Answering this letter about Ecuador has helped me find some real bargains there!
Dear International Friend,
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I would never have suspected the bargains I would find when I answered this question below.
"Gary;With the events of 9-11, everything everywhere has been shook up to some degree. I think it would be of interest for some words on how Ecuador is faring. Is tourism down? Any effect on real estate prices yet? Are the exports holding up? Any new laws we need to be aware of as strangers in a strange land? Have attitudes towards Americans changed? Are the new airport and pipeline initiatives still on track, or have they been delayed? Is the inflation rate still continuing to go down? Is the new president still able to get any reform measures in place/ Does he still have a chance to win the election next year? Is the war with Peru really over?...etc.,etc"
I sent this note to eleven of my best contacts in Ecuador covering every area, Quito, Guayaquil, the coast and Cuenca. They included Americans, Europeans, and Ecuadorians who are doctors, accountants, attorneys, business people, real estate brokers, bankers and developers. So we'll get a feel of the entire spectrum.
Here is the first reply received. Later I explain the good news contained in this seemingly negative message.
"Gary, thank you.
I believe every country feel the effect of Sept. 11, and perhaps especially here in Latin America since most of the trade is towards the US. Ecuador seems to have been hit quite hard. Perhaps mostly because the economy is still so weak. I took a cab today and the cab driver told me that he feels the situation for Ecuadorians is worse than ever, I feel the same way.
Just to give you an idea about how this is affecting me; my school has very few US students compared to about 30 last year at this time. We do have some more European students than before but still about 40% less than October last year.
My travel agency is selling much less tours of course and tourism is down since most tourist to Ecuador are US citizens. I am not sure how much it is down.
We have tried to sell lumber for more than a month now but our clients say that the market is totally "dead". Prices on lumber is down approx.. 40% from a month ago due to large stocks and less export. There is very little construction going on.
I heard on the radio today that immigrant (who has been keeping up the economy so far together with petroleum) are sending much less money that before. This has a dramatic effect on housing construction since most of the money sent back was spent on building a home for the future. The biggest colony of Ecuadorian immigrants lived in New York and many are now returning due to lack of work.
In addition the dollarization has made Ecuadorian products more expensive and less competitive than before. To complete this list of miserable news the prices on petroleum (which represented approx. 60% of the income, and probably more now due to all the problems..) have dropped and Ecuadorian crude is selling for about $ 18 at the moment and $ 15 just a week ago. Well, not much good news...however this does force the country to produce better quality products, improve the service sector and the country's infrastructure to become more attractive to foreign tourists, etc. I believe the long term affect should be good.
The economy of Ecuador is so small that the expected 5% increase in the economy this year is mostly related to the construction of the new pipeline for transportation of crude oil from the Orient.
Inflation seems to be under control now and should be about 20% next year. Which of course is very high considering that the price adjustments for the dolarization process should be completed now.
I believe I have said before that I believed the prices on real estate would still drop. It did increase just after the dollarization but this was just temporarily. The rental market for small luxury suites is however very good since the pipeline construction is attracting foreign experts for the next 2 to 3 years. A very good buy at the moment is to buy these types of apartments which is about 20-40% less expensive than before the crisis. I bought one suite in 95 for $ 50.000 that is now worth approx. $ 35-40.000 and I have realtors calling me every week wanting to rent it out furnished for $ 6-700 per month.
The pipeline construction is still on track I believe but will for sure be delayed as all government projects are. The new airport for Quito is also being worked on but I do not know the timing for that. About the attitude towards Americans I believe it is the same as before. There are some anti-American sentiments due to the military base in Manta and the "Plan Colombia" but nothing that should worry Americans coming down. Well, I hope this answered most of his questions. I see you in November. Regards,"
As a business person I shiver with excitement when I read about problems like this. Business is solving problems and I remember what happened when I first moved to Hong Kong so many years ago. Bombs were going off in the street. Most who could, left. Those who stayed made fortunes! Existence comes in waves. The nature of life is ups and downs. This is obvious yet is ignored by a majority of the population so those who act when things are down really can get ahead.
These problems tell me there are incredible opportunities and wonderful bargains. Merri and I are in Quito as you read this letter and I'll update those who have subscribed to eClub Ecuador list on my return.
A few years ago I was speaking at a seminar in Spain and was listening to Johan Paludin, of the Copenhagen Institute of Future Studies. He outlined what the institute thought of the future and explained how to position a business or investment to its best advantage. Then he was asked what would happen to all this in the case of a global nuclear attack.
His reply was there are some events you cannot plan for, so go ahead and plan for the good. This is what history says is most likely to happen.
My experience is that even in very bad circumstances some do well. Ecuador is such a case. We who have a little cash can invest and live, full or part time, in the sun like royalty at a modest cost. In this enjoyable process we can make a real contribution to helping the poor. There is nothing like bringing money and business to help bolster a weak economy and the rewards can be outstanding.
Until next message, good global investing. I hope to see you in Ecuador!
Gary