Investment Migration, Global Development, and the Economic Potential of New Generations

After three to four decades of globalization that brought about new wealth creation, global mobility and a few crises, things are changing and now the world faces the risks of continued armed confrontations, trade wars, political polarization in big countries and policy unpredictability. All these factors are leading to an increase in the insurance value of investment migration that attracts High-Net-Worth Individuals (HNWI)¹A wealthy person or HNWI is often defined as individuals with investable (liquid) wealth over U$ 1 million (some use a higher threshold of investable wealth of over U$ 3 million), see Solimano (2024)., professionals, entrepreneurs, and other talented people. Global solutions for this pool of internationally mobile people are, certainly, needed. In addition, new topics are emerging such as the growing portance of the youth as a very relevant actor in the process of wealth accumulation and international mobility, but challenges also exist in this area.

In the last 15 to 20 years governments of a significant number of high income and middle-income countries have developed Investment Migration Programs (IMP) to attract investors from around the world, offering Residence by Investment Programs, (RBI), sometimes called “golden visas” and in some countries (Caribbean nations, Turkey, Jordan, and others) the right of citizenship with Citizenship by Investment Programs, (CBI) or “golden passport”. Other attraction programs are the digital nomad visas and visas for financially independent persons.

Investment migration and these other programs must also contribute to global development and a more equitable and safe global economy. For the investor, investment migration offers new commercial opportunities, visas, and citizenship in countries that offer safe cities, good medical and educational facilities, cultural opportunities, sound financial systems for them and their families. The inflow of foreign resources associated with IMP come in different modalities: investment in properties in the receiving countries, capital contributions to government-sponsored development plans, acquisitions of government bonds, capital contributions to private project financing leading to the creation of new firms and the generation of employment. Main channels through which IMP affect the economy of the receiving countries are savings mobilization, financial deepening, positive impact on private and public investment and the fiscal budget, transfer of technology and the generation of new markets. At the same time there could be some potentially adverse effects from the inflow of foreign capital associated with investment migration that need monitoring such as an upward pressure on real estate and housing prices that displace domestic residents from central locations, as well as effects on the real exchange rate that becomes stronger making exports and tourism more expensive. At the same time investment migration and capital mobility may erode the tax base in the origin country (see Solimano, 2024).

An important new theme is the savings potential of the youth and the need to examine the demographics of countries to infer their national and international investment patterns. Currently there are near 600,000 millionaires’ millennials in the United States (individuals born between 1981 and 1996)²See Henley @ Partners (2024.). In this group near 30 percent of 25-year-olds already owning a house. The stories of wealth creation at a young age include those who have launched successful start-ups and/or have well remunerated jobs in the financial and the service sectors. Moreover, it is envisaged a “great wealth transfer” of around U$ 84 trillion, that is expected to take place in the next two decades around the world from the silent generation and baby boomers to Generation X, Millennials and Generation Z. Furthermore, there are important differences in investment patterns between millennials and Generation Z and Generation X and Baby Boomers. While US stocks is the main investment vehicle for the older generations, real estate, and crypto/digital assets more important for the younger generation. Tellingly, crypto investments lie at the bottom of the portfolio preferences for the cohort of 44+ while US stocks at are at the bottom of the investment priorities of the age cohort of 21-43.³Bank of America Private Banking (BoA, 2024)

Still, a considerable proportion of the cohort 21-43 years old currently face tougher conditions in the housing market, than those faced by their parents when they entered the job market, due to high housing market prices worldwide.⁴Solimano (2017, 2020). In fact, in the real estate sector, the talk is of the emergence of a “generation rent” of individuals who simply cannot afford to buy a house given their incomes and debt profiles and just rent properties. However, the incoming big wealth transfer may alter this reality and enable vigorous wealth creation and mobility for the youth.