Wealth International, Limited (trustprofessionals.com) : Where There’s W.I.L., There’s A Way

W.I.L. Offshore News Digest :: November 2009, Part 4

This Week’s Entries :


The family whose saga is detailed in this piece thought about moving from Atlanta to Costa Rica, but when they finally were ready to “pull the trigger” they found that the “quaint little community” they had discovered two years earlier was now priced out of reach. Going back to the drawing board, “pioneer” spirit intact, their searching eventually brought them to Nicaragua, where they immediately felt they had found “home.” Another two years and they were moving there.

And how has that worked for them? Read on for details, but the conclusion: “We enjoy beautiful weather, a simplified lifestyle, incredible freedom, and the experience has enriched us forever. Long before we reached a point where we believed the best days of our lives were behind us, we are enjoying the splendor of a extraordinarily special place – Nicaragua. ... Life could not be any better for our family.”

Any more questions?

We once heard a real estate developer offer profound advice saying, “Inexpensive beachfront property does not become a better value, rather it becomes more expensive. Pioneers who stake their claim make significant money for their children and are able to enjoy the beauty for themselves, at value prices.” And so began our personal quest to be pioneers and “discover the undiscovered.”

Our quest began in 2002, when my wife Carolyn and I acted upon that same advice and began our search for a beachfront property that would serve as a sound investment and provide for an occasional tropical getaway. We ventured into the latest “hotspot” of Costa Rica and were awed by the beauty of the Pacific coast and the availability of undeveloped property.

Indentifying a beautiful piece of property was the easiest part of the process. However, “pulling the trigger” and actually purchasing the property is where our small, conservative North American mentalities kept us from expanding our horizons and making a wise decision. We decided that we just could not get out of our “comfort zone” and commit to buying a piece of land overseas, no matter how beautiful and inexpensive.

Upon making our decision not to purchase, we returned to our daily routine in Atlanta. Time passed, the frantic pace of daily life continued to increase, traffic got worse, monthly expenses continued to climb, and after two years we decided to venture back into Costa Rica with a real commitment to take the plunge into international real estate ownership.

But, upon arrival in the quaint little community we had discovered two years past, our anticipatory spirit was quickly broken as we researched availability and prices. The exact same properties we could have purchased on our previous trip for $69,000.00 were now selling at an astounding $499,000. Our fears and our procrastination had cost us our opportunity to expand our horizons, enjoy the beauty of a tropical environment and benefit financially from the discovery of the undiscovered.

As any good pioneers would do, rather than accept defeat, we rallied and focused our determined and collaborated efforts on finding the next undiscovered paradise, having no idea how that one minor setback in Costa Rica would change our lives forever.

One month later, we and our daughter Claire traveled to Managua, Nicaragua on another Central America “scouting trip,” hoping to find a little piece of undiscovered paradise. From the moment we put our feet on the ground in Nicaragua, our hearts and our minds told us we had found “home.” And, just two short years after that first trip to Managua, we had packed up our Atlanta lives, said one last goodbye to the concrete jungle and began our journey down I-75 to Miami, where we would load our pets on an air-conditioned cargo plane and complete our greatly anticipated move to a new country.

But, as with every major step in life, there are always mountains to climb.

We never anticipated the need to stop on the interstate and break up a dog fight in the back seat.

We did not expect to arrive in Managua and find that our contractor had decided to tackle every stage of our home renovation all at once, rather than in staggered phases, demolishing all of our living space and placing our toilets in the backyard.

Imagine our surprise, as we learned our new life in paradise would begin by sharing one small bedroom with our 10-year-old daughter, three dogs, three cats and a bird, for six months!

With school starting for our daughter the Monday after our arrival, with dust and construction noise all around us, with roosters crowing at 5:00 a.m., with sporadic electricity and cold showers greeting us every morning, the reality of our new life was staring us square in our faces. Yet, we all agreed we had never been happier. Nicaragua was our new home, and we had no desire to look back. No second thoughts, no remorse.

Our new Nicaraguan home has provided us with a life, a lifestyle and a level of happiness that we would not trade for any amount of money.

To understand our new home, one must first know that as a country, Nicaragua is incredibly North Americanized. During the 1980s, many Nicaraguans left their homeland to live in the United States and Canada. Their children were educated in U.S. and Canadian universities. They became bilingual, and they experienced North American amenities, culture, sports and foods.

When the opportunity to return to their homeland was available, an overwhelming number of natives returned and began to open businesses and provide services never before seen in the country. Thus, for us, starting a new life in Nicaragua has come with relative ease, as we were able to transform our North American experiences into a lifestyle that includes much of what we love about our birth country, yet is seasoned by the fresh and simple qualities of Central America.

Having everything we need on a smaller scale is actually one of the most endearing qualities of life in Nicaragua.

When evaluating Central American countries, there are always subtle differences between nations that oftentimes appear indistinguishable. We love Central America as a whole, and find the challenges that it brings invigorating and entertaining on a daily basis, but there are absolutely particular qualities we have found in Nicaragua that enhance our experiences and make our daily life rich. We came from a city with skyscrapers and a fast-paced life, yet living in Nicaragua we are no longer burdened by the big city life. Panama City, Panama, Mexico City and even San José, Costa Rica, offer the “big city” lifestyle, but having everything we need on a smaller scale is actually one of the most endearing qualities of life in Nicaragua.

There are cultural distinctions in Nicaragua that are probably most attributable to wars, foreign government domination and even military rule. Nicaragua has experience in all of these areas, but has reacted with very little resentment or change. Nicaraguans remain open, friendly, jovial and light-hearted, never seeming to be suspicious and closed to foreigners. Nicaraguans are curious about others, and compelled to help them, without giving a thought to their place of birth or the color of their skin.

Our lives are filled with constant invitations to share dinner in the homes of our new Nicaraguan acquaintances, as well as attend their family weddings, funerals, christenings and birthday parties. We have been welcomed at every moment, even to the point of being showered with welcome gifts that included a rooster, hens, a calf, goats and even a pig. We never counted on having our own barnyard.

Nicaraguans are pleasantly courteous and extremely humble. In Nicaragua, you are often answered with the phrase, “a la orden.” Literally, it means “to the order,” expressing a person’s desire to please you and be at your service. Or, when you ask “how are you today”, the most common response is, “Bien, bien, gracias a Dios,” which means “good, good, thanks to God.”

That very person may have not eaten that day, they are potentially unemployed and more than likely one of their family members is sick. Given the opportunity, they will be happy to tell you about all of their problems, but in either case, their initial response will almost always be upbeat, hopeful, happy and with thanks to God.

Another beauty of the Nicaragua people is their attention to their own personal appearance and daily habits. We are constantly amazed at the ability of Nicaraguans to keep their white shirts so brilliantly white, to meticulously iron their clothing and overall, present themselves to the very best of their economic means. They truly have great pride in their appearance, and most would not be caught in any type of social setting or public location without being dressed to the best of their ability.

The people in Nicaragua are truly special, and in our opinion they are what set this country apart from all others in Central America. However, the quality of our life here is also enhanced by the “what,” as well as the “who.” To the average North American, infrastructure means mega shopping malls, glistening asphalt, and 20 fast food restaurants in every mile. In fact, this type of infrastructure is around every corner of North America.

But, as opposed to the North America of our parent’s and grand-parent’s generations, there is no longer novelty up north. The infrastructure of North America has robbed us of true identity and the joy of knowing truly special places and things. When you absolutely must purchase something special here, you might actually be required to get creative and search in unusual places for it, which often leads to even more enlightening and invigorating experiences.

The second safest country in the Western Hemisphere.

We feel incredibly safe and secure in our new home. Nicaragua has been statistically identified as the second safest country in the Western Hemisphere, and though we take the same normal precautions for our safety as we did in the U.S., we have never felt in danger or felt as if we needed to fear for our safety. We travel freely throughout the country and my wife and daughter ride horse-back for hours on the beaches and through open fields.

In Nicaragua, we have all the basics of a modified North American life, including clean drinking water, electricity, internet, direct VoIP phone lines to the U.S., international video conferencing, cell phone service and satellite television for watching U.S. television and sports. While living here is real world, it is a simplified existence. When we walk into the grocery store, our life is not complicated by over 100 choices of cereals. We have learned that only 20 choices work just fine for all of us.

Our daughter is no longer bombarded by obscene consumerism. She has everything she wants (and more, as an only child), but she is no longer faced with the pressure of her classmates questioning as to why she does not have the latest designer shoes or this week’s technological break-through product.

For our basic food needs, we buy fresh fish and seafood. Or, we enjoy the exceptional taste of free-range chicken and beef without steroids and growth additives. We grow or buy fresh vegetables and fruits. We patronize the local bakery. Simply stated, we eat healthier and enjoy the benefits. Restaurant options are abundant here, and the food is excellent.

