Ecuador Real Estate Gains True Value


Ecuador real estate may offer better value now due to fears about the recent election results.

Ecuador real estate is affected by the major driving forces of markets are supply, demand, fear and greed. Opportunity arises in Ecuador real estate whenever one of these forces gets out of hand.

Real estate in Ecuador is at times moved by the force that moves markets fastest…fear. Lots of exiting Eciuador real estate, not much door. This creates a real estate squeeze in Ecuador . This is a guaranteed formula for profit. We even have a word for fear in this highest form….stampede!

Right now there is some fear about Ecuador real estate due to its new election. We have seen real estate in Ecuador affected this way before…after earthquakes, after volcanoes and after new presidents (there have been plenty of them to observe). We lived through Ecuador ’s total bank shut down. We watched the sucre drop from 3,000 sucre per dollar to over 20,000 sucre per dollar in months. We even watched this tiny oil producer country even run totally out of gas.

Yet we continued to invest in Ecuador real estate. In each case the symptoms were the same, rumors, false concerns, a dash out of the country, etc. We watched this again and again…and invested more in Ecuador real estate. Fear drives markets below true value and creates exceptional value in Ecuador real estate.

Learn in this message how to profit from this picture.

A cold front hit last night and when I rose this morning the thermometer hovered at zero. At sunrise I took this shot of our front yard. As beautiful as it is, this photo gives a visual perspective of just one reason why Ecuador real estate offers even more exceptional value now. Merri and I were delighted to have a rare visit with clients and friends in town at a cozy coffee shop. However, to get back home required not quite 2 hours for 16 miles! And we had to walk the last mile in a first class blizzard…finally we arrived safely to our warm radiant-heated house.

Even if you have no interest in Ecuador at all, this message shares a lesson that works anywhere in the world and has enriched Merri and me again and again.

Merri and I have increased our involvement in Ecuador each time the world has perceived trouble there because of a lesson first learned during a move to Hong Kong in 1968. In the late 60s, communist riots were taking place. Bombs were exploding. The day I arrived, a traffic police sergeant had his leg blown off in a main street by a package bomb planted on the road. The Chinese military were massing on the border. Investors were fleeing the colony in droves!

I was just starting in business. Lack of capital and experience missed making money in this rush for the exit. I was well compensated in experience though because I watched those who stayed (and bought up all the real estate being unloaded at bargain basement prices) become some of the wealthiest people in the world.

If this lesson, learned so long ago in Asia, is applicable, Ecuador real estate offers even more value right now.

There are three reasons why this may be so.

The first reason why Ecuador real estate may offer better value is the cost of familiarity.

A recent message at this site looked at how we confuse familiarity with safety. See garyscott.com/international_investments/international_investments_127.html

That message said: International investments in Ecuador may have suddenly gotten better because many investors are unfamiliar with Ecuador . Some of his election rhetoric did appear very leftist and populist. A lot of Western society has been taught to fear these words “leftist” and “populist”. So the press scares people…because they are not familiar with Ecuador or really what the words mean.

For a moment let’s put this in perspective. If Ecuador’s President had been elected by the minority (with the help of a State where his brother was Governor) and he had started a war based on a totally false set of facts (such as the search for weapons of mass destruction), we might have a reason to be scared out of our wits about the man.

A reader perfectly proved how familiarity works when he sent this note:

“Gary, For a lot of us, the reason we fear leftist populism in Latin America is because of the theft of private property by the state. Look at Chavez and Morales. Look at how the new president of Ecuador cozies up to Chavez. How can an investor feel safe if they see these clowns steal assets that are privately owned by people who purchased them on the open market. I hope you are right and he doesn’t resort to theft by the state.

About Bush, everyone acknowledges that the war has not gone as well as it should have, and mistakes were made, and adjustments are being made. The “false set of facts” on which the war was based is not based on invented stories. It was the best intelligence our intelligence agencies had, and that was the result of a failure of a much longer policy that neglected “human” intelligence collection and that created a wall of separation between agencies so that they could not share information. The false set of facts had little to do with Bush, and a lot of do with policy failures in the decade plus leading up to his election.

Bush’s election by a minority is exactly what the constitutional designers intended. They specifically designed the electoral college so that one can legitimately and correctly be elected by a minority. That’s what the founders wanted. I’m not a personal fan of the electoral college system, but for those who don’t like it, their issue is not with Bush or the republicans or anyone else, but with the constitution itself.

