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Weekly Update Bulletin On-Line.........  
In The News, Editorials, and Readers Write In (with our answers to Questions)

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Once again we turn the corner into a new calendar year and we can think of no better time to take out our crystal ball for 2005.  What is ahead on the horizon economically, politically and even socially?  Your guess is as good as mine, but as always is the case, there are some trends and events to keep an eye on which should offer at least a glimpse or indication where things might be headed.  With this theme in mind, the following are some news stories and commentary regarding trends and issues to watch out for in 2005.
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IN EUROPE, VIEWS, IMPACT OF DOLLAR VARY - By John Daniszewski, Times Staff Writer - December 31, 2004
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LONDON -- Across Western Europe, manufacturers are bemoaning the rising value of European currencies, saying it makes their exports less competitive. Consumers, on the other hand, are happily opening their wallets for U.S.-made products and Florida vacations, which look cheap on this side of the Atlantic when calculated in pounds and euros.  Although European officials are complaining, he said, many academics see the currency slide as a timely adjustment that could help the U.S. economy avert a recession that would cause more pain in Europe later.
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http://www.latimes.com/news/nationworld/world/la-fg-
eurocurrency31dec31,1,478683.story?ctrack=1&cset=true

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2004: BUSINESS YEAR IN REVIEW - In the first of a two-part review of the year, World Business Report asks if the greenback's days as the top global currency are numbered?  By Martin Webber, BBC World Business Report editor - December 27, 2004
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For much of 2004, the world has looked on as the US dollar dropped in value against the euro and the pound.  In the first of a two-part review of the year, World Business Report asks if the greenback's days as the top global currency are numbered?  Concern about where the US economy was heading led to a sharp fall in the value of the dollar, heralding suggestions that the dollar is on the way out as the global top currency.  The last century saw the demise of gold as the world's key store of value. It was replaced by the dollar as the asset most central banks around the world wanted to hold.  But since April this year, the dollar has slid by 12% against the euro and by 10% against the pound.  Not surprisingly, tourists around the globe are now regularly being asked for payment in euros rather than dollars.  Any country that spends beyond its means usually ends up devaluing its currency, and the US continues to spend heavily on foreign wars and tax cuts.  Stephen Roche, who is chief economist at the bankers Morgan Stanley, in New York, told World Business Report that Americans had overspent other people's money.  The US economy continues to grow beyond its means. It has gone deeply into debt. I do not think that this is a sustainable recipe for economic growth for the world's dominant economy.  We have demanded and asked more of the world in the way of financing our own economic growth than any nation has done in recorded history.  Globalization cuts both ways and if foreign investors ever - for what ever the reason - get tired of investing in dollar denominated assets, then the US dollar cracks, interest rates shoot up sharply and our asset dependent economy goes up in smoke.
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http://news.bbc.co.uk/1/hi/business/4112649.stm
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EDITORS NOTES:  The fact that the US Dollar has been dropping like a rock, and even more aggressively after the US Presidential election as we predicted previously, is no secret.  What is very interesting however is the fact that we are hearing now that this is being done deliberately to avoid a US recession.  This is something NOT touted in US based media sources that Americans read or are hearing.  In fact and on the contrary, US officials seem to be telling US citizens that the US economy is much better now, or at least is improving.  However, despite rhetoric to the contrary, it seems to us that the official fiscal policy of the current US administration is inflation, or severe devaluation of the currency as an alternative to other things (devaluation of the currency is a direct result of inflation, or printing more money than the economy can support).
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In short, what is the net result?  We suspect that the manufacturers of many foreign goods (non US made products) will probably elect to absorb some of the currency exchange loss and NOT increase prices for products sold in the US, at least for the moment (which is what the US Central Bank, also known as the Federal Reserve is counting on so US consumers do not see any retail price hikes accordingly - and of course as a result they can claim there is no inflation for US consumers).  Most notably are the Chinese however, who have a policy of an artificial fixed exchange rate to the US Dollar, with the goal of keeping Chinese products inexpensive (even at perhaps a short-term cost or lower profit margin).
