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Where to Make a Fortune in China20TH ANNIVERSARY OF HURRICANE HUGO: SURVIVING HUGO (PART 1 of 2)
A Liveaboard Mariner’s tale of Hugo
When Hurrican Hugo made landfall just north of Charleston, South Carolina on September 22, 1989 it was the the strongest storm to strike the U.S. in the previous 20-year period, and was also the nation’s costliest in terms of monetary losses. Both the wind speed and damage records have since been exceeded.
Hugo – map of its track here – caused extensive damage to several eastern Caribbean islands before hitting the U.S., including Guadeloupe, Antigua, Monserrat, St. Kitts, Saba, the U.S. and British Virgin Islands. The storm altered the way insurance was assessed and paid on homes and boats, and caused governments to give more priority to disaster preparedness. This has helped mitigate the effect of more recent hurricanes as a result.
This article is part 1 of a yachtswoman’s riveting first person account of living through the storm on the British Virgin Islands.
Sunday 10th September 12 GMT Lat 13.2 Lon 20.0 Pressure 1010 Wind 30 mph.
The weekend that Hurricane Hugo was born we watch nervously as Hurricane Gabrielle heads for us for a few worrying days, and then tracks north. A small tropical depression forms but way south and east. Cannot worry about it yet. Just check the weather once a day, then twice a day if it gets closer.
Monday 11th September 1800 GMT Lat 12.5 Lon 29.2 Pressure 1003 Wind 40 mph.
September is the height of hurricane season, and Safara, our 45 foot steel yacht, is safely back on her mooring in Maya Cove in the British Virgin Islands. We are back at work on Tortola. The tropical depression has been upgraded to a Tropical Storm called Hugo. Hugo sounds like a nice gentlemanly name, much too nice to bring any unecessary unpleasantness to our idyllic Caribbean islands!
Tuesday 12th September 1800 GMT Lat 12.6 Lon 36.7 Pressure 996 Wind 60 mph.
One of our children has gone back to school in the UK after a summer of sailing “down island,” the other one is doing a gap year and so back with us for a time. We had a slight scare from Hurricane Dean and holed up in Isles Des Saintes between Dominica and Guadeloupe in early August. Had a wonderful calm, cloudless couple of days snorkeling on the reef whilst Dean-watching. But Dean stayed East of us and ran out of steam in the middle of the Atlantic. That is where we like to see hurricanes blow themselves out!
Wednesday 13th September 1800 GMT Lat 12.8 Lon 43.5 Pressure 987 Wind 75 mph.
HURRICANE CATEGORY 1
The line between those who live and work on the waters of the Caribbean and those based on land is never more obvious than when bad weather is in the offing. You will not see landlubbers rushing home after work every evening to listen to the weather forecast and chart the position of every tropical storm in the Atlantic with furrowed brow and pounding heart. The island of Tortola lies at around 18.24 north and longitude 64.38 west. If the storm continues to travel more west than north then it will inevitably cross 64 west. But the question is will it be north of us, south of us, or the dreadful alternative of neither; in other words, right over the top of us?
Thursday 14th September 1800 GMT Lat 13.6 Lon 49.1 Pressure 970 Wind 105 mph.
HURRICANE CATEGORY 2
The forecast is that the atmosphere is favourable to Hugo growing into a monster. The storm of the century is forecast to pass south of us into the Caribbean and then turn north towards Puerto Rico or Hispaniola.
But what if it starts to make its northerly shift before then?
We know that tomorrow morning is D-Day, Decision-Day. Securing boats and property takes hours and hours of heavy manual labour. Judging how much preventative work to secure live and property against the unknowns of intensity and position of an oncoming cyclone, is a constantly changing anxiety. The difference between a Category 2 and a Category 5 is almost immeasurable. With the one everything can be saved if properly secured, with the other, very little can be expected to survive.
Friday 15th September 0000 GMT Lat 13.8 Lon 50.5 Pressure 962 Wind 115 mph.
HURRICANE CATEGORY 3
We sleep badly. It is a clear still night, hard to believe there is dreadful churning beast out there hurtling towards us with unimaginable ferocity. Something that can change our lives forever. We get up before dawn and listen to the 6 a.m. forecast. For the last 24 hours the system has been moving WNW, just what we did not want.
Friday 15th September 1200 GMT Lat 14.2 Lon 53.3 Pressure 940 Wind 145 mph.
HURRICANE CATEGORY 4
At work by 7.30. I am an administrator at small private plastic, general and reconstructive surgical clinic. It should be a normal clinic and outpatient day, with patients booked in all morning for post-op checks and consultations and small surgical removals of anything from warts to sutures. We are nervous and tense and rush patients through as fast as possible so that we can close up and start securing the hospital and its grounds. The expats who come in are full of worried energy and anxious. BVIslanders and down-islanders put their trust in a higher authority. “Dis island is blessed. Tortola don’t have no hurricanes. God will protect us,” they tell us. They will not be shutting a single shutter or bolting a single bolt. Are we mad? Do they know something we don’t? Its only later that we discover that God was not protecting anyone from Hugo.
Friday afternoon at last and we can secure the place. I clear my desk and my office which has full length and width glass windows facing southeast from where Hugo will be entering our island archipelago. Though the first big winds from the dangerous northern sector will arrive from the northeast. I cannot take a chance on my computer, prints, photocopier, telephone answering machine, etc. being obliterated by glass flying like bullets and rain traveling with the power of a train.
The owner and surgeon Robin Tattersall and I check throughout the buildings and have Jaigopaul the handyman put away anything that might roll or move. We decide to leave battening everything down in the Clinic until Saturday’s weather position makes it inevitable. There is still a chance that the hurricane will slide past south of us.
It happened, of course, that Hugo was not to be avoided and Robin and Jag (the handyman–Indian) spent all day Saturday securing the property. They threw all the plastic/metal garden furniture in the swimming pool and boarded up every window in the place. It is a long, tiring job for them. Robin spent the terrifying night of the hurricane alone in that empty old building full of echoing corridors and pillars while Hugo howled outside looking for vulnerable spaces to burst through.
Having gone so far as I thought was sensible at the clinic on Friday, I met husband Stewart and son Orion for a last shop at Riteways supermarket. People were buying the oddest things and there were no candles or matches or batteries to be had anywhere.
Some four hours earlier, our neighbour David calls me in a panic, “have you heard – what shall I do?” David is a close friend and neighbour liveaboard in Maya Cove. But currently in between women and so has nobody tonight at home to share the heightened anxiety!
I suggest he go straight home and take “Serai,” his 38 foot sloop, round to the safety of Paraquita Bay – he only draws 5’6” and he should be able to squeeze in. Paraquita is the BVI’s excellent hurricane hole, it is a large lagoon surrounded by mangroves and only a very tiny entrance. Unfortunately it has quite a shallow bar and at 6’6” we cannot get in on our yacht.
Irish Pete, another neighbour, I tell David will have already sailed to Paraquita with a new case of rum and beer on board. Oh yes, and his unwanted tenant, a large rat that had climbed on board just a few days earlier! His creative attempts to eject that rat are the stuff that legends are built on, specially Irish ones. As we look at Maya Cove on Friday evening, we see an unfamiliar geography to the anchorage. Many of our neighbors have disappeared into hiding places, others have swapped to bigger heavier moorings with more space around them to place anchors.
Irish Pete is gone but there is David’s boat Serai lying on his mooring still. So – he did not make it into Paraquita, I wonder why? John and Susie Tait had left yacht Gawaine on her mooring in the Cove, but of course they are not liveaboards. Gawaine is just a weekender dinghy really, whilst they actually live in a huge house on the hill overlooking the Cove.
Pat and Dorothy, elderly English liveaboards have moved their little yacht “Shamwari,” built from the very trees on their Rhodesian farm, into our tiny mangrove beds here in the Cove. This sheltered area is very small in the north part of the Cove up beyond the West Indies Yacht Charter docks and their boats. They have buried her bow deep in the shallow water where the mangroves grow, with many lines tied to the tree trunks.
Friday 15th September 1800 GMT Lat 14.6 Lon 54.6 Pressure 918 Wind 160 mph.
HURRICANE CATEGORY 5
That evening I invited David for dinner and we banned the “H” word! During the early afternoon Hurricane Hugo became a dangerous Category 5. It all became very lively when Steve and Helen arrived and stayed till past midnight. They were going to make their decision in the morning as to whether to take Scaup Duck (only draws 4’5”) into Paraquita at first light Saturday morning. I kept looking at the faces grouped around our cockpit and wondering with teeth clenching nervousness, whether it would ever be the same again.
Stewart and I barely sleep; we hold hands a lot in the night. At the first crack of light over Ginger Island we wake. Listen to the weather and the knot in my stomach pulls tighter.
We discuss the following options:
There was nowhere to go. Our lovely family home in which we had sailed across the Atlantic, Safara, would have to fight for her life right where she was and we have 24 hours left in which to prepare her.
We start work. Four anchors, laid north, northeast, southeast, south, each heavily weighted with an interesting selection of steel objects that we keep in our bilges. Each anchor is set out as far as possible across the bay and attached to rode (rope) so that no chain enters the boat. Chain snaps under sudden shock loads.
