Recession Proof?

June 17, 2008

Paris , France

PLUS:

n  How Much To Rent An Apartment In Panama City ? Heaven Only Knows...

n  The Closest Thing To A Recession-proof Market Anywhere In The World Right Now...

n  " Nicaragua Does Not Have Top-notch Medical Care. You Just Lost All Credibility."...

n  How To Get A Cell Phone In Costa Rica (Hint: You Need To Get Creative)...

n   "$1.83 A Bottle For Good Quality Argentine Wine? Have I Got My Sums Right?"

n  13% To 14% A Year Net-net...Making A Killing In The Liveliest Short-term Rental Market In The World...

n  This Market's Got Legs...

AND:

n  Ignore Your Income And Focus On Your Assets As You Plan For Your Retirement Abroad...

------ A Vine Romance in the "Next Napa " -----

Your "own private vineyard" in Argentina for less than $5,000. Limited opportunity. Details here.

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Dear Overseas Opportunity Letter Reader,

From the start, the colonists (and the pirates, too) recognized the importance of what they'd discovered... for travel, for trade. In fact, it was Spain 's King Charles V, in 1524, who first had the idea of digging a canal through the isthmus of land we know today as Panama so the two oceans could meet.

It was the French, though, in 1880, who had the first go at blasting through Panama 's mountains to link the Atlantic and the Pacific. Their attempt was ill-fated. Then, in 1904, the Americans took up the engineering challenge...and succeeded in literally dividing Panama in two. The Panama Canal was open for business starting Aug. 15, 1914, when the SS Ancon made the first official voyage through.

The Americans operated the canal they'd dug through the end of the 20^th century, pulling out in 1999. With them went their military personnel, their support staff, their engineers...and all the disposable income those gringos had been dumping into the Panamanian economy for nearly a century. No surprise, recession followed in the hub of the Americas .

Fewer than 10 years later, the turnaround has been remarkable. Today, Panama is a great success story and the fastest-expanding economy in the region. But perhaps the best part is that there's every reason to believe this country is positioned for years of continued growth and sustained stability.

Not only are the Panamanians operating the canal far more successfully (that is, profitably) than the Americans ever managed to do, but they've also begun work to expand it. They've committed $5.2 billion to the Panama Canal Expansion Project, to make the waterway wide enough to accommodate post-Panamax freighters. It's the most ambitious infrastructure project in Panama and in the region since the canal was built.

As I said, Panama is the fastest-growing country in this part of the world. It enjoyed growth rates of better than 8% in 2006 and in 2007, and projections are for a further 7% spike in 2008.

You can't grow as rapidly as Panama is growing without experiencing stress. And, indeed, Panama 's capital is a city bursting at the seams and operating well beyond full capacity. You can't get a hotel room, you can't hail a taxi, and you need reservations for dinner at the city's many trendy restaurants. The city's infrastructure, built by the Americans during the 80 years they were in town operating the canal-and long recognized as the best in the region-is, to put it kindly, straining.

Work is under way to expand Avenida Balboa in an effort to ease gridlock along downtown Panama City 's primary thoroughfare. Meantime, driving in this city is not for the impatient or the intolerant.

As many as 10,000 new hotel rooms are either under construction or in the planning stages. It will take up to two years, though, for enough of them to come online to make any real difference in the city's ability to accommodate the tourists, engineers, architects, visitors, workers, investors, businessmen, and would-be retirees migrating here in ever-greater numbers.

Just beyond the city, crews are busy blasting and digging the bigger canal. This mammoth canal-expansion project, launched in September 2007, is contributing big-time to the surge in the capital city's population and to the stress being put on the country's infrastructure and service systems.

But it's not the only infrastructure project in play right now. In addition, the country's existing ports on both coasts are being expanded, and a new port is being planned for the Pacific entrance to the Panama Canal . Mega-energy projects (hydro-electric, ethanol, and oil) are in proposal and planning stages, and the government is working hard to attract outside investment, offering incentives for foreign companies to set up call centers, for example.

Panama 's telecommunications are without peer in the region, and Panama City is a globally-recognized financial center, home to more than 70 international banks.

Panama is also a tax haven, taxing residents on money earned within Panama only. And its has been a dollar-based economy since 1904, meaning Americans living, investing, and doing business here face no currency-exchange risk.

