Here I am with Merri last January enjoying our small Ecuador business of putting on conferences …getting sunburn where prices are so low while many of our friends up north where prices are high are getting frost bitten!
Emerging stock markets and currencies have been hit hard in the current economic downturn.
Jyske Bank wrote in a recent multi currency emerging market update:
“Dante has again sent the emerging markets into purgatory and although all countries are hit hard at the moment, those countries which have been living modestly must also be the ones that will end in Heaven instead of ending up in inferno… We maintain that the Latin American countries are in a better position than the Central and Eastern European countries. But as long as we are in purgatory, nobody is unaffected.”
Statistics support Jyske Bank’s Latin feelings.
The October emerging market value analysis in our Multi Currency Portfolios course shows that during the first nine months, the Morgan Stanley Capital Emerging Markets Total Return Index dropped 35.5 % in dollars and 32.9 % in euros.
As was the case in the developed countries, there was no place to hide in multi currency Emerging Markets last month either. Every market fell.
But by region, Latin American stock markets which year-to-date, Latin America is down 26.3 %, while EMEA (Eureope-Middle East-Africa) lost 33.1% and and Asia was down 40.1 %.
This may sound bad…but here is an important point to remember…a weak currency and economy in an emerging market can create extra business opportunity.
However there are a number of issues to consider…especially the drop in gas prices. An October 7, 2009 Newsweek article summed up some of the issues when it said:
“Over the past few weeks, some silly ideas have circulated on the impact of the financial crisis on Latin America. The most dangerous was that Latin America would be largely impervious to a debacle that was, as Brazilian President Luiz Inácio Lula da Silva imprudently phrased it, “Bush’s crisis.” Leaders ranging from Mexico’s Felipe Calderón on the center-right to Fidel Castro and Hugo Chávez on the extreme left all claimed, for different reasons, that orthodox macroeconomic policies, recent growth, solid banking systems, the high price of commodities (oil, soybeans, copper, iron, coal) and tighter market regulation and supervision would help spare the Latin economies from the woes of their partners across the Rio Grande, the Atlantic and the Pacific.
“Well, the Brazilian real has dropped 30 percent from its August high and the São Paulo stock exchange has fallen 45 percent since the end of June. The Mexican peso has fallen 30 percent against the dollar since mid-September, and the local stock exchange has collapsed. Commodity prices, which through direct ownership (Mexico, Venezuela, Ecuador, Colombia, Chile) or taxation (Argentina, Bolivia) provide huge shares of government revenues, have dropped sharply. Growth forecasts for the last quarter of 2008, and mainly for next year, have been cut dramatically. So much for the idea of Latin immunity from contagion.
“It was always naive, even deceitful, for these experts and rulers to maintain that the region would be cushioned from the effects of the crisis. While many Latin banks do not depend as much on foreign credit and thus are less vulnerable to the credit crunch than richer nations, suppliers’ credits are key for exports, foreign loans are crucial for infrastructure projects and foreign investment remains important for many economies (Mexico, Brazil, Colombia, Peru). Since much of the impressive recent growth has been commodity driven, the fall in prices can be devastating for countries like Peru, Venezuela, Ecuador and Argentina.
“Some countries will emerge from the current crisis better than others. Mexico, Chile, Brazil and Uruguay should manage just fine, with only bruises and scrapes; others will weather the storm, though suffering greater harm (Colombia, Peru). But others will incur severe damage: Venezuela, Bolivia, Ecuador, Central America and the Caribbean. With too much delay, all of their leaders have finally acknowledged what everybody knew: no crisis with this impact in the United States and Europe could avoid ravaging Latin America as well. Now all these leaders have to do is decide how to protect their societies, and how to pick up the pieces when the time comes.”
The point should be clear…no emerging market is going to be a panacea.
Yet bad conditions in emerging countries now create extra good business opportunity.
For our example, our Ecuador business of offering courses is booming in part because the price of Ecuador services and products are so low!
Emerging market small businesses like our Ecuador business gain a small edge because no major market is going to be a panacea either.
The Bank of England Governor has just said this week that this is Britain’s worst banking crisis since World War I and is likely to push the economy into a recession. He wants to prevent inflation from slowing too much. There is a chance that slowing inflation will not be a problem. The conditions for stagflation (inflation and a recession) are ideal.
There are five reasons why I am concerned about global inflation.
#1: So much money, without any productive backing, has been created for the current financial bailout. Globally.
#2: The world population is growing but global resources are not. Increased demand without increased supply increases cost.
#3: The entire increasing global population expects more. The linear mindset of our modern, materialistic society is based on ever rising expectations. Everyone works hard now with expectations of more in the future. Work…save…have a better life. That is the capitalistic dream that drives the world.
#4: Demand for a static supply of products that create the energy to our run our complex global economy is rising. This increases the cost of energy which increases the cost of everything.
#5: This entire process is aging. The global infrastructure is stressed, airports, roads, law enforcement, education and most of all…the people.
