THIS ISSUE: What could possibly go wrong in 2018? >>PAGE 2 TAX EU tax list implications are a gray area >>PAGE 3 HEALTH Telemedicine: The future of healthcare >>PAGE 4 REGULATION Cayman’s new anti-money laundering regime >>PAGE 5 183 Reinforcement learning the winner in latest AI exploits MICHAEL KLEIN Twenty years after a computer, IBM’s Deep Blue, beat a reign-ing chess world champion, Garry Kasparov, for the fi rst time, ma-chines have made another extraordinary breakthrough. DeepMind, a London-based alterna-tive intelligence project and Google sub-sidiary, published a paper in December 2017 that outlined how its latest artifi cial intelligence (AI) program called Alp- haZero has beaten Stockfi sh, the strong- est chess software, which is able to cal- culate 70 million moves per second and outplays the best human players. This in itself would not be remark-able, given that in 2016 one of Deep-Mind’s AI engines had already beaten 18-time World Champion Lee Se-dol at Go, a game that combines intuition and logic and is considered to be more com-plex than chess. In October, DeepMind then pre- sented AlphaGo Zero, a self-learning Go-playing predecessor of AlphaZero, which thrashed by 100 games to nil the program that had beaten the best hu-man Go player. What makes the latest achievement so signifi cant is that AlphaZero was never programmed to play chess. The neural net was taught the rules of the game but, unlike DeepMind’s fi rst Go program, had not been given any open-ing, endgame or match databases. Alp-haZero learned its chess strategy simply from playing the game against itself. After only eight hours of so-called reinforcement learning, the AI pro-gram outclassed the Stockfi sh program in 100 matches by winning 28 matches, drawing the remainder and not losing a single one. In other words, after only a few hours of studying the game, AlphaZero was able to exceed or completely demolish, depending on the viewpoint, 1,500 years of accumulated chess knowledge.“By not using human data – by not using human expertise in any fashion – we’ve actually removed the constraints of human knowledge,” said AlphaGo Zero’s lead programmer, David Silver, at a press conference. “It’s therefore able to create knowledge itself from fi rst princi-ples; from a blank slate …. This enables it to be much more powerful than previ-ous versions.” For chess players, the AI’s learn-ing progress showed how AlphaZero initially favored certain opening and de- fense techniques, like the Ruy Lopez or the Caro-Kann defense, only to discard them later as unsuccessful. In turn, it started to prefer some of the best known human strategies, the English and Queen’s Gambit opening and the Berlin defense, as more promising. The results are likely to change the strategies of the world’s best chess play-ers, just like they did for the game of Go, but there are also real implications for the wider uses of AI. Although critics have pointed to the differences in hardware during the matches – AlphaZero was powered by a supercomputer, while Stockfi sh was not – the results may have wider impli-cations, nonetheless. It was never the goal of DeepMind to create AI programs that would beat humans or computer programs at board games. The company’s objective is to create an intelligent machine that can tackle a broad range of challenges.According to DeepMind, the results could bring the company closer to cre- ating general-purpose algorithms that can help solve some of the most complex problems in science. “If similar techniques can be applied to other structured problems, such as protein folding, reducing energy con-sumption or searching for revolution-ary new materials, the resulting break-throughs have the potential to positively impact society,” co-founder Demis Has-sabis says on the company website.He concedes that it is still early days. “We’re tr ying to build general purpose algorithms and this is just one step to- wards that but it’s an exciting step.” Scientifi c problems are, of course, very different from the controlled envi-ronment of complete information-based and easily simulated board games with few basic rules such as chess, go or backgammon. But AlphaZero refutes one of the crit-icisms of AI, that the recent highlights were simply the result of increasing computer power and the ability of ana- lyzing ever larger datasets more quickly. Because AlphaZero is self-taught, it Bahamas trying to attract more foreign investors MARK MUCKENFUSS Government offi cials in the Ba- hamas are attempting to stay abreast in the competition for attracting international investors and businesses. The island nation recently passed the Commercial Enterprises Bill, which makes it easier for foreign compa- nies to land there and obtain permits for non-Bahamian workers. The bill, which was passed by both the Assembly and Senate in recent weeks, has drawn criticism from the op-position Progressive Liberal Party, which says some of the provisions in the bill put Bahamians and Bahamian-owned busi-nesses at a disadvantage. One of the more controversial ele-ments in the bill is a default mechanism on immigration. Current wording gives the government 14 days to process for- eign worker applications. If it fails to do so, the permits are automatically ap- proved. The move is meant to speed up the process to be more in line with com-peting countries, such as the Cayman Islands. Companies that have a specifi ed business license can bring in workers for a year with nothing more than an ap-plication that needs to be submitted 30 days before they arrive. Labour Minister Dion Foulkes was quoted in local media, Tribune 242, as saying the bill would not hurt Bahami-an-owned businesses and would give the economy a boost. “We are losing a lot of business to other jurisdictions, such as the Cayman Islands, for example, because of their ease of doing business and the rate at which they turn around applications,” Foulkes was quoted as saying, “whether it’s business licences [or] work permits. We are determined to … be the major player, as we have been, in the fi nancial services industry.” The bill also requires new businesses to invest a minimum of $250,000 into their companies. Edison Sumner, CEO of the Bahamas Chamber of Commerce and Employees Confederation, said he does not think that fi gure is high enough for in- ternational corporations and was too high for Bahamian-owned businesses, espe- cially small businesses. “We felt the playing fi eld should have been more leveled,” Sumner said. “That has been addressed to some degree in the amended bill.” The amendment removed the require-ment for Bahamian-owned businesses, but kept the US$250,000 threshold for foreign-owned companies. Sumner said the government seems more interested in quantity rather than quality in appeal-ing to outside businesses. “It’s an attractive bill for foreign in- vestment,” he said, calling it a “step in the right direction.” That is, as long as it does not hurt lo-cally owned business. “The door’s open to the foreign invest-ment, but the Bahamians who have been working in the economy ought to be given the same level of consideration,” he said.He is expecting further modifi cations to the law. “We’ve seen some amend-ments being made,” Sumner said. “As it goes further, I think we’re looking to see further amendments.” PLEASE TURN TO PAGE 8 » The world’s top-ranked Go player Ke Jie took on AlphaGo, an artifical intelligence program, in May 2017. After his loss, he acknowledged the machine’s deeper understanding of the board game. - PHOTO: AP JA NUA R Y 2018 • W W W .J O URN A L.KY ECONOMY THE CAYMAN ISLANDS JOURNAL Reinforcement learning the winner in latest AI exploits High of 78 Low of 70 Slight to moderate with wave heights of 2 to 4 feet today, rough with wave heights of 4 to 6 feet tonight. Small craft should exercise caution over open waters. ESTABLISHED 1965 www.caymancompass.com – 50 CENTS – WEDNESDAY JANUARY 3, 2018 MAN ADMITS CRIMINAL TRESPASS AT CHIEF JUSTICE’S HOME CAROL WINKER cwinker@pinnaclemedialtd.com The first criminal pleas in the new year were entered on Tuesday morning when Tha- deus (Thad) Kaemeron Bodden pleaded guilty to two counts of criminal trespass, including one that involved entering the home of Chief Justice Anthony Smellie. The offenses occurred in the early hours of Saturday, Dec. 30. Mr. Bodden, 41, replied “Guilty” when Mag- istrate Valdis Foldats put the charges to him. The first was that without lawful excuse, he entered the premises of the private residence of Mr. Smellie at Patrick’s Island. The second charge related to the premises of a private res- idence at Spot Grove. No background to the charges was pro- vided by Crown counsel Eleanor Fargin be- cause defense attorney John Furniss did not apply for bail. A press release issued by the Royal Cayman Islands Police Service stated that the man had been seen behaving suspiciously near a resi- dence in Patrick’s Island around 2:30 a.m. by an officer on patrol and had been arrested. After the man’s arrest, CCTV footage of FLU CASES ON THE UPSWING IN CAYMAN KEN SILVA ksilva@pinnaclemedialtd.com With flu season in full swing, there has been a “marked increase” in the number of influenza cases in the Cayman Islands over the last several weeks, according to Public Health Department Acting Director Dr. Samuel Williams-Rodriguez. Dr. Williams-Rodriguez