The Citizenship by Investment Program (CIP) is St Lucia’s lifeline to bringing foreign capital into the country, while simultaneously funding development projects and providing tax-free status through citizenship for the investor. With the island-nation unable to borrow anymore money through rights issues, all eyes fall upon the CIP; a program marred with accusations of controversy, impotence and perhaps illegality. Newly-appointed CEO of the Citizenship by Investment Unit, Mr. Nestor Alfred, has brought with him the mantra of due diligence but acknowledges a battle to assert investor confidence.
With an effectively worthless bond system, and the egg-on-face situation of the 60 minute documentary that made a mockery of the regions CIP system, it is down to the newly-appointed chief to reposition the image of St. Lucia’s model of Citizenship by Investment and hammer home its socio-economic importance. The man in the hot seat cites the IMF’s fourth consultation, which certifies the contributions to GDP and to the reduction of debt that similar CIPs have had across the region. Similarly, the island has fared well compare to the regional counterparts in the eyes of the Caribbean Financial Action Task Force’s assessment. The pressure remains to make sure this model is secure and sustainable and can be utilized as a genuine economic driver for St. Lucia.
Topping the list of priorities for the incumbent is to make the program secure; by making sure those that are issued citizenship are of good character and have a clear criminal record. The scheme has been dubbed as cash-for-passports which lacks the necessary regulation. Alfred confesses: “When people think about CIP they think about selling passports, and selling your birthrights, and sometimes there isn’t sufficient information going out, whether it is to the citizenry or the general populous outside of solution.” So it’s not just about passports being effectively sold, the CIU hasn’t been able to promote and represent the scheme appropriately.
For the system to have a “meaningful contribution, not just in revenue, that is must have a structure that is robust and strong; and I speak specifically of the due diligence system. So when we give those citizenships they are not going to rogues.” The key question is what is this process and how is it executed and monitored? There is a lack of detail from the Chief Executive.
Minimum investment starts at $100,000, although the man at the helm doesn’t have the figures for the bottom line cost, once the promoters, marketing team, and lawyers have all taken their fees and commissions. Therefore, it is difficult to be accurate about how much the program contributes in dollars. This minimum investment weighs in at a reasonable figure, but for similar investment any businessman or woman could set up an IBC; a system which has been proved to work throughout the region. Alfred talks up the idea of an investor looking to expand their business, and becoming part of the socio-economic fabric of the island. It’s romantic, but ultimately unconvincing, particularly noting the previous administration’s threat to remove citizenship should they return to power, having been ousted in 2016. By contrast, IBC status remains protected under CARI-CON treaties. Alfred doesn’t wish to speak on behalf of politicians, but acknowledges that those threats may not be the most appropriate.
The flagship project that the CIP has been partly funding is the mixed-development “Pearl of the Caribbean” project, which will include a racecourse as part of a bid to draw tourists to the country. The 840-acre project will be lead by Hong Kong-based investment firm Desert Star Holdings (DSH), but will be fortified with money accrued by the CIP. The development has already received international criticism ranging from the environmental, to socio-economic as local pig farmers will have to be relocated. It is not clear how much capital will come from the private sector, and how much will go be funded through CIP.
The government has confirmed that it will lease lands to DSH at a measly $1 an acre, costing them a grand total of $840. The purchase price of these lands is valued between $60-90,000. It begs the question whether the project is financially viable, given the temporary foregoing of at least $50.4m of revenue. St. Lucia’s GDP in 2015 was $1.4bn, making this $2.6bn project is a true behemoth, but the government is focused on job creation and mobilising resources so that they can have a long-term economic benefit. It primarily looks like the outright profit making is a focus for the private investment. It isn’t clear whether this could leave return-seeking CIP investors in limbo, as their investment is private capital is driven through the government scheme.
There is a cocktail of issues surrounding still surrounding the program; the integrity, longevity, and whether it is actually the best way for investors to gain access to the St. Lucia market. The success on the scheme rests on the ability for the management to place security at the fore, which can generate investor confidence. Should this uphill struggle be traversed, then CIP can truly function as its intended purpose; as perhaps the last lifeline of FDI to St. Lucia that can deliver socio-economic development.