Escape Hatch – Costa Rica here we come!

Here is an excerpt taken with permission from the highly regarded High-Tech Strategist Newsletter written by Fred Hickey who recently purchased a home in Playa Hermosa, Guanacaste, Costa Rica.

Fred Hickey has produced the High-Tech Strategist Newsletter for over 25 years and is a highly respected investment analyst and forward thinker.

“Escape Hatch

As you can gather, I am very concerned about this country’s direction [United States] – and have been for years. The near-total collapse in the financial system in 2008 was a scary moment indeed, and I’m not sure the risks have lessened much. The “weapons of mass destruction”(derivatives) remain in place. This country cannot continue down the path of spending massively more than it receives in revenues. Yet the huge increases in entitlement spending (which are placating the unemployed masses), cannot be continued forever. Necessary cutbacks in entitlements could be messy. For now, we have no breadlines or shanty-towns (as in the 1930s) because the government takes care of everyone – through its deficit spending. The end result of the money printing experiment may lead to inflation and a worsening in the inequality gap between the rich (who benefit from asset inflation) and everyone else. I worry that our bootstrapping culture is no longer the same as it once was and our people may react badly in difficult times.  Almost 41% of all children in the U.S. are born to unwed mothers (all races).  For blacks, the rate is a staggering72.5%. Over the past several months, some of the best performing stocks have been gun makers such as Smith & Wesson.  Not a happy thought. While I remain hopeful that we can right ourselves, as we’ve done before, there are growing risks.

Many smart and well off people are making plans to escape, if need be. Liberty Media chairman John Malone told The Wall Street Journal (in 2010): “Well, my wife, who is very concerned about these things, moved all her personal cash to Australia and Canada. She wants to have a place to go if things blow up here.  Canada has a lot more fiscal and bank responsibility than most places in the world and lots of natural resources.  We have a retreat that’s right on the Quebec border.  We own 18 miles on the border, so we can cross. Anytime we want to we can get away.”

I’m happy in New Hampshire (except in the long winters).  I’m not hoarding stores of food, guns and ammo. Given the choice, I’d rather flee than fight. For some years now, I’ve been researching potential winter escapes – with a secondary goal of establishing an “escape hatch.” This year’s bout with double pneumonia accelerated the search.  Canada was ruled out (too cold in winter). Locations such as New Zealand and Australia were too far away from friends and family.  We looked hard at Florida, but it’s still in the U.S. and not warm enough in December-February for Kathy. Many Caribbean islands don’t have enough resources or have drug and violence problems.  Finally, a couple of years ago we narrowed our search down to Costa Rica, and specifically a region in Costa Rica named Guanacaste.

The weather there is incredible, especially during the “dry season” November-April, when it almost never rains. The climate is “tropical dry forest.” During this period (overlaps with the period we need to get out of New Hampshire) every day is the same: high temps around 90 degrees, lows at night in the 70s. There’s no humidity because of the lack of rain, Very comfortable. In the May-Oct. period (green season) it’s nice during the day, highs in the mid-80s, but it typically rains by late afternoon (like in Florida). It is humid, but still very pleasant. It’s considered to be the finest weather in the world.

Guanacaste is the most sparsely populated area of Costa Rica. It is mostly farmland. You can drink the water right out of the tap. In the mid-2000s a U.S.-led real estate boom erupted on the Costa Rican Pacific beach areas. As the U.S. real estate boom turned to bust, so did this area. There are now incredible bargains to be had. We purchased a house on a cliff 300 feet above sea level with spectacular views in the beach community of Playa Hermosa. We paid 45% below the original list price (first listed in Sept 2010) and 20% below the latest offer from a “motivated seller” (an American businessman).  Property taxes are very low.  U.S. citizens have the same property rights as native Costa Ricans.  The government encourages expats.  The country has the highest number of U.S. citizens per capita outside of the U.S.  There’s also a huge Canadian presence. The wonderful Grant’s Interest Rate Observer has in recent months been doing a series of articles on real estate bargain areas around the U.S. In my opinion, real estate in Costa Rica is an even a better opportunity.

The people are extremely friendly. Costa Rican’s are the happiest people in the world (Gallup survey). The literacy rate is 96%, (higher than in the U.S.). The family structure is very important there.  The vast majority of the people are Catholic.  The government is a stable democracy.  There is no army – it was eliminated 63 years ago. Costa Rica is called “The Switzerland of the Americas.”  The unemployment rate is 6% and it was lower (4%) before the global slowdown.  In addition to pineapples, bananas and coffee, one of the top exports is technology products.  Intel has a huge factory in Costa Rica. IBM, Hewlett-Packard, Proctor & Gamble also have large operations there (in a different part of the country).  Inflation runs around 5%. There is virtually no violent crime in the area, just petty stuff.

A brand new modern airport terminal opened less than a year ago, twelve miles away from our home. It is about a 20 minute drive on all paved roads for us, door-to-door.  Most major U.S. airlines (including American, United, Delta, US Air, Frontier and Jet Blue to name a few) fly in there, with three hour direct flights from Atlanta, Miami, Charlotte and Houston.  JetBlue just recently started direct flights out of New York.  We paid under $500 round trip for the 5-hour direct flight from NY.  It is easy access to and from the US for us.  A brand new hospital is complete just outside the airport.  At our home we have high-speed wireless internet access.  The cable TV service has about 20 channels in English, all the major Miami channels (ABC, NBC, CBS), as well as FOX, CNN, ESPN and even CNBC (OK, so Costa Rica’s not perfect).  There are several supermarkets nearby, carrying a wide variety of American products. The ‘culture shock’ is limited here.

 To get a sense of the properties available, the following YouTube video of the very house we purchased is below.  This was filmed by the seller’s realtor. This house has spectacular “million dollar views” of the Pacific Ocean, but I paid much less than that for it.  The house is in a gated community.

Video No Longer Available

The history of the house is that it rents well.  We are retaining the excellent management company that’s been managing it for the last three years.  There is a ‘flagship’ Four Seasons resort nearby, as well as a Westin and Hilton for anyone that wants to come down to investigate.  If anyone wants to rent a house, (including the one we just purchased) the management company has a stable of about 50 beautiful homes to choose from. It’s much less expensive than the resorts and renting would give you a sense of living in Costa Rica.  Just send us an email request and we’ll send the link to the management company. We also have an excellent real estate broker that we can heartily recommend. I’ve been offered referral fees, but will not accept them. We also have real estate attorneys we can recommend.  Just send us a request.

Warmest regards,

 

Fred & Kathy Hickey

High-Tech Strategist”