NEWS/BLOG

Nicaragua - Real Men Don’t Carry Umbrellas

If you want to live in the tropics on a budget and don’t mind foregoing certain amenities, Nicaragua might be the place for you. There are drawbacks: the roads are bumpy and sometimes flooded; temperatures range from hot to very hot; utilities aren’t always reliable. Umbrellas are available, of course, but as Randall Wood and Jashua Berman write in Moon Living Abroad in Nicaragua, “...although Nica men sing dance, and write poetry, real men definitely do not carry umbrellas.”

This is just one item in their list, “What Nicaragua Has Taught Me.” Wood and Berman moved to Nicaragua in 1998 and they write, “it ended up being the perfect fit.” These writers know and understand Nicaragua; it may help that Wood has Nicaraguan in-laws. This the book to read if you’re seriously thinking of Nicaragua as a place to live or even to visit. Part of Moon’s respected Living Abroad series (not related to Network for Living Abroad), it’s one of the best in the series.

Nicaragua is either the second or the third poorest country in Latin America, depending on your source of information. However, low prices should never be the prime reason for moving to a new country and a new culture, and these authors warn against moving to Nicaragua to take advantage of cheap land and cheap labor.

Expats who come here because of the friendly people, relaxed pace and breathtaking landscape won’t be disappointed. While expats often fail at becoming part of the local culture elsewhere, Nicas take an unusual interest in foreigners. Very little English is spoken, and the authors recommend learning at least some Spanish.

Nicaragua has visa and residency programs that allow foreigners to live here. There’s red tap, of course. Wood and Berman suggest getting to know the vendors outside the immigration building because you’ll be making many visits and eating many lunches here. They acknowledge that the process may be discouraging, and they offer some useful tips.

A special program lets retirees bring in a vehicle and up to $10,000 worth of personal possessions. Since cars, electronics, furniture and linens cost more here, this can make sense. These authors note, however, that many don’t take advantage of this.

The book suggests budgeting $800 to $1200 for living expenses, more in some areas, and other sources hae recently pegged the amount at $1000. Individual needs vary, of course. Doing business is possible in Nicaragua, but this book warns that it’s “not for the faint of heart.” Opportunities to volunteer abound, however. Many expats who are far from wealthy come here hoping to make a difference.

Like others in the series, the book gives sample itineraries for trips lasting one week, two weeks and one month. The most pages, however, are devoted to various cities, towns and neighborhoods where expats may want to live. Also included are fascinating profiles of expats with details of their lifestyle along with any complaints and advice to others.

Employed expats are more likely to live in Managua, the capital, and the book describes various neighborhoods. Expats who have a choice may opt for the charming,colonial city of Granada, situated on Lake Cocibolca. Nearby Las Isletas, a peninsula, is a tourist destination with some restrictions on buying property.

The Southwest, along the Pacific and to the north of Costa Rica, draws more local tourism as well as backpackers. The town of San Juan offers rentals and real estate in all price ranges. Note: no building is permitted along the beach. Further south, Isla de Ometepe is a charming spot that has avoided the real estate boom across the lake in Granada.

Leon, the other colonial city, is in the north, with a more pronounced dry season along with higher temperatures. Home to the National University, and a haven of progressive thought, it offers old world charm equal to that of Granada with housing costs are lower. Nearby are beach towns with reasonable rentals.

The Caribbean Coast is a world apart, a rustic spot even by Nicaraguan standards. It was colonized by the British, who left the indigenous peoples intact and armed them with muskets, hence the name “Miskito” (no, not mosquito) Coast.

Also included here are Spanish phrases, basic vocabulary, multiple resources and bibliography. It’s all in a paperback small enough to take with you.

A Call to Help Flood Victims in Peru

Over 12,000 people have suffered the effects of severe flooding in Peru ’s Sacred Valley between Cusco and Machu Picchu. Planeterra has mobilized an onsight team to help with the immediate needs of the local people. The nonprofit has established an online help site: Peru Flood Relief (https://app.etapestry.com/fundraiser/PlaneterraFoundation/PeruFloods/) where the public can make charitable donations.