---------- Important Notice ----------

The cost of a Reforestation Visa, Panama 's best residency option, is scheduled to double Aug. 26, 2008.

If you're thinking of settling in the world's premier tax haven, act now. Details here.

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Where am I putting my money right now?

In fact, I have been investing in Panama for the past half-dozen years. Today, though, I'm accelerating efforts with the intention of positioning myself further in what I believe is the closest thing to a recession-proof market you'll find anywhere in the world today. Little Panama has solid legs that should carry her well into the 21^st century.

This country's prospects for growth and sustained prosperity are not tied to the U.S. market or to any single market anywhere. Panama holds a one-of-a-kind asset with unequaled global value, one that guarantees the world will keep returning to her shores to do business.

I don't see any other market in this part of the world competing long term.

Kathleen Peddicord

P.S. My favorite neighborhood in Panama City , Casco Viejo, has grown more expensive than I can afford. It's one of my many woulda', shoulda', coulda' stories. If only I'd bought an old colonial building in this charming old town five or six years ago...

Casco Viejo is technically part of Panama City but really a world unto itself. Situated at the western mouth of the Panama Canal on a peninsula jutting out into the Bay of Panama , it's the oldest city on the Pacific coast of the Americas . It was the cultural and political center of Panama City until the early part of this century. But its labyrinth streets were too narrow for the modern world, and the city spread east.

As the new Panama City grew and modernized, this historic district was left to decline...and decline it did. Then, in 1997, UNESCO listed Casco Viejo as a World Heritage Site, and the revitalization efforts began.

When the French made their failed attempt to build a canal across Panama at the end of the 19^th century, Casco Viejo is where they hung their hats. Their influence is obvious in the architecture, the squares, the parks...

As unlikely as it may seem, my favorite place in Panama outside Panama City also has strong French connections.

For the past 10 years, the French have been endeavoring to dress up another part of this little country. A decade ago, a French architect named Gilles St.-Gilles and his wife discovered the east coast of Panama 's Azuero Peninsula . They came to visit an Italian friend with a home here on the Pacific...and, as the story goes, and as the French would say, they had a coup de coeur. They fell in love with the place.

They proceeded to buy about 300 hectares...to build a house for themselves...and then a small hotel...and, today, a decade later, they're developing on a full scale. It's an extraordinarily beautiful spot...remote...carefully and extravagantly landscaped...with views you don't easily forget of the rocky coast and the crashing Pacific.

But what sets the place apart is the attention to detail. It is like nothing I've ever seen in any development any place else. This is no typical gringo project...for Monsieur St.-Gilles is no gringo. His French preoccupations with appearances and presentation are evident down to the mosaic paving stones and the big iron bell you must get out of your car to ring by hand to call someone to come to open the great wooden gate so you can enter the property.

Beyond this gate, terraced on the hills rising from the ocean, stand a couple of dozen houses...and 42 more under construction. The most affordable one currently on offer is a resale loft apartment, priced at $450,000. Farther up the hill are full-fledged mansions...selling for $1.5 million and more.

And they're selling as fast as M. St.-Gilles can build them. 

------- Borrow To Buy In Central America ------

Georgetown Trust lends in Panama , Nicaragua , Costa Rica , Belize , Honduras , and beyond. Attractive terms.

Find out more here. 

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FROM THE MAILBAG:

One dear reader in Nicaragua seems to have taken issue with comments from contributor Lori Estrada in last week's dispatch on the quality of health care in that country:

"I am from Nicaragua . It is not a top-notch medical country. You just lost all credibility."

Lori responds:

"I have lived and practiced medicine in Nicaragua for 11 years. I can tell you from much personal experience that colleagues here are caring and competent and give a level of personal attention to their patients that has not been seen in the United States for years.

"Two weeks ago, the caretaker of our farm suffered a heart attack in the field. When my husband realized what had happened, he rushed the man to the Metropolitan Hospital in Managua . The man had a second heart attack while entering the hospital.

"The staff receiving him was calm and efficient and stabilized him quickly. They then moved him to intensive care. They saved his life. Today, he is fine.

