Carlos Slim thanks you

The new richest man in the world doesn’t know me, but he sure loves the seventy-some Nuevo Soles we pay every month for our Telmex satellite TV service. Telmex is of course one of Carlos Slim’s main entreprises.

Funny story, when we first rented our apartment in Cusco the landlord said that “… cable was included …”, we just had to pay an extra $10 per month to her, not to Telefonica (the cable company). Hmmm, how did that work out you ask? Well, about a week after SuperBowl XLII (Giants – Patriots), the cable guys from Telefonica came through our neighborhood and cut the shared coax cable between all of the apartments. There was coax everywhere, all of the buildings in our complex had their shared cable taken away 😦

I have since learned that you can actually bribe the cable guys and they will let you keep the shared cable when they come through every so often, but we now have Telmex because it’s cheaper than cable or DirectTV.

On a more serious note, Peruanista has a good blog post about the relationship between Bill Clinton and Carlos Slim. Pure coincidence no doubt that donations to a good cause here and there happen to lead to big business deals in the same places. There is also some controversy over the way Telmex was privatized to the benefit of Carlos Slim and his partners.

Anyway, I won’t make it to the super-rich list, ever. I’ve given up on that, but I’ll take all the luck I’ve had in life and family and count my blessings any day 🙂

Idiots with MBA degrees

I could devote a whole blog to idiots in suits, also known as MBAs, but it would take away from the generally optimistic world view I have and try to share on this blog.

However, I just couldn’t resist this one, from Time magazine: Belgium’s looming beer crisis.

Just a teaser… Clearly 14th. century monks were more capable of running a business than today’s idiots in suits:

“InBev can trace its brewing roots back to 1366 … It has expanded rapidly following a series of rapacious mergers and acquisitions in recent years, most notably its takeover of Budweiser brewer Anheuser-Busch in 2008 — after which InBev became AB InBev. But that move also saddled the company with huge debts, which it is still struggling to pay off. …”

And if you can stomach reading through to the end, here’s what the people who gave you the financial crisis, Government Motors and $400 Amazon stock plan for Belgian beer:

“AB InBev is thinking on a bigger scale and wants to go for volume rather than quality,” he says. In other words, AB InBev is focusing on a grand strategy, which means that what happens in Belgium now is small beer.”

Belgium is of course my home country, so this one hits close to home. There’s also a Latin American connection in that AB Inbev is largely controlled by Brazilian investment bankers, stemming from one of the mergers that made the company what it is today.

Excuse the French, but if some people can screw up a wet dream, I guess even screwing up Belgian beer is possible for idiots in suits.

Go read the full article at Time.

$1202

The current price of gold, one of Peru’s 2 main exports (the other is copper).

Here in the Empire of blood and gold the effects of the run-up in gold prices are decidedly mixed. While gold certainly has been good for Peru’s macro-economic numbers, the current gold rush in places such as the pristine jungle of Madre-de-Dios has undeniably had a significant environmental and social impact.

Gold mining in the jungle of Madre-de-Dios, Peru

Gold mining in the jungle of Madre-de-Dios, Peru

On the purely financial aspect, I tend to agree that gold will likely do no better than protect your purchasing power in the long run. Gold has no intrinsic value and I’d say the current run-up is largely due to lack of faith in paper currencies, since central banks are printing them up like Monopoly(tm) money, but you can’t expect artisan miners in Peru or the suits at the TSX to give 2 hoots about that.

Here’s to Peru’s Ministerio de Energia y Minas.

Peruvian economists

It’s really a shame this should be a headline in Peru’s newspaper of record, El Comercio.

“Economists: continued growth is not possible unless poverty is reduced”.

Peruvian economists

Just saying, that one is right up there with “the sky is blue” and “Bill Gates not hurting for money this week”.

But such is the dilemma that is Peru: for the suits in Lima economic growth has long been detached from quality of life for ordinary Peruvians, especially in the provinces. Take for example this chart from official INEI statistics, during a period where GDP grew at a 9% annual clip.

