Andrés: Governments or recipient countries have to develop new, more imaginative ways to attract foreign capital through this modality of investment migration that goes beyond by property. But the idea is to invest in sectors that have positive externalities like IT or innovative activities or activities go in the direction of mitigation of climate change. Governments should align with the new priorities for investment that call for a change in the productive matrix away from the intensive use of fossil fuel, for example.

Salman: Welcome to the Investment Immigration podcast by Uglobal.com with weekly in-depth interviews with the world's leading Investment Immigration professionals. Welcome to another episode of the Uglobal Investment Immigration Podcast. I'm your host, Salman Siddiqui. And in this episode, we're going to talk about the Investment Immigration trends that we're seeing all around the world. A lot has been happening lately. There are some programs which are threatened with being shut down by the EU. Some programs are coming up with new visas. There's a lot that's been happening. So it's a good time to have an overview of what's been happening in the world, and especially now that the year is coming to an end. And to help us unpack all of what's been happening, we have a very interesting guest today. His name is Andrés Solimano. He's the founder and chairman of the International Center for Globalization and Development. He is currently based in Chile. His background. He has a PhD in economics from the MIT. He has worked in senior positions at the World Bank and several other institutions. He has also written several books, including one which I found quite interesting was on International Migration in the Age of Crisis and Globalization. So welcome to the show, Andrés.

Andrés: Thank you very much Salman. It's a pleasure to be here. Thank you very much.

Salman: Thank you. So let's get into the heat of the matter here And the bulk of the investment done for the purpose of immigration in most countries goes into real estate. Don't you think countries need to offer more attractive options to investors so that the focus shifts away from just real estate?

Andrés: Yes. Yes. Well, there is a distinction here between passive investments and active investment. In general, the history of investment migration over the last 10, 15 years has been focused more on passive investments. I mean, the requirements set by the government is that the person that is applying to one of these program purchase property, maybe house, an apartment building or residential, an office, etc., but there is nothing that precludes that. The money goes to other sectors like, for example, more technologically intensive activities, that people bring money and put in the development of technologies that help to mitigate climate change or investment in green energy, non-fossil energy, in education, in health. But the thing is that it's easier to channel the money to real estate. It's a vehicle. But there is some side problems of this practice, though, in the sense that, for example, there is a tendency for the price of real estate, the price of property to go up, and that tends to displace local residents and they have to move away to more distant location, far away from their jobs or the school of the children. So it has drawbacks.

Salman: Exactly. And I want to actually ask your opinion on this, because as an economist and you've seen the global picture in a very good place to share with our viewers, then who is to blame in all of this? Is it the investor or is it the unimaginative programs offered by most countries? What is the solution here?

Andrés: Well, that's a good question. I would say when these programs were designed and that was uncharted territory, these programs sprung up more or less at the time of the global financial crisis of 2008 and 2009, when governments were short of cash, they needed foreign inflows of capital. They were trying to emerge out of recession. So the idea was to facilitate things in order to make more attractive the money to come. And real estate looked like a good channel. People in general, the long term trend in the last 30, 40 years internationally has been for an increase in real terms in the price of property. So it has been consistently a good investment. So for international investors investing in New York City, in London, in Paris, in Sydney, Melbourne, etc., it was attractive. Now, with 10, 15 years of experience, we see more this drawback effects like crowding out of the locals. It's a passive investment in the sense that you put the money and expect to up the property to appreciate. Even we have seen that people spend no more than a week per year in this new properties. So it's New York City, Madison Avenue or other important avenues in New York. There are many high priced apartments that are virtually empty.

Salman: Yes. I can also share something with you here. I'm living in Berlin right now, and the apartment building is owned by investors from Hong Kong, and they've never been here. Their properties are being managed. I don't know who my landlord is in person, but that's how investors operate. If they have an opportunity, they will put their money. But then my question to you is, there's often this kind of criticism about investment in migration programs, that there's gentrification going on in the city. It's because of this money which is brought in and then it's actually doesn't help the people. But what is the solution then? What needs to be done?

