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WHERE CAN YOU AFFORD TO RETIRE TAX FREE?           WHY ARE SO MANY OF THE MIDDLE CLASS LEAVING THE US & EUROPE?

Our August 2005 Newsletter:
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Oil at US$100  - Fact or Fiction?  The Cost to Live Well in the US These Days and Can You Afford It?  Plus Our Readers Write In Section. 
John Schroder - Author of The Ascot Advisory News Letter Bulletin and Numerous Expatriate  Articles
IN THE NEWS:
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WHAT IT COSTS TO LIVE WELL IN THE US - Forbes magazine, July 2005
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How much does a family of four need to earn per year to live the upper-middle-class American dream? Forbes.com looks at a major metro region in each of the 50 states and estimates such expenses as primary and secondary homes, private education, taxes, utilities and more, to find out what it costs to live the good life. One thing is for certain: The dream is a pricey one.
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http://www.forbes.com/lifestyle/2005/07/01/cx_sc_livingland.html?chan=l1living
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EDITORS NOTES:  According to Forbes, to live well in the North East part of the US, one needs to take home about US$400,000 AFTER TAXES.  To do the same in the Mid-West and some other areas, a bit less, but still they offer up the figure of about US$200,000 take home pay AFTER TAXES.  It would seem that living abroad on about US$2,000 per month (complete with live-in maid, nice home or apartment in a warm weather environment, etc., etc.) is looking better and better every day.
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OIL: WHY US$100 PER BARREL IS NOT SO FAR FETCHED
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Peak Oil is also called Hubbert's Peak, named for the Shell geologist Dr. Marion King Hubbert. In 1956, Hubbert accurately predicted that US domestic oil production would peak in 1970. He also predicted global production would peak in 1995, which it would have had the politically created oil shocks of the 1970s not delayed the peak for about 10-15 years.  Oil will not just run out because all oil production follows a bell curve. This is true whether we're talking about an individual field, a country, or on the planet as a whole.  Oil is increasingly plentiful on the upslope of the bell curve, increasingly scarce and expensive on the down slope. The peak of the curve coincides with the point at which the endowment of oil has been 50 percent depleted. Once the peak is passed, oil production begins to go down while cost begins to go up.
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In practical and considerably oversimplified terms, this means that if 2000 was the year of global Peak Oil, worldwide oil production in the year 2020 will be the same as it was in 1980. However, the world's population in 2020 will be both much larger (approximately twice) and much more industrialized (oil-dependent) than it was in 1980. Consequently, worldwide demand for oil will outpace worldwide production of oil by a significant margin. As a result, the price will skyrocket, oil-dependant economies will crumble, and resource wars will explode.
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The issue is not one of running out so much as it is not having enough to keep our economy running. In this regard, the ramifications of Peak Oil for our civilization are similar to the ramifications of dehydration for the human body. The human body is 70 percent water. The body of a 200-pound man thus holds 140 pounds of water. Because water is so crucial to everything the human body does, the man doesn't need to lose all 140 pounds of water weight before collapsing due to dehydration. A loss of as little as 10-15 pounds of water may be enough to kill him.  In a similar sense, an oil-based economy such as ours doesn't need to deplete its entire reserve of oil before it begins to collapse. A shortfall between demand and supply as little as 10-15 percent is enough to wholly shatter an oil-dependent economy and reduce its citizenry to poverty.
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The coming oil shocks won't be so short-lived. They represent the onset of a new, permanent condition. Once the decline gets under way, production will drop (conservatively) by 3% per year, every year.  That estimate comes from numerous sources, not the least of which is Vice President Dick Cheney himself. In a 1999 speech he gave while still CEO of Halliburton, Cheney stated:
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By some estimates, there will be an average of two-percent annual growth in global oil demand over the years ahead, along with, conservatively, a three-percent natural decline in production from existing reserves. That means by 2010 we will need on the order of an additional 50 million barrels a day.
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Cheney's assessment is supported by the estimates of numerous non-political, retired, and now disinterested scientists, many of whom believe global oil production will peak and go into terminal decline within the next five years.
