Bermuda is not immune from the global financial turmoil that has plunged world markets into free fall, but the Island's international business sector could emerge well from the global carnage.

That is the view of Finance Minister Paula Cox, who told The Royal Gazette who said that although Bermuda was exposed to the crisis through being an international financial centre, it was not hampered by many of the factors that had ravaged the US economy.

She hinted that tax increases were unlikely, as the Government looked for ways it could lessen the burden on Bermuda residents and businesses stung by the crisis.

Government infrastructure projects would help to support the construction industry after the current round of major projects were completed, she added, though she also expected "belt-tightening" in both public and private sectors to occur as a natural consequence of the world's economic woes.

Ms Cox said she had never seen anything like the current crisis. "It really seems like it's a perfect storm," she said. "It's a textbook example to study, because you've had a convergence of so many things happening and people feel like they're in a time warp, ricocheting from crisis to crisis.

"There's tremendous volatility, the markets are disrupted and people are trying to make sense of it. We will see the effects of the Economic Stabilisation Act and the Tarp (Troubled Assets Relief Programme) in time. Personally I think it was mis-characterised as a bailout of Wall Street. "Many people did not appreciate that in order to keep the economy bolstered, so that people trying to get a student loan, or buy a car. Just to try to release the market paralysis, something had to be done."

She said that as the US government begins to buy troubled assets over the coming months, more liquidity will return to the global financial system. Bermuda was a very different case to the US, Ms Cox stressed.

"Our housing market is relatively stable and we haven't had the predatory lending practices that you have seen in the US, which have led to some houses there effectively being built on sand," she said.

"The Bermuda scenario is somewhat different, but when you look at the insurance sector, you're mindful that some monoliths have been seen not to be immune from the economic problems. Apart from some of the financial guaranty business, Bermuda has generally effectively been very strong.

"When you look at our banking sector, the BMA has required levels of capitalisation in excess of international minimum standards. While nobody has a crystal ball, in terms of our institutional structures and mechanisms, we should be fairly well placed.

"In these situations, the Government has to be seen as the lender of last resort and that's why our excellent sovereign creditworthiness rating from Standard & Poor's and Fitch is so important. If circumstances require, then we will have access to capital because of these ratings and our jurisdictional reputation."

With local and international businesses alike looking to cut costs, tourism visitor numbers falling, the annual inflation rate hitting five percent and the value of pension plans and investments linked to the stock markets falling, the average Bermudian is feeling the pinch.

Pressed on what the Government could do to help and whether tax cuts were likely, in order to give the local economy a shot in the arm, Ms Cox said: "There'll be an attempt notwithstanding difficult times to see what we can do to assist, using some of the tools within our armoury.

"I'm not going to pre-empt budget decisions, but I think that we will certainly be looking at how we can try to assist. I think it would be reckless and imprudent to talk now about budget cuts, but what we do want to do is minimise the pain in terms of tax increases."

She added that "at times like this we try to keep people in the picture and try to give them a little more in terms of their disposable income". Projects in the pipeline that would save people money included free childcare and public transport, she said. And for businesses, Government had provided breaks for retailers making refurbishments, as well as for those in the Economic Empowerment Zone, and economic development order, which gives duty deferral for five years for projects of particular economic value.

If economic activity declines, then Government revenue from taxation and duties will fall too. Ms Cox said this would mean belt-tightening by Government and it would be necessary to prioritise plans, meaning some might have to be put temporarily on the back burner.

"It's not necessarily that we will see less Government revenue, though we don't anticipate the level of growth we had in past years," Ms Cox said. "What we have done is look at the financial projections and have looked in more stark terms at our priorities, and being ruthless with those matters. Because an initiative may not be funded does not mean never, it means not now."

The major pillar of Bermuda's economy the international business sector was weathering the storm well, although several individual companies had been more seriously impacted, Ms Cox said, and financial regulator the Bermuda Monetary Authority (BMA) had played an important role in maintaining stability.In fact, she suggested that Bermuda's uncomplicated regulation model could prove attractive to companies seeking certainty from their domicile in these uncertain times.

