Immigrants invest in U.S. businesses in exchange for visas
Sunday, January 10, 2010
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 economically disadvantaged.
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 the program.
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 the State 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 the corporation. "These two wards have the highest unemployment rate in the city and the lowest incomes."