"I know of countless horror stories of botched medical care in the 'more advanced' countries. And I know many U.S. expats here in Nicaragua who, once they've been treated locally, tell me, 'I can't believe the level of care I received.'"

More on Nicaragua 's increasingly state-of-the-art medical care facilities below...

A developer friend in Nicaragua elaborates on my observations last week regarding the real estate market in that country:

"Did property prices drop in 2007? They fell off the charts. No new buyers, and buyers who had signed agreements to buy in 2006 changed their minds and wanted their deposits back. Which we returned to them.

"Nothing...no activity whatsoever...until November/December 2007. Since then, the market's been coming back. People are feeling more relaxed about Ortega and more comfortable with the political situation in this country in general.

"In the first five months of this year, our sales have been greater than they were for all 2007, and the momentum continues to build."

Reader M. Lyonette writes from Amsterdam :

"I was intrigued by your letter last week regarding the Mendoza  private vineyard club.

"Your valuation is based on expected market prices of the wine, which is a fair way of looking at it. However, looking at it also from a cost per-bottle point of view (and if I have understood correctly):

"Up-front membership--$5,450, less 500 discount = $4,950

"Annual fee ($249) discounted at 5% for 21 years from year 3 = an average of $156 in today's money: $156 X 21 = $3,276

"Total commitment in today's money = $8,226

"Assuming 25% and 50% delivery in years 3 and 4, this means 4,500 bottles.

"This means a cost of US$1.83/1.19 euro per bottle--for good quality Argentine wine?

"Plus you get one week a year all-in at the clubhouse?

"Have I got my logic and sums right? It sounds too good to be true."

Yes, dear reader, you've got it right. That's the limited-time offer on the table. Read full details here.

ALSO RIGHT NOW:

Panama City 's may be the most active short-term rental market in the world today.

We leave Paris for Panama in less than three weeks... and, as of this writing, we've yet to find a place to live. In fact, we've given up trying. Searching long-distance for an apartment or a house to rent, we finally had to admit, was a waste of time.

We own a one-bedroom loft apartment on Avenida Balboa that we've been renting out short-term for the past 11 months. In that time, we've netted over 1% a month...after management fees and all related costs and expenses...everything. I'm talking 13% to 14% for the period net-net.

That's unheard of. Nevertheless, we're going to take the apartment off the market for a month or two when we arrive. We have no choice. Rentals of every description are thin on the ground right now in this city. Don't show up without a reservation. You might find yourself sleeping on a park bench. Hotels are booked weeks in advance.

A friend had a client coming to town for two days recently...and he needed to find the guy a place to spend the two nights. No room at any hotel our friend contacted. Could we help, he asked? Lief called the rental manager for our apartment, who told him that, yes, she could rent the guy one of her apartments for two nights--at a cost of $265 a night.

Another friend told a story of a guy in town for one night...desperate for a place to spend it...paying $500 for an overnight apartment rental.

Our real estate agent contact on the ground (agents in Panama typically handle both sales and rentals) advises that the market is so competitive right now, you've got to be in the city yourself to find what you want and you've got to be ready to act...to commit on the spot. If you hesitate, someone else will come along right behind you who won't.

Meantime, how much should it cost you to rent an apartment long term in Panama City ? I've been trying to find an answer to that question for weeks. As recently as eight or 10 months ago, it was still possible to find long-term rentals for less than $500 a month, maybe for as little as $300 a month. Some I've been speaking with maintain that this is still true today...as long as you search on your own, without an agent. An agent in Panama City earns, typically, one month's rent in commission for a rental placement. In today's market, no agent wants to waste his time on a $300 to $500 rental.

Which means you've got your work cut out for you. You'll need to travel to the city and scout on the ground via the local classifieds and the coconut telegraph. Start with La Prensa, Panama 's largest-circulation paper with online ads at http://clasificadosweb.prensa.com/search.asp.

In today's listings I noticed a "mini-studio" in Marbella listed for $275 a month. Hard to beat the price, no question...but is it a place you'd want to live? You'd have to go visit...

Which is just what I'll be doing the first couple of weeks we're in the city...visiting apartments for rent to try to get an idea myself how much it costs to rent a nice place in a good neighborhood in this city right now.

Stay tuned.