Steve and Helen leave the Cove for Paraquita Bay on little Scaup Duck. As they motor past us we wave bravely and wish each other luck with hearty smiles and banter. “Save some of those beers on board for the after-Hugo party!” I yell.
Saturday 16th September 1200 GMT Lat 15.4 Lon 58.4 Pressure 940 Wind 140 mph.
HURRICANE CATEGORY 4
Around midday a position fix for Hugo showed more northing and for a little while we dream that Hugo will go north of us and tomorrow we will all be taking up our anchors and laughing at our over-zealousness. But that little fantasy did not last through the next position fix on Saturday which put Hugo dead on target for the USVI.
Nobby, an ex naval engineer on a 38 foot ketch and Ian on Gypsy a 42 foot wooden yawl, the only two liveaboards left in the cove, put out 2 more anchors each. Susie Tait had called me on Friday morning and said that we must not remain on Safara during the storm. John Tait her husband, (runs the Moorings Charter company, with a fleet of 120 charter yachts to be secured) was a retired naval commander and had been through a few such storms before. He feels very strongly that no one should risk their lives by staying on their boat, and so we were “invited” to stay with them in their strongly built hillside home for the passing of Hugo.
We think about the Tait’s kind offer as we work. Stewart wants to stay with the boat, but we both know that once the wind rises to above 100 knots there is nothing he can do to help Safara. Rather than be tempted to climb out on dock to tend her lines and fend off boats that have broken their own lines, he would be better away from her.
Of course if the storm goes north or south of us the winds would be lesser and we can all stay with Safara. We defer the decision until another weather forecast. By late afternoon on Saturday we have 11 lines running through our fairleads and down to the bottom of the Cove, each one runs through plastic hose carefully positioned to prevent chafe.
We clear the decks, remove all the sails and stow them below decks. We even throw the spare toilet sitting on the stern deck waiting to be fitted, over the side where it will be safe from becoming a missile from battering winds. Easy to retrieve from the bottom only 20 feet under us after the storm passes. We setup the running back stays balancing the pull of the inner forestay, and bowse down the halyards as extra support to the mast.
Occasionally we look up at the bay road circling the Cove and see pick-up trucks, loaded with wooden boards, roaring smokily along to the East End. Much too little too late, I suspect. If Hugo speeds up we are not ready. I made an apple pie, something to do with all that nervous energy.
At this point the storm, encompassing winds of 130-140 knots, is beginning its destruction of Guadeloupe, and our fervent hope is that the high mountains there would slow it down and at least when it hit us, it would be with diminished ferocity. Eerie radio silence from Guadeloupe as though a half million people no longer existed.
The hurricane has slowed to 12 knots forward speed. The present course takes the 15 mile wide eye just south of St. Croix. The northeastern quadrant of a hurricane is the most dangerous sector. It would give us the highest winds plus the forward speed of 12 knots; the lower quadrants have less forward speed. We would be 38 miles away from the eye at its closest and must expect NE to SW winds of maximum gusts 140 knots. The winds in the Virgin Islands must expect to pick up before dawn on Sunday.
I cook – and call Susie Tait and tell her we will have dinner on Safara and then be up at her place around 10 tonight. We could not be sure that we could leave Safara in our little dinghy first thing on Sunday morning – if the winds reached 30 knots; hence the sudden decision to leave Saturday night. There is nothing more terrifying than not being able to get off your boat when the time has come.
Around 10 pm on Saturday night we left Safara and David left Serai. I took our passports and our boat papers, but nothing else. It was a token gesture. We all knew that even if Safara ended up on the road her strong steel hull would be only bruised. It was all the other weaker boats that we thought of. In the moonlight as stumbled into the dinghy we saw tears on David’s face.
China our Siamese cat, was very put out as we bundled her into a basket and puttered across the cove. It was a perfect moonlit night, the deserted yachts with their webs of lines leading in to the sea beneath them seemed expectant somehow. Yachts are built to sail, not sit at anchor for months an end. The men hauled the dinghies as high in the mangroves as possible; a 6 foot tidal surge in a place that only has a 1 foot tidal difference normally is a sobering thought. David goes up the hill to stay with other neighbours and we drove up to the Tait’s.
I noticed that the old navy salt Nobby who never leaves his boat in any weather – also left on Saturday evening and went to stay at Harry’s Place on the bayside, a hostelry of doubtful reputation but only at $10 a night. There was no one left in the Cove that night, the deserted homes of all our friends rocked infinitesimally on the calm water.
We walk into the Tait’s house like refugees, I holding a cat under one arm and a half eaten apple pie in the other. Stewart carried his tool box and Orion had a bag full of foods for Susie’s cupboards.
We are terribly bright and fun guests that night. John tells us exciting stories – of the days when he commanded the British Naval Squadron during the “Cod Wars” around Iceland. He was known by the Daily Telegraph as killer “Tait.” He yarns about days off the coast of Iceland where winds blew at 135 knots and ice grew on the decks like tropical vegetation, and of ramming Icelandic fishing boats.
We look at their roof and make silly jokes about it blowing off in a hurricane; we roll up a carpet or two that might be damaged by rain and then go to our respective beds. We could not sleep. I got up at dawn, around 5:30, as did everyone else.
Sunday 17th September 0000 GMT Lat 16.1 Lon 60.4 Pressure 941 Wind 140 mph.
HURRICANE CATEGORY 4
On Sunday morning there was no wind. The dawn was perfectly, glidingly tranquil. I could see Safara just below us and I could not remember a time when I had not had that knot in my stomach.
Since there is no sign of Hugo, Stewart decides to go back to Safara with Orion and they will take down the stanchions and do a few more tasks to secure her. I was nervous not having them with me. We are waiting now ... just waiting for the frightening unknown.
John left for the Moorings Marina in Roadtown about 6 miles away. The Moorings still had paying guests and as the General Manager his responsibilities were total. But, once the hurricane moves over us the government curfew will kick in and he needs to make sure that he gets back home before the roads are shut down.
The hurricane was expected Sunday evening. By the early hours of Monday morning it would all be over. The airport closes, no-one can leave the islands at all. Sea and airports are shutdown. It is strange not seeing the evening lights coming to the airport, most of the BVI planes had gone down to Curacao. Everyone rang me at the Tait’s house, friend after friend. It was like Christmas we wished each other good luck and felt a nervous exhilaration. We who are about to die Caesar, salute you.
Friday 15th September 1200 GMT Lat 14.2 Lon 53.3 Pressure 940 Wind 145 mph.
HURRICANE CATEGORY 4
What does one gossip to fellow seawives about in the teeth of an oncoming cyclone? Storm recipes? How the kids are? No we compare barometer readings as though our lives depend on them. The first harbinger of Hugo hit Tortola around 9.00 am. It was a furious squall and I watch Safara, and the two distant tiny figures working on her deck still.
Susie asked me to help her bring the dog in. Belle is an outdoor dog who never enters the house, we would have to drag her in. But first we have to de-tick her. We sit on the verandah teased by the first of the hurricane winds, picking, huge, fat bloody ticks out of Belle’s coat.
The phone rings. Its Stewart, “We’re off the boat,” he said. “I am at Gordon and Nancy’s house. Gordon has to go and board up the shop so I’m here boarding up the house with Nancy. I’ll see you in a little while.” Hugo traverses over Montserrat. Radio Antilles put out a frightening and feeble call and was never heard from again.
We hear in horror, and sick with fear the first hand story from a friend listening on ham radio to the professional radio operator still transmitting alone from the top of Saba “please if anyone can hear me, Montserrat is obliterated. We need help, please help us, please call someone.” Then Saba was gone. As though plucked by a dark hand from the surface of the sea.
The hurricane is slowing down. His forward speed is now only 9 knots. We hear that two British naval boats, a frigate and RFA Bramble Leaf, are following the hurricane in at a distance of 100 miles. Six hours after Montserrat was hit the British navy were there – someone had heard!!!
The first squall dies but the sky is changing. We see the towering hurricane bands striping our usual blue skies. Soon the wind comes hard and steady like an autumn gale. Susie thinks she will take Matthew, her 2-year old son, for a last play on the verandah. I sort her fridges out because soon the power will go, and we should put everything we do not actually need immediately in a fridge not-to-be-opened! We collected torches, candles and lamps together.
John had, but two lucky weeks previously, fitted very expensive alloy hurricane shutters to the front of his house and these made the inner house very warm. But gave a wonderful sense of security. Stewart and Orion return and as we stand on the verandah looking across towards the South East horizon in the rising wind, mouths dry with fear.
The barograph is dropping steadily and the wind is piping up to 50 knots. The sky grows dark in the early afternoon and we have to keep the lights on indoors to see. John is still at the Moorings. Safara is looking good, lying just sheltered from the north easterlies by the shoreline.
We think we will settle down and watch Crocodile Dundee on the VCR. We have our last showers, for when the power goes out there will be no more water, it will all be out of buckets lifted out of the cisterns below our feet. We just settle down in front of the TV – and the power goes out. The house seems to go quiet and outside the wind prowls and pokes like a wild beast not quite ready to attack. Building up hunger and rage first.
