RCBJ Retrospective: Emerging EB- Markets Spotlight: Venezuela

03.30.16 | Archived

Investor Market Spotlight: Venezuela

by McKenzie Penton, IIUSA Membership Development Assistant

Over the last seven years, Venezuela has emerged as one of the largest immigrant investor market in Latin America, consistently generating the most I-526 approvals year-over-year. Between 1992 and 2008, Venezuela had a grand total of 11 I-526 approvals. However, between 2008 and 2014, Venezuela has accounted for 130 I-526, approvals accounting for almost 6% of the world market share, when excluding China.

Political, economic and social unrest has prompted High Net Worth Individuals (HNWI) to consider emigration programs such as EB-5. Under its former President Hugo Chavez (1999-2013), the country saw solid economic growth driven predominantly by the state controlled oil industry which helped sustain moderate economic and social gains. However, with worldwide oil prices slumping and Venezuelan production faltering, socio-economic concerns in Venezuela have been cause for serious concern among the country’s elite.

Current president Nicolas Maduro’s government has increased the state’s role in the economy by further expropriation of many major industries, discouraging private investment and implementing strict currency and price controls. The Venezuelan currency is losing value faster than any other in the world and while the government continues to maintain an official exchange rate of US Dollars at 6%, the widely used currency black market paints a much more startling figure of over 800 Venezuelan Bolivars per US Dollar according to a recent Bloomberg Business report.

Venezuela is also dealing with a dramatic increase in crime, extreme shortages of food and other consumer goods, and rampant inflation. Venezuela struggled with a 159% inflation rate and the world’s largest GDP contraction of 10% in 2015. The immediate outlook does not look promising, with the International Monetary Fund (IMF) October 2015 World Economic Outlook projecting a 204% inflation rate on the horizon for 2016.

With a destabilized economy, tightening social and economic freedoms, a tense political environment, and rampant corruption, it is even more likely that the Venezuelan elite will look to emigrate. With over one million Venezuelans estimated to have emigrated during the Chavez regime, according to the CIA World Factbook, and almost 200,000 Venezuelans living in the US, there are strong established ties in both the United States and Europe bolstering the hopes of EB-5 project sponsors looking to Latin America for increased investment.



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