Ecuador Economic Worries


A number of readers have sent questions about Ecuador economic worries. One regular Ecuador economic worry I receive is that Ecuador will stop using the US dollar as its currency.

There is little doubt that Ecuador’s economy is in a mess.

Which economy is not?

We’ll look at this Ecuador economic worry in a moment, but to put this worry into perspective, may I share some other economic worries at the same time… plus post some photos from our friend, Dennis Goff… such as this shot from a boutique hotel in Manta, Ecuador where you can stay for $52 a night.

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These pictures were taken by our friend Dennis Goff and they make an important point.

Dennis is a friend and a professional photographer.

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He and his wife, Nicki, live part time in Ecuador and often join us on our tours where he helps us by providing some really great shots.

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All the photos here were taken by Dennis…

Ecuador has economic worries, yes, but are they worse than the economic worries in Europe or the US?   The photos show that while we worry we can be in paradise on a shoestring budget.

For example, Dennis took this shot of a four floor Bahia, Ecuador house on our latest Ecuador coastal real estate tour…  just $95,000 asking.

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The four floors run up a hill…  over 3,000 square feet with these…

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views.  Here are our real estate tour delegates viewing this house.

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I wonder if  the Western  economic and social system will do well if the current economic downturn continues?

Global economic problems are not likely to disappear soon and they are everywhere!

Excerpts from the New York Times March 20, 2009 article “New Deficit Forecast Casts Shadow on Obama Agenda”  by Jackie Calmes shows how disturbed America’s economy is when it says:

WASHINGTON — The Congressional Budget Office placed a new hurdle in front of President Obama’s agenda on Friday, calculating that the White House’s tax and spending plans would create deficits totaling $2.3 trillion more than the president’s budget projected for the next decade.

Senator Kent Conrad said the budget office analysis confirmed the need for adjustments.

The difference largely reflects the administration’s more optimistic forecasts of economic growth through 2019.

The budget office figures, which will guide Congress as it takes up Mr. Obama’s proposals in earnest next week, were worse than Democratic leaders expected and further complicated their job of achieving the president’s priorities on health care, energy policy and much more.

Moderate Democrats from competitive districts and states have already expressed nervousness about some of Mr. Obama’s plans, especially as Republicans have grown increasingly emboldened to stay on the attack.

Senator Judd Gregg of New Hampshire, the senior Republican on the Senate Budget Committee, said the new report “confirms that under the president’s plan, our debt will increase to shocking levels that are simply unsustainable and will devastate future economic opportunities for our children and grandchildren.

I fear that anyone looking for a perfect place, with honest, intelligent politicians, a great economy, perfect law and order and a low cost of living will have a long search.

At least while searching for economic stability in Ecuador, you can enjoy perfect weather, friendly people and incredible values.

Ecuador’s economy is oil dependent which creates economic problems if oil prices remain low.

Yet Ecuador has many other resources and for gringos it offers amazing value.

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Where else could you live on a beach like this… with great weather for $79,000… including…

ecuador-economic-ideas membership in this club house… with spa, pool, luxury dining and tennis on the beach?

Lower oil prices have reduced Ecuador revenues. Remittances from Ecuador workers abroad have dropped and foreign investments have fallen due to the rising dollar and Ecuador’s decision to default on its bonds.

Because the U.S. dollar is Ecuador’s currency, it doesn’t print its own money. This keeps politicians who would like to turn on the printing machine from doing so.

This is why Ecuador dollarized in the first place.  Dollarization worked an economic wonder.  Inflation fell from over 70% to below 5% in 2001.

But extra income from oil set the government on the wrong course… just as the high 1998 tax revenues in the US set America’s government on a spending spree at exactly the wrong time.

Now a severe trade deficit caused by the strong dollar is draining Ecuador of dollars.  The dollar has risen versus currencies in Colombia, Brazil, Argentina, etc. This makes goods in Ecuador cost more and thus they are harder to export.

Ecuador’s government has reacted by creating high import taxes to slow down imports. This has caused the cost of living to rise in Ecuador.

Excerpts from a recent Bloomberg article entitled “Ecuador May Have to Drop Dollar, Credit Suisse Says” by Lester Pimentel helps explains why:

March 19 (Bloomberg) — Ecuador’s banking system strains and plunging foreign-exchange reserves may force the South American country to drop the dollar as its currency, Credit Suisse Group AG said.

“Mounting pressures on the banking system could potentially harm the fiscal accounts further and could force the government to de-dollarize the economy, in spite of its wish to continue to defend the use of the dollar as the country’s currency,” Diego Sasson, a Credit Suisse analyst in New York, wrote in a report published yesterday.

“Ecuador won’t abandon use of the dollar to offset plunging oil revenue and worker remittances from abroad,” President Rafael Correa said today in an interview with the Unimax television network. The country adopted the dollar in 2000 to help curb inflation after the sucre tumbled 73 percent against the dollar and the government defaulted on $6.5 billion of foreign debt.

