June 4, 2010
New York City

Today, my friends and colleagues from the Atlas 400 group are gathering in New York City for another weekend adventure. It’s something I’ve been looking forward to since our last event in Panama.

As you’ve heard me describe before, the Atlas 400 is a private group of successful, like-minded individuals who meet at world-class locations to discuss their ideas, socialize, and forge lasting personal and business relationships.

I go out of my way to attend the events, and I’m pleased that a handful of Sovereign Man subscribers have joined the club. If you’re interested in learning more about the club, you can read more here.

Afterwards, I’m hopping on a plane for Panama where I have a short, 3-day trip planned before heading on to Chile, Brazil, and then Europe.

More on that next week; for now, let’s move on to this week’s questions.

James asks, “Simon– Can you tell me if precious metals held in an offshore depository such as Brinks or Viamat are required to be reported on TDF 90-22.1? No one else seems to be able to tell me for certain, and I have even offered to pay for the advice.”

No payment necessary. TDF 90-22.1 is the Department of Treasury form that US taxpayers must file by June 30th of every year if they have a financial interest or signature authority in a foreign financial account.

Under current law, the term ‘financial account’ refers to banks and brokerages, not physical bullion stored overseas. Thus, if you hold precious metals in an overseas vault, you do not need include that information on this form.

If you have a financial interest or signature authority over at least one bank or brokerage account, and the total value of those accounts exceeded $10,000 at any time during the calendar year, you would need to file the form by June 30th of the following year.

Additionally, if you have a foreign bank account, you will also need to check box 7a on Schedule B form 1040 when you file your taxes.

Next, Robert asks, “Simon– does Singapore tax companies on income they earn outside of Singapore, and then bring into Singapore? I am a Canadian who owns and operates a business that can be done entirely online, and I’ve been considering Singapore as a jurisdiction.”

Good choice. Singapore is a great place to structure an online business. In general, profits that are generated outside of Singapore are not taxable there as long as the funds are not repatriated to the country.

In practice, many Singapore companies earn money outside of the country, and they bank in a place like Hong Kong to ensure that none of the profits ever enter Singapore. Through this approach, the company has effectively eliminated its Singapore income tax liability.

This is a very clear example of how a business can benefit by planting multiple flags– structuring the company in one location and banking in another.

Durabo asks, “Simon, have you heard of Anglo Far East Bullion Company? They are a precious metal storage facilitator, and I’m wondering if you have any experience with them.”

Yes, I do have experience with them; I have met with the principals at their headquarters in Panama, and I generally find their service to be very expensive. There are cost effective alternatives for bullion purchase and storage, such as Best Safety Boxes in Panama, or Das Safe in Vienna.

Last, Kevin asks, “Simon, is there any chance of becoming a Colombian citizen and obtaining a second passport?”

Yes, but it’s not a country where you would really want to pursue citizenship.

First of all, it takes several years, and the process is very bureaucratic. During some of that time period, you cannot leave the country for more than 6-months at a time.

Eventually, if you are finally able to obtain citizenship, you may be signing yourself or your children up for military service in the country.

The biggest reason, though, is that Colombians have some of the worst visa restrictions on the planet; it is a poor travel document, and there are much better/easier options out there.

Instead, I’d suggest considering Ecuador, Brazil, Paraguay, and Singapore. These countries are much stronger travel documents, and you’ll have a much easier time acquiring them.

Subsequently, you could still spend a great deal of time in Colombia, either as a tourist, or applying for residency. This is another multiple flags example– citizenship in one country, residency in another.

That’s all for this week, have a great weekend.

June 2, 2010
Washington, DC

A few days ago, Colombian voters went to the polls for the first round of their quadrennial presidential elections. For many, it will be the most important decision of the new century thus far.

The current President, Alvaro Uribe, leaves office later this summer after two consecutive terms in office. He is legally barred from serving a third term. Uribe is regarded as the nation’s savior by many Colombians, and as the devil incarnate by others.

While his administration was salted with multiple accomplishments and scandals, Uribe’s lasting legacy will be the tough war that he waged on the FARC and paramilitary groups… and by many accounts, it is a war that the government has won.

I need to pause for a moment and explain a bit about the differences in the various groups in Colombia, which are often used interchangeably by mistake.

The FARC (Revolutionary Armed Forces of Colombia) is a Marxist guerrilla group numbering anywhere between 10,000 to 20,000 strong. The FARC’s aims are political, and they fund their operations primarily through ransom kidnappings.

Conversely, the paramilitary groups in Colombia consist of loose factions that are largely driven by economic prospects rather than political change. They are not Marxists, they are drug traffickers and extortionists.

While in office, Uribe stood up to both the FARC and paramilitaries, waging a tough war of attrition that turned his nation into a police state, albeit a much safer one than before.

According to Uribe’s numbers, over 16,000 ’subversives’ have been killed since he took office in 2002, while kidnappings and other violent crime have fallen precipitously. I’m not sure the body stack is an accomplishment, but Colombians generally feel much safer than 5-10 years ago. The credit has gone largely to Uribe.

His hand-picked successor is Juan Manuel Santos, a former defense minister who was an active architect of Uribe’s war on the guerrillas. Santos was credited with engineering multiple blows against the FARC, including the 2008 rescue of Ingrid Betancourt.

