Retired Yanquis Are Coming

The Yanquis (Yankees) Are Coming!
By Coley Hudgins

Prior to the passage of the Central American Free -Trade Agreement
(CAFTA), the anti-globalization doomsayers were out in force with
bold predictions about the “final blow” the deal would mean to the
economies of Central American countries. Pro free-traders argued just
as vehemently that CAFTA was a major step in building the foundations
for a democratic community of nations in our hemisphere.

What’s largely been overlooked from both sides, however, may have
little to do with CAFTA at all. Instead, one of the biggest economic
forces reshaping Central America in the coming years may be a demographic
shift occurring right here in the Unites States, spurred by the
massive retirement of the baby boomer generation.

According to a recent New York Times story, starting in January of
next year baby boomers — defined as those born between 1946 and
1964 — will start turning 60 at a rate of more than 4 million a year.
The leading edge of the baby boomers is beginning to turn 59 now —
the age when Americans can start collecting certain retirement benefits
without penalty. The number of Americans 55 and older is expected to
skyrocket from 67 million this year to 97 million by 2020.

In many ways, boomers are a different breed altogether than the
generations that preceded them. They are healthier, live longer and are
more active, mobile and adventurous than prior generations. Trends
suggest many will continue working beyond the traditional retirement
age of 65, launching second careers, becoming entrepreneurs or focusing
more on charitable and volunteer projects.

But in one fundamental way, baby boomers may not be so different
from their parents and grandparents. Consider what I call the “Del
Boca Vista” migration.

Del Boca Vista is the mythical Florida retirement community Jerry
Seinfeld’s parents, Helen and Morty called home. Like Helen and
Morty, the enduring cliché about older Americans is that, once retired,
they pack up their belongings, bid adieu to colder climes, and move
to Florida to enjoy rounds of golf and blue-plate specials in Del Boca
Vista-like retirement communities.

Like many stereotypes, this one contains a kernel of truth. According
to a 2001 American Demographics study based on 2000 census
data, Florida registered the highest share of seniors of any state in the
country in the1990s, but other sun-belt centers such as Phoenix, Sacramento,
Raleigh-Durham and Las Vegas were also highly attractive
“elderly magnets.”

William Serow, professor of economics at Florida State University in
Tallahassee has been studying migration patterns of the elderly for years,
and believes that since the end of World War II younger, more well-off
“roving retirees” in their 60s still instinctively seek out warmer climates
in “fun” places such as Arizona, North and South Carolina, and Florida.

According to Serow, the other key goal of this more affluent group
of retirees is reducing living expenses by moving to sun-belt communities
with cheap housing and lower taxes. And therein lies the big conundrum
for today’s boomer retirees: just as millions of retiring baby boomers
are getting ready to migrate to warmer sun-belt states, these attractive
retiree destinations are experiencing skyrocketing real estate prices and
property tax assessments that may put these locations out of reach for
all but the most wealthy boomers.

So, what’s the significance of all of this for Central America? Tomorrow’s
Del Boca Vista migration won’t necessarily be to the sun-belt
states in the United States. It’s just as likely that a large subset of boomer
retirees — call them “boomer gringos” — will bypass southern sunbelt
states altogether for more affordable Central American alternatives
headed by Costa Rica, Nicaragua and Panama. Most Central American
countries are still only a two or three hour flight back to the United
States and have adequate infrastructures allowing retirees to stay in touch
with friends and loved ones back home—good cell phone coverage,
broadband Internet connections, even satellite television.

Having recently returned from vacation in Nicaragua and Costa
Rica, the anecdotal evidence suggests it’s already happening. Costa
Rica is experiencing a housing boom that rivals anything here in the
United States. and is driven in part by new boomer retirees. Two-or
three-bedroom homes that were selling for $270,000 in December of
last year are now selling for $350,000 and $400,000 in some parts of
the country. While coastal areas may be experiencing their own version
of a housing bubble, there are still very reasonable prices for many
boomer retirees.

