by Charles Simpson
Invest Magazine
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, Juarez, Tijuana
and Nogales.
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 cancelling
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 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”
Additional Comments from Focus on Mexico
Those of us living in Mexico fully understand why the U.S. and Canadian governments might indeed want to
discourage boomers taking their money and moving to Mexico. One paragraph from above
article bears repeating:
“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.”
So you can see from the above article,
there are many reasons why Americans are leaving the U.S. But what isn’t mentioned are
the positive attractions that are bringing Americans (and Canadians), to Mexico
(the # 1 retirement location) and
specifically to Lake Chapala (the # 1 choice for retirement in all of Mexico).
- Cost of living is 30% less
- 2nd best climate in
the world
- Village life on the largest
lake in Mexico
- In the mountains
- No heating or air-conditioning
- Excellent affordable health
care; world class doctors and hospitals
- Mexicans are happiest people in
the world
- Largest Expat community (outside U.S.
or Canada)
– 20,000 foreigners
- Laid back, stress free live
- Fabulous infrastructure with
live theatre and movies in English, huge English library, entertainment galore,
wonderful restaurants (Argentina
steak dinner with wine for $15 US)
- Beautiful affordable homes
(life in the lap of luxury for less)
Pretty
much a no-brainer, wouldn’t you say? We live in a little pocket of paradise,
amongst the happiest people in the world; a place where the sun always shines (even in the rainy season), where we can
walk anywhere, feel safe, and enjoy a whole new lease on life.
What are you waiting for? We invite you to join us on a Focus
on Mexico 8-Day Educational program where you will learn everything you
need to know to make an informed decision as to whether Mexico is right for
you. New Financial Seminars alone are worth the price of the program.