Santos is viewed as the Presidential candidate who would most seamlessly carry on Uribe’s policies and maintain the stability that the current government has been able to achieve. As such, Santos was the undisputed victor in the first round of the Presidential elections, and he will advance to the June 20th runoff.

Some Colombians, though, are ready for a change. They are weary of the super-security culture in their country and would rather focus on things like education, regulatory reform, and economic growth rather than continuing to wage war on fractured guerrilla organizations.

The second candidate who will join Santos in the upcoming runoff is former Bogota mayor Antanas Mockus– an eccentric mathematician and university professor who is as close to Santos’ polar opposite as it gets among political candidates.

Mockus is a self-proclaimed pacifist whose focus on education and tolerance propelled him to second place in the first round of the elections with 21.47% of the vote. He is the change candidate and represents the desire of at least a minority of Colombians who want to move on from terrorism and security.

Santos garnered 46.57% of the votes in the first round though, so it is widely expected that he will handily win the June 20th runoff election to become Colombia’s next president.

The Colombian peso, local stock market, and government bonds have all rallied on the expectation of a new pro-business, pro-security Santos administration. Santos himself has stated that he would like to raise tax revenue, not by increasing tax rates, but by encouraging investment to boost production instead.

I’ve stated before that I think Colombia is largely undervalued. Real estate prices, for instance, are incredibly cheap in many parts of the country, frequently selling for less than the cost of construction. This is due mainly to the ‘Colombia stigma’ that has long plagued the country… it keeps foreigners out and prices low.

In the not-so-distant-future, though, I expect this stigma to fade… possibly under a Santos administration. When that happens, you can be sure that Colombian assets will experience significant growth.

Overall, I think the country has one of the brightest futures in Latin America.

April 16, 2010
Medellin, Colombia

Yesterday I celebrated tax day by charging up my AMEX card on one of the IRS’s official payment websites. There’s nothing like earning travel points for keeping the flames of bureaucracy burning.

And speaking of travel, I should be headed to Ecuador this weekend where I plan on spending several days hopefully hopping around the country; more to follow next week.

On to this week’s questions…

Fred asks, “Simon, I cannot find a clear answer as to whether or not the purchase of Perth Mint Certificates in excess of $10,000.00 would require filing of Treasury Form TD F 90-22.1 (Report of Foreign Bank and Financial Accounts).

This is a really important question that applies to both Perth Mint Certificates and GoldMoney.com accounts. The IRS, as usual, provides no clear guidance specific to these institutions… so I posed the question to my team of legal/tax advisors.

One of them, “JN”, participated with on the recent S&A teleconference that I discussed yesterday, and he is probably one of the world’s foremost experts in offshore banking. I find that his information is priceless, and he’s the kind of guy that you definitely want in your corner.

JN had this to say:

“As far as the TDFs are concerned, I would generally argue that neither gold currency accounts nor Perth mint certificates meet the definition of a foreign financial account.

The new “jobs” bill however changes the dynamics, effective December 31, 2012 by requiring the disclosure of ANY asset outside the US that has a value of $50k or more. This will pretty much make the TDF issue academic except in cases where someone has say between 10k and $49k in gold.”

Next, William asks, “Simon, Medellin sounds like it’s full of opportunity; I’m curious how you would compare/contrast the investment opportunities with Panama.”

Frankly, an analysis of Colombia vs. Panama deserves its own missive. But briefly, I think the best Colombian small investment opportunities are in the property market; you’ll likely score the trifecta– substantial capital appreciation, high income yields, and currency appreciation.

As such, property in Medellin is an excellent investment candidate for tax free / tax deferred structures.

There are also a handful of Colombian mining companies traded on public exchanges, but I’m staying away from them. Here’s why:

The property market in Medellin is undervalued. Cheap, actually… mostly because the market is still pricing in the “Colombia stigma,” i.e. prices are lower than what they should be because the market still has overstated concerns about stability and security.

On the other hand, mining companies with heavy Colombia operations seem to have absolutely no risk priced into their stocks… which is quite strange. The stock market has assumed away Colombia’s risk, and the property market is irrationally overstating it.

The truth lies somewhere in the middle… though I would argue that the best properties in cities like Medellin have very little risk compared to remote mining sites where there is still paramilitary activity.

Next, Bonnie in Massachusetts asks, “Hi Simon, I do a lot of serious road cycling. Are the roads in Panama good for cycling? Are there bike groups or clubs down there?”

The best places to bike in Panama (or walk) are the Amador Causeway (about 4 miles) and the Cinta Costera… but typically, no, the roads in Panama are terrible for cycling. If you bike on a regular city street, you’ll probably get run over. Panama is not biker/walker friendly.

Next, Richard comments, “What’s up with all the violence in Thailand? I thought it was an idyllic Buddhist country. Now it seems like they’re more prone to violence than the good old U.S.A. Even with our budget issues and governator, I’ll take southern California anytime.”

I like southern California too… but don’t be too quick to judge Thailand based on an anomalous incident in which 21 people died. Statistically, violent crime is much, much worse in southern California.

