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Pro-Ecuador Insiders' Newsletter, Issue #004 -- Ecuador Offers Protection From a U.S. Recession
December 12, 2007

Ecuador Offers Protection From a U.S. Recession

by Jason Murphy

My decision to move to Ecuador, and especially to buy property here, was based primarily on intuition. I decided to purchase my condo in Santo Domingo before visiting the property and before moving to Ecuador. I trusted my intuition and I am happy.

Recent news headlines talk a lot about sub-prime loans, the housing market, and the possibility of a recession. From the December 6th Economist print edition:

“AMERICA'S housing market is on its sickbed. Sales of lived-in houses fell by more than a fifth in the year to October. The backlog of unsold single-family homes has risen to 10.5 months of sales, the highest for 22 years. And despite a sustained fall in house building, there is still more than eight months' supply of new homes yet to be sold.”

I have been watching the U.S. market fall while the value of my property in Ecuador has been steadily rising. Historically, U.S. market fluctuations have affected the global economy but this time things are different. The article continues:

“Less certain is whether the rest of the world will catch America's property flu. The Economist's quarterly round-up of global house prices suggests that American sneezing has already induced a few sniffles in other rich countries, but that emerging economies have so far proved immune.”

The international media is aligned with my current experience with the statement “…emerging economies have so far proved immune.”

My question is whether or not Ecuador would be immune to a possible recession in the United States.

“WASHINGTON (MarketWatch) -- The U.S. economy is likely to slip into a mild recession in 2008, said economists at Morgan Stanley, which is the first major Wall Street firm to predict a recession."

This recession may result partially from record high energy and commodity prices. Whereas consumers in the United States suffer from high oil prices, Ecuador is a net exporter of crude oil and is experiencing a period of record high revenues. Gasoline in Ecuador sells for $1.48 per gallon and diesel $1.03 per gallon, and has not fluctuated in the year and a half I have been here.

Text of Federal Reserve statements Tuesday:

“The Federal Open Market Committee decided today to lower its target for the federal funds rate 25 basis points to 4-1/4 percent.

Incoming information suggests that economic growth is slowing, reflecting the intensification of the housing correction and some softening in business and consumer spending. Moreover, strains in financial markets have increased in recent weeks. Today's action, combined with the policy actions taken earlier, should help promote moderate growth over time.”

The Fed has a difficult task regarding interest rates. Low rates typically reduce the strength of a nation’s currency. However, in this case failure to reduce rates enough could increase the changes of a recession.

Ecuador is a great place to hedge against both a potential U.S. recession and a falling U.S. dollar. Prices are low compared to value and the economy is growing.

If you are interested in Ecuador real estate, our friend Jorge Quilumbaqui has an excellent project in process.

Located just off a side street in the small northern hamlet of Cotacachi, Ecuador, behind a high earthen wall and through a grove of old avocado trees, lies Primavera II, the second phase in a very special development.

Hidden away in a park-like setting, this premier Ecuador real estate is now being offered at pre-construction prices. These units are priced in the $40’s, which includes private parking, gated security entrance, completely fenced, and beautifully landscaped.

Visit to learn more.

Living in Ecuador Blog

Today we launched our Living in Ecuador Blog. We share our daily Ecuador Experience as well as answer your questions about Living in Ecuador. You can read answers to questions from Pro-Ecuador readers…and more!

We encourage our readers to submit questions and post comments.

Click here to visit the Living in Ecuador blog.

Click here to ask a question about Ecuador.

Best regards,

Jason Murphy

Jason is a business consultant living with his Ecuadorian wife Tania in Santo Domingo de los Colorados, Ecuador.Click here to read Jason's bio

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