Health and hygiene are extremely important in Nicaragua and is ever-present in the food service industry. Though Nicaragua is one of the poorest nations in the hemisphere, people eat healthier in restaurants here, with a wider variety of slightly less-fried street food and whole food options. The habit of eating a drive-thru meal while hurriedly driving down the expressway is a distant memory for us.

Living expenses are now four to five times less than what we left behind, and that includes a maid, a gardener and our daughter’s private school education.

Simply put, we have been fortunate enough to acquire many of the creature comforts we crave without too much effort, and at the same time, we have embraced the cultural differences and obstacles here that lead to surmountable challenges and humorous experiences. And, we have it all for a fraction of the cost of living that we faced in the United States. Our living expenses are now four to five times less than what we left behind, and that includes a maid, a gardener and our daughter’s private school education.

Further, we have been able to cultivate our love of horse ownership, something we could never have afforded in Atlanta. We now have more free time and we spend those new-found, precious hours relaxing and enjoying each other, rather than constantly chasing the next gold ring. We spend time with our horses, play golf, learn to surf or simply sit and read at the beach. And, we do it all while spending 70-80% less than the cost of the life we decided to forego.

Innovation in communications has made it possible for us, and for many of our expatriate friends here, to make a conscious decision to change our lives. We enjoy beautiful weather, a simplified lifestyle, incredible freedom, and the experience has enriched us forever. Long before we reached a point where we believed the best days of our lives were behind us, we are enjoying the splendor of a extraordinarily special place – Nicaragua. We truly have discovered the undiscovered.

Life could not be any better for our family.


Don’t worry how your children will adjust. Worry how you will survive the adjustment period.

Kathleen Peddicord shares her very interesting firsthand experience moving to a new country with children ... three, count ‘em, times.

My daughter Kaitlin, age 9 at the time, cried herself to sleep every night during our first year living in Waterford [Ireland]. Kaitlin was fiercely opposed to the idea of leaving her grandmother, her cousins, her friends, and her school in Baltimore behind, and she made sure we were painfully aware of that fact every single day. “You’ve ruined my life!” she would sob night after night as she fled from the dinner table to her bedroom and slammed the door.

My husband Lief and I, of course, thought we were doing precisely the opposite. We believed we were enriching Kaitlin’s life and expanding her horizons. But, I have to admit, some nights I would lie awake wondering if maybe Kaitlin were not right. Maybe launching a new life in a foreign country at age 9 would translate into years of psychotherapy down the road.

Our first year in Paris it was Kaitlin’s little brother Jackson, age 4 at the time, born in Ireland, who struggled through the transition. “Give him six weeks,” his preschool teacher advised me every morning when I dropped him off. “At this age, he will adapt very quickly. In six weeks, he will speak French, and he’ll be fine. You will see.”

Meantime, every morning, as I would turn to leave, Jackson would wrap his arms around my ankles, crying and begging, “Please don’t make me stay here!” I would pull myself free and race out the door and down the street, fighting back tears myself and wondering, again, if this moving around the world with kids thing was really such a good idea. Six agonizing weeks later, though, and, volia, seemingly overnight, Jackson spoke French. He had adjusted; he had made friends.

In truth, our lifestyle has been easier for Jack to handle than Kaitlin. While Jack was born into it, Kaitlin might say she was yanked. On the other hand, it was Kaitlin’s idea to move from Waterford to Paris. Kids in Ireland take what is called a “Gap Year” at age 15, between what would be their freshman and sophomore years of high school in the States. For this year, many study or take internships abroad. As they approached their Gap Year, Kaitlin’s friends began making plans to attend school in the U.S., Britain, and elsewhere. Kaitlin decided she would like to spend the year in Paris.

We had been enjoying Irish country life, but, by this time, we were wanting for more cosmopolitan distractions. We took Kaitlin’s suggestion, therefore, as an opportunity for another family move. In the essay Kaitlin prepared as part of her admissions application for St. Johns College in Annapolis three years later, she wrote, “I fought against my family’s move to Ireland and resisted life in that country completely. But, if not for Ireland, I probably wouldn’t have gone to Paris. And now I can’t imagine not having had the chance to live in Paris. ...”

Kaitlin continues her higher education in the States but begrudgingly. As soon as she has finished her studies, she has made it clear, she intends to find a way to return to Paris. For Kaitlin, this city has become home.

Jack enjoyed Paris and is happy today living in Panama, where he has learned to speak Spanish not in six weeks but in about six months. However, ask Jackson where home is, and he will tell you Ireland. That is where the 9-year-old insists he will return when he's grown up.

Children raised overseas are generally self-confident, open-minded, and resourceful. They learn to make friends easily and to adjust quickly to change.

The advantages of raising children abroad are many, from a second (or even third) language to a second passport. Children raised overseas are generally self-confident, open-minded, and resourceful. They learn to make friends easily and to adjust quickly to change.

That is not to say raising kids in another country is easy. If you are considering making an international move with children, they, specifically the options for their education, become your priority. Moving with children also means that you must move full-time or, at least, that you must schedule your part-time life in your chosen haven around their school calendar.

The fundamental education choice you must make is whether to send your child to a local school (where, unless you are moving to Belize or Ireland, for example, he will need to learn to speak the local language fluently), to a bilingual international school (where he will have the opportunity to learn the new language but will take classes, as well, in his native tongue), or to an American or British school (where he will be largely insulated from the local culture and community).

In Ireland, Kaitlin attended a local private school. In Paris, we enrolled Jack in the local public school. (In France, public schools are more highly regarded than private ones. Kids get kicked out of public school for not meeting study or discipline standards, not vice versa.) In Panama, Jackson is attending the French school, so that he can keep his French and so that, if we return to Paris, as we intend, before he is finished his undergraduate studies, he will be able to slide easily back into the French system.

In other words, just as we have chosen to go local with our lifestyles overseas, so, too, we have gone local with our children’s education. Why drag the kid to a new country only to enroll him in a school that could as easily sit in any U.S. suburb? We considered this question head-on in Paris, where the American School of Paris was one of our options for Kaitlin’s education in this city. Kaitlin and I visited together, and we both had the same reaction. The American School of Paris could be the American School of Any American Town. Every student is from the States, as is every member of the faculty. English is the only language spoken. The curriculum, the calendar, the special events, everything about the school is as it would be Stateside. Nothing wrong with this, per se, but it seemed a shame to us for Kaitlin to miss out on the chance to learn French, to make friends from all over the world, and to become part of the Paris teenager scene.

Another plus of going local with your child’s schooling overseas is the cost. In most of the world (unlike in France), the local public schools probably do not offer the standard of education you are looking for. You will be delighted, therefore, to learn that private schools in many countries are a bargain compared with the cost of private schools in the States. Tuition at Jackson’s private French school in Panama City is about $3,000 per year. At Kaitlin’s private elementary school in Waterford, Ireland, the tuition was less than $2,000 per year.

In addition to schooling options, moving with children you also must consider health care and local kid-friendly opportunities. Are there parks, playgrounds, private tutors, and places where the child could go to study the guitar, to learn to dance, or to take karate lessons?

With a child, you cannot easily reside under the radar.

Likewise, you should also think about residency options. With a child, you cannot easily reside under the radar. I do not recommend residing overseas without proper papers under any circumstances, of course, but, over the years, I have known expats in France, Panama, Thailand, and elsewhere who have never gotten around to legalizing their stays. Often, this is not a big deal. With school-aged children, it can be more difficult. This restriction, especially, can take a number of countries off the list of options, as it would be difficult or even impossible to organize legal residency for you and your family.

Your children will be fine. The truth is, their move will be harder on you than it will be on them.

Moving abroad with children, your biggest worry might be their ability to adapt and to adjust. It has been mine. Having now moved my then 9-year-old daughter from the States to Ireland, then my then 14-year-old daughter and 4-year-old son from Ireland to France, and, then, most recently, my then 8-year-old son from France to Panama, here is what I can tell you: Your children will be fine. The truth is, their move will be harder on you than it will be on them. They will learn the new language quicker than you will, they will make new friends more easily, and they will assimilate more readily.

Our first six months in Paris, Kaitlin would sit at the dining room table after dinner doing her homework – all in French. Before our arrival in this country, she had never studied the language. Then, overnight, she was studying in the language, doing high school math in French. The work would take her hours, after which she would retire, exhausted and nearly in tears. Then she would have to get up the next morning to return to school, where, again, all lectures, presentations, and course materials were in French. This should not be so hard on her, the mother in me could not help but observe. I made an appointment to meet with her advisor at school, who said this:
“Kaitlin is struggling, yes. But you must let her struggle. It is good for her.”
This is the last thing a child wants to hear and the hardest thing for a parent to accept. But I tell you now, it is the right thing, the true thing. After six months of exhausting effort, Kaitlin was bilingual. She retains this asset, which, already, has opened doors for her. Her first year of college back in the United States, it was her overseas experience and her second language that helped her to land a part-time job in a chic photography gallery.

