The USA, with its ever-resilient economy, throughout history had been the backbone of a worldwide cycle of unrestricted growth. The US stock market is no longer the preferred investment vehicle of the "baby boomers." Many of them have cashed out and are developing new business ventures in emerging economies such as Costa Rica.
The reshuffle of the FTSE 100, a share index of the 100 most highly capitalized companies listed on the London Stock Exchange, saw the expulsion of eight young companies.
Ericsson, which accounts for 8% of Sweden's GDP, announced a 20% cut in their workforce.
This intensification of the recession in the US, will undoubtedly affect the global economy in other industrialized nations. This is largely due to the increased integration of the world economy.
World trade over the last decade has grown 2.3 times faster than world GDP, compared to 1.4 times for the previous two decades. American imports make up for 6 per cent of the GDP of the rest of the world, doubling the proportion of 1990's. In the last six months, US imports fell by 13 per cent and imports of IT fell by almost 50 per cent.
RECESSIONS IN THE USA HAVE ALWAYS RESULTED IN MANY YEARS OF RECOVERY...
Additionally, the growing influence of multi-nationals has a key impact: with US companies' profits diving, they are increasingly cutting output and jobs in the US and looking at emerging economies like Costa Rica for opportunities.
Recessions in the USA have always resulted in many years of recovery. The recovery periods last much longer than the downturns. A housing decline that started in 1925, lasted seven years, until 1932, weakening financial institutions and contributing to the Great Depression, which began in 1929.
Furthermore, look at how long the Resolution Trust Corporation, (RTC) functioned, as the US government-owned asset management company mandated to liquidate assets of real estate and mortgage loans, from the savings and loan crisis of the 1980's. The RTC was established in August of 1989 and was closed six years later, in December 1995.
The current events are frighteningly similar to those that caused past recessions in the USA.
Furthermore, a large percentage of Americans used their homes as ATMs, enjoying the appreciation during the booming real estate market. They lined up for cash-out refinancing programs or home-equity loans to turn housing equity into spending money. And that money, if it hasn't already been spent, is going offshore, because there are no logical investment vehicles in the US that currently offer acceptable returns.
The pending recession has increased investors and international company's interest to search globally for "safe havens" in emerging economies offshore.
What does that mean to the average North American civilian? It means there will be less jobs and less consumer spending which affect everyone in the USA.
An economic downturn is unavoidable in major industrialized countries and no one knows for how long?
With the frightening global economy, many folks are considering moving to Costa Rica.
Over the last year, consumers ignored the approaching economic storm and continued spending, while economists debated about how the housing downturn would affect the US economy. After sub-prime loans, home-equity lending is the biggest financial problem American's have right now. Credit debts, as well as energy and housing prices are burying the average consumer.
Consumers are slowing down and spending less. This is healthy for them but not for the worlds weakening economies. Consumer spending fuels around 70% of world economic output, so a pullback directly affects growth.
Europe is not going to get a special dispensation from the global slowdown. With their strong economies, India and China will not fill the economic spending void that is going to be left by the American consumer.
Now, evidence is mounting that people have had enough. The Dow Jones Industrial Average is way down this year, because of lower consumer spending.
Fed Chairman Ben Bernanke indicated the Federal Reserve will take "substantive" new actions to provide insurance against a recession. Congress and the White House have committed to keeping housing aloft so it doesn't kill the economy. The Fed has reduced its benchmark interest rate, called the federal funds rate, five times since September, including two cuts within eight days in January. This is somewhat helpful for debtors but not for those who have savings to invest.
Gold prices are increasing, a sign of investors' desire for alternative assets that are seen as stable.
Housing pressures are causing most consumers to take a second look at their budgets, as high energy and food costs take a bite of their incomes.
Steep gasoline and home-heating costs are probably the biggest thing dipping into the average consumer's budget right now. Moreover, consumer-credit woes are an issue for many to be concerned about.