said his depart- ment will release detailed statistics on the flu outbreak later this week, but that the number of recent flu cases definitely exceeds the 80-85 cases per week that the territory typically sees. The outbreak of flu and flu-like illnesses has also been more widespread than during seasons in recent years, he said. So far, no deaths have been attributed to the illness here, he said. The public health director said the in- crease in cases of the flu is likely due to the National Geographic touts Cayman’s hidden charms JAMES WHITTAKER jwhittaker@pinnaclemedialtd.com It may only be 26 miles from end to end, but Grand Cayman and its charms were signifi- cant enough for a National Geo- graphic publication to recom- mend an island road trip to its readers. The Cayman Islands features in the January issue of National Geographic Traveler magazine, which has 9.6 million readers worldwide according to its website. The coverage features a two- page spread, titled “Road Trip Grand Cayman,” featuring a multi-stop tour of the island. Starting at the Kimpton, which it labels as a “hip hangout,” it directs visitors on a round-the-island tour taking in the Queen Elizabeth II Bo- tanic Park, the Blow Holes and the Wreck of the Ten Sail, Old Man Bay and Davinoff’s Con- crete Sculpture Garden before finishing up at Starfish Point. The article points visitors beyond the sun, sea and sand of the conventional Cayman holiday, highlighting the hidden gems of the island’s eastern districts. Emergency sirens proposed for fuel depot Sol responds to public pressure following 2017 tank fire JAMES WHITTAKER jwhittaker@pinnaclemedialtd.com Sol Petroleum has made a proposal for an early warning siren system to better alert its neighbors in emergency sce- narios after complaints about the handling of a mass evac- uation following a fire at the South Church Street fuel depot last year. Fuel inspectorate OfReg has completed its investiga- tion into the fire and is final- izing its report. In the interim, Sol says it has made some upgrades to its own processes and submitted a proposal for an emergency siren system. All homes within a mile ra- dius of the facility were evac- uated after fire broke out in a diesel tank in July last year. At a public meeting with fire officials, regulators and area MLAs in the aftermath of the fire, residents vented their frus- tration about the level of com- munication on the night – both the speed of informing resi- dents of the fire and the lack of updates through the night. Multiple residents suggested a siren system that would alert them immediately to any emer- gency at the fuel terminal. PLEASE TURN TO PAGE 6 » PLEASE TURN TO PAGE 6 » Sol is proposing installing a warning system at the fuel depot at Jackson Point. - PHOTO: TANEOS RAMSAY PLEASE TURN TO PAGE 6 » PLEASE TURN TO PAGE 6 » EDITORIAL | PAGE 4 TWO LEADERS, OPPOSING SIDES, SHARED PRIORITIES Rosa Harris, director of tourism2 LOCAL&REGIONAL WEDNESDAY JANUARY 3, 2018 • CAYMAN COMPASS • Daily Matinees Every Day • $8.00 Seniors, Mon-Fri Before 6pm Cayman Cinema@cbcinema6cbcinema6 • Additional charges will apply per 3D/VIP ticket requested SATURDAY NIGHT: For your viewing pleasure, minors under the age of 18 will not be admitted to any film starting after 6pm, unless accompanied by their parent. - WEDNESDAY - 640-FILM (640-3456) FATHER FIGURES (R) 1:00 I 3:40 I 7:00 I 9:40 JUMANJI: WELCOME TO THE JUNGLE (PG13) 1:10 I 3:50 I 4:05 VIP I 6:45 I 9:30 STAR WARS: THE LAST JEDI 3D (PG13) 12:50 2D I 6:35 2D I 8:40 I 9:20 2D VIP THE GREATEST SHOWMAN (PG) 1:30 VIP I 4:05 I 6:50 VIP I 10:00 SUN: 3:20 I 6:20 I 6:50 VIP I 10:00 FERDINAND 3D (PG) 1:00 I 3:40 2D I 6:10 2D PITCH PERFECT 3 (PG13) 12:30 I 2:50 I 5:10 I 7:30 I 9:50 Trash problem continues to pile up MARK MUCKENFUSS mmuckenfuss@pinnaclemedialtd.com Residents and property owners are continuing to complain about inadequate garbage collection around Grand Cayman. In mid-December, De- partment of Environmental Health officials said trash service was returning to normal following a slow- down because of a labor dis- pute. But some residents say their neighborhoods have gone a week or more without any pickup. A spokeswoman for the Department of Environ- mental Health said she was unable to reach anyone on Tuesday who could comment on the situation. In the community of East End, overflowing garbage cans and stacks of garbage bags sit in front of residences that line Sea View Road. George Rankin, 63, said there have been long pe- riods between pickups in the past two months. “Sometimes it’s nearly two weeks they don’t come,” Mr. Rankin said, sitting on a doorstep and eyeing a nearby pile of garbage. “We’re getting flies and I see the rats run- ning about. These trucks don’t come on time. Christmas, they had a mess there.” Mr. Rankin said he had not called environmental health officials to complain. Across the street, Chad Mitchell Ebanks, 30, said he had spoken with East End MLA Arden McLean two weeks ago. “He said he was going to get them to come around,” Mr. Ebanks said. Since then, he added, a pile of large items – part of the annual oversized materials collection – had been hauled away, but the residential trash has not. Mr. Ebanks said the smell has been a problem and he worries about his fami- ly’s well-being. “It’s a very dangerous health issue,” he said. “You wouldn’t want a pile of gar- bage outside your front door. You get garbage full of mag- gots and flies. We’ve seen a lot more rodents than be- fore. I go outside and throw bleach around it.” The smell and the in- creased presence of flies keeps him from being able to open his windows, Mr. Ebanks said. He also thinks the problem could affect the larger economy. “It looks bad because it’s right on the roadside,” he said. “You have tour- ists driving by and they think the government is not doing its job.” He said one neighbor who owns a trailer took matters into his own hands. He drove around East End letting people fill the trailer with their trash before hauling it to the landfill himself, Mr. Ebanks said. How widespread the problem is, is unclear, but Ron Blair, 68, who owns two rental properties in George Town, said he is experi- encing similar problems, par- ticularly at an apartment building he owns on Crewe Road and Alamo Drive. “The whole street is a pig pen,” Mr. Blair said. “Garbage in bags is littering the street.” “I’m concerned about the process of disease,” he said. “I think there’s a health hazard brewing.” Chad Mitchell Ebanks says the trash in front of his East End home is overdue for collection. - PHOTO: MARK MUCKENFUSS Man seriously injured after stabbing A 25-year-old man suf- fered life-threatening inju- ries after he was stabbed in the chest in a brawl outside a bar in the early hours on Saturday. The West Bay man, who was still in hospital Tuesday in a serious but stable condition, was among four people ar- rested in the aftermath of the fight close to Whiskey Mist in the Strand Enter- tainment Complex in the Seven Mile Beach area. All four people in- volved suffered inju- ries after an argument escalated. One of the men involved in the in- cident just before 1 a.m. was reported to have used a crowbar. A 43-year-old man was arrested on suspicion of attempted murder in con- nection with the stabbing. The victim of the stab- bing was also arrested on suspicion of assault causing grievous bodily harm, according to a po- lice statement. Two others, a 32-year- old woman and a 21-year- old man, were arrested on suspicion of affray. Police said Tuesday that all four people in- volved had been released on police bail. 10 KILLED IN CRASH ALONG MEXICO’S PACIFIC COAST ACAPULCO, Mexico (AP) – Five people visiting from the United States were among 10 people killed in a fiery car crash on a coastal highway in southern Mexico, authori- ties said Sunday. Guerrero state secu- rity spokesman Roberto Alvarez Heredia said the crash late Friday also left two U.S. residents hospitalized. A van carrying the family from Washington state as well as at least two local people collided with a motorcycle and an- other car. All of the vehi- cles caught fire. Two people riding the motorcycle died as well as the driver of the other car. Seven of those inside the van were killed, in- cluding five from the U.S. family and two Mex- ican residents. Two people from the U.S. were injured. The U.S. Embassy in Mexico City confirmed only that “several” U.S. citizens were killed in the accident. The van was rented and carrying the family to Acapulco when the crash occurred in the municipality of Tecpan de Galeana. Bodies emerge from Guatemala’s war-era ‘model villages’ SANTA AVELINA, Guatemala (AP) – It was not only bullets and violence that killed thou- sands of indigenous people during Guatemala’s 1960- 1996 civil war. The government forced tens of thousands of farmers into so-called model villages under strict army control to isolate them from the guer- rillas. They were promised healthcare and other ser- vices, but instead were left to die from malnutrition and treatable illnesses. They were not included in the casualty count in the brutal conflict. Now, in the hamlet of Santa Avelina, their bodies are being unearthed, identi- fied and reburied. Among the bodies are scores of indige- nous children who died from measles in the former model