GUIDE TO FOREIGN REAL ESTATE TO FOREIGN REAL ESTATE 2 I˜˙˚ˆˇ˜˙ ˜ GIDE FREIGN REA ESAE TABLE...

GUIDE TOFOREIGN REAL ESTATE

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GUIDE TO FOREIGN REAL ESTATEInternational Man

TABLE OF CONTENTSDoug Casey on Foreign Real Estate.......................................................................................................... 3

The Retention of Wealth .......................................................................................................................... 8

Foreign Real Estate Is the New Swiss Bank Account ............................................................................. 10

An Inescapable Global Dragnet ....................................................................................................... 10

When All Else Fails ........................................................................................................................... 11

A Bright Spot ................................................................................................................................... 12

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DOUG CASEY ON FOREIGN REAL ESTATEIn a wide-ranging interview with Casey Research editor Louis James, Doug Casey discusses why it’s imperative to start diversifying one’s assets today, and provides some guidance on foreign real estate.

Louis James (L): Doug, we talked previously about getting assets out of your home country, especially the US, where to take them, and what to do with them. In so doing, you touched on the inevitability of currency controls just ahead, especially for Americans. Can you tell us more about that?

Doug Casey: Yes. I’m quite serious about what I said about “the grim reality of impending currency controls.” As the global economy continues to deteriorate, governments will have to appear to be “doing something.” It’s going to become very fashionable to institute some sort of foreign exchange control.

Why might that be? Because, obviously, people who are taking their money out of the country are unpatriotic…

L: Those bastards.

Doug: That’s right. Jingoistic Americans naturally, but stupidly, see taking money out of the country as being unpatriotic. They don’t understand that it’s mainly those prudent people who will be able to supply the capital to rebuild a devastated economy later. Besides, getting money abroad is obviously something that only rich people would do… and, of course, it’s time to eat the rich, as well. For those two reasons, there won’t be much resistance to controls. And the state gets to appear to be “doing something.”

And when they do, more people—at least those with any sense—will get scared and really try to get their money out, which will exacerbate the run to the exits. The bottom line is that if you want to get your money out, the time to do it is now. Beat the last-minute rush.

I don’t know what form the exchange controls are going to take, but there are two general possibilities: regulation and taxation.

The regulations might take the form of a rule prohibiting you from taking more than X thousands of dollars abroad per year without special permission. No expensive vacations, no foreign asset purchases without state approval.

As for the taxation, if you want to, say, buy foreign stocks or real estate, you might have to pay an “interest equalization tax” or some such. So, you could do it, but it’d cost you a lot of money to do it.

Something like either of these, or both, is definitely in the cards.

L: But aren’t FX controls something from the past? I mean, where do they exist today?

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Doug: Well, FX controls have been used since the days of the Roman Empire. A country debases its currency, raises taxes beyond a certain level, and makes regulations too onerous—and productive people naturally react by getting their capital, and then themselves, out of Dodge. But the government can’t have that, so it puts on FX controls. They’re almost inevitable at this point.

Almost every country—except for the US, Canada, Switzerland, and a few others—had them until at least the ’70s. I remember leaving Britain once in the ’60s, and a border guy searched me to see if I had more than 50 pounds on me. In those days, currency violations in the Soviet bloc countries could get you the death penalty. Things liberalized around the world with Reagan and Thatcher, and then the collapse of the USSR. But you have to remember that that was in the context of the Long Boom. Now, during the Greater Depression, things will become much stricter again.

Right now, the US just has reporting requirements. But some places, like South Africa, make it very expensive and inconvenient to get money out. South Africa, perversely, may serve as a model for the US.

L: Okay, so we talked previously about Americans at least setting up a Canadian bank account and safe deposit box and, better yet, going in person to Panama, Uruguay, Malaysia, or a similar place to do the same. And once there, you advised getting with a lawyer, either referred by someone you trust or found through an interview process, to set up a corporation that can handle your assets and investments for you. This all needs to be reported, but it’s wise to do it in advance of the higher costs or other limitations to come.

Doug: Yes. While US persons must report foreign bank and brokerage accounts, safe deposit boxes are not—at least not yet—reportable. This leads me to the biggest and best “loophole” when it comes to potential foreign exchange controls, and that’s foreign real estate.

I’m of the opinion that, broadly speaking, real estate as an asset class is going to be a poor performer for a long time to come—but that won’t be equally true across all countries. Real estate in countries that rely on mortgage debt to buy and sell will continue to be the worst hit.

