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Latin America's Fast Growing Financial Hub
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Thursday, February 8, 2007
Vol. 9 No. 34 |
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In Today's Letter:
Comment: A First-Hand Look at Latin America's Fast Growing Financial Hub
Currencies Tomorrow's G-7 Meeting
Wealth: Profit Reports Offer Investors Little To Cheer About
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A First-Hand Look at Latin America's
Fast Growing Financial Hub
Today's comment is by Bob Bauman, The Sovereign Society's Legal Counsel and a former Member of the United States House of Representatives from Maryland, (1973-1981).
Dear A-Letter Reader,
Last week I was in Panama for several days, my 10th visit to that republic in the last five years.
This attractive country has been transformed from an American "colony" into major Latin American nation, over the last 30 years. Panama is now a world class tax and asset haven, sitting in the midst of a major economic expansion and construction boom unparalleled anywhere in Central or South America. Panama's gross domestic product (GDP) will grow this year by at least 6% and more next year. The Latin Business Chronicle agrees. It reports that the IMF has predicted that "...Panama is set to grow more than any other country in Latin America."
Panama also registers high on the freedom scale. On the Heritage Foundation/Wall Street Journal 2006 Annual Freedom Index, Panama receives high scores for business and fiscal freedom, freedom from government interference, and on financial, investment and monetary freedom.
Commercial operations are generally subject to clear rules. Personal and corporate income tax rates are moderate for locals. Foreigners generally pay zero income tax. Government expenditures are also fairly low, and the country experiences only a marginal amount of inflation. The law welcomes foreign capital and imposes only minor restrictions on investments. Panama is a major regional Latin American financial hub and has used the U.S. dollar as its currency since 1904.
Panama Real Estate Is Booming: But with No Sign of a Bubble Popping Yet
During my visit to Panama the big question on many folks' minds was whether this nation's continuing economic boom, especially, its real estate sector, may be a "bubble" about to burst. In my opinion, I think there may be some cooling of that boom, especially in Panama City condo sales and prices. The bargains are getting harder to find as some local prices approach those in South Florida. But you can still find deals at a quarter or a third less than comparable U.S. ocean front and ocean view prices.
Numerous, multi-story condos are going up everywhere in Panama City. The Pacific and the Canal waterfront is beginning to look like a miniature version of the Shanghai building boom I witnessed in China over a year ago. Construction cranes are everywhere. Donald Trump's announcement of his planned Trump Towers in Panama City (shaped as a giant ship's sail) has only turned up the heat, as well as condo sale prices.
Some local observers argue that Panama's road and utility infrastructure, (especially in the Panama City area, home to 1.5 million people), is inadequate to meet the thousands of condo units under construction. On my way in from Tocumen Airport I counted at least 40 towering condos under construction. All of these will require new and better roads, sewer and water facilities, pollution control, health care and commercial establishments. The government has just announced a multi-million dollar road building program to meet such concerns.
Five years ago there were no major mega-malls in the city. Now there are three that can compare with almost any U.S. mall. On recent trips here I received very good health care service, with a doctor's fee and the prescription costing half what it would in the U.S. As to pollution, the waters around the city look as clean as they ever have -- which is not all that great, but hardly worse than what can be found in some parts of the United States. My one complaint is that the monopoly Bell South cell phone service is less than adequate.
Come On Down! The Panama Boom Continues...
Everyone I talked to in Panama agreed that the overall Panama boom will continue, even if real estate cools a bit. The question is how long the boom
will keep on booming. Major international companies, retirees from across the globe, expatriates looking for second homes, and real estate investors have long since discovered the advantages and lower costs of Panama -- and they are still coming.
One factor that should assure continued growth is the planned expansion of the famous Panama Canal. Last October the citizens of Panama voted, by a margin of over 70%, to expand the Panama Canal to allow the largest modern ships to pass through. Assuming sound financing can be obtained, (China, Japan and the U.S. are all interested in contributing the US$6 to US$10 billion needed), eventually the Canal expansion could mean tens of thousand of new jobs in a nation the size of South Carolina with only 3 million inhabitants.
