Spain’s golden visa program has helped to attract thousands of affluent Latin American politicians and business owners to Madrid, but its days may be numbered, at least in its current form.
Former Mexican President Felipe Calderón Hinojosa has a major problem on his hands. On Tuesday (Feb 21), the man he handpicked to serve as public security minister for the entire duration of his presidency (2006-12), Genaro García Luna, was found guilty by a New York court of taking millions of dollars from Mexico’s biggest crime group, the Sinaloa drug cartel. García Luna is one of the highest-ranking Mexican officials ever to be convicted of having ties to drug trafficking.
Other figures close to Calderon, including Facunda Rosas and Luis Cárdenas Palomino, both senior civil servants during his presidency, have also been arrested in recent months.
Now, the spotlight is on Calderón himself, who insists he had no idea his “super cop,” as he was wont to call García Luna, was involved with the same drug traffickers against whom Calderón declared war in 2007, with devastating consequences for the country. But in the trial against García Luna, one of the key witnesses for the prosecution, Edgar Veytia, a former attorney general and now-convicted drug trafficker, accused both García Luna and his boss, Calderon, of providing protection for Mexico’s apex drug trafficker Joaquín “El Chapo” Guzmán, then leader of the Sinaloa Cartel.
Since that revelation, more than 80% of Mexicans believe Calderón should also be investigated, according to a recent poll by Enkoll.
But Calderón is not in Mexico. He’s in Madrid, where, with a little help from his friend, former Spanish PM José María Aznar (the oft-forgotten third man of the Azores Summit), he qualified for a Premium Visa in October. To be eligible for the visa, Calderón was offered a job at Aznar’s think tank, the Atlantic Institute of Governance. He joined an “academic” board filled with CEOs of some of Spain’s biggest corporations (Repsol, Telefonica, Endesa, Iberdrola, Mapfre…) and an assortment of like-minded neoliberal politicians, current and former, from both sides of the Atlantic, including Aznar himself, Ernesto Zedillo, Guillermo Lasso, and Bill Richardson. Oh, and Peruvian Nobel Laureate Mario Vargas Llosa.
Calderon is not the only former Mexican President to have sought, and been granted, Spanish residency in recent years. Enrique Peña Nieto (2012-2018), who is under investigation for money laundering and illicit enrichment and is embroiled in corruption scandals involving Spanish construction giant OHLA, is also in Madrid. So, too, is Carlos Salinas de Gortari (1988-94), who signed NAFTA and privatised and liberalized much of Mexico’s economy.
The New Miami
Madrid is attracting affluent exiles from across Latin America more than ever before, many of them fleeing from left-leaning governments at home. This is one of the big curses of Latin America: wealthy families and businesses, who in most cases possess a huge chunk of their nations’ wealth, are always quick to move overseas, often taking their money with them, whenever a government of even mild left-wing persuasion comes into power.
For decades, Miami has provided an idyllic haven for Latin America’s rich and well-to-do, as well as a perfect bolthole for the region’s plotters of failed coups. But as the New York Times reported last April, Madrid has begun to give the “Magic City” a run for its money:
[W]ealthy Latin Americans have… begun shifting their money out of countries where voters have recently elected left-wing presidents, including Mexico in 2018, Peru last year and most recently Chile, where Gabriel Boric took office in March as the country’s youngest president. Mr. Boric has pledged to make Chilean society more egalitarian.
The response in Spain seems to have been to roll out the red carpet. When [Antonio Ledezma, a former mayor of Caracas,] arrived in Madrid in November 2017, he was welcomed by the prime minister of Spain at the time, Mariano Rajoy, who immediately offered him Spanish citizenship. Mr. Ledezma turned down the offer, but many other Latin Americans, particularly the rich, are applying for or have received Spanish citizenship. Some received a so-called golden visa that Spain has been granting in return for spending at least 500,000 euros, or about $550,000, on a property.
Some wealthy Latinos are even selling their property in Miami in order to buy one in Madrid. As El País reported in November, recent years have seen “wealthy Venezuelan, Mexican, Colombian and Peruvian businessmen converge on the Spanish capital,” now “the second largest destination for Latin American investment in the world, only behind the US.” Within Spain itself, Madrid receives a whopping 70% of all Latin American investment.
There are a host of reasons why Madrid has become such a magnet for wealthy Latin Americans. It offers personal and legal security; attractive fiscal conditions (though those conditions changes notably in December); relative political and economic stability; a high quality of life; direct flights to and from most Latin American capitals, and a rich cultural offering. As one Argentine told the NYT: “In Madrid, I live near eight theaters, so I can see a different performance every week without taking a single taxi — and this kind of opportunity just doesn’t exist in Miami.”