People don’t understand that buying property with a mortgage is just the same as buying stocks on margin. It’s caused speculative bubbles and malinvestment. Until the malinvestment in those countries is entirely liquidated, you don’t want to invest in real estate in them. But a lot of countries, especially in the Third World, have no mortgage debt whatsoever. Zero mortgage debt. You want a piece of property, you pay for it in cash. That keeps prices down and the market much more stable. And it makes for more interesting speculations, because if a mortgage market develops in the future, it could light a fire under prices.

But, from the viewpoint of FX controls, the nice thing about real estate is that there is no way they can make you repatriate it. Other than owning a business abroad, real estate is the only sure way to legally keep your capital offshore.

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L: I suppose it would be difficult for even Uncle Sam to seize your estancia in Argentina… not without starting a war.

Doug: Yes. Although I don’t doubt he’ll be starting more wars as well… [laughs].

L: So, part of your thinking here isn’t just speculative. You’re talking about strategies for wealth preservation, not just in the face of foreign exchange controls, but more aggressive, predatory taxation and confiscation by the state—they can seize your assets, even real estate, in the US, but not abroad.

Doug: Exactly. Argentina is excellent from that point of view: rights to real property are, if anything, better than those in the US. In many ways, Argentina is culturally and demographically more like Europe than Europe. Uruguay is also excellent, although culturally it’s like a backward province of Argentina. Paraguay is quite secure—but a bit weird as a place to live.

I’m not currently up to date on the Chilean real estate market, but Chile is definitely now the richest and most advanced South American country, and an excellent choice. Brazil is fine. Colombia is improving greatly. Ecuador has a goofy president, but parts of it are very nice, and it’s about as cheap as Argentina. Eastern Bolivia is interesting, actually, despite Morales. Only Venezuela is out of the question in South America. It’s just a pity they have all that oil, which is always a corrupting influence.

L: Well, then, what about Central America? I know you prefer South America for speculative purposes, but what if someone wants to park a lot of wealth by buying a couple miles of beautiful beachfront property in Costa Rica, or some place like that?

Doug: I was a big fan of Costa Rica for many years… The first time I went down there was 35 years ago—but it’s a different place now. Then, it was very cheap, and now it’s very expensive. And it’s totally overrun with gringos. So, Costa Rica is not of that much interest to me at this point. It’s pleasant, but there’s limited upside.

I think an excellent place to be in Central America is Belize. Although culturally and ethnically, it’s not really part of Central America, it’s part of the Caribbean.

L: And they speak English there.

Doug: They do indeed, though things are changing. The Guatemalan government has always regarded British Honduras, which is what Belize used to be called, as part of Guatemala. There have actually been confrontations between Britain and Guatemala over this. But that’s in the past; now there’s a different problem. Guatemalans are rolling over the border in much the same way that Mexicans are in Texas, New Mexico, Arizona, and California.

So, the character of Belize is changing, but for the foreseeable future, it’s still going to be Belize, and I rather like it. Aside from Panama, Belize would be my first choice in Central America.

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The problem with Central America, however, is that it’s a bunch of small countries that have historically been very unstable. And culturally backward. Most are under the thumb of the United States… there’s a long history of US invasions, most recently in Panama with Noriega. There are “Frito banditos” running around these places.

The most culturally advanced country in Central America—not counting Mexico, of course, since it’s in North America—is Guatemala. But Guatemala has had huge troubles with violence, which has only recently come to an end. I hate going through checkpoints at night, manned by jumpy, uneducated, heavily armed teenagers.

Nicaragua is the low-cost alternative, but it’s relatively backward. Panama is probably the best choice. It’s very international, very urban (in Panama City), and it’s very sophisticated, infrastructure-wise.

If I didn’t like Argentina and Uruguay so much, I would put Panama at the top of my shopping list.

L: Got it. Back to the exchange controls themselves. Do you think people will have any warning at all? It seems to me that this is the sort of thing the powers that be would want to spring on people.

Doug: I think it’s going to come out of left field. It always does, with at most an official denial just before it happens. In August 1971, Nixon devalued the dollar, which immediately dropped against gold and all foreign currencies. I think there’s a reasonable probability that the government will do that again. Gold may not be part of the equation, but they may decide to put in some sort of fixed exchange rate between the dollar and various foreign currencies.

The reason for thinking this is simple: with all the dollars outside the United States devalued by that much, that much of a liability just vanishes into thin air. And in the short term—it’s never a long-term fix—US exports would go up. This would “stimulate” the domestic economy. Imports to the US would go down, which would make for fewer dollars leaving the US.