In Thailand, violent crime, particularly against foreigners is almost unheard of; the worst thing you have to worry about there is corruption, not getting your head blown off.

Lastly, Pamela comments, “Simon- I would like your take on Medellin from the single female perspective. What about the men– looks, demeanor, attitude relative to females, local and foreign. What about safety/security, getting around, etc.?”

Look, I definitely do not claim to have the perspective of a single female… but from the best that I can tell, men here interact with their women in typical Latin style, though slightly more respectfully than I have seen in places like Argentina where men regard women as their toys.

As for safety and security, the single women that I know here have never complained about being accosted or threatened… though it is uncommon to see a single, nonprofessional woman in Medellin, mostly because Colombians tend to socialize in mixed groups.

Overall, while I’m soundly unqualified to rate the attractiveness of the men folk here, I can tell you that Colombians are generally a very friendly people. If you speak some Spanish you should be able to make friends in no time, and that goes for anyone.

April 14, 2010
Medellin, Colombia

In yesterday’s letter, I told you why Medellin, Colombia might just be the greatest city in the world for some people. Well, today I had to send my assistant flowers because she got bombarded with so many subscriber emails questioning my sanity–

“You must be kidding! Medellin is the heart of the Columbian [SB: yes I know it's a misspelling] drug dealing racket!”

“Isn’t Colombia the most dangerous place in the world?”

“Are you kidding me? Colombia is one the most violent places to live. Crimes and kidnapping are terrible.”

We also received a handful of emails like this one:

“Bravo! Finally another American who sings the praises of my favorite city! Medellin is a hidden gem because most Americans are scared to go there… it’s amazing what they believe about getting killed and kidnapped. Their information is outdated by 15-years.”

Naturally, my experiences on the ground here have me more aligned with the latter opinion. In 4-years of traveling to and around Colombia, I have never felt unsafe.

There are definitely problems, no doubt. Antioquia Department, where Medellin is located, is still experiencing paramilitary activity out in the jungles where a lot of the gold mines are located. Gold, drugs, and AK-47s tend to not mix well.

Back in Medellin, however, away from the guerrilla action, I’ve read conflicting reports about whether the crime rate is increasing or decreasing. One report mentioned that the murder rate is up 50% year over year, while the government’s commission (biased, clearly) says that violent crime is down.

Here’s the bottom line– don’t automatically believe all the negative publicity that you read about Colombia. Come and see for yourself.

To pain the picture more clearly, I want to tell you a quick story about a local friend of mine. I’ll call him Victor:

Victor is sharp… very sharp. You pick up on that within 10-seconds of shaking his hand. He studied hard science and engineering in the US for nearly a decade and has a full residency visa to go back whenever he wants.

Ten years ago he returned to Colombia to start an engineering firm in Medellin. The business became successful quickly, and life was good…

… until the FARC came along and kidnapped Victor’s brother. This was in 2000. They held him for over two years to the tune of $1 million, which Victor eventually paid. After releasing his brother from captivity, the FARC destroyed all of their heavy equipment out in the field, effectively bankrupting the company.

Victor had nothing left, a family to feed, and a job offer in the United States waiting for him… yet he decided to stay in Medellin.

As he explained to me yesterday, “We all knew the FARC was on the way out, and that Colombia was entering a new era of stability. The turning point was 2003, right around the time my brother was released. Given the opportunity available here, the quality of life, and cost of living, I wouldn’t be anywhere else.”

Victor now has another successful business. His story is very compelling, and if you come down here you should meet up with him.

Locals understand that the tide has turned… but for now the rest of the world is still transfixed on the ‘FARC stigma,’ drug trafficking, and conflicting reports on whether violent crime is rising or falling. (of course, the rest of the world doesn’t really know what the FARC is, or how they differ from other guerrilla groups)

Frankly, it is this negative perception of Colombia’s danger that keeps it a hidden gem… otherwise cities like Medellin and Cali would be crawling with drunk college kids on spring break, and Cartagena would be mentioned in the same sentence as Punta del Este.

I have no doubt that this will all happen someday, and probably within the next 10-years.

This is why, in my assessment, Colombia (and Medellin in particular) is definitely worthy of consideration to plant an overseas flag, particularly for real estate. For a country with such a developed infrastructure and vast amenities, real estate should be much more expensive.

In some of the best neighborhoods of Medellin, for example, existing apartments sell for roughly $750 to $1,000 per square meter. In many cases, this is less than the construction hard costs– a real indicator of value in my opinion.

In neighboring Panama, you’d be very lucky to see $1,200 to $1,500 per square meter for comparable quality, and $2,000+ is not uncommon for existing home sales. New construction is even more.

Is the perception of Colombia’s risk worth a 40% discount to Panama? When you put your boots on the ground in both places, the obvious answer is no.

Expanding the analysis a bit, I would peg Medellin’s property market in line with Tangiers, Morocco where I was just a few months ago, and slightly cheaper than Pattaya, Thailand where I spent most of March.

In the long run, despite euphoria-based ups and downs, the market always catches up with value. When that happens, I expect that prices of quality real estate assets in Medellin will double.

In the meantime, Medellin’s pro-landlord property market offers viable double-digit rental yield opportunities, especially when catering to long-stay tourists and business travelers.

