October 8, 2010
Cape Town, Republic of South Africa
It’s been several months since I’ve put boots on the African continent. This place changes all the time, and I believe that, country-by-country, it’s probably the most diverse and intriguing continent on earth… constantly teetering between boom and bust.
To be clear, most of Africa has the right ingredients to be wealthy and successful– there is no shortage of resources on the continent, including oil, gas, gold, fertile land, etc. Unfortunately, there is also no shortage of rampant corruption.
Equatorial Guinea is a great example; the tiny nation sits atop some of the richest hydrocarbon reserves on earth, and given its small population, it should be the Kuwait of Africa.
Not exactly. While EG does have among the highest GDP-per-capita rates in the world, it is also among the world’s poorest nations. Effectively all of the oil wealth has been confiscated and distributed exclusively for the ruling Obiang family.
Much of this systemic corruption is rooted in Africa’s imperialist history. The continent was carved up by European leaders without regard for tribal boundaries, and it’s taken decades of civil war to even begin sorting these issues out.
Today, there are a lot of relative bright spots in Africa. Even Zimbabwe, where I’ll be headed next week, is starting to show some signs of life… but more on this later, let’s move on to this week’s questions.
First, an anonymous reader asks, “Simon, I am presently a contractor in Iraq and have socked away a nice nest egg. I have a Security Clearance and hope to get a US government job, but I also want to plant multiple flags. Is it impossible to go ahead with my plans and embrace these two conflicting ideas?”
US government security clearances require a lengthy application and investigation process, as well as periodic reinvestigations, known as PRs. The folks who carry this sort of thing out at the Defense Security Service (DSS) take their job very seriously.
Their mission is to determine if your loyalty to the US government could be compromised in any way, especially for philosophical or financial reasons. Planting certain flags like opening a foreign bank account or buying foreign property are not necessarily disqualifiers, but they will raise doubts.
Eventually, the DSS bureaucrats who get paid to scrutinize your life will probably call you to the carpet to explain such ‘suspicious activity’. If you spend a lot of time overseas, you should be able to explain away these sorts of things fairly easily, though.
Obtaining a second passport, though, is simply a non-starter. For DSS, it demonstrates that you could be philosophically or legally compromised if by your foreign government.
Next, Christine laments, “Simon, I enjoy your emails but I have to take umbrage at your recent comments about finding love in Ukraine. I think they were sexist because you were singling out the opportunities for men and ignored the fact that women also read your posts.”
Fair enough… bear in mind that I was talking about Ukraine in that missive, where the ultra-low male/female ratio clearly gives men the upper hand. For women who are looking for love, lust, or just plain ole’ impolite attention from men, head to Morocco, Jamaica, or Argentina. You’ll get your fill.
Next, Lawrence asks, “Simon- I really value your advice and wanted to ask you about Belize. What do you think of the country’s residency program?”
The Belize residency program isn’t cumbersome to qualify and apply for– there is no massive financial investment required, and only about $1,000 in fees, give or take your lawyer’s cut.
What I don’t like about it is that, under the official permanent residency program, you cannot leave the country for more than 14 days during the first year.
Under the qualified retired person program, applicants have to spend at least one month each year in the country, and (at least officially) submit annual compliance documentation like bank statements, etc.
Given the options available, I would take a pass unless you plan on living there. Ecuador, for example, is much more attractive– minimal compliance, no medical screening, no background check, and only three years to citizenship.
Last, DmLane writes, “Hi Simon- It’s true that any country at any time can change its rules. Take Panama, for example– sales tax used to be low, and the government recently increased the sales tax by 2% without warning. Deciding which country to place your flags can be difficult. What are your thoughts?”
DmLane raises a great point: nothing is permanent, and governments certainly can change things to suit their interest… but countries don’t generally turn on a dime. We can see these warning signs coming from years away.
In the case of Panama, bear in mind a few things: first, President Martinelli was trying to simplify the tax code. He eliminated 30+ different types of taxes and slashed the corporate and personal tax rates, making up for it with a 2% increase to the national sales tax.
Second, Panama never was considered a place to plant flags for the cheap shopping. Sure there’s a lot of product availability in the country, but the real draw to Panama is in its offshore structures, banking, and low taxes.
Martinelli’s tax reforms made these flags even more attractive in Panama at the expense of consumption, which was never a big draw for the country to begin with.
Overall, when selecting jurisdictions to plant flags, you have to stick to places that are on a long-term, upward trend. Whose economy is booming, who is developing thriving industries, etc.? In these places, even the dumbest politician won’t be stupid enough to kill the golden goose, not for a long time.
To use your Panama example, all the politicians know that the local economy depends heavily on its offshore sector, so they’ll fight tooth and nail to keep the party going.