Ecuador’s use of the dollar gives Correa no outlet for providing credit to the economy as access to foreign financing dries up and revenue from oil sales slides. Crude, which has dropped 65 percent from a July record, accounts for 60 percent of Ecuador’s exports.

The country’s foreign reserves declined 5 percent to $3.31 billion in the week ended March 13, the lowest since June 2007, the country’s central bank said in a report on its Web site March 16. Reserves have plunged 47 percent from $6.5 billion in September as the global recession eroded demand for oil exports and the country defaulted for the second time this decade.

Yet despite the rising costs you can still enjoy a hotel like this for as little as…

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$85 a night, which is what…

ecuador-economic-ideas delegates at our recent coastal tour paid.

The Ecuador economic worry is that dropping the US dollar could cause an economic collapse that would somehow destabilize the country.

Perhaps.

But those who are concerned about Ecuador economics may not have thought the problem and resultant social economic reactions all the way through.

Perhaps they have not lived and invested abroad for 41 years as Merri and I have.

Generally I look for places with social or economic worries  to invest. The economic worries are almost always overblown which creates extra value like…

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this one bedroom condo ($75,000 asking) in Manta.

I started my business career in Hong Kong when bombs were being set off by terrorists.  I saw how the fear created by those bombs built fortunes for those who did not over react.

If Ecuador eliminates the dollar as its currency, chances are that the cost of living in Ecuador for those who earn dollars… such as those living on social security and or pensions, will drop.

In other words, if Ecuador returns to the sucre life gets better for the gringos whose income is generated from abroad.

Delegates on our most recent Ecuador coastal real estate tour bought lots in this gated community for $17,500.

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This is assuming that a collapse does not create too much social unrest.

Fortunately we have some recent Ecuador economic history upon which to reflect.  In 1999 Ecuador’s economy came to a grinding halt.   All the banks shut.  Ecuador ran out of gas. Millions emigrated to Spain, Italy and the US.

Were there riots? No.  Murders?  No. Mayhem? No. Social disintegration? No.  A breakdown of law and order? No.

My reaction to that 1999 crisis.

I bought 962 acres of Ecuador real estate.

Ecuador is a pretty good place to be in times of economic collapse.

Prices are low now. beauty is high.  This Manta condo offers…

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three bedroom units at $130,000 asking.

There is always plenty of food.  Ecuador’s people are happy, friendly and industrious. They have never learned to expect much from their government. They have never learned to rely much on the purchasing power of paper money or Ecuador’s banks.

We are living in a time of global change and turmoil.

My belief is that those who ignore or try to avoid this fact will have a hard time.

Those who embrace change and adapt will have greater than average opportunity.

See more on this thinking at Ecuador Perceptions and International Investments in Fear.

Here is another shot of the Manta condo that Dennis took on our last Ecuador coastal real estate tour.

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Remember the following rules of investing:

#1: Markets are efficient in the long run but financial markets are not effective short term due to human behavior.

#2: To attain higher growth you must either increase risk or trust luck.

#3: Invest in inexpensive equities or real estate that is paying a reasonable dividend or rent.

The economic cleansing we are enduring has not changed any of the rules above but has made it easier to find good inexpensive shares and real estate.

For example this Bahia condo on the 7th floor has over 1,000 square feet, 2 bedrooms 2.5 baths with views from all rooms.   The balcony looks over the peninsula of Bahia, and the Pacific Ocean.  Yet…

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the asking price is only $81,000.

There are three important facts that investors need to remember:

#1: Do not care too much about day to day volatility.
#2: Care more about strategy.
#3: Avoid short term buying and selling.  Spend time analyzing and forecasting instead.

The condo above is near this shot.

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Here are rules for gaining in a market crisis.

#1: Turn on the auto pilot and normally add to your position.
#2: Do not panic.
#3: Do not let feelings influence you too much.
#4: Do not count on extraordinary returns. Be realistic.
#5: Add some restructuring stories to your portfolio
#6: Know that a period of low returns will be followed by a period of high returns.
#7: Do not underexpose yourself for the long term.

Here is another scene near the Bahia condo.

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Ecuador may or may not leave the US dollar behind.

If it does, I expect real estate values to move just as they did before Ecuador dollarized. Hotel rooms were quoted in dollars and changed daily as the sucre fell.

Real estate was bought and sold in sucre but the price changed each day as the sucre fell.

Ecuador real estate is a global commodity just like oil.  The price will adjust to a falling currency… which is why Ecuadorians always invest in real estate instead of bonds, shares or bank accounts.

We can choose to worry or not….about Ecuador’s economics… or those in the US, Europe or anywhere. We live in a global economy.

We can also choose where to be when we worry.  Ecuador offers  many reasons why it’s a good place to be during these times of change.

Until next message, may all your changes be good.

Gary

If you plan to join us at six or more seminars and tours in Ecuador, Florida or  North Carolina in 2010 you can save as an International Club member

See details about each of our seminar and tours below… then see our December special that allows you to attend as many of these courses you like at a huge savings.