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Some geologists expect 2005 to be the last year of the cheap-oil bonanza, while estimates coming out of the oil industry indicate a seemingly unbridgeable supply-demand gap opening up after 2007, which will lead to major fuel shortages and increasingly severe blackouts beginning around 2008-2012.
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http://www.lifeaftertheoilcrash.net/
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RELATED LINKS AND RESOURCES ABOUT THE FUTURE OF OIL:
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http://www.hubbertpeak.com/
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http://www.peakoil.net/
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http://www.oilcrash.com/
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http://dieoff.org/page140.htm
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EDITORS NOTES:  What the article failed to mention or also factor in is the growing demand of new economies.  In other words, nations such as China, India, and a host of others that would have been called third world just twenty or thirty years ago - are now emerging as more developed economies with increased demands for petroleum accordingly.  China especially has been trying to buy up American and European oil companies with all that extra cash they have accumulated from surplus trade.  Are they doing this because they have nothing better to do with the money - or could there be a logical reason and goal in mind?  Accordingly, why is the US so fearful of selling an American oil company to the Chinese?  They have sold US car companies to the Europeans, and a host of other US businesses as well.  They have allowed a sale of a previously IBM owned business to the Chinese - so why not oil?  You know why - Specifically, what is for sure coming down the road in terms of the limited supply of oil, and who (plus who will not) have access to it.  Was this the reason for the Iraq invasion or was it to bring democracy and freedom?  You decide, but certainly the information baits the question.  
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The bad news is that you can expect inflation to become a very serious issue going forward as the cost of petroleum continues to rise, thus increasing the costs of just about everything that involves the use of oil.  Not just gasoline, but the cost of vegetables in the supermarket (as just one example) since the cost to truck those products from farm to store shelf goes up in tandem.  The good news is, you are aware of this issue and can plan both personally and in terms of your investments as well.  Going forward, in terms of investment ideas, take a look at renewable fuel sources or companies involved with this technology.  Solar panels, wind turbine generators, hydroelectric power, battery inverter systems and a host of other industries will both profit and become very necessary in the future.  If you have watched any television commercials lately, you will notice that BP (British Petroleum) coins the terms, beyond petroleum.  Even Exxon Mobil has started to talk about alternative energy products and businesses.  Why?  Just as buggy-whip manufacturers had to retool and switch over to making something else after the invention of the automobile - so will petroleum companies be forced into other businesses as their existing main product line becomes less available.
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On a personal level, what will you do when the cost of electricity starts to increase?  Is severe conservation measures and rolling blackouts a very real possibility?  It is interesting to note that there currently exists a two-month backorder wait for solar panels from many US distributors.  Why?  The Europeans in general, and the Germans most notably, have been buying up solar panels like crazy - and are willing to pay top dollar to get them (even if that means buying from the US).  Are they gearing up for what is yet to come or has everyone in Europe simply gone green?  If you do make the decision to re-evaluate your life and maybe where you want to end up living (if in another country) - then perhaps the idea of a warm weather climate with year round sun for your solar panel system is not such a crazy idea after all.          
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INDIA TO EXPLORE ENERGY COOPERATION WITH CHINA, Indo-Asian News Service - New Delhi, August 5, 2005   
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An Indian delegation leaves for China on Sunday to lay grounds for a historic collaboration in oil and gas exploration and other common activities leading to energy security.  India and China are going to be the world's main energy consumers in the coming years and currently account for a substantial share of global oil imports to meet the voracious needs of their fast-growing economies.
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http://www.hindustantimes.com/news/7598_1452897,000500020007.htm
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READERS WRITE IN:
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Update for you. I moved to Santo Domingo! Waiting for my furniture to arrive. Thanks for all the advice you made it less scary.  And now for better news - I went from a 3/2 in Sunny So Florida to a 5/4 in Santo Domingo and best of all- NO MORE MORTGAGE. Thank you for the applause. You deserve one too!
