In the aftermath of the Napoleonic Wars of the early 19th century, Switzerland declared itself neutral. That meant that no country could invade it or use it as a base of military operations. A little more than a century later, Switzerland introduced the Swiss Banking Act of 1934, which prohibited banks from providing authorities with personal and account information about their customers unless certain conditions apply.
People tend to think Switzerland’s bank secrecy laws spawned the concept of offshore banking, yet it existed in the Caribbean long before then. Going back in history, 18th century colonialism drove an increase in international trade between the new world and the old. Plantation owners and merchants not only needed trade financing, but they also wanted to avoid paying high tax in their home country.
Caribbean offshore banking really started to take off in the 1920s because its close proximity to the U.S. made the islands an attractive location for branches of foreign banks. In the years surrounding World War II, there was a huge shift in the world’s population along with a migration of funds in response to conflict and instability. Post-war, strict banking laws in countries such as Britain encouraged more business to flow toward offshore centers. For example, during the 1950s there was a ban on lending to non-British borrowers following devaluation of sterling.
The same logic exists today. Businesses and individuals turn to offshore banks for:
- Tax-effective financial planning
- Availability of multi-currency accounts
- Ability to set up offshore trusts
- Protection of assets against political and economic instability or threat from legal matters
If anything, there’s more demand for offshore banking. The world’s population is not only growing, but people are living and working longer. They’re better educated and more well-nourished, notably in emerging and frontier markets, which in turn leads to increased wealth. Business is global, and people are mobile: it’s not unsual for executives to live in many different countries during their career.
Belize is well positioned to benefit from these trends. Geographically, it’s in close proximity to emerging economies in Latin America. According to the CIA’s World Factbook, Brazil is the world’s eighth largest economy, Mexico ranks #12 and Argentina, Colombia, Perú and Chile rank in the top 50. The World Bank estimates 2013 GDP growth in the region will be 3.8% to 4%, largely driven by infrastructure development.
Several other factors make Belize an attractive offshore banking center including:
- Strong discretionary policies
- Solid, sovereign government and a stable economy
- No history of currency devaluation and fixed exchange rate pegged to the U.S. dollar since 1976
- Tax treaties with multiple jurisdictions
- Multilateral trade relationships and memberships with international organizations
- Forward-thinking, technology-based culture
Extrapolating on the theme of history repeating itself, author William Faulkner once said, “The past is not dead. In fact, it’s not even past.” In Belize, we’re continuing to build on our strong heritage and strong foundation in Caribbean offshore banking.
The information contained in this document is for information purposes only and not for the purposes of providing legal advice. You must not rely on the information in this document as an alternative to legal advice from your attorney or other professional legal services provider. If you have any specific questions about any legal matter you should consult your attorney or other professional legal services provider.