Hurricane Hugo keeps to its course just south of St Croix – perhaps at the last minute the high pressure below Florida would push the system further south and we will have a margin of 60 miles instead of 30 from the eye? On the dining room table was a chart of the area with two hourly plots marked in – we endlessly stop before it and discuss all possibilities.
Outside it gusts 60 knots and one of the hurricane shutters lifts and begins to bang. “I don’t like that,” said Stewart, “The wind is creating lift, hurricane shutters are built for pressure not for lift.”
Sunday 17th September 1200 GMT Lat 16.6 Lon 62.5 Pressure 949 Wind 145 mph.
HURRICANE CATEGORY 4
He goes outside and wedges it in place with a large shoring timber braced against the verandah balustrade. He searches for more wood to make bracing timbers for all of the windows. Susi calls John immediately at the Moorings and asks him to come home. He does, and the three men saw up pieces of timber for bracing doors. John decides not to fit them unless it becomes necessary. He tells us a story of commanding an aircraft carrier in a cyclone blowing 150 knots. The aircraft housing broke free, and went banging round the vast deck taking a few turrets with it before blowing over the sides.
We light candles and try to think about dinner. No one is very hungry. Susie has a spare Christmas pudding from a new recipe she has been trying out. Do we eat Xmas pudding? Do we? I make the rum butter extra rum! It was like Christmas. We eat sausage casserole by candlelight. With the last of the daylight and the help of full moon we peep out and take a lingering look at Safara. How proud and white she looked in a hurricane lit by moonlight.
Full moon – extra high tides. Maybe an 8 foot rise in the water we worry?
Then the first casualty strikes. To our horror we see Alec and Ginnie’s boat has broken her mooring lines and is lying across Don’s little Sea Urchin. She is lying to the one extra anchor that had been thrown out, and at the start of the winds this is all she has to prevent her becoming an agent of destruction and sinking three other of our friend’s boats in her path. It was an awful last sight of the pretty little Bay which was home to so many friends and neighbors, and which lives with us all through that night until the dawn on Monday morning brings the final outcome.
We listen to the VHF for news and contact with others in the darkness. We tune into St. Croix radio and Isle 95 until they are silenced by the oncoming storm in the early evening. Then we switch to St. Thomas which disappeared at around 11 p.m., and finally our local radio ZBVI which clings to the air throughout the night.
There is no rain. John says he has never known a cyclone with so little rain. But its still early ... there is plenty to come. Nevertheless here in the house 160 feet above sea level, water begins to creep in under the hurricane shutters and the glass doors on the inside. We collect towels and place them in front of the only door which faces northeast.
The wind rises to 80 – 90 knots and we try to go to bed around midnight. Every time I shut my eyes I see the boat. I block my ears with cotton wool and roll a pillow over my head, and the dull roaring which reaches brings with it pictures of our home, twisting and turning at the ends of her lines retreating in the face of an implacable enemy.
Part 2 of the story was finally published in January. You may find it here.
CONSIDERING RETIREMENT BUT SHORT ON CASH?
“We discovered an affordable virtual paradise when we made Puerto Vallarta, Mexico our permanent residence 10 years ago and are sharing its features and benefits with you,” says the author of this article. He provides a back-of-the-envelope calculation to back up his buy in recommendation. As long as real estate values in Puerto Vallarta rise at the forecast rate it all works pretty well.
The calculated out-of-pocket cash per month here for a $400,000 property financed with a $120,000 down payment is about $3000/month. Contingency planning for the event that real estate prices do not rise as hoped for one should be the first order of business if contemplating the suggested strategy.
Attention all baby boomers. Are you starting to think about retirement but your cash is tied up in 401(k)s, IRAs, pension programs, retirement funds, stock options, or your residence and you are not quite ready to liquidate any of these assets? Have you been watching retirement properties continue to escalate in price and are concerned that the cost of your retirement dreams might be beyond your reach when you are ready? Well, perhaps you will find the following information quite enlightening and hopefully it will alleviate some of your concerns.
We discovered an affordable virtual paradise when we made Puerto Vallarta, Mexico our permanent residence 10 years ago and are sharing its features and benefits with you. In 1997, prices for real estate, land, labor, and construction materials were about 1/3 of prices today in Puerto Vallarta, known otherwise as Vallarta or PV. 10 years ago, prices for food, clothing, household goods, etc. were quite reasonable in Vallarta but selection was poor. 10 years ago, virtually all financial transactions in PV were cash, including the purchase of house and land. Although the real estate prices were 1/2 to 1/3 of those of comparable amenities in the U.S. or Canada, in the absence of mortgages, one needed total financial resources in order to purchase a retirement property here. North American banks were reluctant to provide mortgages in Mexico and Mexican banks lacked the available capital.
During the past 10 years with the Mexican economy booming, the peso stable, and Vallarta exploding with growth, the situation has changed dramatically. Today, mortgage capital from a number of American mortgage firms is readily available in PV. Interest rates are generally 2% to 3% above the prevailing U.S. rates. Mortgage insurance is also now available as is title insurance. Because the economy is so stable, strong, and growing, the mortgage companies are offering financing up to 70% of the appraised value, thus opening the market to a flood of new baby boomers about to retire.
Now that North Americans can acquire their dream retirement condo or villa in Paradise prior to full retirement, let us consider some of the associated expenses. As a rule of thumb, $200/square foot would be an average price for a beautiful ocean or bay front condo and approximately $250/square foot for a villa facing the bay. Almost all properties have sweeping 180° views of Banderas Bay, the entire city of Vallarta, and the Sierra Madres and are comparable to the finest properties in the California seaside areas. As a typical example, a 2,000 square foot condo might cost $400,000 and require a little more than $120,000 initial deposit with the balance being mortgaged at 8% for 15 years. Such a fixed rate mortgage would require payments of approximately $30,000 annually. Trust fees are about $500 per year and property taxes are roughly 0.12% of the appraised value, or $500 per year. Condo association fees are usually about $4,000 per year bringing the total out-of-pocket expenses to approximately $35,000 per year. It must be remembered that the equivalent property in the States could easily be $1,000,000 with taxes alone of $20,000 per year! In order to reduce the $35,000 per year expense in Vallarta, many of the about-to-be-retired condo owners rent out their condos during the seven month “high season” of November through May. Rental income for a $400,000 condo should average at least $2,500 per month. Do the math and you will understand the relative ease in owning a property in Paradise prior to full retirement.
Now that you have a place to retire, let us consider the other living expenses and compare them to the equivalent in the States or Canada. All of the following information is rule of thumb and based on knowledge and experience derived from living full time in PV for 10 years, while owning property here for 23 years. Food purchased in supermarkets and meals in restaurants are of the same quality and price as in the U.S. Clothing, hardware, electronics, and everything else imported will cost about 50% more than in the U.S. Furniture costs are equivalent to those in the States. Fuel for your automobile and electricity for your residence will cost about the same as in the U.S. Car prices are roughly 20% higher in Vallarta so bring your own car! Auto insurance is about the same and although house and condo insurance is available, very few people seem to have it. Health insurance is the same, however healthcare, in any of the three new and modern high-tech hospitals in PV, is substantially less expensive. It would be safe to assume that health and dental care costs are 1/2 to 1/3 of the same medical services in the States. Fees associated with hobbies such as golf, tennis, fishing, etc. are about the same as in the States. Labor for house work, gardening, handyman, etc. is a third of such costs in the U.S. Skilled tradesmen such as electricians, plumbers, air-condition repairmen, etc. charge about the same rates as in the States. You can find self-proclaimed skilled tradesmen for 1/3 the price, but you will get what you pay for!
Next, let us assume that you are retiring and going to spend the “high season” in Paradise where it almost never rains, the sky is blue, and the average daily temperature is 73°F. You have purchased your million dollar condo for $400,000, drove your SUV loaded with clothing, personal belongings, and dog with it is proper immunizations to Vallarta, and you are ready to begin enjoying life. Your food, energy, furniture, insurance, hobby related expenses, property maintenance expenses, etc. will be about what you are accustomed to back home. Property taxes will be an insignificant fraction of what they would be in the States, medical and dental care will be 1/2 to 1/3, labor around your residence will be 1/2 to 1/3, and most all other service related expenses no more than 1/2 of those in the U.S. or Canada.
Finally, for the kicker! During the past 10 years, we have seen property values triple in Vallarta. The tourism boom is only beginning at this time with a 10 year building plan that borders on being incredible. The Mexican government in conjunction with global developers and a handful of Billionaires, yes with a capital B, are currently in the planning stages and just beginning construction of a mega-resort retirement destination zone near Vallarta. Prices in PV are sure to double in the next five years. The Mexican law assures all foreigners that they are considered “permanent residents” if they spend more than 50% of their time in Mexico for at least five years. That translates into “permanent resident” status if you live in your dream condo or villa during the “high season” for five years. As a “permanent resident,” you are exempt from Mexican capital gains tax upon the sale of your property in Vallarta. So, let us say that you decide to sell your dream condo after five years and return to the hectic pace back home. While the housing market is softening in Florida and California, the market continues strongly upward in Vallarta and in five years the value of your condo is estimated to be $800,000. Assuming that you financed your purchase and that you paid $120,000 initially and another $175,000 in mortgage payments and condo fees, without any rental income, you should have around $570,000 equity in your residence at the time of sale. That $275,000 profit should more than offset all expenses that could possibly be incurred even with the highest standard of living in Paradise. Using this hypothetical scenario, the $275,000 gain over five years equals about $55,000 per year. It is difficult to spend more than $3,000 per month living like a king in Paradise, therefore the seven month “high season” should not cost much more than $20,000 leaving $35,000 for travel and living expenses during the five summer months, or $7,000 per month. If you cannot make it on that, it might be time to go back to work! By the way, your monthly social security checks will be electronically deposited into your account regardless of where you live.