L: I know you hate making predictions, but can you tell us if your guru sense is tingling on this so strongly that you think it could happen soon?

Doug: The timing on this is really unpredictable. These people don’t have a plan. They’re acting ad hoc to whatever seems most urgent. All the so-called economists around government today are really just political hacks. Their world-views are totally unsound.

L: With all the problems the US has, do you think this could happen now? Could we be reading about new exchange controls on CNN.com this afternoon?

Doug: Sure. Although they typically pull these stunts over a weekend. I expect something of this nature to happen any time between tomorrow morning and two years from now. If some form of currency controls are not instituted within two years, I’m going to be genuinely surprised.

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So, if you’re going to take action, you should start heading for the exits now. Not next month, and certainly not next year.

L: For those who don’t take action until it’s too late, under the scenarios you mentioned, they’ll still be able to get money out. It’s just that it might be more difficult, time consuming, humiliating, and certainly more expensive to do. For every $100,000 they move, only $90,000, or $70,000, or whatever will get to where it’s supposed to go. Can you foresee a more Stalinesque alternative, where they simply can’t get anything out at all?

Doug: Hopefully not. Anything is possible, and things can change so rapidly… but I’d hate to think of what conditions would be like if they ever became that draconian. It’d be so bad on other fronts that there would be all sorts of even more urgent things on your mind— Americans would get a very quick and unpleasant education in the real meaning of Maslow’s hierarchy.

L: Like the Mad Max–style neobarbarians at the door with a battering ram.

Doug: Exactly—that’s when you’ll definitely want to be in more pleasant climes. I’d want to be watching it on my widescreen, in comfort, not out my front window.

L: We’re talking about extremes here…

Doug: You know, back in the 1970s, there was a spate of books published on financial privacy. In those days, financial privacy was still possible. Now, it’s not only no longer truly possible, short of embracing a completely outlaw lifestyle, it’s very dangerous to write about it or even talk about it. I kid you not. These days, people who ask too many questions about privacy techniques may well be government stooges…

There’s lots of handwriting on the wall. All those books on financial privacy were published in the ’70s—if you look on Amazon, you can still find them. But there’s nothing really worth reading that’s been written on the subject in 20 years. It’s actively discouraged by the government. I could name—but I won’t—at least two authors who got themselves into a real jackpot this way. Forget about the First Amendment.

In fact, I even feel uncomfortable talking about it in this interview.

So, let me once again emphasize that I advise everyone to stay fully within the bounds of the law.

That’s not for moral reasons, of course; there is no morality to the law. It’s strictly for reasons of practicality. Risk/reward ratio.

L: Understood. Loud and clear. Thanks again, Doug—you’ve given us a lot to think about.

Doug: My pleasure.

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THE RETENTION OF WEALTHBy Jeff Thomas

For most people, the term “investment” means the purchase of something for its anticipated rise in value in the future. However, there is another category of investment, generally referred to as “retention of wealth,” that does not adhere to this definition. Although investments in this category may well rise in value over time, their principle purpose is not profit. Their purpose is to assure that if other investments fail, the investor will still have a portion of his wealth to fall back on.

Generally, during good economic times, investors are inclined to be somewhat uninterested in this category. However, when bad economic times are on the horizon, retention of wealth becomes (or should become) far more significant in importance.

The world has never seen a time like the present one. In most every facet of the economy, personal wealth is threatened. In many countries, there is the threat of greater taxation, devaluation of currencies, collapses in markets, and even outright confiscation of bank accounts.

Consequently, if the powers that be exert their power to (quite literally) rob their citizens, those citizens need to determine the safest havens for their wealth that they possibly can… and need to do so before the wolf arrives at the door.

Those of us who have been predicting the coming economic debacle for many years have, not surprisingly, spent much of that time researching and identifying such opportunities and divesting ourselves of investments whose days may well be numbered.

Basic Truth #1: Precious metals and real estate will become the last safe investments for the retention of wealth.

At some point in the Great Unravelling, we will reach the point when virtually the only “safe” investments will be precious metals and real estate. (It should be stressed that even these are not guaranteed, but they are, and will be, the last bastions. They are the Alamo.)

Although a small number of people were professing this Basic Truth prior to 2008, very few people were listening. But today, more and more people are realizing that soon the jig will be up, particularly if they live in the EU or US, where some, if not all, of the threats listed above are virtually certain to become reality in the foreseeable future. As a result, there is growing interest in the ownership of precious metals and real estate.

Basic Truth #2: Precious metals and real estate are only safe if they are located outside an endangered jurisdiction.