village, where residents lived in small, dirt-floor houses and sermons and Christian hymns were played from loudspeakers. Miguel Torres, a 67-year- old farmer, recalled how the army occupied his commu- nity and, under the threat of accusing locals of being guerrillas and then killing them, made them live in the model village. “We were afraid every day. They said if we weren’t there in a week they would burn the house. ‘We will leave it in ashes,’” Torres recalled soldiers saying. The strategy unfolded during the hardest years of the decades-long war. In 1979 the army began relo- cating people who had been displaced from the western mountains by fighting. The army had identified the Ixil indigenous region as the support base of the Guer- rilla Army of the Poor, one of Guatemala’s four guerrilla groups. Thus the Ixil region became a testing ground for the kind of ‘strategic hamlet’ program used by the United States in Vietnam. In 1980 the army formed one of the first model villages in Santa Avelina, located in the heart of Ixil territory in Quiche department. But without access to doctors, a healthy diet and freedom, people began to die. Exhumations in Santa Avelina started in 2014 and in late November forensic anthropologists handed over the remains of 172 people who perished during the years of military control. Their bones and tattered bits of clothing were re-buried individually by surviving family members after over more than three decades in anonymous mass graves. Torres recovered the re- mains of his daughter Magdalena, who died at about age 1½. “The children were fright- ened because the soldiers came. The people ran up the mountain to hide. They thought they were going to die, that they had come to kill them. When they get scared they die. Sometimes they got diarrhea, fever, and they died.” That’s how Torres explains the death of his daughter. An Ixil Mayan carries the remains of a civil war victim to a memorial for a mass burial in Santa Avelina, Guatemala. – PHOTO: APThe islands’ most-trusted news source 3 CAYMAN COMPASS • WEDNESDAY JANUARY 3, 2018 From the heart At Ogier, we focus on what really matters, inside and outside the workplace. We believe that strong businesses and strong communities go hand in hand and that's why we're so pleased to have been able to support some great local causes in 2017, which include: • Meals on Wheels • Junior Achievement Cayman Islands • Kiwanis Cayman Islands • KidsCARE • Cayman Arts Festival • Big Brothers Big Sisters of the Cayman Islands • The Cayman Finance Student Education and Work Experience Programme • Ogier Stroke and Stride – for the Cayman Islands Crisis Centre and the Cayman Islands Triathlon Association • Cayman Islands Breast Cancer Foundation • Cayman Islands Cancer Society • CICC – TAYA Lounge • Alzheimer's and Dementia Association of the Cayman Islands • Cayman Islands Little League • Chamber of Commerce Earth Day Clean Up • Cayman Chess in Schools • 100 Women Who Care Cayman Islands • Annual CIBC First Caribbean Walk for the Cure • United World College Scholarship • CIMRA Toys for Tots Programme • NCVO • Truman Bodden Law School Student Society • Breeze Fusion Walk/Run Our commitment to building long-lasting relationships isn’t just about our clients and our employees, but also extends to our partners in the community - so on behalf of all of us at Ogier, we wish all of our friends in Cayman the very best for the New Year and look forward to continuing to work with you in 2018. Legal services in British Virgin Islands Cayman Islands Guernsey Hong Kong Jersey London Luxembourg Shanghai TokyoThe islands’ most-trusted news source 4 – EDITORIAL – Opinion&Letters The Cayman Compass welcomes comments, opinions and viewpoints from readers. Letters to the editor can be emailed to editor@pinnaclemedialtd.com, submitted via www.caymancompass.com, sent by post or hand-delivered to the Compass office. PRINTED AND PUBLISHED BY: Caymanian Compass Limited (a subsidiary of Pinnacle Media Ltd) Compass Centre Shedden Road, George Town SEND US YOUR VIEWS OR NEWS: P.O. Box 1365 Grand Cayman KY1-1108, Cayman Islands Telephone: (345) 815-0095 Email: newsdesk@pinnaclemedialtd.com ADVERTISE WITH US: Telephone: (345) 949-5111 Email: sales@pinnaclemedialtd.com Website: www.caymancompass.com PUBLISHERS DAVID R. LEGGE AND VICKI L. LEGGE EDITOR-IN-CHIEF DAVID R. LEGGE EXECUTIVE EDITOR PATRICK BRENDEL A MEMBER OF THE INTER-AMERICAN PRESS ASSOCIATION “Give light and the people will findtheirownway” Premier Alden McLaughlin and Opposition Leader Ezzard Miller may sit on opposite sides of the Legislative Assembly, but in their New Year’s messages, they appeared to be singing from the same hymnal. In statements that appeared in yesterday’s Compass, both men identified improving education as one of government’s top priorities in the coming year. The Compass would like to add its voice to that choir. Mr. McLaughlin and Mr. Miller also, correctly, highlight topics such as the public sector’s responsibility for safeguarding vulnerable citizens (such as the elderly), fighting crime, meeting physical infrastructure needs and addressing problems facing Cayman’s workforce. Mr. Miller, in his statement, articulates and enumerates a bold and praiseworthy agenda of addressing what in the past have proven to be intractable social issues, including the provision of affordable and effective healthcare for the populace, as well as revising a wholly inadequate pension scheme. However, there is an important distinction between the messages from Mr. McLaughlin and Mr. Miller. True to form, Mr. Miller’s statement carried a strong dose of the populist and parochial perspective that characterizes his politics. Mr. McLaughlin articulated a broader (and, in our opinion, wiser) view. Mr. Miller vowed to work to “improve job security, satisfaction and reward for Caymanians” … “provide an improved quality of life for all Caymanians through proper physical and economic planning” … by placing “Cayma- nians at the forefront of both the financial and tourism industries” … and “returning the Good Ship Cayman to the control of Caymanians, for the benefit of all Caymanians, and of giving each and every Caymanian the opportunity to fully participate in the Cayman econowwmic miracle in line with their full potential and God-given talents.” But Mr. Miller’s depiction of born-Caymanians as victims, rather than beneficiaries, of the “Cayman miracle” is factually inaccurate and ultimately divisive and destructive. As has been demonstrated in Cayman for the past 50-plus years, a rising tide lifts all boats. Conversely, a receding tide can cause shipwrecks. The disconnect between Cayman’s workforce require- ments and the skill level of too many in the local popula- tion presents a real issue that must not be papered over by political rhetoric featuring a message of “victimization.” The twin pillars of our economy – financial services and tourism – are global, not local, by definition, and both require highly educated, highly motivated professionals to keep them locally viable and globally competitive. Premier McLaughlin understands this. As he wrote in his New Year’s message, “This optimism and confidence in Cayman does not happen by chance. It is the result of a responsible and responsive government coupled with an innovative private sector and an efficient and effective workforce.” Mr. McLaughlin knows, and has so stated many times in the past, that it will be the partnerships between gov- ernment and the private sector, between Caymanians and expatriates, between all who espouse harmony and goodwill that will lead these small islands to far greater successes than our forbears could have ever imagined. The model that has worked for Cayman and Cayma- nians in the past, and will continue to work in the future, is based on inclusivity, not exclusivity. In this New Year, our country should be encouraged that our premier and opposition leader share many of the same priorities. We encourage both to elevate the good of the country above political partisanship as we enter the new year. Two leaders, opposing sides, shared priorities WEDNESDAY JANUARY 3, 2018 • CAYMAN COMPASS We do not need government reminders that smoking kills WASHINGTON – Preaching morality while practicing cupidity can be tricky, but various American govern- ments have done it for years regarding smoking. This mental contortion now has a new chapter. The four largest American tobacco compa- nies (Altria, R.J. Reynolds, Lorillard, Philip Morris) are, under government compul- sion, funding newspaper and television ads to tell – actu- ally, to remind – people that their products are sickening: “Smoking kills, on av- erage, 1,200 Americans. Every day. More people die every year from smoking than from murder, AIDS, sui- cide, drugs, car crashes, and alcohol, combined.” “Ciga- rette companies intention- ally designed cigarettes with enough nicotine to create and sustain addiction.” Etc. Please. Tell us something everyone has not known for decades. In 1988, the sur- geon general declared to- bacco addictive. Since 1966, there have been increasingly severe health warnings on cigarette packs. In 1964, the surgeon general declared to- bacco carcinogenic. In 1906, a character in an O. Henry story used a common slang phrase: “Say, sport, have you got a coffin nail on you?” In 