THE NEW GLOBAL ECONOMIC REALITY

by Charles Simpson, Mexinvestnow.com

First: A reality check on Mexico

Mexico is in a unique position to reap many of the benefits of the decline of the US economy. In order to not violate NAFTA and other agreements the U.S.A. cannot use direct protectionism, so it is content to allow the media to play this protectionist role. The U.S. media – over the last year – has portrayed Mexico as being on the brink of economic collapse and civil war. The Mexican people are either beheaded, kidnapped, poor, corrupt, or narco-traffickers. The American news media was particularly aggressive in the weeks leading up to spring break. The main reason for this is money. During that two-week period, over 120,000 young American citizens poured into Mexico and left behind hundreds of millions of dollars.

Let’s look at the reality of the massive drug and corruption problem, kidnappings, murders and money. The U.S. Secretary of State Clinton was clear in her honest assessment of the problem. “Our insatiable demand for illegal drugs fuels the drug trade. Our inability to prevent the weapons from being illegally smuggled across the border to arm these criminals causes the deaths of police officers, soldiers and civilians,” Clinton said. The other large illegal business that is smuggled into the U.S.A. that no one likes to talk about is Human Traffic for prostitution. This “business” is globally now competing with drugs in terms of profits.

It is critical to understand, however that the horrific violence in Mexico is over 95% confined to the three transshipping cities for these two businesses, Tijuana, Nogales, and Juarez. The Mexican government is so serious about fighting this, that they have committed over 30,000 soldiers to these borders towns. There was a thoughtful article written by a professor at the University of Juarez. He was reminded of the Prohibition years in the U.S.A. and compared Juarez to Chicago when Al Capone was conducting his reign of terror capped off with The Saint Valentine’s Day Massacre. During these years, just like Juarez today, 99% of the citizens went about their daily lives and attended classes, went to the movies, restaurants, and parks.

Is there corruption in Mexico? YES !!! Is there an equal amount of corruption related to this business in the U.S.A.? YES !!!. When you have a pair of illegal businesses that generate over $300,000,000,000 in sales you will find massive corruption. Make no mistake about the Mexican Drug Cartel; these “businessmen” are 100 times more sophisticated than the bumbling bootleggers during Prohibition. They form profitable alliances all over the U.S.A. They do cost benefit analysis of their business much better than the US automobile industry. They have found over the years that the cost of bribing U.S. and Mexican Border Guards and the transportation costs of moving marijuana from Sinaloa to California have cut significantly into profits. That is why over the past 5-7 years they have been growing marijuana in State and Federal Parks and BLM land all across America. From a business standpoint, this is a tremendous cost savings on several levels. Let’s look at California as an example as one of the largest consumers. When you have $14.2 billion of Marijuana grown and consumed in one state, there is savings on transportation, less loss of product due to confiscation and an overall reduction cost of bribery with law enforcement and parks service people. Another great savings is the benefit to their employees. The penalties in Mexico for growing range from 5-15 years. The penalties in California, on average are 18 months, and out in 8 months. The same economic principles are now being applied to the methamphetamine factories.

FOX News continues to scare people with its focus on kidnapping. There are kidnappings in Mexico. The concentration of kidnappings has been in Mexico City, among the very rich and the three aforementioned border Cities. With the exception of Mexico City, the number one city for kidnappings among NAFTA countries is Phoenix, Arizona with over 359 in 2008. The Phoenix Police estimate that twice that number of kidnappings goes unreported, because like Mexico 99% of these crimes were directly related to drug and human traffic. Phoenix, unfortunately, is geographically profitable transshipping location. Mexicans, just like 99% of U.S. Citizens during prohibition, go about their daily lives all over the country. They get up, go to school or work and live their lives untouched by the border town violence.

These same protectionist news sources have misled the public as to the real danger from the swine flu in Mexico and temporary devastated the tourism business. As of May 27 2009 there have been 87 deaths in Mexico from the swine flu. During those same five months there have been 36 murdered school children in Chicago. By their logic, if 87 deaths from the swine flu in Mexico warrants canceling flights and cruise ships to Mexico, then close all roads and highways in the USA because of record 43,359 automobile related deaths in the USA in 2008.

