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By Charles Simpson How to prosper & avoid the coming storm and prolonged economic stagnation in the USA. 
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First: A reality check on Mexico Mexico is in a unique position to reap many of the benefits of the decline of the US economy. In order to not violate NAFTA and other agreements the U.S.A. cannot use direct protectionism, so it is content to allow the media to play this protectionist role. The U.S. media – over the last year – has portrayed Mexico as being on the brink of economic collapse and civil war. The Mexican people are either beheaded, kidnapped, poor, corrupt, or narco-traffickers. The American news media was particularly aggressive in the weeks leading up to spring break. The main reason for this is money. During that two-week period, over 120,000 young American citizens poured into Mexico and left behind hundreds of millions of dollars. Let’s look at the reality of the massive drug and corruption problem, kidnappings, murders and money.
The U.S. Secretary of State Clinton was clear in her honest assessment of the problem. “Our insatiable demand for illegal drugs fuels the drug trade. Our inability to prevent the weapons from being illegally smuggled across the border to arm these criminals causes the deaths of police officers, soldiers and civilians,” Clinton said. The other large illegal business that is smuggled into the U.S.A. that no one likes to talk about is Human Traffic for prostitution. This “business” is globally now competing with drugs in terms of profits. It is critical to understand, however that the horrific violence in Mexico is over 95% confined to the three transshipping cities for these two businesses, Tijuana, Nogales, and Juarez. The Mexican government is so serious about fighting this, that they have committed over 30,000 soldiers to these borders towns. There was a thoughtful article written by a professor at the University of Juarez. He was reminded of the Prohibition years in the U.S.A. and compared Juarez to Chicago when Al Capone was conducting his reign of terror capped off with The Saint Valentine’s Day Massacre. During these years, just like Juarez today, 99% of the citizens went about their daily lives and attended classes, went to the movies, restaurants, and parks.
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Is there corruption in Mexico? YES !!! Is there an equal amount of corruption related to this business in the U.S.A.? YES !!!. When you have a pair of illegal businesses that generate over $300,000,000,000 in sales you will find massive corruption. Make no mistake about the Mexican Drug Cartel; these “businessmen” are 100 times more sophisticated than the bumbling bootleggers during Prohibition. They form profitable alliances all over the U.S.A. They do cost benefit analysis of their business much better than the US automobile industry. They have found over the years that the cost of bribing U.S. and Mexican Border Guards and the transportation costs of moving marijuana from Sinaloa to California have cut significantly into profits. That is why over the past 5-7 years they have been growing marijuana in State and Federal Parks and BLM land all across America. From a business standpoint, this is a tremendous cost savings on several levels. Let’s look at California as an example as one of the largest consumers. When you have $14.2 billion of Marijuana grown and consumed in one state, there is savings on transportation, less loss of product due to confiscation and an overall reduction cost of bribery with law enforcement and parks service people. Another great savings is the benefit to their employees. The penalties in Mexico for growing range from 5-15 years. The penalties in California, on average are 18 months, and out in 8 months. The same economic principles are now being applied to the methamphetamine factories.
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FOX News continues to scare people with its focus on kidnapping. There are kidnappings in Mexico. The concentration of kidnappings has been in Mexico City, among the very rich and the three aforementioned border Cities. With the exception of Mexico City, the number one city for kidnappings among NAFTA countries is Phoenix, Arizona with over 359 in 2008. The Phoenix Police estimate that twice that number of kidnappings goes unreported, because like Mexico 99% of these crimes were directly related to drug and human traffic. Phoenix, unfortunately, is geographically profitable transshipping location. Mexicans, just like 99% of U.S. Citizens during prohibition, go about their daily lives all over the country. They get up, go to school or work and live their lives untouched by the border town violence.
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These same protectionist news sources have misled the public as to the real danger from the swine flu in Mexico and temporary devastated the tourism business. As of May 27 2009 there have been 87 deaths in Mexico from the swine flu. During those same five months there have been 36 murdered school children in Chicago. The “news sources” in the USA have a lack of integrity. By their logic, if 87 deaths from the swine flu in Mexico warrants canceling flights and cruise ships to Mexico, then close all roads and highways in the USA because of record 43,359 automobile related deaths in the USA in 2008.