Rajoy’s government launched the golden visa project back in 2013. At that time, the economy was still on its knees following the sovereign debt crisis and bailout of the banking system. The initiative was ostensibly meant to lure entrepreneurs and international investors to the country, by offering residence to non-EU citizens who make a significant investment in Spain, by buying real estate worth at least €500,000, investing in a company or companies (€1 million), or Spanish debt instruments (€2 million).
Other European countries have offered similar arrangements, but none quite as vigorously as Spain. Between 2013 and 2018 alone, it granted more than 25,000 golden visas to investors and their families, according to a survey by Transparency International and Global Witness, bringing in almost €1 billion in investments per year. Spain accounted for roughly one in four of all golden visas dispensed by EU countries during that time. Since then, the number has continued to mushroom. In 2019 alone, Spain issued more than 8,000 of the documents.
In the early years, most applications for golden visas came from Russia and China. In recent times, however, many Latino millionaires — mainly Mexicans, Venezuelans and Peruvians– have taken advantage of the program, with most choosing to live in Madrid. As the NYT piece notes, the number of arrivals from other Latin American countries is also rising, with many apparently “worried about [the] ‘leftist politics’ sweeping the region”:
Colombia could become the latest to swing in that direction, with a presidential election in May in which the front-runner is Gustavo Petro, a leftist former mayor of the capital, Bogotá. Mr. Petro has a clear message for the rich: Pay more tax.
As readers well know, Colombia did indeed “swing in that direction.” As I wrote in A Political Earthquake Just Took Place in Latin America, Petro made history by becoming the country’s first left-wing president since Colombia won independence in 1819.
Early Signs of Exodus
Petro’s government did honor its pledge to raise income taxes on the more affluent as well as levy a wealth tax on the wealthiest, though the reforms were watered down on their way through the opposition-controlled Congress. Taxes on inheritance and dividends were also raised. As even BBC World noted (in Spanish) in November, Colombia is one of the most unequal countries in the world and its economic elite have for decades paid less in tax than their counterparts in most other Latin American countries.
Nonetheless, an exodus has begun, and not just among the rich. According to a report by the Center for Resources for Conflict Analysis (Cerac), more than half a million Colombians emigrated last year — 2.7 times more than the annual average since 2012. An article in La Republica mentions two possible reasons for the dramatic increase: the sharp davaluation of the Colombian peso last year, which has spurred many people, particularly at the lower end of the income scale, to look for work abroad in order to send remittances home; and the “high levels of market risk,” which have had a detrimental effect on economic confidence in the country.
How many of those Colombians ended up moving to Spain is unclear, since the data for the full year is yet to be released. But in the first half of last year alone, during most of which time Petro’s election victory was far from certain, 60,000 Colombians settled in the country.
Thousands of upper and middle-class Argentines have also moved to Madrid in recent years. As a recent report in the Art Newspaper notes, “Most are met with open arms, both culturally—Latin Americans can naturalise easily into Spain due to a shared language and common ancestry—and financially: Madrid levies the lowest taxes of Spain’s 17 regional governments.”
In fact, until December last year, a common complaint in the Spanish provinces was that Madrid’s regional government — the Comunidad de Madrid — is functioning as a tax haven within Spain itself, sucking up wealth and business activity from other regions. In 2021, even the OECD accused the government of operating as an “internal tax haven” that attracts rich taxpayers from across Spain by applying a 0% inheritance tax.
To try to level the playing field somewhat, the national government in December passed a new wealth tax on fortunes over €3 million (h/t Rabid Gandhi). It also closed some important loop holes frequently exploited by foreign property investors. Madrid’s regional government has responded to the move by proposing a new tax initiative for foreign investment, which, if passed, will essentially involve subsidizing any investment made by a foreigner in Madrid with a 20% deduction in personal income tax at the regional level.
Side Effects
While the golden visa program may bring significant investment into Madrid, particularly its property sector, it also has serious side effects. For a start, it is driving up property prices in the capital. Many foreign investors are not just buying up one property; they’re buying up batches. The golden visas can also become a magnet for corrupt politicians and businessmen. A 2018 report by Transparency International and Global Witness warned that golden visa programs allow corrupt non-EU citizens to avoid suspicion from global banks — thanks to the added security offered by European passports — as well as escape from justice in their countries of origin more easily.
In 2020, the European Commission called on EU Member States to closely monitor these visas due to “the risks” that “lack of control” over the influx of capital could imply for the bloc. Those risks, it said, include “security risks, money laundering, corruption, circumvention of EU rules and tax evasion.”
