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The World in Crisis

12 September, 2012

Just throw a dart at any globe and more than likely your going to hit a a state or a country that’s in financial crisis or at least in danger of defaulting on its debt. New York,New Jersey,Illinois,California,Venezuela,Argentina,Spain,Portugal,and now,notoriously,Greece.

Take a gander around the U.S. and you'll find New York has a budget deficit of $9 billion,New Jersey $13 billion,Illinois $10.7 and California over $19 billion just to highlight a few. Hop down to South America where you'll see that Venezuela and Argentina were just ranked #1 and #2 on the list of major governments “most likely to default on their sovereign debt”.

Skip across the Atlantic and you'll discover Spain and Portugal's credit ratings have been slashed and the largest austerity measures and budget cuts seen in 3 decades have been enacted to salvage their floundering,soft economies. Greece,on the other hand,may even be beyond helping because such measures may stall overall European economic growth for decades. Greece's outrageous debt is currently at an all time high of 115% of GDP,yet in the United States the federal debt is projected to reach an incomprehensible,140% of GDP in just two short decades. If so,Greece's money problems will seem measly by comparison.

Where in the World to invest?

It was recently announced that Mexico’s economy is surging out of the global crisis,recording a 4.3% growth rate in the first quarter of 2010 alone (much faster than the U.S.) which represents a trough-to-peak increase of 10% in just one year. The only other country expected to grow that quickly is Turkey. Mexico can expect similar growth for the entire year according to Moody’s Latin America as the government expects $20 billion in foreign direct investment this year. Mexico’s debt-to-GDP ratio is projected to hover around 37% this year,exactly where it used to be in the U.S. only a few decades ago. Mexico is doing quite well. In fact,in case you haven’t noticed,the Mexican,Carlos Slim,just surpassed Bill Gates as the reigning “Richest Man in the World.”

And if you had invested only $10,000 in shares of the MSCI Mexico Investable Market Index in 2000 you would have witnessed a 232% gain and now be sitting on $33,189 in your bank account. The same amount in the S&P 500 during the same period would have only netted you $9,466.

There are now over 18,000 major American companies currently investing and operating in Mexico including General Motors,Ford Motors,GE,Bristol-Myers Squibb,Xerox,Coca-Cola,Hershey's,Kimberly-Clark(Kleenex),Raytheon,Evenflo and John Deere Tractor just to name a few. Currently over 1 million Americans are investing,buying,building and or retiring in Mexico with many more on the way. 

Perhaps the biggest gains for investors in Mexico are being taken in the real estate sector. In key areas, real estate development in Mexico is far outpacing growth in other countries. For example,Playa del Carmen was named the fastest growing area in the world just a few years ago and Tulum,just to the south,is poised to grow even faster in the next 5 years. Those who get in on this land rush now and ride the wave over the next few years are likely to position themselves far ahead of even Warren Buffett. It is rumored that Carlos Slim is doing just that.

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