The boomers are retiring and want their pensions. Yet most countries have not invested or saved to fund this cost. This is a global phenomena as well. It was not just Americans who came home from the war and had kids.
A United Nations report says:
This report was prepared by the Population Division as a contribution to the 2002 World Assembly on Aging and its follow-up. The report provides a description of global trends in population aging and includes a series of indicators of the aging process by development regions, major areas, regions and countries. The report shows that:
“Population aging is unprecedented, without parallel in human history—and the twenty-first century will witness even more rapid aging than did the century just past.
“Population aging is pervasive, a global phenomenon affecting every man, woman and child—but countries are at very different stages of the process, and the pace of change differs greatly. Countries that started the process later will have less time to adjust.
“Population aging is enduring: we will not return to the young populations that our ancestors knew.
“Population aging has profound implications for many facets of human life.”
The report goes on to say:
“The older population is growing faster than the total population in practically all regions of the world―and the difference in growth rates is increasing. The number of older persons has tripled over the last 50 years; it will more than triple again over the next 50 years
“In 1950, there were 205 million persons aged 60 or over throughout the world. At that time, only 3 countries had more than 10 million people 60 or older: China (42 million), India (20 million), and the United States of America (20 million). Fifty years later, the number of persons aged 60 or over increased 606 million. In 2000, the number of countries with more than 10 million people aged 60 or over increased to 12, including 5 with more than 20 million older people: China (129 million), India (77 million), the United States of America (46 million), Japan (30 million) and the Russian Federation (27 million). Over the first half of the current century, the global population 60 or over is projected to expand by more than three times to reach nearly 2 billion in 2050 (figure 8). the United States of America (107 million), Indonesia (70 million) and Brazil (58 million).”
So the global economy may slow and yet prices may still rise.
How can an Ecuador business profit from that?
The three main ways to protect purchasing power during inflation are real estate…shares and your own business.
Since the data above suggests that emerging countries may have dropped more than major markets…but might be affected less in the long term…shares, real estate and business in emerging markets may offer the greatest opportunity. History also shows that growth in emerging markets is faster than mature economies.
Ecuador does not really have a stock market. This is why I am buying more and more real estate in Ecuador now. Emerging countries are likely to need capitalistic experience and labor start up costs lower. Ecuador does for sure!
This is why though Merri and I are at what society considers retirement age, we continue our business in Ecuador. We love the process, but even if we did not, we would still look for a ways to earn though serving because this helps assure that we’ll always be financially secure.
The wonderful thing about your own small business is that it can solidify your finances and enhance your fun, sense of adventure, satisfaction and fulfillment!
We have proven this fact in our own business as have many delegates who attend our courses there.
Ecuador has many wonderful products to export:
of all types….silver…
Flowers of every type.
High end crafts.
Here is one former delagate who sells at flea markets.
One delegate from an Ecuador export course wrote:
Our business of selling Ecuador products is still going well. We are now appointing Agents across Australia and should have the whole country covered by mid-August. Our initial shops continue to re-order on a regular basis. The best shops seem to re-order every two weeks.
We have also received inquiry to provide buying services for people in a few other countries. So we will be seriously thinking about starting our own brand name to market globally. If successful, it should help many Ecuadorians.
Another who began selling roses wrote:
Gary, This has been an initial wonderful impression (feeling) in this first direct transaction with you and “Ecuador”. Roberto is certainly a professional and his selection of roses was fantastic.
I went to Ecuador to attend Gary and Merri’s import/export course.
I was hoping to find items to bring back to the States and sell.
I love to travel and was looking for business ideas that would enable me to do that.
I had never been to South America (never even considered it) before so it was an adventure. I didn’t know what to expect, but I had been reading Gary’s newsletter for a while and I was impressed with the Scott’s honesty and integrity. They don’t promise overnight success or try to sell you a business opportunity. They share their wealth of experiences, open doors for you and educate you on the possibilities and opportunities available. It’s up to you to implement what you learn.
I found so much more than high quality products in Ecuador, the people I deal with are kind, hard-working folks who truly appreciate my business and I appreciate their honesty and skills. I have returned to Ecuador 6 more times since my first trip and each time I leave I’m anxious to return.
Yet there is more than just the money. I cannot describe how satisfying Merri’s and my 40 years of working and sharing has been or explain how much our global travels have broadened our horizons.
If you like these ideas and want to travel, consider your own business based around your travels….even more so in an emerging market.
One travel business tip is to know that our friends at American Artists and Writer’s Travel Division have organized a teleconference with four savvy business travelers who will discuss the tools they use to consistently fund and profit from their vacations. They regularly conduct courses in Ecuador.
The teleconference is October 28, 2008 and costs less than $20. See details here.
Until next message, good inflation fighting to you!
Better still join us in Ecuador! See our schedule of 26 courses, tours, mingos and expeditions we’ll conduct in 2009.