Don’t worry how your children will adjust. Worry how you will survive the adjustment period. ...

P.S. Moving overseas with children is one of the topics I address in the How To Retire Overseas book I have written for Penguin, due out in U.S. bookstores in March 2010. Meantime, you can purchase a pre-release copy at a discount here.


“The only risk is wanting to stay.”

Medellin, Columbia has received favorable mention by articles posted in these pages previously, e.g., here. Here is another favorable report. The writer found it impossible to open a bank account, and the taxes are high, but the writer’s friend has a plan to deal with that: He is basing his business and banking in Panama while enjoying the lower cost of living and “fun lifestyle” in Medellin.

“I don’t live in Panama, but my business takes me there often,” writes new Correspondent and offshore banking consultant Peter Macfarlane (Q Wealth Report). In fact, I have spent time in the majority of Latin American countries. Yet there was Colombia, just next door to Panama, where I visit so often, but seemingly a different world. I had heard many good things about it (from both living and investing points of view), but I had never managed to come up with an excuse to make the trip.

Finally, a friend, a European expat who had been living in Panama, moved to Medellin and invited me over to stay with him. I hopped on a plane as quick as I could.

Medellin was built in a deep valley surrounded by tall, pine-covered mountains. The domestic airport sits almost downtown. However, my one-hour direct flight from Panama landed at the larger international airport, situated on higher ground, about an hour’s drive from the city. The trip in to town makes for an exceptional first impression.

Medellin has a distinctly European feel. It is clean and more orderly than charmingly chaotic Panama. The people are friendly and polite and more reserved than the typical Central American or Mexican.

Medellin has a distinctly European feel. It is clean and more orderly than charmingly chaotic Panama. The people are friendly and polite and more reserved than the typical Central American or Mexican. Another difference is that the locals are not used to big numbers of expats or tourists among them. You need at least some Spanish to get by day-to-day.

Medellin may feel like Europe, but it differs drastically from that part of the world when you look at the cost of living and, especially, the cost of real estate. My friend lives near the Parque Lleras. This is probably the best address in downtown Medellin, an attractive plaza of cafes and restaurants where people go to see and be seen. My friend had bought a studio apartment here for US$25,000 a few months before my visit, which, following a basic remodeling, he reckoned was worth at least double. Not one to waste time, after the first purchase, my friend began buying up other apartments on the same block.

My friend works mainly on the Internet and has an excellent fiber optic connection. You will find lots of free wi-fi in the city, including at Juan Valdez Café, the Colombian version of Starbucks with branches all over the city and the region.

Colombia is just opening up for foreign investment, and intrepid bargain-hunters will find good deals, particularly when it comes to real estate. It is relatively easy to obtain a retirement residence visa.

However, there are exchange controls and other bureaucratic restrictions in place, and taxes are high. As an early expat in Colombia, you would need to be prepared to navigate the system a little. I attempted to open a bank account, for example, which proved almost impossible. I think my friend has the right idea. He is basing his business and banking in Panama but enjoying the lower cost of living and the fun lifestyle in Medellin – all the while investing pocket money in real estate that I believe should grow in value over the medium to long term. When he needs to visit his business, it is a short flight to Panama.

Safety is not a problem anymore.

Of course, everybody’s big question related to Colombia has to do with security. Is this country unsafe?

The answer is no. Safety is not a problem anymore. As in any big city, there are areas where you would not want to go, especially alone, especially after sundown. But I felt very safe wandering around, even late at night. Colombia is working hard these days to attract tourists, investing millions in advertising abroad using the catch phrase, “The only risk is wanting to stay.” I would say the slogan rings true once you have spent any time here.

Some facilities in Medellin are spectacular. The El Tesoro shopping mall, for example, is the most impressive mall I have seen anywhere in the world. It is a five-minute cab ride up the hill from Parque Lleras. Their website shows a great panoramic photo of the city (the same view you see from the mall).

I am already making plans for my return sometime early in 2010.


Use an agent.

Malaysia is gaining a reputation as a good place in Asia to live and do business. The author here moved to Kuala Lumpur and, confronted with a bewildering set of rental options, decided to hire a property agent to work on their behalf. Good choice, it turned out. We would hazzard that the concept probably applies in other locations as well.

“When we decided to move to Kuala Lumpur, Malaysia,” writes Asia Correspondent Wendy Justice, “we wanted the experience to be as stress-free as possible, and we didn’t want to have to stay in a cramped hotel room for weeks while we searched for just the right place to live longer-term.”

We turned to the Internet for help, where we found so many property websites listing so many options that we became overwhelmed. All the prices were reasonable, leaving us at a loss to choose.

Then we noticed that most of the places advertised were being offered via property agents. Ah, that might make this easier, we thought ... working with an agent who could vet listings in advance and then show us several good options upon our arrival.

Our search for a good agent was surprisingly easy. We chose one who had several attractive listings on her site and emailed her to discuss her services. She replied right away with questions that helped us to define our search – What sort of neighborhood did we want? ... How much did we want to spend on rent? ... Did we want fully furnished? ... Did we need easy access to public transportation and shopping? (The answer was yes to this important questions, as we did not plan to have our own vehicle.)

The agent assured us that she would be able to show us several properties in parts of the city that she thought would be most appealing to us. She emailed us a list of options in advance, and we selected those we liked best. We then set up a time to meet with her the day after we arrived in Malaysia.

It was one of the most stress-free house-hunting experiences we have ever had. Our agent, Lorraine, had appointments set up so that we could view about 10 properties over two days, and she drove us to view each one. She was receptive to our needs, did not try to upsell us, and never showed us anything that did not fit the criteria we had discussed.

Lorraine’s service, though, went beyond that. When we finally did find a place that we liked – a condo on the 15th floor of a high-rise with jaw-dropping views, a five-minute walk from the iconic Petronas Towers – she successfully negotiated with the landlord for the purchase of additional furniture and household items (plates, pots and pans, bedding, etc.) and a reduced rent. We had to pay a deposit equal to one month’s rent and a stamp duty, which is a tax paid to the government whenever someone rents a house or apartment. Once the deposit and stamp duty were paid, we signed the rental agreement and received a receipt for the deposit and stamping fee. Our agent took us back to our hotel.

The next day, Lorraine called to tell us that she had filed the stamp duty and that our lease was now notarized and ready for final signatures. We set up a time to meet at our new rental to finalize things with the owner. It was all very straightforward. We paid a pro-rated amount of rent for the first month and a deposit equal to one month’s utility bills – gas, water, and electricity. Landlords, we found, are happy to keep the utilities in their names. This is good, as a foreigner is required to make a deposit of roughly US$350 to each utility provider to have an account opened in his name. This can easily amount to more than US$1,000. We agreed with the landlord that he would give us the bills each month and that we would then pay them before the due dates. We got our keys, and that was that! We had an apartment that we loved and a view that we never tired of, right in the heart of the city.

Agents can negotiate much more effectively on your behalf, as ours did, than you could on your own.

Using an agent makes a lot of sense, especially as, unless it is negotiated otherwise, the landlord pays the agent’s fees. Furthermore, no fee is due unless the agent is successful, so they are motivated to show you places that meet your needs. A good agent really knows the area and can set up appointments to allow you to see many places within a short period.

Most agents work independently, meaning they answer to no one but you. They can negotiate much more effectively on your behalf, as ours did, than you could on your own. In addition to the language barrier, there are also the local customs and business protocols. You will never figure these things out without help. A good agent will help you to file the stamp duty, will review the lease for you, and will serve as a general resource as you settle in your new home. Our agent spent time showing us where the markets and malls were located and how to use things, from the hot water heater and the phone to the train system. After we had lived in KL for a few months and learned the neighborhoods better, we contacted her again to see about finding a new and bigger condominium. Lorraine helped us to locate an even nicer place for less money.

Bottom line, our agent made the experience very stress-free. She answered our calls and emails promptly and efficiently. She did not waste our time or hers showing us units that were out of our price range. For every apartment she took us to see, she pointed out the negatives as well as the positives, to make certain that we would be happy with our decision. She even came by when we vacated our condominium, to make sure that that process went smoothly, too.


Panama already boasts the best infrastructure in the region. But The Martinelli Plan calls for Panama to compete not regionally, but globally..

Kathleen Peddicord has frequently voiced her high opinion of Panama. “Panama is a country loaded with potential. I have been making this point for years.” However, the waggish line about Brazil, “Brazil is the country of the future and it always will be,” applies to many other Latin American countries as well.

