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The reality of Rocky Point

December 16, 2007
Could it be they were in danger of losing the condo, home or land they had purchased there because of corrupt dealings? A couple of quick phone calls to their local Puerto Peñasco developer, real-estate agent or lawyer confirmed for them that, in fact, their dream vacation home or condo was safe and their children and grandchildren would be able to continue to enjoy sunsets for many years on what is affectionately known as "Arizona's beach."

For others who have not yet had the opportunity to enjoy Puerto Peñasco or buy Mexican beachfront property, the article raised more questions than it answered about the safety and security of making an investment in our neighbor south of the border. Although the article documented a serious situation that is affecting a small group of real-estate investors (both Mexicans and Americans), this land-ownership dispute is an isolated incident similar to ones that arise in the United States from time to time. It does not affect the safety and security of American real-estate holdings in other parts of Puerto Peñasco.

Puerto Peñasco, in fact, has experienced unprecedented growth over the past 10 years, with developers successfully building and selling such resorts as Puerta Privada, Las Palomas and the Sonoran Resorts. To date, several thousand condominiums worth an estimated $2 billion or more have been sold or are close to delivery in Puerto Peñasco. Larger developers from other parts of Mexico, Spain and the United States have begun planning for the next stages of Puerto Peñasco real-estate development, and new development areas such as Las Conchas Resorts are being master planned for building over the next 25 years.

In this day of increased rhetoric and misinformation about Mexicans and Mexico, it would benefit us Americans to take a little time to separate the facts from the myths about Puerto Peñasco:

Myth No. 1

Americans can only lease real estate in Mexico.

In 1993, in order to make its real estate more attractive to foreigners, Mexico passed laws to protect American and other foreign real-estate investors by allowing us to own condos, homes and land in Mexican coastal towns through a bank trust. A Mexican bank (all of which are now owned by large European, U.S. or Canadian banking conglomerates) holds the real estate in a trust, while the American acts as the sole beneficiary, enjoying all the same rights of ownership they would in Arizona. This bank trust lasts 50 years and then is renewable indefinitely and transfers to the beneficiary's heirs when he or she passes.

Myth No. 2

The Mexican government might take away my land.

This is the last thing Mexico wants. The Mexican government has been doing everything it can over the past 15 years to promote tourism and American investment in Mexican real estate. Tourism and foreign real-estate investment is now the second-largest contributor to the Mexican gross domestic product behind oil - and, unlike oil resources, U.S. investment in Mexico is growing rapidly. The Mexican government is expected to zealously protect this important revenue stream and continue to strengthen real-estate laws and protections for foreigners. In fact, Mexico's real-estate laws are now friendly enough that large U.S. lending institutions such as GMAC, GE and Citibank are willing to provide mortgages to Americans for real-estate purchases in Mexico, and title insurers such as Stewart Title and First American Title issue U.S. title insurance on Mexican real estate.

Myth No. 3

The growth of Puerto Peñasco has ended.

Although Puerto Peñasco has experienced the residual effects of the slow Arizona market, its fundamentals have remained strong. The resort town is only beginning 25-plus years of stable, sustainable growth fueled by the wealthy, retiring U.S. baby-boomer generation and the population boom in Arizona and the U.S. Southwest. The lull Puerto Peñasco is experiencing in the new condo sales market has been felt much less in the resales market, and most agree it has been healthy for the local economy. Developers and the Sonoran government have had a chance to catch their breath and start implementation of the commercial tourism infrastructure necessary to continue the transformation of Puerto Peñasco into a world-class vacation destination. The spas, restaurants, golf courses, nightclubs, shopping and transportation that have long been planned are now being built. And the Sonoran and city governments are refurbishing city fresh-water wells, increasing electrical capacity and improving roads. Transportation infrastructure also is expanding rapidly with a nearly completed coastal highway to California, new Aeromexico flights between Los Angeles International (LAX) and Puerto Peñasco and the soon-to-be-opened Puerto Peñasco International Airport. Best of all for Arizonans, the Lukeville border crossing is slated for expansion this coming year, which should dramatically cut down on waiting times to cross back into the United States.

Myth No. 4

Political instability and the Mexican economy make an investment in Mexico unsafe.

Mexico is experiencing a sustained period of economic growth and increasing prosperity amid political calm. In 2006, Mexico elected President Felipe Calderón, a pragmatic, Harvard-educated politician, to continue Mexico's, business-friendly economic policies. During his first year in office, he has built consensus in the Mexican Congress and has quelled political strife by taking the lead on solving some of Mexico's most pressing issues. Mexico is experiencing strong job growth, and its economy continues to expand at a rate of 5 percent per year with low inflation. The country also has escaped being directly affected by the subprime-lending woes experienced in the United States because of its much tighter consumer-lending standards. In September 2007, Calderón visited Puerto Peñasco to pledge his federal government's support for its tourism growth.

Myth No. 5

Puerto Peñasco is unsafe for Americans.

The real-estate boom in Puerto Peñasco has created one of the lowest unemployment rates in Mexico, so low that developers must bring most of their workers in from other parts of the country. This has led to low crime rates. Americans can wander the streets and beaches of Puerto Peñasco day and night. Many Americans are surprised to find how welcoming the residents of Puerto Peñasco are, despite us sometimes imposing on their quiet lifestyles. Although Americans should always take the proper precautions, as they would traveling in any U.S. city unknown to them, they are no more likely to be a victim of crime in Puerto Peñasco than in Phoenix, Scottsdale or Tucson. It is estimated that in the course of a year, more than 1.6 million visitors travel to Puerto Peñasco to safely enjoy its beaches and fine seafood. Americans can enjoy a secure and potentially profitable investment in Puerto Peñasco that will last for generations to come. I encourage everyone to take the time to learn more about Arizona's beaches.

Paul P. Kingsley is a member of the Puerto Peñasco Destination Group, an association of real-estate developers and professionals committed to promoting sustainable growth there. Kingsley, a resident of Phoenix, writes a blog covering real estate, tourism and business at www.puerto penascopost.com.
Contributed by Paul P. Kingsley. Mr. Kingsley is a founding member of The Primestone Group LLC (www.primestonegroup.com) and writes a business, real estate and tourism blog about Puerto Penasco at www.puertopenascopost.com.
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