by Peter Macfarlane

Here at Q Wealth we have been writing about Paraguay for nearly a decade. In that time we have seen many of our readers happily immigrate to Paraguay and some have obtained citizenship through naturalization, and with it the Paraguay passport that Paraguayan citizens are of course entitled to. I first visited Paraguay in 2004 and saw a country with huge unexploited investment and development potential, populated by friendly and well-educated people. The past years have been difficult for Paraguay, with a lot of ups and downs, but now things are finally going well there. Mark my words: Paraguay is really set to boom now.

That’s one of the reasons why in January this year we held our first ‘Paraguay Briefing’ in Asuncion, at which we introduced a number of our  readers in person to our recommended residence and citizenship expert, to a top bilingual lawyer in Asuncion who is an expert in real estate, and to various experts on agriculture and land investments. In the evening we enjoyed dinner together at one of Asuncion’s trendy Irish pubs.

Those who attended that briefing had the chance to make a killing, just by opening a local currency Paraguayan bank account – a great opportunity to diversify into a non-US dollar bank account. In January 2011, $5,500 (the minimum required for the residency application) in a Paraguay bank account would have bought around 25 million guarani (local currency). Today, about three months later, that 25 million would buy $6,250. That is just currency appreciation, not accounting for interest etc. We fully expect the dollar to keep falling and the guarani to keep rising.

Anyway, one of the reasons we always liked Paraguay was that it was off the radar. Paraguay has been popular with German expats for some time, mainly for retirement. The German ‘international retirement’ type newsletters have been discreetly pushing Paraguay for years. Most of the serious foreign investment, however, was coming from wealthy Brazilians and Argentinians, who were doing well in their own countries but very wisely sought to diversify. Spanish investors were another group of early adopters. There was very little information in English on Paraguay. That seems to be changing.

Change is certainly not a bad thing, and we’re happy that this wave of interest in Paraguay reflects the fact that our feelings and recommendations over the years have been spot on. But it is having an effect on residence and citizenship matters, which readers should be aware of.

First of all, things are getting harder, and the immigration office is getting stricter. For Americans, a local sheriff’s report used to work fine. Now you need an FBI ‘rap sheet’ report. The same applies to Mexican citizens, who need reports from their federal police, and some others.  We have also seen the immigration office getting much stricter on medical tests than they were before. Our sources in Asuncion indicate that this trend is set to continue, ie as more and more people seek to obtain Paraguayan residency rights, it will not be as easy as it was. The bottom line: if you’re considering it, do it sooner rather than later.

Second Passport Scams: Beware

Secondly, there are some scams popping up with regard to Paraguayan residency. For some time now we have known of facilitators in Asuncion who offer to help with residency and citizenship, then simply don’t deliver. I even lost $10,000 myself once to such a person. She was supposed to deposit the money in the bank, and she spent it instead. I had to put this loss down to experience, because if this kind of thing happens there is not much you can do.

That is why recommendation is so important. We have changed our contacts in Paraguay over the years but are now very happy with the one we are working with, who is by far the most efficient and responsive yet, even if hes more expensive than some. I know I can e-mail him and get a reply within an hour or two, or I can reach him on Skype or call his cellphone. He speaks multiple languages so I don’t have issues sending readers directly to him. That peace of mind is worth paying extra for in my opinion.

But there is more. The problem is no longer just Paraguayan wannabee fixers whose friends at immigration lose their jobs. Now there are gringos involved in this. The other day we saw a well-written e-book in English doing the rounds on the internet, with a lot of inaccurate and misleading info in it.  Let’s hope the author was just naive and mistaken, rather than intending deliberately to mislead people.

He claimed it was possible to get permanent residence ‘stamped in your passport’ in one week: completely false. That’s just not how it works. He claims that naturalization in Paraguay is easy: it used to be, but it’s getting more difficult. Nobody can guarantee what will happen three years from now. Honest facilitators will tell you this.