April 13, 2010
Medellin, Colombia

Just about anyone who has been to Medellin, Colombia in the past 5 years will tell you that the city is about as perfect as it gets. I’m one of them.

Travel there yourself and you’ll find that it’s no understatement.

Medellin is one of Colombia’s largest cities, set in a picturesque Andean valley that could probably pass for Austria on a warm summer day. Because of its altitude at about 1500 meters, coupled with equatorial climate, the temperature varies between perfect and near-perfect, 365 days a year.

This is why they call it the City of Eternal Spring– year round warmth with very little humidity. You don’t need heat, you don’t need air conditioning, and the flowers literally grow like weeds.

In short, it’s all the benefit of the tropics without the nasty weather or bugs.

But there’s a lot more to Medellin than the weather. In fact, I would go so far as to say that, for some people, Medellin is definitely Shangri-La. Here’s the type of person who I think would thrive here:

- You speak at least basic Spanish and are willing to learn: Medellin is NOT an international city. It is very clearly Colombian, so the locals’ English skills are marginal at best.

- You do not need to travel frequently: Colombia, in general, is a very challenging place when it comes time to travel. Check in times at airports generally take about 2-hours for reasons that I will discuss momentarily.

- You like steady temperatures, not four seasons: Again, the weather doesn’t vary here a bit.

- You have about $1,500 to $2,000 per month for living expenses: Medellin is not an expensive place. Sure, you could probably get by on $800/month, but for the range I quoted, you can be living a very active lifestyle in the nicest part of town.

(note: if you’re looking to buy, property is pretty cheap. Even in the best part of town, you can buy property for under $1,000 per square meter, which is my usual ‘cheap’ threshold)

- You like the outdoors: There is no shortage of outdoor activities in Medellin… it’s like Austin, TX without the infernal temperatures.

- You have no major or chronic health problems that require regular treatment: medical care in Colombia is adequate, but I would say it is definitely not tier 1. You would do much better in Brazil.

- Bonus points for single men: I could write volumes about this, but there’s enough information on the Internet about it. Suffice it to say that the women in Medellin live up to their reputation.

And now for the potential drawbacks that you would need to consider:

First, the security culture can get fairly annoying, though to be fair, this is a national issue in Colombia. These people have spent decades dealing with paramilitary terrorist groups and drug violence, and while those issues are all in the past, the scars still remain.

To be clear, Medellin is exceptionally safe… but people have a way of remembering. Years ago, the government really stepped up security, and even though the threat has subsided, the security remains.

You still see a lot of police in the streets and at the airports (this is why the check-in procedures take so long); even doormen at residential buildings are quite vigilant about security.

People have simply gotten used to security as part of their lives… and it’s going to take time for the paranoia to heal. Security is not an impediment or obstacle in daily life, but it is noticeable.

Second, Colombia has a higher tax and bureaucratic structure than neighboring Panama. Most places in Latin America do. While Medellin is not an expensive place, I have found that the current tariff system generally limits the availability of import products on store shelves.

Third, and this is the big one for me, depending on where you are in the city, the air quality can be quite poor on some days… though if you are from a big city like Los Angeles, Buenos Aires, Hong Kong, or Houston, you probably won’t notice.

A study conducted by the Panamerican Health Organization found that Carbon Monoxide is the most emitted pollutant, almost all of which comes from motor vehicles.

In fact, according to the study, motor vehicles in Medellin are responsible for 58% of the city’s air pollution. Most comes from trucks and buses, which the local government has been phasing out in favor of natural gas vehicles. This should have a positive impact on air quality over the next few years.

One last potential drawback to mention, and this only affects some people– Medellin is not a walker-friendly city… not because there are no sidewalks, etc. Actually, the city is quite clean, you could almost eat off the streets.

The problem is the topography: Medellin is just too damned hilly. A short walk down the street can be the equivalent of 20 flights of stairs. Think San Francisco on steroids.

Taxis are such an integral part of the scene here that distances between two points are generally quoted by taxi fare… (“Oh, from my house to the bank is about 5,000 pesos”)

More on Medellin tomorrow.

March 3, 2010
Pattaya, Thailand

One of reasons that a lot of people are hesitant about making a move overseas is because they’re concerned about being isolated. The world can be a cruel place, especially to newbies.

Sure there are the nomads out there who want to be left alone with their little slice of paradise in the middle of nowhere… but most people crave some human interaction from time to time, especially from like-minded souls.

I’m one of those people. I enjoy the company of interesting, like-minded, and well-rounded individuals.  This is the chief reason that I’ve encouraged kindred readers to join us in the private Atlas 400 group, whose next gathering is coming up next month in Panama. I’ll be there.

On the subject of social interaction, I think Panama is one of the easier places in the world to meet people, both foreign and local. Despite Panama being a Spanish speaking country, the English language is absolutely pervasive, particularly in Panama City and Boquete.

It’s easy to meet anyone, and with the exception of a handful of elitist gringos who think too highly of themselves for having lived in the country for so long, most people are actually quite friendly and welcoming.

