By Uglobal Staff
Saint Lucia’s citizenship by investment program saw a surge in applications in 2017, thanks to the government’s decision to reduce the cost of donation-based individual applications from $200,000 to $100,000 at the start of the year. Still, stiff regional competition and political blowback mean the island could face a struggle to sustain momentum in 2018.
The program raised less than $6 million for the island’s government in 2016, its first full year of operation — just a quarter of the $24 million that officials had anticipated, according to Saint Lucia’s Department of Finance. In 2017, following the price cut, the program raised more than $43 million, and officials forecast that revenues will rise to almost $65 million in 2019.
The surge has been driven by the lower price-point, which attracted a significant number of applications from the Middle East and North Africa region, said Jonathan McNamara, COO of McNamara Citizenship Services. “We were priced out of the market in 2016,” he said. “Once they reduced the price, at the beginning of 2017, that’s when, in my view, the program really started to get some traction.”
The 2017 reforms also saw Saint Lucia remove a a cap of 500 passports per year and scrap a ruling that applicants have a net worth of more than $3 million.
Saint Lucia’s CBI program offers several pathways to citizenship. The donation pathway costs $100,000 for individuals, $165,000 for married couples, and $190,000 for a family with two children. Investors can also qualify by purchasing government bonds and holding them at zero interest for five years, at a cost of $500,000 for individuals or up to $550,000 for a family with two children. Other options include a $300,000 investment in approved real estate or making an enterprise investment of $3.5 million.
Both bond and real estate applications carry additional administrative fees: a $50,000 per application fee for bonds was introduced in early 2017, while real estate applicants must pay $50,000 per application, plus $35,000 per adult dependent and $25,000 per minor dependent. There are no administrative fees for donation-based applications, but all applicants must pay $9,500 in processing and due diligence fees, plus up to $6,000 in fees for each dependent.
In the program’s early days, both bonds and donations proved popular with investors. Now, though, virtually all applications come through the donation route, said Diana Thomas, a partner at Deterville, Thomas & Co. law firm. “When the prices dropped in January, nobody would take the bond option,” because the lost interest on a bond investment cost about the same as simply making a donation, Thomas explained. “People who’d been interested in the bond option changed course to do the NEF option.”
Saint Lucia’s National Economic Fund is a special fund, created under the Citizenship by Investment Act, to receive qualifying cash investments for funding government-sponsored projects.
No enterprise projects have yet been approved by the government, and the three approved real estate projects haven’t yet been opened to investors. Still, agents anticipate strong demand for such opportunities, especially from the Chinese market.
“In terms of real estate, none have come off the ground as yet, but it’s very, very popular,” Thomas said, adding that she’s received numerous calls from agents and investors seeking real estate opportunities. “The Chinese market is now opening to us,” she said.
Despite a successful 2017, there are signs that Saint Lucia could struggle to deliver a similarly robust performance this year. Agents saw a wave of applications following the price cut, said Patricia Prudent-Phillip of Citizenship and Corporate Services, but demand dropped later in 2017 as rival Caribbean CBI jurisdictions such as Saint Kitts and Antigua also reduced their prices.
“With Saint Kitts and Antigua drastically slashing their contributions, Saint Lucia is no longer one of the cheaper programs,” Prudent-Phillip said. “From our experience, that’s affecting demand.”
Also of concern was Saint Lucia’s inclusion on the European Union’s tax-haven blacklist in December 2017. Besides complicating life for Saint Lucia businesses, some CBI experts fear the rating might impede Saint Lucia’s efforts to win or maintain visa-free travel for its citizens, or otherwise reduce the attractiveness of Saint Lucia passports.
Further problems could come from a domestic source: the 2017 reforms were implemented after the island’s conservative United Workers Party ousted the Saint Lucia Labour Party in the 2016 general election. The SLP, now an opposition party, has vowed to reinstate the net-worth requirement, revoke the citizenship of CBI beneficiaries who don’t meet the standard, and levy additional charges upon applicants who benefited from the lower prices.
“All citizens who did not donate the full contribution amount of $200,000 will be compelled to top up the contribution that they made at the time of becoming citizens,” party leaders warned in a statement.
Government officials have sought to reassure investors, saying that Saint Lucia’s laws allow for revocation of citizenship only in very limited circumstances. “This is a program the opposition party put in place, yet now they are trying to undermine it and scare away potential investors,” said government spokesperson Nicole McDonald.
Industry professionals said they believe the row will blow over before Saint Luca’s next elections, which aren’t scheduled until 2021, and said it’s unlikely that the SLP would act upon its threats even if it regained power.
“I don’t think that legally they can do that,” McNamara said. “It’d open up a whole can of worms.” It would be possible for the SLP to overhaul the CBI program moving forward, but retroactive changes would invite lawsuits and scare off investors, he argued. “It would be a complete nightmare, and probably a death blow to the program. I don’t know how you’d recover from something like that.”
In a bid to steady the ship and make Saint Lucia’s CBI program more attractive, officials are now reportedly considering further changes, including a move to accept payments in euros, yen, and perhaps Bitcoin, and an effort to open a branch of the Bank of Saint Lucia in Dubai to facilitate money transfers. Industry experts also anticipate changes to the rules governing dependents, to allow investors to include older adult children and younger parents on their applications.
Meanwhile, Nestor Alfred, who took over as CEO of Saint Lucia’s Citizenship by Investment Unit in August 2017, is taking a conciliatory stance that industry professionals said has been well received by islanders.
“I can fully understand people’s level of hesitation and concern when they think of the program,” Alfred told reporters after taking office. Still, he insisted that the CBI program would deliver significant benefits to the island. “It is maybe one of the more important avenues at this time where we can look towards growing our economy and creating the jobs that we require,” he said.