As Ms. Peddicord puts it: “[T]he trouble in this part of the world is that potential is more often squandered than realized. Funds are misappropriated or misplaced. Money ear-marked for public services and infrastructure projects ... often disappears before it can be spent. People look the other way, and usually no one is held accountable.” Is it the case that this time – and place – it’s different? “President Martinelli is not interested in doing business that way,” she believes.

As this was written President Martinelli had a 90% approval rating. Will he continue to earn that level of support? We suppose that the worst that could happen is that the country goes the way of the United States.

Since taking office July 1, 2009, Panama’s new President Martinelli has made ground-breaking changes propelling Panama quickly forward along her path of progress and political and economic stability.

His first week in office, the new President, in work shirt and blue jeans, appeared, unannounced, at the waterfront site where a wealthy local businessman who owed the state of Panama US$11 million in unpaid rent was building a new marina for himself, without approval, on land he did not own but was leasing from the government. President Martinelli, with his own hands, tore down the wall surrounding the marina construction site. Then Martinelli posted a police guard, who was instructed to arrest anyone who attempted to continue construction efforts on the leased land.

Other business owners who owe back taxes and back rent are now scrambling to pay up.

Panama already boasts the best infrastructure in the region. But The Martinelli Plan calls for Panama to compete not regionally, but globally. President Martinelli is committed to building a First World Panama, a country to take its position on the world stage. Watching him at work is like watching time-lapse photography.

Recently, the President showed up late to a meeting of investors, bankers, and businessmen, again in his work clothes. He offered his apologies, explaining that he had been delayed handing out checks for his new “US$100 for 70s” program. Thanks to this new pension plan, the 11,000 of Panama’s elderly population 70 years old or older, who had not been eligible for any state pension previously, are now receiving monthly checks for US$100.

Meantime, since taking office, Martinelli has donated all but US$1 of his own US$11,000 salary each month to local charities.

President Martinelli right now enjoys a better than 90% approval rating.

Martinelli is a showman, no question. But he is making his point. He is not only putting on a show and making speeches; he is taking action. And the good people of Panama are taking notice. Their new President has taken a zero-tolerance position against fraud, corruption, and theft in government, and his constituents are cheering him on. President Martinelli right now enjoys a better than 90% approval rating.

Martinelli’s government recently issued US$1 billion in 10-year notes yielding 5.224%. The issuance coincided with S&P’s upgrade of Panama’s credit rating, which is now one level below investment grade. US$1 billion is a lot of money for a country this size, and Martinelli is keen to make sure it is well-spent.

Panama is a country loaded with potential. I have been making this point for years. The trouble in this part of the world is that potential is more often squandered than realized. Funds are misappropriated or misplaced. Money ear-marked for public services and infrastructure projects – everything from transportation to education and health care – often disappears before it can be spent. People look the other way, and usually no one is held accountable. President Martinelli is not interested in doing business that way.

Panama continues to hold out as a jurisdiction that respects banking secrecy, refusing to buckle to OECD threats. More important, this country’s banking system is more developed than that of any other jurisdiction in this part of the world. It is also well capitalized and has been largely unaffected by what has gone on in the banking trade elsewhere worldwide.

Furthermore, as I remind you often, it is possible, as a foreigner, to borrow from banks in Panama for the purchase of a home, an apartment, even land and construction. This is a significant advantage for both the real estate investor and the second-home owner – not only because it is not possible for a foreign property buyer to borrow locally in most anywhere else in the region, but also becuase Panamanian property is right now one of the smartest buys on the planet.

Later in the ame missive, a Live and Invest Overseas reader asks why Panama will not go the way of Costa Rica (see Short Takes below):

“I’m wondering if you think it could be possible sometime down the line for the same thing that has happened in Costa Rica to happen in Panama? Having lived in South America all my life, I’m wary when countries go all out to attract foreigners, because the love affair usually doesn’t last.

“Your recent comments on Costa Rica were no surprise at all. Do you have any reasons to believe this would not be the situation with Panama 10 years down the road? Not that we expect you to be a soothsayer, but is there a reason you have a different feeling about Panama?

“I’m curious to know because your judgment is usually right on target as far as I can see.”

-- Charis B., South America

Panama and Costa Rica are very different places. Since the days of the corsairs, Panama, thanks to her geographic position, has been a melting pot. In the 16th and 17th centuries, during the heyday of the Spanish colonizers, Panama was a primary counting house for the treasure being gathered throughout the New World and the launch point for its journey back to Spain. It is estimated that, at the time, one-third of the world’s gold and silver passed through Panama’s customs houses.

In other words, Panama is well accustomed to outsiders in her midst, and she is used to doing business on the world stage. It seems unlikely that, at some point down the road, she would suddenly decide she did not want any more foreigners within her borders. In some ways, Panama is an entire country of foreigners.

It is also unlikely that Panama would ever allow her infrastructure to deteriorate in the way the Costa Ricans have allowed their roads and bridges to crumble. The whole world depends on the Panama Canal and the infrastructure that supports it.

By the same token, thanks to the Panama Canal, it is hard to imagine Panama going broke. And, in addition to the Canal industry, there are the banking and financial services industries, the tourism industry, and, yes, right now, the foreign retiree industry.

One thing to note on this last point is that the in-country benefits that the retiree enjoys living in Panama are not intended for foreign retirees only. That is, they are not bribes to encourage foreigners to seek out these shores in retirement. The many discounts that retirees in Panama are eligible for are available to all retirees in Panama ... even the Panamanian ones. It would be difficult, therefore, for the government to decide to do away with them at some point.


Like any boomtown, Panama has attracted its share of shady characters.

Like Kathleen Peddicord above, Simon Black is impressed with how new Panamanian President Ricardo Martinelli has conducted himself in office. His anti-corruption initiative is impressive, and his infrastructure improvement plan is well-timed. “Martinelli’s actions are keeping Panama on the right track, and I believe the country will remain a safe long-term bet for investors and residents, as long as you do not end up with the wrong people.”

How to avoid ending up with the wrong people? Mr. Black has a “little black book” of Panama contacts he is offering to a limited number of takers – people who have survived his having “burned through dozens of bankers, lawyers, and real estate agents in Panama who did not measure up, either lacking competence, character, or both.” Take up the offer or not ... you are warned that finding the right people is not necessarily a process which runs itself.

If he keeps this up, they might start calling it Panama, Inc.

Panamanian President Ricardo Martinelli has been in office less than 6 months, yet to the extent that it is politically possible, he seems bent on running Panama with the same vision as when he ran the chain of supermarkets that made him one of the country’s wealthiest men.

Step 1 – eliminate corruption in the government. All side deals and back room handshakes that were entered into under previous administrations are now off the table. Martinelli has been leading from the front, personally strong-arming several businessmen who had been paying off bureaucrats for years.

“Expedite fees” are out.

His efforts seem to be working. In the past, anyone in the government beyond the level of basic peon used to be Old Faithful when it came time to accept “expedite fees.” Not anymore. People are actually focused on doing their jobs and playing by the rules.

Martinelli is also keen on business and tax reforms. He proposed a flat tax during the campaign and will likely push for relaxing Panama’s strict labor code to make it easier for entrepreneurs to hire and fire employees.

He is also taking advantage of historically low interest rates to make some much needed investments in the country’s infrastructure; as a business owner, he would do the same thing – capitalize on cheap money to invest in positive NPV projects that will generate a return for shareholders.

As such, the Panamanian government recently issued $1 billion in 10-year notes, yielding 5.224%. This is about 1.8% higher than the U.S. 10-year yield. The issuance coincided with S&P’s very enthusiastic upgrade of Panama’s credit rating, which is now one level below investment-grade.

$1 billion is a lot of money in Panama, roughly 6% of GDP. It would be like the United States issuing $1 trillion in debt, all at one time ... it is an enormous amount of money, but Panama’s dollarized economy can handle the inflows.

With so many capital-intensive public projects like highway construction, the Canal expansion, airport renovations, etc., the money will likely be spent quickly. But considering the direction that Panama is headed, Martinelli will likely come away looking very smart for making these investments with a cost of capital at only 5.224%.

At the moment, he has popular support as well. His approval ratings are just about the highest in the western hemisphere at over 90%, compared with Barrack Obama’s 53%, Hugo Chavez at 46%, and Argentina’s Cristina Kirchner at a laughable 20%.

So what does all of this mean for banking and real estate?

Panama still has banking secrecy and will likely be, along with Hong Kong, the last holdouts that will buckle to the OECD’s offshore witch hunt. But that is not necessarily the reason you want to consider Panama for international banking.

Panama’s banking system is very mature and offers a variety of unique products and services – online wire transfers to anywhere in the world, debit/credit cards, and personal attention from a private banker. Furthermore, it is actually possible to obtain a loan in Panama, which is next to impossible in many other jurisdictions.

Most importantly, though, Panamanian banks are well capitalized; they largely dodged the meltdown that wrecked havoc in North America and Europe, and their balance sheets remain strong.

