Margarita- The Last Of The Cheap Caribbean Islands
Margarita- The Last of the Cheap Caribbean Hideaways.
Margarita is a tropical island off the coast of Venezuela, and it offers some interesting advantages over every other island in the Caribbean. There are a few disadvantages as well, but for the average person, Margarita is literally the last of the affordable Caribbean islands. We aren't trying to sell you a home on Margarita. This is our analysis as people living on the island. There's nothing we hate more than the "sales approach" that hides all the flaws until you've signed on the dotted line and transferred your money. We simply tell it like it is.
Margarita Island Margarita is to Venezuela what Hawaii is to the U.S., but with only a 25 mile channel separating it from the mainland. This is one of the biggest differences between Margarita and all the other Caribbean islands: Margarita is just a small part of a large country. Margarita is the largest island of the three-island State of Nueva Esparta, the smallest of the Venezuelan States. The capital is La Ascuncion. Margarita is a duty-free port, so there is no tax or tariff on any of the products you buy on the island. This duty-free status is in marked distinction to the outrageous taxes on just about every other Caribbean island. Imported products are more expensive on Margarita, but it isn't anything like the Bahamas, for example. In fact, the Caribbean island climate combined with the extremely low cost of living is one of the brightest aspects to Margarita. Beer is literally cheaper than water. Food is extremely cheap and plentiful. Gasoline is about 15 cents a gallon. You cannot compare any other Caribbean island to this cost of living: nothing else even comes close. From our perspective, it's living on a Caribbean island with a cost of living hitting right about half of what we were spending in rural Kentucky. Living on Margarita doesn't take much money. If you want to live here, you can. You can go through the paperwork and become a resident in several different ways, but we assure you- where there is a will there is a way. Sometimes there is even an easy way, and as with most situations like this, all it takes is money. The relationship with the mainland can be a two-edged sword, but from the standpoint of Caribbean Island living, there is far more benefit than drawback. The airport at Porlamar (code: PMV) and several ferry services allow easy transit on and off the island, but it's very regulated. Getting goods shipped in and out is relatively easy (from an infrastructure point of view), and the island is well supplied with consumer goods. Spare parts may or may not be available for your particular needs, but you can get them. Domesa is the parcel delivery service, and the partner of UPS for Venezuela. FedEx and DHL have offices here as well.
The main disadvantage of having the relationship with the mainland is that the island tends to suffer from the bad reputation Caracas and the rest of the mainland has earned for crime and political unrest. The reality is that crime on Margarita is nothing like the mainland, which has car-jackings, murder and other violent crime in abundance. Margarita is politically conservative, basically pretty safe and Nueva Esparta is one of only two states in Venezuela where the party in opposition to Hugo Chavez is in power.
Opportunities On Margarita There are many opportunities on Margarita that you won't find in the U.S. due to cost issues. After Brazil, Venezuela has the second highest level of cosmetic surgery by population. Cosmetic surgery on Margarita is excellent, available and cheap. Medical and dental care are excellent and cheap. If you have some health problems and can't afford to have them taken care of in the U.S., consider a long vacation on Margarita. Recreation opportunities depend on what you want and what you're interested in. Some like sitting on the beach drinking beer and watching the eye-candy walk by, others like an active night-life. Both are available in abundance- especially during high season. Entertainment and recreational activities also depend on your level of funding: Boating and its related activities are affordable on Margarita- if for no other reason than because fuel is so cheap. The cost of labor is so low that you can just about get a boat overhauled for less than it would cost for a complete inspection at a good marina in the U.S. Of course, being below the hurricane belt is also a major issue to boating. Small boats are cheap but you'd have to live on the coast in order to really take advantage of the opportunities. Fishing, according to the fishermen we know, is pretty good. They go out on their boat, they catch fish, they come home and sell some and eat the rest. They enjoy it. We confess that we aren't motivated to go fishing... perhaps it's something in our DNA that just doesn't get excited by thrashing fish on the end of a line. We prefer to sample our seafood in a nice restaurant or in the comfort of our home. According to our friends who like to fish, life on Margarita is good. Diving- If diving is something you'd like to try your hand at, Margarita is a good place. By boat, there are plenty of dive sites within easy reach for a day trip, and even more if you have a boat capable of doing overnight trips. Hiking is available in the large sections of national forest that have been set aside on Margarita and Coche, but we don't know anything about safety way back in the country. For the compulsively competitive, just driving from point A to point B can be a satisfying experience because there are few rules to the traffic flow, and nice guys definitely finish last. Drinking and driving isn't illegal, and while we're sure that driving while drunk is illegal... it doesn't seem to be enforced. Driving on a Saturday night during the holiday season can be a real adventure. OK, maybe it isn't quite as wild as all that. The traffic speeds tend to be somewhere between 30 and 45 miles per hour, and getting over 60 mph on the highway isn't common, so we see very few accidents. In the off-season there isn't much traffic anyway. Margarita Has Three Major Problems: - 1. First, the water is piped over from the mainland and currently, the water line coming from the mainland only has a flow of 200 liters per second. That may seem like a lot, but 200 liters per second isn't nearly enough when the island is full of tourists. The issue of water is a red-hot political crisis at the moment and it seems as if there will actually be some action taken in a timely manner.
