A side benefit of living in La Estancia de Cafayate, Doug Casey’s upscale expatriate community in Northwest Argentina, is the steady parade of interesting individuals passing through. Some are owners and guests, and some are just individuals curious to see the sporting and lifestyle estate Doug and his partners have established.
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One of the latter, an individual who lives in Switzerland, recently spent the better part of a week with us, enjoying the golf, horseback riding, leisurely dinners at the Grace Hotel, and so forth. Over the course of our time together, the talk turned to global investments, and he told me about a property investment fund (in which he is a partner) that buys and refurbishes Swiss apartment and office buildings in order to sell them for a profit, or – if the math is right – generate ongoing rental revenue.
As I’m a huge believer in diversifying across political jurisdictions, markets and asset classes, I asked my new friend if he could make room in an upcoming fund for me. He said he would be happy to have me as a partner and promised to send me the details on returning to his home in Switzerland.
And that sets the stage for the following “Dear David” letter, which fully reveals the noose tightening around the neck of Americans looking to move assets out of the direct grasp of their government. The correspondence which follows has been edited only to protect the identity of my Swiss friend.
Dear David,
I am sorry for not having returned to you sooner regarding the promised overview of our partnership and investments in Swiss real estate.
We have just completed another project concerning a property in the German-speaking part of Switzerland. As part of securing a mortgage from a local bank, we had to read and sign papers for almost one hour (and I do not exaggerate) only regarding FATCA. The bankers present at the meeting didn’t even know how we should answer half the questions without incriminating ourselves! If it was not so depressingly serious a matter, it would be very funny in a Monty Python sort of way!
However, to cut a long story short (and reduce my promised overview to a single paragraph), and despite the fact that I would personally treasure to have you as a co-investor, it is simply impossible to include a U.S. citizen in our group of co-investors. And investing through a trust doesn’t change anything; the Swiss banks are looking for a copy of the passport of the ultimate owner or beneficiary of whatever financial vehicle is used by our co-investors.
My Swiss partners (and also our Swiss bank connections) tell me that there used to be plenty of options available to hide the identity of the ultimate owner of just about any investment. That is no longer the case. The only completely durable option for a U.S. citizen is to renounce U.S. citizenship and get another from a less problematic country – which is at the moment equivalent to saying almost anywhere else in the world! Just getting a second passport is not enough; FATCA killed that option.
I am sorry about this – I had hoped to find a way through.
******* MY REPLY *******
Dear (Friend),
Thanks for the note and the explanation.
Sadly, this is where the future is… to wit, capital controls. And soon, I suspect, it won’t just be the Americans who are locked in, but most of the Western world…
Best,
David
******
Dear David,
It is indeed a grave development and I am afraid that you are spot-on regarding the spread of this capital control nonsense to most of the Western world.
As a matter of fact, in our property investment partnership, we believe we have an “open window” period of only a few years more and then either the bureaucrats of EU or the “knaves, dupes and do-nothings” in Switzerland itself will stop our purchase of commercial properties with foreign co-investors of any nationality.
Residential properties are already “off-limits” for foreign investors with residency outside of Switzerland (due to an earlier law: Lex Koller)…
Anyway, we are for sure entering interesting times… [but] I am also sure that the “prepared will be spared”; actually, I believe the prepared might even profit…
All the best,
******
While it is increasingly difficult for Americans to find foreign financial institutions who will accept them – and soon it may be impossible – it’s still possible to buy land in many desirable countries around the world without being a resident. This is why, in addition to our property in La Estancia, which is more of a lifestyle diversification than an investment (though I expect it will do well in that regard as well), we also now own Paraguayan farmland and are always on the lookout for land in other attractively priced markets.
However, unless the statists with their anti-capitalist meddling are turned out of power, I believe in time we’ll see restrictions on buying foreign property as well.
And once that happens, the wealth trap will be closed tight, giving the U.S. government free rein to tax, confiscate and otherwise threaten the populace with penury if they don’t follow orders. Given the leadership role the U.S. government plays, I don’t believe it will be long before all the large Western governments with cross-border interests will demand the same sort of reporting and compliance as required by FATCA.
It really does behoove you to take countermeasures before the trap closes by exploring foreign real estate, establishing foreign trusts (which still can be of help in many jurisdictions), and looking into a legal and properly organized second passport program. But you’ll need to get off the dime, because the clock is ticking.
Cheers!
David Galland
For The Non-Dollar Report
P.S. One way to get the ball rolling is to sign up for Doug Casey’s Estancia Experience, a private gathering at La Estancia de Cafayate being held this November 7-12. In addition to your weeklong immersion into the incredible lifestyle at La Estancia, the Casey Research folks will hold a half-day conference featuring experts on topics related to foreign investing and overseas residency. For a complete itinerary and more information, email Chris Leverich at experience@LaEst.com. Please tell them The Non-Dollar Report sent you!
*A version of this column was published originally in International Man.
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