Citizenship by investment programs (CIPs) play an essential role in economic growth. The Caribbean Five, consisting of Antigua & Barbuda, Dominica, Grenada, St Kitts & Nevis, and St Lucia, are all developing nations that introduced CIPs to bolster their economy. Their programs went above and beyond expectations, though, and instead of acting as an economic leverage that aids growth, these programs have become a vital pillar of these nations’ GDPs. CIPs bring in unencumbered funds and targeted FDI. The Caribbean Five’s savvy structuring and pricing of the programs has allowed these nations to maximize the benefits while maintaining a steady growth rate in demand.
From assistance to reliance
Caribbean CIPs evolved from being a supporting venture to a primary revenue stream. In 2017, when the devastating Hurricane Maria struck Dominica, the CIP took on the economic banner, accounting for nearly 25% of the country’s GDP and about 52% of the government’s overall income. CIP revenues in Dominica were directed into housing projects and relief causes to assuage some of the US$ 1.2 billion economic losses resulting from the hurricane, and the program continues to invest in critical projects such as the “Future Housing Program,” which aims to provide affordable housing options for employees in both the private and public sector. But it hasn’t stopped there. The Dominican government announced the beginning of the construction of the country’s first international airport in 2021, a project worth US$ 370 million, entirely funded by the CIP. This project will transform the entire economic landscape of the nation, which relies heavily on international airports of neighboring countries. Having its own airport will connect it to the world, bolstering business, tourism, and more. It is a transformative project that wouldn’t be possible without the CIP. Antigua & Barbuda’s program also provided similar economic performance, accounting for 20% of the country’s GDP in 2017, yielding nearly US$ 64 million in direct revenue for the government.
The program has transformed into a vital lifeline for the country, especially in times of need, prompting Antigua & Barbuda Prime Minister Gaston Browne to state that there can “be no doubt that, in the years of its operation, the CIP delivered for our people.” In St Kitts & Nevis, the program performed so well that the country maintained a decade of budget surpluses between 2010 and 2020, allowing the country to lower public debt below the regional debt target of 60%. Grenada’s CIP revenues also highlight the evolution of a CIP’s importance. In 2017, Grenada’s CIP generated XCD 42 million; in 2023, that revenue grew to XCD 834, boasting a staggering growth rate of 1887%. If in 2017 the CIP was considered a boost to Grenada’s economy, in 2023, it was one of the foundations. The Caribbean Five are all smaller nations with developing economies mostly focused on tourism and agriculture. The introduction of CIPs provided these nations with a steady influx of FDI that they used to develop and diversify their economies. While the quantitative facts show how important these programs are, the qualitative, transformative effects may even be bigger, as CIPs allow governments to invest in and build their economies more dynamically and expeditiously.
Bolstering targeted sectors
Caribbean CIPs do much more than just bring in revenue for the government. Through shrewd structuring of a CIP’s investment options, a Caribbean country can divert funds directly into targeted sectors that are either growing or critical to a country’s economy. Take Antigua & Barbuda as an example once more. The tourism sector accounts for more than 50% of the country’s GDP, and it is responsible for a whopping 46% percent of the national employment (both directly and indirectly). Tourism is the most important economic sector in the country, and the government has utilized the CIP to bolster it further. Antigua & Barbuda’s CIP has a real estate option that allows investors to buy shares in high-end hotel and resort developments that will increase tourism lodging, add optionality and decadence to the touristic experience, and – vitally – providing more jobs in both the construction and hospitality sector. Grenada, which attracted XCD 502 million in real estate investments in 2023 alone, greatly feels the job creation effect, as 19% of all private sector employees are based in the construction sector. A CIP’s real estate investment trickles down into other industries as well. New developments need designers and planners, construction materials, transportation and logistical services, admin services such as accounting and legal, furniture, power, kitchenware, landscaping, and more. One successful CIP real estate project can have direct and indirect effects on various sectors, boosting the overall income of an entire community, not just the project owners. Real estate investments can inject life into various aspects of a Caribbean market, providing a boost either directly or indirectly to a plethora of beneficiaries, which leads to higher income and better lives.
CIPs do not just target real estate, as the donation option goes directly into funds that can diversify the economy by investing in certain areas. But in some cases, such as Antigua’s University of West Indies Fund (UWF), the effect is more socioeconomic. The UWF provides one of the Caribbean’s top universities with a constant stream of donations that help it expand and evolve. Unlike in the US, Caribbean universities have little access to fundraising and donations, so the UWF is crucial. The University of West Indies provides top-tier education in 18 countries and territories in the Caribbean. Hence, the UWF positively affects education across the entire region by providing the university funding through its Antigua branch. This socioeconomic development is key for the region. CIPs not only provide an influx of cash but also affect the social fabric of the nations through a knock-on effect. Better education means higher quality talent, which means higher paying jobs that lead to an overall greater standard of life.
Flexibility is key
Another critical aspect of the CIPs is the economic flexibility they give their host nations. In times of need, CIPs deliver. In St Kitts & Nevis, for example, the CIP allowed the country to enter the COVID pandemic lockdown in positive fiscal health, which offset a significant chunk of the economic strain that would have happened had the country’s coffers been depleted. St Lucia introduced the COVID Relief Bond (CRB) investment option in order to maintain fiscal cashflow when the pandemic took out the country’s main economic lifeline – tourism – through global lockdowns. The CRB proved to be widely popular and provided the government with the cash flow it needed to navigate the pandemic. But 2020 wasn’t the first time CIPs came to the rescue. After Hurricane Irma hit in 2017, St Kitts & Nevis introduced the Hurricane Relief Fund (HRF), which was a CIP investment option dedicated to rebuilding the country’s economy and aiding the populace with the losses suffered. CIPs give countries an economic lever to utilize in times of crisis, and the Caribbean Five have the technical ability, flexibility, and know-how to adjust their programs to match any crisis that may come their way. Instead of having to lean on their citizens for support, the government relies on its CIP, relieving the economic stress off of both the government’s and the citizens’ shoulders. The Caribbean Five do not levy global income, wealth, capital gains, or inheritance tax. As many countries looked to increase or introduce taxation during the pandemic, the Caribbean Five didn’t need to do so, thanks to their CIPs. This flexibility allows the governments to provide their citizens with a lax tax regime without dwindling the treasury.
Domino effect
CIP quantitative effects are easy to see and measure. Much like any FDI metric, a person can take a look at how much money a program brings into the country. That metric, of course, is extremely important, especially when you consider that smaller countries often rely on few major revenue streams. However, that isn’t the entire story. A CIP’s qualitative effects are crucial. Investments do not stop at the first destination, as they trickle down into other industries and businesses, boosting the entire economy through a domino effect. These investments generate more business and jobs throughout the entire country, and their effects can be seen years after they are initially made. By affecting the community as a whole and the government’s funds in particular, CIPs raise the entire standard of living in their regions. Governments have more unencumbered funds to enhance infrastructure, better their healthcare systems, and elevate their education framework. Businesses get more work, leading to expansion and more employment, as well as higher average income that then leads to greater purchasing power and a more dynamic market. CIPs may not be the most vital revenue streams in monetary terms, but their socioeconomic effects have been driving growth in the Caribbean region for decades.
