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Old 08-22-2012, 05:11 PM   #335
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"Win from now on" - Elway

Join Date: Apr 2001
Location: in the present moment
Posts: 69,057



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, Juarez, Tijuana and Nogales. 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.

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

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

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. 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.

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.

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.

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 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


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

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 history of its financial markets when compared to the
U.S.A.'s financial markets suggests.

DOW JONES AVERAGES MAY 2004 10,200 - MAY 2009 8,200 20% LOSS IN 5 YEARS

MEXICAN BOLSA MAY 2004 10,000 - MAY 2009 23,000 130% GAIN IN 5 YEARS

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