GOVERNMENT'S flirtation with the Communist dictatorship of Fidel Castro in Cuba could rebound on Bermuda both diplomatically and economically, former Premier Sir John Swan has warned.

Sir John, who spent several years in the mid-1980s negotiating directly with the White House, the State Department and the Congressional leadership to win Bermuda key economic concessions under the US/Bermuda Tax Treaty, said the island's largest trading partner would "not be be overly impressed" by Government's abrupt and unprecedented decision to encourage commercial and tourism links with Cuba.

"I have never been as confused about the overall long-term prospects for Bermuda as I am now," said Sir John, who served as Premier between 1983 and 1995 and is credited with laying the diplomatic and regulatory foundations on which the island's off-shore financial services economy is built.

"I believe there is a growing sense of alienation and frustration among Bermuda's traditional friends and business partners as a result of certain pronouncements and decisions that have been made by the current Government.

"These pronouncements clearly affect people's attitudes towards Bermuda - people in the diplomatic realm, people in business circles, the people who have traditionally felt welcome to come to Bermuda and conduct their business here."

Last month Transport Minister Dr. Ewart Brown announced the Bermuda Government would gift its old fleet of buses and ferries to the Caribbean Stalinist dictatorship.

Later, in the House of Assembly, he said that his Ministry was studying the possibility of opening direct air routes between Bermuda and Cuba as well as increasing economic co-operation.

Dr. Brown's announcement came at the same time Fidel Castro began his harshest crackdown on internal dissent in Cuba in more than a decade - executing three dissidents by firing squad and sentencing dozens of others to jail terms as long as 27 years for "crimes against the state" that included reading books banned by the Castro regime.

Castro's iron-fisted actions were widely condemned by the international community - including countries and individuals who have maintained friendly ties with the dictator since he seized power in the 1959 revolution.

"Dr. Brown's timing could not possibly have been worse," said Sir John. "At the same time Castro is being roundly condemned not just by the United States but by those who have been his traditional apologists in North America, Latin America and Europe, here's Bermuda talking about forging bilateral ties with Cuba.

"We already know full well how the US, our largest trading partner, will view any attempt by Bermuda to develop trade relations with Cuba.

"The US has maintained a trade embargo against Cuba since Castro came to power and only has very low-level diplomatic relations with Havana. That's hardly going to change as a result of Castro's most recent actions.

"Bermuda is not a large nation but it is a very prosperous nation because of economic and diplomatic benefits we have received directly from the United States. We know that the US has always tended to view Bermuda with a special regard - we have pre-Immigration and Customs clearance to enter the United States; visa requirements have been waived for Bermudians; and we have a tax treaty and associated benefits that are the envy of the world.

"There is a sensitivity in the American psyche to Bermuda, a sensitivity that regards Bermuda as a very special place. Former US President Taft said as long ago as the 1920s that never had such a small country played such a large role in American history and this is true, going all the way back to 1610 when the Deliverance and Patience saved the colony at Jamestown with supplies brought from Bermuda.

"So why are we jeopardising that longstanding relationship now? What benefits will accrue to Bermuda as a result of developing ties with Cuba, of all places? We are putting all of the benefits we currently enjoy at risk; we could well go from being extraordinary to ordinary in the thinking of both US officialdom and the American public.

"There is currently a renewed effort in the US Congress to close the so-called 'Bermuda loophole' in the American tax code. Surely this development has not gone unnoticed by Bermuda's Government. This is the very time when we should be redoubling our efforts to strengthen our friendship with the United States, not providing our critics in Congress and the various lobby groups with additional ammunition to fire at us."

Sir John said the Government's Cuban overtures should be viewed as a continuation of the controversial initiative to enrol Bermuda as an associate membership in the Caribbean Community (Caricom) trade bloc.

"This Government seems to delight in pulling Bermuda away from its traditional ties with the Northern Hemisphere - the US, the UK, Canada - and putting all of its emphasis on Southern Hemisphere countries," he said. "At the time Bermuda joined Caricom I said we might well have embarked on a slippery slope when it comes to our country's place in the world and how it is regarded.

"Now with the Cuban decision, it's clear to me that Government intends to continue on the course that it set with Caricom, a course that is taking Bermuda further and further away from its historic place in the world as a bridge between the Old and New Worlds.

"What's more, I see absolutely no benefits deriving from these decisions. All that linking Bermuda's fortunes to those of Caricom and Cuba will do is reinforce a growing perception in North America and Europe that Bermuda is removing itself from the real world - the real world of common sense, the real world of opportunity - and throwing its lot in with the developing world."

Sir John said Bermudians had to weigh the possible benefits and risks of Government's "bizarre forays" into the world diplomacy.

"I don't think that even young people on the wall or traditional supporters of the Progressive Labour Party want to find themselves living in a Bermuda that does not allow them to continue to gain the benefits that we currently have available to us," he said.

"Bermudians need to go back and compare and contrast the findings of the most recent 2000 Census with the contents of those issued in the 1970s, '80s and '90s. They would be amazed - genuinely amazed - by what they would find if they did so. The lifestyle that we now take for granted and treat in so cavalier a manner simply did not exist two or three decades ago.

"So Bermudians need to ask themselves: 'What are the consequences of what our Government is doing'?" he said. "Surely the Government should be putting more emphasis on looking for new business opportunities for the island than deliberately weakening long-fostered international relationships that once made Bermuda the premier off-shore destination not only for tourism but also for international business.

"We have already experienced a tremendous erosion in our tourism business; we really cannot afford to allow the same thing to happen to our international financial sector, which is now the linchpin of the economy.

"And we know some of the attitudes that are being encouraged out there; we are constantly trying to blame expatriates - guest workers who we invited to this island to conduct their business - for problems that are of Bermudians' own making.

"We constantly try to hijack the expatriate community, to assign responsibility to them for problems they did not create and which Government already has the obligation and the power to try and control."

Sir John said semi-official efforts on Government's part to scapegoat the expatriate community were counterproductive and potentially "hugely destabilising" given the basic economics involved.

"Expatriates pay rents on their apartments that allow Bermudians to pay their mortgages; they create employment opportunities for Bermudians in satellite services ranging all the way from legal and accountancy firms to restaurants and grocery stores and the construction sector.

"They and the industries they have created here are the spark plug that fires the engine of Bermuda's economy. This is an economy that is the envy of the developed world. Yet the message that is being sent down from on high to these companies - the insurance, reinsurance and management firms - is one of derision."

Sir John said Government could not on the one hand take credit for presiding over one of the world's most dynamic economy while simultaneously eroding confidence in Bermuda among key players in the off-shore financial sector.

"Bermuda has made more progress in recent decades than any other predominantly black jurisdiction that I know of," said Sir John. "Not just in terms of income and material success but in areas like education, employment opportunities and social safety nets.

"Yet the Government seems to have an unspoken policy that nobody has benefited from what really has been a Bermudian economic miracle. The Government likes to project itself as having a social conscience, of being socially responsible; some of the Government's own members like to pretend that they themselves have not been recipients - major recipients, in some instances - of the benefits that have accrued to Bermuda from the off-shore financial sector.

"But if they had a genuine social conscience, they would point out not only how fortunate Bermuda in comparison to any other jurisdiction in the world but also just how fragile our current prosperity is.

"If they had a genuine social conscience, they would stop scapegoating the international business sector for everything that ails Bermuda; rather they would identify and isolate the genuine problems and address them accordingly.

"The reality is that the international business sector cannot continue seeing themselves being targeted by this Government and its mouthpieces without developing a certain level of discomfort, without beginning to look at other jurisdictions with much more hospitable social climates."