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As the title says, would it be helpful for a low population country like Canada to get financial aid in the form of Investment in return for PR?

Canada used to have such a programme but it was abolished in 2014. Quebec still has one.

Almost every country in the world is suffering from economic recession because of the pandemic, people are losing jobs, poverty is on the rise in many countries too etc... Immigrant Investor visas, also known as golden visas, are used by countries predominantly to make a countries economy flourish or at least save it from a recession (US introduced it in 1990 and Greece, Portugal etc.. introduced it around 2010-12 when they suffered from economic recessions). Golden visas are offered to wealthy people in return for Cash/Investment, that directly boosts a countries economy.

But Canada, a country that isn't really resistant to recessions like some other wealthy and powerful countries are, and a country that desperately needs immigrants too, already abolished such a scheme in 2014.

Is there actually any benefit in saving Canada's economy (so many countries' economies have been destroyed by the pandemic) by relaunching such a scheme? Can such schemes help in partly reviving economy of Canada in a post-covid world (say next year or so)?

If there is a benefit to save Canada's economy, can you say how it could actually help the country from fighting recession?

You can easily find on the internet that all countries (mainly European and Carribean) are all set to take advantage of the pandemic to grow investor immigration and have also reportedly halved the required investment amounts (example Italy).

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    This question is hard to answer when you don't define what "beneficial" means. Beneficial for whom and in what way? ("everyone in Canada in every way you can think of" is too broad)
    – Philipp
    Oct 3 '20 at 16:58
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    @Philipp You are right. I am going to edit this and define beneficial in a narrow manner. Thank you for pointing out. Oct 3 '20 at 17:00
  • @Philipp Is there anything you would like me to edit now? Any more suggestions? Oct 3 '20 at 17:10
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The premise that reinstating an immigrant investor program would help the Canadian economy is based on the assumption that Canada's economic woes are materially related to a lack of investment that immigrant investors would provide in a manner superior to the status quo.

Often, this would be a reasonably sound assumption during an economic downturn. But at the moment, there is very good reason to think that the Canada's economic woes are almost entirely related to the local and global impacts of the COVID-19 pandemic, and there is almost nothing to indicate that a lack of available investment capital plays any part in its economic woes.

Given the atypical cause of Canada's problems, it is hard to see that it would be economically beneficial to reinstate the immigrant investor program now to any greater extent than it would have been when Canada (outside Quebec) repealed the program after careful deliberation. One can argue that it made the wrong decision then and that its decision then is still wrong. But again, there is nothing to suggest that this should be at the top of the list of Pandemic specific recovery solutions.

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This is challenging question which requires consideration of multiple factors.

When an immigrant comes to a country, they become both an asset and a liability for that country.

Being an asset

  • Immigrants may bring cash, which when invested or spent on consumption has a temporary positive effect on the economy. For example, buying a house requires another one to be built, but it is only a one-off transaction between the immigrant and the house builders. Pushing up house prices in the short-term has a roughly net-zero average affect on incomes, but in the long-term tends to lead to a huge transfer of wealth from the young to the old, which can have mixed (in my opinion negative) effect on GDP and often a negative effect on the birth-rate which stores up serious problems for the future.
  • They may bring highly valuable skills which in a sense can be seen as bringing capital into the country. A skilled worker is able to increase productivity of the economy which leads to a continued increase in GDP, and they may be able to train others, thus having a secondary positive effect. This could in some situations lead to higher incomes for other citizens, but it is not guaranteed.
  • They may be prepared to work for a lower income than the existing citizens (or to perform jobs that are seen as undesirable). Their work in such professions may end up contributing more to economic productivity than their income suggests, thus again being a boost to other citizens incomes. However, this is at the expense of the existing low-skilled workers, which may lead to greater inequality and political tension.
  • The immigrant may be motivated to perform other non-paid valuable work, such as supporting the local community etc., providing free childcare etc. This is equivalent to a productivity enhancement for the economy, which eventually translates into greater overall GDP and incomes - even if that person has no formal income.