As a rule of thumb, the more ‘international’ a city is on a per-capita basis, the easier it will be to meet like-minded, English-speaking expats who are at your level.  Panama City has about 50,000 expats and roughly 1 million locals.  Boquete has a population of about 20,000 with at least 5,000 expats.

By contrast, as city like Shanghai has 300,000 expats and 17 million Chinese people, most of whom do not speak English.  You get the idea.

I’ve honestly found both Phuket and Pattaya, Thailand, which are fairly small cities of about 100,000 each, to be among the most international cities in the world on a per-capita basis.

Here in Pattaya, for example, I have gotten to know people from 6-continents– a Russian movie producer, a French investment banker, a Norwegian surgeon, Canadian entrepreneurs, a retired Australian footballer, an Indonesian factory owner, Yemeni medical tourists, Sudanese vagabonds, and a lovely topless sunbather from Peru.

In fact, Pattaya is the only place in the world that I have been to where on a single block you can see a dry cleaner’s sign in Arabic, a restaurant shingle in German, a real estate billboard in Russian, a newspaper kiosk in Thai, a travel agency in Mandarin Chinese, and a Go-Go bar promotion in English. It’s really amazing.

Just recently I was having lunch in an Arabic restaurant owned and operated by former Iraqi soldiers of the elite Republican Guard. When I looked around and saw Russians, Europeans, Africans, Arabs, and a handful of Jewish tourists eating large meze plates, I thought that I must have stumbled upon the center of the universe… or some strange version of MLK’s dream.

In these sorts of ultra-international locales, breaking the ice is as simple as asking the question, “where are you from?” Be prepared for long answers.

Other places that you may want to consider are Singapore, Hong Kong, Qatar, Capetown, Dubai (though it’s a bit pretentious), Georgetown (Malaysia), Punta del Este (Uruguay), Hanoi (Vietnam), Colima (Mexico), Medellin (Colombia), Cuenca (Ecuador), and just about any mid-sized city in Brazil (Natal, Florianópolis).

Mexico City (DF), Mexico

20 January 2010

My route to Panama has become quite slow and roundabout thanks to a bit of bad weather, and the fact that I gave up my seat on an oversold fight to accommodate a lady who was rushing home for a family emergency.

I am optimistic about this series of events, though, because I have the opportunity to once again put my boots on the ground in one of Mexico’s “most dangerous places.”

Ask a foreigner about Mexico City and you’ll get the “Good God don’t go there!” speech. After all, that’s where they filmed that kidnapping movie with Denzel (Man on Fire).

It’s funny how Hollywood and a few negative media reports can cause completely irrational levels of fear.  The general public is a willing participant in spreading misinformation (thank you, Wikipedia) as most people who render an opinion about ‘dangerous’ countries usually speak out of total ignorance.

To put it plainly, stories of chaos and violence in Mexico are substantially overrated, just like Colombia.  Mexico City, where I am presently, has the worst reputation in the country, but again, this is mostly hearsay and manufactured sensationalism.

Yes, kidnappings, drug trafficking, and violent crime occur in Mexico… just like they do in the US, UK, and Japan.  But Mexicans are no more cast in the throes of criminal violence than the average Italian who goes his entire life without ever once seeing a mafia henchman.

Oh, and lest I forget, the ’swine flu’ started here as well, further stirring the pot of falsehoods and misconceptions.

Here’s the bottom line– Mexico is one of the largest economies in the world and has an established, stable middle class. People do not hide in their houses from drug gangs; daily “OK-Corral style” shootouts do not occur; and there is no H1N1 pandemic.

My friend Jeff who lives on Mexico’s pacific coast recently had this to say in an email to me:

“You know, Simon, things in Mexico are definitely not how they appear in the American media.  Mexico is a huge country and is as diverse as the US, so to paint the entire country with one brush is simply an exercise in futility.

Honestly I would think that Americans and Canadians are safer here than in their home country.  I’ve lived in Acapulco for 2 years and haven’t personally seen or heard of ANY crime, including basic theft or anything.

When I lived in Vancouver it seemed that about once every month or two I’d have to scatter out of a nightclub with my head down as rival drug gangs shot it out… not to mention having my car broken into on nearly a monthly basis!”

Simon again. If you can get past the stigma, Mexico may be a viable option for you to plant a residency flag.  Personally, there’s no way that I could live here in Mexico City– the endless urban sprawl grates heavily against my DNA, and a country this size has hundreds of better options to choose from.

Regardless of your preference, though, the benefits to Mexico are plentiful, particularly if you are from North America:

First, it’s close to home and has an established infrastructure. You can drive back and forth (yes, it’s safe), or choose to fly to/from several of destinations– Acapulco, Guadelajara, Oxaca, Cancun, etc.

It’s so close that when I used to live in Texas, I would even fly from time-to-time down to Monterrey just to have dinner;  my favorite steak house in the world is located there, and the flight would only take about 35 minutes.

Second, the cost of living is reasonable. It’s not eye-poppingly cheap (go to Ecuador or Thailand), but you can do quite well in most cities for less than $2,000 (US) per month.

If you want to go high-end, premium properties on the coast list in the range of $3,500 to $6,000 per square meter– so a tier-1 ocean-view condo can set you back between $400,000 and $1.2 million.