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Jan.   8-11     Ecuador Export Tour
Jan. 13-14     Imbabura Real Estate Tour
Jan. 15-18     Coastal Real Estate Tour
Jan. 19-20    Quito-Mindo Real Estate Tour
Jan. 21-23    Cuenca Real Estate Tour

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Feb. 11-14   Quantum Wealth Florida -International Investing & Internet Business, Mt. Dora, Fl.

Feb. 15-16   Travel to and visit Quito
Feb  17         Travel to Manta
Feb. 18-19   Coastal Real Estate Tour
Feb. 20        Travel to Cotacachi
Feb. 21-22   Imbabura Real Estate Tour
Feb. 23-24  Quito-Mindo Real Estate Tour
Feb. 26-27  Cuenca Real Estate Tour

Mar. 11-14     Super Thinking + Spanish Course, Mt. Dora, Fl.
Mar. 15-16    Travel to Quito and Andes
Mar. 17-18     Imbabura Real Estate Tour
Mar. 19-20    Cotacachi Shamanic tour
Mar. 22-23    Coastal Real Estate Tour
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Mar. 28-29   South Coast Real Estate Tour

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Apr. 17-18   Imbabura Real Estate Tour ($499 or couple $749)
Apr. 20-21  Coastal Real Estate Tour ($499 or couple $749)
Apr. 23-24  Quito-Mindo Real Estate Tour ($499 or couple $749)
Apr. 26-27  Cuenca Real Estate Tour ($499 or couple $749)

May  13-14     Ecuador Shamanic Minga  ($499 or couple $749)
May  16-17    Imbabura Real Estate Tour  ($499 or couple $749)
May  19-20    Coastal Real Estate Tour ($499 or couple $749)
May  22-23    Quito-Mindo Real Estate Tour  ($499 or couple $749)
May  25-26    Cuenca Real Estate Tour  ($499 or couple $749)
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July 3-4          Coastal Real Estate Tour   ($499 or couple $749)
July 6-7          Quito-Mindo Real Estate Tour    ($499 or couple $749)
July 9-10        Cuenca Real Estate Tour   ($499 or couple $749)

Sept.   3-6      Ecuador Export Tour  ($499 or couple $749)
Sept.   8-9      Imbabura Real Estate Tour  ($499 or couple $749)
Sept. 11-12     Coastal Real Estate Tour   ($499 or couple $749)
Sept. 14-15     Cuenca Real Estate Tour    ($499 or couple $749)
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Sept 20-21      South Coast Real Estate tour ($499 or couple $749)

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Nov. 16-17      Quito-Mindo Real Estate  ($499 or couple $749)
Nov. 19-20     Cuenca Real Estate Tour ($499 or couple $749)
Nov  22-23      South Coast Real Estate Tour (($499 or couple $749)

Dec.   3-5       Ecuador Shamanic Mingo  ($499 or couple $749)
Dec.   7-8       Imbabura Real Estate Tour ($499 or couple $749)
Dec.  10-11    Coastal Real Estate Tour ($499 or couple $749)
Dec. 13-14     Quito-Mindo Real Estate Tour ($499 or couple $749)
Dec. 16-17      Cuenca Real Estate Tour ($499 or couple $749)

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You may well wonder why I would make such an offer and ask why the cost is so low? Let me answer this question frankly and from the heart.

First, it helps us do a better job for you. We feel greatly enriched when we can really help our clients improve their lives. We have learned through years of experience the best way to do this is to meet with you regularly. We can best help you learn how to improve your health and wealth through continual expansion of knowledge.

Second, we gain enormous fulfillment from the many friendships we form through the years. Our friends have enriched our lives tremendously. Let me explain this in more detail.

As a member, you will be part of our international family that meets intensively over the next year to examine ways we can make our lives better. Our goal is beyond just having money. Our goal is to have quantum wealth… good health… wealth and fulfillment through service.

Though I give all course delegates my very best, I cannot help but to do a better job for those who come again and again. As we meet often; your particular wants, needs and desires become clear, and it is easier for me to point you in the right direction.

Another phenomenon is that repeat delegates help each other! They get to know one another, help each other learn, share their insights, make contacts and gain more wealth.

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Lifestyle for Two. There is more! I have learned at my courses that many repeat delegates were couples.

We want couples! As a member of the program, you are entitled to bring another person to every single course or tour. The cost for that extra person will be ZERO!  You can bring whomever you wish. Bring your spouse, a friend, son or daughter, partner, accountant, adviser. You can bring the same person each time or a different person, whomever you choose to accompany you. (Accommodations and air fares relating to the courses are not included for members, delegates or their guests.)

Won’t you join us in this exciting club and share Merri’s and my lifestyle for the next year? We look forward to seeing you at as many courses as possible and sharing this wonderful world of abundance and well being with you!

Gary

International Club 2010 Membership  Enroll here



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