1604, England’s King James I called smoking “harmful to the brain, dangerous to the lungs.” Eight years later, a colony named for him, Jamestown, in a place, Virginia, named for his immediate prede- cessor (Elizabeth I, “the virgin queen”) became an enriching source of tobacco – until a tobacco farmer named Washington dis- rupted things. The strange, meandering path of tobacco – a legal commodity that is harmful when used as in- tended – to the present began in contradictions. They are crowned by this one: Many state governments are ad- dicted to revenue from to- bacco taxes. The federal tax on a pack is $1. The lowest state tax is Missouri’s 17 cents; the highest, Connect- icut and New York’s $4.35; the average, $1.72. So, many governments have huge stakes in a steady supply of new smokers to replace those killed by smoking. Hence these governments cannot afford for their anti- smoking efforts to be too successful. Furthermore, if every smoker quit tomorrow, Social Security’s slow-mo- tion crisis would accelerate and many public and private pension systems would be staggered by having to re- vise downward their actu- arial assumptions about the number of persons who will die before collecting many or any benefits. In 1998, 46 states, in a mutually lucrative collabora- tion with trial lawyers (some of their $13 billion in fees amounted to tens of thou- sands of dollars an hour), sued the tobacco compa- nies. The companies agreed to – if they will pardon the expression – cough up $246 billion over many years. The theory, more successful than plausible, was that health- care for smoking-related ill- nesses makes smoking a huge net cost to the states. Actually, smoking might be a net financial gain for gov- ernment: Cigarettes are the most heavily taxed con- sumer product and, again, many smokers’ prema- ture deaths limit their re- ceipt of entitlement benefits for the elderly – Social Se- curity, Medicare, Medicaid, nursing homes, etc. The lawyers also argued that tobacco is so addictive that quitting requires he- roic willpower that few can manage. Even then, however, there were about as many ex-smokers as smokers. In 1845, former President John Quincy Adams wrote, “In my early youth, I was addicted to tobacco.” Its addictiveness was known and surmount- able long ago. Much of America’s healthcare expenses (from lung cancer, coronary ar- tery disease, AIDS, Type 2 diabetes brought on by obe- sity, violence, vehicular acci- dents) result from known-to- be-risky behaviors involving eating, drinking, smoking, driving and sex. The most cost-efficient thing gov- ernment does is dispense health information about smoking, cholesterol, au- tomobile seat belts, sun- screen use, etc. This is why only a sixth of adults, com- pared to nearly half 50 years ago, are smokers. But the anti-smoking message that government is now coercing from the to- bacco companies – Trust us, we are untrustworthy – merely confirms common sense: Filling one’s lungs with smoke from a burning plant is dumb. Smoking is increasingly concentrated among downscale, low-in- formation Americans. (Hence tobacco taxes are regres- sive.) It has lost the cachet that once made it a marker of sophistication. Ninety percent of smokers begin by age 18 and vanishingly few after 21. So, the way to extin- guish smoking is not by be- laboring the health issue (smoking is the leading pre- ventable cause of death, it has killed many more than all of America’s war deaths, etc.) but with the sort of broadcast ads Cali- fornia used years ago to cut smoking 17 percent: “I tried it once and I, ah, got all red in the face and I couldn’t inhale and I felt like a jerk and, ah, never tried it again, which is the same as what happened to me with sex.” George Will’s email address is georgewill@washpost.com. © 2017, Washington Post Writers Group GEORGE F. WILL GEORGE The strange, meandering path of tobacco – a legal commodity that is harmful when used as intended – to the present began in contradictions.5 LOCAL NEWS CAYMAN COMPASS • WEDNESDAY JANUARY 3, 2018 McLaughlin honored for culinary skills Bradley McLaughlin, 15, of Bodden Town, is being recognized in the culture field of the annual Proud of Them initiative. Bradley may be young but he is already a com- mitted amateur chef, a culinary master-in- training who has the acco- lades to prove it. Through his involve- ment in the Youth Culi- nary program, he has al- ready competed in and won awards in several local and regional cooking competi- tions. These include earning second place as part of Team Cayman Islands com- peting against cooks in the Caribbean Junior Duel- ling Challenge in Barbados earlier this year. Bradley’s two-person team brought home gold in the first three rounds, winning silver overall. He was the contest’s youngest competitor. Previously, the Clifton Hunter High School stu- dent was part of a pair who won gold in the National Youth Cook-Off finals at the 50th Agriculture Show in March, over a talented Cayman Brac team. As well as placing first overall and being the winner of the Best Chili Competition, Team Bradley also received the Tanya Foster trophy for winning the title of Best Young Chefs. Bradley especially enjoys creating local dishes with a contemporary twist. His in- terests in the culinary field also include pastry work and creating desserts. Bradley thinks that local and regional cooking is one of the most immediate forms of culture a society can impart. When in Bar- bados, he acted as a youth cultural ambassador, in- troducing people to Cay- manian cooking. As a born extrovert, it seemed a natural choice for Bradley to one day join the Youth Services Unit’s Youth Flex radio show. Knowing that he would later need to gain additional speaking skills to host the youth- magazine program, he joined the local Toastmas- ters public speaking club program. Now a graduate of the debating club, he has the additional skills needed for public speaking. Despite his many suc- cesses in the last few years, Bradley admits that his life was not always so golden. This changed when he dis- covered cookery on joining the Cooking Club in the YMCA after-school pro- gram. He says the disci- pline and focus he learned in the kitchen soon began reaping dividends in other aspects of his life. And as his skills and confidence in the kitchen grew, so did his culinary talent, which shines through. PROUD OF THEM Bodden recognized for academic work Brianna Bodden, 16, has been an exceptional pupil since she started at Clifton Hunter High School. The well-rounded stu- dent, with her never-give-up attitude, has been involved in just about every aspect of school life. She plays net- ball, is an avid swimmer and is involved in track and field, having represented the school in all these ath- letic disciplines. Brianna also represented her school in the Conyers’ School Debate, the National Oratorical competition and the KPMG Brain Bowl, while garnering gold and silver medals in the annual Na- tional Children’s Festival of the Arts in the areas of creative writing and music (voice and instrument). Brianna’s busy lifestyle continued with her diligent attitude toward service; she was a peer mentor, Key Club vice president, presi- dent of the Financial Aware- ness Now Club, vice cap- tain for the academy track team and director of the Cayman Islands Youth As- sembly. Outside of school, Brianna found it important to be an active member of her church by fulfilling roles such as the assistant youth leader, Children’s Choir di- rector, Vacation Bible School crew leader, assistant com- munications director and also a member of the Pathfinders Club. Brianna’s leader- ship roles included being the coordinator for the Formal Committee, pre- fect/deputy head girl and the chairperson of the Stu- dent Council Executive. She has also represented the Cayman Islands at the Global Young Leaders Con- ference, the Rotary Youth Leadership Conference and the Key Club District Con- vention, among others. She topped off her im- pressive tenure at Clifton Hunter by attaining 12 passes overall, 11 being grade 1 passes at CXC and an A grade in GCSE statis- tics. She now attends the sixth form at Cayman Prep and High School, where she continues to excel academically. The Proud of Them initiative recognizes the positive achievements of young people between the ages of 10 and 25. Through a public nomination process, individuals are honored in various categories. Each person selected is featured for six months on billboards across the Cayman Islands and receives a certificate and $500. Bradley McLaughlinBrianna Bodden Christmas tree recycling begins Owners of natural Christmas trees can deposit their trees at six Department of Environmental Health col- lection points throughout Grand Cayman, the de- partment advised. Residents are urged to remove all wires and orna- ments from Christmas trees before placing them into col- lection bins. The bins will be available until Friday, Jan. 19. The trees will be shredded and provided to the public as free mulch at the George Town Cricket Field on Saturday, Jan. 20 from around 8 a.m. Mulch will be provided on a first- come, first-served basis, the department stated in a press release. Residents are invited to come out early and to bring their shovels and bags for the removal of the mulch. The bins will be provided at the