Andrés: Well, I think governments or recipient countries have to develop new, more imaginative ways to attract foreign capital through this modality of investment migration that goes beyond by property. And also they ask the applicants to buy government bonds or deposit in a development fund. But the idea is to invest in sectors that have positive externalities like I.T. information technology or innovative activities or activities go in the direction of mitigation of climate change. Governments should align with the new priorities for investment that call for a change in the productive matrix away from the intensive use of fossil fuel, for example, more what is called green development. This is an idea I think there is a need for governments and the industry also for investment migration to work together in devising new vehicles to receive the money. So I see as a result of the first stage, the initiation of these of this modality. But there's nothing that precludes these to be changed.

Salman: I'm glad you mentioned also climate change. There are some countries in the Caribbean who are actually they promote certain projects saying that it's because of the climate change happening there. They're offering some products which are to stem the effects of climate change. I'm glad you mentioned that. But let's move on and also talk about how certain countries are. You know, I've noticed that they now have a tendency to increase the investment thresholds. For example, in New Zealand recently, they are offering a new visa where the investment threshold has been increased to 15 million. But would you agree that actually they need to do the opposite? The investment thresholds need to be lowered so that the country's programs become more attractive. What's your view on it?

Andrés: Well, first there is a wide variety of minimal investment requirements or investment threshold to apply for investment migration programs. At the lower end, you have Caribbean countries that offer citizenship by investment with an initial down-payment of $100,000. And then you have other investment that raised number closer to $300,000. But you have Antigua and Barbuda, Dominica, Saint Lucia, Saint Kitts and Nevis, etc. around that, the vicinity of $100,000, $200,000, $250,000. And then you have, for example, Malta, the south of Europe, $738,000 requirement. Montenegro, $450,000. Turkey €400,000. You have Austria. It's an unspecified amount, but it's a large amount to apply for residence. Eventually for citizenship. It's a country that is sometimes not that open to foreign emigration. Their investment requirement is much higher than other countries and you have the case of Australia. Australia charge more than 5 million AUD as a minimum investment. So you see a big variety. So there is a competition, but if you define it as like the price to access these programs, it seems to be that there is a positive correlation between the degree of economic development of the country, the recipient country, and the price that they charge to the person that is interested in coming through this modality of investment, migration, more developed economies, mature economies with good financial system, with the rule of law, well established, politically secure, stable nations.

Andrés: They charge higher investment requirements that other countries that belong more to the emerging economy group or developing countries. Now, if they should reduce the amount, that's an open question. It depends. I mean, it's like any other market. You have to calibrate supply with demand or demand with supply. If you see that there are queues and you see that there is excess demand for these programs, the governments may not be tempted to reduce the price. If they have few applicants and they need the resources. They may be tempted to to increase this threshold. But you see worldwide a big variety in these requirements. And you can think and also it depends on the demand and what they do offer. You see countries that offer just residence by investment, charging more than countries that offer citizenship, quick citizenship, like in the Caribbean or the southern Pacific countries. There is an index, there is Christian Kälin and Dimitry Kochenov's produced an index of nationalities where they try to rank countries by the degree of demand for their passports. And these indexes show that countries that passports are more valued and they tend to charge more as investment requirement for investment migration.

Salman: That's true, and this has been the case for a long time. But the question is really whether I mean, how do they gauge that? It seems like every country is coming up with your own price tag, if you like. There's no uniformed principal as such. It doesn't seem like it at least.

Andrés: Yes. And also, you have to take into account that there are new products in this market for residence, for example, the digital nomad visa. I mean, it's intended for people that have a job that they can then produce there. They deliver their systems in digital way through the Internet. They just need a laptop and they can settle almost anywhere in the world. So these people go to a country, settle there. They don't go to the local job market, so they potentially don't displace a local in terms of jobs. And so countries have say, okay, let's attract these people. They don't pose a threat, so to speak, to the local market, the job market. They bring somebody, they rent an apartment, they go to restaurants, they travel around, etc.. So there is an inflow of some money. They may stay for one year or renewable for two years or three years or this could be a pathway to more permanent residency. They don't require $200,000, $300,000, €700,000 to qualify as investment migration programs.

Salman: That's true.

Andrés: So you have competition from there. So you have to be careful about the threshold.