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What is just getting underway is what many are calling the “Largest southern migration to Mexico of people and real estate assets since the Civil War” A significant percentage of the Baby Boomers have been doing the research and are making the life changing decision to move out of the U.S.A. The number one retirement destination in the world is Mexico. There are already over 2,000,000 US and Canadian property owners in Mexico. The most conservative number of American and Canadian Baby Boomers who are on their way to owning property in Mexico for full or part time living in the next 15 years is over 6,000,000. Do the math on 6,000,000 people buying a $300,000 house or condo and you will understand why the U.S. Government is trying to tax this massive shift of money to Mexico through H.R. 3056. The U.S. government calls this “The Tax Collection Responsibility Act of 2007”. Those who will have to pay it are calling this the EXIT TAX.
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Mexico: A better economic choice than China Another large exodus from the U.S.A is high paying skilled jobs. The job shift in automobile sector, both car and parts manufacturing, is already known by most investors. In the last few months as John Deere and Caterpillar have been laying off thousands of workers in the U.S.A., and hiring equal numbers in Mexico. The most recent industry that is making the shift is the aerospace manufacturers. In the city of Zacatecas there is currently a $210 million aerospace facility being built. With the 11 U.S. companies moving there, it is estimated to provide over 200,000 new high paying jobs in the coming years. One of the main factors for the shift in job south to Mexico instead of China is realistic analysis of total production, labor and delivery costs. While the labor costs in China are 40% less on average, the overall transportation costs and inherent risks of a long distance supply chain, and quality control issues, gives Mexico a distinct financial advantage.
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Mexico’s real economic future Mexico has avoided completely the subprime problem that has devastated the U.S. banking industry. The Mexican banks are healthy and profitable. Mexico has a growing and very healthy middle and upper middle class. The very recent introduction of residential financing has Mexico in a unique position of having over 90% of current homeowners owning their house outright. U.S. banks are competing for the Mexican, Canadian and American cross border loan business. It is and will continue to be a very safe and very profitable business. These same banks that were loaning in a reckless manner have learned their lesson and are loaning here the old fashioned way. They require a minimum of a 680 credit score, 30% down payment, and verifiable income that can support the loan. In most areas of Mexico where Baby Boomers are moving to, with the exception of Puerto Penasco (which did not have a national and international base of buyers), there is no real estate bubble. The higher end markets ($2-20 million) in many of these destinations are going through a modest correction. The Baby Boomers market here is between $200,000 and $600,000. With the continuing demand inside the Bay of Banderas, that price point, in the coming years, will disappear. This is the reason the Mexican government is spending billions of dollars on more infrastructure north along the coast all the way up to Mazatlan.The other major area where America has become overpriced is in the field of health care. This massive shift of revenues is estimated to add 5-7% to Mexico’s GDP. The name for this “business” is Medical Tourism. The two biggest competitors for Mexico were Thailand and India. Thailand and India’s biggest drawback is geography. Also recent events, Thailand’s inability to keep a government in place and the recent terrorist attack in Mumbai, have helped Mexico capture close to half of this growth industry. In Mexico today there are over 56 world class hospitals being built to keep up with this business.Mexico is currently sitting on a cash surplus and an almost balanced budget. Most Americans have never heard of Carlos Slim until he loaned the New York Times $250 million. After that it became clear to many investors around the world what Mexicans already knew: that Mexico had been able to avoid the worst of the U.S. economic devastation. Mexico’s resilience is to be admired. When the U.S. Federal Reserve granted a $30 billion loan to each of the following countries Mexico, Singapore, South Korea, and Brazil, Mexico reinvested the money in Treasury bonds in an account in New York City.According to oil traders, Mexico’s Pemex wisely as the price of oil shot to $147 a barrel put in place an investment strategy that hinged on oil trading in the range of $38-$60 a barrel. Since the beginning of 2009 Mexico has been collecting revenues on hedged positions that give them $90-$110 per barrel today. Mexico’s recent and under reported oil discovery in the Palaeo Channels of Chicontepec has placed it third in the world for oil reserves, right behind Canada and Saudi Arabia.The following is a quote from Rosalind Wilson, President of the Canadian Chamber of Commerce on March 19, 2009. “The strength of the Mexican economic system makes the country a favorite destination for Canadian investment”.
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OPPORTUNITIES: WHY PUERTO VALLARTA & THE RIVIERA NAYARIT? The answer is simple and old fashioned: SUPPLY AND DEMAND. The area of Puerto Vallarta/Riviera Nayarit inside the Bay of Banderas is an investor’s dream. This area has the comprehensive infrastructure in place, world class hospitals and dental care, natural investment protection from the Sierra Madre Mountains, endless future water supply, low to nonexistent crime, international airport, and limited supply inside the Bay, first class private bilingual schools and higher than average appreciation potential. Like many areas in Mexico there is large demand for full and part time retirement living and a lot of construction underway to meet this demand. Pre construction of course is where the best bargains are available.I would offer a word of caution for investors in Mexico. Do not be seduced by the endless natural beauty that is everywhere, both inland in colonial towns and along thousands of miles of beach. Apply conservative medium and long term investment strategies without emotion. The demand for full and part time living by American and Canadian Baby Boomers is evident throughout the country. The top two choice locations are ocean front, and ocean view. The third overall choice, which is less expensive, is inland in one of the many beautiful colonial towns or small cities.