Then, he talked about using a cedula for travel within Latin America and avoiding visa fees at borders. He doesn’t point out that this applies only to Paraguayan citizens – the cedula issued to residents doesn’t count. And Paraguayan citizens wouldn’t be subject to the visa fees he mentions anyway. Then he mentions Germans having to relinquish citizenship if they apply for Paraguayan passports: most Germans I know in Paraguay who have done this are scared stiff that the German government will find out.It is not a good solution.

But that all pales in comparison with his claim that you can become a Spanish citizen in two more years (ie, five years after getting residence in Paraguay). This is just preposterous. Spain does allow for a shortened naturalization period for Latin Americans, yes, but it only applies to people born in those countries, and even then it will take a lot more than two years in practice. This concession in Spain absolutely categorically does not apply to naturalized Paraguayans. Call your local Spanish embassy and ask them if you don’t believe me.

Then there is the suggestion that you can live in Asuncion and hire someone to manage your ranch for less than the cost of your current monthly cell phone bill. Yeah, right, I agree Paraguay is a land of opportunity but it certainly isn’t that easy. Or maybe he just hasn’t figured out yet that he really needs to buy a local pre-paid chip instead of using international roaming!

Don’t get me wrong, there is some good info in this book that I agree with. There are good summaries of Paraguay’s green energy resources and investment opportunities, and information on how the Paraguayan government is supporting the mining business that I see as something full of potential (Paraguay is already a gold-producing nation with some of the biggest fresh water and natural energy reserves in the world)

I admire it when people set up new publishing businesses, and usually try to support them, but some of this guy’s research is seriously wonky, and publishing things like this damages the reputation of Paraguay’s hard-working, honest immigration consultants who have been quietly helping our readers over the years. It is sure to lead to further tightening of immigration rules. Residency and citizenship is simply not something you can commercialize and  package into a ‘product.’ People who try to approach things in this way will have problems. Immigration is something that has to be handled by lawyers on a case-by-case basis.

I happen to know for a fact that this stuff is already on the Paraguayan government’s radar. Yes, they can read English and they do have internet access.  No government likes the suggestion that its basic laws and procedures are being misused or abused. They are painfully aware that this kind of publicity can literally cause international incidents. Some years ago Paraguay was accused by the US government of giving citizenship too easily to Arabs, leading to it being stigmatized as a hot-bed of islamic terrorism. This was complete rubbish of course but still it led to a serious tightening up of naturalization procedures, and even today, Arabs are subject to blatant discrimination in the Paraguayan immigration offices.

So, in conclusion, Paraguay is now on the radar. I have investments there myself, I love the country, and I still recommend it for those who are seeking residence and citizenship opportunities. It is true that in order to be classified as a resident, you need only visit the country once every three years. It is true that with three years of residence, you can apply for citizenship. It is true that the costs are some of the lowest in the world, especially when compared to economic citizenship programs. I think changes are afoot so I would urge you to act now rather than later if you are interested in moving on the opportunities.

I would also suggest you plan on spending some time in this country of opportunity to get to know it for yourself. The government there are looking for real new residents, honest people who can bring benefits to the country. Behave appropriately, respectfully and politely when dealing with the Paraguayan government and you will be welcomed. Entrepreneurs and investors are very welcome. The same cannot be said for those whose only interest is seeking to acquire a cheap passport by the back door. They are not welcome. Paraguay does not sell citizenship.

Please take care who you deal with for your immigration processing and who you rely on for information. If you are a Q Wealth member, we are happy to assist you as always with referrals from our rolodex.

Further reading:

Q Wealth Second Passports Page by Joe B. Gonzalez

Second Passports by Residence and Naturalization

Economic Citizenship: Legal Second Passports for Sale

First and foremost, a Happy New Year to all our readers. May 2011 be full of wealth, health and peace for you and your family. Before I get on to the topic of new citizenship and residency opportunities (specifically in Latvia, Hungary and Montenegro) I would like to say a few very important words.