Third, Mexico is already accustomed to a bit of social and political instability… whatever negative consequences shall occur down the road as a result of dwindling oil output and rising inflation will not cause a systemic failure– instability and economic challenge are nothing new here.

Contrast that with wealthier countries which have yet to undergo a widespread panic and collapse of confidence in its modern history. As strange as it sounds, you might find yourself better off in a society that has experience dealing with turmoil.

I’m often asked to compare Mexico to Panama, which frankly is a great question… I will save that for a future letter, but suffice it to say that they are different options for different desires. More to follow.

I’m sitting in a comfortable, overstuffed leather chair this morning typing away at this letter while a team of local women give me a traditional Thai foot massage.  30 minutes in the chair will set me back about $4, and I can’t think of a better way to part with my money.

It is with great hesitation that I’m even sitting in this chair– not because I don’t like massage, but because this particular chair happens to be at the airport.  You see, I’m waiting for my departure to Europe, and if it weren’t for an important meeting in Spain that I’m looking forward to, I would be staying right here in Asia.

It’s not that I don’t like Europe– I love it, actually… the scenery, the people, the history, the architecture. It’s hard to not feel alive on a summer day in Krakow, racing down a ski slope in the Italian Alps, or driving a Porsche down the Croatian coastline.

In terms of value for the money, however, Asia has Europe beat hands down.

Take this simple, $4 massage; it would be difficult, and entirely cost prohibitive, to find a team of European professionals who would be willing to provide this level of attention; Europeans feel that ’serving’ another human being is elitist, which is part of their egalitarian socialist dogma. The session would be courteous, at best.

Many cultures in Southeast Asia, on the other hand, are happy to go the extra mile, especially when there is a gratuity attached.  The ladies who staff this airport location, for example, wouldn’t even let me remove my own shoes and socks– they did it for me.

Having another person do that honestly makes me feel a bit uncomfortable… but providing this level of service is what they are accustomed to, if nothing else than for the gratuity at the end.

The motivation to earn more by providing excellent service is clearly more prevalent in the Orient than in Europe.  Neither mentality is right or wrong, just different. Naturally, though, as a consumer, I prefer a greater level of service.

Price is also a major factor. In Asia, with few exceptions like Singapore, Japan, and South Korea, you have to put up with some level of squalor– trash in the streets, gratuitous displays of poverty, etc. While these indications are not completely lost on Europe, it’s safe to say that cityscapes in the west, in general, are cleaner.

That being said, however, the price difference is enormous. The cost of living very well in Europe is easily five times the cost of living very well in Asia.  Is Europe five times as nice? Depending on what you are looking for, most likely not.

As I look around the world and price compare, I wholeheartedly believe that Asia and Latin America still provide the most value for the money.  My top picks for those regions are:

- Latin America -

1) Chile: Strong economy, beautiful landscape, modern and developed infrastructure. Living costs are low, and the cleanliness makes it feel like you are in Europe. The biggest concern with Chile is that it is growing too quickly; the Chilean peso is one of the best performing currencies in the world, so costs for foreigners are going up.

2) Panama: Also a strong economy with developing infrastructure and increasing local standard of living; costs in Panama City are going up, but if you get out of the city, you’ll find that you can still live incredibly well for very little.

3) Colombia: Clean, modern, and home to some of the best weather on the planet (especially in Medellin). You have to be willing to look past the “Colombia stigma,” but I guarantee it’s well worth the exercise in intellectual independence.

- Asia -

1) Malaysia: Home to a growing influx of Islamic funding, the country is on solid economic footing while maintaining very low living costs. Medical care is strong, and the “My Second Home” program provides an easy route to permanent residency.

2) Philippines: Stable economy, cheap real estate, and excellent English proficiency. Manila and Quezon can be tough, but just outside of the cities you can find inexpensive, pristine coastal property. I know many expats who are happily living out their years being fed grapes on a hammock with just a meager retirement pension.

3) China: Lack of English proficiency can be very frustrating… but China is becoming nicer and more livable by the day. In terms of its modernity, it will be the first developing nation in Asia to match the west, and it will happen in the next 5 to 10 years.

Naturally, I will provide more about these locations in future letters, but I wanted to give you a quick overview today; if you have any specific questions or your own additions, please let me know.

Amazingly enough, Hugo Chavez is giving us a gift.  Allow me to explain.

World leaders are gathered today in Berlin, celebrating the 20th anniversary of the fall of the Iron Curtain.  What would have been the greatest armed conflict in the history of the world was successfully avoided… peace prevailed.

Meanwhile, thousands of miles away, Hugo Chavez is stoking the flames of war in his region.

Notwithstanding the collapse of European communism, Hugo steers a rather unwieldly ship of socialism in Venezuela.  Hugo calls his brand “Bolivarian Socialism,” named after the famous Andean political leader Simon Bolivar who had served as President in Colombia, Venezuela, Bolivia, and Peru. 

Ironically, despite the moniker bestowed by Chavez, Bolivar was an avowed proponent of the free market who admired Thomas Jefferson and traveled with Adam Smith’s Wealth of Nations.  Hugo’s policies are a far cry from Bolivar… but then again, the US government does not exactly promote the ideals of the Constitution either.