The recount in Florida would not have made a difference whether Jeb’s brother was in office or not, because EVERY recount after the certification came out the same way – Bush won. Believe me, the press, university researchers, and others spent the weeks and months after the 2000 elections recounting ballots, and none of them came up with a scenario in which Gore won. The Democrats would like people to believe that they were the fair minded ones who only “wanted all votes to be counted”. In actuality, their lawyers were at least as Machiavellian as the republican lawyers, and Gore NEVER requested every vote to be recounted. What he did is conveniently select only those counties in which he thought he would do well, and requested only a re-count in those areas. He wasn’t looking for every vote to be counted, but rather a way to slice and dice it so that he could come out ahead. Justice was done in Florida, the votes were counted, and then re-counted, and then certified on the legal day in which it was supposed to be certified.

Sorry to give you an earful. From your comments about centralized planning, I know you are not a leftist, but feeding false stereotypes only bolsters our own democrat leftists here in the US, who in their own populist way, demonize Bush and then talk about the gap between the rich and the poor, with the implication that the government should step in to steal from the rich and give to the poor through tax, business, and social policy.

This reader showed how familiarity affects us. The message referred to by this reader did not say that Bush did not win the election. The message referred did not say that anyone invented stories. The message said that “if these things had happened in Ecuador, it would have scared the wits out of people because people were not familiar with the country”. This reader defended a number of unsafe and bad events that took place in the US because he is familiar with the circumstances.

The second reason Ecuador real estate may offer better value is because the majority ignores the facts. Regretfully we become so caught up in looking outward that we ignore what is happening in our own little pond.

The reality is that the Ecuadorian constitution is based around a fundamental of property ownership and guarantees the rights of anyone regardless of nationality to own property. Ecuadorian law treats everyone equally and protection from seizure is strong.

This is not so true in the US . The Foreign Investment in Real Property Tax Act of 1980 (FIRPTA), requires that an amount equal to 10% of the selling price be withheld from a foreign seller of real estate. This amount is withheld to cover the potential taxes on the gain, but the 10% withheld can be much higher than the actual amount of tax due. The foreign seller will then need to file for a tax refund to collect the excess amount of taxes withheld. This creates waits for a refund and other hassles, the need for foreign buyers to talk with an accountant, get a tax ID number, etc. In Ecuador there is no capital gains on real estate sales.

In the US the reality is that small municipalities can (and are) seizing property using imminent domain just to develop the local economy.

A 2005 Washington post article entitled “Justices Affirm Property Seizures 5-4 Ruling Backs Forced Sales for Private Development” says: The Supreme Court ruled yesterday that local governments may force property owners to sell out and make way for private economic development when officials decide it would benefit the public, even if the property is not blighted and the new project's success is not guaranteed. The 5 to 4 ruling provided the strong affirmation that state and local governments had sought for their increasing use of eminent domain for urban revitalization, especially in the Northeast, where many city centers have decayed and the suburban land supply is dwindling.

Another article from New York Daily News says: It’s not too late for state politicians to stop themselves from stealing New Yorkers’ property. The Supreme Court’s new definition of “public use” under the U.S. Constitution’s eminent-domain clause could spur Gotham’s spendthrift politicians to seize vast swaths of private property, just to generate more tax dollars to feed the city’s bloated $50 billion budget — unless state lawmakers act. Two weeks ago, the court ruled against families in New London, Conn., who sought to protect their property from seizure by local officials. Those officials had invoked eminent domain because they want to bulldoze private homes and turn the land over to developers, who would build luxury condos and office towers to generate more tax revenues on the property. Tax dollars are a public benefit, in the court’s expansive new view. State and local officials around the nation can now seize private property for just about anything, so long as that anything is government-planned economic development.

The facts are: Ecuador’s Correra may try to reduce property ownership rights. He may even try to seize some property. Who knows? In the US, property ownership rights have been reduced. Property has been seized. In the US, we do not have to speculate.

There are two other forms of property confiscation taking place in the US. Merri and I especially saw this in Naples . Now it is taking place here in Ashe County. This confiscation is through increased tax and insurance costs.

A recent letter in the Naples news titled “Tax burden unfair” says: As I mail my check covering the property taxes due on my vacation home located in Naples , I can’t help wondering why the government doubled my property taxes in the past five years — not to mention the housing insurance has quadrupled since 2000. I am starting to believe that the state of Florida dislikes tourists and snowbirds.

