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20.10.09
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An American Dream For Sale
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By Irina Aervitz
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In the United States, the EB-5 preference immigration program is a way to obtain a green card by investing in the U.S. economy. Plenty of affluent individuals covet permanent residence in the United States enough to relocate their capital and their families, not only from countries with unstable political and economic regimes but also from developed economies like the UK and South Korea. However, Russia’s involvement in the program is limited.
In 1990, the U.S. Congress established the Fifth Employment-Based Preference (EB-5) visa category for immigrants willing to engage in commercial activity in the United States and to create at least ten full-time jobs. The minimum amount that must be invested in the U.S. economy is $1 million. This sum can be reduced to $500,000 if the investment is made in a “targeted employment area” (TEA), which is a designated area in the United States with high unemployment rates, or a rural area. Out of 10,000 slots available for the EB-5 preference, about 3,000 are allocated for projects in the targeted employment areas. On top of that, an additional 3,000 are allocated for investors who immigrate through a regional center pilot program.
So far, relatively few people have taken advantage of the program: in 2005, only 346 investors, including their families, immigrated; in 2007 – 806, in 2008 – over 1,000. It takes from two to 18 months to receive an immigration visa through the program.
The United States Citizenship and Immigration Services (USCIS) reported that only seven people from Russia acquired an immigration visa through EB-5 in 2008, and in 2007 there was just one person. South Korea is the leader in terms of the total number of immigrants via the program – about 700. China is at 360 and the UK at 115.
About 90 percent of all EB-5 investors immigrate through the regional center pilot program created in 1992 to encourage immigration in the EB-5 category. In 2009, Congress extended the pilot program for another three years, but efforts to make the program permanent have failed so far. Supporters of making the pilot program permanent point out that in 2003, the EB-5 category had brought about $1 billion in investment into various U.S. businesses, and 90 percent of this money came from the regional center pilot program. Since 2003 this number has been growing, and by 2009 over half a billion dollars were brought into five regional centers, including Pennsylvania, Los Angeles, and Hawaii, from a single regional center grouping.
As of this summer, about 60 regional centers have been approved, and a number of applications are still pending. The centers are required to submit their development strategy and qualify on a number of counts: listing the kinds of local enterprises that will receive cash inflow, showing how new jobs will be created, and demonstrating the future economic impact. For example, the Los Angeles Film Regional Center raised about $150 million and created 3,000 jobs. It invests in the "Big Six" film studios with the highest corporate ratings, including 20th Century Fox, Paramount, Universal Studios and Disney. Thus, there may be a piece of “immigrant money” in every American blockbuster.
Another EB-5 regional center in Orlando, the Florida Equity and Growth Fund, specializes in real estate development projects targeting investors worldwide. According to Doctor Ian Pardoe, a participant in this center, the EB-5 program is an excellent opportunity for foreign investors to get involved in the American economy, receive returns on investment, and obtain a green card.
According to Stephen Yale-Loehr, a lawyer and an advocate for making the EB-5 regional center program permanent, the overall impact of the program on the U.S. economy is easy to underestimate. Potentially, the program could bring in about $5 billion a year, not counting the economic spillover effect that 10,000 new entrepreneurial class individuals and their families would create by buying property, sending their children to schools, consuming, and paying American taxes.
But even though the contribution of the EB-5 preference program is obvious, it has problems. Canada and the UK have immigration programs for investors that have been ranked as administratively easier, faster, and overall more welcoming. Apart from certain bureaucratic inefficiencies of the USCIS, the temporary status of the regional center pilot program also introduces a certain level of uncertainty for the EB-5 immigrants and their families. After all, people who immigrate under the EB-5 provisions do so not only for the green card; they invest in the hope of receiving a profit. Otherwise, there are less expensive ways of getting permanent residence in the United States.
Russian businessmen can benefit from the EB-5 preference program alongside everyone else. However, many experts note an informal bias against Russian businessmen investing in the United States. Many Russians, especially those affiliated with state oil and gas enterprises, are “black-listed” for immigration purposes.
The one requirement for making an investment is demonstrating the legal origin of the money. The investment capital should be liquid (cash) or include equipment, inventory, and other tangible property (the requirements depend on the specialty of the regional center). The transfer of the investment capital and its source should be properly documented, which can be problematic for those involved in the routine channeling of money from Russia to off-shore bank accounts. Thus, the number of people in Russia who qualify for the EB-5 preference immigration program is small, and its implications for the U.S.-Russian relationship are unclear.
Another aspect is that the program requires people to live in the United States for most of the year, which entails relocation. Just a few people in Russia are in a position to take advantage of this program, and those should have a genuine desire to invest into the American economy with the additional benefit of the green card. Speaking allegorically, the EB-5 regional centers in the United States “sell” the “American dream.”
Irina Aervitz, Ph.D., is the vice president of the Federal News Service in Washington, DC. She is also an adjunct faculty at George Mason University, where she teaches globalization. |
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