“I’m a young, single US Citizen who is very concerned with the way things are going. I hope the government works things out fine. But in the meantime, prudence dictates that I have an exit strategy in place.”

That question came in recently for a reader asking about second passports and economic citizenship programs. The client was willing to do the following things:

1. Marry a Local Citizen (with an enforceable pre-nup).
2. Purchase a small property at Fair Market Value and pay property taxes.
3. Start a small business and pay local taxes.
4. Spend time to learn the local language.
5. Live in my new country for about 4-6 months per year for 3 years.

However, he also had a clear list of things he wanted to avoid:

1. I’m not willing to spend much more than 4-6 months per year.
2. I’m not willing to wait much more than 3 years.
3. I don’t think a Dominican Republic passport, St Kitts and Nevis Passport or Dominica passport is taken seriously so I want to avoid those countries.
4. I want to Avoid Canada because their taxes are too high.
5. I want to avoid renouncing my USA passport (but I might if needed)

The client’s research has already had him zeroing in on South America. Both Uruguay and Paraguay are attractive options, though they both have their clear advantages and disadvantages.

Although I don’t necessarily agree that Dominica and St Kitts and Nevis passports are not taken seriously, people in the know will certainly be aware that you’ve bought them. They are respectable programs, but still, I can understand this chap’s sentiments. If you can take the time to acquire a second passport by residence, including learning some of the local lingo, the advantages are huge. Both Uruguay and Paraguay have great visa-free travel. Feeling comfortable with your travel document is very important, so, in this case, I would definitely recommend the client goes with something from the zone he has been looking into.

“I’ve never been to Uruguay but I did the most research on Uruguay and it seems like a good country to gain citizenship. I must marry a local to get my citizenship in 3 years.  I’m told a great advantage of Uruguay is that you only need to be in  the country 3 months per year for 3 years if married and 5 years if single. I don’t know if this is true?”

Not exactly. A great thing about Uruguay is that although the normal waiting time for a passport for a single person is five years, anyone who is part of a “family unit” living in Uruguay can apply for naturalization and passport after three years. This does not necessarily mean you have to marry a local. It just means that if you have family in the country, it shows a greater committment, and therefore the waiting time is reduced to three years.

Marrying a citizen of any country is fine as long as the married couple live in Uruguay. Gay marriages are acceptable too. A family unit could also consist of brothers, a father and son, an uncle and nephew etc. The point is just that you should have a significant other in Uruguay.

The time you have to spend there is not set in stone but I guess 4-6 months is about the minimum. The connection you have with the country is more important than the number of days you physically spend there. Buying real estate, for example, demonstrates a connection, as does having a local corporation, paying taxes and social security etc. These are the kind of things you can expect the Uruguayan government to check up on when it comes to applying for citizenship.

Living in Uruguay is easy. More details of expat life in Uruguay, for example, can be found at Ola Uruguay. In the areas where expats typically live, services are of first world standard and there is little corruption.

All this comes at a cost, however. Compared to the rest of Latin America, both real estate and the cost of living in Uruguay is high. In the jet-set hideout of Jose Ignacio, a trendy village half an hour east of Punta del Este, I thought I was in London or Paris when I saw the restaurant bill!

So that’s living and obtaining a second passport in Uruguay, but what about taxes? For more details of Uruguay residence and citizenship, I am currently working on a free report that should be available during the summer to Q Wealth members. The report will take into consideration the new tax situation in Uruguay announced in May 2010, where for the first time Uruguayan residents (both citizens and foreign residents) will be subject for the first time to taxation on their worldwide income. If you would like to get this report as soon as it comes out, and without having to remember to check back here from time-to-time, let us know here: Uruguay Residence and Citizenship.