What is just getting underway is what many are calling the “Largest southern migration to Mexico of people and real estate assets since the Civil War” A significant percentage of the Baby Boomers have been doing the research and are making the life changing decision to move out of the U.S.A. The number one retirement destination in the world is Mexico. There are already over 2,000,000 US and Canadian property owners in Mexico. The most conservative number of American and Canadian Baby Boomers who are on their way to owning property in Mexico for full or part time living in the next 15 years is over 6,000,000. Do the math on 6,000,000 people buying a $300,000 house or condo and you will understand why the U.S. Government is trying to tax this massive shift of money to Mexico through H.R. 3056. The U.S. government calls this “The Tax Collection Responsibility Act of 2007”. Those who will have to pay it are calling this the EXIT TAX.

Mexico: A better economic choice than China

Another large exodus from the U.S.A is high paying skilled jobs. The job shift in automobile sector, both car and parts manufacturing, is already known by most investors. In the last few months as John Deere and Caterpillar have been laying off thousands of workers in the U.S.A., and hiring equal numbers in Mexico. The most recent industry that is making the shift is the aerospace manufacturers. In the city of Zacatecas there is currently a $210 million aerospace facility being built. With the 11 U.S. companies moving there, it is estimated to provide over 200,000 new high paying jobs in the coming years. One of the main factors for the shift in job south to Mexico instead of China is realistic analysis of total production, labor and delivery costs. While the labor costs in China are 40% less on average, the overall transportation costs and inherent risks of a long distance supply chain, and quality control issues, gives Mexico a distinct financial advantage.

Mexico’s real economic future

Mexico has avoided completely the subprime problem that has devastated the U.S. banking industry. The Mexican banks are healthy and profitable. Mexico has a growing and very healthy middle and upper middle class. The very recent introduction of residential financing has Mexico in a unique position of having over 90% of current homeowners owning their house outright. U.S. banks are competing for the Mexican, Canadian and American cross border loan business. It is and will continue to be a very safe and very profitable business. These same banks that were loaning in a reckless manner have learned their lesson and are loaning here the old fashioned way. They require a minimum of a 680 credit score, 30% down payment, and verifiable income that can support the loan. In most areas of Mexico where Baby Boomers are moving to, with the exception of Puerto Penasco (which did not have a national and international base of buyers), there is no real estate bubble. The higher end markets ($2-20 million) in many of these destinations are going through a modest correction. The Baby Boomers market here is between $200,000 and $600,000. With the continuing demand inside the Bay of Banderas, that price point, in the coming years, will disappear. This is the reason the Mexican government is spending billions of dollars on more infrastructure north along the coast all the way up to Mazatlan.

The other major area where America has become overpriced is in the field of health care. This massive shift of revenues is estimated to add 5-7% to Mexico’s GDP. The name for this “business” is Medical Tourism. The two biggest competitors for Mexico were Thailand and India. Thailand and India’s biggest drawback is geography. Also recent events, Thailand’s inability to keep a government in place and the recent terrorist attack in Mumbai, have helped Mexico capture close to half of this growth industry. In Mexico today there are over 56 world class hospitals being built to keep up with this business.

Mexico is currently sitting on a cash surplus and an almost balanced budget. Most Americans have never heard of Carlos Slim until he loaned the New York Times $250 million. After that it became clear to many investors around the world what Mexicans already knew: that Mexico had been able to avoid the worst of the U.S. economic devastation. Mexico’s resilience is to be admired. When the U.S. Federal Reserve granted a $30 billion loan to each of the following countries Mexico, Singapore, South Korea, and Brazil, Mexico reinvested the money in Treasury bonds in an account in New York City.

According to oil traders, Mexico’s Pemex wisely as the price of oil shot to $147 a barrel put in place an investment strategy that hinged on oil trading in the range of $38-$60 a barrel. Since the beginning of 2009 Mexico has been collecting revenues on hedged positions that give them $90-$110 per barrel today. Mexico’s recent and under reported oil discovery in the Palaeo Channels of Chicontepec has placed it third in the world for oil reserves, right behind Canada and Saudi Arabia.

The following is a quote from Rosalind Wilson, President of the Canadian Chamber of Commerce on March 19, 2009. “The strength of the Mexican economic system makes the country a favorite destination for Canadian investment”.

OPPORTUNITIES: WHY PUERTO VALLARTA & THE RIVIERA NAYARIT?

The answer is simple and old fashioned: SUPPLY AND DEMAND.

The area of Puerto Vallarta/Riviera Nayarit inside the Bay of Banderas is an investor’s dream. This area has the comprehensive infrastructure in place, world class hospitals and dental care, natural investment protection from the Sierra Madre Mountains, endless future water supply, low to nonexistent crime, international airport, and limited supply inside the Bay, first class private bilingual schools and higher than average appreciation potential. Like many areas in Mexico there is large demand for full and part time retirement living and a lot of construction underway to meet this demand. Pre construction of course is where the best bargains are available.

