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John Truszkowski

Dr. Barrows

ES 342

9 December 2014

Immigration Incentives That Build Our Economy

Many believe The United States of America to be the greatest country in the world. Being

a citizen of the USA is a blessing and people who are from different countries know about the

freedoms that Americans have, as well as, the opportunities and security that come with

citizenship in our great country. People from foreign countries are demanding visas to become

residents here, and this desire has created value in immigration visas offered by the United States

Citizenship and Immigrant Services within the Department of Homeland Security. This desire is,

in part, motivated by the hope of security for the investors and their families. During the

introduction of an informational text written by Brian Dickens titled, “Certain Security: Finding

Refuge from Criminal, Economic, and Political Instability through US Investment Visas”, he

shares a heartbreaking story about a foreign investor that he worked with some years ago that

illustrates very clearly a major benefit to foreign investors seeking citizenship within the United

States. His client’s name was Jorge, and he was a successful business owner from Mexico.

Jorge’s motivation for moving his family to the United States stemmed from a tragic situation

that happened very close to his home. In fact, it was his neighbor that was threatened by a local

drug cartel to pay them a certain sum of money, or they would return and murder his children.

The man refused to pay them and the next day Jorge watched as his neighbor’s sons were killed

in the middle of his street (Dickens, 2013, pp. 13-15). Jorge was influenced by this lack of

security in his home country, and began to make arrangements to move his family into the

United States. He knew that he wanted to make sure that his family was safe from the drug

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cartels, but wasn’t sure how he would be able to come to the US. Many foreign investors are

under similar circumstances or are simply looking for an investment opportunity outside of their

home country, and like Jorge are looking for a way to gain citizenship into the United States.

There is a program that began in the early 1990s that capitalizes on the value of these

immigration opportunities, and the desire of foreign investors to be a part of our unique country.

Having a global mind set in business is crucial today and legislation that encourages

globalization is an effective method of improving Gross Domestic Product and this program, the

“Employment-Based Immigration: Fifth Preference” (EB-5), is mutually beneficial and helps to

both build our economy by increasing the US Capital and Financial Account while offering

foreign investors a chance to have new freedom and security by becoming United States citizens

through investment-visas, and should be made into an entirely permanent law that doesn’t

require periodic approvals for some portions.

To begin with some background information will be helpful to understand the nature of

the investments, and the amount of capital and jobs that can be generated by the EB-5 program.

The program was brought into effect by congress in 1990 as a way to stimulate the economy by

giving foreign investors an avenue to citizenship in exchange for their positive influences on the

US economy by way of capital investments and subsequent job creation (EB-5 Immigrant

Investor, 2012). The United States Citizenship and Immigration Services (USCIS) branch of the

Department of Homeland Security is the controlling mechanism for the program. All visas must

be approved by them through a lengthy and complicated process, as shown by the timeline on the

next page provided by The International Michigan Investments Regional Center Website:

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As capital investment and job creation are the goals of the entire program, the foreign

investor must meet certain criteria in order to keep their visa and remain in the country. There are

three categories in which the investors must meet strict requirements in order to be approved by

the USCIS to obtain their unrestricted visa.

The first requirement is for capital investment from the potential recipient of the visa, and

the funds cannot be barrowed (EB-5 Immigrant Investor, 2012). The minimum dollar amount of

the investment is dependent on the geographical location in which the investment will take place.

For an investment that is located in a Metropolitan Statistical Area (MSA), the minimum amount

of investment is $1,000,000. An MSA is an area that surrounds a large city, and calls for a

significant investment, because of the stable opportunities within regions near major cities. In

contrast, an investment that is located within a Targeted Employment Area (TEA), requires a

lower minimum investment of $500,000 to spark commercial activity in rural and high

unemployment areas. In order to determine which category the location falls in, the concerned

parties should consult monthly unemployment statistics and census information (Dickens, 2013,

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pp. 25-28). These figures represent the minimum amount of investment, but a foreign investor

can go well beyond the minimum in order to ensure they obtain the job creation requirement

which is the second requirement in the EB-5 program.

The second main requirement for the EB-5 program is job creation from investment

activities. The minimum requirement calls for the creation of ten full time jobs within two years

after the initial investment. These jobs are broken up into two categories, direct and indirect jobs.

Direct jobs are full time employees that are hired to work for the actual business or project that

receive the investment. For example, a foreign investor involved in the EB-5 program invests

$500,000 to build a new ice arena in a rural area. The employees that are hired for cleaning,

maintenance, and management of the arena would be considered direct jobs. The USCIS gives a

clear and exact definition of an indirect job, in these cases, “Indirect jobs are those jobs shown to

have been created collaterally or as a result of capital invested in a commercial enterprise

affiliated with a regional center…” (EB-5 Immigrant Investor, 2012). In other words, these

would be the players on a hockey team that are paid to play inside this ice arena, but are not a

direct employee created by the initial investment because he would be paid by a different entity.

Other than these two requirements, the rest of the process to receive immigrant visas deals with

being approved by the USCIS and getting through bureaucratic red tape.