Regarding real estate, I have been very vocal about my thoughts on Panama’s future; it is not without its problems, but given the maturing economic growth engines and massive infrastructure development that is underway, the country is clearly on an upward trajectory.

Martinelli’s actions are keeping Panama on the right track, and I believe the country will remain a safe long-term bet for investors and residents, as long as you do not end up with the wrong people.

Like any boomtown, Panama has attracted its share of shady characters. You see the same types of folks in Dubai, New York, and even here in Bangkok.

The problem is that many gringos rely solely on Google for their “due diligence”; they do a search for “Panama Property” and the first presentable looking, English speaking bloke who pops up becomes “their guy.”

This sort of thing is truly dangerous, yet it happens all the time. I personally have burned through dozens of bankers, lawyers, and real estate agents in Panama who did not measure up, either lacking competence, character, or both.

The fact is, some Panamanians have made a science out of taking advantage of gringos coming down to Panama. These guys look good, sound good, but absolutely cannot be trusted.

Over time, I assembled a list of the most intelligent, honest people that I have worked with in the country, as well as a list of people who should be avoided like the plague. The whole thing was packaged together in what I called the “Panama Black Paper.”

Later note: It is unclear whether the “Panama Black Paper” is available in any form anymore. The preamble warning obviously still stands.


What might be the longer-term consequences of American’s taking their retirements overseas?

One of Kathleen Peddicord’s readers wonders: As more Americans move overseas, could a “gingo backlash” develop, as is taking place in Costa Rica? Good question, and interesting answer given.

“First, I would like to say that I appreciate your research. The expat question could become critical in the near future, as economic conditions continue to deteriorate in the United States.

“Which leads me to a question related to your response to a recent Mailbag question regarding Costa Rica. I do not question your response, but reading it made me wonder how long it might be before the same conditions prevail in other countries. At some point, all the current top overseas retirement destinations may grow weary of being invaded by elderly U.S. citizens. The added burdens on their infrastructure and medical services could become an issue.

“You mentioned crime in Costa Rica. We knew a couple here in our small town of Idaho who went to Panama, built a home, and then were murdered by home intruders. Granted, this could happen anywhere, and you may still be safer in Panama than in many cities in the United States, but I wonder about your balanced view, in that you are promoting Panama. I do agree, however, that Panama has much to offer.

“I guess what I am speculating about, and would appreciate your opinion on, is to do with the longer-term security of foreign residents in certain retirement havens if economic conditions in those countries deteriorate ... and they may!

“Many Boomer Americans are looking for a panacea for their retirement situations, myself included, but I wonder what the longer-term consequences of taking our retirements overseas might be.

“The answer to that question is unknowable, really, but I suggest that everyone should consider it, nevertheless. I think the world is on the cusp of a major transition.”

-- John M., United States

You are right. The kind of gringo backlash taking place in Costa Rica now could happen elsewhere. In all these years spending time in places where foreign retirees and expats congregate around the world, I have not witnessed anything to compare with what I sense going on in Costa Rica these days, but, as you make the point, dear reader, the numbers of North Americans and others relocating overseas are increasing. Could it be that, in 5 or 10 years, Panama, Belize, Uruguay, etc., will also say, enough ... no more expats!

Panamanians are well used to Americans living among them. Belize is a melting pot, as are Argentina and Uruguay (though the mix is European, not Caribbean and British).

Friend Paul Terhorst reports some anti-farang (that is, foreigner) sentiment on the ground in Thailand these days. That is why he and his wife Vicki are considering moving on to Malaysia and China for a while.

When we decided to move from Ireland to Paris several years ago, my family tried hard to get me to rethink the plan. Parisians don’t like Americans, they pointed out. You won’t be welcome.

Maybe some Parisians do not like some Americans, but our neighbors on the rue de Verneuil treated us with nothing but courtesy and respect. Some became good friends.

There is no guarantee you will like your neighbors or that they will like you wherever you choose to settle. I am a big believer in the notion that you get what you give.

The first move is the toughest.

Bottom line, the secret may be to remain flexible. Paul and Vicki are considering a move from one point in Asia to another. Many foreigners who settled in Costa Rica over the past decade-plus are moving on now, to Nicaragua or Panama, for example.

No move has to be forever, and most expats I know, like Lief and me, move ... and then move again. And maybe again. The first move is the toughest. Once made, a new world opens before you. It is bigger, brighter, broader, and less intimidating. You realize new options, and each step as you explore them brings more self-confidence. So that, after a while, the idea of moving again is not cause for worry. It is a next step in the adventure.


Science hobbyist with no previous criminal record.

The U.K. overtly overrode the time-honored rights to remain silent or not incriminate oneself in a criminal proceding with the Regulation of Investigatory Powers Act (RIPA), which became effective about two years ago. RIPA imposed penalties for not providing the keys to encrypted files if authorities demanded that the keys be disclosed.

Now the first person has been jailed under these laws: A possibly schizophrenic, definitely eccentric, self-described “amateur scientist” who authorities involved admit is in no way a terrorist threat. In other words he is being jailed purely because he is resisting arbitrary government demands. Yup, that sure enough sounds like the government we all know and love.

Why is the jailed man not providing the encryption keys demanded? On principle. One must admire his attitude. His defense of the right to remain silent appears to be unrelated to his mental issues.

The first person jailed under draconian UK police powers that Ministers said were vital to battle terrorism and serious crime has been identified by The Register as a schizophrenic science hobbyist with no previous criminal record.

His crime was a persistent refusal to give counter-terrorism police the keys to decrypt his computer files. The 33-year-old man, originally from London, is currently held at a secure mental health unit after being sectioned while serving his sentence at Winchester Prison.

In June the man, JFL, who spoke on condition we do not publish his full name, was sentenced to nine months imprisonment under Part III of the Regulation of Investigatory Powers Act (RIPA). The powers came into force at the beginning of October 2007.

JFL told The Register he had scrambled the data on several devices as part of security measures for his business, a small software company.

He was arrested on 15 September 2008 by officers from the Metropolitan Police’s elite Counter-Terrorism Command (CTC), when entering the UK from France. Sniffer dogs at Gare du Nord in Paris detected his Estes model rocket, which was still in its packaging and did not have an engine.

On arrival at St. Pancras, JFL was detained under the Terrorism Act and taken to Paddington Green police station, a highly secure facility where UK police hold their most dangerous suspects.

He was returning to the UK for an appointment with customs officials, to surrender after a missed bail appearance. This separate customs investigation – since dropped without charges – surrounded a failed attempt to enter Canada, and JFL missed bail following a move to the Netherlands. This contact with British authorities was apparently part of CTC’s decision to arrest JFL.

While interviewing him, CTC, the unit that in 2006 replaced Special Branch as the UK’s national counter-terror police, also seized more luggage. JFL had sent packages separately via Fedex to the Camden Lock Holiday Inn, where he had booked a room.

Throughout several hours of questioning, JFL maintained silence. With a deep-seated wariness of authorities, he did not trust his interviewers. He also claims a belief in the right to silence – a belief which would later allow him to be prosecuted under RIPA Part III.

A full forensic examination found 9 nanograms of the high explosive RDX on his left hand, but JFL was given police bail. His passport was seized, however.

JFL says he does not know how the RDX, which has has military and civil applications, came to be on his hand. A result of 5 nanograms or less is routinely discounted by forensics and no charges were ever brought over his result of 9 nanograms.

He returned to Paddington Green station as appointed on 2 December, and was re-arrested for carrying a pocket knife. During the interview CTC officers told JFL they wanted to examine the encrypted contents of the several hard drives and USB thumb drives they had seized from his Fedex packages.

Again he maintained silence. Police then warned him they would seek a section 49 notice under RIPA Part III, which gives a suspect a time limit to supply encryption keys or make target data intelligible. Failure to comply is an offence under section 53 of the same Part of the Act and carries a sentence of up to two years imprisonment, and up to five years imprisonment in an investigation concerning national security.

Following the warning he was bailed again, to reappear on 4 February. JFL did not attend the bail date. Instead he moved to Southampton, living in a series of temporary homes. He says he felt harassed by authority and helpless against police he believed were determined to pin a crime on him.

His disappearance led to a raid on 7 March this year. Officers bearing sub-machine guns broke down the door of JFL’s flat. He rang local police before realizing CTC had come for him.

At the local Fareham police station he was served with the section 49 notice. Signed by CTC’s Superintendent Bell, it said: “I hereby require you to disclose a key or any supporting evidence to make the information intelligible.”

JFL maintained his silence throughout the one hour time limit imposed by the notice. He was charged with 10 offences under section 53 of RIPA Part III, reflecting the multiple passphrases needed to decrypt his various implementations of PGP Whole Disk Encryption and PGP containers.