Mexico, with the world’s 13th largest GDP, is no longer a “Third World Country”, but rather a fast growing, economically secure state, as the most recent five-year
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history of its financial markets when compared to the U.S.A.’s financial markets suggests.
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DOW JONES AVERAGES MAY 2004 10,200 JULY 2009 8,800 15% LOSS
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MEXICAN BOLSA MAY 2004 10,000 JULY 2009 26,000 138% GAIN Return to top Hurricane Preparedness for PrincessesBy Susan A. Fogel
 It’s that time of year again: hurricane season. The season officially opens on May 15th. That is when the National Hurricane Center (NHC) starts sending out public advisories about hurricanes.
After experiencing four hurricanes in southern Baja, I have come to be an expert on how to prepare. And also having grown up in New Jersey where hurricanes come every year like clock work, I take every hurricane warning seriously. And I have perfected my preparations to make sure that the high-maintenance Diva that I am remains comfortable.
We lived through hurricanes Juliette, Ignacio and Marty in our old house two blocks back from the beach. We were on vacation for Ignacio ( a non-starter). Two years ago over Labor Day, hurricane John wailed through. We had been in our new house right on the beach only nine months. Built to the standards of California for earthquakes, and Florida for hurricanes, we were confident the house would sail through unscathed, and it did. But we still lost power.
What I learned about hurricanes in Mexico:
They are just as unpredictable, and dangerous as anywhere else. But the damage they do to infrastructure is immense, and far-reaching. And being without electricity can be a five-day ordeal. We all forget how much we depend on electricity. After hurricane Juliette in September of 2001, I have learned a few things that served me well last year.
As soon as you get the warnings:
1. Charge up your tooth brush
2. Make bread
3. Make a chocolate cake or brownies
4. Grind a week’s worth of coffee
5. Make sure the Itty Bitty Book Light has fresh batteries
6. Buy butane candle lighters to light the stove and grill
Just before Juliette hit, I was baking a birthday cake for my beloved. Not too long afterward the power went off, and stayed that way for FIVE days. We still had propane. So every morning we had freshly brewed coffee and chocolate mint cake. It takes the sting out of being without a shower, and air conditioning. And of course the calories don’t count. It was a weather emergency. We boiled water on the stove and poured it directly into the basket of the coffee maker, a little slow, but we had dark, rich Italian roast every morning. We actually hand-squeezed the grapefruits using the electric juicer parts and elbow grease. Needless to say I was exhausted by the ordeal of five days without electricity.
Oh yes, you should as soon as you start getting weather warnings:
1. Buy extra water for drinking and cooking.
2. Get ice, candles and batteries
3. Fill the car with gas.
4. Buy an old fashioned phone that needs no electricity
5. Make sure your flashlights work
6. Fill important prescriptions
7. And visit the ATM
Usually the grocery stores and restaurants will get power and you will need cash to buy things, the ATMs, and credit card machines, needing internet lines, were down for the entire time we were without power.
After watching the disaster of Katrina I have done this:
1. scanned our passports and residency visas and emailed them to my kids
2. scanned other important docs and credit cards and emailed those as well
3. charged the cell phones and camera and sealed them in plastic
4. sent emails to family with emergency numbers and likely places we would end up if we had to flee the house
I also made a survival pack. I packed all of the important documents in Ziploc baggies. Gathered sneakers, medicines, bottled water some dog food, doggies collar and leash, some clean undies for me, nylon windbreakers, flashlights, keys and our wallets, and put them all in a canvas bag at the bedside. Now that we are on the beach, we may have to cut and run in a flash. I wanted to have our life in a bag at hand.
After Juliette. We went to town in search of working phones or Internet service so we could reassure our family that we were safe. Juliette was a category 5 hurricane. Because it was a few weeks after the September 11th attacks, no other events made the news in the U.S. When friends and family contacted my daughter saying they hadn’t heard from us, she assumed we had gone away for the weekend since it was my beloved’s birthday). That is why we now inform them in advance of impending hurricanes. So they will worry appropriately and search for us if we don’t make contact.
We have a nice saltwater pool, gas stove and lots of friends. Our house became the hub in the days following the hurricane. A little bit of a party atmosphere prevailed.