Salman: I'm glad you mentioned the digital nomad trend, which has picked up after the pandemic. A lot of countries began to see the light for attracting remote workers to their destination. So I'm glad you mentioned that. But moving on, let's also talk about how the European Commission is now going after certain citizenship by investment programs, especially in the EU. You must have heard about the case regarding Malta. There's also pressure on some Caribbean programs because of that. How are you looking at this and do you think a compromise would be reached and eventually maybe the Commission, the European Commission would allow only residency by investment programs. How do you think this will pan out?

Andrés: Well, two things at least. So the debate is at two levels. One is conceptual or philosophical? Probably the European Commission or the European Parliament particularly is leaning more towards that nationality is something that should be attached to the place where you were born, the place of birth. So that is more natural, so to speak, like natural rights in the tradition of John Locke or Rousseau, that you see nationality or citizenship is tied to the place of birth and where you were raised, etc. And then you have this globalization of citizenship through this CBIs citizenship by birth. Well, basically you pay money to acquire through investment, citizenship. That's part of the way capital is developed because labor and land were not commodities. They were not traded in markets before the advent of capitalism. Capitalists turned them into, let's say, commodities in a general way that are traded for money. Now, the system work now in that passport can be traded by financial resources. So there is a certain clash of values and philosophical outlooks between the way the European Commission or the European Parliament see this matter and alternative views.

Andrés: Now, this is one dimension. Another dimension is that you don't have to forget that granting citizenship belongs to national governments, but you have national governments that are supported because you get, let's say a passport from Italy is an European Union passport and an Italian passport or first Italian passport, then the European Union and the European Parliament or Commission. I assume that they have to accommodate the views of the national government. So if the national government are offering these citizenship by basement, well, you have to accommodate to some degree. So you have a little bit of a clash between the supranational practice embodied by these agencies and the national view, the national governments. So I see the discussion at these two levels. I don't know where this going to go. Probably an accommodation can be reached in strengthening more the residence by investment modality rather than the citizenship by investment. That's because residence is different from citizenship. It's it creates less worries or concerns, but it's an open process. But I would take these two considerations, these two broad considerations into account in this whole discussion.

Salman: Thank you for pointing out the clash which is there in this debate. And there's also this element that, on the face of it, their argument sounds very reasonable that citizenships are not for sale. And it seems all right to the years. But there's also the ground reality that European economies need, the investment. They need to attract the big money into the economy, which are struggling, especially in times of war that's going on in Europe. Inflation is going up. So it's a difficult position for them as well to accommodate and programs in a day, isn't it?

Andrés: Yes, I think you have this pragmatic but very important consideration that you need foreign capital, you need foreign talent, you need market contacts, that is. People can bring when they come to the countries through these programs. This is part of the economic realities and also the fact that a term called the birth lottery, if you were born in Ghana, your economic chances are different that if you were born in Sweden, let's say, or Canada or the US, or if you were born in Haiti. So that's something called morally arbitrary consideration. You were born, but you don't choose where you were born, and that determines a lot of your future economic future and life cycle possibilities. So I see this mechanism of residence by investment and citizenship by investment. A way to break a little bit, this iron clown of that, your chances are driven by something that is completely exogenous out of your control, the place you were born. So that's also part I think it's important to keep that into consideration.

Salman: But the way the European Commission and the European Parliament looks at this debate is really from a security lens. They use the term security and they say things like a lot of criminals and especially these days, they're basically referring to some investors from Russia, mainly coming into Europe to this route. And the debate has become sort of more urgent in their tone that we need to do something. But do you think that really is the right, correct framework to look at this huge issue.

Andrés: Where we have had in the past, probably in the present, the problem of international terrorism? Now we have the war in Ukraine, international sanctions. So it's a complicated period for the international mobility of people around and say, well, these people coming from Country X may be a threat to national security, etc.. But as an ideal, I tend to believe that globalisation is not only the international flow of commodities or financial capital, but also of people. So truly open international system is one that you allow for reasonably free mobility of individuals. Now you have this, these realities, war, etc. but I don't think this modality of investment migration, the vehicle that people bought, people maybe cases here and there and everything, but I don't think this will be a threat for the national security of any country. But also you have to strengthen the due diligence, you have to strengthen the checks on the background of people as transparency. You have to do these things. But as a matter of principle, I think it's the terms security is so broad and it lends for so many interpretation.