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However, aside from the Chinese as one exception, foreign manufacturers will not take a loss forever and other commodities and or products probably will increase in price going forward (oil as just one example).  Oil did drop back down to the US$40 range, but it did hit US$50 very recently before that - AND the oil is running out according to many noted geologists (not to mention a weaker US Dollar makes imported oil more expensive simply because of the currency decline).  Also, if the US currency continues to tumble and US interest rates remain at less than 4 percent, you will see an exodus of foreign capital from the US (this has steadily already taken place) until such time that interest rates go back up to compensate (the US Dollar has already lost MORE than 10 percent of it's value versus the Euro, so 4 percent interest rates do not make up for it).  Of course higher interest rates will for sure pull the US economy into recession, so it is a double edged sword indeed.
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In addition, market rumors that one of the biggest creditors to the US (China) is looking to stop buying US Government Treasury Bonds and instead buy gold - will add pressure as well.  So, the bottom line is we see higher interest rates in the US as inevitable (either to stem the tide of foreign capital currency financing US deficits from leaving, or as a simple economic result of inflation in general).  Bad news for anyone that does NOT have a fixed rate mortgage or that has one of these floating rate interest only mortgage payment plans.  In summary - Keep an eye out for higher US mortgage and other interest rates, higher gold prices, higher oil prices going forward and the possible demise of the US Dollar as the world's safe haven currency (perhaps the Chinese may be buying gold so they can let the Yuan float freely as an international gold backed currency alternative in the future).  Sounds crazy, but in a capitalistic economy controlled by a political dictatorship, as is the case in China, they do have the economic will (China has made a whole lot of money over the past twenty years) and political capacity to carry it out.
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CHINA: THE NEXT WORLD ECONOMIC SUPERPOWER?  WILL THE THIRD-WORLD NATIONS BECOME THE NEW RICH?
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Sound crazy does it not?  It will seem so especially for Americans, who have been educated and raised to believe that the US is the premier nation on earth, both economically and politically, but this is part and parcel of the problem as well.  Americans will have a very difficult time accepting a lifestyle decline in this regard, and in fact it would seem that both the US political machinery and the US consumer are in denial.  However, as painful as it may be, the numbers do not lie.  Europeans will be facing some tough situations also going forward, as the democratic social welfare states of Europe find themselves unable to continue to pay for the varied and very generous social welfare benefits in place there as well.  However, Europeans have learned to get by and live on less than their American counterparts (less disposable income after taxes and no so-called American Dream culture whereby it is expected the sky is the limit economically speaking).  So, is this a US only phenomenon?  The answer is no, but emotionally speaking, the Europeans do not have the same mindset or difficulty in taking a step back in terms of their own history.
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In terms of investment opportunities and relocation ideas - keep a look out for countries that have a net trade surplus (they export more than they import).  Also, keep an eye on growing economies where cost of living and housing is still affordable (at least in terms of European or North-American prices for the same kind of housing).  We have seen a tremendous upsurge in both Americans and Europeans who are interested in expatriating, or better said, interested in living somewhere else whereby they can maintain an upper middle class lifestyle (somewhat of an increasingly difficult feat these days in the so-called industrialized high tax countries).  In fact, this is one trend we think will continue as taxes are increased in their previous country of residence AND as inflation has continued to push up the cost of things like home ownership to unaffordable levels for many of the middle class as well (although interesting enough, the middle class in the US and Europe are quickly finding out that they can live well elsewhere, which is causing a backlash from governments losing such citizens and the resultant loss to tax revenue).  We continue to see high tax nations becoming even more aggressive to stop citizens from either moving wealth abroad and or pursuing such things as tax shelters, etc.  Let us face facts.  These governments could really care less if the citizens leave (one less participant to pay off from the social welfare state) but they DO care if the wealth and money is exported out.  In other words, they increasingly need the money, and despite lack of attention in the news regarding the numbers of people expatriating from high tax countries to low or no tax nations, it would seem the existing numbers of middle class people doing so has caught the attention of these governments.  So, with this in mind, watch out for more and more scrutiny and difficulty getting your own money out going forward (possible new taxation on foreign money wire transfers, new restrictions to move funds, etc.).