Now, for young-at-heart individuals with a sense of adventure and a slightly higher tolerance for risk (or perhaps an appetite for profit?) there is a wildcard choice: Paraguay. One might choose Paraguay over Uruguay because:

• you can apply after three years for citizenship, with no need to worry about family units
• no need to buy real estate: $5000 deposit in a local bank is enough
• costs in Paraguay are much lower
• it’s a country full of business opportunities
• it’s more anarchic than Uruguay, meaning less control and more freedom… for example, nobody is really going to count how many days you are there. Having residence on paper is enough.

I’ll be writing more about second citizenship opportunities in Paraguay in the second part of this article, which will be published in a week’s time. In the meantime, we have another article here: Paraguay Second Citizenship

Although the Dominican Republic is not typically regarded as a tax haven, that is actually one of its attractions. Unlike traditional offshore centres, it has not been under pressure from the likes of the OECD, the G20 and the Obama administration. The Dominican Republic has a territorial tax system much like Panama’s, meaning that you can live there and enjoy the beaches tax free, provided your income comes from outside the country. It’s also known as one of the more liberal places for those seeking a second passport or citizenship.

The following is an edited version of an article by Rob Montes appeared in last week’s Q Bytes, our free newsletter. If you are not yet on the distribution list, sign up here: Free Q Bytes Membership to receive more exclusive content like this on a weekly basis.

Three Good Reasons to Consider the Dominican Republic for Second Passports and Offshore Investing

The more I learn about the Dominican Republic, the more I like it and see potential. Learning more was my original purpose in studying its national history. Right now the country has three things about it that would be particularly appealing to our members:

• Tax Haven – Dominican Republic has a territorial tax system, meaning that if you live there, you would only be subject to pay taxes if you had local income. You can earn what you like outside the country and you don’t even have to declare it, yet alone pay any taxes. This applies to both individuals and companies.

• Second Passports – Dominican Republic is one of the most liberal countries when it comes to granting citizenship through naturalization. After two years of residence, you can ask for a passport. As long as you haven’t done anything to upset the President, he will sign a decree making you a citizen. Absences of up to one year at a time don’t affect your residency status. This liberal naturalization law dates back to 1948, and there is much talk of it changing soon. Dual citizenship is allowed.

Note: Please do not confuse the Dominican Republic with the Commonwealth of Dominica. The Commonwealth of Dominica is a small, English-speaking island state with an established economic citizenship (second passport) program catering mainly to the super wealthy. The Dominican citizenship program requires an investment of hundreds of thousands of dollars. With Dominican Republic, however, you could likely obtain your second passport for as little as $10,000 – $15,000 plus the two year wait.

• Liveability – Dominican Republic is a good place to live. First of all, it’s affordable. The tax exemption you get in the Bahamas by buying a half-million-dollar property you get almost for free here. The capital, Santo Domingo, is a modern cosmopolitan city with a beautiful colonial heart. The Spanish colonised it, then the Americans were mainly responsible for the development of the city. The country’s second city Santiago, and the beautiful north coast, were only joined by decent roads built by the Americans in the 1920s. Before that, the north was almost a separate country – trading more with the British and Germans. Today there is a substantial Jewish population up there, and parts where French and Italian are frequently spoken. So there’s really something for everybody.

Dominican Republic has not been high on the traditional lists of places to retire to, that are hyped on the internet. This might be a good thing. Real estate is good value, it’s relatively easy to immigrate and obtain citizenship, and the business environment is nearly as favorable as the climate!

We will be in Dominican Republic next month and if any subscribers would like to get together, feel free to e-mail me. We can also recommend a special VIP immigration processing service, so you can get your initial residence by spending as little as one day in the country.

The ‘underwear bomber’ incident on Christmas Day on the NWA flight landing in Detroit should serve as a wake-up call for us all.  All the security measures put in place by governments supposedly to protect us against terrorists are not working. The government’s knee-jerk response is to increase security checks. Both these facts are of serious concern to our security, privacy and freedom. Allow us to explain…

Here at Q Wealth our intention is to bring you the common sense analysis behind the headlines. We base this analysis on our extensive experience and our good friends in both the ‘civil liberties’ and ‘intelligence’ communities. Bearing in mind that few facts of the case are known as yet and we are relying on TV reports for our information, here is our initial analysis – first of the actual event, then of the consequences. Warning: It is scary stuff.