Salman: It's also political.

Andrés: It's political, too. Yeah, sure.

Salman: And moving on, let's now also talk about there's often talk in the Investment Immigration industry that the pandemic worldwide was it was horrible, but it was also good for the industry because a lot of people realize the importance of having more residences, more passports. And I've been thinking that in the future, will we say the same thing about the impact of the Ukraine war on the industry here? Do you think this chaos which is happening, will eventually benefit legitimate investors and entrepreneurs who have to move to other countries with their capital? How do you look at it?

Andrés: Yeah, as you mentioned, two main shocks have affected the world in the last three years, the COVID 19 pandemic. And now we have the Ukrainian war that are wars too, not because the Ukrainian war affected more than Europe and the Western sphere, etc.. So I see investment migration in a way that you acquire either a citizenship or residence as like an insurance. These programs provide an option value. If you are in country X that is affected by war, and if you have the resources that condition, you can apply for these programs and then the set of opportunities you are facing will be expanded compared to a situation that you have nowhere to go. And you have to stay in a country that is torn by war or by pandemic that is not well managed or by natural disaster or by economic crisis or by political instability. There are several factors that are pushing people away from their national boundaries. So I see The insurance value of investment migration clearly goes up with the pandemic and the war, because there are two very complicated contingencies that you look for insurance now to have a more fair global migration system, you have to care also for those that don't have the means to apply for programs. And then leave their countries as refugees. In the case of Ukraine, 6 million people had to go to Europe, mainly escaping from the war. And also you have migration of workers, migration coming from sub-Saharan Africa, from poor countries in Asia, from some countries in Latin America, etc.. So you have to accommodate the different dimensions of the global international migration process. If migration is one segment more in the top of the pyramid distribution, people with means, people that have an investment drive they have, or people with special talents. That were settled in third countries. But then you have a mass of migrants though that the system also have to care of. But clearly, for all the categories, the insurance value of having open doors in other countries has increased, starting by better migration.

Salman: Right. And I want to also understand from you your prediction about the future for specifically for the Investment Immigration industry. Do you think investors and entrepreneurs will see a lot more movements that we've already seen? Or do you think the space for them is going to get restricted because of what's been happening? Like I mentioned, the European Commission now cracking down. What do you think is going on? What do you feel will happen?

Andrés: Yeah, I Think the demand for investment migration, let's say people applying to these programs because they want to have another passport or they want to have the right to reside in other countries. I think we'll stay high for several years down the road. The world has became so uncertain, place, so turbulent. There's a lot of uncertainty, instability around. This demand for insurance, so to speak. It's very difficult to say no, it will go down in the next, let's say, next 5 to 10 years. That's irreality. So, I think this industry of Investment Immigration will keep its dynamism. Now, on the supply side, supplier defined as type of programs offered by different governments. There is a lot of change here. Well, there are preferred locations like, for example, some countries, the United Arab Emirates, Australia, Singapore, Israel, Switzerland, the USA, Portugal, Greece, Canada, New Zealand. These are the top ten destinations of investment migrants. But if you see the list, they are not all located in the core traditional capitalist economies of the world let's say, North America, Western Europe. But you see the least UAE, the net inflow was in the top. Australia, which is in the global periphery. Geographically speaking, it belongs to, let's say, the core of the most developed economies in the world. But it's geographically in the periphery. It's not in Western Europe or the US or Canada. You see Singapore, a city state, you see Israel, Greece, New Zealand. So you see a diversification towards the periphery. These programs and also people I would say it's time to conduct analysis in terms of cities rather than nations, because, for example, Canada, Vancouver is a very attractive destination, but you have Toronto, you have Quebec City, you have other cities. In Australia, the top two destinations are Sydney and Melbourne.