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WHY 2005 WILL BE WORTH TURNING UP FOR - Analysis By Evan Davis, BBC News economics editor, December 17, 2004
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Now we have faithfully reported all the individual developments through the year, in growth, currencies, energy and housing.  But they were not isolated phenomena, dropping like meteors out of the sky, on an unsuspecting planet. No, they were all different parts of one simple story.  That story relates to the aftermath of the dot.com era, when interest rates were sent to new lows around the world, to stimulate spending and growth.  Those low rates worked, and 2004 can be best understood as the year their effects reached a peak. World growth was on a high, cheap borrowing kept houses in demand, so prices reached a peak, and all the activity stimulated around the world, kept oil in demand too, with a consequent $50 barrel.  In the US, the public - ably assisted by their Federal Reserve and their tax-cutting President - kept on spending. And the rest of the world - keen to sell - kept on lending them the money to do it.  And it was in 2004, as American spending and borrowing looked manifestly unsustainable, the rest of the world decided to be more careful about sending money in that direction, and the dollar consequently fell.  Clearly, the big issue is whether the fall from the 2004 peak will be akin to a gentle drift down a children's slide; or whether it will be like the accidental plunge off the top of a climbing frame on to a concrete playground.  Or, more specifically, on the international front, will we see the dollar collapse? And in the UK, will house prices do so? And in either case, would that have tumultuous effects on the real economy?  But likely outcomes are not the same as certain ones, and we do have to face the possibility that the world will face a more serious disruption: possibly, the dollar falling substantially to reduce US imports, with US inflation consequently picking up, interest rates soaring, and spending collapsing, with ripples occurring around everywhere.  Certainly, the scale of the adjustment to be made in the world is huge: the US trade deficit soaks up two per cent of everything the world outside the US produces. Getting that back in balance without a big shock or two would be an achievement indeed.  In addition to that global risk, we have a risk in the UK that house prices will tumble, and consumer spending will tumble with it.
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http://news.bbc.co.uk/1/hi/business/4078873.stm
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RECORD YEAR FOR CHILEAN COPPER - BBC News, December 29, 2004
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Chile's copper industry has registered record earnings of $14.2bn in 2004, the governmental Chilean Copper Commission (Cochilco) has reported.  Strong demand from China's fast-growing economy and high prices have fuelled production, said Cochilco vice president Patricio Cartagena.
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http://news.bbc.co.uk/1/hi/business/4132065.stm
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CHINA DRIVES SURGE IN ZINC PRICE - BBC News, December 30, 2004
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The price of zinc has hit a seven-year high, driven up by runaway demand from China, which has become a net importer.  China consumes about one-fifth of the world's zinc, and analysts estimate the demand will rise 11-18% in 2005.
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http://news.bbc.co.uk/1/hi/business/4134963.stm

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BRAZIL'S TRADE SURPLUS IS BIGGEST EVER - By ALAN CLENDENNING, AP Business Writer, January 3, 2005
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SAO PAULO, Brazil (AP) -- Brazil racked up its biggest trade surplus in history last year, but the country's export boom of everything from soybeans to automobiles is expected to ease in 2005.  South America's largest economy sent $96.5 billion of goods abroad in 2004 while importing $62.8 billion, giving Brazil a trade surplus of $33.7 billion that eclipsed the previous record of $24.8 billion set in 2003.  The export increase was fueled in part by rising worldwide demand for commodities like iron ore, sugar and soy - all produced in Brazil - but experts expect that high commodity prices will retreat somewhat in 2005.
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FUNDS: WHERE A PRIVATIZED RETIREMENT SYSTEM IS MORE THAN AN IDEA - By Alan Clendenning, Associated Press, December 31, 2004
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Instead of paying social security taxes and wondering whether the government will ever pay promised retirement benefits, Chilean workers bankroll their own retirements and manage their nest eggs.