Debt is part of this; consumers are accustomed to purchasing with credit cards. It used to be 75% paid with cash, now it's the other way around. Most vendors are predicting slower sales than during the past years.
Many people are fed up and looking offshore for logical alternatives.Here are some facts that reflect the current state of worldwide consumers.
Michael Goldstein, an international dealer of antique diamonds based in New York City, notes that record-high prices for gold have prompted many people to trade in their jewelry for cash.
The Gold Refiners in New York City have many people waiting in line to have their jewelry appraised, so they can exchange it for cash.
Those Americans that have cash are now facing an economic dilemma. They are waking up and taking notice of the factors that have taken place. American consumers are done worrying about the US economy and are looking for realistic and safe alternatives to improve their own economic welfare.
IT MAKES PERFECT SENSE THAT INVESTORS ARE MOVING MONEY INTO EMERGING ECONOMIES THAT WILL PROVIDE GREATER RETURN ON INVESTMENT
The Economist, an international weekly news publication, since 1843, with 1.2 million copies sold per week, advised its readers to; "Get a parachute. In the time-honored tradition, working class and poor people around the world will find that their masters have already grabbed the restricted number of parachutes and that they are the ones who are in for the hardest landing."
Look at global economic fundamentals. Everyday, money moves across borders, chasing extra returns. Economic strength or weakness is reflected in yields on bonds and interest rates. Right now, the bond markets reflect more expected interest rate cuts from the Federal Reserve. That means the markets are expecting a deep slowdown in the U.S.
Many investors say, "Why even bother investing in CD's paying the current interest rates." It makes perfect sense that investors are moving money into emerging economies that will provide greater return on investment.
The ICT, Costa Rican Tourism Board, said that more than $2 billion in projects were announced for Costa Rica in 2007 and many new endeavors are planned for 2008. Costa Rica in the eye of a property boom, according to the Global Property Guide.
The advent of affordable financing in CR has created an attractive housing market for the Latinos and foreigners as well. With Scotia Bank, HSBC and now Citi Bank purchasing Costa Rican financial institutions the competition will drive the local economy to its limit.
The limit is difficult to envision because for many years the Costa Rican market did not offer mortgage financing and now with these major financial institutions all competing to lend money in little ole Costa Rica you will see tremendous growth in the housing sector.
Remember what it was like to get your first new car and borrow the money from the bank? I for one was honored to be accepted into the adult financial world! The Ticos are now being offered financing for cars, homes, etc at affordable rates. Therefore, the average middle income Costa Rican is just getting a taste of how financing can improve ones lifestyle and create new opportunities.
The Costa Rican economy is like any other and is driven by financial investment and borrowing power. With these new international banks just now beginning to lend money here, the local economy is just getting started.
Additionally, global real estate investors gravitate where the opportunities are attractive. In the US, the real estate market is correcting and the opportunities are limited. Developers have taken their money and borrowing power to the markets that offer opportunities and appreciation.
Take a look at some of the new projects committed to and who are behind these megabuck investments. REVOLUTION PLACES
Steve Case who founded AOL, is the chairman of the parent firm, Revolution Places, and Vice chairman is Philippe Bourguignon, former president of Club Med and president and CEO of Euro Disney. The president of the firm, is Donn Davis, who with Case helped build AOL. The company has Philippe Cousteau, grandson of the famous undersea explorer, as an environmental adviser. Although Case and his associates do not have extensive experience in real estate development in Costa Rica, the president of Revolution Places Costa Rica is Darren Linnartz, who worked for 15 years with Marriott/Ritz Carlton.
Revolution Places, just north of Playas del Coco, has been presented as an integrated luxury resort. The first phase, due to open in 2010, is on 263 hectares, about 650 acres. The estimated investment is $800 million, said the company. The project seeks to bring in One & Only Resorts, which will build 120 detached casitas. Also planned is an 18-hole golf course and a tennis center. Exclusive Reports was listed to build 30 residences. Miraval Cacique is contracted to build 60 villas and 120 luxury rooms.
