EB5 Investors Magazine - Page 85

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