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http://www.iht.com/articles/2004/12/30/yourmoney/mfunds31.html
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EDITORS NOTES:  Once again, who is exporting more than they are importing?  Who is a net debtor nation and who is a net lender nation?  Who will have a problem in the next 15 years and beyond in terms of social welfare liabilities either because of simple population demographics (a nation with more old people than young people for example) or because of finances (they cannot afford it).  You do not need an advanced university degree to figure it out.
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MORE AGRRESSIVE TAX COLLECTION IN 2005:
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INVESTMENT ADVISOR WARNS ABOUT PERILS OF OFFSHORE ACCOUNTS - By David Kravets - ASSOCIATED PRESS - December 6, 2004
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SAN FRANCISCO - Jerome Schneider once was the enemy of the Internal Revenue Service, by his own account, having helped about 100 wealthy Americans hide millions of dollars in illegal overseas tax havens.  Now awaiting sentencing for money laundering, he's become one of the agency's most valuable assets.  When agents raided his Vancouver, British Columbia offices in 2001, they took hundreds of files from his clients, who are named in court documents. They include physicians, dentists, entrepreneurs, computer technicians and retirees from across the country.
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http://www.signonsandiego.com/news/nation/20041206-0022-ca-
taxcheat.html

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TREASURY, IRS TO ISSUE NEW RULES ON TAX SHELTERS: Dec. 9, 2004 (Associated Press) -- Stepping up its war on tax shelters, the U.S. Treasury Department and the Internal Revenue Service plan to announce revised ethical standards for lawyers, accountants and other tax advisers.
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The new standards attempt to discourage people from designing and peddling shelters that have no apparent purpose other than to dodge taxes. IRS officials are focusing on tax professionals, since that's where taxpayers - both wealthy individuals and businesses - typically hear about shelter ideas in the first place.  The rules take aim in particular at a widely used tool in selling complex tax shelters: vaguely worded "opinion letters" that are written by lawyers and accountants and used to assure investors a transaction is legitimate. Many investors assume, often wrongly, that an opinion letter - especially one written on the stationery of a blue-chip firm - will protect them against stiff financial penalties in case the IRS decides to attack a shelter.  The government has gone to court to challenge shelters - but with mixed results. This summer, it scored a major victory in a federal district court case involving a hedge fund. But more recently, it has lost a few shelter-related cases, sparking speculation that Congress may step in next year with new legislation designed to provide broad anti-abuse rules.
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http://accounting.smartpros.com/x46158.xml
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EDITORS NOTE:  The bottom line is that taxpayers are now being told that a private opinion letter from a qualified accountant or tax attorney is useless (although it is almost impossible to get such an opinion letter from the IRS, but that is another matter).  So, you cannot stand by any advice (written or otherwise) because the tax authorities will disregard it and fine you, jail you, whatever.  In addition, it would seem the new modus operandi is to also fine and jail the person or company offering any assistance in terms of a so-called tax shelter, although they seem to have a particular zest for anything offshore or non-domestic.  Why is that?  Is it that ALL accountants and legal professionals are crooked or do not understand the tax code?  Or, is it the case that raiding client files of tax accountants and attorneys has become the new tax collection method?  Also, is true that so many people all of a sudden are tax cheats? If so, why then is this the case?  If not (if the percentage of people basically the same as always), then why the stepped up zeal to violate the professional relationship privilege that existed before?  Perhaps one of the answers can be found with the following news article.        