For many people, it goes very much against the grain to own anything outside the country in which they live. (The average American in San Diego would sooner own property in Miami, Florida, some 2,500 miles away, than in Tijuana, Mexico, just over the border.)

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Yet if the threat to your wealth is your own government, it is essential to remove your wealth from the country in which you live. The reason is that, as long as it remains in the country in which you are a citizen, it’s likely that your government will regulate it, tax it, cause it to lose its value through inflation or hyperinflation, and/or simply confiscate it.

It’s far more difficult for your government to destroy your wealth if you have expatriated it, as your government does not have free control over the laws and government of the country where you have invested. It would be harder for your government to force the repatriation of your precious metals, and downright impossible for it to demand that your overseas real estate be shipped to your home country.

Therefore, when choosing a jurisdiction in which to invest in precious metals and/or real estate, in order to maximize safety, the investor should choose a country that:

A. Is not likely to be a candidate for major decline in the coming economic collapse;

B. Is not likely to cave in to the demands of countries that are likely to soon collapse; and

C. Has laws that impose as little as possible on foreign-owned investments.

This last item is critical. The safest countries are those that do not tend to fall prey to dictatorships or dramatic changes in laws. The ideal countries are the ones that impose the least interference in your ownership of your investment.

This leads to:

Basic Truth #3: The ideal jurisdiction in which to own property is one that does not tax your property.

This final principle is understood, at present, by only a handful of investors. A country that imposes income tax, capital gains tax, etc., may very well—in hard times—suddenly decide to tax precious metals ownership. Likewise, a country that imposes property tax may very well raise that tax suddenly in pressing times. Indeed, it may choose to claim that the investor has not paid his most recent tax bill (regardless of whether or not this is true) in order to justify the confiscation of his property.

Many governments of the world are now hopelessly in debt and on the verge of economic collapse. As their leaders become more desperate, they will resort to more desperate measures. In the next few years, we shall see the leaders of the most “respected” countries throw out the rule book and resort to a final grab of their citizens’ wealth.

It’s important to recognize that the word “wealthy” does not only refer to those whose net worth is in the seven-figure range and above. If your wealth is $5,000, that amount might be better protected by the purchase of a few one-ounce gold coins. If it’s $50,000, it might be better protected by the purchase of a house lot. Those who need to protect $500,000 or more might wish to create a portfolio of gold, silver, house lots, and built property.

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Regardless of the amount of your wealth, the principles remain the same.

As to what countries the reader might consider, several nations in the world have no income tax, including the Bahamas, Bahrain, Bermuda, Brunei, the Cayman Islands, Kuwait, Oman, Qatar, Saudi Arabia, and the United Arab Emirates (UAE).

There are 16 nations that have no property tax: Bahrain, the Cayman Islands, the Cook Islands, Croatia, Dominica, Fiji, Israel, Kuwait, Liechtenstein, Malta, Monaco, Oman, Qatar, Saudi Arabia, Turks & Caicos, and the UAE.

Once having decided to invest wealth in a safer jurisdiction, an investor might also consider which of the above countries might additionally provide him or her with an increased value. Still, the primary goal in retention of wealth is to save it from the negative effects that may soon be caused by governments.

FOREIGN REAL ESTATE IS THE NEW SWISS BANK ACCOUNTBy Nick Giambruno, Senior Editor

Financial privacy is essentially dead.

I think it’s only prudent to assume that sooner or later, all the details of your financial life will come to rest in a government computer—if they haven’t already—and to plan accordingly.

We live in a world where pretty much every penny you earn, save, and spend is stored in a permanent record somewhere and can be retrieved for scrutiny one day if needed.

It’s not a comfortable or happy thing. But no matter how unpleasant it is, I believe it’s a reality we have to face.

Knowing that you are financially naked and exposed to an insolvent government hungry for revenue might make you feel like you just ate rat poison for lunch.

That said, don’t be tempted to try to illegally hide your income and skirt reporting requirements. It’s a fool’s errand. The draconian penalties make a cost/benefit analysis easy… don’t even think about it.

AN INESCAPABLE GLOBAL DRAGNETFATCA is at the vanguard of the global trend for the automatic reciprocal exchange of financial information between governments.

In case you don’t know, FATCA, the Foreign Account Tax Compliance Act, is the wildly unpopular law that forces every financial institution in the world to report information about their American clients to the US government, which imposes huge costs on those financial institutions. In effect, FATCA causes every foreign bank to become unpaid agents of the IRS.