Meantime, if you're shopping for an apartment rental in Panama City , and your budget is more than, say, $500 to $700 per month (that is, enough to make working with an agent worthwhile), the man to speak with is Maurice Belanger. Reach him here: PanamaRentals@LiveandInvestOverseas.com.

Managua 's state-of-the-art Metropolitano Vivian Pellas Hospital is the most modern private hospital in all Central America .

"Residents in Nicaragua no longer have to leave the country and travel to Costa Rica or Miami for first-class private hospital care," writes correspondent and physician Lori Estrada from Managua .

"In fact, I believe that, once word gets out about this country's new Hospital Metropolitano Vivian Pellas, foreigners without health insurance will begin traveling to Nicaragua for affordable quality medical treatment.

"Open since May 2004, the $23-million hospital has been heralded as the most modern and state-of-the-art private hospital in Central America . It employs more than 300 of Nicaragua 's leading medical specialists (most English-speaking) in gynecology, cardiology, orthopedics, pediatrics, internal medicine, surgery, neurology, urology, anesthesiology, and ophthalmology.

"The hospital has a modern emergency room, pain clinic, maternity ward, burn unit, pharmacy, and lab that can run all the tests a U.S. hospital can run and at a fraction the cost. A private room is $110 a day."

Want a cell phone in Costa Rica ? You may have to get creative...

More on the creative approach to managing the logistics of living abroad from David Stubbs, our Costa Rica correspondent:

"In Costa Rica , there's but one cell phone service. Unlike in other countries, in the United States , for example, or in Panama , in Costa Rica , you can't simply walk into a store and walk out with a phone-card cell phone. Here, the only service available is by monthly subscription.

"However, temporary residents (like us) can't subscribe to cell phone service. I guess other expats have skipped town without paying their bills.

"You see our predicament.

"We have two teenaged children...meaning we now have four cell phones in the family. We weren't able to register any of them in our names, though. We're lucky enough to have a friend who has let us use her name in each case.

"The trouble is that, now, the company won't issue her anymore phones. So she is using a phone borrowed from a friend of hers who is overseas for 12 months. At the end of the year, we will need to give one of our lines back to her...

"I'm holding out hope that CAFTA will be ratified in time, and that, before we have to relinquish one of our phones, this country will finally enjoy competition among cell phone service providers."

Step 1 to successful financial planning for your retirement abroad: Ignore your income and focus on your assets.

Twenty-year retiree abroad Paul Terhorst writes:

"If you're like most of us, you've paid attention your whole working life to your annual income. You've prepared budgets, either formally or generally, to keep your expenses in line with your income. When your annual salary goes up, you decide what to do with the extra money. You invest it, buy a new car, pay down your debt, etc.

"Before Vicki and I moved to Buenos Aires in 1981, like you, I thought about all these same income-related matters. Imagine my surprise, then, when I discovered that the Argentines never consider income at all. Argentines, and probably most others in the Third World , focus on assets instead of income. The way they look at it, too many things can happen to income, especially earned income. The government might take it away, the company might go broke, inflation might make a nominal salary worthless...

"So Argentines focus instead on assets--what you own, what you have in the bank (preferably a bank abroad), and what you have stashed away. The way they look at things, you need to work to protect your assets, especially in the Third World .

"In our 27 years of experience in Argentina , the government has confiscated bank deposits three times. Both individuals and companies were wiped out in the process. Astonishing to you and me but something that Argentines are used to.

"From a financial standpoint, then, at the end of the day, your assets, everything you've managed to accumulate from a lifetime of sweat, are all you can count on.

"I found this shift from income- to asset-based thinking tremendously useful. These days, Vicki and I consider only our assets, our income not at all. We figure our assets should go up by inflation every year. We also figure we can spend up to 4% of our assets, provided we invest properly in a mix of stocks, bonds, natural resources, real estate, etc.

"As you prepare for your retirement abroad, practice living off your assets. First step: Change your thinking from an income base to an asset base. As Warren Buffet points out, if you run out of cash, you can always sell something.

"Second step: Ignore your salary and try to live on 4% of your net assets. And think about what you would give up if the money runs short. Could you make those adjustments if you had to?

"You'll find your asset-based thinking will give you confidence and a sense of being in control of your life, things that become even more important as you prepare to march into the great adventure of a retirement abroad."