Along with stock and real estate portfolios, the global rich are now buying a new form of economic security: passport portfolios.
Wealthy investors from around the world are increasingly shopping for visas or citizenship in other countries, hoping for a personal hedge against their own volatile governments or economies. A vast majority are new millionaires and billionaires from emerging-market countries, especially China, Russia and nations in the Middle East. Often, they’re shopping for passports or entree into Europe, the United States, Canada and Australia.
Experts estimate that these “economic citizens” are spending $2 billion a year on second or third passports and visas. Demand is so strong that governments around the world have started an arms race of sorts for V.I.P. visas, offering ever-faster residencies and passports for ever-higher prices. Over the past year, Australia, Canada, Britain and several other European countries have raised the prices or investment requirements of their so-called golden visas and created a new fast lane for citizenship.
“Wealthy people in fragile countries want to have a second option in a more stable country,” said Christian H. Kalin, group chairman of Henley & Partners, a citizenship advisory firm based in London. “The wealthy already diversify their assets for protection. Now they want to make sure their residency is diversified as well. Why not have a portfolio of passports, too?”
Opponents, however, say the programs have a downside. Some say they have the potential to offer safe harbor to people who made their fortune through corruption or illegal activities.
Others say that at a time when immigration and inequality are heated political topics, V.I.P. visas amount to selling citizenship to the rich without bringing many broader benefits to the host country.
“These programs bring huge benefits to the Russian oligarchs or the various Chinese wanting to benefit from the rule of law, good educations and robust capital markets,” said David Metcalf, chairman of the British government’s Migration Advisory Committee and a professor emeritus at the London School of Economics. “But the fundamental question is, What does everyone else get out of it?”
Last year, Viviane Reding, then the European Commission’s vice president for justice, fundamental rights and citizenship, put it more bluntly in a speech, saying, “Citizenship must not be up for sale.”
Even as criticism mounts, however, governments are cashing in. One of the biggest winners is Malta. In January, this island nation of about 425,000 people started selling citizenship for a fee of 650,000 euros (more than $800,000) with no residency requirements. Because Malta is a European Union member, citizenship also gives holders the ability to travel and settle within the European Union’s 28 countries.
After the plan drew protests, the government added new requirements, including a demand that applicants spend at least €350,000 on real estate and €150,000 on government bonds. In the first six months, more than 200 investors signed up, earning the government $200 million, according to Mr. Kalin, who helped design the plan. He said the government carefully screens each applicant for financial irregularities.
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“If you have a high-quality program,” he said, “you attract the right kind of people.”
Elsewhere, Australia recently announced plans for a Premium Investor visa, nicknamed the platinum visa. That nation already has a golden visa, called the Significant Investor visa, which offers permanent residency after four years in exchange for an investment of 5 million Australian dollars ($4.15 million). More than 436 visas have been granted under the program, bringing in more than 2 billion Australian dollars in investments.
The new program will give faster residency (in just 12 months) in return for 15 million Australian dollars in investments.
In response to criticism that the investments were being parked in government bonds, rather than more directly helping the economy, Australia may now require investors to put the money into venture capital, infrastructure or agriculture projects.
Consultants, lawyers and advisers to the wealthy say golden visas bring many benefits to host countries. Rich immigrants invest in new companies, buy new homes and spend on almost everything from restaurants and private schools to personal staffs.
“Aside from spending, they bring skills and talent,” said Nadine Goldfoot, a London-based immigration lawyer at the Fragomen law firm and a member of the governing board of the Investment Migration Council, a nonprofit advocacy group.
But critics like Mr. Metcalf argue that in Britain, at least, the benefits are often offset by the overseas rich bidding up prices for luxury real estate and services. And, he contends, because most of the investments go into government bonds that pay interest, “we are essentially paying oligarchs to come to the U.K.”
In Britain, an investor visa program gives residency for 2 million pounds ($3.14 million); applicants are eligible for “indefinite leave to remain” after five years. But the government recently added fast-track programs for people who invest £5 million (requiring a wait of only three years) and £10 million (a wait of two years). Half of the visas go to Russians and Chinese.
Mr. Metcalf argues that visas, if sold at all, should be offered through a formal auction, with proceeds going to a national education program. While he acknowledges that an auction may seem crass, he argues that it beats the current system.
“Let’s find out what the optimal price really is,” he says. “People say, ‘Well, you’re selling citizenship.’ We’re not selling citizenship; we’re selling settlement. And right now, we’re practically giving it away.”
In the United States, the investor-visa program called EB-5 has been so popular that it has hit its cap of 10,000 visas this year, for the first time since 1990. The program awards visas to foreigners willing to invest at least $500,000 in approved projects. An investor who can show that a project creates or preserves at least 10 jobs can get a green card and eventual citizenship. More than 80 percent of the applications are from Chinese investors.
The program has come under fire for failed projects and lack of oversight. Yet because its renewal is tied to broader immigration policies, experts say it’s unclear how or when it might be changed.
At the very least, experts say the investment level of $500,000 — set in 1990 — should be raised to reflect the new economics of V.I.P. visas.
Stephen W. Yale-Loehr, a lawyer at Miller Mayer and an adjunct professor at Cornell University Law School, who supports the program, says: “I think that after 24 years, it’s appropriate for Congress to consider adjusting that level.”