In summarizing, if you are thinking about retirement within five years and would like to enjoy your life to its fullest, you can probably buy that million dollar retirement dream residence in Vallarta today, even if you are short on cash!
About the author
Jim Scherrer has owned property in Puerto Vallarta, Mexico for 26 years and resided there for the past 12 years. The mission of his series of articles pertaining to Puerto Vallarta is to reveal the recent changes that have occurred there while dispelling the misconceptions about living conditions in Mexico. For the full series of articles regarding travel to and retirement in Vallarta as well as pertinent Puerto Vallarta links, please visit PVREBA.
INVIGORATING ... OR TERRIFYING?
Go local ... or not?
Would you be more comfortable retiring to an established expatriate community, or do you want to go local, immersing yourself in a new culture completely? Kathleen Peddicord encourages you to think about your answer early in the process, because “the answer sets you on one track or another, and they lead very different places.” You could be an American retiree first, an expat of your new country second ... or the reverse.
It comes down to this question: Is the thought of being the only foreigner in town and having to learn to live like the locals appealing, exciting, and invigorating? Or terrifying?
Go local...or not?
I have to admit, we did not address this question before our first international move about a dozen years ago. It did not occur to us. We were moving from Baltimore, Maryland, to Waterford, Ireland. How different could Ireland be from the United States? My husband, my daughter, and I, we will slide right into Irish life – at least that is what I thought at the time.
I discovered quickly, though, that I had been overly optimistic. The Irish speak English (sort of), but they operate differently from Americans. In truth, adjusting to life in Ireland was more difficult than we ever could have predicted. We discovered that launching a new life on the Emerald Isle was in some ways more challenging than it would have been in Ajijic, Mexico, say, or Boquete, Panama.
Ajijic and Boquete are established expat communities, home to thousands of foreign retirees who speak the same language, share the same interests, and approach life in the same way. There are no expat communities in Ireland. In Waterford, we settled in among the locals and embraced Irish country living. We had no choice.
Our Irish neighbors were friendly and welcoming, but, sometimes, we longed for American company. For fellow Yanks who would appreciate our offhanded cultural references, understand our slang, and laugh at our jokes.
In Paris, we had a different experience. While you will not find established expatriate communities in the French capital, you will find lots of expats. Living in Paris, we made new friends who were Italian, Spanish, Portuguese, Argentine, and, yes, to our relief, American. We made many French friends in Paris, as well, but we had no trouble finding American company when we wanted it.
Now, in Panama City, we are again living among the locals. We are not the only gringos on the block, as we were in Waterford (our next-door neighbor hails from Arizona), but we are not living in a gated community of fellow foreigners either.
This is one of the fundamental choices you must make as you survey the world map in search of the overseas retirement haven with your name on it: Would you be more comfortable retiring to an established expatriate community, a place where you will have no trouble slipping in to the local social scene and finding English-speakers who share your interests? Or do you want to go local, immersing yourself in a new culture completely?
This important early decision may never have occurred to you, as it did not initially occur to us. But I encourage you to consider the question directly, for the answer sets you on one track or another, and they lead very different places.
In places like Chapala, Mexico, and Boquete, Panama, for example, it can be possible to live the retirement life you may have dreamed of for decades, just exactly as you dreamed it, only in a different country. You could have a beautiful home of your own, brand new, with all modern conveniences, by a lake or on a lush highland. Many houses in these two towns have been built to American standards, even by American builders. You could be an American retiree first, an expat in Mexico or Panama second.
Ajijic and the area around Lake Chapala, Mexico, is the most organized, developed expat community in the world.
Ajijic and the area around Lake Chapala, Mexico, is the most organized, developed expat community in the world. The Lake Chapala Society reports about 4,000 American and Canadian residents in Chapala proper. The Mexican government, meantime, estimates that nearly 20,000 expats reside full-time in the state of Jalisco, the region where Lake Chapala sits.
In other words, the path has been cut. Moving here, you could slide into a way of life not dramatically different from the life you left behind in the States. You would not have to worry about learning the local language if you did not want to. You would not have to work to make a place for yourself among the local community, because this is not a “local” community. This is an entire community of non-locals. You could wander into the restaurant down the street anytime and find English-speaking companionship, someone to complain to about the bureaucracy at the department of immigration or the challenges of studying to take a driving test in Spanish. Retiring to Ajijic and Chapala, you could make a comfortable life for yourself in a place that is exotic, beautiful, safe, and very affordable.
Mexico Correspondents Akaisha and Billy Kaderli have taken this path. They have been in Chapala for years, where they live comfortably on less than US$50 per day, including housing, food, transportation, entertainment, and in-country travel. They eat well, play tennis, socialize, and travel comfortably. As they put it themselves, they want for nothing.
Don’t misunderstand. Ajijic, Lake Chapala, is not a retirement village. This is not Sun City South, at least not formally. This is a legitimate Mexican town that, over the past three decades, has attracted such a volume of foreign retirees that it has become less Mexican and more foreign resident-friendly.
Boquete, Panama, is [that] country’s gringoland. According to Boquete’s information and tourism office, some 3,000 foreigners live in this colorful mountain town. Migration continues, and the number of foreign residents in Boquete is expected to increase to 10,000 by 2016.
What is the attraction? Beautiful setting, good climate, Gold Standard pensionado rules (for all Panama), yes, but, mostly, the draw in Boquete, as in Ajijic, is the established gringo community. This is a place to come to enjoy many of the benefits of being retired overseas without leaving behind too many of the comforts and conveniences of American suburban living. In one private, gated, residential community development I know in this region, for example, amenities include a golf course, stables, even a small, central town created specifically for foreign residents, and construction, for both the shared amenities and the individual homes, is to U.S. standards, with U.S.-style finishes, fixtures, and fittings.
In Boquete town itself, more shops and services cater to the ever-growing foreign retiree population than do not. It has become a retiree boomtown, with U.S.-style restaurants serving American-style menus (featuring scrambled eggs for breakfast and cheeseburgers for lunch) and where you will hear all-English conversation at the tables around you and all-American music coming from the speakers above the bar. People you pass on the street will greet you with a wave and a casual “hi” or a “hello,” assuming that is how you would like to be addressed and that you will reply in kind.
It can be easier, frankly, to seek out a place like Ajijic or Boquete. Ajijic, for example, could as easily sit north of the Rio Grande as south. It can seem like a transplanted U.S. suburb. This can make it a terrific first step for some, a chance to tip your toe in the retire overseas waters rather than diving in headfirst. In Ajijic, you are living overseas and enjoying many of the benefits (great weather, affordable cost of living), but the surroundings and the neighbors are familiar in many ways. You can shop at Wal-Mart, meet up with fellow Norteamericanos for Bridge on Thursday evenings, and never have to travel far to find English-language conversation.
On the other hand, life in Mexico would be a very different experience residing in a little fishing village or a small colonial city in the mountains where you are the only foreigner in town. Settling among the locals means you must learn to live like a local.
Is the thought of that appealing, exciting, and invigorating? Or terrifying?
THE COST OF LIVING IN LATIN AMERICA: THE GRINGO TAX
Go ahead and visit Latin America. Count your blessings that you are able to do so, but be sure to also count your fingers after you pay someone.
How to avoid paying the out-of-towner premium when visiting or living in Latin America? It starts with understanding that the tax exists. Once this is clear you can effect a strategy to counteract it. Herein are a few tips.
[Gringo / noun (pl. os) (informal, disapproving) used by Latin American countries to refer to a person from the USA]
Most of Latin America is full of travelers’ delights and people are generally honest, helpful and friendly but when money is involved everything changes. For anyone who has lived in or traveled to Latin America the term “Gringo Tax” will elicit a wry smile. For those of you who do not know what the Gringo tax is, it is the amount of money you pay for the same goods or services over and above what a local would pay for no other reason than because you are a Gringo.
It comes in many forms and is extracted in a myriad of ways. From inflated prices for construction work, a taxi driver that takes the long way, overpriced hotel rooms or being short changed in a petty transaction. It seems the Gringo tax is ubiquitous in Latin America. It is a time honored sport to try and take advantage of the fat, rich, stupid American customer.
Sometimes Gringo taxing is government sponsored and blatant. One state owned airline charges foreigners triple for domestic flights over what a local would pay. If you ask the airline staff why they do this you will get the eye roll and shoulder shrug. Your alternative is to take the bus which costs a lot less and is more reliable and comfortable.