After almost a decade in force, Spain’s “Golden Visa” may have its days numbered anyway, at least in its current form. Más País, a left-leaning party led by former Podemos star, Iñigo Errejón, has presented a bill in Congress to eliminate golden visas for non-EU citizens who buy a homes worth at least 500,000 euros, which is how 90% of golden visas are currently acquired in Spain. Last week, the government of neighboring Portugal unveiled plans to scrap its golden visa scheme as one of a raft of measures aimed at tackling soaring housing prices.
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Nick Corbishley: I don’t understand this reference:
“former Spanish PM José María Aznar (the oft-forgotten third man of the Azores),”
How did those darn Portuguese get mixed up in this visa sweepstakes?
Otherwise, an enlightening post.
Thanks, DJG. Aznar was the third man (and José Manuel Barroso the fourth) at the Azores Summit of 2003, from which Bush and Blair, the two front men, delivered one last 24-hour ultimatum to Saddam Hussein.
I suppose this is an extension of that earlier story in Links (I think?) about the US becoming less attractive to the rich…
I’m not sure I buy the ‘The rich are fleeing to Madrid to avoid socialist confiscatory taxes’ argument, and this sounds more ideological than accounting driven. A couple reasons why:
Ultimately, if taxation is the true criterion, and if these poor refugees can’t bear the poverty of the Cayman Islands, I hear tell the Irish Coast is lovely, Andorra has some stunning mountain views, Château de Vianden is cool, and Amsterdam has, well whatever Amsterdam has.
Thanks for that comment, RabidGandhi, and for bringing me up to task on the wealth tax. I really should have known (hangs head in shame). Have amended the text of the article to include the information. It seems that the Comunidad de Madrid is already trying to undo at least some of the damage, by proposing legislation that will offer additional tax incentives to foreign real estate investors.
And you are right that all residents of former Spanish colonies in Latin America can obtain Spanish citizenship within two years of arriving in Spain. I have lots of friends who have been through the process. That said, I think one of the most important draws of the Golden Visa is that it offers a far faster, smoother, altogether more comfortable experience. In fact, applicants do not even have to be in the country to get one; they can just designate a representative to do all the paper work for all them. Once all the documentation has been provided to Spain’s Ministry of Foreign Affairs, they just need to wait 20 days and if they don’t hear back from the Ministry, they can rest assured that their application has been accepted. And at some later date, they can always apply for permanent residency or even a Spanish passport.
Au contraire Nick, you should hang your head high for yet another excellent post.
I am looking at Latin America even Colombia to escape high cost of living in USA. Latin America could actually be fixed very quickly if USA would invest properly. I see it as a great opportunity going forward. Been to Colombia and it was great. Americans get ripped off big time on everything. Be it healthcare, food, etc. Yes there are problems but have you looked at any major city in USA? Is the trend getting better or worse? Eventually the cancer spreads as it always does to the suburbs. Over a million expats in Mexico right now. They understand the game to well.
Only if you’re going as a retiree, to spend your solid dollars on their weak economies lol. Come on, why do you think people cross deserts and rivers and risk everything to work in the US? Because their countries suck big time. Go there to work earning weak pesos, spending in pesos, and facing their violent cities. I dare you.
Hear ye, hear ye… So very true.
Just saying that I find it interesting that these people are ducking over to Madrid instead of Miami which is much closer. Yes, there is the language factor where the people in Spain speak the same language but I wonder if there is another factor at work. Could it be that their is blowback with how they see the US grabbing Russian assets and giving it to friends? And that they may be wondering just how safe their assets are if lodged in the US? All it takes is for a shift in US policies and they may find themselves being caught up in financial sanctions. Yes, the EU is trying to do the same thing but it is the US really pushing for grabbing people’s wealth. Personally if i had a few million kicking around, I certainly not want it parked in the US as I would always be wondering how safe it is.
I imagine that for urbane Latin Americans, Florida is barbaric. Note what was said about going to theatres. And once you avail yourself to cultural life, you may see some genuine aristocrats. Additionally, Spanish food etc. can be first class. In short, it is like living in Manhattan, except less expensive and most people speak understandable Spanish (for all small differences with Mexican Spanish, Argentinian Spanish etc.), unlike Caribbean variety that predominates in Miami (did I mention barbaric?).
You’re correct. Miami is barbaric. It takes the Latin American rabble who brings with them their horrible customs and lack of basic education. Madrid is like the best of New York, with a wonderful weather.
Surprised it took them this long, as USA has a long history of turning on their South American allies when they become inconvenient (or USA need to restore “face”).
