Published On: Tue, Apr 5th, 2016

The Effects of the EB-5 Visa Program on the American Economy – Reflections

By Carlo Barbieri

 

Mr.-Carlo-Barbieri (1)Legislation of the EB-5 Visa program has brought with it immense financial gains and has generated an astonishing amount of jobs for the United States.

The numbers are startling given the program’s rapid rate of success over the past few years, and have placed Federal Authorities and the American Congress in a difficult position.

By the end of 2015, there were 21,988 applications submitted and waiting to be processed by immigration authorities.

It’s worth noting that in 2007 there were only 700 visas issued through the program.  By 2014, the number grew to 10,000, which represents the maximum amount of visas to be allotted under the program annually.

This begs the question: do the authorities understand that the number of authorized visas refers to all members of a family, and not just the investor?

As such, on average there are three to four people, in a family, per investor, which means that the supposed number of 10,000 visas is in fact reduced to a little more than 2,600 visas.

As far as the financial benefits of the program, if we take in to account the pending applications and the minimum amount of US$500,000.00 required per investor, there is close to US$11 billion dollars in American banks waiting for the investor’s approval to be deployed and creating at least 219,000 jobs (normally it would be 240,000 jobs if you consider the 20% margin that the projects forecast).  In other words, more than the entire number of jobs created in the United States in the month of March.

There is however a certain amount of uneasiness among businessmen and investors with regards to the future of the program, since they depend on the American Congress to renew the terms and regulations by September 30, 2016, particularly with respect to the Regional Centers.

There are several unresolved issues that must be discussed.

The first of which is the creation of jobs in areas that are already highly developed, such as New York and San Francisco.

The second is related to the concentration of visas among Chinese investors.  For the sake of comparison, there were 9,128 visas granted to Chinese investors, with only 96 for Indians, and this is considering that these are the two largest countries in the world.

The third point is in the interpretation of the number of visas allowed annually, as mentioned above.  If there were truly 10,000 visas issued to investors with extensions granted to their dependents, the number of visas would practically quadruple.

A fourth point that is being discussed is related to the indirect jobs created through the program.  This controversial matter, in a certain sense, is merely a way to attack the Regional Centers.  The algorithms used by the government are consistent and are well structured to calculate the indirect jobs in a technical and accurate manner.  It’s undeniable that without the Regional Centers, or even without the modification to the law in 1992, the program would not have taken off.

Today we have more than 1,110 Regional Centers that should and must be regulated.

We have thousands of projects that need to be better evaluated.

We also must consider the matter of the “Chinese agents”.  They have been using the chaotic situation to obtain visas to their advantage, and by doing so, have been profiting handsomely.  Currently, a Chinese citizen has to wait close to six years to be able to receive a Green Card.

Being that the “agents” must make an investment of US$5 million to receive their credentials from the Chinese government, they end up charging a fortune for the work they do to process visas for interested parties in their country, and they also seek out “extra” remuneration from the Regional Centers and investors.

Some (mainly the more well-known ones) seek to charge, on top of the administrative tax that the investor pays of roughly US$50,000, an annual commission of 2% to 4% of the total amount invested.  This discourages serious enterprises, as the agents receive compensation, aside from the payment received from their clients, which is higher than the interest rates of the American marketplace.

Since there is a steady flow of new “naive investors” in the EB-5 program with seemingly endless resources, but with a lack of knowledge of how to invest their money, they wind up being victimized, albeit knowingly, by these exploiting agents.

There is much room for improvement in the discussions about the EB-5 program, not least because it is an undeniably successful program that attracts foreign investment and generates employment opportunities.

 

 

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