Now that Canada, as of February, has cancelled its Investment Visa Program, we asked U.S. attorneys and service providers involved with the EB-5 Immigrant Visa Program for their thoughts on how this might effect the United States’ program, what lessons could be learned, and what might have went wrong. We received varied responses, here’s their answers:
“I don't think it will have much impact: the backlog for this program was so long (estimated as about seven years based on last-published processing times), anyone who tried to get into this program was taking a big risk in the first place and it was therefore not that appealing to most. For those who had no other options it was probably worth a try, but not a high priority as a 'best path' to Canadian citizenship. Most immigration lawyers that I know of in Canada were discouraging their clients from bothering with this program in its last iteration.” Philip Cohen, Strategic Element Consulting,
“I think the cancellation of the Canadian program will lead to increased interest in the EB-5 program, particularly among Chinese investors since the vast majority of participants in the Canadian program were Chinese. However, per country quotas could be imposed soon on Chinese investors which could cause the already long EB-5 process to become longer for Chinese nationals. If that happens, that could make the EB-5 a harder sell for Chinese nationals. There were apparently more than 40,000 Chinese waiting on investor visas. The U.S. quota of 10,000 is just a fraction of that.” Greg Siskind, Siskind Susser PC
“I anticipate there shall be interest in the EB-5 program from these unfortunate applicants. The Canadian program required applicants demonstrate a minimum net worth, however, access to financing and its popularity under the Canadian program would indicate that some of these applicants may not have the minimum $500,000 to invest under the EB-5 program.” Reza Rahbaran, Rahbaran & Associates
“It will greatly exacerbate the wait impending backlog for Chinese nationals, which was certainly going to be a least a year long, and now, with increased interest in the U.S. EB-5 program, could stretch the wait time to several years. Charles Kuck, Kuck Immigration Partners
“The implosion of the Canadian immigrant investment visa program can have a positive impact on the United States EB-5 Program.”
“There is already such a high demand for participation in the EB-5 program, so it may not make much of a noticeable difference. I have rarely heard from potential clients that they were deciding between the U.S. and Canadian programs.” Salvatore J. Picataggio, Beshara Professional Association
“EB-5 number will increase compared to last year. Chinese agents will now promote EB-5 more aggressively. In 2004, when we introduced EB-5 to agents in Canada, they were not interested in EB-5 as commission was very low and Canadian program was risk-free.” Prashant Ajmera, Prashant Ajmera & Associates
“This might help redress the balance between overly strong migration brokers on China and regional center project developers. IF the migration agencies have to place thousands of investor candidates in quick order, this diminishes their bargaining power in shaking down the EB-5 projects for referral fees, equity kickers, etc.” Brandon Meyer, Meyer Law Group
“This could be a mixed blessing for the U.S. EB-5 program, at least in the short term. I think the rather obvious positive side is that the Chinese investors who are already in the middle of the Canadian process are generally likely to continue their quest to relocate somewhere. Again, the most obvious choice is the United States. I say that because their choice of Canada is an indication of their inclination to immigrate to the Western Hemisphere. Their original capital will also become unencumbered, so they will have cash readily available that had been tied up in the Canadian program.”
“On the other hand, the alleged reason for the cancellation of the Canadian program was to “eliminate a large and longstanding backlog of applications.” Therefore, it is reasonable to assume that, whether the Canadian government processes those applications forward (which they are not going to do) or processes them backward (returning deposits to program applicants and close their files), it is going to take quite some time to complete either task. For that reason, I do not see a near-term tsunami of EB-5 investors hitting the West Coast. Nonetheless, should Canada take an inordinately lengthy amount of time to implement a new program, the number of Chinese seeking to participate in the EB-5 program could increase substantially.”
“It is also important to note that the EB-5 program puts their investments at risk. The Canadian program did not. None of us can know how significant that was in those Chinese investors choosing Canada over the U.S. in the beginning. It could have been significant to all of them. We need to remember that the number of applicants for the EB-5 program may not be as much of an issue in our case as the U.S. limitation on the number of visas we are willing to issue. Which also leads me to speak to our own bureaucratic backlog with processing EB-5 applications. That alone has the power to make the question a moot point.” Dr. Gregory Finkelson, American Corporate Services, Inc.