The third requirement to be approved for a visa is to pass a criminal and financial

background check conducted by the USCIS division of the Department of Homeland Security

which requires that they go through an extensive process to know as much as possible about the

nature of the investment funds coming from the foreign investor, and the nature of the character

of the person and their family members. Therefore, the investment funds will have to be

accounted for back to the origin, and be considered legitimate by the employee in charge of the

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case at the USCIS. This prevents capital investments that have been made through illegal

practices from coming into the United States. The USCIS is the blockade to keep dangerous

people out of the United States, and bring in investors that are morally sound in regards to the

values of the American People. Also, this amount of rigor in assessing the origins of funds

insures that no illegal activities continue inside the United States. For instance, capital earned in

a drug cartel cannot be brought in, invested and “cleaned” to bring back into the home country of

the investor. The American people should find comfort in this process, because it is a very

lengthy and complicated one that almost always results in applications for visas being returned to

the applicant with a request for evidence of the origin of the funds (Dickens, 2013).

Aside from the requirements, results of the EB-5 program have shown it to be a success

with meaningful investments during the last 20 years. The amount of regional centers steadily

increases each year, and these are the locations that bring the most capital and jobs into the

country (Dickens, 2013, pp. 28-30)

.

Many more statistics show that the demand continues to increase for investor-visas within

the US, and the industry is still relatively young and not fully matured as an investing industry.

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Therefore, much more marketing is needed to continue the growth of demand for visas, and there

is plenty of opportunity to bring more capital into our country.

Increased capital inflows are beneficial to the economy, in the sense that, it adds to the

Capital and Financial Account which helps to decrease the Current Account deficit. Deficits are

paid for by borrowing and selling off assets, and the US currently is an international debtor. As

of 2013, The United States owed almost 6 trillion dollars to foreign sources that are financing

our trade deficit, as shown in this graph from The Washington Post:

The country would be in a better position, if the EB-5 program, and others like it, grew

large enough to bring in capital investments to finance these deficits instead of being a borrower

from countries throughout the world (Carbaugh, 2013, pp. 339-340). Why would a reduction in

the amount of deficit the US records be beneficial, and who would it benefit? In short, the

decrease of the deficit would slow the depreciation of the dollar relative to other countries. As it

stands right now, the dollar has been losing value against many currencies which harms the US

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consumer, but helps the producer of products that are exported. To maintain the amount of

importing that our country is involved with at the consumer level, we would need ways to bring

in capital such as the EB-5 program. Bringing in foreign capital will have a direct effect on the

capital account, and the result would most likely be an appreciation of the US dollar relative to

our trading partners’ currencies. Not letting the dollar lose too much value is important, because

it makes everything that the US consumer buys overseas more expensive. Since the United states

does not make all of the goods demanded by its people, the result of a depreciated dollar would

be foreign goods prices seeming to be more expensive in the eyes of the US consumer

(Carbaugh, 2013, p. 337). Therefore, the EB-5 program has the potential to increase the buying

power of US consumers. Ultimately, capital inflows from foreign investors will help offset the

deficit in the US current account, and help the US consumer be able to buy overseas products

that are affordable. This is one of the economic benefits of the increased capital investment

brought into the country through the EB-5 investment program.

With so many benefits that come from this program, it is disheartening that that a large

portion of it still needs periodic review and approval. Regional Centers are established to bring

together a pool of investors that are trying to obtain their visas. They pool their resources and

with the help of the people in the regional center, create or improve a business in which they can

all share in the jobs created from the project for their job creation requirements. Many investors

find this method of investing has less risk because it is shared among the other foreign investors,

and sometimes domestic investors. The local ties are another advantage that the regional centers

have over a single investor trying to start or buy their own company. However, this pathway to

citizenship stands on shaky ground whenever it comes time for Congress to approve and renew

them (Dickens, 2013, pp. 32-34). To maintain confidence in the eyes of the investors and project

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managers, this portion of the EB-5 program must be made permanent to avoid unnecessary risk

created by doubt in the longevity of the regional centers.

In closing, the EB-5 program has two beneficial impacts on both sides of the agreement.

For the foreign investor, if all criteria are met, them and their families get to escape uncertain and

dangerous conditions in their home countries. Some of these immigrants are in dire situations,

and this program has been able to help many relocate to the United States and bring opportunity

and freedom to their spouses and children. This humanistic effect is the greatest advantage of the

program, and shows the values that are treasured here in The United States. As if it weren’t

enough to bring people into our great country and out of harm’s way, this program also serves as

a significant financial asset to the economy by providing investment into business sectors and to

the infrastructure of the US. For these reasons, this law should be made entirely permanent

without a constant renewal process for regional centers in which there is a chance that it might

not continue serving foreign investors and the United States economy.

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Works CitedCarbaugh, R. J. (2013). International Economics. Mason, OH: South-Western.

Dickens, B. (2013). Certain Security. Bloomington, IN: iUniverse.

EB-5 Immigrant Investor. (2012, July 3). Retrieved November 30, 2014, from U.S. Citizenship and Immigration Services: http://www.uscis.gov/working-united-states/permanent-workers/employment-based-immigration-fifth-preference-eb-5/eb-5-immigrant-investor