See below why Ecuador makes more good financial sense than you thought.
In the first book I wrote back in the early 1970’s I wrote that “The sun always shines somewhere”. This has been motto of our publishing company since.
On the eve of the 4th of July… a celebration of independence it may be fitting to remember this fact and that this celebration is about an attitude and way of life, not a place.
The only source of real freedom comes from a strong economic base where everyone has a chance to live well.
The history has been that industrialized countries provided this economic base of freedom and emerging countries did not. So great fences have been built to keep to poor from moving to places where most are rich. However as the tide changes we have to wonder… will the walls build to keep people out start keeping citizens in… like a Berlin Wall?
Readers often ask me about Nationalization in South America.
Photo from May 6 Economist article on Bolivia nationalization.
I often receive notes from unsettled readers writing with worries about Correa nationalizing all of Ecuador whenever politicians in Venezuela or Bolivia or Peru act up.
These really are different countries… different people…. different political histories and Correa is quite different having risen from poverty via the educational route not military.
Photo I took of Correa in Cotacachi.
Yet the economic prosperity is growing in Latin America… as excerpts from the New York Times below explains.
We can see the future in the here and now. Plus our imagination is a value tool if we use it realistically and see ahead with an open mind. Our forward vision is always blurred by the haze of quantum uncertainty that create this world.
We should hedge our bets.
One chapter there was about the “Concept Conversion Trick” and says:
“The Concept Conversion Trick begins when people agree on a good concept for working and living together. The people go to work and if the concept is good they will create a paradise. The government gives them a flag and a song. Then the government pulls the trick. The government convinces the people that the flag and song are important. Then while the people are busy watching the flag and singing the song, the government replaces the concept with a set of ever increasing written rules and regulations administered by bureaucrats and backed up by a police force.
“This trick trades people’s individual freedoms for a shiver up the spine when the song is played the piece of cloth is waved. The Concept Conversion Trick turns spirit into matter. Like trading love for a beautiful plastic doll. When the trick has been pulled and the dust settles, the people realize too late what has happened. Anyone who steps out of line is called unpatriotic or even criminal. He is swatted down by the bureaucracy or police force, crushed with overwhelming power or made an example of so others will tow the mark ‘for the good of society’. All this is done in the name of public interest.”
If this writing sounds prophetic having been written 25 + years ago, it was not. Any simple review of any previous great society shows this trick and evolution. Like the Roman Empire , things may get better for a while, then worse and then better again. In the long term, as societies age, they lose their original vibrancy and life.
Should we be surprised? Does not every single thing in this universal existence develop in the same way, vibrant and flexible while young and growing thicker and more brittle with age?
My father loved animals and worked at the Portland City Zoological Gardens. He was a really kind, gentle, fair and scrupulously honest man. Yet one of his jobs was doing the zoo’s annual budget. I recall him spending weeks late at night (on his own time) working over these budgets each year. I also remember his telling me that every year they had to ask for more money because otherwise the city government would give them less. “If we do a good job with their funds, they penalize us,” he told me.
This is how the bureaucracy and society works, millions of small units each trying to grow and spend a little more, until the whole thing swells into an unstoppable mass of self-interest. This is the universal nature to grow until the growth becomes so excessive that balance is lost!
This truth shows us the nature of mankind and every underlying force that goes from birth to continuity and then transformation. This is the way of life and if we are smart investors we recognize this and adapt.
This is why I have almost always bet against the US dollar.
This is why my business has been global for more nearly 40 years.
This is why I am so involved in Ecuador now.
My experience is that Ecuador is very democratic free country filled with sweet friendly people. My bet is that the flag waving focus on drugs and terrorists and anti US sentiment will mislead a lot of potential investors and create bargains here now. That’s where I am putting my money.
An article in yesterday’s New York Times entitled Economies in Latin America Surge Forward by Moises Saman shows how correct this decision has been. Here is an excerpt:
LIMA, Peru — While the United States and Europe fret over huge deficits and threats to a fragile recovery, this region has a surprise in store. Latin America, beset in the past by debt defaults, currency devaluations and the need for bailouts from rich countries, is experiencing robust economic growth that is the envy of its northern counterparts.
Copper awaiting delivery in Valparaíso, Chile. Latin America has benefited from strong Asian demand for commodities.
Strong demand in Asia for commodities like iron ore, tin and gold, combined with policies in several Latin American economies that help control deficits and keep inflation low, are encouraging investment and fueling much of the growth. The World Bank forecasts that the region’s economy will grow 4.5 percent this year.
Recent growth spurts around Latin America have surpassed the expectations of many governments themselves. Brazil, the region’s rising power, is leading the regional recovery from the downturn of 2009, growing 9 percent in the first quarter from the same period last year. Brazil’s central bank said Wednesday that growth for 2010 could reach 7.3 percent, the nation’s fastest expansion in 24 years.