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HO, HO, HO - THE IRS HAS A GIFT FOR YOU - Alternative Minimum Tax net widens - By John Byczkowski - Enquirer staff writer - December 12, 2004
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It's soon to be income tax season. You are entering the Alternative Minimum Tax Zone. For a growing number of taxpayers, the AMT strips away your tax deductions and leaves you paying higher taxes.  Bring your income but leave most of your deductions behind - your state taxes, your city income taxes and your real estate taxes. They'll do you no good. Leave your spouse and kids behind, too. All rules are different in the Zone: Up is down, left is right, the future is now.  Congress created the first minimum tax in 1970 to make sure the highest-income taxpayers have to pay something no matter how many deductions and shelters they use.  But the AMT system hasn't been modified significantly in nearly 20 years, and that's the problem.  While regular tax brackets are adjusted for inflation, the AMT limits are not.  Because inflation means a $75,000 income is in a lower tax bracket than it used to be, more and more taxpayers are falling under the AMT's umbrella.  A CBO report last year said this tax system isn't completely effective in making sure the rich pay taxes. In 2001, 1,100 taxpayers with incomes above $500,000 paid taxes only because of the AMT but another 900 still paid no taxes at all.  Instead, Holtz-Eakin said, the AMT is hitting people further down, people who might think of themselves as not the really rich. They're paying the rich person's tax.  Just three years ago, 1.5 million taxpayers paid the AMT. For 2004, the number will be closer to 3 million, and by 2006, the CBO estimates, it will be 14 million.  By 2010, as many as 20 percent of all taxpayers - and 40 percent of married couples filing jointly - might be subject to the AMT, the CBO says. A study by the Tax Policy Center in Washington, D.C., said that by 2010, half of all AMT payers will make less than $100,000 (and qualify for the higher and more restrictive AMT tax).
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http://news.enquirer.com/apps/pbcs.dll/article?AID=/20041212/BIZ01/4
12120339/1076/BIZ

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EDITORS NOTES:  According to H&R Block, Most people aren't affected by the AMT - hence the lack of awareness. An estimated 2.1 million taxpayers were affected in 2001, but that number is expected to rise to 30 million-plus in 2010.  How do you know you are subject to these higher taxes?  You must crunch the numbers to be sure, but YOU should be concerned if any of the following applies to you:
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You are single and earn between (or more) US$35,750 to US$40,250.  You are a Married Couple earning from (or more) US$49,000 to US$58,000.  You have a large number of itemized deductions.  You have children and or have a large number of personal deductions.
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http://hrblock.com/taxes/fast_facts/articles/amt_feature.html
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EDITORS NOTES:  In the USA, you are considered wealthy if you are a married couple earning a joint household income in excess of US$50,000 (according to the IRS, just in case you did not know, YOU are wealthy).  Break out the champagne and celebrate.  How does it feel to be rich?
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READERS WRITE IN:
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Dear John - I am interested to know if the 15% import duty on all goods that Hipolito put into effect DEC. 2003 is still in effect. I know this last newsletter indicated that all imports have actually come down (except in the stores due to greed). Did I miss it somewhere that the 15% duty was discarded?  The following is just a comment about some of my observations over the last 5+ years.  I have been coming to the DR since 1999 and until the US economic crisis took my business by the throat I have spent many days in the DR. As a matter of fact from June 2002 to June 2003 I spent 165 days there (not continuous). The reason I mention this is that I spend a lot of time inland with my Dominican friends. These are not the middle-class that travel to the U.S. and try to emanate the lifestyle. These are the real basic Dominicans that have practically had their backs broken by the collapse of their economy. They tell me how difficult it is to survive. For example a Green Plantin used to cost 2 pesos and now is 10. Rice is now 18 pesos per pound and a motor conch (motor bike driver) used to charge 5 pesos and now charges 10 to 20 for the same ride, and many families travel with this mode of transportation and even send their kids to school daily using this method. Well I think this speaks for itself. Of course most of the population does not have the $25 U.S. monthly to send their kids to school, plus they need at least $2500 to 3000 Pesos just to buy the school supplies and uniform (a requirement). This may seem like peanuts to foreigners but when your salary has never increased ($2,000 Pesos per month and that's a good salary, not a factory worker in the free zone) and prices have increased so, life becomes extremely difficult.