fol- lowing locations: ■■ Ed Bush Stadium, West Bay ■■ George Town Cricket Field ■■ George Town landfill public drop-off area ■■ Spotts Dock ■■ Entrance of Frank Sound Road ■■ Front of George Dixon Park, East End. Christmas trees are shredded and turned into mulch during the annual recycling exercise in January last year. Department of Environment Health collection bins will be available at various locations until Jan. 19.The islands’ most-trusted news source 6 WEDNESDAY JANUARY 3, 2018 • CAYMAN COMPASS In a statement to the Cayman Compass last week, Sol said it was awaiting the findings of the OfReg investigation. It said some changes had already been made, in response to the fire, in- cluding a recommenda- tion for emergency sirens. “Because of the pub- lic’s feedback, we made a proposal for the govern- ment agencies’ consider- ation to install a pair of sirens at the terminal, which could be used as a public warning system in the event of an emer- gency at the terminal,” ac- cording to the statement. The company said it had also made up- grades to the terminal’s fixed firefighting foam in- jection system. The tank, which caught fire, is still out of service and is being prepared for an internal cleaning pro- cess in early January, ac- cording to Sol. The company has also hired indepen- dent engineers to carry out a structural inspec- tion of the tank. The cause of the fire has not been officially ex- plained. At the public meeting in August, resi- dents claimed they had seen workmen welding on the tank on the day of the fire. A representative from OfReg told residents at that meeting that the cause would need to be thoroughly investigated. He said the findings would be made known to the public when the inves- tigation was complete. Duke Munroe, director and chief inspector of OfReg’s Fuels Market di- vision, has provided prog- ress updates during the course of the investigation. He was not available for comment Tuesday, but told the Compass last month that its prelimi- nary report on the fire was expected to be com- plete by January. It states, “On the other side of the island and tucked into the undeveloped interior, discover blue iguanas, hidden beaches, shipwrecks, blow- holes and surprising sculp- ture. Despite its name, Grand Cayman, mostly unaffected by recent hurricanes, is easy to explore in a daylong road trip – leaving time to revel in more classic island life.” For tourism officials, the impact of a National Geo- graphic spread is huge. The Department of Tourism runs a visiting jour- nalists program to help fund visits to island attrac- tions from travel writers. In this case, according to Rosa Harris, director of the De- partment of Tourism, the Kimpton resort’s public re- lations team arranged the visit and coordinated with the department over the ac- tivity schedule. Ms. Harris said helping fund such visits was part of the department’s mar- keting strategy. “Having someone visit the destination and give their firsthand experiences is of great value,” she said, “particu- larly in a magazine as well es- tablished and highly regarded as National Geographic.” illness being spread from the United States, which is ex- periencing colder than usual weather in many areas. Recent statistics from the U.S. Centers for Disease Con- trol and Prevention indicate that the number of states re- porting widespread flu ac- tivity jumped from 23 to 36, and the proportion of samples testing positive for influenza increased from 14 percent to 22.4 percent during the week ending Dec. 23. The H3N2 virus has been responsible for about 90 percent of the flu cases studied, according to the CDC. Dr. Williams-Rodriguez said people can protect them- selves from the flu by get- ting vaccinated. Vaccinations are being offered for free at clinics around the island. People can get their free flu shot at the General Prac- tice Clinic at the Cayman Is- lands Hospital and all dis- trict health centers from 2-4 p.m. Monday to Friday; at Faith Hospital in Cayman Brac; and the Little Cayman Clinic. Cayman Brac resi- dents should call 948-2243 to arrange a vaccination, and Little Cayman residents should call 948-0072. To minimize disrup- tions in business and en- sure that as many people as possible become inoculated, the Public Health Depart- ment stated that it also has an initiative where officers will administer onsite work- place vaccinations for com- panies where 20 or more em- ployees wish to have the shot. Companies interested in the program should contact the Public Health Department at 244-2621 or 244-2889, or email publichealthde- partment@hsa.ky. Additionally, Dr. Wil- liams-Rodriguez stressed that people should regularly wash their hands, and should stay home and drink plenty of fluids if they come down with the virus. another criminal trespass incident was obtained by police. It showed the sus- pect trying the doors of a locked white car off Poin- dexter Road. The CCTV was circulated online and via social media. In court, Mr. Furniss advised that Mr. Bodden had been participating in the Drug Rehabilita- tion Court and wished to continue. The attorney said the drug court team would be meeting again on Thursday afternoon and that tribunal would have to make the deci- sion as to whether he could remain. The alternative will be to return to the regular criminal court for sentence. The magistrate remanded Mr. Bodden in custody until Thursday, Jan. 4. National Geographic touts Cayman’s hidden charms CONTINUED FROM PAGE 1 CONTINUED FROM PAGE 1 Man admits criminal trespass at chief justice’s home Emergency sirens proposed for fuel depot CONTINUED FROM PAGE 1 Public health officials are advising the public to get vaccinated against influenza. CONTINUED FROM PAGE 1 Flu cases on the upswing in Cayman Gretchen Carlson named chair of Miss America organization ATLANTIC CITY, N.J. (AP) – Former Fox News Channel anchor and 1989 Miss America Gretchen Carlson was named chairwoman of the Miss America Organi- zation’s board of directors Monday, and three other past pageant winners will join her on the board. The new leadership comes less than two weeks after leaked emails sur- faced showing CEO Sam Haskell and others dispar- aging the appearance, intel- lect and sex lives of former Miss Americas. Haskell re- signed Dec. 23, along with two other top leaders. The selection of Carlson marks the first time a former pageant winner has served as the leader of the nearly 100-year-old organization. The organization also an- nounced the appointments of three other past Miss Amer- icas: 2012 winner Laura Kaeppeler Fleiss, 2000 winner Heather French Henry and Kate Shindle, who won in 1998 and now serves as pres- ident of the Actors’ Equity Association. Their appoint- ments take effect immedi- ately, as does Carlson’s. “Everyone has been stunned by the events of the last several days, and this has not been easy for anyone who loves this program,” Carlson said in a statement issued by the Miss America Organization. “In the end, we all want a strong, relevant Miss America and we ap- preciate the existing board taking the steps necessary to quickly begin stabilizing the organization for the future.” Carlson said she and the new board would imme- diately work with all Miss America stakeholders, in- cluding the organization’s state executive directors and former state titleholders, “to continue an ongoing inclusive and transparent process to identify additional new board members and management.” Gretchen Carlson, a former Fox News Channel anchor and 1989 Miss America, has been named chairwoman of the Miss America Organization’s board of directors. – PHOTO: AP National Geographic Traveler magazine’s January 2018 edition includes this double-page spread on the Cayman Islands.7 REGIONAL NEWS CAYMAN COMPASS • WEDNESDAY JANUARY 3, 2018 Reporter’s murder highlights blurred lines in journalism in Mexico ACAYUCAN, Mexico (AP) – For some, Gumaro Perez was an experienced reporter who got on well with locals and earned the nickname “the red man” for his coverage of bloody crimes in Veracruz, one of Mexico’s deadliest states for journalists and ci- vilians alike. In the eyes of prosecu- tors, Perez was an alleged drug cartel operative who met a grisly end when he was shot dead Dec. 19 while attending a Christmas party at his 6-year-old son’s school in Acayucan, purportedly by gunmen from a rival gang. Either way, the brazen daylight killing underscored the blurred-lines nature of how journalism is practiced in much of Mexico, especially in the countryside and in areas where organized crime gangs hold sway over corrupt authorities, terrorize local populations and are largely free to harass and murder re- porters with impunity. Reporting in such places often entails writing or up- loading photographs to a rudimentary website or Facebook page, or working part-time for a small local media outlet whose meager salaries do not cover ex- penses. Holding down a second job is essential. Some moonlight as cabbies or run small businesses. Others may work for a local government. And some, it’s widely be- lieved – though it is said to be a small minority – go on the payroll of a cartel or a corrupt government. At least 10 Mexican jour- nalists were killed in 2017 in what observers are calling a crisis for freedom of ex- pression, and the risk is es- pecially high for those who