Where Will Investment Migration Be When the Virus-Dust Settles?

 

As with most of the world, I am working from my home office and trying to make sense of the global pandemic that has overtaken the world-changing the way we live and making us re-examine our priorities.

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It has only been a short while since governments introduced drastic measures to counter the effects of the coronavirus and only time will tell if these actions have been successful.

The impact of the coronavirus had led to governments shutting down borders, imposing quarantines, and limiting mobility. The knock-on effect, such as airlines reducing their number of flights, supermarkets running out of key supplies, and the general slowdown of daily life, is impacting everyone.

Depending on where you are in the world, the impact could be significantly greater than in other parts. For many, there is a sudden urgency to return to their home country so they can be near family, have access to health services, and support their community. In some cases, due to travel bans, only citizens/permanent residents are permitted to enter a country.

When the dust settles
Over the next few weeks and months, there will be a period of consolidation and people will be re-evaluating their priorities. As they do so, some will most certainly want to look at increasing their mobility and access to countries that they feel could provide a safer haven for them and their family.

While many companies have a ‘business continuity plan’, a crisis such as this provides time for reflection and reinforces the need for us to develop our own ‘personal contingency plan’. We have often discussed the need for a plan B to cover all sorts of ‘what if’ scenarios. This usually relates to situations where people live in areas of social, political, or economic uncertainty. We have seen spikes in interest from regions such as Hong Kong, Lebanon, and South Africa for these very reasons.

While most of us will continue to focus on how this pandemic is affecting our personal lives, let’s also consider what could happen in the RCBI industry.

Short term pain before we’re out of the woods
Many of those who are looking to participate in these programs will have their wealth held in listed stocks and shares. The daily news of losses on the stock market will have a clear impact on their funds that may have been put aside for investment into one of the RCBI programs.

Not only could this option be off the table, but just the ability to preserve their wealth during this uncertain time could be a grave concern. This will then affect private client firms who rely on these clients proceeding with their applications. A major slowdown will affect their revenues, and many of these firms will be forced to examine their overheads and reduce their workforce. This is not unique to the RCBI sector as all industries are being affected and most are in consolidation mode.

As a consequence, fewer applications and investments will be made to the various RCBI programs in the months ahead. This will impact the program revenues on which many countries have become reliant.

In the Caribbean, for example, tourism will take a major hit. It is high season and with flight cancellations, travel bans, and the suspension of cruises, the primary source of revenue will be eliminated. Unfortunately, many will not be able to absorb such a significant financial impact and this, combined with fewer RCBI applications, will be a double whammy for these islands.

How will they react?

Will we see short term incentives to stimulate interest as we saw with the Hurricane Relief Fund in St Kitts & Nevis? Perhaps there will be directives from the OECS and Eastern Caribbean Central Bank (ECCB) to ensure investment levels are maintained or a least a floor is fixed to avoid another race to the bottom. Will we see a coordinated response from CIPA to work together to protect the industry for the region? Will other islands decide they want to enter the RCBI market? Many tough questions will present themselves over this difficult period.

A late-bloomer phoenix
Although Europe has been affected enormously by the coronavirus, they are able to rely on other revenue streams to support their economy. As the global economy remains volatile, we can expect real estate prices to devalue. When that happens, how attractive will these programs be?

While we are all being prudent with our activities, social distancing, hand washing, and self-isolation, this isn’t always possible for everyone. We can look at countries with extreme poverty and wonder how the virus can be contained. People in these countries will not have easy access to washbasins and hand sanitizer.

A crisis like this also reinforces why some clients look at these programs to benefit from stronger health care systems. The Schengen zone has been closed but what value would you now place on a European residence card from Malta, Greece, or Portugal, especially if you are from a less developed country?

These are the types of questions people are asking. They’re realizing that having an alternative residence or citizenship is now becoming a necessity.

The global economic impact will be significant, and no one can predict what the final outcome will be. All we can do is be responsible with our behavior and make plans to prepare for any such event that could happen in the future.

Stay safe, everyone.

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