The project is good for Costa Rica because it will provide jobs for 2,500 employees, will generate $20 million in taxes and the company promised to donate a million trees for a conservation group to plant nearby and $1 million for organizations that develop initiatives to protect the Costa Rican environment.
Another major project, involving an estimated $600 million investment, was announced for Esparza earlier in 2007.
PACIFICO Another new project, designed by US developer, Jack Parker Corporation, is a master-planned, mixed-use community, named Pacifico. Encompassing 175 acres along Costa Rica's Northwest Pacific coast, the gated residential community and adjoining commercial center combines Mediterranean architecture and coastal design elements, resort-style amenities and modern conveniences with Costa Rica's primeval environment.
The 500 residences within Pacifico -- a combination of 350 condominiums, town homes, and villas; 20 rental apartments, and 150 single-family home sites -- will be built to U.S. standards, offering custom cabinetry, designer fixtures, brand name appliances, and pre-wired for phone, cable and Internet access.
For those of you who worry about worldwide economics, the subject is a notoriously inexact "science," and no one can predict how the Costa Rica economy will react to the crisis in the USA. One thing is certain though, and that is that reactions to the problems will be not the same.
MORE FOREIGNERS ARE...MOVING HERE..COSTA RICA HAS BECOME A 'SAFE HAVEN' INSTEAD OF JUST AN EXOTIC PLACE TO VACATION.
I have been in the real estate development and housing business for over fifteen-years in Costa Rica and speak to buyers and sellers everyday, and am in contact with many more of them every week on the Internet. Here is what I am hearing and reading:
Instead of abandoning Costa Rica, more foreigners are jumping off the fence and moving here. Costa Rica has become a "safe haven" instead of just an exotic place to vacation.
The "baby boomers" who are even more affected by a slowdown in the economy are cashing out of their stateside investments and moving their assets offshore. Costa Rica is a very stable country to invest in.
More people than ever are looking at Costa Rica as a very stable real estate investment environment.
Costa Rica's real estate market and economy is nothing more than a reflection of basic supply and demand. And demand far outstrips supply at this point. Remember, Costa Rica is smaller than most states in the USA and the number of buyers far exceeds the sellers. This is economics at its most basic level. There are still, as the press likes to remind us, "pockets of rising real estate prices worldwide."
There will be a few areas in Costa Rica where prices may not appreciate as in the past years, but with the demand, will come the investors from Europe, who have recently enjoyed a windfall of economic prosperity and are seeking an attractive economy to invest their profits.
Costa Rica, like all others, has its problems. However, this country attracts millions of vacationers who continually express the same sentiments, year after year, "I'm in the process of disposing of my assets where I have been living, so I can move to Costa Rica permanently."
From living in Costa Rica for over 15 years, I have acclimated to the culture through my understanding of the local language and customs. I see most things in Costa Rica getting better everyday!
Investments in Costa Rica are growing more fruitful, and North Americans, Britons, as well as Europeans and Asians, moving their investments, businesses, and families here are fueling this growth.
Author: Tom Rosenberger, with more than 25 years homebuilding experience 15 of which have been in Costa Rica, construction consultant Tom Rosenberger knows the ins and outs of building and remodeling a home in Costa Rica. A Free Gift To You - Key Documents With 25 Years Of Experience: As part of his 'Build Your Own Home in Costa Rica - Key Documents' Tom offers his customers several informative documents, including a Land Acquisition and Home Building report, which outlines the process one can expect when purchasing property and building a home in this country. Other documents include a construction cost spreadsheet, payment schedule, and list of construction specifications.
 Email Tom Here
|
FULL - LENGTH ARTICLES FEATURING YOUR PROPERTY! Tell YOUR story and get exposure! Sell your property or business (or business opportunity) through editorials and feature articles!
Retirement Planning For Offshore Living: Maintain and Enhance your lifestyles spending less than 25% of your monthly budget.
2 0 0 8
Click Here to download this article in PDF format.
SEARCH OUR MAGAZINE ARCHIVES
contact us