Andrés: You have Perth also is attracting people on the West Coast, so Singapore, etc. people go to like to go to Dublin. It's a wonderful city. So sometimes the analysis should be conducted by cities as different from whole countries. That's something that I think the industry should take a fresh look at. So I would say I see demand strong for Investment Immigration programs and I see changes in supply. No country has the monopoly, you're saying, because historically I have been the most preferred destination. This will remain this way. It's a very fluid market even in the US, which has been historically the main destination. So for international migrants of all types now there is a non negligible numbers of US citizens that renounced their nationality because tax considerations and they are looking for... They want to go to Portugal, they want to go to Greece, they go to go to Spain, the Caribbean, some of them you don't have a niche forever. And also you have these dependent means visas and the nomad digital visas, which are not exactly the same, but they offer an outlet for people, let's say between 18 and 45 or 50, that there are talented mobile people with skills, Generation X, Generation Z, all these generations, and they may go to other countries and they are required to generate more, no more than 15 hundred dollars per month, plus some other money, but not that much. And they qualify. They don't have to make any better for €300,000, €500,000, 5 million AUD to settle in those countries they can go for these visas are shorter terms, but still they can probably spend three, five years in a country under those visas and then perhaps stay if you want. So the market is very fluid. That will be my point.

Salman: And I appreciate you also mentioning the fact that this observation that the trend seems to be now that people would be moving towards peripheries instead of the traditional centers. And on that point, since you're in Chile, I have to ask you this what do you think will happen to the programmes, some of which were offered in South America? Countries like if I remember correctly, El Salvador was offering crypto investors to come to the country, but then crypto went bust, you know, and it didn't really work out as they had thought. So what's your outlook there in that part of the world?

Andrés: Well, Latin America, there are several countries that are offering now, including Chile, either independent means visas, people with friends or people that have retired and want to go countries or these digital nomad are starting to offer this digital nomad. Some countries. There are others that have more traditional investment migration programs like Panama and the eastern Caribbean countries. Mexico, Costa Rica are all offering these visas I just mentioned. So the Latin American market is becoming more attractive in terms that the governments are offering new programs. Now, in the case of El Salvador, well, they adopted last year Bitcoin as the official currency beside the US dollars because they dollarized in 2002 when they had a crisis there. And now some 20 years later, almost 20 years later, they offer a second currency, digital currency, the Bitcoin. And the interest of the government of El Salvador is creating a hub for investors that invest in El Salvador in the development of new software or blockchain technologies. And they have a Bitcoin city near the capital city that they want to attract capital. They have a several, I would say, very interesting and imaginative ideas. And my son was there. He's this area of writing on Bitcoin and he was in Salvador and he told me, Look, international tourism in the last year has skyrocketed to El Salvador and also the demand for residencies there to developers.

Salman: And also the downward slump of the of the crypto market.

Andrés: Yeah, the slump is a problem, but this project are looking for 5 to 10 years horizon because you see a slump in also in another asset prices or are these volatility in more traditional financial assets. They have a problem because the international reserves in Bitcoin for Salvador have decreased in value because of the drop in the price. The price is now between $17,000, $18,000 per one unit of Bitcoin and last year in November or October, correctly, it reached $70,000 per Bitcoin. So it's a big, big cut, big correction. But the price is, in my view, is so low, so to speak. It was much lower five, ten years ago. Of course, that the higher probabilities for the upside. So the upside, in my view, it's a volatile investment. I'm not recommending for somebody that is risk averse, go to Bitcoin, but it can be a very attractive. This has created an ecosystem, a country that that venture to enter this new currency against the advice of the International Monetary Fund, because the IMF, the World Bank, my own institution, has been making observations of this experiment, this monetary experiment. So the government of El-Salvador has been courageous that keeping this route in spite that powerful international institutions don't like the experiment, and they have this course of action and they are attracting I mean, the numbers show a big influx of tourists and people coming migrating in some capacity these days. You don't migrate and stay in the country forever. You migrate for a few years and they probably return back much more fluid than it was 30, 40 years ago. But it's a very interesting case. So this is open for innovation, policy, innovation. Other country may invent something that attracts digital investors, I.T. people, investment migrants of different kinds. And as you say in the periphery, you have more scope for experimentation, Great society, less society. Europe is a great sort of the world. You have the European Commission that stick to the to the more traditional views on these, etc., But this is the world that we live in.

Salman: Thank you so much for sharing your views. And we've come to the end of our episode. I really appreciate you taking the time for us.

Andrés: Okay, wonderful conversations Salman, let's keep in touch and this is a great topic.

Salman: You've been listening to the investment immigration podcast by Uglobal.com. Join us again soon for more in-depth conversations exploring investment immigration opportunities from around the world.

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