China warrants criticism
as well as Venezuela

Dear A.M. Costa Rica:

We condemn the government of Venezuela every chance we get and ridicule its every move.  The U.S. is extremely critical toward the way the news airways are handled in Venezuela.  Much of that is well deserved.  

On the other hand there is the more repressive government of China.  Venezuela would seem quite open and free compared to the government of China, but do we read about their abuses of the government daily or in such harsh terms?  Do we hear about the government control of the airwaves, people, religious practice, human rights abuses on a level that we are hearing about the retraction of the press in Venezuela?  No, we don't hear it on that level.  Why?  Because the United States is beholding to the country we owe most of our money too and the country we buy most of our products from.  There is a double standard. This is also becoming true with Costa Rica and many other, bought by China, countries.

The Peoples Republic of China detains individuals for exercising their rights to freedom of association, freedom of religion and freedom of expression, including the right to impart and receive information, and other basic rights.  The PRC employs a wide range of controls that violate the right to free expression and interfere with independent media. These include severe restrictions on contact between foreign news media and Chinese viewed by the government as critical of the regime.

An extensive censorship bureaucracy licenses all media outlets and publishing houses and must approve all books before publication. China's laws restricting contact with foreign religionists, prohibiting parents from exposing children under the age of 18 to religion, and outlaws nongovernment-controlled churches, which violates the U.N. Declaration on the Elimination of All Forms of Intolerance and of Discrimination Based on Religion or Belief.

We are even told by China who the U.S. president should see and who he shouldn't.  China meddles in U.S. and Costa Rican government affairs.  Does Venezuela directly meddle in our affairs?

Should we condemn the acts against free speech by the Venezuelan government?  Absolutely.  On the other hand we should do the same for the more oppressive government of China.

The U.S. is a hypocrite when it comes to the real issue of human rights.  Costa Rica seems to have followed in the same footsteps.

Shaky U.S. dollar suggests
buying here is a good idea

Dear A.M. Costa Rica:

How does the shrinking value of the dollar affect Costa Rica real estate values?

We have written in A.M. Costa Rica in the past that the value of real estate is the multiple of cash flow generated by any property over time.   If the value of the currency decreases in purchasing power by 20 percent, then the value of the underlying asset decreases by 20 percent in general terms.  Sometimes this takes time for one to catch up to the other.  What we see is that rents are not going up, and clients ask for discounts though they fail to understand the same rent paid last year is of less value this year.

So what is the 5- or 10-year horizon since any buyer or seller of real estate should ask this question first and foremost.

This now becomes a complicated issue since anyone who holds paper money is at risk of devaluation either in real terms or in purchasing power.

The U.S. coinage act of 1792 prescribed the harshest penalty under law for any official who fraudulently debased the currency.  The reality is the current dollar is simply an IOU convertible to nothing but another IOU.  Why is gold going up against all paper currencies?  The market is shouting loss of faith.

Our opinion is that of all the options to invest and or save or even hedge that real estate in places like Costa Rica may be the best of many bad options since we really do not see any guarantees out there.  If the dollar, and lets be clear, the colon is not separate than the dollar, goes down in purchasing power dramatically over the next year or few years eventually rents will adjust to a real return in purchasing power.  On the other hand in five years if you are a buyer, there may be no sellers who want dollars.  There are too many stories in economic history of people rushing to the store to buy bread with their debased currency since by the next day the prices of bread are much higher.

We are not managers of funds nor take investments from clients and generally do not act as real estate agents but we do believe in the eventual value of property in Costa Rica.  Costa Rica has a future, and often it is misunderstood since most do not see a longer-term horizon.  We do give advice from time to time on values.  For those who want a more in depth understanding of the dollar see the article by James Grant in the Wall Street Journal Dec. 5, 2009.