Jerome Dwight, Royal Bank of Canada examines how Barbados has positioned itself as the domicle of of choice for Latin American multinationals and how the jurisdiction continues to expand to serve this growing base of clients.
Barbados: A Gem for High Net W…
With political stability, a strong economy, a long reputation as a financial jurisdiction and extraordinary natural beauty, it’s not surprising that Barbados is a popular destination for international business corporations, captive insurance companies and trusts. After enjoying many years of having a very effective tax treaty with Canada, Barbados has now increased its focus on marketing itself as a domicile of choice to Latin American multinationals and its high net-worth segment. In an era of increasing regulation and compliance, Barbados continues to benefit from being identified as a jurisdiction based on the principles of cooperation and compliance instead of secrecy and confidentiality. As Latin American markets continue to grow at a rapid pace with the economies of Brazil, Mexico, Colombia and other emerging markets driving historic levels of output and wealth creation, Barbados continues to benefit from significant inflows of assets from these regions.
Increasingly, Latin American corporations and wealthy individuals from these regions are looking to access global capital markets, invest internationally and manage local currency and inflation risks – for these types of clients, the benefits of utilising a Barbados offshore structure are quite expansive ranging from the ability to access global service providers located on island, a tax efficient treaty network, a solid investment protection treaty network along with a stable political climate and mature financial system. The ability to minimize withholdings and capital gains on foreign income and sale of investments utilising a Barbados International Business Corporation (IBC) holding company continues to provide significant planning opportunities, the benefits of which many Canadian multinationals have utilised for the last two decades. As Latin American organisations become net exporters to countries across North America, Europe and increasingly China, existing treaty networks allow for highly effective cross-border transaction structuring which mitigates the risk of investment disputes and maximize tax efficiencies on repatriation of profits.
With increased size and complexity, Latin American businesses are also looking to manage their risks using bespoke captive insurance companies tapping into Barbados’ extensive network of world leading captive insurance managers providing direct access to global reinsurance markets and investment managers. As a long preferred domicile for Canadian captives in the mining and oil and gas sector, Barbados now has the requisite experience to meet the demands of Latin American companies steeped in natural resources, energy and exports.
Additionally, as Latin American companies continue on the path of globalisation they are increasingly keen to consolidate their international treasury and cash management needs in Barbados leveraging the breadth of service providers and local capabilities. Commercial needs such as foreign exchange, global investment, cash management and the need for structured credit facilities all continue to fuel demand for a more sophisticated suite of integrated services – much of this demand for international financial services are being met using a centralised treasury function based in Barbados.
Barbados is situated strategically as a hub to markets in the southeast Caribbean, Central America, Venezuela and Colombia. As of late, Barbados has seen significant growth from fast growing Latin multinationals engaging in global expansion leveraging the benefits of the double taxation treaty network and bi-lateral investment treaties (BITs). In the latter category, Barbados has signed 11 BITs including BITs with two LATAM countries, namely Venezuela and Cuba; as well as with Belgium-Luxembourg Economic Union (awaiting ratification), Canada, China, Germany, Ghana (awaiting ratification), Italy, Mauritius, Switzerland, and United Kingdom. These BITs complement Barbados’ extensive tax treaty network and provide a wide array of investor protections.
On the estate planning landscape, Barbados has seen an increase in the use of trusts by wealthy Latin American families and individuals as a method of holding personal wealth confidentially. Barbados has evolved as a choice for Latin American individuals, businesses and families from around the world seeking to structure their affairs internationally. It is significant that Barbados has concluded treaties with several Central and Latin American countries in which there is no practice of utilising trust structures under civil law regimes. For such segments, it is anticipated that Barbados will soon feature foundations which are characterised generally as a fund which has been endowed by its founder to be utilised for persons or purposes detailed in its statutes. Foundations offer high net worth individuals the ability to transfer the ownership of assets to a separate legal entity while still retaining control of how the assets are managed and distributed.
As Barbados continues to expand its ties with countries such as Mexico, Brazil, Venezuela, Chile and Colombia the opportunities for integrated investment, credit and fiduciary solutions continues to expand. Barbados will continue to expand its capabilities with a keen focus on serving its growing base of Latin American clients.
About the Author
Jerome Dwight CA CFA Jerome Dwight, CA, CFA is Managing Director of RBC Wealth Management-Barbados and head of Corporate & Institutional, Caribbean & Latin America