I would offer a word of caution for investors in Mexico. Do not be seduced by the endless natural beauty that is everywhere, both inland in colonial towns and along thousands of miles of beach. Apply conservative medium and long term investment strategies without emotion. The demand for full and part time living by American and Canadian Baby Boomers is evident throughout the country. The top two choice locations are ocean front, and ocean view. The third overall choice, which is less expensive, is inland in one of the many beautiful colonial towns or small cities.

Mexico, with the world’s 13th largest GDP, is no longer a “Third World Country”, but rather a fast growing, economically secure state, as the most recent five-year history of its financial markets when compared to the U.S.A.’s financial markets suggests.

DOW JONES AVERAGES MAY 2004 10,200 MAY 2009 8,200 20% LOSS IN 5 YEARS

MEXICAN BOLSA MAY 2004 10,000 MAY 2009 23,000 130% GAIN IN 5 YEARS

I am glad to share all of my research with investors.

Original Article here

Posted on April 15th, 2010 by Tropicasa Realty
Filed under: News | Comments Off

How Safe is Mexico?
by Anne Johnson

Drug-related violence in cities south of the United States-Mexico border has caused the U.S. State Department to issue a travel warning for Mexico — but did you know most of Mexico is as safe as ever? Our government is actually advising against visiting very specific places where drug cartels are warring over the billions of dollars made yearly trading illegal substances into the United States, and the efforts by the Mexican government to put an end to the drug traffic. Unfortunately, after hearing “warning” and “Mexico,” many Americans perceive the advisory for the country as a whole, which it definitely is not.

There are, of course, caveats about travel in Mexico, just as there are for visits to any foreign city or resort area, but many of these fall under the realm of common sense: Don’t stray from the well-known tourist areas, stay alert and don’t drink too much, avoid walking alone at night, only take public transportation or drive on the highways during daylight, don’t deck yourself out in expensive jewelry and avoid large crowds and demonstrations. Before traveling to Mexico, make sure your cell phone works on GSM or 3G international networks, and memorize the Mexican version of our 911, which is 066.

The Most Dangerous Places In Mexico

Despite the increase in drug-related violence, a closer look at Mexico shows that the country is actually safer than what headlines suggest. As a whole, Mexico’s murder rate is surprisingly low: 12 homicides for every 100,000 inhabitants. When compared to Washington, D.C.’s 31 people per 100,000 inhabitants and New Orleans 64, the numbers aren’t cause for concern if you know where to avoid.

According to the State Department’s warning, these are the places you should take extra caution:

Ciudad Juarez
The “Deadliest City in the World” has seen 130 murders per 100,000 inhabitants. More than 2,600 people were killed in Ciudad Juarez in 2009.

Gomez Palacio, Durango, and Torreon
Each of these cities has seen sharp increases in violence. In late 2009 and early 2010, four visiting U.S. citizens were murdered in Gomez Palacio.

Chihuahua, Sinaloa and Northern Baja California
These areas have seen spikes in the number of robberies, homicides, petty thefts, and carjackings.

Tijuana and Nogales
Along with Ciudad Juarez, these cities have experienced public shootouts during daylight hours in shopping centers and other public venues.

Nuevo Laredo and Matamoros
Criminals have followed and harassed U.S. citizens traveling in their vehicles in these areas and in other border cities such as Tijuana.

Monterrey & Highway Travel
Travelers on highways from Monterrey and other parts of Mexico to the U.S. have been targeted for robbery and violence.
“The news media prefer to report horrible events rather than address the reality; Mexico is, in general, a very safe country — with the notable and news-making exception of Juarez and other border towns — and has far less violent crime than any large U.S. city,” says Barbara Erickson, one of more than a million Americans who lives safely in Mexico.

According to Erickson, a San Miguel de Allende resident, “one would have a greater chance of being hit by lightning than being shot or kidnapped by a drug load’s gang.”

Another plus to our relations with those living south of the border is American companies successfully conduct business in Mexico. “I have clients traveling to Mexico regularly to film and to do photo productions and we have never had any problems,” says Clare Beresford of World Locations in Hollywood, a company that scouts locations for movies, commercials and photo shoots.” World Locations has sent people to Mexico City, Merida, Zihuatenejo, Manzanillo, Puerto Vallarta and Careyes, among many destinations.

Tourism from North America is a significant part of Mexico’s economy. In 2008, foreign visitors (22.6 million of them, 80 percent of whom were from the U.S.) spent $13.3 billion in Mexico, making up 13.8 percent of the country’s GDP.