Friends would come for a shower. They could fill a bucket or two and stand in the pool house shower and wash their hair and douse themselves from the bucket. And of course by having a pool we had the luxury of using the “bucket flush” method to flush the toilets. And we could spend hours neck deep in the pool tepid Margaritas in hand.
After the shame of Katrina, the world watched, and Mexico, especially La Paz, learned about emergency preparedness. CFE (electric company) and TELMEX ( telephone trucks) with cherry pickers and other emergency equipment were gassed up and deployed along the highways for easy access to damaged areas.
The first area to get power back is downtown. Next comes the poorer neighborhoods, then the rest of us. This makes sense. Once the restaurants are open, those of us with cars and cash can go have a good meal at lunch time and a cold drink. We have the wherewithal to take care of ourselves. The poorer areas need the government assistance.
We would head into town every day to do just that, have a meal, sit in air conditioned comfort, have a cracklin’ cold beer, buy more emergency Tuna…ok, we did grill steaks.
But, for a day or two after a big downpour we can be cut off from town, by floods, so we live on what we can boil or grill, and tuna.
The funny part of the last few hurricanes is that our cranky Internet service stayed up throughout the storm until we lost power. My friend Melanie that lives an hour south of here right on the Pacific beach and I kept giving each other updates, she was describing the storm as it passed her before it hit us. Melanie and I shared recipes, and discussed what we were serving the hurricane party crowd.
Last year we had a hurricane that was more like a giant thunderstorm, it came in the daytime. I pulled a nice chair into my luxurious bathroom with the best view of the beach and watched our normally flat bay, have real surf. Great fun!
When it all got too much, the hand juicing, no hair dryer, no internet, more tuna for dinner, I would simply remember a few of my favorite things…oh, that’s Julie Andrews. What I would do was remind myself that this would end soon, and I would think of the women of Afghanistan and feel truly blessed.
The Price of Economic Consequence
By Bruce D. Greenberg, MAI, SRA, ASA May 20, 2009  The Mexican people should be commended and congratulated by the international community for placing the health and safety of its citizens and the world first, regardless of economic impact. Through the leadership of its government and the strength of its community, Mexico successfully slowed the advancement of the A(H1N1) virus through a Federal public health declaration that required both private and governmental to close their doors to the public and limit physical interaction. In effect, this action shut down the country and its economy for a six-day period. This type of impact in the United States would be detrimental to the economy.
On May 10, 2009, I arrived at Mexico City’s Benito Juarez International Airport on a flight from Dallas and was greatly overwhelmed by how the community rallied together to create an ultra-hygienic community to combat this virus. From my first steps off the airplane into the airport, and on to the taxi, hotel, restaurants, offices, and retail stores, it felt as if Mexico had become the most hygiene-conscious country in the world. The owners and employees of the hotels, restaurants, , taxis and public venues made my health and safety a priority throughout my six-day stay in Mexico City. As I entered various establishments, I was greeted by health professionals who gave me hand sanitizer, took my body temperature and asked me to fill out health questionnaires and while in close-quartered taxis or in high traffic areas, I was encouraged to wear a surgical facemask, although I did not feel the need to take this extra precaution with all of the safety measures that had been put into place.
The A(H1N1) Virus is not a Mexican problem; it is a global problem. With the hygienic measures placed by the government, the Republic of Mexico did their part to help stop the progression of the virus. To date, Mexico has experienced 68 deaths and 3,103 confirmed cases of the virus, according to the World Health Organization (WHO). Today, this same virus that the press has successfully labeled as a Mexican disease has now spread in the United States to 5,123 cases and 6 deaths in a total of 48 states as well as more than 40 other countries. Other affected countries should be enforcing the same type of preventative measures as Mexico did.
The Panamerican Health Organization stated that without the drastic preventative measures of the Federal and State governments of Mexico, “more than 8,600 lives would have been lost and more than 30,000 hospitalized, severely compromising the public health system.” 68 deaths in Mexico is an epidemic; 8,600 lives would have been devastation for the country. The loss of life in the United States and around the world would have been catastrophic without the measures taken by the Republic of Mexico.
In early reporting’s, the international media assured the world that the A(H1N1) Virus could kill hundreds of thousands. Instead, the only true virus was a successful media campaign, which halted the Mexican economy, nearly destroying its tourism sector overnight. Dozens of hotels have been closed, and unemployment will continue to rise until Mexico can regain its strength in the tourist sector.
I am not an expert either on health or how governments should be run, and I am not pretending to be so by the publishing of this editorial. However, I do understand real estate and it’s affect on the economy.