Peru quality of life

Chullo tip to IKN.

Now I’m not pretending to have an easy solution for the quality of life issues in Peru, but hopefully some of the suits in Lima will start to seriously look beyond the neo-liberal dogma that “what’s good for business is good for everyone”.

I’ll propose a new ideology for economists in Peru: “do what’s good for the people and economic growth will follow”.

  • Stimulate the economy in the provinces
  • Improve the infrastructure in Lima’s slums and in the provinces
  • Respect labor and environmental protections
  • Reduce bureaucracy and hold the bureaucrats accountable
  • ….

The economy in Peru is too dependent on tourism and export of base metals. While those are great sources of revenue, the suits who run Peru should look at adding technology, manufacturing and quality services, the types of employment that would raise the standard of living of the average Peruvian worker.

At the end of the day, the Peruvian economy is the total of what the average Peruvian worker contributes to it, and expects to receive from it. Not in monetary “funny printed paper” terms, but in terms of products and services. It’s a no-brainer, focus on the quality of life of ordinary Peruvians and economic growth must follow.

Funny printed paper

2 cool charts I copied from Rolfe Winkler at Reuters. To illustrate my point that money’s just funny printed paper.

US public debt outstanding

US public debt outstanding

US public debt, doesn’t include unfunded healthcare and Social Security oblications. Original here.

Dow Jones historical chart valued in gold

Dow Jones historical chart valued in gold

Dow Jones historical chart as valued in gold. Original here.

Peruvians should pay attention to these, since Peru historically has very close ties to the US and gold is a major part of Peru’s foreign exports. To stay up to date on all things gold and Peruvian economy, head over to IKN.

Read ’em and weep

The real-estate classifieds for Cusco, that is. Here’s a few examples:

We’ve started looking to buy a house or apartment in Cusco, because the apartment we’ve been renting is becoming too small, especially since baby got a new swing 😉

Brianna in her new swing

Brianna in her new swing

Real estate here in Cusco is very expensive compared to the rest of Peru, since the area is thriving with so much tourist money. Asking prices for some nice apartments we’ve looked at range from $60,000 to $120,000, and mortgage interest rates range between 9-14%. This in a country where the per capita GDP is $8,500. If I worked full-time at my teaching job, my entire income would be spent on the $500 mortgage payment if we bought a $60,000 apartment with 20% downpayment 😦

I’m really on the fence about this… to get a nice place that we can afford we may have to look outside the city. I actually prefer the quiet areas outside the city, but then we’d be further away from family, friends, etc.

In terms of real-estate value, I’m worried that much of the increase in Cusco in the past years is speculative and that prices appear to be wildly out of line with personal incomes. On the other hand, I think long-term demographics, conservative lending standards and the mountainous terrain could put a floor under real-estate prices in Cusco, plus we’d be buying something to live in, not as an investment to “flip” in a few months or years.

So if any readers have a rich aunt or uncle… tell ’em to help out a poor gringo in Cusco 😉

Unconventional

In the comments to this recent post I somewhat defended my ideas around business and geopolitics as unconventional. I happen to think it’s necessary to challenge the ways of the 20th century and the groupthink of the rich old men in suits who run the world.

Take for example this US government mortgage calculator, it won’t accept a negative value for home value increase. Hmm…

idiot mortgage calculator

idiot mortgage calculator

Chullo tip to the always excellent Rolfe Winkler.

BTW – I think home values in Peru are a bit safer than in the US, since banks in Peru have stuck to conservative loan values (typically requiring 20% down on mortgages) and the demographics in Peru bode well for economic growth in the long term. That said, in areas such as Cusco real estate prices have skyrocketed in recent years, and home prices are entirely out of line with personal incomes.

Best charitable giving in Peru

DISCLAIMER: no offense is intended

Earlier this year one of our best friends in the US asked me if I knew of any good charities in Peru. He had set aside some cash and was looking for a good way to make a donation. Patricia and I have talked about charitable giving in Peru, and since the holidays will be upon us in a few months I decided to write this post as food for thought, so to speak.