“Canada's immigrant investor program, along with that of Australia, have both been far more popular than the U.S. EB-5 program at an international level for a number of reasons, not the least of which is that the U.S. program requires an "at-risk" investment while the others assure that if a person invests, they WILL get residency, irrespective of any business success metrics. But there are other reasons which suggest this latest decision on Canada's part will push more investors towards the U.S. and EB-5: recent media coverage in both Australia and Canada have focused on an increasing distaste for migration, particularly from China. While the issue certainly does not smack of the violent xenophobia witnessed in recent years in Europe (esp. Germany and Greece), it is clear that both Australia and Canada have put away the welcome mat for foreign investors.” Jose E. Latour, EB-5 Public Relations
“There is a pent-up demand for wealthy Chinese to emigrate to western countries. Therefore, these investors will now actively look to the well-established EB-5 program in the United States for relief.” Ronald R. Fieldstone, Arnstein & Lehr LLP
“None – the Canadian program stopped accepting applications some time ago and people who wanted to leave China and come to North America were already coming to the U.S. Most of those who were to invest in Canada and can’t do so now, will probably invest in the U.K.” Margo Chernysheva, MC Law Group
“The termination of the Canadian Immigrant Investor Program brings new opportunities as well as a challenge to the U.S. EB-5 Program. Upon termination, more than 75,000 pending applicants’ funds will be returned to the investors, totaling more than 800,000 Canadian dollars each. The grand total being around US$30 billion dollars which, theoretically, could be available for direct foreign investment. These investors are likely to choose other destination countries to place their investment.”
“We believe that the U.S. is the top choice because of the vitality of the economy, superiority of the education and simply the proximity to Canada. Seventy percent of the pending applicants in the Canadian program are from China.”
“Anyone already dealing with the migrant agencies in China, knows that most, if not all agencies handle Canadian Immigration, along with EB5, this includes the larger first tier agents. In conversations with migrant agencies over the years, we are often told that many investors would prefer the U.S., but have chosen Canada because the return of the investment money is guaranteed, the health system also guarantees medical treatment and often because that investor already has relatives in Canada. Other than this, the Canadian program is much older and more well-known – it began in 1986. The commissions for the brokers were also higher than what was received from the U.S.”
“If the said Chinese investors will invest in EB-5 Program in the U.S., undoubtedly EB-5 visa regression for Chinese investors will be more likely. We feel that this is an excellent opportunity to promote immigration reform and increase the existing quota.”
“In addition, the available investment funds from the Canadian program may change the landscape of EB-5 marketing. In the past week, Mona Shah & Associates have been approached by several agents from mainland China, Hong Kong, India and Canada for possible transfers of their investors to the EB-5 program. EB-5 regional centers and project owners usually need to budget large amounts for traveling expenses to attend overseas expos, seminars and meetings and to pay high commissions to the agents, the sudden windfall of investors from the Canadian program may change the method and process of EB-5 fund raising.” Mona Shah, Mona Shah & Associates
“Any such program needs to have an economic benefit to the hosting country. Canada’s economic benefit was tenuous at best and it appeared that the Chinese and other nationalities were ‘buying’ residence. The U.S. program, on the other hand, has a direct economic benefit by requiring the employment of at least 10 people.” Edward R. Litwin, Litwin Law
“Not really, in my opinion. The closing of the program was a political move and it is very likely that it may be replaced with another program at some point. Given that the Canadian economy was not as badly affected in the most recent economic downturn as the U.S. economy was, job creation was not as high a priority. If it was, I would not be surprised to see the government come up with some program more like the EB-5 program.” Philip Cohen, Strategic Element Consulting
“Based on the Canadian government reports, the program investors are not the type of investors they are intended for, many investors returned back to their native countries after they secured the Canadian legal residency and never intended to conduct further business or investment in Canada.“ Brian Su, Artisan Business Group, Inc.
“The Chinese program involved making a five year interest-free loan of about $750,000 to a provincial government in Canada. I’m not sure that Canadians could see the benefit of that type of investment nearly as much as, for example, a program like the EB-5 program in the U.S. which is mainly focused on job creation. And while I’m not excited about putting limits on how many visas can go to any particular country, that 99 percent of the Canadian investor visas were going to Chinese was probably also of concern given that many policymakers who would feel more comfortable with an investor program that had some more diversity.” Greg Siskind, Siskind Susser PC
“This further exemplifies the principles upon which the EB-5 program was created, where funds are invested in businesses and not with the federal government. Where funds create jobs, not just balance sheets. The efficiencies of business will always seek to maximize returns for investors and thereby lead to longevity of the business. The Canadian program was unable to be more than a source of alternative finance for the Canadian government.” Reza Rahbaran, Rahbaran & Associates
“The Ministry of Citizenship and Immigration in Canada confirmed in a statement that the existing federal Immigrant Investor and Entrepreneur Programs provide limited economic benefit to Canada. The Canadian Program has the following criteria:
- A minimum of 2 years of business or management experience acquired over the last 5 years.
