by Milton Chacon
A growing concern over potential delays with the processing of Chinese EB-5 visas is pushing regional centers to consider other countries as a steady source of wealthy immigrants eager to relocate to the United States under this program. With over 600,000 millionaires, Latin American countries can become a large source of such investors, particularly at a time when many of these countries have experienced extended periods of economic growth and relative political stability, giving way to the expansion of a wealthier upper middle class that might not have previously satisfied the financial requirements of the EB-5 program.
Latin America consists of 22 separate nations comprising approximately 600 million people. However, despite their common distant past as Spanish and Portuguese colonies and numerous treaties attempting to unify the region, many significant differences remain between these nations. Not the least of which relates to economic cycles caused by unstable political regimes that have, at times, derailed economic progress and created social instability. Specifically, the leftist, anti-imperialist and populist rhetoric of some regimes has periodically impeded progress, leading to social unrest, volatility and less predictable economic decisions. However, despite occasional anti-American propaganda, the United States remains the most appealing destination in the developed world for Latin American emigrants due to its proximity to the region, large and established Spanish-speaking communities and robust legal system.
The challenge and the opportunity
The reality is that the historical number of EB-5 applications from all countries except China is dismal. Out of the 3,677 I-526 applications approved during the fiscal year ending September 30, 2013, 86 percent were for Chinese nationals, meaning there were only a little more than 500 approved applications from all other countries around the world. Of those applications, 95 were from South Korea, and 42 were from Taiwan; no other country had more than 34 approved applications. The three largest concentrations in Latin America came from Mexico, Venezuela and Brazil, in that order. However, it is worth noting that the number of approved applications from those three countries declined from 116 in 2012 to only 65 in 2013, an overall 44 percent decline. This is perhaps related to the perceived strong economic outlook during that period, at least with respect to Mexico and Brazil.
Despite the historical results, Latin America still represents one of the most promising sources of EB-5 investors. With 605,000 millionaires, Latin America has a little more than half as many as China. India, with around 182,000 millionaires, has only slightly more than Mexico and fewer than Brazil. Therefore, if through targeted marketing and education we could achieve the same capture rate as in China (number of approved applicants over number of millionaires) then Latin America could produce around 1,600 applicants a year. The rest of this article considers whether this goal can be achieved.
Why haven’t more Latin Americans taken advantage of the program?
There is no doubt the EB-5 program has not been marketed as well in Latin America as it has been in China; in fact, many potential investors are unaware of the program’s existence, let alone its requirements and benefits. The surprisingly low number of applicants can be attributed to several factors:
- Fewer direct marketing initiatives targeting those investors locally, due in part to the size of some of these countries. This is further complicated by the difficulty of meeting and connecting with candidates who are typically more protective and cautious because of historical safety concerns and a Latin culture that demands warmer and more time-consuming professional relationships. Chinese-style road shows are unlikely to work well in this environment. It would be harder, and in some cases unsafe, to convince large numbers of Latin American millionaires to attend group EB-5 presentations during road shows.
- EB-5 applicants must be willing to commit a minimum of $500,000 for up to five years at low rates of return and in some cases pay $100,000 or more in professional and miscellaneous fees. The “sticker shock” associated with these costs and expected investment returns can be disconcerting to qualified candidates, particularly in countries where the program is not well known, and applicants cannot easily point to an acquaintance that has successfully completed the process.
- The same economic growth that has expanded the universe of qualified EB-5 investors has also made it more appealing for them to stay home. Furthermore, quality of life for a Latin American millionaire can be very appealing, and family, social and cultural bonds make emigrating difficult.
- Becoming a permanent U.S. resident exposes an immigrant to the worse of two tax systems (their native country and the United States). Even worse, a new U.S. resident can be subject to double taxation if no bilateral tax treaties exist between the United States and their native country. Fortunately, these adverse tax implications can be partially mitigated with careful tax planning, but they create additional cost and complexity.
The perception of easier access to U.S. temporary visas, combined with all of the above factors, make permanent residency less appealing. Wealthy Latin Americans want to invest in the United States and in many cases own an apartment in New York or Miami to visit during their vacations and business trips, but they may not necessarily want to relocate and settle permanently in the United States.
So will a larger number of wealthy Latin Americans apply for EB-5 visas?
