Migration By Investment In The Era Of Globalization

Societies and economies are experiencing tectonic shifts to the scale caused by a world war. In the past two months, job losses could well have exceeded 500 million people globally with 36.5 million people having lost their jobs in the United States alone. Leading economists are projecting a 30 to 40 percent reduction in US GDP for Q2 2020. The y-axis on economic graphs have been re-calibrated – such is the bleak and grim outlook for the world.   The United Nations has warned over 1 billion informal workers face poverty.

The largest destruction of capital will take place in the emerging markets and will be under-reported in the world’s press until civil unrest is rife. The Global Financial Crisis of 2008 and its aftermath will be remembered fondly by comparison.

The current economic climate and resurgence of popularism

Marrying the current economic disaster with the resurgent trend of popularism over the past few years, the inevitable result is deglobalization.  In the past 4 weeks, bail-out after bail-out has shaken the foundations of free-market economic theories giving way to intertwined public and private sectors. Governments are demanding companies and supply chains come home. And all of this in three months without a single gunshot. Simply unimaginable.

A few weeks back, in my first piece in this series, I made the case it was premature to draw conclusions on the near- to medium-term outlook for the citizenship by investment industry or a particular country’s offering. As the ashes of the COVID-19 crisis begin to settle and we believe once again the world will continue to turn, some discernible patterns are emerging for our industry and market participants.

Investors seek opportunities to relocate or expand overseas

During this lockdown, I have interacted daily with scores of high net worth investors across the key emerging markets. They are mostly aligned in outlook. They fear political instability and serious civil unrest as poverty strangles their societies; from an economic perspective, their businesses have been forced onto the sidelines by their government’s public health response.

For some, difficult yet sensible decisions are being taken to liquidate these businesses and start afresh in pastures new; typically in the United States or established European economies. They are encouraged by the governmental support these established economies have benefited from and do not wish to find themselves in yet another emerging market economic collapse with no safety net as they approach their silver years.

Others, with very substantial, globalized businesses, seek to establish an additional physical presence in the United States or Europe to combat deglobalization and weave themselves into the fabric of society in their consumer markets. Both groups of investors will invariably require a second citizenship that provides access and residency in the United States or European markets.

Grenada and Cyprus provide investment gateways to the U.S. and Europe

Grenada, with unique E2 USA access, and Cyprus, providing a gateway to the mature European economies, have emerged as the citizenship by investment destinations of choice in the past few weeks, and will cement their positions in the months ahead. The two countries are distinguished by providing access to different economic blocs (the US and the EU, respectively) and their vastly different price points – Grenada is a mere 10 percent of the cost of the Cypriot option. I would be remiss if I didn’t mention Malta, which is a viable alternative to Cyprus. While Malta’s solution merits evaluation, its significant non-refundable government contribution will be a deterrent to many.

The direction of the citizenship by investment industry is clear. Truly high net worth investors will remain the only participants; the mass affluent have been decimated. High net worth clients demand more discernible service and customized solutions from their citizenship advisors.  Professionalism, qualifications, and experience will prevail. The citizenship by investment industry is in the midst of a process of natural selection. Soon, the results will be evident.

Such is the difference in approach that perhaps it is time for a re-branding that more accurately reflects the phenomenon. “Migration by Investment”, anyone?

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