Now Chavez and the United States find themselves pitted against each other once again, this time through Colombia as an intermediary.  Colombia and the US recently signed a military agreement that allows the US to do what it does best– station American military troops in a foreign land.

In this case, the agreement calls for US troop deployments to seven military bases across Colombia.  Their mission will focus on counter narcotic operations and fighting the paramilitary insurgency. 

Realistically, though, the US is clutching on to its presence in the region.  American forces have already been kicked out of Ecuador, and since the withdrawal from Panama in 2000, the closest military installation with US troops is Soto Cano Air Base in Honduras… and as you are undoubtedly aware, Honduras isn’t exactly a beacon of stability these days.

Furthermore, to say that the US military is stretched thin is definitely the understatement of the day.  Sending even more troops overseas to fight yet another noun (this time it’s the war on ‘drugs’) may end up being the straw that broke the camel’s back.

Fortunately, we have little to fear from Hugo Chavez, at least in terms of conventional warfare.  Over the weekend, while Sarkozy and Merkel glad handed with former resistance leaders like Lech Walesa in Berlin, Chavez was addressing his troops.

“Let’s not waste a day on our main aim: to prepare for war and to help the people prepare for war, because it is everyone’s responsibility,” he said.  A few days before, he sent 15,000 troops to the  border with Colombia, citing fears that the US would use its new presence in the region to attack Venezuela.

The fact remains, however, the Venezuela unequivocally does not want to start an armed conflict.

Colombian forces are battle hardened veterans; they have fought for years against guerilla and paramilitary groups, and their combat experience is among the most extensive in the region.

Not to mention, the Colombian military is well-funded thanks to its alliance with the United States… and military funding means top of the line weaponry.

Venezuela forces, by comparison, are poorly trained, dreadfully equipped, and inexperienced.

Sure, a similar matchup took place in the 1980s between Iraq (funded and equipped by the United States), and Iran.  The Iranians had very little equipment or training– their chief combat tactic was to hurl waves of warm bodies at oncoming Iraqi tanks… and Iran had  a lot of bodies at the time.

The tactic worked.  Millions died, and the long battle of attrition between Iraq and Iran ended in a stalemate. 

Venezuelans, however, do not have the Iranian’s overzealous religious resolve, nor do they particularly care for Chavez and his brand of socialism.

Consequently, if Chavez initiated an attack, it would look like amateur night on the Colombian border. 

Chavez knows this, so all of his rhetoric is simply bombastic statement that won’t be backed up with action– unless something truly catastrophic and unexpected happens, like a clear act of war from the Colombians or the United States. This is highly unlikely.

In the meantime, Chavez will continue his peacock strutting and scare the world into thinking that war is imminent.  I think he’s actually giving us a gift, though.

In 2006, Israel and Lebanon held a brief war… a few people came. Markets got jittery, and both the Israeli shekel and Lebanese pound had a brief plunge.  They returned to normal levels quite literally within days.

In the last few weeks since the Colombia/Venezuela saga began, I’ve watched the Colombian peso sink by 8% against the US dollar.  Part of this has been a dollar rally, but most of the swing has been because markets are scared of war with Venezuela.

I’m convinced the fears are unfounded.

Chavez is shrewd and at least reasonably intelligent to have gotten this far. Venezuela is beset by major problems– crumbling oil infrastructure, water scarcity, frequent power outages, etc. War is a great way to distract and unify the masses, but walking in to an absolutely certain military defeat is a fool’s bet.

As such, I think that if the Colombian peso continues to fall, especially past 2,050, it should make a reasonable short-term investment.

I know what you’re thinking.

“Why the hell would he be in Colombia?”

I get that a lot.  The vast majority of the world only knows two things about Colombia– drugs and terrorism (though in all fairness, ‘one man’s freedom fighter…’)

People recall hearing about kidnappings, lawlessness, and of course that scene from Clear and Present Danger… that must be the reality in Colombia, right?

Wrong. To think that cartels and kidnappings dominate the political and social landscape of Colombia is like thinking that everyone from Texas rides horses and wears cowboy boots… or even worse, acts like George W. Bush.

The fact of the matter is that you have about the same chance of getting kidnapped in the United States.

In Colombia, 8 foreigners out of roughly 1 million tourists were kidnapped in 2007, and 553 locals were kidnapped out of a population of 45 million.  That same year in the US there were 3,437 non-runaway abductions reported in the United States with a population of 300 million… pretty much the same odds.

Bottom line, if you don’t feel unsafe in the US, you shouldn’t feel unsafe in Colombia.

Furthermore, similar to how the United States adopted a culture of security after 9/11 with its ridiculous color-coded alerts and nationalization of panty-screeners at airports, Colombia (and Bogota in particular) has adopted its own culture of security.

Police and military forces are present everywhere… it’s impossible to walk on the streets Bogota for more than 5 minutes without seeing uniformed personnel and one of the billboards that says “The police are here to protect you.”

Fortunately, though, in my several visits to Bogota over the last few years, I have yet to have a negative encounter with the cops.  Whether in wealthy neighborhoods like the Zona Rosa, or more squalid areas in the southern part of the city, I’ve never seen the police hassling anyone.  It’s a show of force.