"Bermuda is isolated but we are interdependent," Ms Cox said. "We are a major global player and we're known as the risk capital of the world. We can't bury our heads in the sand and pretend we're untouched by this. We're very fortunate because we have a good regulatory framework. We have an independent Monetary Authority and they've been doing some stellar work.

"Even before recent events, the BMA, since in the early stages of the sub-prime crisis, were carrying out checks, stress tests and making inquiries at our financial institutions and I certainly can't fault them.

"Bear in mind that Bermuda is fairly uniquely placed. The US has a complex, interlocking structure of, I think five bank regulators, 50 state insurance regulators and now you are finding a convergence, as the Treasury Secretary, the chairman of the Federal Reserve and the chairman of the Securities and Exchange Commission, and I think you will see a convergence to a unitary system of regulation.

"Bermuda is fortunate in that our regulatory system is already a fairly simple and straightforward one. The BMA is not a central bank, but it probably the closest in our scenario to what constitutes a central bank. We don't have thousands of banks we have four banks and a deposit-taking institution."

Ms Cox has been involved in frequent talks with business leaders. "International business, just like local business, will always speak to the Ministry of Finance and put in a plug for lower taxes, or less taxes," she said.

"But that certainly hasn't been the recurring strain over the past few weeks."I think they're feeling wary right now. Some of them are most annoyed with the policymakers in the US. They felt their communications did an injustice to the Economic Stabilisation Act, in that it was more about saving the economy and the country than being seen as a bailout for fat cats.

That has been more their focus."Last week, Ms Cox attended the Bermuda International Business Association's (BIBA) annual conference in New York, where the Minister got a sense that there could be opportunities for Bermuda amid the global financial chaos. "In New York, we had a larger-than-ever turnout and there was a eagerness to hear about Bermuda that really signalled they would consider Bermuda for their business.

The underlying message was that in an environment where change is going on around them and they didn't feel in control, they felt reassured by the message of stability and reputation, as well as access to service providers who were representing Bermuda at BIBA.

"Given the whirlwind that they anticipate will be reaped as part of this financial turmoil in the US, they are going to be looking at other places to park their businesses. They saw Bermuda as a quality jurisdiction.

"So we haven't suffered in terms of perception and I think that as long as we keep doing what we've been doing to enhance our standing, and notwithstanding the political rhetoric, Bermuda will be steady as she goes.

"The numerous cranes towering over the Hamilton skyline are testament to the continuing boom in Bermuda's construction industry. But with doubts over the private sector's ability to raise the funds needed to build a wave of new hotels during the credit crisis, construction leaders are concerned over what comes next for the industry.Ms Cox said public projects would help.

"We have a responsibility, as a Government, to stimulate the economy and keep it ticking over in a time of anaemic growth but you've got to do it in a measured way," she said.

"There's no lack of infrastructure needs. We've just spent several million dollars on having an airport that meets international standards and getting the airline aprons fixed up. There are many areas where we have to focus on investment in infrastructure so that we stay competitive. There are other projects that are less immediate, but still important, that we project in three to four years that we'll have to do some work.

"There's issues like school plant, the hospital, though Government realises it can't do everything at once. It wouldn't be responsible or fiscally prudent." Some jobs have already gone, as companies outsource back-office operations and trim their payrolls to cut costs. More cost-cutting is likely, Ms Cox said.

"Business people are going to want to make sure they make a better mouse trap and get better productivity and greater value for money," she said. "They will be looking at how to be more cost-effective for example if they were considering moving to a bigger premises at a greater rent, more will probably decide to stay where they are. Some may keep the status quo instead of adding more personnel."

"Any business will be looking to have a more cost-effective model. There will be belt-tightening all around, at governmental level as well as in the business sector."