I can agree! Just the cost of taxes and insurance on the house we lived in while residing Naples may now near $30,000 a year. We watched our neighbors (many had lived in the area all their lives) forced out of our neighborhood by such costs.

Recently our taxes nearly doubled here in Ashe County as well. Many of our neighbors cannot afford this and eventually will have to move.

This is not a condemnation of the US . Merri and I love America and consider it one of our homes. However just because we were born here and like living here does not mean we ignore the facts. I have been writing about this since the 70s. See garyascott.com/archives/2003/01/21/745/

The third reason Ecuador offers better value is that we apply past thinking to future events. I learned this while conducting a seminar many years ago in London that featured a member of Britain ’s Parliament who had been responsible for looking after Mikhail Gorbachev when he visited England . This parliamentarian spoke in horror at how smart Gorbachev was. Our spirits sank. Our incorrect thinking? "The Soviets are bad. Anything good there is bad". Had we been in touch with reality we would have correctly thought, "If the Soviet Union is bad, a really smart man will change the system." Gorbachev did!

Here is why I believe that we should not worry, (but take advantage of) left leaning fears. Communism is dead. As a method of national organization it does not work. We know this. The Soviet Union, China and Cuba proved this dramatically. But?

Here is the vital key. The conditions that would allow communism to take hold no longer exist. Stalin, Mao Zedong, (Mao Tse Tung) and Fidel Castro came to power under an extraordinary set of circumstances, when there was extreme poverty and lack of communication. Castro has maintained control over Cuba only because it is a small enough island to hold on through force. The bigger countries could not hold this incorrect system together because they were based on incorrect thought and deceit.

Today Mao would probably not get away with promising a chicken in every pot. The television, internet and international community would shed too much light on reality.

Here is the lesson that works anywhere in the world and has enriched Merri and me again and again.

Watch for the populists, left leaners and communists because they will perish. Communistic, central controlled, totalitarian national organization does not work. Any time you see someone try to use it, bet against them! Let the force (of nature) be with you.

Chavez may be trying to unite Latin America. He cannot because his policies are incorrect. The income he derives from oil sales may sustain him for a while, but he will not survive as a leader because the enrichment he promises the people will not come.

There is no doubt that Latin America is susceptible to Leftist populist talk. This weakness is created by a huge discrepancy between the rich and the poor. This weakness has been created by poor, corrupt, less than honest governments in all the Americas.

These problems need to be corrected through economic improvement which confiscation and/or government handouts will not bring. This is one of the reasons why Ecuador has already had eight Presidents in ten years. They promised the poor that which could not be delivered.

Chavez is doing this and will eventually suffer from it. Other leaders who line up with his incorrect thinking will suffer as well. Life liberty and pursuit of happiness do not work just because they are written. These are fundamental natural laws that work!

We have not covered how the snow also increases Ecuador real estate value and will do so tomorrow.

As the storm approached I quickly snapped off this shot at dusk of the rising moon. My mind is always more active. My sleep more restless when the land is bright, even in the darkest hour with reflected ivory light. “Am I right or not about Ecuador ?” was my thinking.

Beyond the lessons we have gained in life, there is no way logical way to know. This is why we all need inspired investing beyond logic, which our next messages will look at as well.

Until then, warm coziness to you if you’re caught in this blizzard too and good investing!

Gary

Get out of the cold, ice and snow. Join us this winter in Ecuador . We are headed south next week! Here is a schedule of the courses Merri and I will sponsor and or conduct.

Jan. 5 – 7, Fri.-Sun. Investing Beyond Logic, Vedic Astrology. http://www.garyascott.com/catalog/va/

Jan. 22 – 26, Mon.- Fri. Self-Fulfilled: How to Be a Writer & Publisher. http://www.garyascott.com/catalog/pc/

Feb. 20 – 25, Tues.-Sun. Import-Export Course. http://www.garyascott.com/catalog/impex/

Mar. 9 – 15, Fri.-Thurs. Expanded Super Thinking + Spanish. http://www.garyascott.com/catalog/sp7/

Mar. 16 -18, Fri.-Sun. International Business and Investing Made EZ. http://www.garyascott.com/catalog/IBEZec/

Mar. 19 – 21, Mon.-Wed. Andes Extension & Real Estate Tour. http://www.garyascott.com/catalog/andeanext/


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