• Ecuador Real Estate and Latin America
  • International Investments – July 2006 Emerging Market Value Analysis
  • Natural Health Tip – More Cook DeBuggin

Latin American investments are hot! You will see in tomorrow’s July 2006 review of emerging market values that of the three emerging market regional indices, Latin America stood out with a 4.2 % monthly gain. Asia lost 0.8 % and Europe, Middle East and Africa (EMEA) declined 2.3 %.

We’ll see that the two best performing stock markets in the last month were Peru (+9.7 %), Argentina (+7.1 %) and that for the year two of the best three top performing markets were Venezuela (+51.3 %) and Argentina (+34.2 %).

So you would imagine we are pretty happy sitting of the middle of this explosion in Ecuador.

We are, but not for what would seem the obvious reason…current Latin market performance. Hot performance is not the best reason to choose to invest. Hot performance does not guarantee value. In fact hot performance is often a sign of bad value. Keppler’s value analysis points this out. Though Peru, Argentina and Venezuela are hot, the only Latin market he deems good value for investment is Brazil.

Ecuador is too small a market to even be rated. This creates a lot of ignorance in this market which has a value as well. If data is hard to get, those who take the extra trouble get extra rewards!

However, it seems fair to point out that there are some concerns afoot.

First, the volcanoes. On July 16, 2006 Tungurahua volcano spewed ash, gas and molten rock for a second day.

Tungurahua, is located about 80 miles south of Quito and has been increasingly active since May 2006 when it blew out big clouds of hot gas.

No one has been injured, though a lot of surrounding area has been evacuated. The short and simple fact is there are many active volcanoes in Ecuador. The Andes are new mountains as far a geology goes. New mountains have volcanoes and faults that are still settling which bring eruptions and earthquakes. In our decade there this has never bothered us but I grew up in the Cascades and Mt. Hood and Mt. St. Helen’s were at our front door. They could have erupted at any time (Mt. St Helen’s did of course). If this was not enough, I then moved to California and worked in San Francisco on the 44th floor of the old Bank of America building. Obviously earthquake concerns were not at the top of my list.

So we do not worry about volcanoes and earthquakes, but you should know they are there.

The Upside of Volcanoes. We know that every cloud has a silver lining. Look at this picture of the volcano taken at night!

A Bigger Social Volcano?

A July 6 Wall Street Journal front page article voices another concern. This article is entitled “a Dash of Mysticism: Governing Bolivia the Aymara Way.”

The article says: “Since he was elected Bolivia’s first indigenous president by a landslide vote in December, Evo Morales, a former leader of coca grower’s union has assembled a governing team of ex-guerrillas, former activists, a former maid who founded the national maid’s union, is now the justice minister although she has never studied law. Since Mr. Morales assumed power he has pledged to redistribute the country’s wealth among Bolivia’s poor Indians and exert greater control over the country’s economy and natural resources. He had forged a close alliance with Venezuela’s fiery anti-American president Hugo Chavez.”

The article then goes on to say that some leaders want to go back to the revolutionary 60s and some even farther clear back to 1491 before the Spanish invaded. The article explains why:

“That’s because the conquest of Bolivia in the early 16th century led to centuries of exclusion and oppression for its Indian inhabitants, a condition that has improved little with independence in 1825. Today 65% of Bolivia live in an income of less than $2 a day. Many Aymara intellectuals say they want to recreate in the 21st century the values of communal Eden they believe existed before the conquest, as place without poverty and oppression.”

That’s a fuss. Communism has pretty well been discredited as an economic solution in the modern industrial era. However industrialization’s inability to help equalize wealth does create problems. The new government is thinking that the one thing its new society will not needed is competitiveness.

Sorry guys! Hey listen up. Competitiveness is not a legislated thing. This is a force of nature. It cannot be stopped!

The new foreign minister, David Chaoquehuanca, brags that he has not read a book in years because he does not want to cloud his mind with European concepts. The article quotes him, “We have been in the hands of people who have read books and look what a mess the Earth is in.” Whoa…just what we need is more lack of understanding.

He has a point, the earth is in a mess, but communism sure did not clean up the environment or society in Russia or

China or Eastern Europe. Nor has it exactly made Cubans the richest people in the world either.