Despite the many considerations that may discourage potential Latin American EB-5 applicants, there are still several reasons why the United States remains a very attractive place to live for many of these millionaires, especially for those confronted with some specific circumstances, including:
- Those touched by violence or who fear for their safety and that of their loved ones;
- Those concerned about political and economic stability and potential additional restrictions on capital expatriation;
- Foreign students who would like to stay in the United States (temporarily or permanently) and whose parents can help them satisfy the EB-5 financial requirements to improve their chances of finding a better job without the restrictions associated with working visas;
- Middle-aged families that would like to stay together despite their intentions of sending their children to U.S. colleges and universities; and
- Older families that would like to retire to the United States for safety, medical care and other quality of life issues
The large amount of traffic and professional connections that wealthy Latin Americans have in cities like New York and Miami may allow for more efficient marketing to these candidates from professional networks within the United States. However, given the considerations above, unless the current economic and social conditions in Latin America take a sudden downturn, the number of EB-5 applicants is unlikely to increase dramatically in the near term. Educating potential candidates will positively impact the number of applicants, but this process will take time. However, it is likely that the growing number of successfully admitted Latin American immigrants under EB-5 will spur a moderate increase in the flow of new applicants.
Focus on the larger countries
Scale is important to achieving the goals of an EB-5 marketing effort: Establishing a qualified network of immigration consultants, licensed local security dealers and agents will be time consuming. Furthermore, the high due diligence cost of becoming familiar with the immigration, taxation, regulatory and cultural aspects can only be justified in larger markets.
Brazil, the largest country in Latin America with more than 200 million people and over 225,000 millionaires, is the most attractive country in Latin America for projects trying to raise EB-5 capital. In contrast with its fast GDP growth of 7.5 percent in 2010, Brazil’s GDP has contracted in three of the last four quarters. The looming challenges of recently re-elected president Dilma Rousseff, including a rising trade deficit, high inflation and a rise in extreme poverty, may result in new attempts to micromanage the economy. This economic uncertainty should produce a new wave of EB-5 applicants and perhaps reverse the overall decline of Brazilian emigration to the United States that began several years ago. Despite these trends, the migration of wealth from Brazil will continue to be dampened by the complexity and high costs of taking capital out of the country.
Mexico, which has over 150,000 millionaires out of a population of 120 million, represents another large source for EB-5 candidates. With a more open economy that is highly linked to the United States, the motivation to emigrate may reflect safety concerns rather than an immediate preoccupation with the economic outlook. The recent events surrounding the disappearance and massacre of 43 students in Iguala, Guerrero, involving organized crime and members of the local government and police, has left President Enrique Pena Nieto with egg on his face. This tragedy, together with other recent, high-profile violent crimes, has provoked political discontent, including demonstrations and public demands for Nieto’s resignation. These events are a reminder of the frailty of the Mexican political system and present a strong argument for increased interest in the EB-5 program among wealthy Mexicans.
Other countries with troubled economies, such as Argentina; unpredictable political environments, such as Venezuela; or growing and alarming crime rates, such as Honduras and Guatemala, are examples of ready audiences that can be very receptive to the prospect of immigrating to the United States.
Mass access to the wealthy in Latin America will remain limited and time consuming. Security concerns and periodically shifting economic conditions will continue to motivate the wealthy in the region to consider immigrating to the United States. By the same token, cultural and family ties, together with the economic success of many of these economies, will dampen the acceleration in the number of EB-5 applications. Factors such as a local presence or strong relationships with local partners, a good understanding of the local culture, a recognizable brand and the availability of EB-5 projects in cities well known to Latin Americans will be key factors in the success of any EB-5 capital raising initiative in the region.
Latin America Initiative
EB5 Investors Magazine is actively seeking to expand its attorney database to cover Central and South America. We are looking to list qualified Spanish and Portuguese speaking attorneys and consultants. Please contact us to be listed in our upcoming directory. Email firstname.lastname@example.org
 Millionaire populations in Latin America were obtained from the Credit Suisse Global Wealth Databook 2014.
Estimates were rounded to the nearest thousandth.
 Latin America is the region of the Americas comprising those countries where Spanish or Portuguese is the official language and it includes countries stretching from the southern border of the United States to the southern tip of South America, including the Caribbean.
 According to U.S. Census Bureau population estimates as of July 1, 2013, there are roughly 54 million Hispanics living in the United States, representing approximately 17 percent of the U.S. total population. The U.S. Hispanic population for 2060 is estimated to reach 128.8 million, constituting approximately 31 percent of the U.S. population by that date. After Mexico, the U.S. is the country with the second largest Hispanic population in the world.
 All statistics relating to 2013 I-526 applications were obtained from the March 2014 Regional Center Business Journal article: “New I-526 Data by Country Illuminates EB-5 Investor Demand Trends,” by Suzanne Lazicki.