By Baron Laudermilk
The Offshore financial centers in the Caribbean have become economically successfully in the last thirty years. Although many larger countries have had failures and successes with the global transition towards service based economics, IFCs have had a long record in terms of economic success as a direct result of their chosen model to provide international financial services.
However, the economic success of the Caribbean Offshore financial centers future isn't has clear cut as it used to be thirty years ago. There are three main challenges which have happened in the last few years that are changing their status; regulatory & tax initiatives, the global financial meltdown, and stronger competition. This will affect Chinese individuals who are interested in investing in the small Western Island.
The IMF, FATF, and the OECD tax initiatives are all changing the way the Caribbean Offshore Financial Center operates. The IMF is doing more reviews on the Caribbean islands to ensure that they comply with formal international regulatory standards that are set by Basel, the IAIS, and IOSCO. The FATF are fighting money laundering and the financing terrorism which is changing the inflows and outflows of money. And the OECD tax initiatives will allow the US to help improve tax compliance involving foreign financial assets and offshore accounts. All three of these will affect the economy.
Clearly the global economic recession has played a toll on the Caribbean Offshore Financial center. Various jurisdictions have witnessed a decrease in new registrations and demand for their services, although in some cases they are still strong. These challenges have also presented certain fiscal challenges for the island, and have raised the debt from the country. This was not helped improve the overall reputation of the islands' offshore centers.
Finally there is a major increase in competition that poses a threat to the future of the Caribbean Offshore financial centers, as more competitors are becoming stronger and prominent. Jamaica is currently trying to launch a new initiative to introduce an IFC and there are talks that the Dominican Republic is attempting to do something similar. Also the rise of Shanghai as an offshore center is making Chinese companies and investors rethink going abroad since they have a strong and international center at home.
Chinese investors can still find many opportunities on the Caribbean offshore financial centers. They are still strong, still protecting investments and privacy. If the Caribbean Islands are able to stay competitive and compete with the larger offshore centers, Chinese investors may continue investing in the region.
