The Evolving context of International Migration
How can you obtain a golden visa in Spain? The international mobility of people is emotive, and albeit to varying degrees, often controversial. As contemporary international relations become increasingly interdependent, culturally diffuse, and generally globalized (economically, politically, etc.) the concepts surrounding migration have evolved, reflecting its malleable complexity.
Within this framework, a new category of international mobility has emerged for affluent cosmopolitan participants of transnational entrepreneurial geopolitics. These international entrepreneurs can broadly be summarized as individuals who are incentivized to invest in a country’s economy in exchange for some formalized legal status attributed to national residency or citizenship (i.e. receiving the protected privileges, rights and entitlements that only residents and citizens enjoy).
While these foreign investment schemes go by many names, they often fall under the umbrella of residence by investment (RBI) and immigrant investment (IIP) programs. Notably, this topic is defined in broad terms because each program offers differing arrangements which change with time.
That said, many resident programs have generally become known as golden visa programs, denoting their migration loophole via wealth. In many ways, the public terminology reflects a viewpoint of disdain among natives and immigrants alike who see their nationality or immigrant experience with a price tag, and a way to ‘skip the line’. This is where the controversy of RBI’s lie.
In social regards, this ethos of public concerns is intuitively understood, and while the privileged and classist connotations are not untrue, this rhetoric negates the motives that create these programs in the first place: boosting the economy.
Despite the public controversy, national governments implement these programs under the guise of fiscal solutions to economic downturns. Notably, these programs often receive bipartisan approval (i.e. governments across the political spectrum are interested in implementing these programs regardless of party affiliation). In other words, a change in national leadership and public administration will not overturn these programs, adding to their longevity.
That said, these programs are more likely to be implemented and promoted during economic downturns (e.g a decline in economic growth such as GDP), and more so during economic crises (e.g. the eurocrisis) when governments are seeking a quick influx of capital to stimulate the economy (Surak, Tsuzuki, 2021).
3 Primary Sectors of Investment
While these programs encourage investment in broad terms, governments act to mitigate targeted economic vulnerabilities, typically seeking investments in one of three sectors: bonds, business, and/or real estate. International investors can alleviate government debt by purchasing bonds, create jobs, boost GDP and reduce unemployment by investing in businesses, or boost the domestic property market by investing in real estate – the most popular choice among foreign investors (Surak, Tsuzuki, 2021).
How can Liquid Capital Stimulate the Economy?
Like most economic infrastructures, Spain’s economy is centered on banking systems. The more liquid capital in banks, the more the banks can spend. When you go to the bank and deposit your money, the bank will only retain a percentage of said liquidity. This reserve ratio is determined by the national government, while the rest is used by the bank through a series of investments and loans. This is known as the deposit multiplier effect, the proportional amplification of liquid capital. Notably, this is not a measurement of liquid capital, but the aggregate value of applying said money into the economy’s circulation.
Note: As the reserve ratio decreases, the multiplier effect increases
To calculate the deposit multiplier effect, divide the deposit by the reserve ratio. For example, if the reserve ratio is .1, each euro in a bank’s reserve can generate up to €10 in circulation. Thus, the multiplier effect stimulates the economy by increasing the net effect of each euro. Consequently, affluent individuals can have a disproportionate impact on the economy, hence the creation of Golden Visa’s.
Deposit Multiplier Effect Example
Let’s say you deposit €10,000 into your bank. If the reserve ratio is 10%, the bank will keep €1,000 of your €10,000, and use the other €9,000. When the bank loans that €9,000 to a local business, the local business uses the money to buy equipment. When the equipment vendor deposits the €9,000, their bank will retain €900 and inject the rest of the €8,100 into the economy.
In other words, your €10,000 quickly became €19,000. The bank profits in returns and interests, which you – the depositor – receive a small percentage of, a subtle nod to your initial investment, while the aggregate economy continues to grow as the cycle continues.
Establishing the Minimum Investment
Given the context of implementation during economic slow-downs, these programs are priced based on simple free market supply and demand theory to determine the point of maximum profit. That is to say that the more interest the program accrues, the higher the minimum investment the government can set. Conversely, where, or when, there is less demand, governments are likely to increase their minimum investment to apply (Surak, Tsuzuki, 2021).
Notably, the minimum cost of investment is also proportional to the size and strength of the economy in question. In other words, the program has to effectively contribute to the economy, as per the purpose of golden visa programs. Thus, the larger and stronger the economy, the higher the entry fee, and vice versa. Within this framework, it is also important to note that while urban areas receive most investment, rural areas see the most economic growth (Surak, Tsuzuki, 2021).
The EU’s Allure
Globally, Europe stands out for its cosmopolitan open-border regime system. Which is to say that once you are in the EU, you can freely move between countries without crossing restricted borders. In many ways, this open policy system – particularly the Schengen zone –is a beacon for the potential of the future liberal cosmopolitan movement. That said, entering the EU – or becoming an EU resident – is necessarily more selective, and understandably so.
Many countries in the European Union (EU) offer Golden visa or related programs. However, each program differs, some programs are more popular than others. Spain, the *United Kingdom (UK), Latvia, Portugal, Greece and Hungary represent approximately 95% of golden visa applications, claiming 95% of the revenue in the EU.