Another popular method of price adjustment is when items are listed for sale in local newspapers. The price is rarely displayed. This affords the seller the opportunity to size up a potential buyer. The better you are dressed or exhibit some other sign of wealth the price goes up accordingly. Again, watch out Señor Gringo.
If you live in a small town where you could potentially be a steady customer it is all too common for local businesses and service providers to ask a foreigners to pay a higher price. This is puzzling to the outsider who has money to spend and other contacts to make recommendations to. The short term view, “make a few extra bucks today and don’t worry about tomorrow” is an alien concept to most business people from the U.S. who strive to attract repeat customers.
This begs the question why does it happen? Is it simply because they can get away with it if the opportunity presents itself or are there other more complex reasons?
Cultural differences or xenophobia may account for the main underlying reasons. You are perceived as rich and come from a land of opportunities and they are poor with little chance of bettering themselves. This gives way to the Robin Hood mentality.
It could conceivably be simply a sporting challenge if the person you are dealing with is not poor. What could be more entertaining than discussing the latest Gringo slaying with your buddies? This may be borne out of the perception that many foreigners disrespect the culture of their host country and therefore there is nothing wrong with getting them to part with a bit of extra cash.
An influx of foreigners in to a town often has the effect of pushing up prices especially in the real estate market thereby pricing locals out. It is not difficult to understand that this will inevitably cause resentment against the new comers.
Men do not like it when Latin women prefer foreign men because they have money, treat them better and could be a free ticket to the U.S. This is a blow to the macho Latin masculine mentality.
All things considered it is not really surprising that the Gringo Tax is levied but it does not mean we have to like it or pay it.
So, how do you avoid the gringo tax?
There are few rules of thumb that if you adhere to will reduce your Gringo Tax liabilities.The thing that puzzles me the most about the gringo taxing mentality is the lack of realization that it hurts their business and the country in the long term. They are effectively killing the goose that lays the golden egg. It is sad that the big picture is obscured by resentment and they fail to see that foreigners are bringing in fresh cash to economies that are starved for it. Generally foreigners do not leech off of the public dole, do not commit crimes and create jobs. I doubt there really is a quick way to stop this gringo taxing but a good start is to spread the word about it.
- Never buy anything that does not have a price clearly marked but even if it does, ask for a discount especially if you are paying with cash.
- Always shop around before buying.
- Ask other expats where they shop and why.
- Make sure you are on the same page as far as currency is concerned. Some currencies in Latin America use the $ sign and are worth significantly less than U.S. dollars.
- Check your change immediately after a transaction and certainly before leaving the store.
- Befriend a local whom you trust and ask them to get quotes for you or ask for prices.
- Avoid using businesses who charge foreigners more whenever possible.
- Never get in a taxi that does not have a functioning meter. There are a lot of illegal cabs in Latin America. Know the route you are taking. Watch out for counterfeit bills in your change. You can get pens that will make a black mark on fake bills and a clear mark on the good ones. Avoid taxi drivers that hang out in front of hotels. It is better to wave one down off the street.
- If you are getting some work done on your house always get several quotes in writing and be absolutely clear what is included. You may think materials are part of the quote price and then find out they are not.
- Same applies for work needed on your car, get several written quotes. It is not advisable to leave your car overnight with a mechanic you do not know. It is not unknown for unscrupulous mechanics to make use of your vehicle for their own personal use or change out good major components and replacing them with ones that barely work. The best way to get a good mechanic is by word of mouth from someone you trust who has done business with them before. Never let anyone start doing work before an agreed upon amount is determined before the work starts. Tell them that you will only pay for the work agreed to. Sometimes they will do something that they want to do and expect you to pay for it.
- Check your restaurant bills carefully. Genuine mistakes always happen of course but this is another favorite way to target Gringos.
Just be aware of friendly strangers with a “deal.” Most instances of Gringo taxing are perpetrated on events that will happen in the future. Never pay for anything in advance. Make sure all goods are present and accounted for before payment. Pay for labor after it is done and you are satisfied with the results.
Every place has good and bad aspects about it. The Gringo tax is only one facet of Latin America and it should not deter you from traveling there or living there. This is just a heads up for people that may other wise not be as street savvy as they could be. So go ahead and visit Latin America, count your blessings that you are able to do so, but be sure to also count your fingers after you pay someone.
A check to make sure he was not just drinking the mainstream media Kool-Aid about China led to a single, inexorable conclusion: China’s growth is real.
Everybody “knows” China is the place to be. But is what “everybody” knows worth knowing? Well, yes. There is little doubt in our minds here at W.I.L. that China is a tremendous opportunity for any entrepreneur. One of our team is over there a fair portion of the year, and we see it firsthand.
Two critical questions for any particular individual are: (1) Is the lifestyle – pollution, scads of people, very different culture, etc. to go with the tremendous vibrancy – worth the opportunity to make a lot of money? (2) Are you smart enough to deal with the booms and busts that are sure to come along the general up-slope? The other thing we have little doubt about is that with the state’s heavy hand in the economy, of course including the credit and foreign exchange markets, there have been tremendous malinvestments built up which need to be liquidated. ... Nowhere to the degree as in the U.S., mind you – and better too many concrete plants than too many McMansions. Or, looking at it another way, better to misallocate your savings than your borrowings.
As with the U.S. in the 1800s, the growth and energy is astonishing, but the financial system is still young, and panic selloffs are inevitable. Hopefully the Chinese will do as the U.S. did before Hoover and FDR, and be wise enough to get out of the way and let nature take its course.
Simon Black paid a several-week visit to China, which reinforced his long-held premise that Asia’s economies represent “vast, wide open potential.”
There are a lot of people in the financial community, including a few notable figures, that are highly bearish if not outright suspect of China’s growth.
I am always puzzled by this opinion. I have been to the country several times before and keep regular tabs with influential players and insiders, and my own assessment has always been quite positive on the country.
This trip, though, was specifically designed to check my premise and make sure that I was not just drinking the mainstream media Kool-Aid about China. Furthermore, I wanted to spend enough time on the ground to explore more than just the key cities; sure, everyone knows about Beijing, Guangzhou and Shanghai, but what is going on in Tier-2 and Tier-3 cities?
The facts and observations from this trip thus far point to a single, inexorable conclusion – China’s growth is very real.
In fact, I will go a step further and say that an enterprising foreigner can still make a fortune here; China is very much still a “developing” country – despite its advanced age as one of the oldest countries in the world, economically it is quite adolescent.
Consequently, the country is a “target rich environment” for skilled entrepreneurs that specifically fall in the “pioneer”, “expeditioner” and “internationalist” categories.
Real economic growth is based on technology and the accumulation of savings, and China has both in spades.
Here are the fundamentals which compel me to make this point:
As I have mentioned in previous missives, real economic growth is based on two factors – technology and the accumulation of savings. China has both in mass quantities. Accumulation of savings provides a deep capital base for funding trade, infrastructure, manufacturing capacity, and small business loans ... all of which create additional economic activity.
And technology? China has everything that is required – brainpower, design creativity, equipment, and skilled labor. Take a walk through one of the knock-off technology markets to see for yourself.
With both of these elements, China is investing heavily in its economy; new businesses are being created, more workers are being hired, and average wealth is expanding ... which propagates continued economic growth.
Domestic consumption is also picking up steam. In theory, people have two options with every dollar earned – save it, or spend it. In the past, Chinese have opted for the former – working hard, saving their money, and building for the future.
Well, the future has arrived.
I have never witnessed such levels of consumption before, both in the white markets and the gray markets ... mega-stores, knock-off markets, shopping malls, bars, restaurants, etc. are all packed with patrons. The crowds are overwhelming, would definitely make a fire marshal nervous.
In the LONG run, China will find itself in the same position that the United States is in now – a depleted capital base thanks to decades of mindless consumption. But this is at least a generation away.
There are long-term consequences for Chinese consumption – a dollar consumed is a dollar not saved, so China is now effectively trading future growth rate for consumption today. In the LONG run, China will find itself in the same position that the United States is in now – a depleted capital base thanks to decades of mindless consumption.
This economic causality, however, is at least a generation away. For the next several decades, you can expect that internal consumption will be a major growth engine of the Chinese economy ... and consumers are barely getting warmed up.
Meanwhile, the government is spending an enormous amount of money, businesses are investing heavily in capacity and new infrastructure, and exports are still net positive. All of this spells significant economic growth.
Yes there will be problems like any other country – inflation, resource shortages, social strife, corruption; none of these factors is strong enough to derail China’ s growth – there may be hiccups along the way, but the country’ s fundamentals are solid.
Do I buy the Chinese government’ s official numbers? Of course not. I do not believe any official numbers from any government. Nor do I believe in popular industrial indicators like counting the number of tower cranes dotting the skyline (which can often be a clear sign of overdevelopment).
The most obvious indication of China’s potential can be seen on the streets and in shops in Tier 2 and Tier 3 cities that most people outside of China have never heard of.
The most obvious indication of China’s potential can be seen on the streets and in shops far away from the bustle of Shanghai in Tier 2 and Tier 3 cities that most people outside of China have never heard of. The wealth effect is cascading across the entire country, and consumers in remote provinces are buying televisions, air conditioners, automobiles, etc. for the first time ever ... and most of it is paid for with savings, not credit.