- Have a net worth of at least 1.6 million Canadian dollars, equivalent to approximately $1.5 million USD. The assets do not need to be liquid-able. Qualified assets include: bank accounts, stock-exchange portfolios, real estates, company's value, etc.
- Deposit 800,000 Canadian dollars, equivalent of $750,000 US dollars, for 5 years, without interests, with the Government of Quebec or Canada. The investment is guaranteed by the government.
- If the investor does not want to freeze the assets of 800,000 Canadian dollars for five years, the investor can obtain a loan from a Canadian financial institution. This loan will cost a total amount of approximately 190,000 Canadian dollars in interest and administration fees.
“The EB-5 Program is designed to stimulate the U.S. economy through job creation and capital investment by foreign investors. What creates jobs? Modern economic theories conclude that jobs are created by investment when an opportunity exists. Opportunity is created by innovation and demand. EB-5 Program increases the capital expenditure with the objective of increasing or creating the capacity for producing goods or services. The US EB-5 Program needs to clear out the backlog and become more transparent, efficient and effective.“ Mona Shah, Mona Shah & Associates
“Nothing in life is permanent, especially if it is Canadian! Actually, the reality on the ground in Canada is that the politics of the program got in the way of it functioning properly. We have to avoid that happening in the U.S.” Charles Kuck, Kuck Immigration Partners
“Direct government participation in an immigrant investment visa program is a liability. Government rarely does things well.” Boyd Campbell, Boyd F Campbell LLC
“It seems that public perception played a large role in the cancellation of the program. The EB-5 program’s focus on job creation and the at-risk requirement of investments (that is, the return is not and cannot be guaranteed) could keep the American public in favor of the program.” Salvatore J. Picataggio, Beshara Professional Association
“The U.S. government needs to regulate regional centers and other stakeholders. Stop giving regional center status as there are too many.”
“The Canadian federal government failed to make sure of funds they received under investor program. Compare to this Quebec Government that made good use of the investment fund. Also, between 2002-08 the federal government of Canada accepted investor files under a simplified process (just a three-page form and visa fees to be paid to get in line) and hence countries like India received more than 1,000 investors filing in six months. China received more than 40,000 files. I believe one of the main reasons to close the program for NOW is to return these files to applicant who would not have qualified in the first place.”
“Another thing to learn is decide the file in 12 months or less. Businessmen will not wait for several years to get immigration. They have many other options.
Also, the U.S. government should work out a strategy to make sure funds coming in to the U.S. can be safe.” Prashant Ajmera, Prashant Ajmera & Associates
“A “no-risk” program, which does little to force its participants to engage in productive economic activity or develop ties to the country runs the risk of debasing its country’s citizenship by allowing people to use the program as a means of obtaining a passport for a “rainy day.” Brandon Meyer, Meyer Law Group
“One of the biggest problems with government is that policy makers all too often do not count the costs of the programs that they birth. When a woman becomes pregnant, she and her husband do not plan just for the ensuing nine months. They plan for the next 18 to 20 years. Our government – indeed, all governments – should plan far into the future just as the expectant family does. We are already learning the primary lesson that the Canadians have learned. There is much more to process than there are resources allocated to processing it. My question would not be “What have we learned?” It would be “What are we going to do about what we have learned?”
“The EB-5 program represents a golden opportunity for both the U.S. economy and the Chinese EB-5 investors. It is truly a win-win program, but if the processing remains as stagnated as it has been, neither the U.S. nor the Chinese investors will reap the full potential and benefits of the EB-5 program.” Dr. Gregory Finkelson, American Corporate Services, Inc.
“Hard to say, but given the continued flagrant violation of U.S. securities regulations by most Chinese migration agents and by many U.S. project promoters, EB-5 is hardly treated with trust in China. I expect that those projects with a legacy of integrity, whether large or small, will continue to draw investors from China at a strong rate. But the big winners could be the passport programs from St. Kitts or the very popular Portuguese and Greek residency programs currently in the market.” Jose E. Latour, Esq., EB-5 Public Relations
“Each U.S. program must be individually evaluated to determine the level of risk. There is a high degree of variation in the risk profile in the EB-5 projects. Therefore, it is critical that the investors and their agents conduct adequate due diligence in order to mitigate the risk of the investment. There are several very credible U.S. projects that are worthy of consideration.” Ronald R. Fieldstone, Esq., Arnstein & Lehr LLP
“The program in Canada was structured differently – no risk, no commitment, no real contribution necessary – here in the U.S. – too much commitment, too much risk – so no comparison.” Margo Chernysheva, Esq., MC Law Group
“Nothing is for certain, it can always go wrong. The 65k Canadian applicants (plus those “in the wings”) should immediately review U.S. EB-5 filings, or if not suitable, E-2 alternatives.” Gary S. Wolfe, The Wolfe Law Group
“There was no objective standard to see if the program was really working (e.g. 10 new jobs). Also, once the focus is on being able to “buy residency,” the program will fail.” Edward R. Litwin, Litwin Law
“The government seemed to indicate that they were not happy with the fact that many immigrants who took advantage of the program did not actually end up living in Canada. More importantly, they indicated that the program did not meet the government's "objectives." It's hard to say that something or other went wrong with the program without a more definite indication from the government of what motivated them to shut it down. Those of us on the sidelines often felt that the program did not accomplish much in terms of strengthening the country or otherwise leveraging the capital and/or abilities of immigrant investors. It was more like a way for the government to sell the equivalent of government bonds to foreign investors in exchange for immigration.” Philip Cohen, Strategic Element Consulting
“The Canadian program may not have done enough job on investor screening so that some ineligible candidates went through the program.” Brian Su, Artisan Business Group, Inc.
