In an exclusive interview with eb5Marketplace, Martin Litwak, offers his insights on a recent Latin American phenomenon: the migration of high-net-worth individuals into the U.S., often via EB-5.
Litwak heads a new type of company: a hybrid of law firm and family office for Latin-American HNWIs, exclusively from Mexico to Argentina. He advises his clients on matters such as migration, purchasing property, prenup agreements, estate planning, protecting assets, tax planning, and shifting assets for privacy.
What’s the state of Latin America right now?
Can we identify political and economic trends occurring in Latin American right now? Yes, Litwak observes two distinct movements happening in this part of the world.
On one side, he observes, countries are governing by left-wing populism — Venezuela, Argentina, Mexico, Peru, Bolivia — and, probably in the near future, Chile. Such countries aren’t ideal for affluent individuals or families. Challenges of the left-leaning states, Litwak explains, include the lack of rule of law, restrictions to carry out certain investment or commercial actives, animosity against the right, animosity against corporations (especially foreign) and the wealthy, and tax voracity.
On the flip side, he sees other countries with “more reasonable pro-market governments,” like Colombia, Brazil, Uruguay and Ecuador.
Chile: from long-standing stability to uncertainty and flux
Chile is a Latin American country in flux. “It’s a very interesting country,” explains Litwak. “They’ve been the most stable economy for the last 40 years and always an example for the other Latin American countries.” But since political unrest that started to simmer in October of 2019, the president’s popularity has plummeted. And now a presidential election is about to happen and Litwak says there are two main challenges for affluent citizens in Chile.
The first question concerns the new Chilean constitution, which is in the process of being rewritten. Litwak bluntly declares, “We all know it will be bad. But the problem is how bad.”
The second question concerns who will win the imminent presidential election. “If the left come into power with a bad constitution, Chile will be in big trouble,” Litwak warns.
Because of the expected shift to a leftist government and proposed taxes on the rich, Chile has seen an unprecedented phenomenon in the last two years: wealthy citizens are looking to move their money — or even their families — abroad.
This is in stark contrast to the decades of stability that preceded the recent political unrest.
Traditionally, wealthy Chilean families would keep 90% of their wealth at home, and only 10% in other countries, Litwak tells us. What’s more, when they did move some of their money to a country like Switzerland, they would use a Chilean company to hold their money; that had been a testament to the confidence Chileans had in their homeland’s security and rule of law. This did not happen with other Latin Americans, only Chileans.
But in the last two years, for Chileans, much has changed, and the stability they counted on is no longer perceived to be there. Thus, migrating to a new more wealth-friendly country has been the desire of many.
Top destinations for Latin American HNWIs include the U.S.
At the moment, for Litwak’s Latin American clients, Uruguay, Panama, U.S., Bahamas, Spain, and Portugal are the top places in the world they would like to move to. Martin himself cites the U.S. as one of his preferred destinations for people who are still professionally active and want to “establish themselves” in that country.
The tax implications for HNWI who come to America from Latin America are positive. “It’s a tax haven for non-residents and, even when it comes to people living in the U.S., they don’t have a tax on wealth but rather only on income and realized gains,” he tells us. As a point of comparison, some other countries like Argentina, Bolivia, Colombia, and to an extent, Uruguay, and Spain, do have a wealth tax.
With the trend of Latin-American countries making a shift to the political left, there are plans for other countries in the region to implement a wealth tax. But Litwak says this is not a strategy for economic success. To promote savings and investments, and therefore growth and productivity, taxing only income is the better philosophy, he counsels. Generally, wealthy people offer services or products, and tax is generated by consumers. The U.S. is such a country. And that’s a big reason why it offers long-term appeal for many Latin Americans with money.
The U.S. offers safe and welcoming communities
Besides making sense from a tax perspective, many lifestyle considerations can compel a Latin American family to migrate to the U.S. Political stability and an openness to foreigners are key reasons. For Latin Americans with children, U.S. colleges are very attractive. And so are the generally safe communities in big cities with no everyday threat of violence or crime they may have face in their homeland. Chile, Litwak states, is relatively safe, but he does point out that more than 40 of the top 50 most violent cities in the world are in Latin America — mostly Brazil and Mexico. So, even when Brazil has at the moment a pro-market government, many wealthy local families are not comfortable living there, often due to a fear of kidnapping and other crime. Simple, everyday activities that Americans take for granted — like having a coffee and leaving your phone out at a cafe — is something citizens of those nations seek in a new home.
In addtion to offering relative safety, the U.S. has very substantial and welcoming Latin American communities. Litwak lists Miami, New York, Dallas, and Houston as some top cities for Latinos. California, he points out, is another such destination — but it does have more burdensome taxation.
Do American politics influence Latin migration?
When asked if the American political shift to the more immigration-friendly Biden makes the U.S. more attractive than during the Trump administration, Litwak, says no. The trend of moving to the U.S. is less about who’s in the White House and more about the problems in Latin American countries. He reminds us that Texas and Florida were (and still are) pro-Trump but are also among the most Latino-friendly states.
What do Latin Americans know about EB-5? What should they know?
When it comes to U.S. Green Card by investment program, Litwak states, affluent Latin Americans “know more now than before.” He explains that historically HNWIs from that region thought that it was difficult to move to America; but they now understand there are different ways to do so: EB-5, E-2, and O visas (extraordinary ability or achievement).
Of those visa options, he cites EB-5 as the “most automatic” way, without need for creating your own business or checking your passport, as the E-2 treaty list excludes many Latin American countries.
Wealthy Latin Americans looking to move to the States often follow the advice of their financial advisors and lawyers. For example, in Miami, a huge community of bankers advise Latin American families.
With the EB-5 Regional Center Program expired, many wealthy would-be immigrants still don’t understand that the permanent direct EB-5 program can offer a passive investment with potentially higher returns that what regional center investments typically offered. Historically, immigrants and even EB-5 professionals believed that direct investments had to be actively managed; but the EB-5 management requirements for direct investments are the same as for regional center investments. And a new type of model — a direct investment into an established and growth-stage business — can make a passive direct investment not only possible but appealing.
We know many Chileans and other Latin American families and business people are looking to make America their new home; if they can make a $500,000 investment into growing U.S. business, that door may be wide open via EB-5.
If you’re a Latin American HNWI and need advice on structuring your wealth, you can reach Martin here: martin.litwak@untitled-slc.com
If you’re interested in learning about the fastest EB-5 processing options available, eb5Marketplace can help. Book a call with one of our registered securities brokers.