I traveled to Shangdong province so that I could get an up-close assessment of “Anytown, China,” and I am here to tell you that the business opportunities are very real.
More to follow tomorrow.
Where to Make a Fortune in China
Go East, young man (and woman).
If you are an entrepreneur and want to make an absolute fortune, you need to head to Asia.
The last several weeks on the ground here have only reinforced my long-held premise that Asia’s economies represent vast, wide open potential. These economies are growing, and shall continue to grow thanks to solid macroeconomic fundamentals like a large pool of savings, lack of reliance on credit, and dual trade/budget surpluses.
Nowhere is this more clear than in China. Despite its dizzying growth rates in recent years, the middle kingdom is still developing, albeit rapidly.
What does this mean?
In the U.S. or Europe, true innovation is uncommon – anything that could possibly happen has pretty much already happened. If an entrepreneur wants to start a business in New York or London, s/he will be competing in shark infested waters against dozens if not hundreds of other businesses.
Not so in China.
In most cases, the market is wide open simply because there is a critical shortage of qualified talent ... this is readily apparent in Shanghai’s financial community where everything from gold traders, CFA analysts, accountants, fund managers, and experienced executives are in short supply.
The latest statistics show that of 376 listed funds in China, nearly 22% of the fund managers have less than 1 year of experience, and only 3 have been in the business for more than a decade. Pudong, Shanghai’s financial district, should be a haven for Wall Street refugees ... if anyone has the insight to be looking east.
In China, as in most countries, the “stiffest” competition is in the Tier-1 cities, which means Shanghai, Hong Kong, Beijing, Guangzhou. And while I am convinced that hard-working entrepreneurs can make a killing in these cities, the virgin territory is in China’s Tier 2 / Tier 3 cities ... you know, the “small” cities with fewer than 10 million people.
For example:
Kunming, Yunnan province: This is a major logistics hub of southwest China that is known by its pleasant sobriquet “city of eternal spring” because of its fantastic weather. Despite having a population greater than Miami, Houston, and San Francisco, few people have ever heard of it.
Kunming has been experiencing double digit growth rates due to its direct trade routes with key partners in Asia; it is strategically located to do business with Vietnam, Myanmar, India, Thailand, Malaysia, Cambodia, and Singapore ... in fact, foreign investment from Singapore in particular has been surging.
Right now the city is raw, cheap, and full of opportunity – the government has problems that need solving and has the money to throw at sharp entrepreneurs who can provide solutions.
Qingdao, Shandong province: I pen this missive tonight from a city of “only” 7.5 million; originally settled by Germans in 1903, the city is most famous for its “Tsingtao” brand beer (pronounced “CHIN-dao”). What is more though, this coastal city is a major eastern seaport and manufacturing hub with strong ties to Korea (both of them).
Qingdao is also a strong agricultural and fishing center, and the government is desperately trying to figure out how to meet the growing demand for organics. These are all problems that need solving ... and this is the key theme of entrepreneurship.
A brief anecdote – several years ago, a British man who was an expert in the beer and wine industry stumbled upon Qingdao and determined that it was ideal for a wine vineyard. He also realized that wine consumption would grow with affluence rates. He was right – wine consumption is now growing at a 15% annual rate.
With just a $700,000 initial investment, his brand is now considered to be the best white wine in China, and the vineyard makes a metric truckload each year.
I could cite you examples all night of other successful entrepreneurs who came to China, spotted a trend, solved a problem, and made a fortune. Christine, my friend and colleague who has given me a personal tour over much of this trip, is one of them. More on her story tomorrow.
The formula is not complex; the best entrepreneurs are the ones who solve the biggest problems in the most efficient way. Because it is developing so rapidly, China is experiencing significant problems and simply does not have the expertise to solve them organically.
Let me know if you are interested and we can have a discussion about specific examples.
Mr. Black had more than a few other postings from his Asian trip:
The OECD is an aged, irrelevant organization comprised of mostly insolvent western nations; the organization has a penchant for bullying smaller countries into changing both their laws and local culture in order to assimilate.
The Philippines had to labor to get off the OECD “black list,” and in the process become a little more financially transparent. Just a little – at least judging by Simon Black’s sample of bankers in Manila.
Customer information at Philippine banks is not shared with tax authorities, except by judicial decree, and only if the customer is undergoing litigation in the Philippines. We will see if things stay that way. And it would be stupid, even in this case, to rely on secrecy to avoid penalty for not reporting one’s financial account (if the regulations require that). The IRS and other OECD tax authorities are plenty willing to steal customer data using bribes or whatever means is expedient.
This line cracked us up: “Honestly, there are not too many banking jurisdictions that do not require beneficial shareholder information for corporate accounts. Off the top of my head, I can think of the Philippines ... and ... oh, right: The United States of America. Funny how the Philippines ended up on the black list and the U.S. was the one leading the charge. But I digress.”
With tax rates ranging from 5% to 35%, the Philippines can hardly be called a tax haven.
And yet, in a very public “guilty until proven innocent” attack several months ago, the OECD black listed the Philippines along with Uruguay, Malaysia, and Costa Rica.
The OECD is an aged, irrelevant organization comprised of mostly insolvent western nations; the organization has a penchant for bullying smaller countries into changing both their laws and local culture in order to assimilate.
Frankly, these coercive tactics constitute modern day imperialism and demonstrate an overwhelmingly ignorant worldview.
Case in point, the OECD has gotten itself into a twist over the years because Singapore issues a 10,000 Singapore dollar (roughly $7,000 US) note. The OECD views this as a crystal clear indication of money laundering.
Hardly the case. ... Carrying a lot of cash is merely a cultural tendency in many parts of Asia, so the government makes a super-sized bank note. Western bureaucrats ignore this simple reality and instead try to beat smaller countries into submission.
Financial transparency has increased in the Philippines ... but only slightly.
The Philippines has recently fallen victim – but so far has only suffered a flesh wound. I spent a large part of my day today talking to bankers here in Manila; the general consensus among them is that financial transparency has increased in the Philippines ... but only slightly.
For example, bankers in the Philippines do not require personal information on beneficial shareholders for corporate accounts. This is a stark contrast to other popular banking destinations like Panama (which did not make the OECD black list).
Honestly, there are not too many banking jurisdictions that do not require beneficial shareholder information for corporate accounts. Off the top of my head, I can think of the Philippines ... and ... oh, right: The United States of America.
Funny how the Philippines ended up on the black list and the U.S. was the one leading the charge. But I digress.
Customer information at Philippine banks is not shared with tax authorities ... or any other authority for that matter. The one exception is by judicial decree, and only if the customer is undergoing litigation in the Philippines.
To open an individual account, a prospective customer must provide two valid forms of identification, a photograph, and an “alien certificate of registration,” which indicates residency disposition.
For non-resident foreigners, the easiest thing to get around residency requirements is incorporate a business – in this case, the Department of Trade will provide certification.
Assuming all the documentation is in order, it only takes about 10-15 minutes to open an account, and at many branches the ATM card (on the worldwide Maestro network) can be acquired immediately.
Bank accounts in the Philippines are protected by a depository insurance organization similar to the FDIC (except that it is not insolvent).
Bank accounts can be opened in a variety of currencies, including US dollar, Philippine peso, euro, yen, and Australian dollar. Furthermore, bank accounts in the Philippines are protected by a depository insurance organization similar to the FDIC (except that it is not insolvent).
The “PDIC” as it is called, insures deposits up to 500,000 Pesos or equivalent (roughly $10,000).
I met with the branch manager at one of the larger banks in the Philippines ... they are willing to accept customers of any nationality as long as the basic requirements I described above are met. I have no personal experience with any of the banks here though, so I cannot vouch for anyone specifically.
WHAT CAPITAL CONTROLS IN THE UNITED STATES WILL LOOK LIKE
They best ways to ensure your assets do not get caught in the coming net.
Capital controls in the U.S. are as metaphysically inevitable as two plus two equaling four. There is no way they are not coming. The only question is when. We think within the next two years. So the only valid question is the best way to deal with the inevitable.
Simon Black reasonably asserts that buying foreign real estate is the single best way to move money overseas where it cannot be forcibly repatriated. There are no reporting requirements to boot. Physical gold stored overseas is also good for now, as there are no reporting requirements there either. This, however, could be changed in a flash, and it seems that gold could be forcibly liquidated and the proceeds repatriated. Desperate governments can do desperate and stupid things.
Roughly $100 billion.
Even in today’s world where politicians throw out the word “trillion” as if it were a casual dinner garnish, $100 billion is still a lot of money ... especially when you are desperate to sustain glimmers of economic growth and trying to plug a budget shortfall that amounts to 13% of GDP.
And yet, roughly $100 billion is exactly what got sucked out of the United States in July by foreigners: “Net capital outflows” increased to $97.5 billion for the month of July, according to recent data released by the Treasury department. Meanwhile, net long-term capital inflows fell to a paltry $15.3 billion in July, an 80% decline from June’s $90.2 billion capital inflow.
