Why Fundamentals Say Secure Your Land and Water Now

 

According to an in depth report by the Food and Agriculture Organization of the Untied Nations (FAO); How to Feed the World 2050 the world’s population will reach 9.1 billion by 2050, 34 percent higher than today.

 

As the world’s population continues to grow, demand for more housing, land for industrial purposes, and use of foodstuffs in biofuel production applies more pressure to land and water resources.  

 

Recognizing the financial windfall these trends will generate coupled with a desire to lower the impact of market volatility on portfolios in a post 2008 world, institutional investors have began to invest differently – pushing into real assets.

 

Physical property including office buildings, infrastructure, timber, and Farmland offer diversification benefits, as returns are typically less correlated to stocks and bonds.

 

Farmland in particular is attracting growing interest from pension plans, university endowments, and hedge funds.

 

TIAA-CREF, which has managed retirement assets for employees of universities and nonprofits for decades, began investing in farmland in 2007 and now manages more than $5 billion in farmland assets worldwide.

 

Blackrock Inc., the world’s largest asset manager recently conducted a survey in which more than half of its 170 institutional clients plan to increase their allocations to real assets.

 

Through Friday January 26 The S&P 500 declined 6.7% and is on track for the worst January since 2009 – the push towards real assets marches on. I believe individuals ought to take a page from what institutional investors across the globe are doing; investing in farmland.

 

Due to the trend described above (and other events taking place across the geopolitical landscape) real estate in places that are relatively less populated, and have an abundances of productive farmland and water will be in greater demand.  Ecuador is one of those places. 

 

The current economic environment here has created a tremendous opportunity for anyone looking to secure his or her food and water supply.

 

Over 50% of the Ecuadorian governments revenue come from oil exports, an asset whose value has fallen more than 50% in the past 18 months.  Additionally the price of their other exports priced in local currency of South American neighbors Colombia, Peru, Brazil, Chile, and Argentina have all increased rendering exports less competitive.

 

As my Mother would say Ecuador is “caught between a poop and a fart”.

 

The current economic backdrop has caused many property owners to make high quality properties available for purchase.  Many of while are available at a steep discount relative to their intrinsic value.

 

In addition to what I would call a buyers market here in Ecuador, there are two major factors that make now the right time; capital controls and immigration restrictions.

 

Under the guise of combatting illicit transactions, lowering transaction costs and crime, major financial institutions are colluding with governments in the western world to significantly limit the use of cash and the ability to transfer large amounts of money (to other countries).

 

Denmark is on pace to become the first cashless country in the world, in Sweden, Four out of five purchases are now made electronically, and in a letter to business clients on November of 2013 one of the world largest banks, JP Morgan Chase said the following:

 

-You will no longer be able to send international wire transfers. You will still be able to send domestic wires and receive both domestic and international wires. We’ll cancel any international wire transfers, including recurring ones, you scheduled to be sent after this date.

 

– Your cash activity limit for these accounts(s) will be $50,000 per statement cycle, per account. Cash activity is the combined total of cash deposits made at branches, night drops and ATMs and cash withdrawals made at branches (including purchases of money orders) and ATMs.

 

These changes will help us more effectively manage the risks involved with these types of transactions.

 

Like many countries around the world Ecuador may also impose more immigration restrictions to counter balance an increase in foreign interest.  In fact, they are beginning what looks to me to be groundwork with tougher immigration standards.

 

As part of a set of sweeping 2008 reforms, Ecuadorian President Rafael Correa amended the constitution. Among the changes, the document promotes the “principal of universal citizenship,” and “free movement of all inhabitants of the planet.”

 

What that meant in practice is that Ecuador dropped visa requirements for all nationalities.  The country has since reinstated visas for 11 nationalities.

 

Moreover Cuenca, home to Ecuador’s largest Expat community, is the subject of a study by of the impact of the influx of non-Spanish speaking residents to the city.  Pending the results, the foreign ministry has reserved the right to “mitigate the cultural and economic impact immigrants are making to the local population.”

 

If you are looking to secure your food and water supply Ecuador is the place and now is the time.

 

References:

 

http://www.wsj.com/articles/farmland-investments-take-root-1438661041

 

http://www.bloomberg.com/news/articles/2016-01-25/blackrock-sees-clients-shifting-to-illiquid-assets-from-stocks

 

The US Dollar is legal tender in Ecuador.

 

http://www.dw.com/en/cash-payments-on-their-way-out-in-denmark/a-18934027

 

http://www.theguardian.com/world/2014/nov/11/welcome-sweden-electronic-money-not-so-funny

 

http://www.bizjournals.com/southflorida/news/2013/10/18/chase-bank-halts-international-wire.html

 

http://www.miamiherald.com/news/nationworld/world/americas/cuba/article4529909.html

 

http://www.cuencahighlife.com/foreign-ministry-continues-examine-effect-expats-cuenca/

 

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