After a sharp contraction last year, Mexico’s economy grew 4.3 percent in the first quarter and may reach 5 percent this year, the Mexican government has said, possibly outpacing the economy in the United States.
Smaller countries are also growing fast. Here in Peru, where memories are still raw of an economy in tatters from hyperinflation and a brutal, two-decade war against Maoist rebels that left almost 70,000 people dead, gross domestic product surged 9.3 percent in April from the same month of last year.
“We’re witnessing what are probably the best economic conditions in Peru in my lifetime,” said Mario Zamora, 70, who owns six pharmacies in Los Olivos, a bustling working-class district of northern Lima where thousands of poor migrants from Peru’s highlands have settled.
Vibrancy mixes with grit around his pharmacies. A Domino’s Pizza vies for customers with Peruvian-Chinese restaurants called chifas. Motorcycle taxis deliver passengers to nightclubs. Competition, in the form of a newly arrived Chilean pharmacy chain, looms around the corner from his main store. Los Olivos offers a glimpse into the growth lifting parts of Latin America out of poverty, but big exceptions persist. In Venezuela, electricity shortages and fears of expropriations caused gross domestic product to shrink 5.8 percent in the first quarter.
The articles goes on to say: But Venezuela, and to a lesser extent Ecuador, another oil-dependent country that lags behind its neighbors in growth, seem to be exceptions to a broader trend.
This in my way of value thinking enhances the long term opportunity in Ecuador. No political system that reduces the wealth of the individual can surround by prosperity and survive for long.
Whether Ecuador makes sense to you or not, consider investing in South American and other emerging countries.
See some international financial thinking that shows strength in the idea of emerging market investing from the Chief Economist and Chief Editor at Bank Credit Analyst, Mr. Martin Barnes.
Join Merri and me in Copenhagen. We’ll learn more about emerging markets but also love strolling along Copenhagen’s famous pedestrian shopping street called Stroget. Stroget is not a name of a specific street, but a connection between the west and east part of Copenhagen. The shops are amazing… but the street entertainment even better!
Jyske Global Asset management sent me this international financial thought from Martin Barnes a well known and highly respected economist frequently quoted in international financial news media’s. Many of the JGAM investing managers have been reading Mr. Barnes’ writings for many years.
Bank Credit Analyst Research (BCA) was founded in Montreal in 1949 by A. Hamilton Bolton, who pioneered the concept that national economies and their capital markets are led by shifts in financial liquidity, money supply and credit.
BCA though expensive (their annual fees can run $60,000) has a wide following among financial institutions, corporations, individual investors and academics. BCA along with Morgan Stanley and Jyske Bank are important sources of data for JGAM.
BCA’s has dramatically expanded the firm’s research capabilities and global coverage by building a large team of experienced economists and researchers and its operations are worldwide with offices in many major cities around the globe.
Here is an excerpt from JGAM’s summary of Mr. Barnes’ views on economics and financial markets: The economic recovery is developing slowly as normal after a recession caused by a financial crisis. Fiscal policy is being tightened but not to an extend that will endanger recovery. There is a strong case for investment spending as return on capital is high, whereas consumer spending will continue to be moderate because of high unemployment, squeezed house prices and a general need for saving (i.e. deleveraging).
The recent fall in equity prices is a correction and not a new bear market, provided that a new (and unlikely) recession is not underway.
Bond yields are historically low and could stay low for a long period as there is no private credit demand, no inflation, short rates are close to zero and not rising and risk aversion keep investors away from risky assets (e.g. stocks).
Emerging markets are in a better structural position compared to developed debt burdened and aging countries, therefore, expect the new economies to outperform the old world in the long run. Growth in emerging markets will cause a demand pull on commodity prices, especially the demand-supply balance on oil seems vulnerable. Commodities could become the next asset bubble but it will take time to evolve. At JGAM we agree to many of these findings.
During the week the leading world economies have been warming up and positioning themselves to the G20 meeting this weekend.
China is off the hook after it has abandoned the US dollar peg and instead re-introduced a crawling peg. This was foreseen and a clever move by the Chinese as the focus is now back on the US and Europe who disagree on how early and how much to tighten fiscal policy.
Because of the crisis in the eurozone caused by debt problems (not only in Greece), especially Germany has been keen on promoting and restoring fiscal discipline. This has caused concern, especially in the US, that economic recovery could be in danger. A fall in US housing sales has only aggravated the concern. An inevitable consequence of the fiscal thrift is that central banks will be reluctant to raise interest rates for a foreseeable time.
This quote from the German minister of finance, Wolfgang Schäuble, illustrates the clash on fiscal policy across the Atlantic: “While US policymakers like to focus on short-term corrective measures, we take the longer view and are, therefore, more preoccupied with the implications of excessive deficits and the dangers of high inflation.” (Financial Times, 24 June 2010).
