The overwhelming case for foreign currency
Bermudians need to understand our financial predicament. We are in massive financial trouble that could take years to recover, if ever.
At the moment, Bermuda cannot even balance our budget, let alone pay off our crippling national debt. Bermuda needs foreign currency, foreign workers and foreign investment. Foreign investment and business provide us with foreign currency, jobs and revenue through taxes.
Whether one likes it or not, Bermuda has survived and prospered for the past 100 years from this foreign investment. Bermuda has no natural resources and produces nothing to obtain foreign currency. This crucial foreign currency keeps us all alive by enabling Bermuda to buy almost everything we need to survive, from cars to wine to food to freezers.
Bermuda needs foreign currency to survive. A foreign company sets up in Bermuda; they hire 20 foreigners and 20 Bermudians. Their international clients pay this foreign company for their services in foreign currency. To pay for their rent, electricity and expenses, they convert this foreign currency at a Bermuda bank into Bermuda dollars. Bermuda companies — eg, food wholesaler, car dealership, furniture shop — then convert, at the bank, their Bermuda dollars to this foreign currency, with which they are able to purchase goods overseas — 98 per cent of all goods in Bermuda are imported — and sell these goods to the Bermuda population. Originally, all our foreign currency came from the tourism industry; now Bermuda is almost totally reliant on international business for foreign currency. We pay interest on our national debt in foreign currency, at about $500,000 per day. Without foreign currency, Bermuda cannot exist as we know it. The Bermuda dollar is worthless to the rest of the world.
Bermuda needs foreign workers, so we can tax them and their employees. Bermuda may have lost close to 4,000 foreign workers and their families, but we also have lost the payroll tax and luxury tax (duty on goods) that these workers paid.
Payroll tax is the primary source of our government’s revenue that assists in paying for our Civil Service and balancing our national budget. Bermuda needs a certain number of people to tax to keep the country economically stable, similar to a restaurant needing a certain number of customers to survive. On top of this, Bermuda’s population is declining and a large percentage of Bermudians will be reaching retirement age very soon — therefore our tax base will decline further and the demand for pensions will increase. Bermuda needs that added tax income from foreign workers just to survive, let alone prosper.
Bermuda needs foreign business and investment to provide jobs for Bermudians. Bermuda has no natural resources or industry, and is totally reliant on foreign business. We need to welcome foreign businesses to set up in Bermuda and to provide jobs for Bermudians. Until Bermuda has a third pillar, we have no other viable options.
Bermuda needs foreign workers. All the foreign workers rent a house or apartment from a Bermudian, buy clothes and groceries, eat at restaurants, send their children to schools and generally spend their earnings in Bermuda. This spending provides numerous jobs for Bermudians. Bermudian businesses need a certain volume of customers to survive. Most businesses in Bermuda need foreign customers to stay in business. The main reason that restaurants, shops, daycare centres and other businesses are shutting down is related directly to there being fewer foreign workers on the island. Foreign workers create jobs for Bermudians, as our population is reduced the demand for goods and services shrinks.
Foreign workers lower our health insurance costs, pay into our shrinking pension funds and provide more airline seats to Bermuda. Foreign businesses provide volunteers and donate large amounts of money to local charities.
Whether the unions, the Government or Bermudians like it or not, Bermuda is a service industry. Our economy survives by collecting foreign currency through tourism and international business. Bermuda’s service industries are not only waiters, bartenders and chambermaids, but also include lawyers, accountants and bankers.
If Bermuda has any possibility of surviving this national debt burden of close to $6 billion, including pension funds, Bermudians, status Bermudians, permanent resident’s certificate holders, black and white, young and old, religious and atheist, heterosexual and gay, Progressive Labour Party and One Bermuda Alliance will all need to work together to make Bermuda a stable and extremely attractive environment for foreign business and investment.
Otherwise, our children and grandchildren will be enslaved by our huge national debt.
STUART M. SMITH