Look to The North!

img-20160213-00390Upmarket real estate property in St Kitts (Photo: Peter Adrien)

Look to the North reader! Open your eyes. The wind blowing from the north could get stronger. What does a Donald Trump victory in the November 8th US Election could mean for the Caribbean? International economic relation between the two regions (the US and Caribbean) will be affected by the policy of the new administration with respect to trade, financing, foreign investment, labor participation and immigration, just to zero on the core campaign issues. In this column, we attempt a preliminary discussion on the likely negative impact of the US Immigration policy on socio-economy and, emphasize the likely negative impact on the Citizenship-by-investment Programs (CIPs) in the Caribbean.
First, with tougher immigration policy and regulation, the Caribbean islands could see increased deportation of Caribbean migrants with its associated spike in crime and deviance, murders, mercenary activities. The United States has deported thousands of convicted criminals to the Caribbean annually since 1996, when Congress mandated that every non-citizen sentenced to a year or more in prison be kicked out of the country upon release. In all, the US is responsible for about three-quarters of the region’s returning criminal deportees, with the United Kingdom and Canada accounting for most of the other ex-cons arriving in the islands. We could see, as is the case in many parts of Central America, the presence or formation of street gangs that grew out of major US cities spread to the region through massive deportations. These gangs, using sophisticated weapons, are blamed for rampant violent crime, extortion and mercenary activities. It is reported by Caribbean governments that deportees are exacerbating crime in countries with high levels of violence such as Jamaica, Trinidad and Tobago and St Kitts and Nevis, where returning deportees are partly to blame for increasingly bold and sophisticated crimes and homicide rates soaring to record levels.
“The number of all immigrants sent back to the Caribbean region in 2012 was put at 6,510 by ICE and 227, 433 to Latin America. Some 4,898 criminal immigrants were sent back to the Caribbean in 2012; 50,844 to Latin America. Non-criminal immigrants deported to the Caribbean totaled 1,612 and 176,589 to Latin America. (News Americas, NEW YORK, NY, Fri. Jan. 2013)
The Caribbean which well established as a “zone of peace” could lose its allure as a historical attractive destination. Escalating crime creates insecurity in society, deepen uncertainty, dampen investor and business confidence and make the region an unattractive tourist destination and zone. The combined effects are loss of investment capital (loss of much-needed new monies), increased international surveillance, rising unemployment, poverty and its associated social ills.
Second, together with the loss of destination attractiveness, the imposition of additional supervision on the citizenship by investment program could kill the sector as was done to the offshore havens. Citizenship by Investment (also known as economic citizenship) is a investment program that grants citizenship status to an individual (and immediate family members) contingent upon a specified and quantifiable investment in the country. The normal grounds for the granting of citizenship is birth within a certain territory, descent from a parent who is a citizen, marriage to a citizen, and naturalization. While residence is granted to investors and wealthy individuals in most countries, there are only very few countries now which have laws to grant citizenship by way of investment for economic considerations and without any lengthy residence requirements. The USA, Canada, Australia, Austria, Switzerland and Great Britain are among the countries, which offer residency and a fast track to citizenship to wealthy individuals for their investment in their country. Some countries offer significant tax breaks to its citizens who were previously foreign investors, including but not limited to exemption from income tax, property tax, gift tax, and inheritance tax. All economic citizenship programs allow the foreign investor to bring his or her spouse and minor children to the country as the investor’s family dependents. Currently, four Caribbean countries allow foreign nationals to immediately qualify for citizenship after making the required investment: Antigua and Barbuda, Dominica, Grenada, Saint Lucia and St Kitts and Nevis. In these countries, foreign nationals are eligible for citizenship if they invest in upmarket real property or contribute to a development fund or project.
Despite the attractiveness of the investment product, the Caribbean citizenship-by-investment program (CIP) has received several setbacks, and, could be the subject of more external scrutiny should the new US administration get tight on foreign nationals who obtain dual citizenship in these countries under the program. Why the concern? The news is that on Tuesday 8th November 2016, Presidential Candidate Donald Trump got an overwhelming mandate to “make American feel secure.” This involves securing the US borders and controlling immigration. This may include i) building a fence between the US and the Mexican border, deploying 25,000 additional border agents, utilizing predator drones; ii) enforcing immigration laws – that is, enforcing existing strict immigration laws; iii) establishing detention centers – vacation resorts for illegal aliens. In 2011, the United States objected to the St Kitts & Nevis citizenship program, saying wealthy Iranians could be sneaking into America after obtaining citizenship on the island. Grenada ran an economic citizenship program until 2001, when it was forced to suspend it after the events of 9/11 – the then Finance Minister, Anthony Boatswain claimed that it became “too risky”. Belize suspended its citizenship program at the same time for the same reason.
