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