operate without editors, com- pany directors or colleagues who could go to bat for them or steer them to institutions that would protect them. “It certainly does make them more vulnerable,” said Jan-Albert Hootsen, Mexico representative for the New York-based Committee to Protect Journalists. He cited in particular the decapita- tion-murder nearly three years ago of Moises San- chez, another Veracruz re- porter, for motives the CPJ has confirmed were re- lated to his work. Sanchez “had his own little newspaper which he didn’t actually make any money with, so he doubled as a taxi driver and he financed that little newspaper with the money that he made as a taxi driver,” Hootsen said. “So he didn’t have any insti- tutional backing. So when he started getting death threats, at that point there’s really no- body to back him up.” Perez, 34, got his start as a journalist working for Di- ario de Acayucan, the local newspaper in the city of the same name. Set in the steamy lowlands of southern Veracruz, near the Gulf of Mexico, the oil-rich region is a hotly contested drug traf- ficking corridor that today is said to be disputed by the Zetas and Jalisco New Gener- ation cartels. “Back then he was a hard- working boy,” said the news- paper’s deputy director, Ce- cilio Perez, no relation, who later lost track of him. Over the years, Gumaro Perez contributed stories to several local media outlets and helped found the news website La Voz del Sur. He also began working as a driver, personal assistant and photographer for Acayu- can’s mayor, although he was not on the government’s pay- roll and it’s not clear how he was being paid, said Jorge Morales of the official State Commission for Attention and Protection of Journal- ists in Veracruz. Mayor Marco Antonio Martinez did not respond to multiple requests to be inter- viewed for this article. According to several local journalists interviewed by The Associated Press, Perez also apparently had a dif- ferent job: Keeping a close watch on what they were publishing about the Zetas and trying to influence their coverage or silence them through intimidation. Two reporters in Acayucan told the AP, speaking on con- dition of anonymity due to concerns for their safety, that they and others had received threatening calls from Perez. In one, Perez allegedly warned a reporter to “take down” a story or else he would pass their number on “to you know who, so they will get in touch with you.” Perhaps innoc- uous elsewhere, words like “get in touch with you” carry life-or-death weight in com- munities where the gangs are dominant. The reporters did not complain to authorities. “If Gumaro were still alive, I would not even be telling you,” one said. “The journalists of Acayucan lived in terror and in constant anguish due to this guy,” said Ignacio Car- vajal, a veteran reporter who covers that region of Vera- cruz, adding that the same pattern plays out repeatedly across a state marked by drug politics. “This is not an isolated case.” Prosecutors said just 24 hours after the killing that Perez was linked to a cartel. They have presented no evi- dence, saying only that the allegation was based on data from his cellphone and visits to a jailed gang leader. Family members denied he was a criminal. “For me and my family, my brother is a very de- cent person who walks with his head held high and was admired by many,” Maribel Perez, his sister, said at his wake. Journalist Fidel Perez, who is also not related to Gumaro Perez, said he had known the slain re- porter for nearly 10 years and he showed no sign of being flush with narco-cash. He called the narco allega- tions by prosecutors “very hasty, very risky.” Early investigations have turned up no evi- dence that Perez was killed due to his journalistic work. The last time he is known to have published was sev- eral months ago. Virgilio Reyes, director of the Golfo Pacifico web- site, said Perez’s most recent work involved crime stories in September and October, after which Perez stopped contributing because his work with the mayor kept him too busy. In a number of other cases, authorities have quickly and publicly sought to decouple the murders of journalists from their work, leading to mistrust of the of- ficial version and a sense that authorities are engaged in victim-smearing. So as much as Carvajal believes Perez may have been crooked, he said that prosecu- tors’ linking him to drug traf- fickers smells of an attempt to lessen the political fallout and have the murder fade from the spotlight without a proper investigation. “Regardless of whether they are good or bad jour- nalists, what remains at the end of the day is impunity,” Carvajal said. Hootson warned that in the absence of proper investi- gations, “isolated cases could be used to criminalize and create an even more hostile environment” for a profession that is already under fire. The 2010-2016 adminis- tration of Veracruz Gov. Ja- vier Duarte, now imprisoned on charges of corruption and money laundering, had been considered a low point for the state in terms of jour- nalist killings. But despite the election in 2016 of a new governor from a different party, things have only gotten worse, with Perez’s murder bringing the 2017 tally of journalists slain in the state to three. That comes amid a national surge in violence to highs not seen since the peak of Mexico’s war on drugs. The beginning of Vera- cruz’s broader wave of vio- lence dates back more than 10 years to when the hyper- violent Zetas cartel infiltrated politics and security forces in the state, fracturing the rule of law, Morales said. The in- creased criminality of today is the “metastasis” of that cancer, he said. In the days following Per- ez’s killing, Acayucan ap- peared calm and police pa- trolled among the low-slung homes. Many residents were unwilling to speak about the slaying or the fear they feel every day. But those who dared said that be- neath the quiet veneer, things are boiling. “Since early this year, it is too much,” said Lilia Domin- guez, who lives across the street from the school where the shooting happened. “They’re killing here, they’re killing there …” A man buys a newspaper carrying the Spanish headline ‘They killed Gumaro!’ on the sidewalk in Acayucan, Veracruz state, Mexico. – PHOTO: AP 9 deaths reported after inmates battle at Brazilian prison SAO PAULO (AP) – In- mates from rival gangs bat- tled at a prison in Goias state Monday, leaving nine dead and 14 injured, au- thorities told the Brazilian news site G1. Officials said the violence at the Colonia Agroindus- trial prison in the Aparecida de Goiania Complex appar- ently erupted when inmates from one cellblock invaded three others where prisoners from rival gangs are housed. The attackers set mattresses on fire when they entered the neighboring corridors and burned the bodies of those who were killed, au- thorities said. Firefighters were able to contain the fire. Authorities confirmed the number of dead, but said identifications had not yet been made, G1 reported. Local media said about 106 inmates escaped during the riot, and officials had recaptured 29. The reports said 127 other inmates fled during the violence but re- turned voluntarily. Officers from the Spe- cial Penitentiary Operations Group regained control of the prison with the support of military police about two hours after the riot started. Exactly one year ago, a prison riot at the Anisio Jobim Penitentiary Complex in Amazonas state caused 56 deaths. A day later, four prisoners were killed at the Puraqueuqara Prison Unit in the same state. Thirty-three more in- mates died Jan. 6 in a riot at a prison in Roraima state, and 26 were killed Jan. 14 when inmates rebelled at Alcacuz prison in Rio Grande do Norte. Prisoners try to contact relatives after a rebellion at the Colonia Agroindustrial prison in the state of Goias, Brazil, Monday. – PHOTO: APThe islands’ most-trusted news source 8 Business Local banks see growth KEN SILVA ksilva@pinnaclemedialtd.com The territory’s banking industry continued to con- tract in 2016 in terms of the number of banks and the amount of assets and liabili- ties held by those institutions, according to the Cayman Is- lands Monetary Authority’s 2016 Banking Digest. However, the domestic re- tail banking sector grew in 2016, increasing its assets and liabilities, and expanding credit. CIMA attributed the expansion to a healthy local economy. According to CIMA, banks’ assets and liabil- ities both contracted to about US$1.04 trillion from US$1.17 trillion and US$1.22 trillion, respectively, in 2015. Cross-border assets and li- abilities declined to about US$1.02 trillion and US$985 billion, respectively, which CIMA attributed to a stag- nation in international lending during the second half of 2016. “This contraction resulted in the decline in ranking of the Cayman Islands in- ternational banking posi- tion to 8th and 7th in terms of cross-border assets and liabilities,” CIMA stated in its report. Of the total assets and li- abilities held by Cayman- registered banks in 2016, US$529 billion were held by European banks, US$370 bil- lion by banks from devel- oped non-European coun- tries (primarily the U.S., Canada, Japan, and Aus- tralia), and US$113 billion by banks from Latin America and the Caribbean (primarily Brazil and Mexico). CIMA attributed some