The President of HydroCaribbe, the local water company, announced plans in Oct. of for an improvement project scheduled to begin at the beginning of 2006. Currently the bids are in and the project is about to start. The first stage of the project, which is scheduled to be completed by the end of 2006, will increase the flow of water in the existing undersea pipeline to 600 liters per second. The second stage of the project will lay another undersea pipeline. Water is distributed on the island by a network of pipelines, with cisterns for storage and water trucks to augment water distribution. Some neighborhoods are dependent on having water hauled in by truck. During the last water crisis (August and September of last year- the summer tourist high season) the owners of hotels were paying the drivers of the water trucks to deliver the water to their hotels, and as a result some of the neighborhoods had severe water shortages. The state cracked down on the water problem, and during the recent Christmas tourist season we didn't have nearly as much of a water problem as during this past summer high season. HydroCaribbe is claiming a commitment to serve not only the people, but the businesses. The problem is that there still isn't a commitment to conserve water: In the midst of water rationing we've observed several instances of water running through the streets from broken pipes or opened valves. No action was taken to fix the problem because the responsible person either couldn't be located or didn't want to do anything. The water ran down the street, through the gutter and into the sea while everyone ignored it... We also continue to hear stories that in spite of all the public statements, the water line from the mainland is open 24/7 at the mainland, but only opened for 3 or 4 days out of the week on Margarita. This is done to protect the water hauling businesses that haul water in trucks to residential and business customers. If the water was on all the time, these trucking companies would be put out of business- and they employ a lot of people. We have no idea whether it's true or not, but we suspect that there may be more than just a bit of truth to these allegations.
2. Margarita's second major problem is with power. There is no power generation capacity on the island. Yes, that's right, they have all their power produced on the mainland as well. With the growth of tourism and an increased population, there isn't enough power. This means rotating blackouts on a daily basis during tourist high season. There you are, having a good time and suddenly the power goes out for an hour or two. Every day or two, but not at the same time. They rotate the times and places to be fair to everyone and to prevent advanced planning. This isn't as much of an issue during the off-season, because many of the houses and apartments on the island are occupied only during the holidays. During the high season with all the air conditioners running and the lights on, the electrical grid is under a great deal of stress and the power is rationed. We don't know of any plans to increase capacity, but it's a local political issue that is definitely getting serious attention. One of the problems with power is that a significant portion of the electrical usage is illegal: people just run a wire to the power lines and connect it to their breaker panel. Occasionally SENECA (the power company) sends an order to its linemen to cut down anything that doesn't look official, but within a matter of hours the illegal hookups are back. Until the Guardia National and police start arresting people for stealing electricty and prosecuting them, it's going to continue. The recent winter high season was better, though, with only a few blackouts- and those didn't last long. This may have had something to do with the fact that December was quite rainy (lower temperatures meant less air conditioning use), so demand wasn't as high. 3. Margarita's third problem is with the disposal of solid waste. Much of it is burned at the landfill, which has an eternal plume of smoke rising from it. The landfill is getting full and nobody knows where the next one will go. The problem is that there is no long-range plan and no plan for growth at this point. The good news is that waste disposal is finally making it to the "front burner" as a political issue, and we hope to see some sort of political solution implemented in the next year or two.
