In a move that took almost everyone by surprise, last Wednesday, the Ottawa government declared that it would be closing its immigrant investment program for good. This comes after almost two years of a complete standstill in the program, with no visas being issued to any applicants since before 2012. That gridlock led to a backlog of over 65,000 immigrant investor applications, some dating back to as early as 2008.
Since the program was halted in 2012, Ottawa had maintained that the program would be opened again sometime in 2014. However, it appears that the pressure to close the program proved to be too great. Unfortunately, for those that have been waiting in line, in some cases for perhaps four years or more, there will be no Canadian Permanent Residency waiting at the end of this road.
It is no surprise that the biggest demographic impacted by this bombshell decision is Chinese investors. According to official numbers from the Canadian government, around 45,000 applicants waiting in line were from Mainland China.
One Door Closes, Another Opens
As we speak, Chinese applicants and the hundreds of immigration agencies all over the country are going over options. In an industry that is far from transparent, Chinese investors that were counting on the program to be reopened are now wondering what direction to go in. Whether they were interested in living in Canada, starting a business, or in most cases, sending their child to school, their plans that had been many years in the making will have to be altered.
Just south of Canada, though, there is another country with its own investor immigration program that looks like the most natural choice for recently rejected would-be Canadian immigrants. The U.S. EB5 program boasts all of the benefits of the Canadian program, and over the next few months we may witness one of the biggest moments in the program’s history.
Canadian Program Basics
The Canadian and U.S. program differed in a variety of ways, both having merits and shortcomings in comparison to one another. From the mid-90s up until mid-2011, Canada dominated the market. The program had been a $400,000 loan to the federal government, which was returned to the investor without interest five years after making the investment. In 2011, the program was raised to a minimum $800,000 investment in an attempt to slow things down; applications still poured in which led to the 2012 halt and today’s outright cancellation.
One of the biggest advantages in the market was that the Canadian program was a no-risk loan to the government, unlike the U.S.’s $500,000 at-risk investment scheme. In a country where trust is scarce, many Chinese flocked to the Canadian program simply because they knew that as long as they could wait in line, the government would guarantee their green card and their money.
The U.S. EB5 Program: A Life Preserver for Clients Rejected by Canada
Since the stall of the Canadian program in 2012, the U.S. EB5 program has started to pick up more and more steam in the Chinese market. In 2011, 2530 EB5 visas were issued to Chinese clients, just shy of 80% of the worldwide market. In 2013, that number was already up to 6895 visas, taking up 81% of the market. That number will likely rise this year in response to the drastic change in Canada.
Agents across China that had previously made their bread and butter from processing clients into the Canadian program had started to shift their business models towards including U.S. programs on their docket, and now that trend will almost certainly go forward at a harder pace.
In many ways, the U.S. program is an easier and more attractive option for Chinese clients. Although the investment is required to be “at-risk,” it is cheaper in price: $500,000 into a venture that creates 10 jobs, as opposed to the Canadian scheme of investing $800,000 to the government. Plus, the wait times are much more reasonable. The U.S. program is averaging between 15 and 21 months, whereas at best, clients looking to the Canadian market could have expected at least a two to three year wait, if not more.
What to watch for in the EB5 program?
Many clients will be considering the U.S. program in depth for the first time. One of the most frequent questions I have received in the last few days is “Could the same thing happen in the United States as in Canada?” While there is no guarantee, it seems extremely unlikely that the U.S. EB5 program would suffer the same fate as the Canadian program. The investments, for starters, are very different functionally. As a condition of the visa, the U.S. $500,000 investment must create at least 10 jobs, which is a direct link to actual economic development. The Canadian counterpart was only indirectly tied to economic growth and job creation.
The EB5 program, most recently renewed in 2012, was actually one of the few things Congress has agreed to at all in the last few years. It was passed unanimously in the Senate and breezed through the House with only 3 dissenting votes. I doubt in an election year, any politician will risk his or her political future on taking a crack at eliminating EB5.
Indeed, what may be more important for clients now considering focusing their aim on the United States is choosing a good American partner for the investment. The Regional Center that our company operates in, the Metropolitan Milwaukee Association of Commerce Regional Center was approved in 2007. At the time, it was the 21st regional center in America. Today, there are over 400! Competition is fierce, and most in the business are newcomers. Now is the time for clients and their agents to analyze projects closely and go with the companies that are committed to building quality, long-term, safe projects.
I believe that for whatever reasons the Canadian government decided to close its program, this is a huge opportunity for America. Communities around the U.S. that are most friendly and welcoming to our Chinese friends and other international friends, and have ready U.S. projects to boot, and will gain the most.
Dan Redford is the Director of China Operations for FirstPathway Partners, and industry leading EB5 immigration fund manager. He also serves as the President of the Michigan State University Beijing Alumni Club. You can follow him and his perspectives from China at http://www.danredford.com.