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Recent news from the Phoenix Business Journal revealed that a Costa Rica-based investment firm purchased more than $12 million in cash to acquire an office complex in Arizona’s capital. In October, The Costa Rica Star reported on the acquisition of North American Breweries Holdings by Florida Ice and Farm Company, S.A., a transaction valued at $388 million, also in cash.

The transactions above may signal the reversal of a trend in which investors from the United States flocked to Costa Rica in the last two decades of the 20^th century and pumped dollars into the national economy, at least until the global financial crisis and the recent Great Recession set in. The ripple effect from the meltdown of the credit, mortgage and real estate markets in the U.S. managed to topple economies around the world, but Costa Rica and other emerging markets proved a bit more resilient.

The U.S. has struggled to maintain its macroeconomic edge over the last few years, and attracting foreign investors -an initiative normally reserved for developing nations such as Costa Rica- has been part of that country’s strategy for economic recovery. The EB-5 visa for immigrant investors is at the heart of this strategy, and it could end up shifting some funds from Costa Rica to the U.S. as Tico investors with big pockets are enticed by the prospect of giving jobs to desperate job seekers in the Land of the Free.

The Costa Rica Star recently spoke to Reid Mack, a Miami-based business strategist who helps foreign entrepreneurs apply for the EB-5 visa, about current business trends in the U.S. and how they can impact Costa Rica.

Reversing the Flow

As a developing nation and emerging economy, Costa Rica has seen her fair share of foreign investors arrive with hope in their eyes and plenty of entrepreneurial spirit. Foreign direct investment (FDI) has always played an important part in the country’s economy, and a significant flow of investors and entrepreneurs from the United States was a staple of business life in Costa Rica at the turn of the century. Things have changed, however, and the some of that investment flow seems to be reversing.

When The Costa Rica Star covered the legislative elections in May 2012, one of the highlights was President Laura Chinchilla’s lengthy speech about how during her first term in office FDI increased by 40 percent. Days after her pronouncement on the matter, she attended the inauguration of a new IBM Technology Services Center in Heredia. This $300 million FDI will produce 1,000 new jobs for qualified applicants in the next two years, but it is less than what Florida Ice, makers of Cerveza Imperial, paid for the rights to distribute Canadian Pilsner staple Labbat Blue in the U.S.

The EB-5 visa program is labeled by the U.S. Citizen and Immigration Services (USCIS) as “Green Card Through Investment.” The program has been around since former President George Herbert Walker Bush was in power, and it never really attracted too much interest until 2008. Under the administration of President Barack Obama, however, the program has become somewhat of an industry, timely providing desperately needed jobs and investment.

Here are the basics of the program:

• Only 10,000 of these EB-5 visas are granted per year

• Investors must be ready to invest a minimum of a million dollars. In some rural areas of the U.S. where unemployment is rampant, the minimum investment is lowered to $500,000.

• The coveted green card can be extended to foreign entrepreneur’s spouses and their minor children.

There are also a number of EB-5 Regional Centers that are essentially business entities that promote economic growth and job creation across the U.S. These centers are approved by the USCIS to assist in the viability and success of the EB-5 program, but they are not guarantees of a visa approval. What some of these centers have accomplished with foreign investment funds is significant. A current proposal of one such regional center in Miami is an 83-story building, the Panorama Tower on Brickell Avenue, right in the heart of an important financial center for the U.S. and Latin America.

Here’s what Reid Mack, Managing Director of the Business Plan Institute told The Costa Rica Star about the EB-5 program:

The Costa Rica Star (TCS): Have you received inquiries from Costa Rica businesspeople interested in the EB-5 visas?

Reid Mack: I receive many inquiries from Latin American investors, and some of them from have been from Costa Rica.

TCS: What kind of services do you provide to potential investors?

Reid Mack: The business plan. This is a key component in getting EB-5 visa approval. While the USCIS does not have any hard and fast rules for the business plan requirements, there has been guidance given in the form of an Administrative Appeals Office decision known as Matter of Ho that set forth the requirements of an EB-5 compliant business plan.