The list had been compiled by the National Technical Assistance Center (NTAC), part of the intelligence agency GCHQ, which attempts to decipher encrypted files for intelligence and law enforcement agencies.

In his final police interview, CTC officers suggested JFL’s refusal to decrypt the files or give them his keys would lead to suspicion he was a terrorist or paedophile.

“There could be child pornography, there could be bomb-making recipes,” said one detective. “Unless you tell us we are never gonna know. ... What is anybody gonna think?”

JFL says he maintained his silence because of “the principle – as simple as that.”

He was also charged for his February missed bail appearance and for two attempts to get a new passport falsely claiming his was lost. He says CTC told him he would not get the one they had seized back, so he applied for a new one.

After three months on remand JFL faced trial on 2 June. He pleaded guilty to all the charges, wrongly believing he would be released that day with an electronic tag thanks to time served. Instead, taking into account the passport offences and missed bail, he received a total of 13 months.

Before finishing what would have been a 6 1/2-month prison term during September, JFL was sectioned under the Mental Health Act. He now does not know when he will be released from hospital.

In his judgment, Judge Hetherington accepted JFL was no threat to national security and noted his outsider lifestyle. “You ... wished to involve yourself in a world which was largely based upon the access to the internet and using computers and not really interacting with other people in the ordinary outside world to any great extent,” he said.

“It is said on your behalf that you lead an existence rather akin to that of a monk, and that there is nothing sinister in any of this but it is essentially private matters and you do not see why you should have to disclose anything to the authorities.”

The judgment also took note of JFL’s unusual hobbies and interests. He describes himself as an “amateur scientist” and his Fedex packages contained lab equipment, putty, devil bangers (which explode with a snap when thrown to the ground and are sold in joke shops), a metal detector and body armour. He also had a book on gun manufacture, a book on methamphetamine production and an encryption textbook. All are available from Amazon.

No wonder Loompanics went out of business. You can get all the books they used to sell on Amazon!

JFL also had a copy of Steal This Book, Abbie Hoffman’s 1970s counter-culture bestseller. Judge Hetherington described it as “a book that detailed how to make a pipe bomb.”

Images of the evidence haul were sent to the Defence Science and Technology Laboratory (DSTL), an MoD agency that carries out assessments in explosives cases. A scientist wrote: “Some of the contents of the luggage could [DSTL’s emphasis] be used for the manufacture of explosives or explosive devices but none of the items (as far as I could tell from the images) were obviously for this purpose and, with the exception of the throwdowns [devil bangers] and model rocket they all appeared to have other non-explosive uses.”

Judge Hetherington backed CTC’s initial suspicions. Added to the encrypted files, he said, the luggage made it “understandable in those circumstances that the various authorities were highly concerned initially as to whether there was some link to terrorism and a threat to national security.”

During sentencing, the judge seemingly confirmed that NTAC staff had been unsuccessful in their attempts to crack the encrypted files – or had not bothered trying. “To this day no one really has any idea as to what is contained in that equipment,” he said. One file encrypted using software from the German firm Steganos was cracked, but investigators found only another PGP container.

The suspicion of terrorism was dropped long before trial and JFL was sentenced under RIPA Part III as a general criminal rather than a threat to national security. Although he admitted guilt, JFL argues he did nobody any harm and the offences were all related to not cooperating fully with police.

Despite referencing his solitary existence, Judge Hetherington appeared not to know about JFL’s mental health problems and criticized him for not speaking to authorities.

Abandoning normal court procedures, he said: “It was because I was satisfied you would not tell the Probation Service anything significant further that I saw no purpose in obtaining a pre-sentence report which is normally a prerequisite for someone of no previous convictions who has not previously received a prison sentence.”

Sticking to normal procedure might have helped explain much of JFL’s behavior in interviews and while on bail. Pre-sentence reports include mental health records and JFL himself sought psychiatric treatment once before, while a computer science student.

His given reason for not cooperating with CTC – the fact that a section 49 notice overrides the right to silence – echoes the original debate over RIPA and encryption. When the law was drafted at the end of the last decade it sparked protests from civil liberties groups and security experts.

In September 2001, shortly after his stint as Home Secretary, when he had introduced RIPA, Jack Straw took to the airwaves to defend the powers.

“It was government trying to put in place increased powers so that we could preserve and sustain our democracy against this new kind of threat,” he said in a Radio 4 interview. “We needed to take powers so that we could de-encrypt commercially encrypted e-mails and other communications. Why? Because we knew that terrorists were going to use this.”

News that the first person jailed for the offence of not talking in a police interview has been judged no threat to national security and suffers from a mental condition associated with paranoia and a fear of authorities is unlikely to win RIPA Part III new supporters.

It will also be news to at least the part of government that administers the justice system. On 3 November, Claire Ward, a junior Minister in the Ministry of Justice told Parliament: “Up to the end of 2007 (latest available) there have been no persons reported to the Ministry of Justice as being cautioned, prosecuted or convicted under section 53 of the Act in England and Wales.

“The government are satisfied that offences set in RIPA are appropriate and that the legislation is being used effectively.”

The Tragic Consequences of Anti-crypto Law

Comment The first conviction of a man under the draconian powers of RIPA Part III tragically bears out a prediction I made at the time: That these powers would do little or nothing to tackle serious crime or terror, but would create a power the police could use to harass people and undermine their right to remain silent.

After all, a hardened criminal can use deniable encryption, or claim to have forgotten the password; the likely victims would be the less organized and the vulnerable.

And so it has turned out. The first person convicted under this law was a vulnerable eccentric who refused to decrypt the files on his laptop when the Met’s terror squad told him to. He was convicted and jailed despite prosecutors accepting that he was not involved in terrorism at all. He is now in a mental hospital.

Old-timers will remember the crypto wars of the 1990s. The U.S. government tried to force everyone to use the Clipper chip, an encryption device for which they had a back-door key. When cryptographers broke the Clipper chip, Washington tried to make cryptography illegal unless the keys were deposited with a “trusted third party” from whom the police could obtain keys secretly using a warrant.

Cryptographers and computer companies fought back, complaining of the threat to privacy, the chilling effect on e-commerce and the cost. Eventually the chief crypto warrior, Al Gore, dropped the issue during his presidential campaign in an attempt to curry favor with the industry.

As sometimes happens, U.S. policy had toxic effects here. In 1996, trade minister Ian Taylor laid a trap for the opposition by talking of government control of cryptography. His shadow Chris Smith was not to be outdone at the “tough on crime” game, and promised that New Labour would require people to hand over keys so that paedophiles could not escape surveillance.

This raised a storm of protest from geeks and from the IT industry, which had been cosying up to New Labour in the belief they would win the 1997 election. Anne Campbell, the MP for Cambridge, ended up in charge of the issue as back then she was the only Labour MP with a publicly visible email address that she actually answered.

The compromise that appeared among New Labour’s election promises was a power to compel decryption of seized material. Taylor then calmly said that he had changed his mind; crypto control was not necessary.

This nifty piece of political footwork was not enough to save John Major, though, and Labour’s election promise duly arrived as Part III of the Regulation of Investigatory Powers Act 2000.

Blair initially tried for even more macho controls on crypto, but these were undermined by UK crypto campaigners, by the Gore U-turn, and by an EU ruling that keys would only be good for digital signatures if only the signer had a copy. So the bill’s passage through Parliament was turbulent. There was much talk of serious crime and of terror. But even despite the events of 2001, Part III was not actually brought into force until 2007.

The whole business brings to mind a comment attributed to Bismarck: “Laws are like sausages – it’s best not to watch them being made.”


Reason #1 we are so nice to China.

Rare Earth Element miners are an obscure but important corner of the natural resources industry. Thanks to an effective predatory pricing campaign in the early 1990s, China wiped out the competition and now dominates the market for REEs with an incredible 95% market share. Oddly, some items integral to national defense that are dependent on REEs are: jet fighter engines, missile guidance systems, underwater mine detectors, range finders, space-based satellite power plants, and military communications systems. Oddly, because it is hard to believe that with its countless wasted hundreds of billions of dollars and a budget bigger than the combined defense spending of the rest of the world, the Pentagon did not spend a few tens or hundreds of $millions to keep the domestic suppliers on a lifeline rather than end up beholden to China. (All that was necessary was to subsidize the mine being kept operable. No need to actually mine anything.)

There are more than a few potential gotchas in investing in the sector, besides the usual difficulty as an outside assessing a mining company’s principle asset – its resource base. China maintains a sustainable competitive advantage beyond its resource base due to its lax environmental standards (many REEs are highly toxic) – China REE mining companies are able to offload their costs onto the populace. New, higher cost, companies would live under the permanent threat of being undercut by the Chinese. No one would make the required investment without a guaranteed market. One might think with all its experience with sustaining non-cost-competitive domestic industries, like sugar and automobiles, that the U.S. government could figure out a way to pull off the trick again. Especially when their worldwide goon squad is vitally dependent on the industry.