What do these numbers mean?
Foreigners are continuing to lose confidence in the U.S. economy at a record pace and are finding better places for their money. This would certainly support the US Dollar Index’s dramatic 3.5% decline in July – though the dollar index only tells a partial story. “DXY” as it is known, though, only tells part of the story.
The dollar index measures the value of the dollar only relative to a small basket of currencies – euro, pound, Canadian dollar, Swedish koruna, yen, and Swiss franc. Powerful Asian nations like the Gulf, China, Singapore, etc. are conspicuously missing. And yet, DXY still dropped 3.5% in July.
Conclusion? If these “relatively harmless” countries that comprise the US Dollar Index are losing confidence in the greenback, you can be sure that China and the Middle East are knocking over women and children on their way to the emergency exit.
Telling you that the dollar will be continually worth less until it is ultimately worthless is nothing new. So if you would indulge me a moment, I would like to prognosticate on the greater implications.
As the pace of these outflows picks up steam, you can be sure that a group of out-of-touch politicians are monitoring the data and thinking to themselves, “we need to regulate this before it gets out of hand!” And this sentiment is exactly what spawns capital controls.
Capital controls by design are intended to regulate the flow of capital in and out of a currency; in times of uncertainty, shaken politicians always pull this oldie-but-goody out of the playbook ... it happened in Iceland, and it has been discussed around the world recently – Russia, India, Brazil, the Baltics, Poland, Czech Republic, Kazakhstan, etc.
Not to mention, a world largely free of capital controls is a relatively new phenomenon. We can look to history for a recent example of a world superpower turning to capital controls for ’stability’:
In the mid-1970s after the collapse of the Bretton-Woods system, the British economy was in serious trouble. GDP was contracting, unemployment rising, investment falling, and the government was drowning in red ink, all while social obligations were climbing.
Financial markets responded by turning their backs on Britain’s Pound Sterling, and the currency was crushed. The Wall Street Journal advised investors to ditch the British pound, running headlines “Good-bye Great Britain.” And the government came under intense pressure to “do something.”
The first thing the UK did was go to the international community with hat in hand to prop up the currency with loans and bonds. This is already happening in the United States as Tim Geithner attempts to woo China and Middle East into buying U.S. Treasuries.
Subsequently, the British government imposed a slate of capital controls that essentially penalized investors for moving capital out of the country and requiring that all investment transactions go through “authorized dealers” who were charged with enforcing this policy.
The penalty ranged from a 10% to 30% premium on the dollar/Pound spot rate at the time – essentially the same tactic that the Cuban government is employing today.
Frankly I can see the same thing happening in the United States, perhaps starting off with a penalty in the Treasury markets where there is the biggest sucking sound ... imposing a sort of “restocking fee” for foreign investors who do not roll over to new issuances upon maturity.
Eventually, though, you can be sure that the government will impose controls at the consumer level as well – requiring a certain allocation of bank deposits to be held in U.S. Treasuries, restricting foreign remittances, and mandating scrutinous approval for overseas wire transfers above a certain amount.
Naturally, U.S. politicians would never call such measures “capital controls,” because the world’s reserve currency must be freely convertible. They will likely wrap up these policies in the “anti-terrorism,” “money-laundering,” or “tax evasion’ blankets, and simultaneously wage a PR war against evil gold and currency speculators.
So what can you do? As I have mentioned before, buying foreign real estate is the single best way to move money overseas where it cannot be forcibly repatriated. Physical gold stored overseas is an excellent option as well – there are no reporting requirements for either.
I have also strongly suggested buying up such assets with tax-deferred retirement savings. In my opinion, there’s no better way to stay within the letter of the law than to buy foreign investment property and physical gold through a self-directed IRA ... I am such a strong believer in this tactic that I negotiated a special discount with a trusted service provider who can set this up for you.
As I conclude this missive today, I see that the “world’s leaders” are gathered in Pittsburgh to listen to the sound of their own voices. Nothing will be accomplished, and they will emerge from their summit with nothing but sound-bytes, empty promises, and a continued fervor to exact tighter control over the markets.
Each of us has the ability to either plan for it, or dismiss reality and do nothing.
WHY YOU NEED AN OFFSHORE EMAIL ACCOUNT
Consider carefully the jurisdiction where you base sensitive and electronic assets.
In the case discussed Google received a U.S. court order to temporarily disable someone’s Gmail account. The reasoning behind the court order was not totally outlandish, but that is not the point. As Simon Black points out, the point is that it illuminates the vulnerability of your internet accounts to government actions. Had the Gmail account been located in a foreign jurisdiction there is no way it would have been deactivated. He suggests some email account providers located outside the United States. Commenters add quite a bit of their own input to the mix.
Last month, a Wyoming bank employee was routinely emailing some loan documents to a customer’s personal Gmail account. It sounds like a simple enough task, yet somehow the employee made an enormous error.
Not only did he erroneously attach a file to the email that included the names, addresses, tax IDs, and loan information for 1,325 customers, but he sent it to the wrong Gmail address!
We have all been there ... victims of our own fat-finger negligence – good intentions gone horribly wrong because our technology moves so quickly.
And so, with pulse pounding and panic setting in, the bank employee immediately sent a follow-up email to the mistaken address, pleading with the account owner to delete the sensitive data and contact him as soon as possible. And then he waited ...
After several days had passed without response, the bank contacted Google for help. They wanted information about the unintended email recipient – is the Gmail account even active? What is the account holder’s name? Would Google take steps to ensure that the confidential information is not open or disclosed?
Google refused to comply without a court order, so the bank sued ... and in this particular case the wheels of justice moved rather swiftly – within a few weeks, U.S. District Judge James Ware ordered Google to temporarily deactivate the recipient’s Gmail account and disclose information about the account to the court and to the bank.
Days later, Google and the bank jointly announced that the issue had been resolved ... but because of the court order, the user’s email account has to remain deactivated until the judge hears the case again on October 5th.
I read through the case files with great interest because, frankly I was disgusted that “the honorable” Mr. Ware could compel Google to deactivate an individual’s email account.
Sure, the bank employee made an unfortunate mistake. But email accounts are deeply personal, even more than physical home mailboxes. I wondered if the employee had accidentally put a physical package in the mail to the wrong mailing address, would a federal judge direct FBI agents to beat down the recipient’s door?
Doubtful. Rather the judge would have told the bank, “Sorry guys, but you had better start notifying customers of the security breach pronto.”
Advances in technology have a significant impact on the world; as I am fond of saying, technology is key economic growth engines over the long-term. But governments and regulatory authorities have a bad habit of abusing the ease and comforts that technology provides as a means to erode personal privacy.
Email usage, web searches, e-commerce, credit cards, etc. all make life easier and more convenient for consumers. They also make it easier for the government to keep tabs on our activity and whereabouts – and as this Google case demonstrates, the burden of proof required to violate an individual’s electronic privacy is quite low.
To take a page from WG Hill’s “Three Flags” approach, I believe wholeheartedly in spreading one’s sovereign risk among different jurisdictions – establishing residency in a country that values foreign visitors, while maintaining citizenship in a country that does not tax worldwide income and basing assets in yet another no-tax/low-tax jurisdiction.
To this approach, however, I would add another “flag”: jurisdictions in which an individual should base sensitive and electronic assets. The goal is to ensure that the computer server where your email is hosted, as well as the company which owns/manages the servers, are both outside of your country of residence and citizenship.
The chances of a foreign judge ordering an email account to be deactivated are slim to none ... and slim’s out of town.
Clearly there is going to be some element of counterparty risk in any transaction that involves more than one person; but if the Gmail recipient had been using an email account in, say, Singapore or Switzerland, the chances of a foreign judge ordering the account to be deactivated are slim to none ... and slim’s out of town.
Below I provide a links to a few offshore email providers whose servers are located overseas. With a properly configured account, you can switch to an offshore provider and still keep your existing email address:
Neobox – http://www.neomailbox.com (Netherlands)
e-mail.ph – http://www.e-mail.ph (Philippines)
HongKong Mail – http://www.mymailhk.com (Hong Kong)
mBox – http://www.mbox.com.sg (Singapore)
Green – http://www.mails.ch (Switzerland)
Swiss Mail – http://www.swissmail.org (Switzerland)
Remember, using these providers decreases the likelihood of your email account being confiscated or deactivated by your home government – offshore email hosting does not guarantee privacy or security unless you use encryption schemes (to be discussed in the future).
If you have suggestions for other providers, please let me know.
There is some truth to their epithets about bankers, although they should look in the mirror as well.
Leftist rants about greedy, money-grubbing bankers are, in the end, accurate enough. Bankers operate inside a cartel administered by the Fed. And “cartel” describes nearly every major industry in the United States today. They are all designed to line the pockets of the members at the expense of the rest of us.
And if we are fingering feeders at the public trough in general, we can include “cops in police unions, members of AFSCME, public school teachers, executives in healthcare firms (and every single one of their employees and shareholders), firms selling everything from Hellfire missiles to toilet paper to the feds and states (and every one of their employees and shareholders), telecom companies selling network access to the Feds for eavesdropping (and every one of their employees and shareholders), regulated utility companies (and every one of their employees and shareholders), and ...” In other words, all of us in some capacity or another.
