Category: Investor News/Analysis

During a meeting in the Mercosur, the executive secretary of the Cepal, Alicia Barcena highlighted the behavior of the Ecuador economy so far this year, increasing by 8.6%.

This doesn’t surprise me personally, Ecuador is a country on the move, most who have been here a few years can see big differences in development in certain areas.

The current government has been great building new roads and bridges which has stimulated national tourism.

Earlier this year when I was in China, I can tell you, many business in China are well aware of this growth rate and honing in on Latin America licking their chops… they know to grow their companies they have to “penetrate” emerging markets like that of Ecuador and South America.

Over the next 5-10 years the real action (and money to be made) will be in the emerging markets (Latin America, Africa, and Southeast Asia)… you don’t have to be the best, if you’re the first.

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According to a survey of 4,231 people all over Ecuador made by the newspaper Telegrafo, approval rates are high for President Correa at an astounding 76%.

I personally have seen a sharp contrast in who follows Correa and who is against him… simply put, the “haves” are against him, and the “have nots” are for him. You know before you even ask the perosn often who they are for. It’s true he has instituted many programs that protect the rights of the working class.

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This week on the Ecuador Insider’s Newsletter I showed you how you can profit investing in the Ecuador Stock Market.

The Ecuador stock market is still in diapers compared to what you may be used to in the States or Europe. But, it is an interesting alternative none the less. But there are many class to teach you more about stock marketing and investments, here is a thorough review. Most families in the States have the financial advisor, invest in IRAs, bonds, mutual funds, and even stocks. In Ecuador, it’s not like that.

Many people in less affluent nations have much fewer investment options than we do in the States, and are often fearful of investing money in things like a stock market.

Instead, they put their money in things like real estate, businesses and even cars, so that, primarily, so they don’t spend it.

But, although most are unaware, there actually is a local stock market that does offer some interesting investment options.

Requirements for investors

Have money. It doesn’t matter if you a foreigner or not, doesn’t matter if you bank in Ecuador or not. You can invest by simply showing your passport in a broker house. You can visit the MBoxWave website for more details on how to trade and make money. Similarly, You can start trading with Axia futures. The Training Programme is that the product of the collective knowledge and knowledge of the Elite Traders of the AXIA Community from round the globe. it’s skills-based and is made on the methodology of developing intraday Futures traders within the biggest markets within the world.

How to get started

First, you need to go to a broker, like the one in the investment department of the Banco Promerica on the corner of Amazonas and Colon in Quito. Walk into the bank and ask for the investing department (Say, “quiero invertir en la bolsa.”).

They can then explain your options and place a buy order for you for the stock of your choice. At the time of research a few months back they charged 1% commission plus a .09% stock exchange fee. The minimums usually start around $1000 but can be negotiated.

The buy order is then manually taken to the stock exchange where someone has to find a seller at the price you are willing to pay per share. For example, if a stock is trading at $4.50 a share, you could place a buy order at $4.30 and see if anyone out there is willing to sell at that price. Your buy (or sell) order will be valid for 5 days, if there are no takers, it gets nullified and you have to place another.

Stocks in Ecuador pay dividends and can also appreciate in sales price, similar to the earning methods of the stocks on the DOW.

Two of the most recognized and successful stocks on the Ecuador market are those of Supermaxi (La Favorita Corp.), and the National Beer Company (Cerveceria) of Ecuador. These companies have very little (to no) real competition in Ecuador, are very liquid with good cash flows, and have proven to pay out good dividends and value to their stock holders over time (anywhere from 5-30% annum more or less).

Also on the exchange are other large Ecuadorian companies, like several local banks, but their stock prices relatively stay flat and are a safer, more stable play.

A great place to see actual stock market prices, trends and stock figures, is the official site (in Spanish) of the market, bolsadequito.com.

Other investment options

Besides investing directly in stocks, there are other options.

One interesting option for some are buying “Obligaciones” or commercial papers on the stock exchange of specific companies who commit to giving you a set return on your investment. These work similar to CDs, and are set for 1,2, or 3 years on average and pay between 5-10% in set increments upon purchase.

My personal favorite is the CDs the local banks sell. You can start by buying one for 30 days at around a 4% annual interest clip. Obviously, with these, the longer you commit your money for, the higher % interest you will receive. Inquire about these options in your local Ecuadorian bank.

One option some don’t recommend is investing in local Ecuador government bonds, because they are paying around a low 3% and are very risky (think of the Ecuador Government like that friend of yours who always asked for money and never paid you back).

Investing in the Ecuador stock market is not for the faint at heart but can be heaps of fun. Buyer beware!

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Foreclosures, defaults, fire sales…

We all know the story of the housing market north of the border, but has the crisis had the same affect on real estate in Latin America?

An important question, indeed, for anyone staring out their frosty window with a sore throat dreaming of their big leap south.

After investigating the housing market in several Latin countries, the best answer I can give you is “it depends.”

I know what you’re thinking. “It depends.” What a nice, safe cop out.

But it’s true. Let me explain. It is a little more complicated down here.

First and foremost, the Latin market has not had across the board drops in prices as seen in the US and Europe.

In Latin America, it has depended on the country, your location within the country, and the type of property you own.

For example, for a rather undiscovered, under-priced country like Ecuador, the crisis has actually increased demand in some areas by as much as 20-30%.

According to one owner of a prominent real estate website in Ecuador wishing not to be revealed, said that traffic arriving from Google nearly doubled as the crisis intensified in the last quarter of 2008 and the first quarter of 2009.

His theory is that with the crisis up North, more and more people have begun to look for cheaper places to reside, and with new technologies like the internet and Skype, many people can continue to work from remote locations.

Whereas in the Dominican Republic, a country that has already experienced a recent market boom, the consensus from local agents seems to be that prices have taken a noticeable drop in the touristy, foreigner-dependent areas like Punta Cana, but in less touristy places like Santo Domingo, the prices have remained relatively stagnant through the crisis.

Although, even in the touristy places, prices have not fallen as much as they have in the US.

Which brings me to my next point: your actual location is also important. One of the main factors people look for when moving to Latin America is security.

This may be the reason why prices for properties in gated communities and posh condo buildings have not felt the effects of the low market as much compared to similar properties located outside guarded areas.

Another important observation is that in both countries, Ecuador and the Dominican Republic, prices of beachfront property have not gone down. For beachfront, they rarely do.

One possible reason for the softer impact of the crisis on the housing market of Latin America is that, let’s face it, the traditional investors in Latin America have been the world’s rich, and the rich have not been nearly as affected by the world economic crisis as the middle class.

Another important observation is that credit has always been expensive in Latin America, so people, foreign and local, normally buy in cash, minimizing the affect of the credit crunch as well.

With that understood, with a little due diligence, there is no better time than now to start taking a gander south of the border.

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