of the decrease in total as- sets and liabilities to the exit of a “Class A” bank from Cayman. The number of “Class B” banks – which are restricted to conducting business offshore with non- residents – also fell from 172 in 2015 to 148 in 2016. The decline in the number of banks has been attrib- uted to “de-risking,” a trend where Cayman-registered banks have had increasing difficulty in finding corre- spondent banking services in other jurisdictions. The banking industry also saw its profitability fall in 2016 with return on eq- uity decreasing from 8.3 per- cent in 2015 to 4.9 percent a year later, and return on as- sets falling from 1.4 percent in 2015 to 0.9 percent. Banks reported negative net income before taxes and dividends of roughly US$1.7 billion, and negative net income re- tained of nearly US$2 billion – marking the first year of negative net income in more than six years. “The reduction in net in- come retained was due to the increase in provisions for credit losses by South Amer- ican banks, losses incurred in other income by European banks from Investments in non-resident related compa- nies and losses in trading in- come from bouts of market volatility in Europe and South America,” CIMA stated in its report. Cayman’s domestic banking sector fared better than its international coun- terpart, seeing its return on equity increase from 11.2 percent in 2015 to 13.3 per- cent in 2016, and its return on assets increase from 1.3 percent to 1.5 percent. In- come before taxes and divi- dends increased from US$175 million to US$216 million, and net income retained in- creased from US$125 mil- lion to US$171 million, ac- cording to CIMA. “The increase in earnings reflects the increase in earn- ings from the interest rates increases and spreads in 2016,” states the CIMA report. Assets and liabilities for retail banks expanded by US$355 million to a total of US$14.39 billion by the end of 2016, and deposits in- creased by US$222 million. “The increase in core re- tail deposits was due to an increase in resident deposits reflecting improvements in the domestic macro-economic environment,” CIMA stated. In turn, credit to the do- mestic market increased by US$39 million to a total of US$3.88 billion at the end of 2016. Loans to households and businesses expanded by US$66 million and US$20 million, respectively. The ex- pansion of local credit in the private sector came at the same time as there was a decrease in loans to gov- ernment by US$38 mil- lion, CIMA stated. While credit expanded, so did the territory’s mortgage foreclosure rate, reaching 2.37 percent in 2016. The in- creased foreclosure rate con- tributed to a decline in the number of non-performing loans – loans that have been delinquent for at least 90 days – which decreased as a proportion of total assets from 2.5 percent in 2015 to 2.1 percent. CIMA stated that the de- crease in non-performing loans was due to more fore- closures, as well as a de- crease in the unemployment rate and a growing economy. US investigating Ford transmission recall Federal safety officials are investigating whether a Ford Motor Co. recall should be widened to fix more than a million additional vehicles. Ford recalled 153,000 vehicles in 2016 because their automatic transmissions could unexpectedly shift into first gear, causing drivers to lose control. WEDNESDAY JANUARY 3, 2018 • CAYMAN COMPASS Hedge fund performance improved in 2017 MICHAEL KLEIN mklein@pinnaclemedialtd.com The average hedge fund returned 7.27 percent through November of last year, almost doubling the performance of 2016, ac- cording to the Eurekahedge Hedge Fund Index. Comparable equity market benchmarks like the MSCI world equity index had a record year, following 13 consecutive months of gains that added $8 tril- lion and 22 percent to the market value of the stock index in 2017. Industry assets grew by US$188.2 billion during the year, with about half of the growth coming each from investor inflows and per- formance-based gains. In 2016, assets under man- agement contracted by $20 billion, when investor re- demptions of $55.1 bil- lion outpaced perfor- mance-based gains of only $35.1 billion. About three-quarters of all hedge fund managers posted positive returns in 2017, the highest share since 2013. The majority of them are long-short equity funds. Around 29 percent of the managers have posted gains exceeding 10 percent last year, while 6 percent of the managers have posted losses exceeding 10 percent. Fund closures continued to outpace launch activi- ties for the second consec- utive year with 490 funds liquidating in 2017 com- pared with 451 start-ups for the year. Asia and North America have seen a net growth in the number of funds, whereas Europe wit- nessed a decline for the third year running. Asia ex-Japan investing funds have delivered the best returns globally and were up 19.89 percent for the year. Within the region, Greater China-mandated hedge funds jumped 28.27 percent in 2017, outper- forming the CSI 300 Index by 7.24 percent. North American hedge funds were up 5.66 percent last year and received the highest investor allocations among all regional man- dates with inflows of $58.1 billion, compared to re- demptions of $11.1 billion a year earlier. The average performance by new hedge funds launched in 2017 improved to 17.11 percent from 16.52 percent a year earlier, while management fees charged by these funds declined to 1.26 percent from 1.41 percent in 2016. In Europe, the man- agement fees charged by new funds were as low as 1.15 percent. Cayman lecturer publishes public-private partnership research Chapter focuses on promoting social standards Laura Panades, course leader at the Truman Bodden Law School in Cayman, has published a book chapter on public-private partnerships as a vehicle to improve so- cial standards. The European Parliament, in collaboration with sev- eral think tanks, has released the book, called “Progressive Lab for Sustainable Develop- ment: From Vision to Action,” as a collection of ideas for fu- ture legislation. The book includes con- tributions from selected ac- ademics and practitioners from across the European Union and presents a prac- tical approach that suggests new legislative pathways. Public-private partner- ships are projects where the public and the private sectors jointly provide public goods, works or services in the long term, and cooperate at sev- eral stages of the project. Ms. Panades’s research focuses on how public-pri- vate partnerships can pro- mote social standards such as better work-life balance, equality among sexes and training opportunities in the workplace. Ms. Panades said the re- search results seek to in- form future policy and law- making, both in Europe and in the Cayman Islands, and feed into the current discus- sion at the national level on public procurement. “The re- cent public procurement overhaul in Cayman makes this an ideal moment to eval- uate further ways on en- hancing the social impact of public-private partner- ships,” she said. The research findings were presented at a confer- ence held in Brussels, and lo- cally at two research semi- nars hosted by the Truman Bodden Law School and the Attorney General’s Chambers. “This publication is an ex- ample of the high caliber re- search being produced by the law school team, who con- tinue to contribute to local and international jurispru- dence,” said Law School Di- rector Mitchell Davies. “This work will feed into the new LLM in International Fi- nance: Law and Regulation at the Truman Bodden Law School, which includes a course on the law of public- private partnerships.” A copy of the book has been donated to the Law School library. The banking industry continued to contract in 2016 in terms of the number of banks and the amount of assets and liabilities held by those institutions. Cayman law school lecturer Laura Panades with a copy of the book that includes her latest research on public-private partnerships. Banking sector slide continued in 2016 The European Parliament, in collaboration with several think tanks, has released the book as a collection of ideas for future legislation. 