Dollar investments and the “likewise in the opposite direction” method
It is no secret to anyone how unstable Latin American currencies can be. One of the recurring ghosts in the region’s economies is devaluation. It is no surprise that within the Top (10) ten among the most devalued currencies in the world so far in 2021, the first six seats are for the currencies of: Colombia, Argentina, Peru, Chile, Brazil and Mexico.
Many would think that the main reason is the pandemic and the social outbreaks that have occurred since 2019. But in reality the devaluation began, for most of the region, from 2016. The factors involved in the valuation of the US currency are too many such as the interest rates set by the US Federal Reserve, the situation of the oil industry, wars or conflicts in the world, etc.
There are several elements you should consider before investing in dollars. First is much more than buying them. Contrary to popular belief, the currency is not always on the rise and depending on the country, savings can be invested in other options that give more attractive returns and in most cases, are higher. Second, like any other currency in the world, it is subject to inflation. Buying them is not enough if you want to keep your capital over time.
More than ten years ago in the Beauty Pageant of Colombia, Miss Antioquia gave, the now iconic, answer “in the same way in the opposite direction” to a question from the jury of the contest. Many say she was actually a misunderstood visionary. And if you’re considering buying dollars, that’s the advice to follow. That is, you must carefully monitor the price of the currency, when it reaches a maximum price it is time to sell and invest the earned in another business and when it goes down to minimums it is time to buy.
Buying dollars is an option if you want to protect your wealth against changes in your local currency. But not when you seek to maintain the patrimony over time and earn a good return. If you lean towards the second option, there are several factors to consider. Some of them are:
1. In which country it is: the currencies of Latin countries are very sensitive to changes in the dollar. Each has a particular economic policy, a unique electoral calendar, different degrees of independence of the Central Bank vis-à-vis the executive branch, different financial products, degree of openness of the economy that makes each case unique. The behavior of the dollar is not the same in Chile as in Bolivia.
In Colombia in 2017 they crucified anyone who said that the dollar was going to cost 4,000 pesos while Argentines consider it a risk to project that it will not rise. But in all cases having an income or a financial product will protect the patrimony. Here it is important to know your local economy, the different options you have and above all what risk you are willing to take.
2. Risk profile: in any type of financial movement, a maxim that you should always take into account is “The higher the profitability, the greater the risk”. It may not be fulfilled in all cases, but it is a guide. The main question you need to answer is what your goal is: to increase your wealth or safeguard it. And based on that answer there is a wide range of options that fit in each case.
3. Common options: land, properties, real estate are the safest option no matter what Latin American country you are in. But you can magnify your results if you decide to invest in Miami, Orlando or South Florida: it is a safe market, it is close to the region, you would rent in dollars, there are many cultural similarities, etc. If your goal is to protect your wealth from the dreaded devaluation, this is the best option.
Investing in dollars is a more complex issue than it initially seems. And it depends a lot on the local conditions of each economy. What they all have in common is the security of investing in the Florida real estate market: rent in dollars, protect your assets against possible devaluations, etc.
In PFS Realty Group given our real estate activity we are focused on advising those people and families who are interested in making investments of this type in Miami, Orlando and South Florida, we have been working for more than twenty (20) years and for this, twenty (20) years that give us a specialty in what we do, If you want to explore real estate investment opportunities, we can schedule a meeting, face-to-face or virtual, to expand this information. Write to us at info@pfsrealty.kinsta.cloud and also visit our www.pfsblog.kinsta.cloud website to learn more about us.