We have been extremely busy helping clients here at Q Wealth and we haven’t had time to update this blog as much as we would like to, but rest assured we will keep posting updates here throughout this year and beyond. The 2011 edition of our Practical Offshore Banking Guide is in the final stages of preparation and will be released shortly. It contains many updates. And if you like what we read, the best way to move things forward is to subscribe, read our material and – most importantly of all – make yourself known to us!

One issue we constantly come up against here is the situation in the USA. We often get e-mails from readers complaining that our articles have a bias towards the USA and there is not enough information applicable, for example, to Europeans. The fact is, the tax rules in the ‘land of the free’ are more draconian than anywhere else in the world. I doubt even Obama would argue with us on that one, though I suppose he might put a positive spin on it by claiming the IRS are the most efficient tax authority in the world…

The fact is, a growing minority of Americans – the ones who can see beyond the propaganda – are very scared. One e-mail that arrived an hour or so ago from a long-term reader is typical of the comments we receive every day: “The World, and the USA in particular, is starting to get really crazy…”  Many of our readers are hard-working and honest American citizens just looking to protect what they’ve achieved so far, and go on working productively, peacefully and unmolested.

We are also seeing a lot of interest in Q Wealth from places like Ireland and Spain, countries where entrepreneurs have built up substantial portfolios over the years only to see them evaporate. The other side of the coin is that we are seeing a lot of interest from Germany… Germany has been doing surprisingly well lately, but Germans are rightly concerned about being the biggest bailer-outer country.

I would say to our European fans that any advice we give to Americans basically applies to you to… but you have one big advantage. While Americans have to acquire a second citizenship then renounce their first – a lengthy, expensive and emotionally charged process – all you Europeans have to do is move to another country… you can do it tomorrow if you want. As I said in my last article, you might be surprised, but life is often better offshore!

Even given more flexible tax systems in Europe, the days of hiding money offshore are well and truly over. Corporate structures like LLCs, trusts and foundations can still provide strong legal asset protection if used properly (read those last 3 words again!) but ultimately, the way things are going, it will be almost inevitable at some point that if you don’t think taxation in the country you live in is fair, you will have to vote with your feet – by getting up and going. For this reason, we’ll be focusing more and more on residence and citizenship programs in 2011.

The 1st of January this year saw an interesting new fast track to European Union citizenship. Hungary’s new naturalization law is designed to make it much easier for anyone with a few drops of Hungarian blood to acquire citizenship in this EU country. Hungary, having fought on the losing side in the first world war, lost a lot of its territory in a division that remains highly controversial to this day, leaving at least half a million ethnic Hungarians in bordering countries like Slovakia and Ukraine, who have not been counted as Hungarian citizens for generations. The political motivation behind this new law was to help these ethnic Hungarians reclaim their ‘national identity’ (Hungarians being nothing if not proud, even as this same government has just blatantly seized private pension funds to help stave off national bankruptcy)

What does this mean for you? People from these countries emigrated by the boatload to places like the USA, Canada and Australia. Previously, a direct line of descent from a Hungarian citizen was required in order to reclaim the citizenship right. This just got a lot easier. Let’s say your Great Uncle Arpad was born in Ukraine but was an ethnic Hungarian (who spoke Hungarian language for example) then you might well qualify for this expedited Hungarian naturalization procedure. You can read the Hungarian government’s statement on the matter, in English, here.

As this procedure is only a few days old, we have to see how it works out in practice. For example, how toughly will the requirement to speak Hungarian be enforced? But if you think you have a little Hungarian in you, you might want to look into this opportunity sooner rather than later. We’ll be following up on it more depth in a forthcoming issue of The Q Wealth Report. Q Wealth members are welcome to contact the office for referrals to our contacts in Hungary.

Another program that has been receiving publicity lately is Latvia’s residence program. This has generated quite some controversy. Whilst not leading to citizenship (but not ruling it out either) this grants instant residency in the Republic of Latvia to anyone investing a few hundred thousand euros in a bank deposit, or buying a property there. Riga, a regional trade hub well known for its art nouveau architecture, may not be everyone’s cup of tea (cold and wet in winter) … though the seaside resort of Jurmula is quite trendy and is within easy reach of Riga airport, one that is surprisingly well connected for such a small country.

