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Pacific paradise realtors found a Great Article on the economic reality of Mexico, Take the time to read

THE NEW GLOBAL ECONOMIC REALITY

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.
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.
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.
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 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”.
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 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


Its not by chance we are here in Mexico with companies like Pacific Paradise Realtors, Paradise Mortgage as with so many others. It was a calculated decission based on what is and was going on North of the border, so much turmoil, debt etc.

Many investors come down and look for foreclosures, short sales etc, few to none around. Traditionally and historically mortgages loans and credit lines have not been part of the equasion as a whole. Here people own property, cars, boats etc, not mortgaged and leveraged as back in the USA. It makes for a real economy, you have money you buy it. The deals that may pop up from time to time are generally an American who is in a pinch up north. But again, most Americans have no debt here on property so can and will hold.

Hope to see you in Paradise,

Published Monday, April 26, 2010 9:55 AM by Jonas Soder

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