Protection against the threat of terror would necessitate increased rigidity of processing immigrants. The target is “persons of Moslem background and Asian and Middle Eastern refugees.” However, given the ease of movement caused by modern transportation, liberalization of labor and capital (in this case, skills persons) and the growing trend of dual and multiple citizenship, persons entering the US via the CIP would most likely be subjected to additional scrutiny. The argument is that persons who enter the US as a third country, having obtained economic citizenship, the US administration is likely to increase vigilance on the citizenship-by-investment programs (CIPs) in the Caribbean, suggesting a more rigid oversight of countries like Antigua and Barbuda, Dominica, Grenada, Saint Lucia and St Kitts and Nevis. This development could prove detrimental to small economies which have become very reliant on the citizenship-by-investment programs, considering it the most viable option to get out of the spiraling economic crisis with its attendant high unemployment, escalating food prices, uncontrollable crime rates, the withdrawal of correspondent banking relationships (CBRs) from the region, and vulnerabilities related to the weak banking system, high debt, susceptibility to natural disasters, and competitiveness.
The four members of the Eastern Caribbean Currency Union have failed to adopt a rational approach at developing declining market, and has instead opted. As is the case in the Caribbean, a fatalistic market competition amongst them akin to crabs fighting in a basket – preferring to engage in petty and useless quarrelling with respect to who has the most and attractive product. While the fragility of the product is well established, currently, Antigua and Barbuda is the most attractive to buyers who are seeking for a passport which give third part entry. Currently Dominica, Grenada, Saint Lucia and St Kitts and Nevis have all lost their visa-free privilege to the Canada, which is a critical pull-factor for Asians and middle East applicants who are interested in doing business in Canada. Only Antigua and Barbuda can offer this product differentiation.
In the context of the depressing challenges relative to the banking, finance, economics, law and order and society at large, any externally-driven or US-led pressure on the existing CBI product could hurt St Kitts and Nevis which is yet to rebrand itself sufficiently to make itself saleable to the international market, a trend that is perhaps evidence by the virtual slowdown of the CBI sector. This is not far fetch as the IMF warns: “ECCU CIPs face increased competition both from among themselves and from outside the region, particularly Malta’s newly launched CIP and other residency-by-investment schemes in Europe. In addition, rising global migration pressures, elevated security concerns, and geopolitical tensions may trigger adverse actions by the international community, in particular the suspension of visa-free travel for citizens of CIP countries.” (Source: IMF Country Report No. 16/333, Eastern Caribbean Currency Union, October 2016.) The worst-case scenario could include denying US visas to citizens of these countries when the international between these countries and America is strained.
Having being spared successive years of devastation by natural disasters, St Kitts and Nevis can ill-offered an unfavorable external disruption that could land the economy into recession particularly in the face of the almost wholesale stoppage of most CBI-financed real estate projects on St Kitts and Nevis – a trend which could be resuscitated with increased investor and business confidence. Significant fluctuations or sharp declines in CIP activities could hurt St Kitts as the IMF noted: “Because CIP inflows are potentially volatile, increased reliance on these inflows to finance the budget would trigger painful fiscal adjustment if they diminish or face a sudden stop, while a cessation of CIP-related private investments can generate boom-bust cycles in the domestic economy. The risk is most acute in St. Kitts and Nevis, where inflows have been most significant, reaching an estimated cumulative 45 percent of GDP over 2013-2015, with inflows to the budget alone reaching a peak of 14 percent of GDP in 2014.” (Source: IMF Country Report No. 16/333, Eastern Caribbean Currency Union, October 2016.) Despite the fragility, with very little fiscal space and stagnating economic activity, “most governments continued to rely on Citizenship-by-Investment Programs (CIPs) inflows to fund their budgets in 2015. Nevertheless, the underlying primary balance (i.e., excluding one-off items and CIP) improved from negative 1.5 percent of GDP in 2014 to an estimated negative 0.2 percent in 2015 (excluding Anguilla and Montserrat) . CIP inflows were highest in St. Kitts and Nevis, the region’s longest standing program, with revenues to the public sector at 17.4 percent of GDP. Inflows reached 7.9 percent of GDP in 2015 in Antigua and Barbuda and 3.6 percent in Dominica.” (Source: IMF Country Report No. 16/333, Eastern Caribbean Currency Union, October 2016.)
Welcome President Donald Trump! Like Barrack Obama, the 44th president of the United States of America, the election of Donald Trump, the 45th president of the Unites States of America signals a watershed in US politics, and indeed international politics. Some political analysts argued that the advent of the first black president was not usual, the advent of the anti-Washington president was not ordinary. How do you credit a man who triumph against all odds – against the combined orchestration of the entire economic, political and societal network, including the capitalists who run America, and the mass media which is the opinion-setter, and wins such a fiercely contested election (galvanizing a mass movement that brought Americans of all classes and color behind him) against such a powerful family, changing the political map of the United States forever? It is either this man is superhuman or the outcome of the election was the reflection of the “hidden hand of the market.” Whatever position one takes, billionaire Donald Trump is an exceptional President for an exceptional time.
What do we take away from the global developments? With increasing movement of people – with a virtual borderless world – there is apparent tribalism and hostility. Unable to deal with the social and economic challenges, “Men’s hearts are failing them for fear, and for looking after those things which are coming on the earth” (Luke 21:26, KJV)
Unable to get speedy solutions to our apparent surmountable problems, we become hostile to the stranger, immigrant, weak and powerless. Not so fast! Will we ever unite as a global family? Why not? Keep on trying; keep on loving. Remember, “I can do all things through Christ who gives me strength” Philippians 4:13, NIV.

Peter Adrien is an author, business coach, financial counselor, economic adviser and columnist. Visit: www.goadriens.com. Contact him via email: peter@goadriens.com; phone: (869) 668-9752 (St Kitts & Nevis) or (305) 848-7604 (USA); twitter: @goadriens; facebook: http://www.facebook.com/Goadriens

 

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