Finding The Expat Havens With U.S. Dollar Currency Advantage

Crisis is all around us these days.

Inflation is eating into your savings…

Wall Street was a scary proposition even before the pandemic and war…

And chances are good that your local property market is dangerously overpriced…

What’s the investor to do?

Property… but, specifically, property overseas… is the answer to that question.

It’s the all-in-one solution to diversifying and profiting across investment markets, geographic regions, and currencies.

Sure, you could try your hand at another store of value like gold…

However, unlike gold, property is also an investment—one that provides the potential for both unlimited cash flow and appreciation. And, in most cases, you can actually use and enjoy the property you own…

A piece of property in, say, Belize could be your second home, a vacation spot, your escape hatch, or your ultimate retirement plan.

Real estate overseas also brings diversification—of currency, of market, and of asset type. Plus, the IRS doesn’t require you to report property abroad in your tax filings, though certain deductions are available if you do.

In short, the purchase of a piece of real estate overseas could bring you profits, privacy, a tax break, cash flow, and a lifetime legacy.

It’s a no-brainer investment strategy—the biggest hurdle is identifying where and what to buy.

One big opportunity right now has to do with currency fluctuations across the globe in response to current events. These are creating windows of buying opportunity for dollar-holders in key property markets.

Even a small shift in exchange rates can make a big difference in price. In Mexico, for example, an exchange rate variation of 2 pesos to US$1 can mean a change in average near-beach property purchase values of US$30,000.

Here are four top safe haven hard asset markets where the current U.S. dollar currency advantage is significant:

Brazil—The Dollar Is Near Its All-Time High Versus The Real But May Have Hit Its Peak

Currency: Brazilian real (BRL)
Exchange Rate: R$5.16 per US$1
Currency exchange controls: Yes

The dollar is 91% stronger versus the Brazilian real than it was in 2015.

But don’t miss this twist: The dollar has lost 8% of its buying power against the real since the start of 2022, reversing a decade-long trend. So its dramatic rise against the real may be tapering off… or it could be over altogether.

I can’t explain why the real is gaining on the dollar since the runup to the Russian was in Ukraine, but here are reasons Brazil remains a safe haven investment option:

• Brazil is one of the world’s major oil-producing nations and exports 20% of its crude. This country will be less vulnerable to skyrocketing oil and gasoline prices than the United States and Europe.
• Brazil is a major commodity producer and therefore less vulnerable, as well, to disruptions in global commodity markets brought about by the war in Ukraine.
• Brazil is dependent on fertilizer from Russia. The country has declared itself neutral in the Russia-Ukraine war, so the flow of fertilizer could continue.

Recent reversal aside, Brazil is a bargain at today’s exchange rates, with the dollar wielding tremendous buying power.

Brazil imposes exchange controls, so money flowing into or out of the country must be declared. Also, you can’t spend dollars or hold dollar-denominated accounts in Brazil. Transferring money is not a difficult process. Your real estate agent should be able to handle the required declarations for you.

Fortaleza is a top option for property purchase. In Meireles, an appealing seaside neighborhood, you could buy a two-bedroom, two-bath, highly rentable apartment within a couple of blocks of the beach for US$100,000 at the current exchange rate.

Colombia—Fantastic Bargains On Offer But The Dollar Could Be Weakening

Currency: Colombian peso (COP)
Exchange Rate: 3,868 pesos per US$1
Currency exchange controls: Yes

The U.S. dollar’s buying power in Colombia increased 13% in 2021 and has increased 64% overall since 2015.

However, please note this new development: Since the start of the conflict in Ukraine, the Colombian peso, like the Brazilian real, has gained on the U.S. dollar. The dollar has lost 5% of its buying power in Colombia since the start of 2022.

Again, I cannot say for sure why the Colombian peso has reversed course, but here’s why Colombia continues to stand out as a top property investment option:

• Like Brazil, Colombia is an oil exporter, with crude accounting for 57% of the country’s total exports. This country is also less likely to be impacted by oil sanctions on Russia. Regular gas in Colombia sells for just US$2.31 per gallon.
• Colombia is also a commodity producer, making it less susceptible to disruptions to Russian or Ukrainian grain output.

Colombia imposes exchange controls, so money flowing into or out of the country must be declared. Also, you can’t spend dollars or hold dollar-denominated accounts in Colombia. That said, the required movement-of-money declarations are straightforward. You could file them yourself, though local attorneys offer the service.

Medellín offers the best city lifestyle option available anywhere in the Americas, with near-perfect weather year-round. Its El Poblado neighborhood is safe, clean, and attractive, with shady streets, upscale shopping, and many good restaurants and cafés. The city also offers a rich cultural scene, from countless open-air festivals to orchestra and theater, all just three hours from Miami.

You could purchase a three-bedroom, four-bathroom apartment suitable for rental in the heart of El Poblado, with parking, a pool, gym, sauna, and a 24-hour doorman, for US$190,000.

Mexico—The First Choice For Americans And Canadians, With A Markedly Undervalued Currency

Currency: Mexican peso (MXN)
Exchange Rate: 20.78 pesos per US$1
Currency exchange controls: No

The U.S. dollar gained 4.4% versus the Mexican peso in 2021, with a total increase of 43% since 2015.

Mexico is a treasure-trove for U.S. dollar investors shopping for diversification overseas. The current exchange rate makes the country’s property markets a bona fide bargain.

Mexico is an ideal Plan B destination. The country has not closed its borders at any time during the pandemic. Restaurants shut down in California? The seaside restaurants in Mexico are open and welcoming.

Mexico is also a good place to avoid the high gasoline prices in the United States and Canada.

Mazatlán is a top oceanside market where you could buy a 200-square-meter, two-bedroom, two-bath oceanfront condo for US$250,000.

The Eurozone—Dollar-Holders Have Gained 10%

Currency: Euro (EUR)
Exchange Rate: 0.91 euros per US$1
Currency exchange controls: No

U.S. dollar-holders gained better than 10% in the eurozone in 2021. This is an historically noteworthy spike.

Portugal, as far as you can get in Europe from Ukraine, remains a safe, welcoming country with sun-drenched beaches and oodles of Old World charm.

Lagos, on this country’s Algarve coast, is a top choice for both lifestyle and a rental investment. You can own here starting from 275,000 euros. Last year, in dollar terms, that equated to US$335,400. Thanks to today’s bump in the dollar’s value, the dollar price is US$305,500, a savings of US$30,000.

Lief Simon
Editorial Director, Overseas Property Alert