Immigrants invest in U.S.
businesses in exchange for visas
Washington Post, January 10, 2010
By N.C. Aizenman
The number of foreigners willing
to invest $500,000 to $1 million in a U.S. business in exchange for a visa
roughly tripled in the past fiscal year, as dozens of cash-strapped
enterprises and local governments scrambled to attract wealthy foreign
backers through a previously obscure provision of immigration law.
Under the EB-5 visa program,
immigrants who can demonstrate that their investment created or preserved at
least 10 U.S. jobs after two years are granted legal permanent residency
along with their spouses and children.
Although immigrants are allowed
to establish businesses under the program, most prefer to invest in
"regional centers" -- public or private enterprises that are
certified by the government to receive funds from EB-5 investors and that
can count jobs indirectly created by the investment toward the 10 required.
The minimum outlay mandated
is $1 million, but immigrants can reduce that to $500,000 by investing in a
regional center or establishing businesses in areas designated as
The program was established in
1990, but potential investors and businesses were often dissuaded by the
U.S. government's slow and inconsistent administration of the complex rules.
In the past year,however, a gradual streamlining of procedures coincided
with the recession and credit crunch to dramatically boost interest in
In a matter of months, more than
50 private and public enterprises were certified as regional centers,
increasing the total from 23 to 74.Three are in the Washington area.
With so many more investment
opportunities to choose from, the number of immigrants (including investors
and their immediate family members) who obtained EB-5 visas jumped from
1,443 in fiscal 2008 to 4,218 in the 2009 fiscal year that ended Sept. 30,
according to theState Department.
Most were granted to people from
Asia, particularly China and South Korea. Several scholars said they expect
the number to double again this year.
"What happens with programs
like this is that sometimes, all of a sudden they get discovered, and then
intermediaries begin to really promote them both here and
internationally," said Demetrios Papademetriou, president of the
Migration Policy Institute, a Washington think tank that recently released a
report about the trend.
Statistics on the total invested
through the EB-5 program are not available, but the capital infusion has
been a boon to Washington area businesses. The Capitol Area Regional Center,
a real estate investment fund based in the District, has been working to
raise a projected $250 million from immigrant investors for use in
Washington area construction projects.
Perhaps the greatest potential
beneficiaries are nonprofit agencies such as the District's Anacostia
Economic Development Corp., which was approved as a regional center in June.
Over the next three years, the group hopes to raise $50 million from
immigrant investors to develop real estate projects and small businesses in
wards 7 and 8 -- a princely sum compared with the $2 million in private
capital it raised for its last major building project in Anacostia.
"Normally, to get equity
capital to these areas is almost impossible," said Michael Wallach,
chief operating officer of thecorporation. "These two wards have the
highest unemployment rate in the city and the lowest incomes."
But because the primary
motivation of the immigrant investors whom Wallach is wooing is to create
enough jobs to meet the visa requirement rather than to maximize the return
on their investment, they might prove less skittish.
'It was worth it to me'
Program participant Eric Canal-Forgues,
a law professor and businessman from France, is a case in point. In 2007, he
invested $500,000 in a regional center that funded construction of Comcast's
headquarters in Philadelphia.
He said it is unlikely that he
will get more than a 1 percent return by the five-year point at which he
will be allowed to withdraw his money. That will barely cover the roughly
$50,000 in administrative costs of his investment, let alone the loss of
value because of inflation.
But Canal-Forgues, 47, who has
moved with his wife and two children to Miami, said he has no regrets.
"I knew the conditions going in, and it was worth it to me," he
said. He said that Miami was attractive because of its financial
opportunities and that he plans to open a franchise of children's clothing
But more than anything else, he
said, "we really wanted our children to be raised in a dual culture,
French and American, especially because I think the educational system at
the university level is much stronger here than in France."
Statistics suggest that many EB-5
applicants might also find the program appealing because it is considerably
speedier than other options: Nearly 70 percent of immigrants granted
investor visas in fiscal 2009 were from China or South Korea, countries
whose nationals face decade-long waits for family-reunification visas
because of quotas on the annual number allowed in from any one country.
Concerns about fraud
That immigrant investors are more
focused on obtaining visas than maximizing profits -- combined with the
government's limited capacity for oversight -- has caused even some avid
proponents of the EB-5program to worry that a profusion of fraudulent or
ill-advised ventures might soon flourish alongside legitimate ones.
"The thing that concerns me
most is that some fly-by-night [operation] will lose a large group of
investors' money, and it will poison the well for the rest of us," said
David Morris, founder of EB-5 America, a Washington regional center that
invested $20 million to refurbish the Sugarbush ski resort in Vermont in
past years and is now raising money for construction projects in the
Yet Morris also notes that some
of the stricter rules of the EB-5 program -- including the rigid timeline by
which the job creation requirement must be met -- do not always mesh with
the realities of the business world, with consequences for both immigrant
investors and potential business ventures.
For instance one of Morris's
clients, Rodrigo Martinez, a Mexican immigrant who lives in Arlington
County, was initially keen to invest in a project to renovate the historic O
Street Market at Seventh and Ostreets NW. "The fact that you are
helping to have a positive effect on the community that you're joining, I
really liked that idea," said Martinez, 27.
But fearing that construction
delays would prevent that project from creating sufficient jobs in time,
Martinez, who attended law school in the United States and now works as a
business consultant, switched his money last year to the Sugarbush resort
Supporters of the EB-5 program
also complain that the government's review process for approving potential
regional centers is still too slow, especially at a time when a similar
Canadian visa program isa ttracting three times as many immigrant investors.
Stephen Yale-Loehr, a professor
at Cornell University's law school and executive director of a trade
association of regional centers, said the number of EB-5 visas being granted
falls well short of the maximum10,000 allowed each year.
"There's a lot more that
we could be doing to promote the EB-5 program so that it can achieve its
true potential in this economic recession," he said.
Powerful members of Congress on
both sides of the aisle agree. In a rare bipartisan convergence on an
immigration issue, Sens. Patrick J.Leahy (D-Vt.), chairman of the Judiciary
Committee, and Jeff Sessions(R-Ala.), the ranking member, recently joined
forces in an effort to make the regional centers permanent. (The centers
were established under a pilot program that has been extended several times
Leahy said he was impressed by
the millions of dollars that EB-5 visa holders have invested in ski resorts
such as Jay Peak and other projects in the distressed northeastern region of
Because of legislative wrangling
unrelated to the EB-5 program, Leahy had to settle for a three-year
extension in the fiscal 2010 Homeland Security Appropriations bill adopted
in the fall.
Still, Leahy predicted that not
only will all aspects of the program soon be made permanent but also that
the annual number of visas might be increased.
"Once it's permanent, I
think we're really going to see the true value of this," he said.
"At a time when we're seeing so many of our jobs exported out of the
country, this creates jobs in the United States."