As an aside to the VIP people I have lately had (good) relations with some Latin Americans from various countries in Madrid but these are migrants from reasons other than cheating the taxman or hiding the millions but sons and daughters of necessity. One particular story is about a Colombian that had to flee his country because he needed protection against his own violent government [one which I believe is kosher to Western standards and neoliberal ideology]. He kept me crying for hours when he told me his story. I realised that we don’t really realise how dreadful are those supposedly complying “democratic” governments that we support.
Most of the worries we see in the standard media about human rights in Iran or elsewhere are mostly politically driven propaganda while we have our eyes wide shut on the violence we support.
Thanks for sharing that, Ignacio. There are many such people in this country.
The golden visa program has very little impact on Madrid, be it on property prices or anything else. So Spain has issued 25,000 of these visas between 2013 and 2018. Great. Are we supposed to believe this had any material impact on the Madrid property market? What evidence is there to support this? Even if one hundred percent of those people bought property in Madrid, it wouldn’t make that much of a difference. And of course they didn’t all buy here. Furthermore, look at the property prices in Madrid during those years. I mean, the idea that this golden visa program did anything is preposterous. Maybe it’s a bad idea because you don’t like rich people, or you imagine that the folks taking advantage of it are right-wing, or whatever. Maybe it’s just immoral and shouldn’t be allowed. Fine. But the idea that it moved the market here at all is completely without evidence.
What did? Well, a few things. First and most important: near zero interest rates. After that there was the Catalonia independence clown show. Whatever you think of that whole thing, it drove business and investment away from Catalonia (mainly Barcelona). Then there is the fact that Madrid is a far friendlier place to do business than most of the rest of Spain.
As far as the rich latin-american crowd that has overrun parts of the city goes, far and away the biggest draw is safety. Madrid is a very, very safe city. Lots of South American rich people come here, they send their kids here, and so forth. This is not new. You also don’t need a golden visa to accomplish this. A very large portion of these people already have Spanish (or Portuguese in the case of Brazilians or Italian in the case of Argentines) passports. Furthermore, if you have a little bit of money — far less than half a million, we’re talking 4x minimum wage in Spain for a year — it’s not very difficult get a residence permit here. See, e.g.: https://extranjeros.inclusion.gob.es/es/InformacionInteres/InformacionProcedimientos/Ciudadanosnocomunitarios/hoja010/index.html
Also, Felipe Calderón did not get a golden visa. I didn’t know this before hand (I couldn’t care less about former Mexican presidents), but five seconds of goolging turns up that he got a “highly qualified” visa. These are not difficult to get if you have an employer sponser. And they don’t require any investment, real estate or otherwise. You can find this online in moments too: https://extranjeros.inclusion.gob.es/es/InformacionInteres/InformacionProcedimientos/Ciudadanosnocomunitarios/hoja022/index.html
Finally, can we please stop quoting the NYT like it’s even somewhat authoritative? They don’t have any real presence here. They never have (at least this century; perhaps in times past they did). They’ve got tourists. Nothing personal; I’m sure Minder is a nice guy and I’ve heard their current guy is too — but man, these people have no idea about anything here.
Anyway, none of this is to defend Spain or Madrid. Or to promote them. They both suck in their own ways, and are awesome in their own ways. Just like every other country and city. Oh, and a shout out Ignacio, who always seems to have insighful comments on Spain related posts. And of course to the whole NC crew, who really do a remarkable job.
There’s a tendency of left leaning people to blame the foreigners for the price appreciation on the real estate market. PT is saying now they are going to expropriate people of their properties in the best communist way, so they can house the poor. How cute. *irony*. You’re absolutely correct, real estate market price appreciation has nothing to do with a bunch of rich foreigners, but lousy central bank policies.
Amongst window dressing for Portugal ‘claiming’ to be ending its Golden Visa programme is the bad publicity it has been getting amongst the “Internationally important High and Mighty” due to their Border Police (SEF) go-slow in renewing the Visa’s.
A go slow triggered by theoretical Government plans to dismantle SEF, following repeated bad PR that culminated in beating a Ukranian (now a protected species!) to death at Lisbon airport.
Keeping ordinary oiks applying for residency via other visa schemes, like Nomad and D7, many months to even get an interview then many months more to get their residency ID card is all very well but keeping heavyweights grounded in Portugal, not able to Schengen around, as they have expired visa’s is not good.
Particularly if they then re-apply next door to get immediate access to Spain’s Golden Visa version; yet can still effortlessly access and leave Portugal.
Closing EU member state Golden Visa procedures only makes sense if it is done simultaneously !
https://www.portugalresident.com/golden-visa-misery-this-is-an-absolute-scandal/