THE RIPPLE EFFECT OF THE
DEVALUATION IN TURKISH CURRENCY
TO EB-5 INVESTORS BEHAVIOR FROM
OTHER EMERGING MARKETS: BRAZIL
With potential retrogression of 17 years in China and
potential retrogression in Vietnam, many want to know the
answer to this question as it relates
to Brazil, Argentina and some of the
other countries whose currencies saw
significant decline due to the Turkish
currency crisis.
INDIA AND OTHER ASIAN COUNTRIES
Finally, other emerging market country currencies such as
those of India, Indonesia and Thailand have also seen
declines but they remain quite high relative to their previous
highs. Therefore, from an affordability standpoint, it is
not expected that investors from any of these countries
will be deciding not to pursue the EB-5 investment due to
the cascade effect of the Turkish
currency devaluation.
10
11
"the financial realities
make it much more
difficult for the
Argentinians to realize
their dreams as opposed
to the Brazilians or the
Turks"
Affordability is undoubtedly a critical
factor affecting the EB-5 investors’
behavior. However, there are certainly
other factors to consider. Brazil is an
excellent example of a market where
the Turkish cascade effect does not
necessarily echo in all emerging
ma r ke ts. O n th e c o n tr a r y, th e
potential of further devaluations and
endogenous political instability create additional incentive
to act more swiftly. Just as the tariffs expected to be
levied by the Trump Administration on Turkish goods,
tariffs on Brazilian steel and aluminum has had a negative
impact on the Brazilian Real. That said, Brazil has roughly
$400 billion in currency reserves and is expected to be
able to withstand these currency devaluations without
creating a major wealth erosion to significantly affect the
ultimate decision to emigrate out of the country.
8
Today, Brazil finds itself in political and economic inertia
despite the election of far-right former army captain Jair
Bolsonaro as its President. Until Brazilian policy is better
defined to deal with pre-existing domestic issues that have
already motivated the EB-5 investor to emigrate, the decline of
the value of the Real against the US dollar cannot dissuade
the EB-5 investor from making a move. A far more pressing
reason to immigrate to the US and other European countries is
the political and fiscal difficulties that result in short and long
term economic insecurity, social and political backsliding and
above normal public insecurity in the overall system.
9
ARGENTINA’S DIFFERENT SITUATION
Argentina, on the other hand, is a different story. Unlike Brazil,
and to some extent Turkey, the overheating of the economy
and high inflation makes it much more vulnerable to currency
devaluations. Argentina has no significant reserves to protect
it from economic shocks that result from the appreciation
of the dollar against the Argentinian peso. Therefore, as is
well known, it had to resort to aid from IMF as a last resort
and accept to raise the domestic interest rates to 45 percent,
potentially further crippling its local economy. While both
Argentina and Brazil have been facing internal difficulties
in the form of political, economic and social pressures that
indeed create enough motivation to emigrate out of the
country, the financial realities make it much more difficult for
the Argentinians to realize their dreams as opposed to the
Brazilians or the Turks.
96
EB5 INVESTORS M AGAZINE
12
Of course, no one can be certain of
the ultimate effect that the recent
Turkish devaluation will have on
Turkish investor behavior and on
other emerging countries. One
thing that can be said for sure is
that the impact will not be uniform.
O ther factors will undoubtedly
weigh in and a composite set of
elements will dictate the ultimate
decision of the investor.
Marko Issever
is CEO of America
EB5 Visa whose mission is to connect
international investors with EB-5 issuers.
He is also a managing director at Riverside
Management Group, where he leads the
firm’s EB-5 capital-related activities, via its
wholly owned subsidiary, BCW Securities.
Previously, Issever was a managing director
at BNY Mellon, leading the firm’s financial
institutions derivative business globally.
Issever earned his MBA in finance from The Wharton School of
University of Pennsylvania. He is also a graduate of Bogazici
University and Robert College, located in Istanbul.
Sources:
1
https://goo.gl/9Fb6Sr President Trump’social media
2
https://tradecaptain.com/news/forex/26512-usd-try-lira-plummets-to-all-time-lows-tough-times-
for-the-currency-10-aug-2018
3
https://www.bloomberg.com/quote/USDTRY:CUR
4
https://www.theguardian.com/world/2018/aug/13/turkey-financial-crisis-lira-plunges-again-
amid-contagion-fears
5
Turunç Law Firm has reported that the Turkish Government has outlawed real estate and certain
other transactions executed in foreign currencies in order to preserve the value of the Turkish lira
against foreign currencies. http://www.turunc.av.tr/publications/alertmemos/32-Sayili-Karar-
Tebligi-Degisiklikleri-(TURUNC-06.10.2018).pdf
6
https://iiusa.org/blog/wp-content/uploads/2018/07/EB-5-Investments-in-Turkey.pdf
7
http://turkishtravelblog.com/patriotic-turks-turkish-flag-eu/
8
https://www.dw.com/pt-br/situação-brasileira-é-diferente-da-turca/a-45067392
9
https://www.nexojornal.com.br/expresso/2018/05/22/Quais-fatores-internos-e-externos-pesam-
na-desvalorização-do-real
10
https://www.bloomberg.com/news/articles/2018-10-05/india-unexpectedly-holds-interest-rates-
after-back-to-back-hikes
11
https://www.bloomberg.com/news/articles/2018-09-05/the-15-000-rupiah-indonesia-of-2018-
looks-different-from-1998
12
https://www.bloomberg.com/news/articles/2018-04-08/cruelest-month-for-thai-baht-could-be-
worse-than-usual-this-year