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I have read emails of expatriates complaining about how expensive it is to live there and that it is like living in New York City and it is quickly becoming as expensive as living in Tokyo. I don't have any pity for these complainers. They're living in a tropical paradise that has not yet been spoiled by High Rise condos on the beach with all the world famous hotels there. I am sure that will change in the next 10 years but for the time being, enjoy what you have NOW! Maybe these complainers should stop buying the products that they bought back home and learn to eat the Dominican basics (much healthier and no chemicals or hormones or vitamins added). I was there this last September with a friend who was never there before. He couldn't believe the difference in the taste of the food. All he does is rave to everyone here how great everything was there, especially the real Dominicans he met through me and would have never met in a tourist town.  In conclusion all I can say is "Love it or Leave it, but better to Live it!
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EDITORS REPLY:  Thank you for the letter and let me say that you are correct in many things that you mentioned.  In regards to taxation, there was an effort under the previous government administration to increase import taxes, but that was bitterly challenged in the courts soon thereafter as being unconstitutional (the way it was brought about).  However, since many of these taxes are in reality pegged to the US Dollar - Peso exchange rate, these amounts have come down considering the exchange rate has been reduced by almost 100 percent (from 52 Pesos to US$1 down to about 30 at the moment).  The problem is that while in theory (and in practice), the costs of imported goods has gone down for the stores or importers, the prices shown to consumers has not (or certainly not in tandem).
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It is of course true that the economic policies of the previous government have greatly and deeply affected many Dominicans in terms of cost of living, etc.  As we did mentioned in previous newsletters, cost of living has gone up yet salaries have not kept pace (as they never do when the government inflates the local currency, or devalues it, which is the same thing).  Interesting enough this looks like a problem effecting Americans in terms of US Dollars at the moment, although obviously not so severe so quick (the Dominican economy is much smaller and such things have a quicker and more noticeable effect).  In any event, it is also true that countries like the Dominican Republic, especially when it comes to housing (usually the largest expense for most consumers) remains to be very affordable in comparison to costs for similar housing elsewhere.  In addition, yes it is true, that the reason many foreigners do decide to retire to or relocate to the Dominican Republic is that costs for many, many things are still much cheaper than what they are in the US or Europe.  So, I guess it is fair to say that in terms of costs, it really all depends upon what your point of reference is (how much money you have and what similar things would cost back home as a percentage of your own personal income or outright cost).  The local Dominican middle-class has been severely set back, where as the foreigners (especially those with Euros or British Pounds) will find costs for some things on par with costs back home (imported consumer goods) but will probably still find housing and salaries a bargain in comparison to both their native country and even many other jurisdictions in the Caribbean.
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In Reply To Previous Information About the Linux desktop computer operating system we spoke of in the last newsletter, This Reader Sends in the Following:
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WRT Linux vs. Microsoft, one of the most devastating and civil independent critiques of Microsoft and its software regime was delivered by DR. EDGAR DAVID VILLANUEVA NUÑEZ, Congressman of the Republica of Perú, in response to Microsoft proposals for Peruvian government adoption of its products. When the Senator's letter was translated and published on the web, he achieved hero status in the Open Source community. Microsoft is not known to have uttered a response.
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http://linuxtoday.com/news_story.php3?ltsn=2002-05-06-012-26-OS-
SM-LL

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This is a later interview with the Senator regarding wide spread reactions to his critique:
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http://linuxtoday.com/news_story.php3?ltsn=2002-05-20-006-26-IN-LF-
PB

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Another Reader Writes:
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Hi John - I left the DR in July 2003 to come back to Argentina and have watched with dismay as Hipolito cut my apartment value and my 2 lots in Cuidad Modelo in half.  Thank God Leonel is back.  Regarding your readers question about Argentina, feel free to send him my email address, I have been down here off and on for 18 years.  The Argentine banks are a joke and the government is worse.  If you run a US Dollar based business (exporting Argentine products or the tourism industry) then you would do well here.  Of course, these two industries died under the 1 to 1 exchange rate for ten years and there is no reason to expect the government here to learn from their mistakes.  They have not done so yet.