First the good news: no-one was badly hurt. The underwear bomber burned his butt. Initial reports suggest he did not have a bomb, but rather some powder sewn into his underwear that he tried to inject with a liquid to cause a fire. Fortunately aircraft interiors are designed to be flame resistant, cabin crew are suitably trained and equipped with fire extinguishers, and one brave passenger physically restrained the terrorist. These three basic, sensible precautions saved the passengers and crew on that flight and the people on the ground below.

Whatever one may think of multi-billion dollar global spying operations and intrusive airport security measures, if they worked it would at least be a strong argument in favor of them. But this incident shows they do not work. The suspect’s father, a prominent banker, had taken the extraordinary step of reporting his suspicions about his son to the US embassy. The UK had refused to renew the suspect’s student visa because of his apparent terrorist connections. Yet here he was in possession of a valid US visa, travelling in his own name, allowed on board a flight to the US.

Airport security in Amsterdam, where the suspect boarded, is as ‘good’ as anywhere else. This writer passed through one of the new full body scanners there nearly a year ago. These are the super-duper new machines that are due to be rolled out over the USA next year. On my particular flight, the business class passengers were being checked by the new machine, while economy class passengers were being checked using the older method.

Nobody informed us what the machine was so I guess the majority of business class passengers had no idea they were having these photos taken. But a properly trained terrorist, especially one with a mechanic engineering degree like this one, who had something sewn into his underwear would surely have recognized the machine and snuck into the other line.

We are civil libertarians but we certainly recognize the need for airport security. The normal airport security that was in place in Europe (but not the US) in 2001 did not particularly bother passengers. It involved a quick scan of the hand-luggage and passing through a metal detector, as well as routine scanning of all checked baggage – measures which would very likely have prevented the 9/11 hijackers. I can also see the logic behind separating laptops at the scanner.

But none of the rules introduced since (restrictions on liquid, taking shoes off etc) make any sense. Does anyone think for a moment that a terrorist is incapable of forging a prescription from a Nigerian doctor that would allow him to take a syringe and more liquid that normal on board a plane? Depriving us of blankets and pillows or restricting hand luggage is just about inconveniencing passengers for absolutely zero security benefit.

Frankly, there is nothing more we can do in terms of physical airport security. It is impossible to introduce a fool-proof system. If a person is smart and determined enough they will be able to carry dangerous items past poorly-paid security guards – people who are taught to function like robots by reacting to whatever the latest threat is and, especially in the USA, to using scare tactics to bully passengers. And while the west wages war in other parts of the world, there will always be those smart and determined people.

Then another personal gripe of mine. More pressure on the use of cash payments for airline tickets. Last night US media were making a big deal of the fact that this guy paid cash for his ticket in Nigeria. All the ‘experts’ claim this is a warning sign of potential terrorist activity. I hope the people who are really in charge, rather than the so-called experts on TV, aren’t so stupid. I took the liberty of checking out the State Department’s website and here is what they say about use of credit cards in Nigeria:

The Nigerian currency, the naira, is non-convertible.  U.S. dollars are widely accepted.  Nigeria is a cash economy, and it is usually necessary to carry sufficient currency to cover the expenses of a planned visit, which makes travelers an attractive target for criminals.  Credit cards are rarely accepted beyond a few upscale hotels.  Due to credit card fraud in Nigeria and by cohorts in the United States, credit card use should be considered carefully.  While Citibank cashes some traveler’s checks, most other banks do not.  American Express does not have offices in Nigeria; however, Thomas Cook does.  Inter-bank transfers are often difficult to accomplish, though money transfer services such as Western Union are available.

