This is the second in a two-part series on the emergence of Cuba as a rival to Bermuda in international business and tourism.

Several people contacted me about last week's column because they too see Cuba becoming a much bigger threat to Bermuda. But more importantly, they too are concerned about what is happening to our Government infrastructure; an infrastructure that was so carefully thought out to create a positive and workable partnership between the private and public sectors. A partnership yet to be developed in any other country. When I talk about government infrastructure, I am speaking in general and not referring to specific party politics.

According to local businessmen Ian Gordon and David Thompson, there is already significant development happening in Cuba, principally by European, Spanish, Japanese, Chinese and Korean corporations. Old Havana is being developed as a business centre and already has underground cabling to facilitate state of the art communications. An Italian phone company is updating the telephone systems. ING bank has an office there as well as several insurance companies and other banks.

The Cuban government agencies are also using whatever resources they can to get hard currency to develop their infrastructure using their best means so far - tourism. Despite no major American airlines flying direct to Cuba, the country still earns between $200 million to $300 million per year from around 2 million tourists. Imagine how many tourists it would attract if it did open.

There are those who believe Cuba is already a capitalist society hiding behind a communist curtain because it allows the chosen few who have grown wealthy under Communism to retain control over the general population. This school feels that even if Castro dies, the chosen few will not willingly abandon Communism because they would stand to lose too much. They feel this group will resist any foreign invasion of Cuba if it threatens their lifestyle.

There are others who believe the Cubans are very proud people who do not want to see their culture stripped away by outsiders. This camp believes the general public in Cuba adores Castro and worships the ground he walks on. Life may not be great under his regime, but it is far better than the days of Batista.

Another camp believes the general public in Cuba resent the US embargoes imposed on their country because they are being unfairly punished for political reasons. As a result they resent the Americans and don't want them in their country.

The question that no one seems to be able to answer is what happens once Castro dies? Right now Cuba is synonymous with Castro's name. When you think of Cuba, you think of Castro and cigars.

The one advantage Bermuda still holds over Cuba is the ease of the regulatory process for company incorporations. Where Cuba could fail is through its bureaucracy. Over the years Cuba's government officials have mastered the power of bureaucracy and use it to their advantage. They believe if they dangle a carrot in front of potential investors' eyes when necessary during negotiations they can keep them interested while stringing out the process of getting anything done for as long as they possibly can. All the while, they are collecting money to maintain their profitability. This bureaucratic approach will not work should Cuba ever truly open its doors.

We have a very unique regulatory process in Bermuda - one we can ill afford to mess up. One of the new insurance companies that set up here was originally supposed to be incorporated in London but when they started the process of incorporation, they discovered it would take a minimum of nine months before all of the bureaucrats signed off on the deal. The need for capacity was immediate. Nine months down the line would have been too late for the company. So by default, Bermuda was chosen because they knew they could get the company incorporated much quicker. It took two weeks and the company was incorporated!

Now for the bad news, the company may indeed have to wait nine months before it gets all of its employees in place because of the bureaucratic infrastructure we are now developing in our government departments. This is one area where Cuba may have an advantage over Bermuda. Why? Because although there is only one shareholder in Cuba, Fidel Castro, every government agency is run as a profit centre. That is, even though there are Departments of Education and Tourism, these departments must raise their own capital to sustain themselves. They can not go to Castro for money. He comes to them looking for money. Consequently, when it suits these agencies, they push aside bureaucracy in the name of capitalism.

So just apply that mentality to a government department in Cuba, say Immigration. A new company incorporates there but now it needs the employees to get up and running. Because the agencies are all run as individual profit centres, the new corporation can either pay the department off to get the people it needs or it can assist that department to get whatever it needs to maintain its profitability.

The Cubans have also mastered the art of bartering. You scratch my back I scratch yours. Some say this type of government encourages corruption. The question then becomes what is corruption? Is there corruption in every society because the only way things get done is by using contacts.

Bermuda still has some time to redeem itself by making sure all of the right departments talk to each other if we want to preserve our favourable regulatory environment status before that large land mass ripe for development becomes open to the those pioneers looking for their next frontier. Remember pioneers are always looking forward with little regard for what's left behind. So they would leave Bermuda without even looking back and our little island in the middle of the North Atlantic with no natural resources of its own would no longer be one of the wealthiest countries in the world.

Think about it. The Cuba threat worries me more than the Patriot Tax issue. It should worry you too. Let's get our house in order.

@EDITRULE:

Cathy Duffy is a Chartered Property Casualty Underwriter (CPCU) and is now a freelance writer. She is a former executive of Zurich Global Energy and has 15 years experience in the insurance industry. She writes on insurance issues in the Royal Gazette every Monday. Feedback crduffycwbda.bm