The problem with all that is that the system is unsustainable. And it could collapse in a hurry, just like the Soviet Union did. Come the collapse people may finally recognize the bubble in which they were living. Sadly it will be too late for many.
The leftist (i.e., dominant) version of America’s ongoing bank debacle typically begins and ends with rants about excessive greed among money-grubbing, capitalist pig bankers. “Silly leftists,” is my first reaction, but then I pause.
Every banker in America operates inside the protective envelope of the Federal Reserve’s and U.S. government’s banking cartel. Inside this cozy system bankers borrow at artificially low rates “money” that represents the savings of no one (actually, it is all based on treasury debt, whose value rests on future extortion via the IRS) and originate outsized loans on assets whose prices are artificially raised by the very demand created by such “credit-from-nowhere” operations.
A banking charter was, for decades and decades, a system for generating income that was all but guaranteed because, absent a systemic disintegration, losses would be wiped clean by the central bank as “lender of last resort” and by government deposit insurance.
Heads I win, tails I don’t lose. You gotta’ love it.
When we think about it, the word “cartel” describes nearly every major industry in the United States today. When the big pharmaceutical companies and their health care industry brethren lobby in favor of a near complete takeover of medical service delivery by the central government, even a child realizes that there is something in it for them.
Not to single out one entity, but the Pharmaceutical Research and Manufacturers of America (PhRMA) is run by people who can see how good business is for Lockheed Martin, Raytheon, and others in the Military-Industrial-Congressional Complex. Why battle for business when it is simpler (and more profitable) to aggregate all your customers into one entity that clearly prefers to deal with Big Firms? People running congressional re-election campaigns sure as heck understand how this game is played. It is their bread-and-butter.
Let’s face it, America’s drug companies already have a lot of experience working with the men and women running Uncle Sam’s boisterous offspring (the FDA, CDC, DEA, OSHA, EEOC, HHS, others I forget, and of course their related vassals at the state level). An overtly nationalized system would simply codify the existing cartel system more explicitly, to the relief of business executives everywhere.
Those who are surprised to see executives at Pfizer, Johnson & Johnson, and many other health-related firms attempt to steer so-called health care reform legislation clearly are ignorant of the support for anti-trust legislation that came from American Big Business early in the 20th century. In both cases the logical conclusion is that any industry cartelized by the government results in business stasis; the big players stay big because only they have the legal and lobbying departments needed to swim with the biggest predator of them all, Uncle Sam. Smaller upstarts have to get in bed with a “rich uncle” among the established firms in order to get their voice heard inside the teak-furnished boardrooms where “negotiations” take place. “Rich uncles” enjoy that kind of relationship with pretty young firms.
The drug industry is currently laying off tens of thousands of salespeople. One reason is that government-licensed physicians are apt to have less input into what drug the patient will be offered. Simple economics is part of this, but in a government-run system like Canada’s, a central bureaucrat determines which drug will be used for a given condition. Instead of an army of salesperson/lobbyists invading doctors’ offices, the “sale” is made by a couple of the firm’s “home office” executives visiting the Health Administration offices. Why, it is so civilized. How else does anyone think a centrally-run system negotiates lower pricing on drugs, for instance? The bureaucrat promises exclusivity and enforces it.
Consumer choice? You are joking.
Think about how good it looks to a firm’s executives if they can eliminate the huge headcount expense of a large sales force. Employees come with payroll taxes, EEOC hassles, sexual harassment lawsuits, and a host of other messy human issues. This is the drug business parallel to a manufacturer replacing line employees with robotic machinery (another trend that politicized government amplifies, for all the same reasons).
Returning to the left’s unfavorable characterization of bankers, I decided that there was some truth to their epithets. Bankers are all money-grubbing participants in a cartel that systematically robs me and everyone else by escalating prices and helping build, brick-by-brick, a monetary system so unstable as to constitute a virtual economic suicide pact.
When leftist money-grubbing, socialist pig organizations (e.g., ACORN and Rainbow/PUSH) extort funds from banks and other businesses they are only one more gang of robbers demanding a share of the loot. The same is clearly the case for cops in police unions, members of AFSCME, public school teachers, executives in healthcare firms (and every single one of their employees and shareholders), firms selling everything from Hellfire missiles to toilet paper to the feds and states (and every one of their employees and shareholders), telecom companies selling network access to the Feds for eavesdropping (and every one of their employees and shareholders), regulated utility companies (and every one of their employees and shareholders), and probably a thousand other entities I am forgetting.
We are all cartel members now.
Contrary to American Mythology, the USA is the inversion of a free country because nearly every industry, nearly every walk of life and occupation exists inside a political cartel system. People do not know any better because it is all they have ever experienced.
How do you explain the concept of “being wet” to a fish?
We know that this system is unsustainable. The USSR appeared mighty and permanent too until one day it precipitously turned into a mature dandelion and blew away in the breeze.
Perhaps we are living in the time when the fish tank finally cracks and the water drains out, leaving citizens shocked and gasping in the few stagnant pools that remain. Then people may see, for the first time, the bubble in which they were living. Sadly it will be too late for many, having so fully adapted to the fishbowl of an artificial system that they cannot adjust to its absence.
SHORT TAKES
In Venezuela Beauty Is a Matter of Pride and Scalpels!
Venezuela’s afterglow of winning yet another Miss Universe crown, its 6th, has not only illuminated national pride in its Latin beauties – but also its women’s widespread recourse to cosmetic surgery.
Surgical enhancement to the body has become such a norm in the South American nation that it has emerged as a top destination for “scalpel tourism” by foreigners looking for a lift or new contours at a cheaper price.
“There are patients who come from Colombia, the United States, Ecuador, the Caribbean islands. ... They have surgery and then spend a few days on vacation,” explained Rosi Oyon, head of a French subsidiary selling silicone breast implants.
The passing of the Miss Universe crown from one Venezuelan to another, from 2008 winner Dayana Mendoza to Stefania Fernandez a week ago, could spur an uptick in a sector already booming, several participants in the industry said.
It was Venezuela’s 6th Miss Universe crown in the 59-year history of the pageant, and the first time the same nation has claimed the title twice in a row.
The win puts Venezuela just one spot behind the United States in terms of overall Miss Universe victories – although with only 26 million people it has less than 1/10 of America’s 300 million population.
Denials their beauty is anything but natural is par for the course in the beauty pageant world, but for plastic surgeons there was no doubt that Fernandez had a little help. “I didn’t operate on her, but I am sure that she has had work. They all have,”said Daniel Slobodianik, a plastic surgeon who has helped several Venezuelan celebrities better fill out a bikini.
Vanessa Brito, a 27-year-old Caracas resident who added breast implants fitted five years ago, explained that surgery was common for women from all walks of life. “I think there is a social pressure in Venezuela, a beauty ideal that can be seen in contests like the one for Miss Universe. And seeing that, everyone wants to look the same,” she said.
Laura Gonzalez, a 19-year-old student, agreed. Over the past four years she has had a nose job and breast enlargement.
“This goes beyond the Miss Universe contest. Venezuelan women love to look good. We love to get our hair done, to dress well. A woman needs to feel good about herself, and it is something that has really influenced me,” she said.
Arturo Rojas, the head of another breast implant supplier in Venezuela, said: “Venezuelan woman are among the vainest in the world. Beauty is considered a basic necessity.” Girls barely in their teens sometimes receive surgery as a gift from their parents, as in the case of Yudnara, a 13-year-old who made a pre-op trip to a doctor’s office accompanied by her mother.
“I think women have the right to get these kinds of operations. We are all beautiful, but sometimes we want to be even more beautiful. Not just on the inside, on the outside too,” she said. Even the risk of infection, which can lead to a mastectomy in the case of silicone breast implants, does little to dissuade adolescents – though that has generated a sideline industry for malpractice lawyers.
“They don’t heal quickly, because such young girls, at 15, 16 or 17 years-old, are not ready for this kind of surgery,” said one lawyer, Emilia de Leon.
Breast surgery is by far the most popular procedure in Venezuela, with an estimated 30,000 procedures carried out each year, according to specialists. “Mammary prostheses are the backbone of Venezuela’s beauty market,” Oyon said.
In that section of the market, French-made silicon sacs – considered more reliable and smoother – dominate over rival U.S., Chinese and Brazilian products, accounting for around 80% of the enhanced busts created. For non-Venezuelans visiting to improve their neckline, the difference in cost can be significant. In Caracas, breast enlargement goes for around $2,500, compared to several thousand more in other countries.
Extravagant Dubai Island Project Sinks Under Weight of the Credit Crunch
What were they thinking department: A development that was meant to send Dubai’s star into the firmament of First World cities has been left to the mercy of the waves and the baking winds.
The worldwide credit bubble showed up in all kinds of bizarre places. The project just off the shores of United Arab Emirate member Dubai – a series of man-made islands shaped like the major countries of the world (the project was named “The World”) – was as ostentatiously extravagant as any of them. And now it has run out of financing and work has stopped. Hardly surprising. As usual, after the bust one is left scratching one’s head over the follies during the bubble.
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