Being a liability

  • If the immigrant is in ill health, or has other needs then the state may be required to provide for them. This is equivalent to a continued transfer of wealth from the existing citizens to that immigrant.
  • If that person goes on to commit crimes, or holds negative ideological beliefs that damage the economic productivity of the country, that will also lead to a negative impact on other citizens incomes. There are many instances of immigrants using wealth that has been acquired through corruption in their country of origin. Those individuals are unlikely to have a long-term net-positive effect on the host countries' economy.
  • If that person is likely to transfer wealth back overseas, rather than to consume and invest in the host country, then they effectively act to reduce domestic GDP (an overseas transfer is equivalent to an import, which subtracts from GDP in the expenditure equation) in that regard.
  • Any way in which the immigrant is seen to be a net asset to the host country, will obviously be seen to be a net loss to their country of origin. In some situations this could cause political friction between the two countries.

With regard to the specific situation of the COVID pandemic, nothing much changes, except the demand for certain skills is slightly different.

A huge misconception about economics is that countries always benefit from investment from overseas. This is simply a debt, and if a country has their own currency, it is (notwithstanding the potentially different interest rate on the loan, and various political issues) equivalent to the government/central bank increasing the money supply. The usual counter to this argument is that overseas investors can bring in new technology and/or skills (which is true), but they also expect an economic reward in return, which is also a negative for GDP (again equivalent to an import). There are examples where it helps and examples where it doesn't.

So, in general the answer is: it depends who you let in!

I have probably forgotten other issues, which I would be happy to add if people suggest. My wording of the above explanations could probably use some tidying up as well. Don't jump to conclusions if you think I am being ideological in my answer, that is not the intention

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Three objectives underpinned the Immigrant Investor program, instated in 1992. These were 1) attain investment from the program itself 2) investment by Immigrants of their Net Worth and 3) the business acumen of the Immigrants themselves.

The problem with the program was that Canada ultimately loosened requirements for Canadians to invest in global markets, meaning that rich business people could attain Canadian citizenship without actually ever investing their net worth in Canada.

As might be imagined for a program designed in 1992, the program has assumptions that really do not match today's reality. With easy access to global communications and travel, experienced business people can share their knowledge from afar.

Immigration itself is also very different from what it was in the past. Many immigrants have a whole past of former nations. New countries have entered the immigration market, some going as far as giving immigrants the right to vote in local elections or to gain free education.

Canada has encountered significant problems with their immigration program, generally. Highly skilled immigrants are vastly underemployed and it appears that this is due to social rather than economic reasons. Women and visible minorities face even worse outcomes. Some economists fear that some business-making by immigrants in Canada is from necessity rather than due to growth. While this change is a global phenomenon, it is very different from the story of immigrants coming to Canada in the 1980s and 90s.

Canada is definitely hopeful that COVID-19 will result in long-run changes that could provide a more hopeful and sustainable global economy. Immigration policy may be part of the story here, but it will have to be a policy that is relevant to the current economy, not a pre-internet, pre-9/11, pre-climate change, pre-Trump world.

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This is but another argument for more neoliberal economic policy, which is the root problem of many countries today. The last thing any country needs is foreign ownership when their economy is suffering. This often leads to increased inequality, loss of control and foreign pilfering, to which any 3rd world country can attest. After all, investors are interested in ROI, not the development of a country or economy.

Btw, it doesn't say much for Canada when they have to pilfer wealth from other countries, countries often poorer than themselves, to "help" their own economy, not to mention the fact that Canada already has a reputation for laundering dirty foreign money.

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  • Your first paragraph suggests the investor gains from the investment. Your second paragraph suggests the country invested in gains from the investment. It doesn't seem so bad for at least one side to gain and presumably both.
    – H2ONaCl
    Oct 7 '20 at 17:33

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