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December 1999

Not a money-launderer in sight





John Grisham got it wrong of course. Grand Cayman is not a place where private aircraft land at night and men in dark glasses deliver bulging suitcases of banknotes to dummy banks sporting no more than brass nameplates.

No, this is an island of sun, sea and fun. Though the traffic jam from Seven-Mile Beach to George Town on a good day is a maximum of seven miles long. Those bankers, housewives, accountants, lawyers, hoteliers and diving instructors in their high-performance 4x4s can only rev their engines, turn up Superjam on Radio Cayman and empathize with their counterparts in the Brooklyn Tunnel or on the Hammersmith Flyover. No-one has yet found a way to reduce this senseless waste of executive time. It can take an hour to travel three miles to luncheon at the Grand Old House - nearly as bad as Istanbul or Bangkok. Bus lanes, road-pricing, allowing odd- and even-numbered cars out on alternate days, probably nothing would deter the persistent Caymanian from getting into that queue. Motorbikes are heavily taxed and pedal cyclists risk being injured by drivers whose average competence is truly appalling. Even using taxis is more than usually dangerous: most of them are US-made minibuses with sliding doors on the wrong side for left-driving Cayman, so passengers step out into the stream of traffic.

But the antidote to all this is close at hand - a snorkel-length away over the coral reefs among brightly coloured fish, friendly turtles and cuddly stingrays. Cayman means "alligator" but there aren't many of those left, except in the Landmark bar on a Saturday night.

Christopher Columbus discovered Grand Cayman in 1503 and loaded his ship with live turtles and fresh fruit. Nothing much has changed in five centuries. Communications are still extremely expensive. The latest deal from monopoly Cable & Wireless is $0.95 a minute for a phone call to the US. And don't bother to bring your Interglobe calling card, C&W will charge you an international rate to dial that 1-800 number anyway.

Cayman - pronounced CayMAN by the locals, and CAYm'n by non-Caribbeans - was uninhabited until the first superbankers set up their condominiums on Seven-Mile Beach - a glorious arc of white sand fringed by mangrove trees - in the early 1700s just in time for the South Sea Bubble. I jest. The first Caymanians were marooned sailors who scratched a living from forest clearings inland and pulled turtles and exotic fish out of the sea when they were hungry. They mostly called themselves Bodden or Ebanks - names that dominate the population even today. Their children tended to go off to sea again, to the extent that until recently the major export of the Cayman Islands, according to unexpurgated geography textbooks, was seamen.

Even though the Portuguese bagged the Cayman Islands first - there are two smaller ones 80 miles to the north: Little Cayman and Cayman Brac - Sir Francis Drake was the first to spend a couple of days on Grand Cayman, guzzling turtles, in 1586. England claimed sovereignty over a bunch of Caribbean islands including Jamaica and the Caymans 84 years later.

The Caymans are still staunchly British, with the Queen's head on banknotes and a governor appointed by her. Former governors rejoiced in such names as George Stephenson Shirt Hirst and Athelstan Charles Ethelwulf Long. But today's incumbent Peter Smith is no pensioned-off diplomat. He has little time for red tape, especially OECD officials who drink his whisky and berate him about "harmful tax competition".

Because Cayman, having tried exporting mahogany, cotton, turtles and jolly Jack Tars, decided in the 1960s that its exports should become invisible. Unfortunately some unscrupulous people took advantage of this lack of transparency to shove all sorts of deals through Cayman that had nothing to do with its innocent, smiling people. Now re-constructed Caymanians are happy to talk about what happened a safe 20 years ago. Because the invisible exporters have cleaned up their act. Only occasionally does the result of a scam elsewhere in the world muddy the clear waters of Cayman.

The $197 billion that appears on Grand Cayman bank accounts is as superficial and fleeting as the near one million tourists a year who camp off George Town in giant cruise ships built like intergalactic invaders. Occasionally the tourists get down to what is truly offshore, the marine delights of Grand Cayman's 119 designated dive sites which can be visited by aqualung, submarine or truly transparent glass-bottomed boat. There's almost no limit to the depth that can be trawled: the nearby Cayman Trench goes down 23,000 feet.

Tourism and all forms of hedonism now leave their stamp in George Town, from the ghastly looking Captain Hook's Grotto to the aforementioned Grand Old House, one of Cayman's most ancient buildings. On its wooden verandah you can spend from midday to sundown eating some of the island's most exotic seafoods - turtle, conch, mahi-mahi - washed down with expensive French wine. Bankers and lawyers stand out in their city suits - no Bermuda shorts or Hawaian shirts here, we're much too respectable - while the reste du monde shamble about in Cayman T-shirts and espadrilles.

Barclays came here in 1953, CIBC wasn't far behind - Cayman is overrun by Canadians sitting out their appalling winter. These two banks are still the best established on the island. They were followed by about 600 others and numerous accounting firms. Law firms haven't branched into Cayman: the global players tend to instruct local partnerships, the biggest being Maples & Calder, which has opened offices itself in London and Hong Kong. Since Cayman law is based on English common law, London or Commonwealth-trained lawyers can transfer here with no trouble.

Life is spent deciding where to eat next, should it be Papagallo, as magical as a bird-cage, but instead of bars there is fierce metal gauze to keep out the mosquitoes. Should it be the Wharf, so close to the sea that the odd diner gets washed overboard, or Casanova - no-nonsense Italian grub.

Grand Cayman is the place if you hate hills - nowhere does the land rise above 50 feet - and you hate tax. However, it's only tax on income and capital gains that is zero. There are many ways the government gets revenue through indirect taxation, giving it a healthy Cayman$70 million (US$87.5 million) surplus in 1998. That comes mainly from duty on cars, fuel, alcohol, and taxing tourists. Other nice little earners are licence fees from banks and trust companies, and Cable & Wireless. The biggest earner of all is the sale of work permits.







The Fitch approach is good. They are now a serious player, and best for covered bonds

So says a German Pfandbrief specialist. Well, as Fitch is maintaining triple-A ratings, while Moody’s makes severe downgrades, he would say that wouldn’t he?

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