See an important point on emerging markets that I especially agree with Martin about below.
Merri and I hike the harbor every day when we are in Copenhagen. We love…
the sights, the…
open air and…
water front dining. Summer is the best time to visit Copenhagen.
Peter Berezin, Managing Editor of Bank Credit Analyst Researech (BCA) will be one of the speakers at the August Jyske Bnak’s Global Wealth Management Seminar, August 25 to 29, 2010 in Copenhagen.
I love attending these Jyske seminars not just as a speaker but because I get to hear all the other great speakers.
This year speakers include will be Bjorn Lomborg known as the “Skeptical Environmentalist.” See more on Lomborg here.
Another speaker will be Jeff Rubin. Rubin was the Chief Economist for CIBC, a North American investment bank for 20 years. See more about Rubin here.
Kenneth Rogoff the Thomas D. Cabot Professor of Public Policy and Professor of Economics at Harvard University and former Chief Economist for the International Monetary Fund is also a speaker. See more at Rogoff.
Another speaker is Daniel Brehon, the foreign exchange strategist, for Deutsche Bank AG. See more about Daniel Brehon and Deutche Bank here.
The strong US dollar makes this the year to enjoy Europe and Thomas Fischer at Jyske just sent me this note: Gary due to the increasing US dollar, the cost for our August seminar in Copenhagen for Americans has dropped from about $2,050 to $1,700, a 15% discount. (THE COST INCLUDES MOST OF THE FOOD, TRIPS, MAKING THE CONFERENCE A GREAT BARGAIN.)
Some great things about the Copenhagen conference are the seminar of course…then there’s the stunning food and the wonderful visits included…This package includes: accommodation at the Copenhagen Marriott Hotel for four nights, (25-28 August) including breakfast, Reception and dinner at the bank’s Copenhagen offices, seminar fee and materials for the seminar sessions on Thursday, Friday and Saturday. full lunches on Thursday, Friday and Saturday, canal & harbour tour on Friday in the late afternoon, four-course gala dinner with entertainment and dancing on Saturday evening, and a Sunday excursion including lunch.
Merri and I always go on the excursion also to Silkebord with a drive out into the country, lovely food, picnic cruise and a chance to see the main office and the trading center. This is always our most interesting, favorite and delightful conference…and we hope you will join us there! We love the stroll along the harbor, the fresh air, wonderful meals and interesting people from all over the world.
See details on how to join Merri and me at Jyske’s bi annual Copenhagen seminar here Global Wealth Management Seminar.
We also really enjoy the restaurants and coffee shops along Nyhavn.
Important point about emerging markets
One of Martin’s comments was: Emerging markets are in a better structural position compared to developed debt burdened and aging countries, therefore, expect the new economies to outperform the old world in the long run.
At our June Quantum Wealth course we looked at a recent 10 year comparison of major versus emerging markets show some of the reasons that emerging markets are one of the seven places I like to invest in now. See that comparison here.
Wherever you go, whatever you are looking for, rely on what you see and that which is real, person to person. Do not let the branding that the politicians spew, rob your of your freedom.
Learn how to invest for high returns in emerging currencies at Borrow Low Deposit High.
Until next message, Merri and I send our best wishes for independence to you!
Join Bonnie Keough and Jean Marie Butterlin in Ecuador.
Aug. 31-Sept. 1 Ecuador Shamanic Minga
Sept. 2-6 Ecuador Export Tour
Sept. 8-9 Imbabura Real Estate Tour
Sept. 11-12 Coastal Real Estate Tour
Sept. 14-15-16 Cuenca Real Estate Tour
Join Gary & Merri Scott, along with Bonnie Keough and Jean Marie Butterlin in North Carolina.
Oct. 11-12 Travel to Quito and Andean Tour
Oct. 13-14 Imbabura Real Estate Tour
Oct. 16-17 Coastal Real Estate Tour
Oct. 19-20 Quito Real Estate Tour
Oct. 22-23 Cuenca Real Estate Tour
Nov. 4-7 Super Thinking + Spanish Course Florida
Nov. 8-9 Travel to Quito and Andean Tour
Nov. 10-11 Imbabura Real Estate Tour
Nov. 13-14 Coastal Real Estate Tour
Nov. 16-17 Quito Real Estate
Nov. 19-20 Cuenca Real Estate Tour
Dec. 3-5 Ecuador Shamanic Mingo
Dec. 7-8 Imbabura Real Estate Tour
Dec. 10-11 Coastal Real Estate Tour
Dec. 13-14 Quito Real Estate Tour
Dec. 16-17 Cuenca Real Estate Tour
Read the NYT article Economies in Latin America Surge Forward