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Despite its sound banking system and stable economy, Barbados continues to struggle in its recovery from the 2008 financial crisis, although things are starting to look up. In early 2011, the Central Bank of Barbados reported that the economy had levelled out in 2010 and was expected to grow by 2% in 2011, contingent on improvements in tourism and international business....

Despite its sound banking system and stable economy, Barbados continues to struggle in its recovery from the 2008 financial crisis, although things are starting to look up. In early 2011, the Central Bank of Barbados reported that the economy had levelled out in 2010 and was expected to grow by 2% in 2011, contingent on improvements in tourism and international business. Unemployment, however, continues to be a problem, and stood at 11.2% as of the end of 2010. One partner describes the situation simply, saying, "People are just buying and selling less."

Nevertheless, international business remains steady. 2010 saw an increase in investment flows to the jurisdiction, according to the United Nations Conference on Trade and Development World Investment Report. One partner notes an increase in private equity with more involvement from Chinese banks, commenting that, "Barbados/Chinese diplomatic relations have always been extremely strong. This has been enormously advantageous for both countries." Canada also has important economic ties to Barbados, which is the third-largest recipient of Canadian direct investment abroad. The two countries are in the process of negotiating a Free Trade Agreement under the Canadian-Caribbean Community Free Trade Negotiations (CARICOM).

On another positive note, hotels and restaurants are reportedly much busier during this year's high season than last year's. Construction of the Four Seasons mixed-use development resumed in April 2011, after being stalled for two years. The Wall Street Journal reported that financing for the development was arranged by the Central Bank. And despite feedback from one attorney that in 2010 project finance in Barbados was just "not happening", the Central Bank expressed an expectation that increased private capital will fund additional projects such as Port Ferdinand and the Barbados Power and Light Plant.

The government continues to work on legislation designed to make Barbados more competitive in the global economy. This includes strengthening the Money Laundering Prevention and Control Act, with an announcement in early 2011 of more stringent measures giving greater authority to investors and increasing companies' responsibility. In 2010, the government also announced the creation of a Financial Services Commission (FSC) through the Financial Services Commission Act.

The FSC is expected to streamline and modernise the financial services industry. In early 2011, the government was poised to appoint the FSC's seven-member board. Barbados has also been expanding its Double Taxation Treaty network. The Barbados/Mexico Double Taxation Treaty came into effect in 2010 and, according to the Honourable Darcy Boyce of the Prime Minister's Office, has generated "buoyant" interest from that location. Over the past three years, Barbados has also signed tax treaties with Panama, Ghana, Luxembourg, Portugal and Spain, all of which have yet to be ratified.

"The double tax treaties are just part of the story. A number of businesses are realising that this is a better place to headquarter their business," comments one attorney. "There is a whole basket of advantages now to being in Barbados which far extend beyond tax treaties."