The real point about Latvian residency, however, is not spending time in Latvia. Latvia is in the Schengen Area. Wealthy non-Schengen nationals (Russians and Chinese to give two examples, but also Americans or Australians) will find this a very attractive way of establishing a low cost base in Europe that allows them to move completely freely around the Schengen zone. Germany and Spain are already concerned about the huge influx of new immigrants this could bring… people theoretically resident in Latvia but living as quasi-permanent tourists, even carrying on cross border businesses quite legally, in their countries.

Latvian taxes, while theoretically high, can probably be mitigated by a bit of careful pre-immigration tax planning. So Latvia could turn into an easy and cheap alternative to Monaco, Andorra or San Marino, to rival the roles currently filled by the residence programs of Cyprus and Malta.

Finally for now, an update on Montenegro. Back in August 2010, while all the European top brass was on holiday, the government of Europe’s newest country, Montenegro, announced an economic citizenship program, priced to rival the existing St Kitts and Nevis citizenship. Several options were outlined, involving payment of around EUR 200,000 to the Montenegrin government for an almost instant second passport.

Soon after that announcement I attended a small meeting of offshore professionals in the beautiful Montenegrin resort town of Herceg Novi. I was taken aback by the temperate climate and the outstanding natural beauty of the country. There is serious investment pouring in too: for example the huge Porto Montenegro development, down the road from where we met, is being spearheaded by Barrick Gold’s founder Peter Munk and by other people who know about good investments: do the names Rothschild and Bernard Arnault ring a bell?

Details of the program, however, proved elusive, as the government kept stalling. Finally, in November, they announced that the citizenship program had been ‘frozen’ until further notice, by request of the European Union.

However, my few days on the ground there convinced me that this announcement is only part of the reality. The website of Henley and Partner, for example, claims that “in the interim, citizenship will be decided on a case-by-case basis.” Anyone who shows up with a serious investment – my guess, half a million upwards – would still receive a warm welcome I think. I was impressed with Montenegro’s possibilities… given the choice between living in St Kitts and Nevis, and Montenegro, I would go for Montenegro – a couple of hours from London, Paris, Milan or Barcelona – any day.  I’m pretty sure I’ll be back there. So it’s another one to watch in 2011.

Still, we are beginning this year with a more traditional focus on citizenship and residence programs in South America: we still like Paraguay and Uruguay. Myself and members of the Q Wealth team will be in South America meeting with clients and experts later this month. There’s still time for you to join us. Either in person, or by signing up to Q Wealth Report.

Peter Macfarlane is just back from a Caribbean trip taking in St Kitts and Nevis and Dominica, the only two countries in the world that still offer Economic Citizenship programs. Things have changed a lot down there in the last few years. Here’s what he found out…

More and more people are looking for second passports. And most of those people these days are US citizens looking to renounce their citizenship. There are only two economic citizenship programs left in the world today, both in small Caribbean nations. I wanted to see what was really going on with these programs and to get some on-the-ground intel that you can’t always gather from the internet. So, I booked a flight into Antigua and got some connections on LIAT, the Caribbean airline.

Although (unlike many others) this publication was launched in England, has a worldwide readership and was never originally aimed at Americans, it’s easy to see that the USA accounts for most of our new subscriptions these days. I believe these are people who value our international outlook.

An increasing number of Americans, it is clear, have simply had enough of taxation, attacks on their civil liberties, Obamacare and most recently the dastardly HIRE Act – perhaps the biggest attack ever on those who have worked hard to build up assets and savings. And who can blame them?

I had imagined that the HIRE Act would have some deterrent effect, making Americans more scared to go offshore. In fact, I am seeing people scrambling to set up offshore structures before the deadline next year and place assets in the best offshore banks that are not likely to co-operate in what is a back door currency control system.