One of the communities severely impacted by the flooding is Ccaccaccollo, an indigineous community devoted to pastoral and agricultural activities. It is also home to Planeterra’s women’s weaving cooperative (http://www.planeterra.org/pages/project/19.php?id=23), a community which travelers visit as part of the organization’s Project Peru voluntourism adventure.

An appeal has also gone out to anyone now in or planning to visit Cuzco. Donations of blankets, sleeping bags, warm clothes for children and adults, jackets, raincoats, tents and mattresses, dried food (rice, pasta, oatmeal, cans of tuna, sugar, salt, evaporated milk, etc) and matches can be dropped off at: Hotel Tupac Yupanqui (Calle 236 San Agustin) in Cusco.

German Mettle?

An update from the currency exchange firm World First.

”People think we are in a mess. We are.” George Papaconstantinou, Greek Finance Minster.

I had the opportunity to sit next to an eminent economist at a reunion dinner on Saturday. The former chief Labor economic adviser now specializes in financial regulation and he certainly had some interesting comments on the current sovereign debt crisis in Greece, what it could mean going forward and why it highlights the problem of trying to use a unified monetary policy to control such disparate economies.

Interestingly, the whole crisis could be averted should Germany come out and publically guarantee the debt.  However, this is a risky strategy even though the Germans hold the largest percentage of Greek debt. The number of countries behind Greece with the potential for similar problems has been well documented and the precedent set could be rather dangerous. The cost of insuring against sovereign default soared in January and the concern that the loss in confidence in sovereign debt, especially US treasures, considered the world’s risk free asset, could have calamitous consequences for the still fragile recovery. Exaggerated fears of sovereign risk could prompt governments into premature fiscal austerity, which could push the world economy back into recession.

In spite of this, the Germans are less than willing to come out and make this statement because, as the premier global manufacturer, they are seeing the euro weaken and with it increasing the competitiveness of their goods in the market. They will have been especially keen to see the large EURUSD move over the past few weeks with many in Germany rubbing their hands with glee.

If you compare the UK to Germany, the argument for a weaker GBP becomes stronger with time and is testament to the ability of the UK to set its own monetary policy. As we have mentioned before, this allows the Central Bank to control the supply of money, availability of money and the interest rate. It has been essential in guiding the country through recession and has enabled a very close degree of control to be exerted over the economy, the lack of which some European countries have deeply missed.

The news that the UK Government still had to borrow in January, when historically incoming tax receipts sure up finances, was a stark reminder of the fragility of the recovery ahead. If the predicted exaggeration of sovereign debt risk is born out it would have catastrophic consequences on the recovery as the Government would be forced into a premature period of austerity. The need to not turn off the taps too soon versus need to sure up the debt position in the country to something resembling sustainable are the two conflicting worries that keep ministers up at night.

The complex relationships between sovereign debt and the foreign exchange market can be seen more now than ever before and with the Germans eager for a weaker euro it would be foolish for Britain to think that a stronger pound would do the economy any favors at the present time. So while both the UK and Europe would like to see a stronger pound, it might be to the detriment of the recovery. You can’t always get what you want, but if you try sometimes, well you might find you’ll get what you need.

Trade of the Week

This week’s trade of the week is a Tarn Convertible. This structure combines the ability to buy above the current market price with the ability to gain should the market move in the client’s favor.

The way a TARN works is the client has a strike rate above the current market, in this example at 1.61 on GBP/USD, and a “bucket” of figures to use, let’s say 17. If the market is trading at 1.52 then the client will get 1.61 and have to spend 9 figures from their bucket. The next month they have 8 figures to spend and this continues until the bucket reaches zero or the term of the structure comes to an end.

If the market is trading above 1.61 then the client is able to benefit up to a level of 1.66 without using any of their remaining figures in the bucket. If on the day of expiry the market is trading above 1.66, the client is obliged to buy his dollars at the strike rate of 1.61.

This trade works for both buyers and sellers of sterling and is available against other currencies (euro, yen, Aussie, Kiwi).

For more information, see World First.

See Disclaimer below.