TCS: Are investors aware of the business plan requirements?

Reid Mack: Not many. Some foreign investors look at the application process and think it is a do-it-yourself affair, with fill-in-the-blanks forms and a few narrative questions. The reality is that they often require legal counsel and a comprehensive business plan that is compliant with the Matter of Ho administrative decision.

TCS: How many investors are in it just for the green card?

Reid Mack: I get quite a few of those inquiries. You have to remember that the EB-5 visa is essentially a passive investment, which prompts some straight-forward applicants to simply say: “Look, here’s a million dollars, just give me my visa and green card!”

TCS: I imagine that is not possible?

Reid Mack: Well, the program is for fostering economic activity through investment and job creation. There are many deep-pocketed investors who need advice, or who want turnkey business solutions.

TCS: And you provide those? Can you explain with an example?

Reid Mack: Many Latin American investors are real estate speculators at heart. They scan the business sections of the newspapers, check online listings, watch CNBC, etc. I can tell you that there are many real estate bargains in South Florida, probably cheaper than Costa Rica.

TCS: That’s not hard to believe. Costa Rica has some of the most expensive real estate in Latin America and the Caribbean, but that doesn’t seem to deter investors.

Reid Mack: Well, the job creation quota is difficult to fill based on real estate speculation alone, so on a recent application in which my company provided the business plan, the attorney suggested the purchase of $125,000 plant nursery just to support the jobs.

TCS: That is some swift, practical advice.

Reid Mack: And in another instance, a couple of foreign investors set up a property management division to meet the job requirements, but their real passion was investing in real estate and living the American way of life. What we do, through adequate business planning, is give the investors a blueprint for job creation that will fuel the regional economic engine. If you have the money, you can put it to work by putting others to work; in this way, everyone benefits.

TCS: How about security? How extensive are the background checks are for the EB-5 visas in a post 9/11 world? Is there any chance that a nefarious organization with plenty of money in their illicit coffers could infiltrate the U.S. through this program?

Reid Mack: Sounds like a James Bond or Jason Bourne plot. I don’t know the exact procedure that USCIS follows with regard to background checks, but I can speak from the money point of view. Investors need to show where the money came from and where it is, show the transfers etc. You have to show seasoned documented for funds that make sense, along with foreign tax returns and other certified financial records.

TCS: How do you feel about investors from Costa Rica, a developing nation that has experienced increased prosperity and quality of life but that many still consider a Third World country, taking advantage of the EB-5 program? Do you think the U.S. is still the land of economic opportunity?

Reid Mack: The investor has to come to that conclusion. My business plan writers are very skilled; the plans they create provide valuable analysis about a country’s economy, industry, market, competitive factors, return on investment (ROI), and other factors that paint a realistic picture for investors. The business plan shows if it makes good sense to invest in the U.S., and the investor has that to think about. It has to make good business sense in the first place; the green card is just one enticement. Some businesspeople think the U.S. is teeming with opportunities, but emerging markets like Costa Rica can also be very profitable. You have to remember that shrewd investors with plenty of money can be found in all corners of the world.

TCS: Thank you very much, Mr. Mack.

Reid Mack: You are welcome.

In the end, Tico investors could consider the EB-5 visa program a form of economic citizenship, but like Mr. Mack explained: It has to make business sense in the first place. The EB-5 program did not attract too many applicants when prosperity was high in the U.S.  In the wake of the Great Recession, some U.S. citizens have looked for ways to renounce their citizenship.

Some U.S. citizens have strong reservations about their country being put in the same basket as other countries like Antigua, Austria, Bulgaria, St. Kitts & Nevis, etc. Costa Rica has some level of economic citizenship as well, although the investment amounts are much lower than in the U.S. The level of red tape and bureaucratic inefficiency of the immigration process in Costa Rica, however, does not make it too attractive –even if some of our country’s policies are becoming eerily similar to those of the U.S.

Note: Reid Mack also lent his business insight back in August, when he explained why a major Hollywood production about the online poker industry in Costa Rica ended up bring filmed in the island of Puerto Rico instead.