Many Americans are looking for second citizenships these days. A decade ago we saw Russians looking for second passports, then came the Chinese… since Obama’s election, the offshore banking countries catering to those seeking economic citizenship (St Kitts and Nevis, and Dominica) are seeing a wave of Americans.

Americans are a patriotic people, but more and more are realizing that their government has been conning them for a long time – trying to confuse patriotism with support for the government. In fact, it’s the American government that is unpatriotic… constantly fighting to undermine the American ideals of freedom, liberty and prosperity. The USA is the only country in the world that expects its citizens to pay taxes even if they don’t live there.

You might already know this, but to expatriate from the USA and renounce American citizenship – thereby breaking free of your US tax obligations provided you don’t intend to live there any longer – you must first have another citizenship. There are basically three ways you can do this:

• Through birth: for example if you are lucky enough to have close family from Europe, you may be able to obtain a European passport
• Through naturalization: this requires a period of residence, sometimes as short as three years (Paraguay and Dominican Republic) but typically five to ten years.
• If you don’t have family connections and you don’t want to wait years, you can basically buy a new citizenship by developing a connection with a foreign country by making a substantial investment: this is what is called Economic Citizenship.

On this recent trip I visited both the Federation of St Kitts (St Christopher) and Nevis; and the Commonwealth of Dominica, both small Caribbean countries that offer you the chance to acquire a new citizenship for you and your family within a few short months, by making an investment. By the way, don’t confuse the Commonwealth of Dominica, a small English speaking island nation, with the much larger Dominican Republic which is hundreds of miles away. (Editor’s note: Dominican Republic citizenship might also be an attractive option, but is outside the scope of this article as it is not an economic citizenship program. You can read more about that here: Joe Gonzalez article on Dominican Republic citizenship)

I had visited both of these nations some years ago, but things have changed – drastically. While you can do a certain amount of research on the internet, there’s no substitute for spending a few days on the ground talking to government officials and well-connected local lawyers who know the score. Most of what you read on the internet is written by foreign promoters of citizenship programs, who will naturally have a certain bias and may never even have visited the islands. In the case of St Kitts, most of the promoters also have a vested interest in selling over-priced real estate.

These two economic citizenship programs are the remnants of what used to be quite a little industry in the region. Countries like Belize, Grenada, Guyana and Suriname have offered economic citizenship programs in the past, but they are long gone. That doesn’t stop unscrupulous promoters from still offering them.

I’ll be writing up a more detailed report on this in a forthcoming issue of Q Wealth Report (available only to members) but I can give you the bottom line now. Dominica is in my view a beautiful country, full of opportunity for tourism development and the like, but that might have to wait for the economic upswing that will be a long time coming. Dominica’s citizenship program is definitely going downhill since I last visited in 2006. I would not be surprised to see it coming to an end soon. While St Kitts and Nevis is doing well, attracting quality, heading further upscale. Here is a little of my reasoning:

• St Kitts and Nevis recently signed an agreement with the European Union allowing visa-free travel for all their passport holders, including economic citizens. This is an important coup that shows major western governments have confidence in the St Kitts program. Dominica does not have this benefit.
• Very importantly in my view, St Kitts and Nevis has refocused its program in recent years away from the idea that it is selling passports. This shows political savvy that seems to be working to their benefit. Naturalization implies a connection with the new country that is not merely financial. That is exactly what they are promoting, by strongly encouraging investors to purchase property in the country. St Kitts and Nevis are both pleasant places to stay, with great golfing and yachting, serious investments by groups like Marriott and Four Seasons, and more and more direct flight connections coming in. And the political savvy has extended to getting the twin island federation not just off the OECD’s blacklist but on to the whitelist… without changing much.
• St Kitts and Nevis enshrined economic citizenship in its constitution back in 1984. It is a well established program. They have maintained the price high and kept out the riff-raff which has negatively impacted other, less well regulated economic citizenship programs. Applications are processed efficiently and according to deadlines.
• Dominica, on the other hand, seems to have lost its direction with regard to economic citizenship, and is caving in to demands from the OECD and wealthier countries. There is greater domestic opposition to economic citizenship, and politicians are arguing over how to spend the money while keeping applications languishing for months without approval. The government seems to be heading more in the direction of accepting aid from Hugo Chavez in Venezuela, which is admittedly probably easier money in the short term and less controversial than selling passports. While I was there, in fact, the Dominican government signed a new Memorandum of Understanding whereby Chavez will give them a new coffee processing plant.