GREECE HAD HELP FROM GOLDMAN SACHS

The debt crisis has more in common with the credit crisis in the U.S. than one might think. According to a New York Times story, February 13, Greece has sought and found help in the form of innovative financial products from none other than Goldman Sachs.

Greece needed money but its politicians, like politicians everywhere, did not want to be seen as incurring debt. Almost no rules exist as to how countries may find the money to meet their needs.

The bankers invented new financial instruments and gave them names from Greek antiquity. Aeolos, a legal entity created in 2001, helped Greece reduce the debt on its balance sheet that year. In exchange for ready cash Greece gave away future landing fees at the country’s airports. Ariadne, created in 2000, meant forfeiting the revenue from its national lottery. These appeared on the books as sales rather than loans.

There were more such deals, all effectively mortgaging the future of a country with such a proud past, and threatening European and in fact global economic stability.

The Plot Thickens in Greece

An update from the currency exchange firm World First.

The story in the markets at the moment is Greece. A country that contributes roughly 2% of the EU’s GDP could contribute to the downfall of the biggest single currency experiment since cavemen fashioned tokens from shiny rocks.

But it won’t. The Union must come first. A poll in the German paper Bild am Sonntag showed that the 53% of respondents wanted Greece thrown out of the EU and over 60% were adamant that German money should not be paid to the Greeks in the form of a bailout. Germans obviously have short memories; it was the beggar thy neighbor approach to crisis in 2008 that extended the downturn. A similar lack of foresight would likely see this Hellenic hell spiral down deeper.

Angela Merkel is a canny political operator; you have to be to become the first female Chancellor. The fact is that the German economy is exposed to the PIIGS heavily. German investment in Portuguese, Irish, Italian, Greek and Spanish debt roughly equates to 19% of German GDP ($3.65 trillion in 2008). $693.5bn; so roughly the same size as the Polish economy or half the size of Canadian GDP. Germany simply can’t afford to let Greece or any other EU members go bust. Doing so would leave a hole in their finances so monstrous that the rest of the EU would implode.

There is a split in the ruling coalition with one politician going as far to say “Solving this problem cannot be about aid for Greece. If anything, it’s about keeping any damage away from German taxpayers.”

The outlook for the euro is, as a result, weak. Hedge Funds and the speculative fraternity will look to drive the currency to its knees as rumor and uncertainty continues to swirl. The EU economy was the least well equipped to deal with the problems that the credit crunch and the winds of austerity brought to its shores.

There is a meeting going on between European finance ministers to discuss the Greek problem Change in a normal state normally moves in painfully slow increments. Greece cannot wait forever though; if no bailout is forthcoming by April then the Uk along with its European neighbors, will be entering a chapter of financial history that would truly define downturn.

Disclaimer: The above comments are the views of World First and should not be construed as advice. You should act using your own information and judgment. Although information has been obtained from and is based upon multiple sources the author believes to be reliable, we do not guarantee its accuracy and it may be incomplete or condensed. All opinions and estimates constitute the author’s own judgment as of the date of the briefing and are subject to change without notice.

Any rates given are “interbank” i.e. for amounts of £5million and thus are not indicative of rates offered by World First for smaller amounts. E&OE. Definitions of jargon/market terms can be found in our Glossary of Foreign Exchange Terms.

This financial promotion is issued in the United Kingdom by World First Markets Limited which is authorized and regulated by the Financial Services Authority (“FSA”) to provide advice on and execute trades in derivatives.  Please note that other activities that may be referred to in this material, such as the execution of spot foreign exchange trades, do not fall under the remit of the FSA.  World First Markets Limited’s FSA Firm Reference Number is 477561.

Investing in any of the hedging strategies contained in this material involves certain risks, for example that the exchange rate at expiry of the contract is less favorable than if you had entered into a forward contract.  Please ensure that you fully understand these risks before investing.  If you are in any doubt as to the nature of these risks, please speak with your financial adviser or an adviser at World First Markets Limited.

There are a number of charges that we will levy if you enter into a hedging strategy.  The nature of these charges depends upon the specific strategy, but may include an up front premium.  We recommend that you read carefully the details of these charges which are set out alongside the description of each strategy.

