Greco: Citizenship by Investment – The True Win-Win-Win of Globalization

Greco’s Geopolitics
With Brian Greco

With an eye to the changing world order, Brian Greco explores how individuals can get and keep global access.

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There are very few things in life that are a true win-win. Almost always, it is easy to point out where – somewhere in the equation – there is a clear winner or loser. The game of globalization is no different and has often been characterized by uneven gains – especially as it relates to the “ordinary person” over the past thirty or forty years.

However, in the wake of some of the industry’s toughest blows to confidence in recent memory – program closures, visa-waiver suspensions, and much more – I’d like to revisit this topic of win-win to remind the reader why this industry is important, especially for that ordinary person who wants more out of life.

Why does citizenship by investment matter? Why is it good? And who are the stakeholders in a citizenship by investment (CBI) equation? Let’s review how (almost) everyone wins.

Governments win

The first and most important winner to highlight in any new program proposal is the government itself. Why should governments want CBI?

Most governments like money for their budgets and usually need more of it. This most readily takes the form of a direct donation-based program or a deposit-based program. But government financials “wins” also come in the form of the ancillary taxes, fees, and stimulus that property investments provide. For example, Vanuatu, a small island nation that many reading this newspaper had barely considered before the program opened, had its citizenship by investment program to thank for some 42% of government revenue in 2020.

The benefit is not just in hard currency injections. Governments also win by attracting new talent and human capital from all over the globe whose investors, spouses, children, and often parents or other dependents will now sport that citizenship for the purposes of travel or housing their assets. CBI attracts talent from all corners of the globe.

CBI also has the potential to build good PR and get your country on the map in a new way. The Caribbean made a name for itself as a financial services nexus, with attractive citizenship and taxation programs as the backbone of its value proposition.

We live in a world where nation-states must now market themselves to attract capital. Old regional power blocs and superpowers such as the EU and US aren’t the only ones with a voice at the negotiating table anymore. CBI gives people a reason to choose your particular jurisdiction over others.

Local industry wins

Local industries benefit from CBI programs because new hard capital flowing in is always good for business. That capital will flow where it is welcomed with open arms. Citizenship programs give investors a reason to pick your country over the next one.

For example, Turkey is the shining example of CBI-driven growth in the real estate sector. Even a cursory glance at Istanbul’s exploding housing market would show that were it not for Turkey’s flexible programs for investment-based citizenship (and residency, by the way), this housing market would maybe be a third of what it is today. Similar arguments could be made about the Portuguese property market.

Construction companies want to build when they know those units can be sold to citizenship investors at a certain price floor. Tourism companies want to expand when they know new investors and their families will be coming and booking flights, reserving hotels, dining out, shopping, and much more. Aviation companies want to know that their country will remain open to the visitor – the tourist, the businessperson, the diplomat -all of which is facilitated by citizenship by investment. All retail businesses grow when the consumer spending base grows. To say nothing of the contributions stemming from the financial, lifestyle, and security services that surround CBI investors and their families.

Investors win

Let’s focus for a moment on customer experience: An investor is writing a five, six, or seven-figure check to get something. What are they getting for the money, and why do they value it at that level? Well, citizenship matters.

What we learned from COVID-19 is that you are not officially in the club until you have the passport. You are not unconditionally able to access that country’s geographic, financial, and security apparatus unless you are protected as a citizen. Even permanent residents of many countries were banned from re-entry or may have experienced additional interruptions over these past few years because their citizenship optionality was limited.

Passports were traditionally evaluated by their visa-free access alone, but as I explained recently, visa-free travel is mostly dead and the new game is accessing a basket of regional blocs that can help expand mobility and the ability to do business wherever you are. Sanctions are a form of modern-day economic warfare that affect even the ordinary citizen just based on the passport they hold. A second passport almost always has a use case, no matter how “weak” on any given index; maybe it’s for banking; maybe it’s for new land investments; maybe it is simply a backup plan.

An investor who buys a second citizenship opens up an entirely new dimension for their personal and commercial activity. They access a new market, a new lifestyle, a new culture. They find another place that they can call their own. They can travel as someone liberated from the constraints of their past culture, a culture to which they may not even have related. They can establish new ties, make new decisions, and contribute to the local and global economy.

That is why we know of few other products symbolized only by a small booklet of paper for which someone will shell out investments in the hundreds of thousands. Citizenship matters.

Local citizens win

Let’s also not forget the people who are already living in the country that’s placed its citizenship for sale. Sadly, there is often resistance here because this issue is not properly explained in terms of its net good. The obvious benefit here is greater local budgets for new projects, facilities, and investments that benefit the community.

When a citizenship is sold, rather than “cheapening” the citizenship proposition, it actually raises it. The keepers of the passport usually have an incentive to lobby for greater visa-free access and expanded diplomatic coverage. The Turkish passport, for example, is seen by many as the new global standard for real estate investors wanting a travel document. New service providers appear to assist in entering that marketplace and spending in local businesses (for example, as already mentioned for tourism, hospitality, and dining establishments).

I think the lack of clarity here is concentrated on the timeline. For some reason, I find most people have no problem with a person living in a country for five years to wait out the clock to get citizenship – presumably because they “pay their taxes and add to society” – yet do have a problem with an accelerated timeline where the direct revenues to the society actually often exceed what a traditional immigration path could ever produce.

The new investor talent pool comes in and can start businesses, create jobs, and increase local spending. Moreover, many or most of them may never even live in the country, doing little to affect the local homeostasis. They are simply exercising more optionality by the ability to unconditionally enter that space in the event of something like the next COVID-19 or worse. That expansion helps hedge against declining demographics and diversify the populace.

Agents and firms win

Last but not least are the committed individuals reading this publication: working hard to provide solutions to client needs and give people a better quality of life and more optionality. The agencies, firms, and individual consultants that service this industry grow – and therefore their clients’ results grow – when citizenship is available for purchase through clear, fast, and legal means. These revenues are then reinvested into R&D for new programs or acquisitions.

I have encountered few industries that are as cutting-edge as this one and so filled with creative thinkers. By nature, we need to always be predicting what is coming next and finding better solutions that are less marketed and more advantageous. That ingenuity deserves compensation and citizenship programs and the commissions and incentives they offer for those who promote them are the backbones of the investment migration industry.

Who doesn’t win?

With all this positivity, why has the messaging seemed to go astray? Why do citizenship programs that seem so perfect often fall flat? Why do governments end them, restrict them, or simply criticize them?

I think in some ways it has to do with dire misconceptions about the tradition of due diligence and strict attention to detail that investment migration actually entails. People are misinformed about how citizenship by investment works and they try to find flaws that are usually not its fault.

They ignore blatant hypocrisies in other policies such as those that enable illegal immigration or shady practices, yet similarly try to thwart valid attempts at creating legal, revenue-producing, and customer-friendly pathways to migration.

So I guess one could say, perhaps the only party that loses is the one looking to restrict people’s freedom of mobility and personal choice. Citizenship by investment calls into question the ability of autocratic systems that want to keep people stuck in the same basket of options and identities that may no longer suit their needs.

So, in some sense, there is a loss. If you consider that a loss, of course.