EB-5: A report from Brazil
During my tenure as a project manager with Jafrejo Holdings, a Florida-based EB-5 funded developer, I have been to several trips to Brazil with the purpose of raising EB-5 capital. In the beginning, most of my time was invested educating investors on the EB-5 program itself, which was extremely time consuming. However, in the past, EB-5 projects looking to raise money out of Brazil competed with the romantic notion that green cards were easily attainable through alternative avenues, such as employment based visas (H1Bs) and intracompany transferees (L1s).
As early as this year, Brazilians became more educated about the EB-5 process, as mainstream Brazilian Media has given substantial coverage to the matter of wealthy nationals leaving the country in pursuit of better economic, social and safety environments. This did not change the fact that Brazilians were still enamored by the thought of a quick fix immigration option to the USA, and did not feel compelled (in most part) to commit a substantial amount of money to the thought of residing lawfully in the USA.
However, in the past three months (I was last in Brazil in June), several things have drastically changed the EB-5 market in the country. The most important being the following:
1. Student visas are harder to get: USCIS, CBP, consulates and embassies picked up rather late on the strategy used by wealthy Brazilians of going to the USA to study English. This was a cost effective manner to spend extended periods of time in the country, while avoiding taxation. In recent weeks, I have received accounts of several Brazilian nationals that were stopped in their US point of entry, and questioned in deferred inspection about the real purpose of their stay in the country. The experience of going to the “salinha” (little room, which is how Brazilians refer to the location in the airports where deferred inspection occurs) is by far the opposite of a day in the spa, and Brazilians are scared of not being allowed entry in the country. Therefore, an exodus of hurry up and wait F1-visa holders are desperately looking into EB-5 as a way to stay in the country lawfully;
2. A slew of L-1s are being denied right now, in various stages. This is a major driver for investors to the EB-5 program. L-1s petitioners are, in most part, businessmen and women who have the wherewithal to do EB-5, but pursue L1s because they think is cheaper, or because the business they plan to implement in the United States is not one conducive to a large staff as demanded by EB-5. Therefore, they pursue the L-1s, and, once their attempt is failed (I have heard from a few immigration attorneys that the approval rate is as low as 25%), prospective investors scramble for their last penny to pursue EB-5.
3. Several of the Brazilians going back and forth to the USA with their B1/B2 visas have been sent to deferred inspection, and, as a result, are traumatized.
4. More project to project competition: Gone are the days when only two or three projects are the reigning kings in the Brazilian market. Now there are at least 20 to 30 projects aggressively pursuing EB-5 in the market. Be prepared to know which project you are selling against, because that will definitely make the difference when selling in this huge EB-5 market;
5. The exchange rate is not helping! When I first promoted our EB-5 projects in Brazil, US$1 cost R$ 1,79. Now US$ 1 costs Brazilians a whopping R$4,09! The issue of a higher minimum amount as set forth by the proposed EB-5 bill is no match to the damaging exchange rate for Brazilians at this point. This has made Brazilians try to negotiate to lower the administrative fee, lawyers fees, and any other expenses ancillary to EB-5 even more;
6. If your client needs to sell a property to fund their EB-5 investment, don’t waste your time. NOTHING is selling in the Brazilian Real Estate market. This statement is pretty self-explanatory…
As the EB-5 community and focus changes, the dynamics of presenting EB-5 change in the same speed. China is a rather mature market, and I believe that Brazil has the capacity to have a similar market organization with agents and local lawyers acting as EB-5 finders. However, Brazilians will not have the same expressiveness when it comes to dollars raised for regional center EB-5 projects.
In spite of that, there are great advantages to raising money from Brazil, as Brazilians are not imposed any type of currency limitations, so they are free to transfer any amount of money they wish abroad, as long as it is sourced, facilitating the source of funds documentation. The Brazilian government does, however, tax donations at 4% for both the donor and the done, so this can be a bothersome reality for some EB-5 applicants who wish to avoid Brazil’s exorbitant tax rates.
Reprinted with permission.
Renata Castro, Esq.,who is brazilian, is a project manager with Jafrejo Holdings, a hospitality developer and operator with several EB-5 projects. Renata is also an immigration attorney with Korda Burgess,P.A.