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EDITORS REPLY:  Thank you for your letter.  I am glad to hear you have relocated into a better financial situation for yourself.  Certainly I have commented in the past, that it is possible (and perhaps wise) to consider selling overpriced real estate in North America or Europe and with the equity or profits, purchase a home for cash in the Dominican Republic, Thailand, Ecuador and a host of other places as well.  In fact, most people will probably find, as you have already, that it could be possible to purchase a home for cash and perhaps invest the rest for a monthly income (often enough tax-free in the new country).  We are seeing more and more middle class people from the US and Europe doing this as a way to maintain and perhaps even improve their lifestyle.  Many Dominicans living in Boston, New York, New Jersey, etc. are also doing the same thing.  In addition, those that have teenagers are doing this because they can send their children to some of the best private universities in the capital for about US$1,000 per semester in tuition costs.  So, it is possible to afford your own retirement, educate your kids and not go broke in the process or better said, not give up one for the other.
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As we already know, the long-term trend of the US Dollar will continue to be devaluation (inflation).  The cost of petroleum will continue to rise.  Both of these things will not happen in a straight line of course, with temporary lapses or slight ups and downs during this long-term journey.  The question is: How will you be able to survive higher costs down the road?  If you can increase your salary or earnings in tandem, then you might be able to tread water, but this is not so easy to do.  To be sure, you will be reliant on other people (such as your boss if you are working) to provide salary increases accordingly.  If the past is any prediction for the future in this regard, do not count on it.
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An much more sound idea and one within your control, is to reduce your living expenses, or an case whereby you can have the same lifestyle as you currently do (or maybe a better one) at a lower cost.  How do you achieve such a goal?  Obviously getting rid of some monthly expenses, such as mortgage payments, is a start.  How do you do that?  Purchase the same if not larger home somewhere else for half (or maybe less than half) the cost of your current home, paying cash in the process.  In addition, relocating to a place that allows you to have a live-in maid for about US$200 per month yet another example of trading up in terms of life style.  If other people have done it - so can you.
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ANOTHER READER WRITES:
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Hello. I much enjoy your newsletters. If nothing else, thank you for the hours of pleasure you have given me.  You offer assistance in incorporating in the DR and Nevis, if I understand correctly. At least you know more about it than I.  I have an US account with a major US discount broker for online margin trades. How nice for me. But of course, it being an American account in my own name, there are things that I cannot do that, say, a Dominican could do legally.  Is it possible to start a Dominican and/or Nevis corporation and find an online broker that would open an account in the corporation's name, without having to give my own? And do margin trades? If margin trades are allowed, then at what percentage?  My current US discount brokerage account, with which I am very comfortable with, except for the risk of future governmental confiscation when the fit hits the shan and the economy collapses, has a 50% limit, which I understand to be the US law. And of course, how low can a stock be and be margin-able, since I do lots of "penny stocks" which aren't, and for which I have to pay cash?
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EDITORS REPLY:  Generally speaking, the concept of deep discount brokerage services and on-line trading will be difficult to find in the offshore arena.  There are some exceptions of course, such as Internaxx, an on-line discount broker based in Luxembourg, which is a joint venture between TD Waterhouse and Banque General Du Luxembourg.  However, as you alluded to some extent, they will not accept US citizens as clients.  In fact, the application form for an account with them forces you to sign off and declare that you are neither a US citizen NOR a citizen of another country with dual US citizenship.  This is very interesting indeed, because it tells me that the powers that be are now aware of the large numbers of Americans who are expatriating AND who are also obtaining other nationalities (second citizenship - second passports) as well (often enough simply to have the ability to be accepted as a client with a foreign bank or investment firm).  This declaration on the Internaxx application form so far seems to be an isolated thing, or certainly not mentioned in applications forms from other brokers (or banks).  Meaning, many people have acquired a second citizenship so they can open an account as a citizen of where ever else and not have any difficulty with a bank or brokerage firm in doing so.  But, as I said, it is very telling that an offshore discount broker (that is affiliated with a US discount broker) has started to put this in their application forms or as a requirement for opening (or not opening) an account.