For your protection, telephone calls are usually recorded

For more information see World First. 

Safety Tips for Driving in Ireland

Whether you go to Ireland for a vacation or to find a new home abroad, you’ll probably want to rent a car or “hire a car,” as they say over there. Whatever your goals are, you’ll get more out of your trip with a car because so many interesting places are not accessible by bus or train.

If you’re coming from the U.S. or one of the other countries where people drive on the right side of the road, your’re probably aware that in Ireland, people drive on the left. Don’t let this deter you from getting behind the wheel of a car. When you pick up your rental car in Dublin one of the other cities such as Shannon or Cork, take a few minutes to get oriented before setting of on this venture.

Become accustomed to the layout of the car and the image you see in the mirrors. With the driver’s seat is on the right, notice that your left hand controls the gear shift. The door and the wing mirror will be on the right and the central rear view mirror will be on your left. Test the various controls before and make sure you understand how they work. Be sure you know where the windshield wiper and headlight controls are.

Remember as you head into traffic - always stay to the left of the road. This may be easier to do if you consider that you, the driver, will always be near the center of the road and the oncoming traffic. Also, pass traffic islands to the left and go clockwise on roundabouts.
The first thing in the morning or after driving on quieter roads, people may forget; stay alert and you’ll do fine.

Also, familiarize yourself with Irish road signs before you arrive; books for travelers often include them. Warning signs may seem provincial, but the most if not all are understandable. Direction signs for motorways will be in blue, for national roads in green, and for local roads in white. Signposts for places of interest appear on a brown background with white lettering.

Make sure you have enough gas or petrol as filling up stations can be quite spaced out in rural areas, with most of them not offering 24 hours a day, 7 days a week service. Try to fill up whenever the tank is half-empty.

Drive with care and consideration and expect the unexpected. Ireland is largely a rural country and many of their roads will have rural traffic, such as tractors and farm machinery on them, especially from March to October. Wildlife or farm animals such as sheep and cattle may also appear from nowhere, so drive slowly around blind curves and at the crest of hills.

Avoid illegal parking; many towns employ private companies to monitor parked autos. Those not legally parked can be clamped or towed away, resulting in inconvenience as well as a large fine before you can continue on your way.

Know your car, follow these basic steps and you will enjoy the winding and undulating roads of Ireland and the many things that the Emerald Isle has to offer the visitor or the prospective resident. If something seems confusing or if you get lost, don’t hesitate to ask for help. The Irish people are famous for their hospitality and friendliness, so you’re not likely to be disappointed.

Trouble Ahead in European Markets

Stock markets across Europe have plunged as much as 6% amid worries that a financial crisis might be just around the corner with the result that the Euro is now at $1.37. a seven-month low against the US dollar. The dollar’s bounce hurt the prices of commodities traded globally in terms of the U.S. currency.

Like the United States, Europe has been suffering from a recession. France and Germany, the largest of the 16 countries using the euro as their currency, have taken important steps toward economic stability. Certain other countries—including Greece, Portugal, Spain and Ireland (all expat havens, by the way)—are having difficulty paying for years of debt-driven expansion. The debts are now coming due and in a worst case scenario, defaults could ensue, with a ripple effect across Europe.

In the credit markets on Thursday, February 4, the cost of insuring the debt of the countries with large budget deficits against default rose. This came on the heels of several items of grim news. One was that the European Commission had put Greece under more pressure to cut its deficit. Another was that the Portuguese government had sold only €300 million ($417 million) of treasury bills at an auction, compared with an offer of €500 million. and finally,that the Spanish government had raised its budget deficit forecasts for 2010 through 2012.

The European Central Bank is leaving the key lending rate for the 16-nation euro zone unchanged at 1%, and the Bank of England is keeping its interest rate 0.5%.for the time being, the Bank of England has halted the central bank’s 200 billion pound ($319 billion) series of bond purchases, opting to weigh the impact of so-called quantitative easing on the British economy.

The Chicago Board Options Exchange’s Volatility Index or the VIX, which measures investors’ nervousness about upcoming market swings, soared 20.9% on Thursday. The index is trackable (and tradeable) as VXX.