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Alex Olmedo’s first trip from his native Chile to the Falkland Islands in October 1990 took five months to organise and, when it came off, involved a six-hour flight in a twin-engine plane. It also took him back in time to an England that hadn’t existed for decades. “When we landed, I thought it was paradise, the sky was so bright and blue,” says Olmedo, 38. “But when I got into town, I could smell smoke. There was a permanent cloud over the town then because people were still burning peat to heat their homes.”

Olmedo’s trajectory since then, from hotel chef on a one-year contract to UK citizen and founder of the islands’ first gourmet restaurant, mirrors the improving fortunes of the Islands themselves. In recent years, the Falklands have gone from being a grim collection of dying sheep farms to a profitable fishing hub and a cruise ship magnet.

Now, the prospect of a major oil discovery in the South Atlantic promises to turn the tiny territory into the next Norway – or Kuwait. Of course, the islands are still the same remote, windswept rocks that led Argentine writer Jorge Luis Borges to call the 1982 Falklands War between Britain and Argentina “a fight between two bald men over a comb.” But now they are also a thriving polyglot outpost where fortunes are being made.

“Things got much better after the war,” says Arlette Betts, a 63-year old native Islander, or “Kelper”, who runs the Lafone House B&B. “Before, there was nothing. People thought they weren’t getting anywhere, so they were emigrating to the UK and New Zealand and not coming back.” Argentina’s 1982 invasion of the islands – which it had long considered its own and which the UK had long ignored – may paradoxically have been the best thing that’s happened to the islands.

Reminded of the impoverished islands’ existence by the 72-day war, in 1986 Britain declared a commercial zone in the waters around the islands, meaning that anyone who wanted to fish or drill in the area had to pay. At the same time, the local government launched a tourist board to market this odd pocket of South Atlantic Britishness to cruise ships visiting Antarctica or plying the Cape Horn swing between Argentina and Chile.

The effects were startling: the islands saw their annual GDP rise from a meagre £3.5m pre-war to around £75m today, of which 60 per cent comes from fishing and 10 per cent from tourism. Its £25,000-per-capita GDP now puts it on par with Sweden, Australia and Denmark. (Falklands pounds have the same value as UK pounds sterling).

The capital of Stanley, where 85 per cent of the population of 3,140 lives, shows the new Falklands in vivid hues. Spurred by an influx of residents fleeing failing sheep farms and an economic boom that increased demand for immigrants to fill technical jobs, Stanley’s population has increased by almost 75 per cent over the past two decades.

Kelpers now account for less than half of the population, and Stanley is home to a diverse mix of Chilean and St Helenian service workers, Russian fishery scientists, Australian agriculture experts and the Indonesian manager of the ­islands’ only bank. Walking through the new neighbourhood of East Stanley you see construction sites and brand new cottages of brightly coloured clapboard walls and wriggly tin roofs. Garden flowers tend towards lupins and red hot pokers; supermarket shelves are filled with ­Cadbury chocolates, Heinz Baked Beanz and ready-made curries.

On Saturday night, the popular pub/ disco Deano’s is packed with plastered Kelpers and immigrants singing along to 1980s music. It feels like a prefab Britain, in large part because it is: as the nearly bald islands offer no building materials themselves to speak of, new houses are shipped from the UK as kits.

“Everyone is intertwined with everyone else,” says Roger Spink, the bulky general manager of the Falkland Islands Company (FIC), a UK-owned, omnipresent colonial vestige that as recently as 1951 owned half the land and employed a quarter of the residents. Almost without fail, people work from 08.00 to 17.00 and walk five minutes home to lunch with their family. Children wander the safe streets unsupervised.

Crime is almost nonexistent (save for a recent incident in which two Spanish fishermen who were arrested with 30 kilos of cocaine managed to steal back the evidence and flush a large part down the police station toilet). Because one cannot move to the islands without a work contract, the only people out of work are a few islanders know as the “Unemployables”.

A typical islander of his age (54), eighth generation Falklander Stuart Wallace left school at 14 and went through a series of clerical jobs, starting at the FIC before moving to the British Antarctic Survey and Cable & Wireless. By the time of the war he was barely making less than £5,000 a year. Today, he has become one of the Falklands’ richest men because of the ­islands’ £150m (€160m) fishing industry. In 1987, he and a partner founded Fortuna to bid on some of the new commercial zone fishing licenses.

Like other local “fishermen”, Wallace had no nautical past – Stanley’s harbour is notable for how few ships are there – so they made contracts with foreign companies, usually Spanish, which did the actual work of pulling squid and Chilean sea bass from the deep. “There were really no Falklands Islanders involved,” says Wallace. “We knew nothing about fishing and far less about squid.” The industry has shrunk a little in recent years because of concerns about overfishing and global warming.

Tourism instead has taken off. At Bluff Cove Farm, a windswept seafront sheep and cattle farm, the daytrippers – mostly retirees – charge the nearby rookery and snap photos of the fuzzy, young gentoo penguins, which obligingly waddle up to the cameras. Started in 2001 as a way to save the farm – the annual wool clip was only covering the cost of the shearers – the penguin tour now sees 5,000 cruise ship visitors a year, for which the ships pay £45 (€48) a person.