But in 2009, Mexican tourism was hammered by the U.S. recession and the swine flu epidemic. Cruise ships briefly canceled trips to the country, and many restaurants and archaeological sites were briefly closed. The revenue from foreign tourism dropped 15 percent to 11.3 billion. This year, tourism is expected to rebound. But 2010 could be another bad year if fear keeps U.S. citizens away.

We’ve drawn up a list of Mexico’s most popular tourist destinations and rated them one to five, one being the highest cause for concern, and five being the safest.

(“PLEASE NOTE THAT RISK FACTOR 5 IS THE LOWEST RISK FACTOR — MEANING THE SAFEST TO TRAVEL TO!”)

BORDER CITIES

Fear Factor: 1

The State Department listed several cities as not advisable to visit, including Ciudad Juarez, Tijuana, Nogales, Nuevo Laredo, Monterrey and Matamoros. The worst of the bunch of Ciudad Juarez, across the border from El Paso, Texas. The city has been the site of some of the most gruesome murders in an already shocking drug war. In January, 15 teenagers at a party were slain, and in March, three people with connections to the U.S. consulate were murdered in two separate incidents while riding in cars with their children, two of whom were wounded. Over the past ten years, the city has uncovered the bodies of over 400 women whose bodies were dumped in ditches or vacant lots, victims of sexual homicides. Until things get under control, this is not the time to venture over the border for some shopping or pozole.

CANCUN, THE RIVIERA MAYA AND COZUMEL

Fear Factor: 5

Cancun is one of Mexico’s most popular beach resorts, which average around four million American visitors per year. Last year a retired Mexican general investigating corruption was assassinated by drug traffickers, but that’s been an isolated event. Over-consumption of alcohol by younger tourists is a problem, and there have been rapes. But on the whole, Cancun is extremely safe. “The leading cause of foreign tourist deaths in Cancun is heart attacks, car accidents and accidental drowning,” says Canadian writer Marlo-Renay Heresco, a Cancun resident who blogs about her life in Mexico on her website, atravelartist.com. “The key to success when traveling or living abroad is exercising common sense.” The Riviera Maya (the Yucatan coast stretching south from Cancun) has little to fear beyond sunburn. The island of Cozumel off the Riviera Maya is a popular, very safe destination for cruise ships, where problems are the occasional purse-snatching or picked pocket.

MERIDA AND THE MAYAN RUINS IN YUCATAN

Fear Factor: 5

Although many people visit Chichen Itza on day-trips from Cancun, Merida is the gateway to comprehensive exploration of Uxmal and other significant Mayan ruins scattered across the state of Yucatan. Merida is a quiet, charming city, and the main ruins have well-organized tours and visitor’s centers, as well as guards. In addition to hotels in Merida, the Yucatan has a number of colonial-era haciendas that have been converted into small resorts. Mayan villagers are welcoming. Here again, it’s not a good idea to drive on unlighted roads at night, but central Merida’s busy colonial-era streets are safe to stroll at night. “Mexico is a large country… deciding not to travel “to Mexico” because of violence is like saying you won’t go to New York because of a murder in Denver,” says Merida resident Ellen Fields. ” Yes, there are places in Mexico where violence is on the rise. Where I live, Merida on the Yucatan Peninsula, and the nearby Mayan Riviera, has not seen this violence and is a very safe place to visit or to live.”

MEXICO CITY

Fear Factor: 4.75

No one thinks twice about visiting our nation’s capital, and the same should go for Mexico’s capital. In 2008, Mexico City had a homicide rate of nine for every 100,000 people, while Washington D.C. had a rate of more than 30 per 100,000 — over three times higher. Visitors to Mexico City should exercise the same precautions taken in any of the world’s big cities; sticking to busy, central areas and remaining aware of one’s surroundings. It’s very important to take only radio-issued taxis or taxis from official stands, never the “libre” (independent) or Volkswagen cabs, as there have been many instances of robbery and kidnapping. Don’t walk at night except short distances on busy streets. This is an exciting city full of museums, art galleries and fabulous restaurants, not to be missed. Most people include a visit nearby to the majestic ruins of Teotihuacan, which are well patrolled and perfectly safe, with a visitor’s center and organized guides.