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The US is in a position to enforce an extraterritorial law only because it controls the world’s reserve currency and has threatened to effectively cut off access to the US financial system for those who do not comply.

This is why a country like Mexico could never impose its own version of FATCA on the world. Not many would care about losing access to the peso-based Mexican financial system.

This success has unfortunately inspired other bankrupt countries to band together and push for a sort of FATCA on steroids. This is where the OECD’s plan for a “global standard” of automatic information exchange—informally known as GATCA—comes in.

Rather than having each country mimic FATCA and tediously create a web of bilateral information-exchanging agreements with every other country, the leaders of this supranational institution are pushing to make the exchange of such information automatic among all countries.

I’d say it’s safe to assume the OECD will be successful in blanketing most of the world with its new “global standard”—at least I wouldn’t want to bet against it.

It’s very likely in the near future that no citizen from any country will be able to “hide” financial assets anywhere. Every financial institution in the world will automatically send financial information on foreign account holders to the holder’s government.

FATCA and GATCA mean there’s no escape. Unless you plan to bank in Cuba, Iran, or North Korea, count on your home government finding out about your offshore accounts automatically.

That doesn’t mean obtaining an offshore bank account is a fruitless endeavor.

Offshore banks are often much safer and better capitalized than most banks in the US. Additionally, a foreign bank account cannot be seized or frozen at the drop of a hat by your home government.

Offshore banks usually allow you to diversify out of the US dollar as well and gain access to markets in countries you otherwise might not be able to. So, despite not having any financial privacy, offshore banking still gives you many important benefits.

WHEN ALL ELSE FAILS…Even if you manage to somehow escape the global FATCA/GATCA dragnet, your private financial information is still very vulnerable.

If it comes down to it, governments are willing and capable of using alternative means to get the information they desire.

They can engage in economic espionage, bribe bank employees, and pay freelance hackers to steal ostensibly secret financial information.

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Take, for example, the case of Sina Lapour, an assistant to a private banker at Credit Suisse. In 2007, Lapour stole the private information of as many as 2,500 clients and sold it to a middleman, who then sold it to the German tax authorities, who presumably shared it with other governments. Or the 2008 case, when a thief stole data from LGT Group in Liechtenstein and then sold it to tax authorities in various countries.

Then there’s Edward Snowden. Before he was an NSA contractor, Snowden worked for the CIA, for which he was posted in Switzerland. Snowden claims that his objective there was to get Swiss bankers in compromising positions so that secret financial information could be gleaned. Specifically, he encouraged a Swiss banker to get drunk and then drive, hoping that he would be arrested. Then, the CIA would offer to help get the banker out of jail and legal trouble… for a price: divulging secret financial information.

And then there’s the hacking and leaks of a number of offshore centers in a sort of WikiLeaks-style operation where confidential information on over 122,000 trusts, companies, and other structures was revealed. The 260 gigabytes of formerly private information was used to publicly identify more than 130,000 people in 170 countries.

A BRIGHT SPOTWhen you consider the combined effects of FATCA, GATCA, and governments engaging in bribery, blackmail, and hacking, it would be foolish to assume that the privacy of your financial assets is assured.

This is why, when I see people argue about which country or which convoluted offshore structure is best for keeping secrets from Uncle Sam, I’m reminded of two bald men fighting over a comb.

It should now be clear that privacy for financial assets like bank and brokerage accounts is essentially dead. However, nonfinancial assets like foreign real estate are a completely different story.

Owning foreign real estate is one of the very few ways Americans can legally keep some of their wealth abroad while still retaining their privacy.

• Compared to fiat currencies, foreign real estate can be an excellent long-term store of value.

• It’s a hard asset outside the immediate reach of your home government.

• It’s something that cannot be easily confiscated, nationalized, frozen, or devalued at the drop of a hat or with a couple of taps on the keyboard.

But foreign real estate also has a rare and notable feature that foreign financial assets—like offshore bank and brokerage accounts—do not have.

Privacy.

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If the foreign real estate is held directly in your name (i.e., not in a trust, LLC, real estate fund, partnership, etc.), it is not reportable to the IRS. Of course, any rental or other income generated is reportable.

What this means is that it’s possible to use foreign real estate—as long as it doesn’t generate any income—to diversify some of your savings abroad and retain your privacy.

In that sense, foreign real estate has become the new Swiss bank account.

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GUIDE TO FOREIGN REAL ESTATE TO FOREIGN REAL ESTATE 2 I˜˙˚ˆˇ˜˙ ˜ GIDE FREIGN REA ESAE TABLE...

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