Recent delays in the processing of EB-5 visa petitions from Chinese investors have encouraged regional centers to focus on Latin America as a potential investment source. Despite political and social instability over the past decades, many Latin American countries are now experiencing economic growth, and the United States has emerged as an appealing destination for investors because of its geographic proximity, large Hispanic community, and strong legal system.
Opportunities for EB-5 Regional Centers in Latin America
China stands out as the source of a majority of EB-5 applications. For example, in the 2013 fiscal year, 86% of I-526 petitions were filed by Chinese investors and only 1.8% by Latin Americans, with the largest numbers of investors coming from Mexico, Venezuela, and Brazil. This can be partly attributed to strong economic conditions in Latin American countries during that year, meaning investors did not feel the need to look abroad.
However, with 605,000 millionaires, Latin America represents a significant opportunity for regional centers. Targeted marketing and education on the benefits of the EB-5 Program could bring about a capture rate, referring to the percentage of EB-5 applicants among all millionaires, identical to that in China. This would result in 1,600 applications per year and a significant boost in investment for U.S. regional centers.
Challenges of Marketing the EB-5 Program in Latin America
Many potential EB-5 investors in Latin America remain unaware of the program and its benefits. This situation is mainly the result of a lack of marketing initiatives and a climate of caution among wealthy investors in Latin American countries due to historical safety concerns. In some regions, unlike in China, where roadshows are a common way to attract investors, it would be unsafe to host a large gathering of millionaires to explain the requirements of the EB-5 Program.
Additionally, Latin American investors may balk at the required investment amount of $500,000, as well as the significant legal fees associated with applying to the EB-5 Program. Unlike Chinese investors, who often have family and colleagues who have successfully navigated the application process, Latin American investors are generally unfamiliar with the requirements and skeptical of the risk when investing such a large sum.
An increased tax burden is also a concern for potential EB-5 candidates. Taxes are high for nonresident aliens in the United States, and in cases where no tax treaties exist with an investor’s country of origin, the investor may face double taxation. While this drawback can be averted through tax planning, it does add an additional complication to the EB-5 application process.
Lastly, quality of life for wealthy investors is generally high in Latin America, and familial and cultural bonds may make emigration unattractive. While Latin Americans may indeed wish to invest in the United States, take advantage of temporary visas for business purposes, and own property in large U.S. cities, many do not wish to relocate permanently.
Benefits for Latin American EB-5 Investors
For some potential EB-5 applicants, the benefits of living and working in the United States far outweigh the drawbacks. Investors from countries that frequently undergo economic or political upheaval may wish to conduct business in a more stable system, as would those who face safety concerns or other quality of life issues. Similarly, students currently studying in the United States may wish to remain there as investors to avoid the restrictions of a working visa, and their parents may wish to join them in their new communities.
Regional centers would benefit from working through Latin American professional networks in cities like New York and Miami, which can facilitate more efficient marketing to potential investors. While the number of EB-5 applicants from Latin American countries is unlikely to spike in the coming years excepting a significant economic downturn in that region, a steady increase in applicants will encourage other investors to take the plunge over time.
Successfuly Marketing Strategies for EB-5 Regional Centers
Because regional centers must establish qualified networks of immigration attorneys and local agents and face significant costs in due diligence while familiarizing themselves with local markets, immigration and taxation laws, and cultural customs, they benefit from working in larger markets, where their efforts will reach more potential candidates. Brazil and Mexico are excellent examples of countries where this strategy may prove useful.
With over 225,000 millionaires, Brazil stands out as a target for marketing of the EB-5 Program by regional centers. The recent contraction of the Brazilian economy, which has resulted in a trade deficit and high inflation rate, has caused extreme poverty in certain regions, and this climate of economic uncertainty poses challenges for investors. Those wishing for a more stable business environment may see the benefits of applying for the EB-5 Program and immigrating to the United States, though transferring capital out of the country remains an obstacle.
Mexico is a second candidate for EB-5 marketing, with 150,000 millionaires and an open economy with significant ties to the United States and other regional trading partners. As a result of recent tragedies perpetrated by criminal organizations as well as politicians and law enforcement officials, wealthy Mexican investors may wish to immigrate to the United States for reasons of safety. Protests and widespread discontent have also cast into doubt the stability of the Mexican government, meaning potential EB-5 candidates may see the benefit of working and living elsewhere.
Other large countries in Latin America face additional challenges conducive to EB-5 marketing efforts. The weak economy in Argentina, political unrest in Venezuela, and crime rates in Honduras and Guatemala all present opportunities for regional centers to encourage immigration by wealthy investors.
Key Points: EB-5 in Latin America
Unstable economic and political conditions in some Latin American countries may encourage potential investors to look into the opportunities presented by the EB-5 Program. While a cautious investment outlook and generally high quality of life in most Latin American countries has historically precluded the need to immigrate to the United States, regional centers can capitalize on conditions in larger markets by working with stateside Latin American professional networks to educate investors on the requirements of the EB-5 Program and the opportunities it presents.