So any plans for Argentina business should be short term 4 to 5 year with 2-year payback on investment.  Never know what will happen here.  The less labor the better, very strong unions that will break you real fast.  You fire somebody and you have to pay for his wife, kids, mother in law (very heavily protected work force).  If you have dollars, or if retired and can pick up your SS check at the embassy, then it is a great place to live.  Cheap, good food, wine, culture, women, etc.  Only problem is security as robberies are plentiful.
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EDITORS REPLY:  Thank you for the letter and information.  While I did not find Argentina and especially Buenos Aires to be any worse than any other major American or European city (in terms of cleanliness, crime, etc.) I have heard that burglaries were on the rise.  Although, once again, I have to say I enjoyed Buenos Aires and the entire country very much and never had a problem.  In fact, I found the people to be very friendly and helpful to tourists (or at least in my case).  However, based upon my experiences with some business infrastructure I would also tend to agree that the best foreigner suited to relocation is a retiree (with a pension and liquid assets held elsewhere) or someone involved with export and tourism, as you correctly mentioned.  Other than that, I like the place and I do like the Argentine people very much (despite being told differently before I visited).  As I have said many times before, no country is perfect, but depending upon what your particular needs and wants are, some countries such as Argentina may fit the bill.  It all depends upon you personally.
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Another Reader Writes:
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Hi John - I have been an avid reader of your newsletter for years and truly enjoy it.  Thanks.  My husband is originally Dominican and I am American.  We live in Scottsdale, AZ.  We are interested in buying a Villa at Casa de Campo.  This is so we can have an investment property and also a place to enjoy in the DR.  Casa de Campo will rent it out for you and yearly the investment is approximately 8% besides the equity in the property.  I have been watching the market closely there for the last three years and it has continuously been on the upswing.
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EDITORS REPLY:  Real Estate in general in the Dominican Republic has steadily gone up, but of course some prices are outside of the norm.  Some people marketing to foreigners are asking ridiculous prices and they think the foreigners do not know any better or will find the price a bargain in comparison to say Miami, Chicago, etc.  In some respect this is true, but of course unfair in that just because a home or apartment is offered for a price less than form something similar in Miami (for example), this in and of itself does not mean the price is in line with the true local market prices in the Dominican Republic.  So, the key is to forget about making a comparison to what the same dwelling would cost in another country, but rather make a comparison of other similar kinds of dwellings within the Dominican Republic.  Only then can you determine if the property is reasonably priced or not (in terms of the local market).  Many foreigners do make these same kinds of mistakes elsewhere (Honduras, Nicaragua, etc.) too.  Meaning that they overpay for a local property only to find they cannot sell it later on (unless they find a another foreigner to sell it to that thinks it is a bargain in comparison to another country, etc.).  If you overpay for a property, this is not the seller's fault.  They are trying to get the most money that they can, as you would if you were selling property.  You, however, must use some common sense and evaluate the local market prices when you buy.
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With that said, you CAN still find very affordable upper middle class or upper scale apartments or homes starting at US$80,000 on up (the average in Santo Domingo is probably about US$125,000 right now for a luxury apartment or upper middle class home).  However, with that said, tourist areas always will be more expensive and small townhouse condos in Punta Cana (for example) have been offered at US$165,000 - which is outrageous in comparison to what you would pay for a similar dwelling not in a tourist area (in the Dominican Republic). 
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In any event, there seems to be a somewhat strong market in terms of foreigners who want a resort or beachfront property in the Caribbean, so as long as that is the case, there is growth potential.  In addition, they say the golden rule for real estate is location, location and location.  So, properties on or very close to the beach will command higher prices than similar properties located elsewhere.  The question for anyone is:  Is this property worth the price being asked?  For some people it will be and for others not.  Again, not to return to what we mentioned earlier, but it is true that one must consider the actual local real estate market to determine if something is a bargain or fairly priced.
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The information has been compiled and provided by John Schroder of Ascot Advisory Services.  Ascot Advisory assists clients with the formation of Panama Foundations and Offshore Company Formation, offshore banking introductions, Residency Services and other related services.  For more information:
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Telephone 809-334-5387 or 809-756-1917 
Email: info@ascotadvisory.com