If you want to make a charitable contribution in Peru, or a corporate charitable event, what do you do?

In a nutshell, after spending time in Peru I no longer believe in the US/European concept of charitable giving. Big charities, churches and NGOs may have good intentions but often appear culturally disconnected at best or self-serving at worst, with charitable giving an extension of foreign policy or corporate strategy.

Look beyond the idea of selecting a better charity. While writing a check to your favorite charity is certainly a very kind and honorable thing to do, sealing that envelope as you’re sitting safely behind a desk only reinforces ideas that you are already comfortable with: that the big white man can make everything all better for little brown people, that countries like Peru need the US to improve their way of life.

Only, it hasn’t worked in the past 500 years or so and it won’t work any time soon.

No offense, Peruvians LOVE gringos, but we gringos typically go down to Latin America with preconceived notions of how our money, influence and business will make life better, which is practically akin to the Prime Minister of India coming down to Texas and “saving” all the ranchers there by educating them on how sacreligious it is to eat steak.

If you’re already convinced that Latin America needs the US, you will by definition be insensitive to its real needs.

I experienced a great way to do charitable giving in Peru during Christmas of 2007: the office where Patricia worked took a trip to a poor, rural village and handed out Christmas presents to the kids there, served hot cocoa and Panettone (pictures below). In my opinion, the only way to do charitable giving in Peru is to fly down to Peru and do something nice yourself. Take a bus to a small rural town, hand out some toys to kids who have none, or build a library or a medical clinic if you have the resources. You know that warm fuzzy feeling you get when your kids open their presents on Christmas day? A US company or philanthropist can easily fly down to Peru and get the same warm fuzzy feeling 100 times over 2 weeks before Christmas, then go home and do it all over again.

Don’t take my word for it, come see for yourself.

Priceless

Priceless

Schoolkids in rural Peru

Schoolkids in rural Peru

Poor rural children in Peru

Poor rural children in Peru

Handing out Christmas gifts

Handing out Christmas gifts

Otto agrees

Adding on to my recent post about LatAm media coverage, where I said:

“…Hugo and Evo are hugely popular in Latin America because they’re good for Latin America”

Apparently Otto agrees in his recent post about the Bolivian economy, saying:

“A once and future coca leaf grower runs countries better than teams of dumbasses in suits (you know them by the name ‘economists’) with multisquillon dollar eddycations…”

My only issue with that is that Otto narrowed it down to economists, instead of the more general rich old guys in suits. Whether it’s Alan Garcia or Jack Welch or Al Gore, be leary of rich old guys in suits who profess to know what’s good for average Joe. Far too often said rich old guys in suits have made big bucks robbing said average Joe blind.

Tim Geithner related to Alan Garcia??

I’m beginning to think Tim Geithner and Alan Garcia are drinking the same Kool-Aid. In the news today:

Geithner sees ‘durable’ signs of stability “Probably why I’m doing this (tour) is to make sure we keep working with governments around the world to continue to provide enough support to lift this global economy back to a sustained pattern of growth,” he told reporters.

And in other news:

Geithner’s rhetoric is like that of Alan Garcia, who keeps claiming Peru is on track for strong GDP growth and has an iron-clad, recession-proof economy. The numbers, souped up to begin with, show otherwise (courtesy IKN) :

Chile and Peru GDP

Chile and Peru GDP

The root of the problem in the US, put simply, is that people bought houses they couldn’t afford. Without steep wage inflation, the foreclosure crisis and falling home prices may continue for some time (see Japan). For all the monetary easing (printing money) Geithner et al are doing, the only thing that achieves is to temporarily prop up the feeble balance sheets of overleveraged banks.

Tim Geithner and Alan Garcia both use optimistic rhetoric to appease the general public but sadly their policies serve rich old guys in suits before the general public.