Once again I have seen the Panama boom first hand and I can assure you it is continuing. The question is, how long before the best bargains are gone? As they say on the long-time CBS game show, The Price Is Right: "Come on down!"
That's the Way It Looks from Here,
BOB BAUMAN, Legal Counsel
EDITOR'S NOTE: The Sovereign Society is bound for Panama May 2 -5th for our annual Total Wealth Symposium. We have invited 29 leading global investment and asset protection experts from around the world to share their best ideas for growing and protecting your wealth in 2007 and beyond.
If you register today, you'll save US$100 off the standard registration fee. Sovereign Society members receive additional discounts. So don't wait! Our last Total Wealth Symposium sold out weeks in advance.
To reserve your spot and claim an early-bird discount, click on the approproate link below:
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Will Tomorrow's G-7 Meeting Finally Shed Some Light on the Asian Currencies?
Expectations are building about the G-7 meeting in Essen Germany this Friday. Currency traders are just waiting, hoping there will be some – or any – communiqué from the G-7 on currencies, specifically Japan and China's currencies.
Many pundits blamed U.S. Treasury Secretary H. Paulson's rather public split with European Council President J-C Juncker on Japan for the currency depreciation wars. But if you were Paulson, wouldn't you want a little bargaining chip for the meeting if your main target was bigger fish, like say China?
Meanwhile, reports yesterday morning revealed that Japan may make World Trade Organization (WTO) complaint against...drum roll please... China! Hmmmm...the yen weakened yesterday morning on the news. Can you say "Quid pro quo?"
But it won't likely be that simple. Five of the G's, and maybe six, aren't all too happy with a super competitive yen crushing exports and grabbing market share in its path. So I'm just waiting to find out if 6 of the G's can get their story straight. What a shock it would be if nothing was accomplished at a G-7 finance ministers meeting.
JACK CROOKS, Currency Director
EDITOR'S NOTE: A couple times a year, we open up access to our "Einstein of currencies," Jack Crooks, through limited, 60-minute conference calls. Next Tuesday, February 13th, Jack returns for his second-ever teleconference. Dial in to find out the latest ideas about how to maximize your returns and limit your risk in the extremely liquid, US$3 TRILLION currency markets. Also be sure to tune into Jack's conference call Tuesday to hear about all the moves from behind-the-scenes at the G-7 meeting! Click here to learn more.
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Profit Reports Offer Investors Little To Cheer About
Hopefully, you got your fill of cheering during Sunday's Super Bowl, because there have been few reasons to cheer recently about the U.S. stock markets. This is especially true, if you've been keeping an eye on the deluge of year-end financial statements issued by American public companies.
So far, it's shaping up to be a pretty lackluster, if not downright disappointing, earnings reporting season. While companies in the Standard & Poor's 500 Index are on track to grow profits about 10.5% year over year in the last quarter of 2006, it still represents a sharp slowdown from the third-quarter's 22% growth in earnings. And most reports out so far are only slightly ahead of expectations, with very few blow-out financial performances to get investors excited.
Another factor that sounds a sour note this earnings season is the fact that S&P 500 companies just aren't exceeding expectations the way they used to - which is a treat Wall Street has grown accustomed to in recent years.
Going forward, expectations are also beginning to dim for the rest of 2007 as well. Current quarter earnings are expected to gain about 8% over the first quarter of 2006. That's the first single-digit profit growth period in several years.
Even if you prefer to invest outside the U.S., American corporate profit growth is a key indicator that attentive investors should be watching. That's because 40% of S&P 500 profits are generated from exports to countries around the world. As such the profitability of American blue-chip firms (or lack of it) can serve as an early warning indicator of slowing global growth.
The jury's still out on just how fast or how far earnings will slow among the S&P 500, but this could potentially be a negative surprise in the otherwise favorable "Goldilocks" consensus on Wall Street these days.
In the meantime, be selective in your investment choices. For example, analysts at Standard & Poor's recently upgraded the Health Care group due their forecast of 16% profit growth this year. This could be a standout sector during a year in which overall earnings growth is expected to slowdown.
MIKE BURNICK, Senior Editor & Director of Research
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