Opinion of the Editor

Why a Bulletproof Mobility Portfolio Should Contain a Western Hemisphere Allocation

Opinion of the editor

In the late 1940s, as World War II drew to a close, most of the old colonial powers of Europe (plus Japan) were, by and large, bankrupt, blighted, and bereft of the military capacities they had during the preceding centuries employed to split the rest of the world between them into mutually exclusive spheres of economic interest.

The United States, meanwhile, found itself in possession of the lion’s share of the world’s gold, its choicest military bases, a thriving economy, and a navy more powerful than the rest of the world’s combined. Though the war had also left the United States’ war-time adversaries vanquished, one formidable foe remained.

The Soviet Union had designs on converting countries the world over – starting with those it had occupied in Eastern Europe and the growing number of countries in Africa and Asia now gaining independence from their former European masters – into fellow proletariate dictatorships.

At this juncture in history, the world was split into three broad groups: The countries aligned with the US and NATO, those aligned with the Soviet Union and the Warsaw Pact, and those aligned with neither side, a group that collectively became known as “the third world”, a term still in use, albeit with slightly different connotations.

The three “worlds” of the Cold War period; 1st world countries in blue, second-world countries in red, and third-world countries in green.

Thus began a Great Powers competition between the first and second worlds to get the third-world countries to pick sides. To do this, both the West and the East bloc employed various means of encouragement. Both sides provided military and economic aid; both interfered in elections; both surreptitiously toppled democratically elected governments; both, in essence, offered “guns and butter”. On balance, the Soviets tended to offer more guns, the Americans generally favoring butter.

The American proposition to unaligned countries was simple: Take our side, and we will a) give you tariff-free access to the US consumer market (by far the world’s largest, then as now), b) guarantee that your exports reach that consumer market (by employing the world’s dominant navy), and c) guarantee you military protection against more powerful countries (including the US itself) by forcing every country inside the alliance to be friends.

Effectively, the strategy was to “bribe” unaligned countries to take the American side. The US, quite deliberately, agreed to labor under a more or less permanent trade deficit with the rest of the world in exchange for military alliances.

The American strategy worked. In fact, it was successful beyond the most ambitious of expectations. Vietnam, Japan, and Korea, countries with which the Americans had recently fought brutal wars, became military allies. Poland, the country from which the Warsaw pact itself drew its name, became an (eager) member of NATO. Communist China became the Americans’ largest trading partner and joined the World Trade Organization, a core Bretton Woods creation (along with the World Bank and the IMF).

And, in 1991, to cap it all, the Soviet Union itself broke apart.

Prior to this Pax Americana, the world had been split into mutually exclusive economic zones managed by the various empires. Each sphere had to ensure access to resources and therefore kept supply chains “in-house”. The Philippines, for example, could export sugar cane to Spain, its colonial master, but not to, say, England, because a) the Spanish empire would not have permitted it and b) the Philippines could not very well float a navy of its own to protect its cargo.

But the American-led world order under which we’ve lived for the last six or seven decades has allowed global supply chains and safe worldwide shipping, courtesy of the US Navy. It’s what allowed anyone to trade with anyone. It’s what allowed poor, former colonies not to worry about border protection and instead focus on specializing in various economic sectors. It’s what brought an end to centuries of military conflicts between Japan and South Korea. It’s what made China’s export-driven economy possible at all.

But the days of the United States holding up the ceiling for the rest of the world is drawing to a close. Not because the US isn’t able to manage the order anymore but because it no longer wants to.

The reversal of globalization and the regression to historical norms

Since the end of the Cold War, the United States has been in an unassailable position atop the geopolitical food chain. It no longer has any serious strategic competitors. To its East and West, it’s buffered by the world’s two largest oceans. To the North, it has innocuous Canada. To the South, it is quickly integrating economically with Mexico, one of only three countries ever to pose a strategic threat to the US but which is now becoming its new biggest trading partner.

Russia, which has an economy smaller than that of Italy, may pose a threat to Ukraine, Poland, Latvia, or even Germany. But not to Wisconsin.

The US is also entirely food-secure. The American midwest comprises the largest contiguous temperate-zone agricultural region on the planet, and the US produces enough calories to feed itself twice over. As we’ll detail below, the same is true for much of Latin America.

Moreover, the United States, while certainly a major player in the global economy, is one of the world’s least trade-dependent countries. Exports and imports account for just 10.2% and 13.3% of GDP, respectively. The US economy is, as a consequence, among the world’s least vulnerable to the vicissitudes of geopolitics or disruptions to shipping.