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Regardless, I do believe the long-term trend will be increased pressures and initiatives to somehow stop the exodus of middle-class Americans (and somehow try to stop the flow of money out as well). Logically, one would think that someone in authority, those that govern, would start to ask the question: Why are these people leaving?  What can we do to correct the problems and the reasons for this?  Yet, rather than fix the problem, the response seems to be an impetus to fix the blame rather than the problem.  Better said, attack the symptoms rather than attack the disease.  So be it.  We, collectively including politicians in this, sadly never learn from the lessons of past history.  But, it would seem the window of opportunity for US citizens to move funds abroad and function as dual citizens is slowly closing (which is why NOW is the time to consider doing something before the window is closed altogether). 
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In any event, getting back to what, and what is not, available in terms of investment options - it is safe to say there are a whole myriad of investment options and products available to you.  However, as I alluded to earlier, the concept of on-line trading and deep discounted brokerage services really is something that started in the US, copied to some extent in the UK thereafter, but to a large extent stopped there.  There are many brokers and private banks that offer brokerage services.  But, at the moment, you will find that commissions will probably be higher than what you are used to seeing (if you currently trade with a discount broker in the US) and the ability to trade on margin, if even available, a costly proposition as well.  I would say that if you wanted to do some exploring, probably Hong Kong, Singapore and maybe South Korea are places you can maybe find the types of brokerage services you are looking for as an active trader.  Or in the least, perhaps have a better chance of finding lower commission schedules and the kinds of services you are looking for. 
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ANOTHER READER WRITES:
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Hi, I recently heard from a source in the DR that the government may be considering allowing the DR Peso to fall to an exchange rate of RD$35 per US$1--any comment on this?  Is this a likely option?  If so, when might such an action be likely to take place?  Thanks in advance.
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EDITORS REPLY:  Many economists believe the correct current exchange rate to be about RD$35 or RD$36 Pesos per US Dollar.  In fact, the IMF and World Bank in terms of their own internal accounting or calculations, have loans pegged to this figure.  It is not really a question of IF the exchange rate will float back to this level, but rather a question of when.  Keep in mind though that the current governmental administration has the concerns of inflation and paying off the foreign debt as some of its top priorities.  To be sure they have done quite a bit during only one year of being in charge, but there is a way to go as well.  One of the things they seem to be doing is creating a spread or a hedge for some of these purposes, and principally for accumulating US Dollars in order to retire some of these foreign loans and IMF loans.  Remember that when Dr. Fernandez was President before, his administration had NO IMF loans outstanding and in fact CANCELED the IMF drawing rights or line of credit with the IMF as well for the Dominican Republic.  So, this would seem to be an administration that feels getting rid of the IMF and foreign borrowings is a good thing (and I would agree with that as well). However, how do you do it?  Do you raise taxes?  What is one way you can capture funds, and more specifically foreign currency, without doing damage (or minimizing the damage economically) to the local population and to the local economy?  One of the ways is exactly what I believe they are doing at the moment, taking the spread between the real rate and the current rate.  As a foreigner converting Dollars or Euros to Pesos, of course I would rather get 50 to 1 instead of 29 to 1.  Of course you will hear Dominicans abroad complaining that in the past when they sent US$100 to Aunt Rosita in the Dominican Republic, Aunt Rosita walked out with RD$5,000 Pesos in her pocket and went to the Supermarket a happy woman.  Now, that same US$100 gets her about RD$2,900 and naturally she can buy less as a result of the exchange rate accordingly. 
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In the recent past under the previous government, you had double-digit inflation rates, so those that did have foreign currency coming to them every month (and those that could convert at RD$50 for every US$1) were at least keeping up.  But, there seemed to have been no end in sight with the inflation and not everyone had a very nice nephew living in New York who was sending US$100 on a regular basis either.  So, it all depended upon what side of the fence you were on.  Now, I do believe, there is a positive economic reason for the current exchange rates.  One is to curb or cut down the inflation rate, which for most part has been done (at least report the claim is an inflation rate of about 4 percent for the third quarter of this year).  The other is to try and capture dollars less expensively to pay off the foreign debt, and hopefully send the IMF packing.
