Risking Investment Capital Offshore

Sept. 7, 2010 - PRLog -- Why are more and more investors risking investment capital offshore from their countries of origin? There is a sense of comfort when doing business in a familiar setting, no matter how bad the economy has become or how restrictive business regulations are. Despite increasingly high taxes many businesses no not venture beyond the confines of their national borders. However, more and more investors are seeking investment opportunities in unfamiliar but potentially very profitable settings. The growth of Chinese industry has been fed to a degree by not only an infusion of Western technology but also Western capital. The same can be said for the so called Asian Tigers like Taiwan, Singapore and the others as well as Japan many years ago. Today investment in the Middle East, Russia, and Latin America is driving growth, emergence of middle classes, and, often, better return on investment than in North America or Europe.

Investors are risking investment capital offshore because they believe that the potential rate of return versus the amount of risk work out to be a better option than in their nations of birth. Many “tax haven” countries offer attractive investment opportunities and extremely tax advantaged situations. Many of these nations have found that their flood of investment capital was sufficient to keep business going during the most severe economic down turn in the last seventy-five years. The little country of Panama, for example, saw its rate of economic growth slow to three percent per years when economies were contracting in recession throughout the world. While workers were being laid off in North America skyscrapers were still going up in Panama City. Investors are not just coming to Panama to set up Panama Private Interest Foundations. They are coming to countries throughout Latin America, as well as Asia, to start businesses, investing in a variety of projects, and catch a ride on one or more of the world’s new growth engines.

Setting up Business Offshore

Setting up an international business corporation will allow an individual or a company to operate in one jurisdiction and throughout the world. Typically the principals will find a jurisdiction with any of a variety of tax advantages and infrastructure sufficient for their business needs. More often than not an international business company will not do business in its host nation but will trade, operate businesses, provide banking or banking like services, and more to clients throughout the globe. Offshore there is availability of offshore vehicles providing a degree of privacy not seen in other nations. Thus, many will choose a multinational solution including vehicles such as a New Zealand trust, a Panama Private Interest Foundation, a bearer share corporation, and other solutions offering a degree of asset protection and privacy typically not seen in many countries.

Risk Assessment

There are a number of things to look at when assessing the risk of investing offshore. These start with economic risk. Namely, will the boom last? An individual or a company will need to look at the factors that make investing in an offshore jurisdiction attractive and come to a decision as to how stable the investment might be and for how long. People who are building skyscrapers in little countries like Panama would seem to believe that these investments will provide substantial returns for generations.

Transfer and exchange rate risk have to do with how a nation will allow currency to flow across its borders and if it will modify exchange rates to the detriment of investors. Here nations have track records. There is no lack of offshore jurisdictions where investors have profited for decades and generations. Also, a company setting up in one offshore jurisdiction may choose to move its investments throughout the world and only need to be concerned about tax and banking issues in the jurisdiction where they bank and have their registration.

Picking a vibrant and growing region is important. This is evidenced by how the smaller Asian countries around China are leading the way out of the recession. It is evidenced by the growth the middle class throughout Latin America. It is evidenced by the emergence of Brazil as the new South American super power. Latin America, for example, has several free trade regions driving economic growth.

What is referred to as political or sovereign risk is the concern of government confiscation of private industries and other attacks on the rights of ownership. Certainly the current situation in Venezuela is a cause of concern for anyone still invested there. However, there are many, many nations throughout the world with pro business governments interested in attracting capital and not interested in starting a stampede for the door by playing games with private ownership rights. Political stability is important. For example, just two generations ago Panama had a military dictatorship in charge and virtually all of Central America, except Costa Rica, were involved in civil war. That era is gone and increasing prosperity is growing the middle class throughout the region. Panama is expanding the Panama Canal and ports up and down the Atlantic Coast of the Americas are upgrading to receive huge container ships full of goods for their industries and increasingly wealthy consumers.

A Comprehensive Offshore Solution

Those interested in making money offshore will typically seek out someone with long and multinational experience in setting up and managing offshore investment, banking, and business solutions. Such an individual will have insights hard to find short or working in the arena of devising offshore business solutions. It is important to deal with someone who deals in more than one nation. Offshore vehicles will vary from country to country and vehicles such as a New Zealand Offshore Financial Company or a Panama Private Interest Foundation are unique for individual company needs. An individual or company need not bank, set up an international business corporation, or invest in just one nation. Starting out with the right counsel will help the principals arrive at the most advantageous solution when risking investment capital offshore.

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