SAN MIGUEL DE ALLENDE AND THE COLONIAL CITIES

Fear Factor: 5

“I feel as safe here as anywhere I have ever lived and so do my neighbors and friends,” says Barbara Erickson, who’s lived in San Miguel de Allende a number of years. “San Miguel is as lovely as ever.” This arty town is popular with Americans, who stroll its lovely colonial streets, dine out and browse the art galleries without worries. This is true of all of Mexico’s stunning colonial cities. In some cases the countryside around them may be iffy (the state of Michoacan, for instance, has had troubles, but its capital, Morelia, is lovely and safe, as is Patzcuaro). Guanajuato, Queretaro, Zacatecas and the rest of the colonial cities are well worth visiting.

GUADALAJARA

Fear Factor: 4.75

Mexico’s sophisticated second city is both a colonial gem and a major center for shopping that’s regularly combed over by interior decorators from the southwestern U.S. There’s also a lively art scene to enjoy, with art galleries and museums. But Guadalajara is a very large city, with the attendant need for caution, and it’s best to stick to the central city tourist areas and leafy upscale neighborhoods like the Zona Rosa. A popular side-trip is past fields of blue agave to the town of Tequila, where tequila distilleries can be visited and the wares sampled from such famous brands as Cuervo and Herradura. This is completely safe, but again, don’t over-indulge.

OAXACA

Fear Factor: 5

Oaxaca city was the site of a teachers’ strike in 2006 that led to some violence and, unfortunately, the shooting of an American freelance journalist. As a result, the city has been tarred as unsafe, although nothing could be farther than the truth. The colonial city center, the nearby ruins at Monte Alban and the surrounding crafts towns like Teotitlan del Valle are well-traveled and very safe. “There is a lot of hysteria in the US about everything from drugs to flu in Mexico, but after five years in Oaxaca with my husband and daughter, I have to say that these issues have not even remotely affected us,” said an American expat. Oaxaca has a thriving art scene and one of Mexico’s most highly-regarded cuisines. The Oaxaca coast, including beautiful, well-developed Huatulco and the little surfing mecca of Puerto Escondido is very safe, although swimming along the coast must be done with caution (check with your hotel), as some areas have rip-tides.

IXTAPA/ZIHUATENEJO

Fear Factor: 5

Ixtapa is a resort area developed by the Mexican government, and its big resorts are extremely safe. Neighbor Zihuatenejo is a former fishing village that reeks charm and has some upscale hotels and lovely outdoor restaurants. Many Americans live in “Zi” including famous American fashion designer Betsey Johnson. This is another spot where your biggest problem will be sunburn.

PUERTO VALLARTA

Fear Factor: 5

The lovely cobble-stoned hillside fishing village that was “discovered” after the filming of Night of the Iguana has spread at a dizzying rate, so that there are many Vallartas, including the original (still charming) town, the Marina and Nuevo Vallarta. Puerto Vallarta is filled with art galleries, which regularly throw open houses, gourmet restaurants and hotels in every price range. There are also the kinds of bars which encourage patrons to over-indulge, and that’s never a good idea. Downtown Puerto Vallarta is safe to stroll, but never late at night after the festivities are over, and it’s not a good idea to venture too far off the beaten track. Thousands of Americans live here, and love it. The Costalegre coast, stretching from Puerto Vallarta to Manzanillo in the south, is very safe, as is the newly-named Costa Nayarit (a series of bucolic fishing villages) to the north.

ACAPULCO

Fear Factor: 4.5

Acapulco in recent years has undergone a major revival. Once Mexico’s most fashionable resort, it had gone a bit seedy, but now has regained much of its glamour. Unfortunately, it has recently been touched by drug-related violence, and although most has been on the edges or outside of town, some bodies have been found on a street lined with nightclubs, including the bodies of police officers. It’s especially important these days to be alert to your surroundings here, and stay away from nightclubs known to attract the narcotraficantes. That said, the possibilities of being caught in a drug shoot-out are on the extreme end of slim to none.

LOS CABOS

Fear Factor: 5

Cabo San Lucas, San Jose del Cabo and the “Corridor” of resorts that stretch between them are like a backyard for residents of the southwestern U.S. Thousands of Americans live here on the southern tip of the Baja Peninsula (light years away from Tijuana’s troubles) and the artsy little town of Todos Santos 45 minutes up the Pacific coast from Cabo San Lucas. Some visitors complain it’s too American in Cabo. The region is very safe, with good highways and busy downtowns. Visitors should stay out of unlighted side streets and stick to the well-traveled tourists areas, where shopping, art galleries and a big choice of restaurants make straying unnecessary. Swimmers must exercise extreme caution — the waters are treacherous and it’s important to know where it’s safe to swim and where not to even wade very far.

Original Article here

Posted on April 14th, 2010 by Tropicasa Realty
Filed under: News | Comments Off