Correa Ecuador’s Economics


Correa Ecuador ’s economic reduces the one frequent concern readers express about Ecuador regards the political and economic stability in Ecuador .   I am doing a series that shares seven reasons why I believe that Rafael Correa could be a good leader.  Here is an excerpt from the second of these updates.

“It is really hard to trust what politicians say. Instead we have to watch what they do and hope that we do not miss too much of the hidden stuff.

The process of observation has given me some positive feelings about Correa. Some of the things he has said made no sense.  Yet his actions did. 

For example early this year he threatened to default on Ecuador bonds. 

On February 12, I wrote:  The Ecuadorian government has coupon payments due on 15 February. Uncertainty on whether they will be paid has pushed up the yield on Ecuador bonds. International investments will be affected by this. Times like this are rich with fear and this fear usually creates international investments value via a fear premium. You can see the huge conflict of opinion by reading what a few analysts have said about Ecuador ’s new president.  This speculation may be a good value because the premium you are paid to take the risk is higher than need be. Correa has the potential of something good.”

Ecuador did not default on February 15.   On February 16th Ecuador bonds jumped about 20% in one day.

Also instead of  creating government handouts to buy votes, he created a 555 economic plan makes a lot of sense to me. I asked Steve, our man in Ecuador , to tell us more. Steve wrote:

  

“Hi Gary, The 555 Plan is an idea to stimulate small business activity. Small business people can go to a state bank called Banco de Fomento and apply for a $5,000 loan at a 5% interest rate, payable over 5 years.

“In just the Ibarra branch of the state bank, since the spring, there have been 600 applications of which 420 have been approved and $2,100,000 has been lent.”

There you have it…an Ecuadorian economic plan that makes sense.  It may work or maybe not.  What I do know is that this is not a populist give away. This is a sensible idea that fits well with what I have learned about investing and business over forty years.   This could help Ecuador ’s economy and paints one more positive image in my mind about Correa.

Until next message good investing and life to you!

Gary

You can get our Ecuador updates regularly as an Ecuador living subscriber. Details are at

http://www.garyascott.com/catalog/ecuador-travel-and-living-service

Come join us in Ecuador this November. See http://www.garyascott.com/catalog/ecuador-tours-november-2007

At the international investment and business course in Cotacachi we will review the five multi currency portfolios we created November 1, 2006.  Here is how they have performed this year.

Portfolios 2007 Mar 27 June 28 July 20 Aug 17 Sept 28
Swiss Samba 16.15% 44.80% 45.84% 15.19% 44.40%
Emerging Market 12.81% 54.31% 67.67% 30.50% 103.22%
Dollar Short 20.12% 33.81% 40.31% 9.14% 42.71%
Dollar Neutral 16.58% 37.64% 38.07% 13.56% 34.74%
Green 86.86% 178.28% 214.15% 110.93% 220.22%

Note the performance of the Emerging Market Portfolio since last November, is up 103.22%.  

The 2006 model Emerging Market Portfolio we created and tracked was up 114%. 

I will conduct most of the November 9-10 and 11, 2007 course in Cotacachi but have also invited Peter Conradsen and  Henrik Villumsen from Jyske Bank to speak and be available for private consultations (no added cost).   Jyske Bank is one of the leading international investing and currency managers in the world. Their trading room process $50 billion of business a day. So this next course makes a huge amount of global investing information available to you.

P.S.  I write and speak mostly from experience not theory. This means I have my own multi currency portfolio (and have for decades).  At the upcoming course we will share our investing beliefs and introduce our 2008 model portfolios.   

We continue with the Green Portfolio but to make comparisons with the other new sandwiches we reset the portfolio.

We continue with the Emerging Markets Portfolio but shift the leverage One times leverage to the Swiss franc and Singapore dollar.

We add an Infrastructure Portfolio of six shares leveraged two times with yen and Swiss franc loans.

We add a Blue Chip Portfolio of six shares leverage six shares leveraged two times with yen and Swiss franc loans.

We add a Danish Health Portfolio of six Danish companies leveraged one time with a Swiss franc loan.

Plus we are adding a sixth non leveraged Dollar Short Portfolio for dollar based investor.

Join us at our Hotel Meson de las Flores for our next three courses or just the International Business & Investing Made EZ in Ecuador , November 9-10 and 11. http://www.garyascott.com/catalog/IBEZec/

We also invest in global real estate and one of our purchases is the hotel, El Meson de las Flores , where we conduct our courses.

Delegates love the warm, colonial atmosphere so conducive to learning, the friendly staff and really low room rates ($49 to $69 plus 22% service and tax).   This includes a delightful and huge breakfast including fresh squeezed tropical juice, fresh fruit, granola or quinoa, eggs, ham or bacon, toast and coffee, tea or herbal tea served Al Fresco in the sunny courtyard.  Ecuador ‘s weather in November is normally perfect, 50 degrees at night and mid 70s during the day with full sunshine…a nice break from northern autumn’s grey.  

You can see more about El Meson, where you can stay (subject to availability) during the course.


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