian manufactures uncompetitive in terms of price (and perhaps quality) in markets out. side Barbados and restricts the long-term potential output of the economy_which could have implications for import volumes in the long term.

The Ministry of Finance makes foreign exchange control policy, which is then administered by the Central Bank of Barbados (CBB) through its Exchange Control Division. Individuals may convert the hard-currency equivalent of U.S. $2,500 per year without special permission, if they are traveling outside Barbados, by applying to a commercial bank. Amounts in excess of U.S. $2,500 may be obtained upon application to the CBB. Profits and capital from foreign direct investment usually may be repatriated if the investment was registered with the bank at the time the investment was made. The CBB may limit or delay conversions of funds depending on the level of international reserves under its control. 3. Structural Policies

Although the Barbadian economy is generally free market-oriented, the government controls a relatively large public sector, including a number of “parastatal” entities. Pricing of goods is generally left to the market, although the prices of certain food staples, as well as utility and public transportation rates, are set by the government. The government subsidizes losses incurred by the entities—such as the monopoly dairy and the public bus system which it partially or wholly owns, but the effect of those subsidies on U.S. exports is probably minimal. For example, milk imports face high tariffs, as they do in most countries. However, even if imports

were liberalized, U.S. exporters likely would face strong competition from many other

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countries with milk surpluses, such as from those in the European Union. Bulk users of utilities such as industry—are eligible for resource discounts, but the trade effect of the subsidy is probably negligible on international markets, because of the generally higher costs of production Barbadian industry faces.

The 1992 and 1993 reform of the direct tax system broadened the tax base while lowering maximum rates a change which resulted in an overall lower level of gov. ernment revenues in the first half of 1994 (see section four). The previous government announced in April 1994 that a value-added tax (VAT) would be initiated in April 1995, which, among other things, would replace many of the indirect taxes, such as consumption taxes and stamp duties on imports—which now exist. The new government has not yet announced whether the VAT will be implemented according to the previous government's plan.

In October 1994, the new government announced that businesses in the manufacturing, agricultural, and fishing sectors will be able to import all inputs free of all duties and taxes. The policy change should result in higher levels of goods imports, a development U.S. exporters may be able to take advantage of.

In regard to purchases of consumer household durables, the government has not yet announced its policy on the amount of down payment needed, if any, to purchases these big-ticket items, many of which are imported from the United States. At one point, the previous government sought to constrain imports by making con. sumers put hefty down payments on installment purchases of durables. Currently, no down payment requirement is in place. 4. Debt Management Policies

The overall deficit on central government operations widened slightly during the first half of 1994, from about one percent at the end of 1993 to between one and two percent of Gross Domestic Product (GDP) at the end of June 1994. The increased deficit was due to a decline in revenues a result of the 1993 tax reform which reduced direct levies

and not to increased expenditures. The decline in gov. ernment revenues took place even as real GDP rose 3.8 percent on an annual basis in the first six months of the 1994 (from 0.8 percent in 1993). The Barbadian government has continued its concerted effort to repay foreign debt, the levels of which have declined steadily for over three years. As in the recent past, an increasing share of debt is being financed locally. As a result of high liquidity in the banking system, commercial banks and other local buyers were the main source of new credit to the government to finance the deficit during the first half of 1994. Previously, the deficit had been financed primarily through purchases by the National Insurance Scheme (akin to the Social Security System) of Treasury bonds. As a result of the government's repayments of its external debt, net foreign financing in the January-June 1994 period was negligible.

With the September 1994 election of a new (Barbados Labour Party) government, it seems unlikely that Barbados will willingly participate in a formal International Monetary Fund (IMF) program in order to obtain funds for structural adjustment in the near- to mid-term. The new Prime Minister has repeatedly said that he will not run his country according to IMF dictates. In the autumn of 1991 (under the former Democratic Labour Party government), Barbados was compelled to ask the IMF for funds to handle a severe shortfall of international reserves. In exchange, the IMF required Barbados to institute economic austerity measures to reduce goyernment spending in ways that were politically unpopular, including cutting spending on public sector wages. Government officials have expressed their desire to continue to work with the Inter-American Development Bank and the Caribbean Development Bank on essential infrastructure projects, and relations between the Government of Barbados and those institutions appear cordial. 5. Significant Barriers to U.S. Exports

The introduction of the CARICOM Common External Tariff several years ago will continue to disadvantage imports from countries which are not CARICOM (Caribbean Community) member states-including exports from the United States. In February 1994, Barbados eliminated its “negative list” of goods which could not be imported

or for which an import license was necessary, and replaced it with a higher duty. The benefit of a duty replacing an import license is that the trade barrier is transparent; previously, there was no way to foretell whether the responsible Minister would approve a particular import license application. There is no provision of Barbadian law that discriminates against U.S. exports in or of itself.

U.S. standards are generally acceptable in Barbados; the American Embassy is not aware of any cases in which Barbadian standards have acted as a trade barrier to U.S. goods exports. Barbados is a member of the GATT/Tokyo Round Agreement on Standards (Standards Code).

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