The only significant reason the Americans needed to worry about its ability to engage with the wider world was access to energy. Many argue that this was the reason it invaded Iraq in 2003, for example.

But in the 2010s, the US experienced the shale oil revolution, which turned it into a net exporter of petroleum products. In addition to economic, military, and caloric security, Americans are now also energy-independent.

For the first time in the country’s history, therefore, the US does not need to worry about the rest of the world. American voters, moreover, fatigued by Iraq and Afghanistan, are not interested in more foreign entanglements. And the US government (not just Trump) is no longer content to subsidize global shipping safety through military spending. The net consequence has been a steady US military retrenchment.

And that has enormous implications for the security environment of the rest of the world. You may not have liked the Americans playing the role of global policeman, but you’ll miss them when they no longer do.

Going forward, America will not be keeping the peace anymore. Old rivalries, kept at bay during the US-led world order, will resurface. India and Pakistan will be eyeing each other again. Armenia will need to figure out how to handle Turkey. Germany will need (and has already started) to re-arm. History, in a word, is returning.

But not to the Western Hemisphere.

The Monroe Doctrine and the American Security Umbrella

In 1823, James Monroe, President of the recently independent United States held that the “New World” and the “Old World” – effectively the Americas and Europe, respectively – must remain distinctly separate spheres of influence. By this point in history, nearly all countries in the New World had gained independence from their former colonial masters. But the newfound independence was, in many cases, tenuous, and there was no guarantee Spain, Portugal, or France would not attempt to re-assert their hold on their formerly sovereign territories in the Western hemisphere.

Seeking to forestall any Old World interventions in the New World, President Monroe maintained that he would view any European efforts to control or influence sovereign states in the New World as threats to American security. The doctrine is now considered a defining element of US foreign policy and has since been reaffirmed in various ways, such as through the formation of the Organization of American States (OAS) and the Rio Pact, a NATO-like treaty of mutual military assistance among countries in the Americas.

Since the formulation of the Monroe Doctrine, therefore, American military security has also effectively meant South American military security. Extra-hemispheric powers would not (could not) engage in military aggression against any country in North, Central, or South America. Not Spain, not Portugal, not France, not the UK, not Russia, not China, not Japan.

A message from our partners
Middle East Road Show Ad

Investor migrants who have a foot in the Western Hemisphere, in other words, are practically guaranteed freedom from any military aggression from any external power.

While the Monroe Doctrine and the American security umbrella protect countries in the Western hemisphere from outside aggression, they don’t guarantee security inside the hemisphere. Many Latin-American countries, admittedly, are notoriously crime-ridden and violent; while the continent has few wars, it has plenty of unorganized violence.

But, at the state level, violence among countries in the Western hemisphere is a historical rarity:

South America: The “Warless” Continent

The 20 bloodiest wars of the last 300 years killed some 210 million people. Only two of them took place in the Western Hemisphere; the American Civil War and the War of the Triple Alliance (Argentina, Uruguay, and Brazil against Paraguay). Together, the two wars in the Americas took some 1.5 million lives, under 1% of the global number of war deaths. Both wars took place more than 150 years ago. Neither is likely to resurface any time soon, if ever.

Whereas Europe and Asia have lots of extensive plains over which armies can easily march (Belgium, the Netherlands, Germany, and Poland all sit on the Northern European Plane, which is why those areas have been corridors for invasion hundreds of times throughout European history), South America's geography is far less conducive to mutual invasions. Soaring mountains, dense tropical rainforests, and high-altitude deserts make wars between two South American countries far more difficult (and much more expensive) than wars between, for example, Germany and Russia or between India and Pakistan.

Chile and Argentina, for example, simply can't invade each other; the Andes mountains separate the two countries, and only a handful of passes enable a way through for an invading army (almost all of which are impassable in winter).

Latin-America is also a place of enormous distances, precluding the possibility of any surprise invasions.

Whereas Germany may catch Belgium off-guard with a rapidly organized blitzkrieg, the Bolivians would have to be entirely asleep at the wheel not to have weeks of prep time for a land-based invasion by Brazil.

But even if invasions within Latin America were feasible, two additional factors make them an extremely unlikely event:

First, the Americans are unlikely to stand idly by and let a war take place in their backyard. Second, most countries in the region simply don't have the kind of capital or infrastructure required to wage a full-scale war. Nor do they have the armies or equipment; remember that the American-led world order allowed them to freeload off American military spending, not needing to invest much in their own military capacity. Much of what passes for armies in Latin America are essentially instruments of domestic control rather than meant for protection from external threats.

