Our vital foreign earnings are in decline

Over all of this hangs a large silence. Premier Dr. Brown’s tenure might well be classified as a regime of confrontation. So far, the new Premier has provided a regime of non-frontation. But the quiet on the financial front is especially disquieting.

Look at the facts. According to an unofficial Bermuda Sun poll, about two out of every three workers says that he or she is uncertain about his or her job tenure. 

The combination of the BIU and the BPSU, between them representing about 6,000 Government blue and white collar workers, have either accepted overtime bans, opted for a wage freeze, or taken some other analogous action; but have not sought and say they will not seek a pay increase.

CD&P, Bermuda’s largest law firm and a leader in servicing international business has sliced out some workers — including lawyers. So has Bermuda’s second largest law firm — Appleby. Monopoly BELCO, employing about 300 workers, went for a  wage freeze.

BTC downsized a while ago. BNTB has reduced staff. There are steady and unrelenting rumours — invariably followed by the fact of action — of smaller downsizing in many, many, other businesses. Hotel employment is down. Retail sales have been sliding downwards for almost 30 consecutive months.

Bermuda is entirely dependent on the steady ingress of foreign exchange — U.S. dollars, Euros, Canadian dollars, and any other freely exchangeable foreign currency. This foreign currency comes to Bermuda and we then spend it around on-island and create what’s called Gross Domestic Product or GDP.  Because we have access to foreign currency, we can eat and dress and sport and travel. Without that foreign currency, we’d be completely dependent on Randy Furbert’s honey, David Lopes’ milk, and Tom Wadson’s chickens and eggs.

So you can see where we would be without foreign currency.

Spinning and spending

How much foreign currency do we get? Well, in the last year reported year (2009) we got about $2,347,000,000. Of that, leisure tourism brought in about $283m.  All the rest came from international business (IB). Practically, IB brings in or attracts 90 cents out of every dollar that arrives here. (National Economic Report, 2009)

Is anything happening with Bermuda’s foreign exchange earnings? Yup. They’re not rising. In fact Foreign Exchange (FE) earnings were about $2,233m in 2006, $2,577m in 2007, $2,400m in 2008, and $2,347m in 2009.  That’s a decline. Not good.

GDP, which is a product of the spinning and spending of those FE dollars, reflects that movement.  GDP has moved like this. In 2006, GDP was $5,387m, in 2007 it went up to $5,860m, in 2008 it went slightly higher to $6,068m, and in 2009 it went down to $5,715m. (Dept of Statistics, GDP Report December 2010).

The ingress of foreign exchange and its spending impact flows a little way past each year’s statistical calculation period. So the rise in FE earnings in 2007 was still pushing GDP higher in 2008. The decline in FE earnings in 2008 would take a few months to work through and would not lower GDP until 2009. The 2009 decline in FE earnings will work through and make itself really felt in 2010.

And what if FE earnings are — or were — down further in 2010? Then they will work through and will impact in 2011 — this year!

So seeing and understanding the figures that are now in the public domain; knowing of the enormous disquiet in the community; and knowing that Bermuda has to deal with numbers — not emotions — I am puzzled by the silences and the admissions of not knowing what’s happening, from people who ought to know what’s happening, and who are supposed to make decisions based on sound information.

The silence puzzles me. What about you?