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Interestingly enough, economic problems crop up whether you want them or not.  Often enough it is the case that such problems are created by the politicians via the economic policies they put in place (or fail to put in place as the case may be).  The question becomes then - What are you going to do about fixing it, as a politician?  Sometimes taking the bitter medicine now to fix the problem is better than brushing it under the rug and hoping it will go away (it never does).  Once again, as an individual citizen getting a lower exchange rate than before, the idea does not thrill me if I have Dollars or Euros to sell - If I am buying Dollars or Euros with Pesos, then of course I am very happy.  On the other hand, if I know or believe the government is doing the right thing for the long-term benefit and health of the economy, then in such a case I must be positive minded on what the longer-term results will be.  However, most people are impatient and do not understand economics nor do they understand that economic policies often take time to filter down and show results.  Problems are not created overnight and the medicine to fix them does not work overnight either. But, this is the reason for the current exchange rate levels and yes - you will see rates in the thirties going forward.  How far down the road is difficult to say, but the correct rate based on economic indicators is probably about 35.
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ANOTHER READER WRITES:
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I read some articles on forums about living costs in DR. They all say life in DR is expensive and these people are living there (they mean electricity bill, water, food, cars and other things you need for living) but not real estate.  In your articles you say it is not so expensive.  I found some apartments for less then back home in Europe and I agree with you about real estate.  What about other things?  I think they are right.  Why should they lie about it?  There is not one positive commentary about cost living.  I am looking forward to hear from you.
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EDITORS REPLY:  Well, to a large extent, this dovetails into the letter mentioned above. However, when one mentions the idea of something being costly or cheap, one is really making a comparison either to previous prices OR to prices for similar products or services elsewhere.  In addition, the question has to be defined or clarified as to: Are we asking if the Dominican Republic is still a less expensive and favorable relocation choice for foreigners - or are we talking about cost of living issues for the native Dominicans?
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You can say that certainly some things, such as the cost of electricity, in the Dominican Republic are more expensive than before, but in comparison to when and where?  More expensive than before absolutely, but is it more expensive than say electricity rates in Panama, California, Europe?  This is the real question, and the truth of the matter is that no one likes to pay higher prices for anything - myself included.  Also, I would have to say that a great many things were almost dirt cheap before in the Dominican Republic, whereas at the moment, they are probably about the same as they are in many other countries.  Of course, there are some specific exceptions to this.  But let us take all of these things item by item.
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Electricity first.  Yes, electricity rates in the middle class and upper middle class areas have gone up tremendously (probably from an average of about US$40 per month many years ago to perhaps US$200 or so per month).  Part of the reason for this has been that the previous government refused to allow the electric company to cut off the people that did not pay in the poorer areas.  Remember that the electric company, prior to privatization under the previous administration of President Fernandez, was owned by the government and as a result really subsidized by the taxpayers.  The pooper people paid almost nothing if at all for electricity in the past.  As a result, many Dominicans have grown up with this idea that electricity is supposed to be free or very cheap.  When the new private electric companies attempted to cut people off for non payment, many Dominicans scurried up the pole the minute the truck turned the corner and reconnected illegally, OR other people started to protest and become unruly (in the pooper neighborhoods).  The previous government, fearful of the poor people rioting, told the electric companies they could not disconnect and or could not raise rates in these areas also.  The result?  The brilliant (I am being sarcastic) idea was, as a result, that the rates should be raised in the so-called middle class and wealthier areas instead.  Ergo, these so-called wealthier and middle-class people have found higher electricity bills, in reality subsidizing all the people that do not pay.  In addition, we now have the issue of higher petroleum prices, which will have an effect on everyone and on power generating costs (electricity) worldwide.  So, I will expect electricity rates to go up even more, both in Europe, the US and the Dominican Republic as well.  Now, with that said, are the CURRENT rates any higher than one might expect to pay in California, Florida, Panama, Belgium, etc.?  