“It costs you nothing” is what some passport sellers will tell you.

Saint Lucia recently introduced a bond option for its Citizenship by Investment program. Invest $300,000 in 5-year Saint Lucia government bonds, pay a few fees, and obtain citizenship this way.

The trick? There aren’t any interest payments.

In this video with Laszlo we discuss the recent changes to the Saint Lucia Citizenship by Investment program, and why the bond option might not be such a good idea after all.

or real the full transcript below
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or send an email to laszlo@thewanderinginvestor.com.

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The Wandering Investor

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Full transcript “Beware of the Bond option when obtaining Citizenship by Investment”

LADISLAS MAURICE: Hello, everyone. Ladislas Maurice from thewanderinginvestor.com. So today, I’m with Laszlo, my favorite immigration agent, and we’re going to be discussing the latest changes to the St. Lucia Citizenship By Investment program. Laszlo, how are you?

LASZLO: Hello. Fine. I’m fine, thank you so much. I’m very, very happy to be with you again.

LADISLAS MAURICE: So the government has made some changes with regards to the bond option. Can you elaborate?

The bond option for the Saint Lucia Citizenship by Investment

LASZLO: Definitely. Two years ago, the government announced the possibility to invest in non-interest yielding bonds called COVID-19 bonds. But that was only for two years. So at the end of last year, they had to decide whether to continue or have a new one. Previously, it was 250,000 US Dollars bond investment. Now, it became $300,000 bond investment. And irrespective of the number of the family members, it is now valid, the maturity is for five years.

LADISLAS MAURICE: So five-year, no interest. So I was looking online, and it would appear, so it’s a very illiquid market, but it would appear that when St. Lucia issues bonds on the open market for five years, they get approximately 6% to 7%. So when we take into account the interest that the investors are giving up on, actually it comes down to pretty much the donation amount.

LASZLO: Yes. And let’s not forget that a possible default or a possible repayment risk, which could also mean an additional 10%, 20%, 25%. And if you add up both costs, then, yes, you are at a point where maybe you should donate instead of the investment of the bonds. It’s up to everybody to decide the financial situation. But yes, the bonds are, unfortunately, illiquid. And, therefore, to get proper value for them when at the time of somebody wants to liquidate the position, for example, it’s very, very hard to do.

LADISLAS MAURICE: And also, when you look at the, to your point on the risk of default, when you look at the debt to GDP ratio of St Lucia, it’s 90%. So you know, lending 300K to a little Caribbean island with a lot of debt, so granted, St. Lucia doesn’t get as many hurricanes as other Caribbean islands, but still, their debt profile is not very healthy at all. And if there were to be a default and a debt restructuring, I’m pretty sure that the IMF wouldn’t be particularly kind on the special CBI bonds. [laughs]

LASZLO: [laughs] Yes, they are owned by affluent people who manage to afford these kind of amounts. All in all, yes, this is not like the poor people we have to save. Anyway, yes, I agree with you. Also, there is no rating on the bonds, according to my knowledge. So all in all, really, there is no secondary market. And that is really, what is the price, what is the interest is really a kind of a risk for the investor. I’m not saying that it is a stupid investment, but everybody has to know, really, that there are risks involved, not just the positives.

Changes to the real estate option for the Saint Lucia Citizenship by Investment option

LADISLAS MAURICE: And there are also some changes to the property option?

LASZLO: Yes. The St. Lucia government decided to decrease the property investment threshold from 300,000 to 200,000 US dollars, which sounds very, very good, and I think that it would work quite well. The property market for the citizenship program is not really very wide. When I was in, last summer, I was in St. Lucia, I looked both properties because, basically, there are only two property projects approved, meaning that you do not really have a choice. And also, I didn’t like them too much as a business proposition. Lifestyle, yes, it’s beautiful, yes, it’s very, very good.

But otherwise, I would say, as a financial investment, with no secondary market after the liquidation period, after the holding period, unfortunately, also raises a little bit of question, if somebody is just buying it to get citizenship, and again, we are returning the question that how much is the possible capital gain, capital loss, the carry on costs of the property, because then you have to pay, its tax returns you have to file, and so on. This kind of small details which means more time, more time should be spent on a property investment. Donation, also like with the bond, might be a comparably very competitive offer from the St. Lucia government. But it means that bond property and donation, there are three options, which is a good option for the investors.

LADISLAS MAURICE: And how much is the donation?

LASZLO: Donation is for a single applicant is 100,000 US dollars.

LADISLAS MAURICE: Okay, so $100,000 plus various fees and that increases–

LASZLO: Various fees, and family members, also if somebody wants to attach family members, then the donation amount is increasing. So all in all, it’s an individual calculation always of what is the actual cash donation part of it and how much is the investment into bonds, possible default risk, interest rate, and so on, and so on. And then the customer will be able to make a very, very educated choice between the three possibilities.

Changes in the profile of the applicants for Citizenship by Investment applicants

LADISLAS MAURICE: Yeah, and what I’m seeing is the market is changing a little bit for CBIs. Traditionally, people who opted for such Caribbean citizens were people from developing countries that didn’t necessarily have fantastic travel passports, and with the St. Lucia passport, they could travel to the EU, to other countries, etc. Then we saw, especially with the advent of COVID and all that, more Westerners opting for passports to increase their own personal freedom away from their governments, and to have a Plan B.

And now I’m starting to hear people saying that they want a St. Lucia passport because it’s non-NATO, and they fear that, you know, things will escalate, and they don’t want to get conscripted, and they want a Plan B passport with a non-NATO passport. So, obviously, this is expensive insurance if this is your only thesis, but it’s interesting to see that these passports are used by very different people for very different reasons.

LASZLO: I have to agree, also, St. Lucia avoided so far the possible bad clients, which if somebody just wants to check in the international press about other countries which are offering the same service, unfortunately, they run into the trouble that, yes, of obviously, there are also crooks who might try to get into the system. So far, St. Lucia’s reputation is one of the best if not the best from this respect in the Caribbean compared to the other four countries.

LADISLAS MAURICE: Okay, fantastic. So if you’re interested in obtaining a St. Lucia passport by investment or any other Caribbean passport by investment, there is a link below with more detail and Laszlo’s services, and also his email. Laszlo, thank you very much. Always a pleasure talking to you.

LASZLO: Thank you, likewise. Have a good day. Thank you. Cheers. Bye-bye.