Caribbean Citizenship-by-Investment Programmes: Performance and Challenges


Coat of Arms for St Kitts & Nevis, Grenada, Dominica, Antigua and Barbuda, and St Lucia

History and Growth of CBIs

Citizenship-by-Investment programmes began in 1984 in St Kitts and Nevis, followed by Dominica in1991, by Antigua and Barbuda and Grenada in 2013 and then St Lucia in 2015. Since 1984, several changes and adjustments were made to the various schemes. Basically, however, there are three types of programmes: a financial donation; real estate and an investment. The donation normally goes to the treasury or to a national development fund to finance strategic development projects. The real estate option which has become the most attractive in terms of demand involves the purchase of property which could be sold after an agreed length of time. An investment would normally cover the purchase of a redeemable financial instrument as a government security. Programs could entail any one of the three above or any combination of them Application fees and a sum catering for due diligence costs are also generally attached to these programmes, and what makes these programmes different from those in Europe is the absence of a residency requirement.

Essentially, the decline in foreign investment and development assistance coupled with the external shocks as the 2008 financial meltdown as well as natural hazards created a need for these programmes. The region has been subjected to heavy losses in GDP due to annual hurricanes. Post-colonial transformation out of sugar and bananas also posed serious problems as well as the need to respond to small state vulnerabilities and build resilience. These were all important drivers behind such programmes.

Judging from what has been assigned to the budget and using available IMF Article 4 Consultation Reports for four countries which have estimated figures generally for the last one or two last years, inflows in the case of St. Kitts and Nevis peaked in 2019 to XCD $ 442.6 million. The nearest to that level was XCD $ 417 million in 2018. On average from 2016 to 2021 the annual sum was around XCD $299 million.

For Dominica the highest recorded revenue was in 2016 which was XCD $ 494.6 million with an annual average of XCD $341 million over the period 2016 to 2021. Similar figures for St Lucia were XCD $67 million in 2018 and an average annual of XCD $33.5 million from 2016-2021.  Similar figures for Grenada were XCD                   $ 4.9 million in 2017 and XCD $3.6 million annual average for 2016-2021 with IMF estimated figures from 2018. No comparable IMF figures were available for Antigua but from an unconfirmed governmental source there was XCD $ 49 million in 2019 and an average XCD $ 33 million annually from 2016-2020.

The performance of these schemes has been particularly good in St. Kitts and Nevis and Dominica. On average from their inception these funds have experienced some growth in terms of the number of applicants and their geographical sources. The pandemic does not seem to have negatively impacted these programmes up to 2020 and 2021 where the on-average the inflows remained close to their average over the last six years.

Development Impact

In St. Kitts and Nevis, these inflows have promoted, in particular, real estate, tourism and construction. The impact of this economic activity has been a boost to employment. Most government projects are now believed to be funded by these CBI schemes According to the IMF, after a decade of saving a significant part of the CBI revenues, and using those funds to significantly reduce public debt to below the regional target debt of 60% GDP, St. Kitts and Nevis was able to respond to the impacts of the COVID-19 pandemic, to pursue assistance and recovery programs, as well as give allowances and subsidies 

In Dominica, they have been used for reconstruction and debt servicing with large sums being spent on the post-Erika emergency infrastructure works and to finance the National Employment Program. Mounting debt in Dominica has now ushered in calls for more CBI funds to be spent on debt reduction.

In St. Lucia, the CBI intake has been modest and was spent, inter alia, on repairing a building affected by the hurricane in July 2021 and paying farmers for the destruction of their banana crop. Authorities are planning a wealth fund together with financing capital projects and repurchasing debt. 

In Antigua, revenues have been employed to support a wide range of public expenses such as pension payments, overtime payments, LIAT 1974 Limited, and other miscellaneous items causing the main opposition party to raise concerns that the funds are being mismanaged.

The CBI Programme in Grenada has focused on general budget financing, including contingency spending, natural disaster response and debt reduction. According to the IMF, there is scope for using inflows to boost resilience and promote job creation and development in other sectors, such as agri-business and ICT. 

In general, CBI programmes in these five states have contributed from 0 per cent of regional GDP in 2007 to now roughly over 5 per cent in 2021. In St Kitts and Nevis and Dominica this figure most likely would be over 10%. They have made an important contribution to macroeconomic stability by improving the fiscal balance, debt repayment, and economic growth. These inflows have substantially supported current economic recovery particularly in St. Kitts and Nevis and Dominica, and to a lesser extent in Antigua and Barbuda. 

Management of CBI Schemes

CBI programmes have come under scrutiny from many local, regional and international agencies. In brief, the concerns expressed largely surround issues of transparency and accountability. The former touches mainly on the paucity of information on the number of applicants for and recipients of citizenship and the amount of revenue collected and its use while the latter involves the provision of oversight and regular audits. As a consequence, CBI programmes are in need of wider public support through a perception that they are generating benefits to all sectors of the population. 

One issue that has encouraged the above negative perception is the extent to which revenue from these schemes is channeled through the country’s budget. In some countries contributions to certain development funds are not reported as part of the budget and managed at the discretion of cabinet. The CBI revenues from the real estate option, as in Dominica,  are regarded as “non-fiscal”, held in commercial bank accounts and transferred to the budget when convenient. 

It is difficult to get an idea of what amount is held outside of the budget since all revenues collected are never fully reported. Whether funds raised through the Real Estate Option, and placed in an escrow account are not legally required to be put into the consolidated fund has to be determined by domestic law. What is clear however, is that an independent audit into the management of this fund is a key requirement for transparency and accountability. Apparently, such an audit is not forthcoming from those appointed as assessors. Finally, application fees and their surplus earnings are also handled outside the budget framework, in most if not all cases, at the cabinet’s discretion. 

In St Lucia, the programme appears more transparent and accountable. As prescribed by the law, at the end of March every year an annual report is submitted. Audited financial statements for each year are included in the annual reports. The last report was filed in 2021. 

Finally, even though in some countries the budget estimates make mention of CBI revenue collected and spent, yet that listing is not a full indication of all CBI revenues collected and spent. With such expenditure outside the budget it is not possible to have a clear idea of the complete nature of Government’s fiscal expenditure as well as incorporate a more transparent frame of accounting to public spending.

The Way Forward

CBI schemes are evolving as countries seek better ways to manage these flows and make them sustainable in the face of growing threats and competition. Caribbean countries have successfully been able to negotiate visa free access in on average around 120 countries which have made these programmes very attractive along with their low cost. The Caribbean CBI programmes have been performing well in the context of a surge in interest in these programmes. Increasing wealth in emerging markets and the rise of geopolitical uncertainties and insecurity have been pushing the demand for these programmes. Alongside this latter development is also the fact that international finance agencies, OECS and ECCB as well as other bodies have also been providing advice on how best to manage these schemes. Most countries seem to be heeding this advice and attempting to adapt to common standards. 

Today countries are moving towards developing a prudent management framework in which saving, debt repayment and the building of financial buffers will get more emphasis. In the region the idea of a wealth fund is growing in attraction to deal with the exogenous shocks that these countries face continuously. Countries are also mindful of the need for solid due diligence to keep their programmes competitive. 

There are however, some lingering issues which have to be resolved. One is the extent to which names of applicants can be divulged without jeopardizing the programme. Another is what can be considered public revenue as opposed to direct foreign investment. A third is the required disclosure from audited accounts and the frequency of financial reports to Parliament. In the future, these matters will require more national attention as well as greater international co-operation and information sharing between authorities.

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