Mexico’s economy has been greatly affected in the past twelve months by the world’s economic situation, the publicity of cartel violence, and the most recent A(H1N1) Virus health scare. None of these things are Mexico’s fault. In fact, Mexico’s financial system is one of the strongest in the world. Mexico has experienced an increase in cartel violence and lost many of its citizens while fighting to prevent the flow of drugs into the United States. The Federal and State governments of Mexico did an astonishing job halting the spread of the A(H1N1) Virus. Nevertheless, Alfredo Coutino, Latin American economist at Moody’s Economy.com, stated that Mexico’s economy will contract 5.5 percent in 2009, and one point of the be due to the A(H1N1) Virus.contraction will
As citizens of our countries, we ask our policymakers to be prudent and take risks on the side of caution while protecting and building stronger economies. We obviously do not want to abandon that stance when it comes to public health policy. The decisions made by the Mexican government concerning the health of its citizens and people around the world will account for enormous economic implications in the months to come, but the Mexican government should be proud of the stance it took.
The country of Mexico was brave and admirable, saved countless lives, and created a type of transparency and full disclosure that has been unprecedented at the price of severe economic consequences. Fortunately, Mexico understands crisis, has rebounded from crisis many times before, and will rebound again.
As for the United States, it is time for the leadership of the country to stand up and become good neighbors to the ones who have been great neighbors to the south. “Though shall love their neighbor as thyself” is a quote that extends far beyond religious belief and into practical day-to-day life, just as Mexico has done by investing billions of dollars into our economy, placing their children at risk to fight the United State’s war on drugs, and as they did by risking economic implications while putting a halt to the spread of the A(H1N1) Virus.
About the Author:
Bruce D. Greenberg, MAI SRA, ASA, has more than 38 years experience as a real estate valuation consultant and appraiser. Under the guidance of Mr. Greenberg, Bruce D. Greenberg, Inc. and Valuaciones Montaña Verde S.A. de C.V. have completed nearly 20,000 valuation and consulting assignments in 14 countries worldwide. Montaña Verde completed its first assignment in Mexico in 1995, and has since performed more than 1,200 assignments encompassing more than 3,500 properties throughout Mexico.
Bruce Greenberg is Managing Partner and Co-Founder of Lifecycle Communities SAPI de CV and Recovery Shield Alliance. Mr. Greenberg is also a member of the Appraisal Institute, sits on the Bi-National Board of Directors of the United States-Mexico Chamber of Commerce and is an active participant in the Urban Land Institute (ULI) Mexico Council, American Resort Development Association (ARDA) and Asociación de Desarrolladores Inmobiliarios (ADI).
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Return to top The Swine Flu Odds  An American expat living in Mexico City crunches the numbers on getting nailed by swine flu.
"Doc, give it to me straight. What are my chances?"
I was curious about that very question just now, and so put my calculator to work. amongst the 25,000,000 good citizens of Mexico City there have been 152 confirmed deaths from swine flu influenza over a 30-day period. That means that there was a 0.00002% possibility that one of those deaths could have been me. Gosh, but how does that compare to my regular odds? Well, lets see. If average life spans are 75 years these days - and lets not complicate matters with age-based actuarial tables - then simply put on a straight-line basis I have no worse than a 0.00365% possibility of checking out of this world on any given day. So, were today to be my day of reckoning, I have at most a 0.55% probability that my fate came from Mexico-born swine flu virus as opposed to some other hapless-yet-fateful ending.
Compare that probability to, for example, a 2 order of magnitude greater probability of dying TODAY from cancer, heart disease, or obesity. or, a 1.5 order of magnitude greater probability of dying TODAY in a traffic accident, or other comparable bodily injury.
And, this being Mexico and all, the apt statician will not rule out .....
- being caught in drug lord turf war crossfire
- eating too many jalapeños
- copious tequila consumption
- broken heart caused by a sensationally beautiful yet gold-digger Mexican señorita
- being conscripted into the PRD revolutionary army, then placed onto the front lines (Xochimilco perhaps?), and then being promptly shot and killed by Mexican federal armed forces
- forest-gump'ing your way into an illicit nuclear arms transaction (Mexico is compared to Pakistan these days, so we're in need of some nukes)
Until Mexico City's death count exceeds 15,000, and assuming that by then that there's still some other safer place on earth, I'll continue to take my chances with Mexico's swine flu. Of course, i'm enjoying wearing my army-issued surgical face mask - that is, at least until my fashion conscious friend in San Francisco Fed-X's my Prada designer mask :=))
KIndly provided by Lawrence P. McDaniel, managing partner and chief investment officer, Axia Partner.
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