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SOVEREIGN MAN

Latvia’s unique new residency program

January 4, 2011
Santiago, Chile

Latvia is broke… I’m talking flat broke– more than Spain, Greece, California, etc. And because this small Baltic, former Soviet republic is not in the Eurozone, it’s generally been left for dead by the EU’s larger economies save a few handouts here and there.

Latvia has recently taken matters into its own hands, establishing a unique new policy that entitles foreign investors to Latvian residency, as long as they meet minimum criteria.

This is a big deal, and I think it is all part of a new trend that will grow stronger in the coming years: governments competing for residents and citizens.

It’s true that the fat, broke, bloated, dominant economies of the old western hierarchy are in decline– we all know that the EU is a financial disaster zone, and the US is insolvent to the tune of negative $14 trillion (12 zeros).

The way they’re dealing with it is to encroach on civil liberties and financial freedom; many nations like Hungary and France are already taking the radical step of seizing their citizens’ private pensions to cover budget shortfalls. This has also been openly discussed in the US by policy advisors.

It’s cannibalistic, to say the least. Politicians feed on the hard work of their citizens in order to advance their own agendas and cling to power. In these countries, you can bet on higher property and income taxes, new (or higher) national VAT sales taxes, increased death taxes, and capital controls.

On the opposite end of the spectrum are the smaller, leaner, more successful countries. They understand that the key to financial harmony is a symbiotic partnership with talented residents, not the host-virus relationship that the west has adopted.

Singapore is a great example. The government in Singapore understands that its primary mission is to create an environment in which talented people can succeed. They do this by keeping bureaucracy to a minimum, maintaining low tax rates, and providing incentives to foreigners who can add value to the economy.

As we’ve discussed before, many other countries provide their own sets of incentives to foreigners, whether retirees (Panama), entrepreneurs (Chile), investors (New Zealand), or professionals (Hong Kong).

Latvia has just joined the ranks of these countries because they understand that an influx of foreign capital is critical. They will not be able to survive by pecking at their own innards– they must attract foreign investors, and the biggest card they’re carrying is EU residency.

This new policy is controversial, both in Latvia as well as Brussels. EU bureaucrats are beside themselves, already lamenting about the number of Russians who will have unfettered access to Europe’s borderless Schengen area.

It’s possible that Latvia may come under intense pressure to undo the policy in exchange for another bailout from Germany… but even as doubtful as that may be, the larger point is that governments are finally starting to think in new directions to solve their problems.

This is a market-oriented trend that I see continuing for several years, starting with smaller countries like Latvia, and eventually working up to larger countries like the UK… and even, eventually, the US.

I’ll have much more information about this Latvia residency program for premium subscribers, including relevant contact information, in this month’s upcoming edition of Sovereign Man: Confidential. Stay tuned for more.

About the author: Simon Black is an international investor, entrepreneur, permanent traveler, free man, and founder of Sovereign Man. His free daily e-letter and crash course is about using the experiences from his life and travels to help you achieve more freedom.

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Comments on this entry are closed.

  • Renoplayer

    You wrote “..the US is insolvent to the tune of negative $14 trillion (12 zeros).”
    Debt does not mean insolvency. Currently, the US has has both income and assets to more than cover the debt load. However, this may not be the case forever.

    • Optima Worldwide

      The US is actually in a worse position than the European problem countries Greece and Ireland.

    • Joe

      You don’t understand economics.

      • Mark

        it’s called the trade-off theory of capital structure. I’m not arguing that the U.S. is not bankrupt, but I am arguing that it is a critical economic understanding in modern day finance..at least for public companies. At a certain point, the debt to equity structure of an organization is optimized by creating a “net benefit”. Or in other words, optimizing the tax shield. Therefore, it is essential and healthy to maintain debt.

      • Ts324

        Sorry … but this has to be the dumbest statement ever recorded. You must work for the Federal Reserve. Stop drinking the cool-aid.

    • Ts345

      You don’t know what you’re talking about. Can you be that obtuse? The USA is completely bankrupt and insolvent… and has been so for a long time.

  • Alex

    Simon, are you currently in Latvia?

  • Brian

    I was trying to find the specific information about this from the gov’t's own websites… couldn’t find it. Do you have a link where I can read more?

  • Gman

    Thank you for all of these insightful dissertations

  • silverpelicanfeather

    I would definitely like a non-US passport since USA citizens aren’t welcome in large parts of the world on the local level. These places have probably never heard of Latvia.

    • Optimaworldwide

      the latvian passport may say ” EUROPEAN UNION ” ,even the last American in Texas meanwhile knows about the European Union…..
      LATVIA may give you a residence , but if they give nationality withouthaving some more relationshipwith the country than a few Dollars

  • Sergey

    Hi Simon!
    That economic residency program is very great, because it attracts in it’s official, second wave the working professionals instead of pure speculists (as in the first wave). This makes it truly attractive from my standpoint. However I would like to offer a warning for your US readers.
    As much as Latvian officials like to lick American ass, the business dislike it strongly, especially banks. There’s a reason to that. You.

    Hence a sovereign man with a US passport will not be able to open an account in a reputable bank, and the bank that will open the account for him will start immediately cabling his account details to officers in the US embassy in Riga.

    To conclude, the economic residency program is nice, but with a US passport in your pocket you are a risky client.

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