So at this time, although the options for economic citizenship in St Kitts and Nevis are definitely much more expensive that those in Dominica in terms of cash you have to put down on the table, I would consider the difference in cash outlay money well spent. Another good thing is that with the St Kitts investment option, you can buy attractive Caribbean real estate which you can enjoy in the meantime and will be free to sell after five years.

We’ll shortly be releasing a more detailed report on St Kitts and Nevis. If you would like to receive it, please go here: Free Nevis Offshore Report

Otherwise be sure to check out my upcoming article in Q Wealth Report, and you can be sure that this will be a hot topic for discussion at our next Q Wealth event in Cork, Ireland this September. See you there!

More Americans than ever before are renouncing US citizenship. That’s the conclusion of a recent article in the New York Times. The steady stream of US citizens expatriating is turning into a flood – to the extent that many US consulates now have a waiting list for appointments to renounce citizenship.

Taxation, offshore investment and banking issues are, unsurprisingly, the main reasons given for renunciation by former Americans. The most productive Americans no longer want to be American… because they don’t feel they are being treated fairly or reasonably by their government.

American expatriates are furious at US attempts to tax their worldwide income… but the straw that broke the camel’s back in this case is the fact that due to the HIRE Act and money laundering legislation, both US banks and offshore banks are beginning to treat American passport holders as personas non grata, denying banking services and unilaterally closing bank accounts.

There’s an interesting change of mindset going on too, according to the NYT article. I quote:

“What we have seen is a substantial change in mentality among the overseas community in the past two years,” said Jackie Bugnion, director of American Citizens Abroad, an advocacy group based in Geneva. “Before, no one would dare mention to other Americans that they were even thinking of renouncing their U.S. nationality. Now, it is an openly discussed issue.”

…

“It is a sad outcome,” Ms. Bugnion said, “but I personally feel that we are now seeing only the tip of the iceberg.”

Renouncing American citizenship certainly doesn’t have the stigma attached to it that it might have had in the past. It seems to many like a smart business decision. Of course what the Times didn’t mention is the fact that in order to renounce American citizenship, the person renouncing must first have a second citizenship.

Many Americans are entitled to European Union or other countries’ citizenships based on ancestry – having a parent or even a grandparent born in other countries can open up a door to obtaining a quick and cheap second passport.

Those who are not so lucky may look instead to economic citizenship programs such as those of the twin island federation of St Kitts and Nevis, or the nature-island nation the Commonwealth of Dominica, the only two countries where one can still ‘buy’ citizenship. (Dominica and Dominican Republic are two different countries, often confused) The cost of such programs is usually in the six figure range, but it still makes good business sense to those who might be paying hundreds of thousands or millions a year in taxes. With the St Kitts and Nevis program, at least, one can invest in real estate and hopefully resell the property at some point in the future.

Fortunately, there’s a third route for those who are not millionaires, but still cherish their freedom: obtain a second citizenship through naturalization. This can typically be achieved for under $10,000, though of course it takes time… typically 3 – 7 years, depending on the country chosen and the category they are applying under. Some of the best countries for those wishing to follow this route are Uruguay, Paraguay, Dominican Republic and Ecuador.

More information on second passports and citizenships appears regularly in The Q Wealth Report. If you’re not yet a member, you may choose to subscribe to the full privately-published newsletter, or sign up for the ‘lite’ free offshore asset protection and second citizenship news in Q Bytes.