Within these applications, just four countries – Portugal, Spain, Greece, and Latvia account for approximately 70% of all approved applications and nearly 60% of all revenue generated in the EU (Surak, Tsuzuki, 2021). Thus, from 2014-2020, while these programs have funneled 3 billion euros per year to the EU, the distribution of said monetary capital is disproportionately skewed to a handful of countries (Surak, Tsuzuki, 2021). That said, because of the eurozone, the EU as whole can indirectly benefit as well, even if only residually so.
*Please Note: the data cited predates the UK’s official departure of the EU in 2020.
Golden Visa in Spain
Spain is one of the most popular investment programs in the EU, boasting the second-highest number of applications annually. From 2013 to 2017, Spain issued over 3,350 golden visas, with roughly 94% secured through an investment in real estate, like our brand Loca Barcelona approximately 2.3 billion euros (Surak, Tsuzuki, 2021).
- Two million euros in Spanish public debt.
- One million euros in shares and/or active participation of Spanish capital. companies
- One million euros in:
– investment funds or;
– closed-end investment funds or;
– venture capital funds constituted in Spain.
- One million euros in bank deposits in Spanish financial institutions.
- Investment in Spanish real estate of at least 500,000 euros, per applicant.
Please consult the Spanish government for more information and the latest updates.
Spanish Dual/Multi Citizenship
Any form of international migration is a complex process with many conditions and stipulations. For example, if you are not a natural-born citizen of a Spanish approved country for dual or multi citizenship,namely, Ibero-American nations including:
- Puerto Rico.
- Equatorial Guinea.
It is possible you will have to renounce your previously held national citizenship. This is just one of many conditions to be aware of. Thus, if you are interested in the potential of expanding your residency to pursue full citizenship, you may want to consult professionals in the field to discuss the immigration process before initiating any commitments.
Applicants: Who are they?
The behavior and characteristics of golden visas for Spain participants differs from “mainstream” migrant compositions. Many participants have little interest in the country or assimilating to culture. To date, participants behave more like tourists than immigrants.
Just as travelers tend to seek out tourist destinations, so do investors. The more touristic a country, the more interest the program will accrue. Thus, they pay less attention to long term living standards (e.g. education, crime, etc.) as determining factors. And given the popularity of real-estate investment among investors, many seek countries with cheaper property values (Surak, Tsuzuki, 2021).
Notably, these criteria are correlated with the government’s minimum investment requirement (i.e. the higher the living standard, the higher the minimum investment). Indeed, like businesses operating at macro levels, governments behave like a private entity, advertising their country and selling to the highest bidder.
The demographic breakdown of golden visa applicants in Spain shows that newly wealthy individuals from non-western backgrounds account for almost half of all demand, making them the largest participatory demographic. Like many other EU golden visa programs, the two main nationalities interested in Spain’s program are Chinese (approx. 37%)and Russian (approx. 27%), comprising approximately 64% of applicants (Surak, Tsuzuki, 2021).
Passive vs Active Investors
The investor profile of applicants accepted into programs is also broadly determined by the government’s economic objectives. Within the scope of foreign investment based visas, there are two categories of investors: passive and active. Passive investment programs simply require the domestic expenditure of money (invested in businesses, bonds, real estate etc.) with little to no other obligations.
Conversely, the active investor profile is characterized by those who have relevant financial experience in addition to capital. Thus, they are accepted with the stipulation that they will apply their skills and experience on an ongoing basis during the duration of their residency. Notably, it is the passive investor profiles that draw the most controversy, as their status is determined by fiscal capital alone, with little-to-no further contribution or integration (Surak, Tsuzuki, 2021).
Foreign Investors ≠ Foreign Direct Investors
Foreign direct investors (FDI’s) wield far more macroeconomic influence than those participating in RBI or IIP programs. For example, RBI and IIP participants have little-to-no effect on the real estate market, while FDI’s play a much larger role.
From 2013-2017, FDI’s accounted for approximately 14% of Spain’s total market in real estate (about 219,000 transactions). In comparison, RBI investors made up just 1.5%, and generally do no exceed 5% in most countries. Thus, the common concerns attributed to golden visas pushing locals out of the housing market is misguided, as it has little to do with golden visa programs and more to do with FDI’s – many of whom are EU citizens (Surak, Tsuzuki, 2021).
If what has been discussed doesn’t sound like migration, that’s because golden visas defy the norms of migration, and instead fast-track people based on capital expenditure. Here are a few key takeaways:
- Golden visa programs in Spain typically receive bipartisan support and are often implemented during economic depreciation and/or crisis (e.g. euro crisis).
- Many of the macroeconomic concerns attributed to golden visa are misplaced, as they are more applicable to Foreign investors (namely citizens of other EU countries).
- Most participants of Golden visa programs are less akin to immigrants, than cosmopolitan business nomads that frequently travel.
- Spain’s RBI and IIP programs are some of the most popular in the EU.
- When given a choice, most investments are used in real estate.
- Most capital is invested in urban areas, despite rural areas having the potential to benefit more.
- RBI and IIP programs have little-to-no effect on a national economy or GDP.
Ultimately, more empirical research is needed to analyze the various factors surrounding golden visa programs, including, but not limited to, identifying potential economic winners and losers. With more informative data, governments can assess, curate, and implement their policy in order to maximize benefits. One wonders how the COVID-19 pandemic has changed these programs, if at all?
Surak, K., & Tsuzuki, Y. (2021). Are golden visas a golden opportunity? Assessing the
economic origins and outcomes of residence by investment programmes in the EU.
Journal of Ethnic and Migration Studies, 47(15), 3367-3389.