To further this point, Colombia’s tourism board recently changed the national tourism slogan to “Colombia– The only risk is wanting to stay…” (this is much better than Panama’s slogan “it will never leave you” which sounds more like a case of herpes.)

I couldn’t agree more. Colombia is an absolutely intoxicating country– beautiful, culturally vibrant, and economically sound. In fact, the most severe impacts of the crisis have largely sidestepped the country, which has shown the same resilience as Poland’s economy.

Bogota is a beautiful city

Here in Bogota, for example, the local newspapers are filled with help wanted ads for everything from medical transcriptionist to associate lawyer. Restaurants and shopping malls are not filled to capacity but still enjoying a steady flow of patrons.

There is also little sign of bubble carnage like closed shops, liquidation events, and an endless row of “FOR SALE” signs in front of properties.  In short, Colombia is appearing quite healthy relative to the rest of the world.

So would I live here? Absolutely. If you’re looking for a place that is off the beaten path, still undiscovered by the mainstream and quite close (3.5 hours) to the United States, I would strongly consider Colombia…

… but not Bogota. The capital city is nice enough, but unless you have to be in Bogota for a specific reason, the best city in Colombia in my opinion is Medellin.  In Medellin, the weather is… perfect. The people are extraordinarily friendly, the nightlife is spectacular, and the costs are very reasonable.

Bogota, in contrast, is slightly more expensive– I have posted a cost of living sample to the website for your review. But most of all, Bogota is a very difficult place to travel from. And for an international man, this is a big negative for me.

I would quite literally have to write you a sonnet to describe how inefficient the airport in Bogota is. The last time I was there it took me 2.5 hours from the time I arrived at the airport until I finally reached my gate.

check-in 'line' at Bogota airport: waiting time 1 hour

Immigration "line" at Bogota airport: waiting time 45 minutes

I have been to Bogota several times, and each time I hope the situation improves. It doesn’t.  Medellin is a much more pleasant experience– more on this in future letters. In the meantime, if you have any experiences living in or visiting Colombia, please feel free to share here.

A sample of basic household items in case you are wondering what is the cost of living in Bogota, Colombia–

All prices have been converted to US Dollars at 2,000 Colombian Pesos (COP) per dollar.

Cost of living in Bogota, Colombia as of August 2009 @ 2,000 Colombian Pesos (COP) / Dollar

Apples, 6-pack: COP 5,210 = $2.60
Bananas: COP 700/500g = $0.31 / lb
Beef, flatiron: COP 13,800/kg = $3.13/lb
Beef, sirloin COP 25,920/kg = $5.89/lb
Blender: COP 199,000 = $99.50
Bread, high quality: COP 5600/500g = $2.54/lb (loaf)
Carrots: COP 705/500g = $0.32/lb
Cashews: COP 11,100/100g = $25/lb
Cereal, granola: COP 5,650/500g = $2.56/lb (box)
Chicken, breast: COP 16,270/kg = $3.69/lb
Chicken, drumstick: COP 10,920/kg = $2.48/lb
China set, 20 piece: COP 139,900 = $69.95
Corkscrew: COP 14,900 = $7.45
Corn: COP 2,125/500g = $0.96/lb
Cutting board: COP 8,500 = $4.25
Egg, 1-dozen organic: COP 8,030 = $4.00
Egg, 1-dozen w/omega: COP 7,280 = $3.64
Egg, 1-dozen: COP 5,260 = $2.63
Gasoline, unleaded: COP 7,000/gallon = $3.50/gallon
Lettuce, organic: COP 3,540/250g = $3.21/lb
Lettuce: COP 2,860/220g = $2.94/lb
Long distance to USA on mobile phone: COP 330 = 16.5 cents/minute
Microwave, large: COP 299,000 = $150
Milk: COP 1,780/L = $3.36/gallon
Newspaper, local daily: COP 1,300 = .65
Olive oil, extra virgin: COP 38,400/L = $19.20/Liter
Onion, white: COP 2,580/500g = $1.17/lb
Pan, square griddle: COP 39,900 = $19.95
Plum: COP 5600/500g = $2.54/lb
Pork, Argentine chorizo: COP 11,640/500g = $5.29/lb
Pork, bone chop: COP 20,590/kg = $4.67/lb
Restaurant Meal for 1 at a cheap restaurant: COP 3,000 = $1.50
Restaurant Meal for 1 at a full service restaurant: COP 18,000 = $9
Shampoo, Pantene: COP 8,650/400ml = $4.32 (medium sized bottle)
Soap, bar 3-pack: COP 4,960 = $2.50
Strawberry: COP 12,150/kg = $2.76/lb
Sugar, refined: COP 4,290/2500g = $0.39/lb
Taxi, from Bogota airport to northern sector: COP 25,000 = $12.50
Television, 42″ Plasma (Samsung): COP 1,899,000  = $950
Toaster oven: COP 37,4950 = $187.48
Tomato, organic: COP 6,900/kg = $1.56/lb
Tomato: COP 1,090/500g = $0.50/lb
Toothpaste: COP 4000 = $2.00
Water, 5L COP 4,040 = $2
Wine, Spanish imported: COP 23,800 = $11.90