Plus we have the problem of interface between this new society and the rest of the capitalist world. Bolivia is a pretty isolated country so if they just did their thing, fair enough..if this is what the people of Bolivia really want.

However, I expect that this non-reading foreign minister will still want to travel on airplanes that came from the messy West. He’ll probably want to work at night with light fueled by generators and oil from the West and abroad.

He’ll probably want his nation to have cars and trucks and tractors and tools and medical supplies that were built by competitive Chinese, Japanese Europeans and Americans. What will his non-competitive society produce to trade for these things?

Bolivia will need to interact with the rest of the world. The good ancient values they want to emerge will have to blend in with the competitive industrialized part of society.

Other solutions seem unlikely. The education minister states he will erase the pernicious effects of colonization. Part of his plan is to let Indian women know that they need to have five to eight children each so the country’s white minority will become inconsequential. This should really be a great way to help the Indians enjoy higher standards. (I hope you see my tongue well and truly in my cheek!)

I don’t see some of their economic plans working too well either, such as allowing the farmers to go back to their old occupation of growing coca. (The new president used to be head of Bolivia’s coca grower’s union.) I suspect that if this new agricultural supply develops the Bolivians will be looking to sell the stuff outside their borders…perhaps in the West where this might not go down too well.

It’s easy for me to sit here and say that all these plans will not work. Criticism is easy but I sure don’t have the answers and the poor Indians have plenty of reason to want to shy away from the system that has treated them so badly.

But the point in this writing is to show that there are some problems without apparent solutions in Latin America. These problems are spreading. Cuba has been there for so long. Then Venezuela and now Bolivia. Plus the Bolivian leaders recently met with Ecuadorian Indigenous leaders in Quito. This suggests a tendency for this to spread.

How far will this spread go? This is the question. Your guess is as good as mine.

This could create some uncomfortable times in Latin America, but I see fulfilling opportunity. Hints of a solution are in a 500 year old Indigenous legend. The legend says that a time will come when the Eagle of the North and the Condor of the South fly in the skies together again. This, the legend says, will help restore the equilibrium of mankind.

The economic momentum in Latin America is clear. Richer societies are emerging. There are more people with more money than ever before. Yes, there are inequalities. Yes, the environment is in a mess. But the good old days were not so good either.

We business people can make a good positive difference as we run successful businesses, if we are not only good business people but broad thinkers who treat clients and associates fairly and honestly so prosperity is spread around more.

The village, Cotacachi, where Merri and I have chosen to live, is a good example of the wisdom of the Indigenous and the West, working in union. The village has its first indigenous mayor. Science and the mystic united. Here, incomes are rising. The Indian culture is intact yet they were proud to note that they have reduced the high infant mortality to zero. Hurray! The Indians still dress as they always have. They still maintain their beliefs. They still respect their environment. But they also compete in the global economy and enjoy the best of both worlds. They have learned to integrate technology into their existing way of life.

There are still enormous inequalities of wealth, but income distribution is getting better. This is one reason why Merri and I like Ecuador, especially Cotacachi. This is a place caught in a huge dilemma. We as business people can make a difference by bringing Western standards there and uniting our business with the ancient ways.

This creates huge opportunity for wealth. Canada, the US and Latin America are natural partners. Business will bind the union. Businesses that unite wealth and spirituality will be on the leading front and there are few places where this could happen more easily.

We welcome you to join us in this union which I believe is a powerful trend.

Another reason we love Ecuador is its beauty. Here’s a shot at sunrise from our suite at El Meson de Las Flores in Cotacachi, Ecuador.

Plus we love the sweet people and their wonderful successful culture. Here is a local coming to the Hotel el Meson. He’s dressed as his ancestors but competing well in the modern world.

International Investments – July 2006 Emerging Market Value Analysis. See the best value markets at http://www.spottingtrends.com/stock_markets/stock_markets_24.htm

Until next message, good investing!

Gary

Join Merri, Thomas Fischer of Jyske Bank and me at our next International Business and Investing Made EZ course in North Carolina. Review where to invest and do business now and learn which markets and currencies may be strong in the year ahead. Meet Steve Marchant, our man in Ecuador, and learn about products to export. Go to http://www.garyascott.com/catalog/ibeznc.html