9 BUSINESS CAYMAN COMPASS • WEDNESDAY JANUARY 3, 2018 A diverse and buoyant market In this update I think it is timely to reflect on the past year and the impact it has had on the industry. It appears that 2017 was probably one of the stron- gest years we have ever had in the real estate industry. In- deed, the past two years have seen an extremely strong and active market with high de- mand and slowing inventory. What has struck me as particularly unusual about this past year has not just been the robust activity along the prized Seven Mile Beach corridor, but the ac- tivity elsewhere on island as well, where numbers mir- rored those seen along Seven Mile Beach a few years ago. We have seen all sorts of different transactions this year: those undertaken by for- eign investors looking for a safe place in which to watch their money grow; investors looking to invest in the com- mercial and industrial sectors; and investors buying multi- family residential properties. Our most active segment of the market is still Seven Mile Beach and it has been interesting to note that the demographics of buyers in this area have changed, from at one time pretty much only foreign investors, to now in- cluding local buyers as well. Now, as I have been fre- quently predicting, inventory is at an all-time low. A case in point, I searched the Multiple Listing System (MLS) system a few days ago for a three bed/three bathroom beach- front unit on Seven Mile Beach and the search came up with just three available, none of which were less than $4.25 million, and two of which were under contract. As far as the local resi- dential market is concerned, the challenges it faces are identical to those faced by the Seven Mile Beach cor- ridor perhaps 10 years ago. There is a good amount of activity but buyers are pre- ferring to build themselves or buy a brand new prop- erty rather than purchase ex- isting, older property. This is a normal part of the buying process because buyers tend to look for new buildings so they can take advantage of efficiencies and technologies not available to them in older properties. I also see residen- tial buyers gravitate toward community-orientated devel- opments, which seems to be where the driver is for such prospective buyers. The question is why is Cayman’s real estate industry enjoying such a boom? It ul- timately comes down to the same set of fundamental benefits that we enjoy in this location, of which I have written about frequently. We offer a safe and stable envi- ronment in which to live; we offer a stable government and a tax-neutral investing environment, making the most of the financial efficien- cies our professional service providers can offer investors; and we have an amazing, beautiful location in which to live, work and play. Since we had the basics conducive to a uniquely harmonious envi- ronment, we were then able to build upon other benefits, including first class educa- tion, dining, entertainment, infrastructure, sports and so- cial activities. As verification of the fact that the Cayman Islands is an excellent place in which to invest, we see our condos and hotels completely booked out over the busy winter season, with full occupancies giving investors steady and consis- tently solid returns. James Bovell is broker/owner at RE/MAX Cayman Islands. PROPERTY Perspective JAMES BOVELL FED OUTLOOK FOR HIGHER RATES DIMS U.S. AUTO SALES VIEW FOR 2018 As automakers seal their first U.S. sales de- cline since 2009, expec- tations for more interest- rate hikes are bolstering the nearly unanimous view that car demand will shrink again in 2018. Few analysts antici- pate sales this year will reach 17 million vehicles, which was just achieved for a third-straight year and only the fifth time in history. The Federal Re- serve forecasts three rate hikes this year, crimping the free-flowing credit that is helped fuel a record streak of demand growth that’s come to an end. “Consumers could face slightly higher costs for all their borrowing: credit-card balances, stu- dent loans, financing a house or a car,” said Charlie Chesbrough, se- nior economist at Cox Au- tomotive, which owns websites including Kelley Blue Book and Autotrader. “At the same time, higher rates drive up the cost to provide low-rate fi- nancing, which eats into profit margins and hurts the carmakers as well.” The central bank, which hiked rates three times in 2017, raises in- terest rates to keep the economy from over- heating and leading to high inflation. For con- sumers, those protective measures make it more expensive to take on new car loans or leases. “The monthly pay- ment matters,” said Jon- athan Smoke, Cox’s chief economist. “When rates rise, many consumers do not have an option to pay more. We believe higher rates have already led the automotive market to see some shift” toward used- vehicle purchases in- stead of new ones. The final tally for 2017 industry deliveries will be reported Wednesday when automakers an- nounce December re- sults. Analysts project that all major carmakers will report declines com- pared with the blowout final month of 2016, which benefited from an extra selling day. Industrywide, De- cember sales probably ran at about a 17.7 million annualized rate, analysts estimated in a Bloomberg News survey. That would be down from the nearly 18.2 million pace logged the previous December but still among the top months of the year. © 2018, Bloomberg Criminal underworld is dropping bitcoin for another currency Bitcoin is losing its luster with some of its earliest and most avid fans – criminals – giving rise to a new breed of virtual currency. Privacy coins such as monero, designed to avoid tracking, have climbed faster over the past two months as law enforcers adopt soft- ware tools to monitor people using bitcoin. A slew of ana- lytic firms such as Chainal- ysis are getting better at flag- ging digital hoards linked to crime or money laundering, alerting exchanges and pre- venting conversion into tra- ditional cash. The European Union’s law-enforcement agency, Eu- ropol, raised alarms three months ago, writing in a re- port that “other cryptocur- rencies such as monero, ethe- reum and Zcash are gaining popularity within the digital underground.” Online extor- tionists, who use ransomware to lock victims’ computers until they fork over a pay- ment, have begun demanding those currencies instead. On Dec. 18 hackers attacked up to 190,000 WordPress sites per hour to get them to produce monero, according to security company Wordfence. For ransomware at- tacks, monero is now “one of the favorites, if not the fa- vorite,” Matt Suiche, founder of Dubai-based security firm Comae Technologies, said in a phone interview. Monero quadrupled in value to $349 in the final two months of 2017, according to coinmarketcap.com, placing it among a number of upstart coins that rose faster than bitcoin, the world’s most valuable digital currency. Bit- coin roughly doubled in the same period, data compiled by Bloomberg show. In monero’s case, criminals are snapping it up because bitcoin’s underlying tech- nology can work against them. Called blockchain, the digital ledger meticulously records which addresses send and re- ceive transactions, including the exact time and amount – great data to use as evidence. Match an address to a crime and then watch the bitcoin universe carefully, and you can see the funds disappear and reappear in other locations. Sleuths have developed databases and techniques for digesting that information to eventually nab wrongdoers. Say, for example, a coffee shop in Berkeley is known to have a certain bitcoin ad- dress, and a wallet used by an extortionist transfers the same amount there every morning at 9 a.m. Police can stop by and make an arrest. Started in 2014, monero is very different. It encrypts the recipient’s address on its blockchain and generates fake addresses to obscure the real sender. It also obscures the amount of the transaction. The techniques are so po- tent that software that flags coins suspected of being ob- tained through crime now tags just about anything con- verted into or out of monero as high risk, according to Pawel Kuskowski, chief ex- ecutive officer of Coin- firm, which helps exchanges and other companies avoid tainted money. That com- pares with only about 10 per- cent of bitcoin, he said. “What we treat ‘high risk’ is something that’s anony- mizing funds,” he said in a phone interview. “How are you going to prove that these funds are not coming from il- legal sources?” Monero is one of many privacy-focused coins, each offering different security features. Its main competitor, Zcash – which is not known to have a significant crim- inal following – can offer even better privacy protec- tion. Instead of creating fake addresses to hide senders, it encrypts their true address. That makes it impossible to identify senders by looking for correlations in addresses used in multiple transactions to pinpoint the real one – a vulnerability for monero. Still, Princeton Univer- sity researchers recently de- veloped a tool that helps them analyze Zcash transac- tions at least to some extent – but they have not been able to crack monero. And Zcash high-security features cannot be used on disposable burner phones, a favorite of criminals eager to stay anonymous. Developers behind monero say they simply cre- ated a coin that protects pri- vacy. Most people use it le- gitimately – they just do not want others to know whether they are buying a coffee or a car, Riccardo Spagni, core de- veloper at monero, said in a phone interview. “As a community, we cer- tainly don’t advocate for monero’s use by criminals,” Spagni said. “At the same time if you have a decentralized currency, it’s not like you can prevent someone from using it. I imagine that monero pro- vides massive advantages for criminals over bitcoin, so they would use monero.” Yet criminals are prob- ably only a fraction of mone- ro’s users, according to Lucas Nuzzi, a senior analyst at Digital Asset Research, which provides research to institu- tional investors. “As with any disruptive technology, many of the ini- tial use cases revolve around illicit activities,” he wrote in an email. But as everyday people grow concerned about privacy and surveillance, “there is utility in these cur- rencies that go beyond just a means of exchange for illicit goods.” © 2018, Bloomberg While Seven Mile Beach was the most active segment of the property market, other parts of the island saw a robust number of transactions as well.Next >