On The Subject Of Crime The advantage of the island with respect to crime is that its an island: There are only a few ways on and off the island and they are well-controlled by the State. There is petty-theft and burglary in abundance, but nobody wants to be the subject of an island-wide manhunt. At the end of the day there just aren't many places to hide. The likelihood of suffering violent crime on Margarita is not nearly as high as in most areas of the U.S., but the likelihood of suffering petty theft or burglary- on average -is probably higher. So, it comes down to the question of "Is Margarita Safe" and our answer is a provisional yes. We live in a nice neighborhood in a well-secured apartment building, but we also have a security door that can't be kicked in. Our neighborhood in Pampatar is a good one, and the streets are fairly safe at night- or at any rate there are still a lot of people out walking around at 10:00 PM in the evening. We take the same precautions we'd take in any large U.S. city. Obviously there are some places where we don't think we'd be safe. Porlamar is the largest city, followed by Juan Griego, and there are several neighborhoods in both towns that we wouldn't consider living in. In the same way, there are plenty of places in Porlamar where we wouldn't attempt to walk the streets after dark and might not feel comfortable walking around during the day. However, in several of the interior villages (where others advise you not to go) we feel perfectly safe day or night. They're close-knit and everyone knows everyone else. You may hold the point of view that you're not rich, but as far as the people of Margarita are concerned you're wrong in that assumption. The average laborer gets paid B10,000 to B15,000 Bolivares a day ($4.16 to $6.25 per day in USD), or about USD $20 to $30 per week. Think about that long and hard before you tip someone a B10,000 note in a restaurant and then try to tell them you aren't rich. As far as the people of Margarita are concerned, you're a filthy-rich American who has plenty of money and nothing is going to change that impression. Unfortunately, the issue of crime has to be dealt with everywhere in the Caribbean. Most of the islands made a decision at some point that the tourist trade was worth too much to allow the crime to continue. This is the attitude of the police on Margarita, but Margarita isn't crime-free by any means. The more developed the tourist trade becomes and the more money it brings in, the more likely that there will be a move to "clean up the town" but Margarita Island isn't there yet.
What About The Politics of Hugo Chavez? We don't have a lot to say about what Hugo Chavez is doing. It appears to us that he understands how much the U.S. needs Venezuela's oil, and he appears to be genuinely interested in helping his country to grow. We hear the screaming about how he's expropriated land from large land-owners, and we wonder why we didn't hear the same kind of screaming when Kelo vs New London was decided. Let's face it: your property isn't any safer in the U.S. than it is in Venezuela. Hugo Chavez has announced that there will be a convention to form a new Constitution later this year. We expect that it will be surrounded with lots of rumor and speculation. We assume that it will depress property prices somewhat. It may be that those who know the lay of the land and the prevailing market prices will be able to pick up some choice properties for much less than current market value. It may be that there will even be another round of panic selling to match that of late 2003. The Chavez government is not on the "A-List" with G.W. Bush and company, but that's not a problem for us. We don't think too much of his association with Fidel Castro, but we understand- when you cast yourself in opposition to the old lion of the jungle you wind up with jackals for companions. Only time will tell which direction Mr. Chavez will take Venezuela, but he seems to be making some very smart moves- for Venezuela -so far.
The Bottom Line The old adage of "buy low and sell high" can be aptly applied to our situation. The U.S. real estate market is in bubble conditions, and values are far beyond reality. We believe that getting rich on U.S. real estate isn't going to happen for the average Joe at this point. Maybe after the crash, but not right now. Margarita real estate represents significant value for several reasons:
- First, it's priced well below comparable properties elsewhere in the Caribbean- often 40% or less.
- Second, Venezuela is a resource-rich country with a poor population and a dynamic government that's making changes. There is a lot of room for growth and when it happens prices will rise.
- Third, we fall back on basic arbitrage theory, which says that in a dynamic market similar assets of the same class will wind up with similar property values. When a group of assets (Margarita real estate) is priced well below other similar assets in the same class (Caribbean beachfront property), expect the low-priced asset to rise in value to the asset class mean. That means- ceteris paribas -Margarita real estate will rise in price.
- Finally, Margarita real estate is so cheap that it's a good buy just from a cost-of-living perspective. That's something to think about.
Margarita is going to see changes in the future, and now is a good opportunity to start gathering information in order to make a wise investment.
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Real Estate Development