Food and Fuel Security

In the globalized, American-led order, countries did not need to worry about alimentary self-sufficiency. Since they could export to and import from anywhere, they could engage in the kind of market specialization that would have made David Ricardo proud. Liberated from the need to maintain a domestic food supply, each country could focus on making what they could produce more efficiently than others. Japan could manufacture cars and high-end electronics; Malaysia could convert its rice paddies to palm oil fields. This state of affairs is what allowed a totally barren country like Saudi Arabia to support a population of 36 million and have one of the world's highest rates of obesity.

But if global, ocean-based supply chains are no longer guaranteed by the US navy and therefore become unsafe (i.e., far more expensive), a long list of countries will struggle to feed their populations.

For the same reasons, they will also struggle to fuel themselves. Unless, of course, they have a navy with long-distance projection power that can physically ensure the delivery of goods. And that makes for a depressingly short list of countries: Beyond the US, countries that have the naval capacity to escort their own cargo ships from, say, inside the Strait of Hormuz (where China, for instance, gets more than 80% of its oil) include Britain, France, and Japan. And that's about it. The rest will have to rely on good trade and military relationships with the great naval powers to make sure food and fuel from the outside can reach their shores.

South America will largely be spared the coming disruptions to global shipping, at least within their own hemisphere, thanks to the Monroe Doctrine. But Europe, Africa, the Middle East, and Asia will not.

Low-tax jurisdictions

Another sound reason to keep at least one foot in the Western hemisphere is that Latin America has a plethora of low-tax jurisdictions.

Tax laws can change in your disfavor quickly and without warning. A few weeks ago in my native Norway, for example, the government abruptly ended the so-called five-year rule for exit tax. In a nutshell, Norwegians are subject to an exit tax that amounts to an egregious 35.2% of the deemed market value of shares they hold if they leave Norway to become tax residents of a non-white-listed tax jurisdiction. Move to a white-listed jurisdiction, however, and you were exempt from the exit tax as long as you don't realize your gains in the first five years. Because the Norwegian government earlier in the year had raised the Norwegian wealth tax rates, more than 50 of the country's richest people left to become tax residents in Switzerland, the idea being that they would wait out their five years there before selling their shares, and also not need to pay any wealth tax in the meantime.

In November, unsettled by the mass exodus of capital from the country, the government suddenly announced it had ended the five-year rule with immediate effect. In practice, this meant that Norwegians would be subject to the exit tax if they moved abroad and sold their assets, even if they waited five years. Those who had already reported their move abroad were safe. The rest are now "trapped" in Norway.

Moral of the story? You never know when you're going to need to quickly change your tax residency to a less aggressive jurisdiction. Those already registered as residents in an alternative location can relatively quickly change their tax residency as well, usually by simply spending the majority of their time in that calendar year in the new jurisdiction.

And the Western Hemisphere has dozens of low-tax jurisdictions. Most are in the Caribbean, but you can also find several on the Central American isthmus (Belize, Panama, Costa Rica), and on the South American mainland (Paraguay, Uruguay). Moreover, some of the South American countries that have nominally high tax rates don't, in practice, require that you pay much tax - if any at all (Venezuela).

Dig Deeper

The Western Hemisphere has no shortage of high-quality investment migration programs. Beyond the Citizenship by Investment Programs in the Caribbean with which our professional readers are already familiar, the Americas are home to a wide variety of independent means visas (which require no investment, merely proof of income), as well as conventional golden visas, typically with minimum investment requirements a great deal lower than those in Europe.

Western Hemisphere golden visas:

Western Hemisphere independent means visas:

Western Hemisphere active investor visas:

I also encourage you to use our Program Comparison and Filter Chart, where you can conveniently compare and filter more than 70 programs globally using your own custom criteria.

Christian Henrik Nesheim AdministratorKeymaster

Christian Henrik Nesheim is the founder and editor of Investment Migration Insider, the #1 magazine - online or offline - for residency and citizenship by investment. He is an internationally recognized expert, speaker, documentary producer, and writer on the subject of investment migration, whose work is cited in the Economist, Bloomberg, Fortune, Forbes, Newsweek, and Business Insider. Norwegian by birth, Christian has spent the last 16 years in the United States, China, Spain, and Portugal.

follow me