Rare earth elements (REEs) have been the mystery metals of the mining world for years. Now, suddenly, everyone has heard about them.

Before we delve into the reasons behind all the publicity, here is the basic skinny on REEs: One, they are rare, at least sort of. Two, they are indispensable to modern technology. Three, the number of active, dedicated producers is tiny, with more than 90% of the world’s supply coming from China.

If you took high school chemistry, you probably remember the periodic table of the elements. But if you are like most of us, even if you pulled a 95 on the chem final, you may not recall many of the details today. And there is a better than even chance you never bothered to memorize the names of the REEs. It is time to get reacquainted.

They are generally clustered in a separate grouping at the bottom of the table, are known collectively as the lanthanoids, and these are their names, in order of atomic number (57-70): lanthanum, cerium, praseodymium, neodymium, promethium, samarium, europium, gadolinium, terbium, dysprosium, holmium, erbium, thulium, and ytterbium. Yttrium (39) and lutetium (71) are also sometimes included.

Need to know, point 1: Rarity.

Fact is, we begin with something of a misnomer. These elements are not, strictly speaking, rare. Earth’s crust is full of them. True, they are not as common as iron, carbon, or silicon, but are about on a par with nickel, copper, and zinc. Even the scarcest is way more abundant than gold, platinum, or palladium.

What is rare about them is that they are widely dispersed. Very seldom are they found in economically exploitable deposits. Complicating matters further is that there are so many of them, and they clump together. They have to be separated first from the ore and then from each other.

Thus REE production comes primarily from other mines’ byproducts. The miner strips off the metal he is really after, then sends the REE clusters to a specialty refiner.

Need to know, point 2: Applications.

It is safe to say that life as we know it would be very different without the REEs. The more our technological accomplishments pile atop one another, the more crucial these metals become. Because of their unique properties, there are generally no substitutes for them.

Of all the REEs, the one people may have heard of is neodymium. Alloys containing it have revolutionized permanent magnet technology, allowing miniaturization of all sorts of electronic components in appliances, A/V equipment, computers, communication systems, and military gear. Your hard drive probably has neodymium in it. So does your DVD player.

Liquid crystal displays depend on europium. Fiber-optic cables cannot function without erbium. Virtually all specialty glass products, from mirrors to precision lenses, are polished with cerium oxide. Several REEs are essential constituents of both petroleum fluid cracking catalysts and auto emissions-control catalytic converters. Half a dozen REEs go into the manufacture of the energy-efficient fluorescent bulbs that will soon be mandatory. Lanthanum-nickel-hydride rechargeable batteries are replacing older ones based on lead or cadmium. And no REEs, no electric cars. Nor next-generation wind turbines.

That is only a partial list. But what makes REEs an increasingly sensitive topic is their role in national defense. Here are a few small items that have become dependent on them: jet fighter engines, missile guidance systems, underwater mine detectors, range finders, space-based satellite power plants, and military communications systems.

Think the Pentagon is very, very interested in maintaining a steady REE supply?

Need to know, point 3: Supply.

95% of the world’s REE production originates in China. If you are looking for reasons why we are so nice to the premier Communist power left standing, this is a biggie.

We were not always so dependent. Not long ago, mines such as Mountain Pass in California made us nearly self-sufficient in REEs. But in the early ‘90s, China flooded the market with cheaper product, until it had driven all of its competitors out of business.

Today, Mountain Pass is being revived, but the start-up of an old mine is a lengthy and costly process. There are also some from-scratch REE development projects under way in the U.S., as well as Canada and Australia. But for the moment, China holds the hand with all of the high cards in it.

Forget your hard drive. Forget 11th-grade chemistry experiments. This is a national security issue. The American government cannot afford to lose that supply source, period. Maybe someday, but not now.

And that is what is behind the recent furor over these obscure elements. Because China threatened just that, a cutoff. The one thing that really gets Washington’s knickers in a twist.

In August, the story broke in the mainstream press. Sources in China leaked news of a draft copy of a report from the Ministry of Industry and Information Technology. It allegedly calls for a total export ban on five of the rare earths, with the rest restricted to a combined export quota of 35,000 metric tons a year, far below annual global consumption of 125,000 tons, and rising fast.

This does not look like a move they would follow through on, if only because of the lost trade revenues. And it is only a recommendation; final approval rests with China’s State Council. But consider it an opening shot across our bow, if you wish. Or perhaps they are telling us they need their REEs for the domestic economy, and we would best go find our own supplies. Either way, the scramble is on to find alternatives.

That could backfire. REE prices and demand were already dropping last fall as the recession deepened, and China maintains a decided competitive advantage beyond control of supply: lax environmental standards (many REEs are highly toxic). Thus the new companies could spend the fortunes required to come on line, only to find themselves victims of yet another market glut engineered by the Chinese. Still, these metals are so important, it would not surprise us if the U.S. government subsidized domestic production, rather than risk a squeeze.

The Market

The market took due notice of the China story, driving the stocks of Western REE producers, and would-be producers, nearly straight up. Since late August, Avalon Rare Metals has gained 120%, Arafura Resources is up 75%, Rare Element Resources has added 72%, and Lynas Corp. is 50% higher (China, ever the master strategist, exploited the credit crisis to grab 25% of Arafura and more than 50% of Lynas). Lurking in the background is Molycorp, the private company redeveloping Mountain Pass. It is planning an IPO that may well come out of the gate red hot.

With market action this frantic, the sector is on the frothy side at the moment. The heady market caps being awarded to these companies are obviously not based on fundamentals, and a savvy investor takes care not to get caught on the wrong side of a bubble.

Even though the Chinese export ban may never materialize, the ever-growing need for REEs is dead serious. And while the current bubble may pop any day, the long-term prospects for successful miners are outstanding.


Focusing solely on the doom, though, while ignoring boots on the ground reality is close-minded and likely unproductive.

Simon Black had an dinner with a table of interesting people. All were uniformly “on the court” people, as opposed to being the types who sit in the stands and kibbitz. Bottom line: “[W]e are quite upbeat and optimistic. In our collective travels, we have seen some amazing recovery stories; companies and local economies have reinvented themselves to adapt to new conditions. Businesses are more productive, people are saving and investing carefully and deep discounts are starting to draw consumers back to the market.”

One could argue that this is seeing the world through rose-colored glasses, but that is actually the point. Focusing on the doom is likely a self-fulfilling prophesy, so why do what does not work?

It was a rare, cool evening in Bangkok, so we decided to take a tuk-tuk back to the hotel. You have probably seen them – they are like open-air rickshaws attached to a lawn mower engine, and the drivers will take you anywhere in town for a buck or two.

I was riding with my friend Gianni Kovacevic who had just flown in from Zurich on his way back to Canada; at 35, Gianni is one of Vancouver’s great up and coming dealmakers, and I consider him to be among the finest investment minds I know.

To put it even more clearly, I have always made money on his recommendations, and that is a pretty winning track record in my book.

When he is not traveling, he spends his time analyzing the markets, keeping up with his network of fund managers and Swiss bankers, and performing some very selective consulting services, which he conducts by invitation-only. Needless to say, he is plugged in.

As the tuk-tuk driver sped a long, weaving in and out of Bangkok’s notorious evening traffic, Gianni and I talked about normal guy things – women, sports, and cars. We share a penchant for fast cars and made plans to ship my Stingray to his place in Croatia when the garage is finished.

By the time we pulled in to the Four Seasons Hotel, though, the conversation had shifted to economics. There was much to discuss.

We rejoined our other friends for dinner, and our party became quite a cast of characters, setting the stage for an interesting discussion.

Jess, an American, is a full-time investor, entrepreneur, and adventure traveler. Vran, a Slovenian who formerly owned a high-end liquor distribution business, is also a successful investor. Agron, a savvy European entrepreneur, secured the exclusive rights to distribute BMWs in Kosovo when he was only 22 years old at the time. Agron and Vran had just arrived from Burma.

One thing we all agreed on – the world has not come to an end.

Including Gianni and myself, it was a lively and insightful meal.

As we are all heavily travelers, we see much of the world with our own eyes and form assessments based on empirical evidence. One thing we all agreed on – the world has not come to an end.

Yes, the economic situation has gotten worse in recent years, and in all likelihood, certain aspects will likely get worse from here. The dollar is strained, as is the anemic U.S. labor market. Commercial real estate carnage is just a few stops away, and the residential market is a long way from a real recovery. Major resources like fresh water and oil could see future shortages.

Most governments are doing all the wrong things, trying to prop up weakness instead of letting recessionary forces cleanse the excess out of the marketplaceca. Taxes will rise and civil liberties have been eroding, especially in the west.

Surprisingly, though, we are quite upbeat and optimistic.