So any airline flying from Nigeria had better accept cash payments……

But this is not an article about airport security. Travelling is a hassle these days but lack of pillows is a minor annoyance in the greater scheme of things.

Think for a moment about what would have happened if this attack had succeeded. The indirect consequences could be much worse than the direct ones. Think back to September 11th, 2001. Only this time imagine it worse. A lockdown of the USA. Borders could be sealed. Banks could be closed (Google the ‘bank holiday’ conspiracy theories…) and ATMs switched off. Assets could be appropriated by the government, as is common in times of war. Telecommunications and the internet could stop working. Martial law could be imposed. Events could easily get out of hand – causing blood in the streets, figuratively if not literally.

Similar things could easily happen elsewhere too. In the UK, for example, it is well known that the military have an emergency plan to seal off the whole of Greater London.

As smart individuals we need to make sure we are properly prepared for such catastrophes. Unfortunately, I think the probability of a successful major terrorist attack within the next few years is high, and it is more than likely to target the financial system. This would in many ways be awfully convenient for the powers that be, too – since then they would have somebody else to blame for a total collapse of the financial system that is happening already (see the related post links below to read about the decline in the value of the US dollar or ‘dollar devaluation‘)

I certainly hope I am wrong, and I am by no means saying that all the above things are going to happen. But I consider it would be smart to be prepared. It’s clearly better to have contingency plans in place and never have to use them, than the other way around.

So let’s treat this incident as a wake up call. We all get lazy. We all get stuck in our routines as soon as we feel a little bit comfortable and secure. But it should be a serious New Year’s resolution to put into place strong strategies to protect not just your assets but yourself. Don’t put it off. Do it now before it’s too late!

What do I mean? Different people have different necessities. But here are some of the basics:

• Physical gold and silver: The majority should be stored outside your home country, but you need some at home. Silver coins are better to barter for things like food. Both silver and gold are great investments. But if trading on the markets is suspended then all your ETFs, mining stocks, Perth Mint Certificates and the like will be worthless, at least in the short term. You need a proportion of your portfolio in physical metals. More on Buying Physical Gold Bullion Offshore here.

• Second residencies and passports: Again, it’s all about diversifying risk. Identifying yourself and your family as citizens of a neutral country may just come in very handy one day. Mobility is essential for your security. In the meantime, having legal residence (the papers) and/or a bolt hole (physical property) in a secure jurisdiction like a tax haven, well away from potential problems, is also reassuring. Rather than being forced to flee to an unknown place, you can just step comfortably in to a new life you have waiting for you. And the legal residence can lead to a second passport by naturalization after a few short years. More on Second Passports and Residencies here.

• Offshore Banking: Something as simple as opening a multi currency bank account outside your home jurisdiction can reduce and spread risk. Hold funds in various currencies and financial instruments. Any prudent investor should have international and foreign currency holdings and a multi currency account is a good starting point. For greater security and personal privacy consider the use of a Panama Foundation or Corporation. More on Offshore Banking matters here.

• Alternative Incomes: What would you do if you had to abandon your business tomorrow and leave the country? You should have not just assets in place overseas, but also a secure income stream from some sort of business you can run internationally. More on Offshore Wealth Creation here.

• Understand and Use Privacy Technology: Secure your internet communications. And, though this is certainly more difficult, think about what you would do if you didn’t have access to the internet. I don’t believe the whole internet will collapse, but parts of it certainly could. More on Privacy Technology in our new Secure Computing report, available in the members area.

There are lots more contingency plans you might need to put in place, depending on your family, your business, and your personal situation. For this reason we offer a free e-mail consultation to all paid-up Q Wealth members (obviously in our own time, it can take a few weeks for your reply) and we encourage you to attend our events where such contingency plans are discussed.

The first and most important step, if you like this article and haven’t already done so, is to sign up for our free Q Bytes newsletter to benefit from free weekly tips on major themes like offshore banking, asset protection, personal security, precious metals, and offshore wealth creation.