My answer or reply is no and in fact I had found the electricity rates in Panama previously to be outrageous in the past in comparison to the previous rates in the Dominican Republic.  So, where as electricity rates in the past were very, very cheap - at the moment they are probably somewhat in line with rates in North America or Europe.  In fact, I am not a gambling man, but I would be willing to gamble that if you currently live in Boston, New York, Chicago, Phoenix, Miami or Los Angeles - with the average suburban middle class home running air-conditioners, that you monthly bill is at least US$200 (if not more).  So, what are the options in you live in the DR currently?  Move to California, Florida, New York, Panama or wherever else, and pay the same thing (assuming we are comparing apples to apples, meaning a warm weather climate with the air-conditioner running all the time).  Or, another idea is to consider investigating solar panel and wind systems for your home - to charge your battery inverter system, run the house and have the ability to tell the electric company to go have a nice day.  Remember, electricity rates will be going up worldwide in the near future, at least in any country that generates a portion of electricity from petroleum or natural gas.  Better to consider a solar panel system in a country that has sun most of the time, most of the year.  By the way, President Fernandez has started an initiative to allow for ZERO TAXATION on alternative energy products and businesses engaged in same, in order to stimulate the market for these products.
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Let us talk about water, food, cars, and so on.  When the exchange rate shot up to 50, the excuse from the stores and retailers was that imported products became more expensive (and as the cost to exchange pesos to a foreign currency goes up, the prices for imported items goes up).  So, imported food products especially did go up in price.  In fact, some businesses, such as car dealers, did start to price in US Dollars rather than Pesos.  Did the prices go up in US Dollars?  The answer is NO.  Did the prices go up in Pesos?  The answer is yes. So, if you had US Dollars or Euros and were willing to pay for things in these currencies, then in that case, it was no major change.  If you were paying in Pesos, then yes you did see the cost go up.  Obviously not everyone had Dollars or Euros, but most of the foreigners did or do (assuming they did not convert ALL of their foreign currency holdings to Pesos previously).  What about local food products?  To be sure, as we reported in some bulletins we wrote in the past, some local producers took advantage and engaged in price gouging.  Where as the exchange rate doubled before (went from about 25 to 50) - some local producers of onions, as just one example, jumped prices 400 percent or more.  The claim was that fertilizer and some other foreign products they use went up in price and therefore the price increase.  However, most people with common sense will tell you, most Dominican farmers do not buy expensive products from Monsanto or Ortho.  They use local fertilizer or whatever else.  So, this argument was not valid.  Even if they did use and purchase such foreign products, what would the corresponding cost of product and price increases be?  Ten percent? Twenty percent?  Certainly such costs would not constitute or reflect a doubling or more of retails prices for these kinds of local food products. 
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What has happened since?  Well, the goal of the current administration was to bring prices and inflation down.  To be sure, even though the Peso has strengthened in value versus the US Dollar (from 50 down to 29, or down to say 35 if you will) some prices have come down by 10, 15 or maybe 20 percent.  Whatever prices have come down within the past year, they certainly have not come down 30 percent across the board (whereas a drop from 50 to 35 represents a 30 percent difference, meaning improvement).  For this reason, the government has been very perturbed with private industry to some extent - questioning why many producers have not indeed lowered prices in tandem.  Again, some food and produced items are less expensive in terms of Pesos than what they were say 18 months ago - yet they are higher than what they were 5 years ago.  Looking at some other prices, such as the cost of a Burger King whopper, French Fries and Soda - the cost in the Dominican Republic is about double what it is in the US.  However, if you take a look at locally produced food items, such as rice, beans, chicken, coffee, cooking oil, chocolate, potatoes, onions, garlic, etc., etc. - such products are less expensive than what they are in the US or Europe right now.  So, it really all depends upon exactly what specific things we are talking about.  Going back to the fast food example for a minute, the items I just mentioned from Burger King will cost the equivalent of about US$7 in the DR.  However, if you visit the local equivalent of a fast food joint and get the daily plate (chicken, rice and beans) you will pay about US$1.00.  So it also all depends too on what you buy and where.  If you live like a local, you can live very inexpensively.  Imported items and foreign food chains do cost more, but then again, they always did. Also, many clients living in the US have told me US supermarket prices have skyrocketed (they officially say that there is no inflation or very little inflation in the US, but of course food and energy is left out of the statistics if you read the fine print). 
