Many Americans are now considering for the first time investing or retiring abroad, and for good reason. We have been hesitant to write an article urging Americans to jump from a sinking ship for fear that we will inevitably be called biased, or America haters, or a snake oil salesman. Do we believe America's best days are behind her? Yes. Are we biased? Yes. Do we stand to gain if people move to Costa Rica? Yes. However, the following is not a political statement or an ideological one, nor is it an advertisement; it is simply a fact-based assessment of the times in which we live.
As the U.S. economy continues its freefall, the quality of life for millions of Americans is being threatened. The U.S. economy declined 3.8% in the final quarter of 2008 and the future appears to be one of further decline. The U.S. economic fundamentals are simply woeful. Unfortunately, it is widely believed that this is just the beginning of the suffering. Every American that I speak with is feeling the pain of the collapsing U.S. economy. I feel that it is finally time to say what we all feel: America's growth and prosperity is over, and maybe it is time to look abroad for retirement and investment.
· The stock market has lost 50% of value
· Jobs are disappearing at a record pace
· House values continue to plummet - down over 20% on average
· Foreclosure numbers have risen 225% since 2006 to 3.2 million filings.
· Health insurance is impossibly expensive
· Social Security and Medicare funds are rapidly facing solvency deficiencies
· The government is waging two expensive wars - $594B and counting
· The Fed is printing money around the clock - they added 98% to the money base last year alone!
· America's service-based economy produces little of value
The US government recently announced that the unemployment rate rose to 7.2% in December from 6.8% the month before. The US economy lost 2.6 million jobs in 2008, of which 1.9 million were lost in the past four months. Of these, 524,000 were lost in December alone. Furthermore, these are the "sugar-coated" government numbers.
The Wall Street Journal stated that "While the official unemployment rate is 7.2%, a different figure that includes discouraged workers who have dropped out of the labor force and those working part time because they can't find full-time work hit 13.5% in December. That was nearly a full percentage point higher than in the previous month and up from 8.7% at the end of 2007."
James Turk, economist and founder of Goldmoney, sees another Great Depression: "Unemployment is the key measure that signals whether or not a depression has begun, and by the SGS measures we are rapidly approaching the 25% unemployment rate usually mentioned as the most important signpost marking the depths of the Great Depression. That high rate of unemployment cut a wide-swath of misery through the American population."
A recent Op-Ed piece that was published in The New York Times by Nobel Laureate Paul Krugman on January 5th stated: "The fact is that recent economic numbers have been terrifying, not just in the United States but around the world. Manufacturing, in particular, is plunging everywhere. Banks aren't lending; businesses and consumers aren't spending. Let's not mince words: This looks an awful lot like the beginning of a second Great Depression."
Sure, the election of Obama brought a certain amount of hope, but the fundamentals are too powerful and too far-gone for a speedy recovery no matter how much money the Fed prints. In fact, the emergency stimulus packages may only exacerbate the problem. The "Deflationists" on one side point to shrinking credit, less consumer spending, falling home sales and lower commodity prices; and on the other side, the "Inflationists" point to the unprecedented amount of money supply as all but guaranteeing runaway inflation leading to a dramatically weaker dollar and steep price increases for consumer goods and services. Either way, no one seems to be pointing to a rosy outcome for the foreseeable future.
The unfolding crisis has indisputably been created by institutional monetary policy; whether the blame goes to Wall Street, The Congress, George Bush, Banks or The Fed, it is inherently something that happens when a tipping point has been reached - growth slows, then stops, then retreats, and someone is left holding their devalued assets and a debt which exceeds the ability to pay back the money borrowed to "own" them in the first place.
We feel that developing countries, such as Costa Rica, are more protected than their North American and European counterparts -- particularly Costa Rica, because of its unique unyielding political stability, strong social structures, and a strict lending environment. Further, the broad appeal of Costa Rica and the close proximity to the U.S. serves to drive demand for retirement homes, investment, and business.
Most importantly, the fundamentals of Costa Rica point to a continuing relative prosperity. After a year of high inflation at 22.5% in 1995, Costa Rica experienced a recession through 1997. Since then, inflation dropped as low as 9% and GDP has grown solidly in the 5% range year after year. Costa Rica now boasts an unemployment rate less than that of the United States. Furthermore, with the arrival of CAFTA, privatization and competition will be introduced, which will update or replace some inefficient national systems, thus creating more jobs across the board and strengthening overall growth opportunities.
Costa Rica still derives most of its income from tourism. It stands as the most visited nation in the Central American region, with 1.9 million foreign visitors in 2007, a higher per capita rate than other popular destinations such as Mexico, Dominican Republic, and Brazil. Moreover, Costa Rica continues to gain popularity for its strong stance on the environment, which as led Costa Rica to be ranked 5th in the world on the 2008 Environmental Performance Index rating -- up from 15th place in 2006. This trend will continue as more channels are opening for those interested in sustainable living.
The world economy is gloomy, and we do not take the position that Costa Rica will be completely immune from the fallout, but the fact remains that Costa Rica is a developing country changing in fundamentally beneficial ways for the tourist, retiree and investor. Costa Rica presents a positive, exciting and fresh alternative in an economic climate that is desperate need of some good news.
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Jeffrey Hickcox is a regular contributor to the Paradise Profits blog, is a Real estate columnist for The Mountain Howler and the Costa Rica Real Estate & Tourism Guide magazines, and for the leading website on Costa Rica www.WeLoveCostaRica.com. In his exhaustively researched book, Real Estate Investing Guide-Costa Rica: Fundamentals for Profit in Paradise, Jeffrey Hickox takes an in-depth look at strategies for sound investing in Costa Rica Real Estate. Compiling years of experience in real estate investment, the author shares knowledge and tools to make money: the local rules and regulations, tips to increase profits in this unique market, and detailed project checklists. Also included are referrals and contact information for professionals in fields such as lawyers, builders, contractors and leading real estate professionals. With a combined 50 years of Costa Rica experience, the author, and his network of professionals, will smooth the transition from novice to local real estate expert.
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