In our collective travels, we have seen some amazing recovery stories; companies and local economies have reinvented themselves to adapt to new conditions. Businesses are more productive, people are saving and investing carefully and deep discounts are starting to draw consumers back to the market.

Asia is showing the world that it can eat its own cooking as domestic consumption from China to Thailand picks up steam. Gray market employment is at an all-time high in many countries, and even some real estate markets are showing signs of improvement. The “poor” countries of yesterday now have emerging middle classes that are becoming eager consumers.

More importantly, nonfinancial factors are routinely ignored. Technological and medical innovations continue to exceed expectations. Peace and stability are becoming the norm in places like Sri Lanka that were at war for decades. Countries that were formerly closed off like China, North Korea, and Burma are showing signs of opening up.

Clearly, we are not seeing a wide-open lane full of green lights ... there are major hazards ahead as there would be in any situation, including life itself. Things happen; people get cancer, get hit by a car, slip in the shower, get mugged, etc.

The same sorts of things happen to society and the world economy. And from our perspective, humanity has started to pick itself up and dust itself off instead of just lay there in the fetal position.

Despite the hazards, smart people are figuring out ways to adapt, survive, and prosper.

Focusing solely on the doom, though, while ignoring boots on the ground reality is close-minded and likely unproductive. And so, from our take, we are largely optimistic.

Jess described what I think is a brilliant new business idea; Vran and Agron were wheeling and dealing in Burma; Gianni travels the world lecturing about a boom in copper; and me ... you know what I do.


U.S. Military Cyber Forces on the Defensive in Network Battle

The U.S. 24th Air Force – the first dedicated American military cyber force to go operational – is “not yet a warfighting organisation” and needs to “create an awareness of the battlespace,” according to its commander.

Major-General Richard Webber, a former nuclear-missile and satellite-jamming officer, took over the 24th in August. Speaking at a recent symposium in Los Angeles, the cyber general indicated that America’s uniformed netwar forces have some way to go before they are ready to put digital boot to network ass.

“We need to know how to set up and defend the enterprise. It is going to be a crawl/walk/run process,” said Webber, quoted by Aerospace Daily and Defense Report. “We’re under attack literally every day.”

The 24th’s main base at Lackland in Texas, which will cover 50,000 square feet, is still being built and equipped with its panoply of fearful cyber weaponry. It is set to be complete and manned up by some thousands of netwar specialists late next year.

Under Webber’s command are two main units, the mainly defensive 688th Information Operations Wing (formerly known as the Air Force Information Operations Center) and the doing-unto-others outfit, the 67th Network Warfare Wing. The 67th has a subsidiary role in doing tiger-team mock attacks against US networks to test their defences, but its main purpose is “computer network exploitation and attack.”

For now though, Webber’s main focus seems to be on holding back the constant raids and meddling directed at U.S. military networks, rather than taking the fight to the enemy – whoever that may prove to be.

Webber’s boss, General Kevin Chilton, spoke of a “massive” cyber attack against the Pentagon nets last year, which was apparently a major reason for the formation of the 24th. “One year ago this month we had a wake-up call in cyberspace,” said the general. “We had a severe intrusion into the Defense networks. It changed the way people are thinking about cyberspace. This time it is everybody’s problem – every soldier, sailor, airman and Marine.”

It seems that at present, U.S. military sysadmins are often forced to respond to cyberstrikes by simply disconnecting from the wider net – but this could have severe consequences on real-world operations if the timing were bad, and senior officers are keen to do better.

“We must learn to fight through an attack,” says Webber.

7 Reasons Why You Should Move to Belize

Wedged between Mexico and the Caribbean Sea, Belize has no strategic importance to anyone. Maybe that is why it has such a peaceful history.

The pirates of the Caribbean thought so – when they needed a base in the 1600s, quiet, little Belize was their first choice. The 200 islands scattered off the coast made perfect hideaways. Later, when the Spanish tried to settle the mainland, it was a disaster. The pirates did not like the idea of someone else telling them what to do.

Today, Belize retains that fiercely independent streak. It is one of the best banking and tax havens in the world. They do not believe in taxes – no capital gains tax, no inheritance tax, no corporation tax. If you join the special retiree program, you do not pay tax on foreign-earned income. A special Belizean retiree is loosely defined – you can be in your 40s or 50s and still working, and get all the program’s benefits.

Whether you chose to be a retiree or not, the lifestyle here will tempt even the most committed workaholic to relax. This is picture postcard Caribbean. Divers and snorkelers explore its 176-mile barrier reef. (The largest living reef in the world.) Sport fishermen are equally happy. They reel in snapper, grouper, barracuda, bonito, tuna, kingfish, sailfish, and marlin.

You will be blissfully free from commuter crush, 24-hour news, and workaday stress. This is a land of few cars, abundant fresh food from the sea and the trees, and great natural beauty. Belize is undeveloped and sparsely populated. You will have lots of room (on the beaches, in the jungle, in the rainforests) to stretch out. There is no rush. Where would you rush to? Yes, there are fiber-optic phone cables, computers, and cell phones, but these things are conveniences, not obsessions.

Everyone who visits English-speaking Belize talks about the friendly people. Of course, lots of countries have friendly locals. But in Belize you can quickly and easily make friends with themóbecause you already speak the language.

You can buy a home on a Caribbean island for less than $100,000 ... and a house near the beach on mainland Belize for $35,000.

For a country where not much happens, there sure is a lot of opportunity in Belize. That is why we have created a brand new report called Belize: Live the Caribbean Dream ... For Less. If you are interested in a place in the Caribbean sun ... but you don’t want to pay typical Caribbean prices ... you need to read this Belize report.

We have also put together a free recording on Belize called Florida Expat Reveals the Caribbean’s Best-Kept Secret.

Why Costa Rica Is No Longer on Kathleen Peddicord’s Top 10 List

Neither its cost of living nor its beachfront real estate is cheap anymore. Meantime, the infrastructure has not improved at all.

Costa Rica is a good case study. About three decades ago, this country decided to make a business of the foreign retiree. The Costa Ricans invested in a formal and successful advertising campaign, targeting Americans primarily. Tens of thousands of would-be retirees from the States took the Costa Ricans upon their invitation and relocated for this phase of their lives to the land of the Ticos to take advantage of tax breaks, special retiree discounts, great weather, and, especially, the super-cheap cost both of living and of owning beachfront real estate.

Nevermind, these retirees told themselves, that the country is undeveloped and the infrastructure lacking. With a cost of living this low, who are we to complain that the roads are pot-holed and the bridges crumbling?

Along with the retirees came the investors and the speculators. Fast forward a couple of decades, and Costa Rica was not so cheap anymore, neither its cost of living nor its beachfront real estate. Meantime, while prices had risen dramatically, the infrastructure had not improved at all. The infrastructure in Costa Rica today is, by all accounts, no better than the infrastructure in Costa Rica when it rolled out the foreign-retiree welcome mat all those years ago.

As A.M. Costa Rica coincidentally reports today, the country’s “deplorable road and bridge conditions have created a recipe for disaster.”

“Roads in Costa Rica,” the article continues, “are much the same as they were 30 years ago. However, during that time, the population has doubled and so has the number of cars on the roadways. Obsolete traffic circles are still used in San Jose, and a minor traffic accident can cause jams of up to five hours. For a country that wants to become part of the developed world, Costa Rica has to address governmental institutions plagued with problems and delays. The problem, of course, is that the country is broke.”

Costa Rica is not ready for real-world business, yet it has been charging real-world prices for its real estate for some time. That is the primary reason why, about a half-dozen years ago, I took the country off my list of the world’s top retirement havens.

Archeologist Says Maya End of World Predictions in the Movie 2012 Are Bunk

The movie 2012 is already out, but a Canadian archeologist says the Maya end of the world predictions that form part of the movie’s story line are claptrap. That is because the prediction in question does not actually predict the end of the world.

Archeologist Kathryn Reese-Taylor teaches at the University of Calgary and says that the source for the end of the world predictions does not contain an end-of-the-world prophecy.

The doomsday prophecy found in the 2012 movie and many other current books and websites supposedly comes from an ancient carved monument called the Tortuguero Monument Six. According to translations of the monument text, December 21, 2012 marks the completion of a 5,125-year-long cycle of the ancient Maya calendar. But Reese-Taylor says the translation of the text just says that something will occur December 21, 2012 that it will be similar to something that occurred on another date in the past.

“We don’t know what that past occurrence was or what the future occurrence will be. At no point do any of the Maya texts actually prophesize the end of the world,” Reese-Taylor says. In fact, says Reese-Taylor, other Maya texts refer to dates beyond December 21, 2012.

However, the supposed end of world predictions have been great for the movie business, and tourism is expected to peak throughout the old Maya homeland, including eastern Mexico, Guatemala, and Belize, as December 21, 2012 approaches.