Inside the nearby five-year-old Sea Cabbage Café, co-owner Hattie Kilmartin serves native-trout canapés and scones topped with local Diddle Dee Jam while a musician plays “Dirty Old Town” on the accordion. “This started as a small farm diversification project and now, last month, I paid 45 people,” says Kilmartin, 42, who came to the islands from the UK in 1996 to cook in a fishing lodge.

The island’s government is betting on tourism to plug the holes left by falling fishing income. This season, tourist board head Jake Downing expects around 68,000 cruise-ship tourists to visit here (a 9 per cent rise on last year). But the real moneyspinner the island is still pinning its hopes on is oil.

“They brought this up last time, so we know there’s some out there,” says Department of Mineral Resources director Phyl Rendell as she plays with a paperweight containing a drop of oil raised by Shell in a previous, aborted, oil drill in 1998. Today the islands are again having North Sea dreams that would make their Argentine problems irrelevant. After finding signs of oil via seismic tests, mining giant BHP Billiton and its local partner, Falkland Oil & Gas, are set to begin drilling deep sea test wells within a year, and Falkland Oil & Gas CEO Tim Bushell says drilling would be profitable even with oil as low as $20-25 a barrel. The experts believe there could be up to 60 billion barrels of reserves, which would mean billions of pounds for the local government.

Although the chances of finding the black gold are slim, there is a buzz of expectation in the islands over what should be done with the windfall. Rendell and other members of island government insist that the local populace won’t be receiving Kuwait-like annual dividends to spend as they please. “Revenue to the Falkland Islands government would allow it to go up a notch. People will benefit from new services – a hospital, roads, ferries – but there will be no handouts,” she says. “People will have to work for the industry or provide services that it needs. Some might get quite rich.”

The image Rendell paints is almost utopian. Because all production will take place offshore, the islands won’t become “another Aberdeen”, swamped by thousands of oil field workers. Besides a few engineers on their way out to the rigs, there will be almost no sign of the industry. “There would be no large construction on the Falklands,” she says. “You’d probably have a growth in population, but quite modest.”

Not everyone agrees. “The size and make-up and values of the community will change,” says Wallace. “Within five years of a significant oil find, we’d probably be unrecognisable.”

Best investments

What the Falklands Islands have bought over the past 10 years:

New Land Rovers – the Falkland Islands Company have sold 325 4x4s in the last five years
Three huge wind turbines – installed by the government in 2007 at a cost of £2.1m (€2.3m), now providing a third of Stanley’s electricity and saving the islands about £500,000 (€540,000).
Subsidised abattoir – to support the 263 people – mainly farmers – who still live outside Stanley in the countryside.
Ferry – to link remote settlements to Stanley.

Ways to get rich in the Falklands

  1. Open a microbrewery to sell a Falklands malt to locals and tourists. Islands that drink this much beer should bottle their own brew.
  2. Exploit the sheep and wool history. An island territory with 500,000 sheep should have a gaggle of shops selling handmade garb to tourists, not just a few.
  3. Build more wind turbines. A place this windy shouldn’t spend a penny on fossil fuels.
  4. Become a tax haven. If Switzerland, Uruguay and the Caymans can made a mint off friendly laws, why can’t the Falklands too?
  5. A good curry house. No British territory, no matter how small, should be without one. With this many sheep, the lamb possibilities are endless…

Relations with Argentina

The flow of war veterans from Britain and Argentina visiting battlefieds of the 1982 war has increased in recent years. But relations between the two countries have gone backwards. While links improved in the 1990s, current president Cristina Fernández de Kirchner and her predecessor, husband Néstor Kirchner, have taken a hard line on Argentina’s claim over the islands.

Argentina has ceased cooperating on shared oil fields and fisheries, and stopped allowing charter flights to the islands to fly through its airspace, making imported food even more expensive—a kilo of Chilean tomatoes costs £5.99 in the FIC’s West Store, Stanley’s main supermarket. Today, there is only one commercial flight from Chile and two military flights from the UK into the islands’ military base each week, with a grand total of about 200 available seats.

“Kirchner and his wife have made Argentina very unattractive to us,” says Mike Summers, the stern legislative council spokesman and arguably the Falklands Islands’ most powerful man.“Their policy has been to squeeze the Falkland Islands economy and people so that we’ll say, ‘The Conflict was all a big mistake. Can we talk to you?’’’

Made in the Falkands

With their tiny population and inhospitable weather, the Falklands need to import most things from abroad, usually from Chile or the UK. But not everything. Not surprisingly, a large number of the native creations have to do with the islands’ three specialities: wool, the War and penguins.

  1. Wool hat with a pony-tail hole in rear – not to be confused with a tea cosy.
  2. Felt wool trivet (aka something to rest a hot dish or pan on) that gives off the scent of the cloves inside when used.
  3. Soap inside a felt holder. Unlikely to become a global bestseller just yet.
  4. Raw Falkland Islands wool. No real use, just proof you met a sheep.
  5. Penguin fridge magnet.
  6. Falklands postcards.
  7. Magnet for fridge raiders spoofing a local landmine warning.
  8. Diddle Dee jam, made of hand-picked native berries.
  9. Tinned Falkland mussels and crab. More could be made of the brand.
  10. Handmade penguin ornament.

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