“I don’t think of it as something “going wrong.” It was a government-run program, and the government changed. That is why it is so important to have bi-partisan support of the program in the U.S.” Charles Kuck, Kuck Immigration Partners
“The Canadian government realized that some of the private investment projects had failed or were going to fail and that it (the government) was liable for investor losses.” Boyd Campbell, Boyd F Campbell LLC
“They didn’t seem to control the program very well, whereas USCIS is continuing the review policy and work towards fairness for both investors and U.S. projects. This dedication to quality control will help the EB-5 program in the long run.” Salvatore J. Picataggio, Beshara Professional Association
“The requirements for participation were too lax, therefore becoming a a strict “visa for dollars” arrangement.” Brandon Meyer, Meyer Law Group
“It was too easy and no risk to receive the Canadian residency through this program so no appreciation.” Margo Chernysheva, MC Law Group
“Generally speaking, government-sponsored projects are less efficient due to the bureaucratic procedures and political risks. This is really evident in the case of the Canadians.
• There is very little “new” money coming into Canada. Almost all initial investments made through the program come from loans from Canadian banks to provincial governments.
• No Long-Term Economic Contribution: Most immigrant investors are not making a long-term positive economic contribution to Canada. The immigrant investors are less likely than other immigrants to stay in Canada over the medium to long term. They report employment and investment income below Canadian averages and those of most other economic immigrants. Over a 20-year career, an immigrant investor pays about $200,000 less in income taxes than a federal skilled worker and almost $100,000 less in taxes than one live-in caregiver.
• Little Capital Actively Invested: The amount capital actively invested in economic development initiatives has been limited. The requirement for provinces to guarantee repayment of the investments after five years limits their ability to invest funds into more high-risk initiatives that tend to reap greater rewards for Canada in terms of true innovation and job creation. In the past 15 years, less than half of the Immigrant investors’ funds are actively invested in the Canada.
• EB-5 Program as a Comparison to the Canadian Program: The EB-5 program in the U.S. has avoided all of the vices that caused the termination of the Canadian program. In the EB-5 program, the investors invest cash or “new money” into the mostly privately owned new commercial enterprise. The investment is placed “at risk” and the return of the funds cannot be guaranteed in any form. The funds are invested into job creating and economic development initiatives.
- Job Creation and Money at Risk: The very elements that have caused investors to be cautious of EB-5 have actually proved to be an advantage. Engaging the private sector by placing new capital at risk has undoubtedly boosted the economy. It is our belief that even if Canada implement an EB-5 styled investment program, it still may not give Canada the desired results. This is because the economy and population of Canada just cannot compare to the US.” Mona Shah?, Mona Shah & Associates
“Remember: the ONLY immigrant investor shut down in Canada was the national one; most if not all of the Canadian provinces continue to have their own investor visa programs!” Jose E. Latour
“Perhaps my greatest concern is that we, meaning the U.S., get our EB-5 program operating with much more efficiency and integrity. We cannot afford to offer an incentive like EB-5 to foreign investors and then allow months to pass with little or no progress in bringing their investment to fruition. Developers cannot afford to wait on EB-5 processing while they are trying to move forward expeditiously on their projects. And we can ill-afford to allow scamming of investors through EB-5 to continue. How the government addresses these issues is up to them. In the meantime, my focus will continue to be to help people involved in all aspects of the EB-5 program become highly successful.” Dr. Gregory Finkelson
“The U.S. took a better approach by making this a ‘job creation’ visa. It put money into our economy and created definite jobs. The problem is that the regional centers may undermine the concept a bit, since sometimes the jobs that are created are not definite, but only identified on paper.” Edward R. Litwin
A great big THANK YOU to everyone who responded to our survey.