The story to the north in Nicaragua—the second poorest country
in the Western Hemisphere, and a country that still conjures up images
of right-wing dictators and left-wing revolutionaries—is even more
interesting. Small coastal communities such as San Juan del Sur and
cities such as Granada are swarming with retired expat boomers who
are buying land and building dream retirement beach-front homes for
a fraction of what it would cost in the United States.

Costa Rica: Imposes no tax on income earned outside the country,
and allows retirees to buy into the national health care system offering
care at public hospitals by participating doctors, many of whom are

Nicaragua: The government recently passed Law 306 that includes
provisions exempting qualified investors from paying income or property
taxes for up to 10 years, and providing generous exemptions from
import duties for “pensioners” and investors that qualify.

Panama: Positioning itself as the world’s greatest retirement destination.
RE/MAX and Century 21 have opened offices in the country, and
affordable housing developments on some of the most coveted and
pristine coastlines in the Americas are now dotting Central America’s’s
Pacific coast. New developments have launched sophisticated marketing
campaigns to attract boomer retirees, and publications geared toward
retirees are hosting retirement summits and conferences to sell Nicaragua
as a retirement destination.

While exact figures are difficult to obtain, the U.S. State Department
estimates that about 380,000 Social Security checks are delivered
to beneficiaries outside the United States each month. Almost 4 million
Americans not including embassy officials and military personnel—are
now living overseas, although how many of those expats are retirees is

What is known is that governments in Central America are luring gringos
with new laws that include impressive incentive packages for retirees.
And despite the inherent volatility and political risks that remain in many
of these countries, boomer gringos (and Central American governments
themselves) are betting that the economic benefits of a retiree migration
to Central America will be a two-way street. Retirees get a lower cost
of living, warm weather and cheap housing and create a virtual cycle; in
return,—more retirees equals more local jobs, resulting in more economic
stability and less political instability, resulting in more retirees.

But will this new economic model pay dividends? Serow figures that
each retiree household in the United States is responsible for a little more
than one job being attracted to the community. While he cautions that
such jobs tend to fall into the low-paying, service category here in the
United States, for developing economies that are starting at close to zero,
service jobs are the best way to get a first foot on the economic ladder.
And it appears that many are already climbing the ladder. The
national newspaper in Nicaragua La Prensa, published a story earlier
this year about how the boom in tourism and the influx of retirees has
benefited the economy. The story described workers who no longer
had to look for seasonal work six months out of the year as “illegals”
in more developed Costa Rica because they were now employed as
full-time laborers close to home, building housing developments for a
new wave of foreign investors.

And while the debate rages here at home about the impact of
illegal immigration on our own economy and government services,
there’s no question that “low-paying” service jobs here in the United
States filled largely by illegal immigrants benefits local communities
back home. (Remittances from foreign countries such as the United
States to families in Mexico, are one of the largest sources of foreign
currency in the country.)

Wouldn’t it be more beneficial to Central American countries if in
the future these service jobs were created locally by an influx of American
retirees? It’s possible that the emigration of wealthy boomer gringos
to Central America in the years ahead could slow illegal immigration
here as workers become part of a home-grown service economy driven
by retirees.

Are American retirees a panacea for Central American economies?
Not by a long shot. There are still fundamental economic and political
issues that will need to be addressed by the governments themselves that
neither an influx of retirees nor CAFTA will completely mitigate. Stamping
out corruption, increasing government transparency and bolstering
education and the rule of law all need to be top priorities at home before
the hemisphere can develop strong and sustained economic growth.
But the facts seem to indicate that barring some unexpected political
upheaval or economic calamity, the Yanquis are going to keep on
coming in larger and larger numbers. Central American governments
have already placed their bets. They see our retirees not as a drag on the
economy as we here in the Unites States often do, but as a potentially
huge source of much-needed capital, investment and job creation. The
smart money should be betting that they’re right.

Coley Hudgins
is a Washington D.C.-based government affairs consultant. He has lived
and worked in West Africa, and has traveled extensively throughout Central America

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