Article for Submission - Will Franchises steal the spotlight in the EB-5 uprise in Brazil?


Brazilians have become the ultimate target investor for American EB-5 Regional Centers and projects for a myriad of reasons. Investors from Brazil have relatively straightforward source of funds documentation to present to the United States Citizenship and Immigration Services; moreover, there are no currency restrictions to transferring funds out of Brazil.

For years Brazilians have pursued L-1s to move to the USA, but current adjudication trends have deterred Brazilians from pursuing this immigration avenue. Also, Brazilians, unlike Chinese investors, want to move here right away and affix residence in the states. This is a hot topic, because, once here, Brazilians start to spend in dollars, and the current devaluation of the dollar[1] has made Brazilians question how they will plug the budgetary hole created by day to day expenses incurred in dollars.

This makes investors consider pursuing EB-5 opportunities that generate income, which is usually not the case with Regional Center projects. Although many EB-5 investors have experience in business enterprises abroad, most of their business does not fare well in the USA, or the investors are not fluent in English. As a result, investors have been considering more closely the option to open Franchises in the USA.

There are, however, several challenges in pursuing this model, as the EB-5 investor cannot run the business during the processing of his EB-5 petition, and USCIS won’t accept that the investor wait for adjudication of the EB-5 petition for substantial steps related to the development of the business to start. It becomes a true situation of the chicken or the egg, as investors need the business to move here, but cannot run the embryonic stages of the enterprise.

Another key consideration is whether the EB-5 investor has the ability to qualify as a franchisee of a successful franchise brand, as the criteria used to admit investors into these opportunities tends to be stringent and most EB-5 investors lack the knowledge and experience needed to even get their feet on the door of mainstream franchises. The likelihood of failure of a business is an important factor, as the EB-5 investor must keep the enterprise open and running for a minimum period of at least 4 years (until the EB-5 investor receives his permanent green card, which he can petition for 2 years after he receives his initial green card), and the failure to do so will jeopardize the investor’s petition.

Regional Centers and Projects should learn about the failure rate of new businesses and new franchises to sell against these options, and immigration attorneys should discuss with clients the real life implications of opening and running a new business, franchise or not.

[1] In 2012, US$ 1 cost Brazilians R$ 1.79 (the Brazilian currency is called Real). Forward to 2015, US$ 1 cost Brazilians R$ 3.90!

Reprinted with permission.

About The Author

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.

The opinions expressed in this article do not necessarily reflect the opinion of ILW.COM.