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This leads us to touch upon another point.  It all depends on who you are talking to, and to what or where you are making the comparison.  Is it a lie that electricity, food prices, car prices, etc. did indeed increase in Peso terms?  No, it is not a lie and the prices did go up.  But, in the context if you are talking to someone who is making a comparison to current prices in another country, or based upon what local prices were, say five years ago as well.  Also, it is very true as we reported in previous writings, that the local population in the Dominican Republic were hit very hard economically as well due to this inflation cycle that took place under the previous government administration.  Imagine, just as in any other country, prices go up for many things yet your salary is the same.  However, the other interesting thing is that real estate, as usual, has kept pace or has increased in value also.  So, if you owned real estate, if you owned gold or if you had your liquid cash in Euros or Dollars, you were not so much affected at the end of the day.  In fact, many of our clients actually made money via the swings or differences in the exchange rates.  Also, if you owned real estate, then you did see your assets go up in value, not down.                               
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With that said, it is interesting to note that even with real estate price increases (in Peso terms) and even with a devaluation of the Dollar or Euro versus the Peso (or conversely that the Peso has strengthened versus these currencies - in theory making the Dominican Republic more expensive) that Dominican Republic Real Estate IS still a bargain.  Again, better stated, a bargain in comparison to Panama, Aruba, Chile, St. Martin, United States, Europe, etc., etc.
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In summary, yes cost of living has gone up.  But does this mean, in comparison to the idea of choosing to live in the US or Europe as an alternative, that the Dominican Republic is still a less expensive alternative?  I would say the answer is yes.  However, if you talk to any local Dominicans that live and work and earn their salary in Pesos, for sure they will tell you that their same salary today does not go as far as it did four or five years ago.  Some prices have actually come down from where they were one year ago, but overall still more expensive that what they were five or six years ago.  In addition, some items do remain to be more costly, as they always were more costly.  For example, the government has an import tariff on cars and vehicles, and because of this reason alone, this results in prices for new cars at least about 35 percent more costly than what the sticker prices are in North America.  On the other hand, some of our clients from Denmark are thrilled with the new car prices in the DR, because they are much cheaper than Denmark (Denmark has a 100 percent tax on cars).  American fast food restaurants are more costly than what the prices are in North America, but then again they always have been.  I noticed this when I first start traveling to Europe many years ago, comparing prices for such things at the time.  So, it depends on what or how you are making a comparison and for what products specifically as well.
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ANOTHER READER WRITES:
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Please check out the site: WWW.FAIRTAX.ORG, and let your readers know about it.  It is a national US sales tax proposal before congress that would eliminate the IRS, and turn our economy into another economic bonanza like Hong Kong.
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EDITORS REPLY:  I have seen some of these kinds of initiatives before, and this is not the only organization discussing the idea.  Certainly, even though there is some criticism to the effect that national sales taxes affect the poor disproportionately in terms of income spent on taxes, I do think it to be a fairer and more democratic form of tax payment system.  Basically, for the most part, this is what already exists in the Dominican Republic in terms of where the government is getting tax revenues from (sales and other use taxes, import tariffs, etc.)
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However, I also would wager to think (in terms of the US) that you are going to see BOTH a new national sales tax AND a continued income tax as well.  As much as I would like to hopeful about it, my gut instinct is to say they will not eliminate the IRS and not eliminate the existing tax structure.  I believe if anything, they may not increase income tax rates but may institute a national sales tax instead of raising income taxes in the future.  But, time will tell and we can only wait and see what comes to pass.
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