Tres Mares Vallarta

SHAW MANAGEMENT COMPANY A Presentation By Ralph R. Shaw To
The Combined Boards of Trustees Aquila Group of Funds
San Francisco, California December 2, 2011 Good evening, everyone. About 35 years ago, Elba and I were visiting Spain. We had left our young children under the care of my parents in Portland, intending to spend three weeks seeing as much of Spain as we could in that brief time. Our starting point was Madrid, a beautiful, historic city and the capital of the country. We were staying at the Ritz Hotel, the most formal and elegant accommodations I had been in during my 15 years of extensive business and leisure traveling. The trip had a somewhat auspicious start. Iberia Airlines had lost our luggage, with not only all of our clothes but all of our toiletries and my shaving gear. If any of you had been to The Ritz in those days, you would know that a jacket and tie was required in all of the public spaces – and an unkempt hombre who had very wrinkled clothes, no jacket and tie and who had not shaved in the past 24 hours was not enthusiastically welcomed. To make matters worse, we had arrived on a Friday evening and all of the stores were closed and were to remain so until Monday. Fortunately, a couple from Los Angeles overheard our conversation with the concierge and they offered us the opportunity to use theirshaving gear and toiletries, as well as some fresh clothing. The next morning we ventured out to explore Madrid. Just around the corner from The Ritz was a grand promenade, Paseo del Prado, on which a large “parade” was taking place. We headed toward the parade, noticing the cars honking, the banners waving and the crowd yelling unintelligible (to me) slogans. Everything seemed peaceful. The crowd looked as if they were having a good time and there was no visible civil disruption. We followed the crowd to the end of the avenue, listened to several speeches and then decided to move on to other sites. That night, we received a frantic phone call from my parents. They had seen on television a large “riot” in Madrid, considered by the reporters to be violent, with substantial civil disobedience and they were very worried about our safety. We told them that we were in a different part of the city and had not seen any rioting and, certainly, no vandalism or other civil disruption. The next morning, I purchased The International Edition of the Herald Tribune, an English-language, U.S.-owned newspaper. In bold print, the headline reported, “Riots in Madrid.” I turned to Elba and said, “thank goodness we were not in that part of the city.” But, as I continued to read the article, it became abundantly clear that the “riots” referred to was the “parade” – or demonstration – protesting actions of the Franco government. And we were in the middle of the demonstration. The one difference between what was reported and what we saw was the total absence of the vandalism and overt civil disobedience the newspaper said was prevalent. It took no time for us to realize that the tranquil image of Spain had been dramatically changed in the minds of my parents and probably everyone else who read the American newspapers or watched the video of the demonstrations shown on the evening news. The remainder of our time in Spain was totally tranquil, with no more “riots” and no visible civilian demonstrations against the repressive Franco regime. Three decades later, Elba and I are looking forward to heading south to another Spanish- speaking destination, our winter home in Puerto Vallarta, Mexico. Let me give you some facts about our southern neighbor. In an article, “Making the desert bloom”, The Economist magazine said, “The financial crisis of 2008 began on the trading floors of Manhattan, but the biggest tremors were felt in the desert south of the Rio Grande. Mexico suffered the steepest recession of any country in the Americas, bar a couple of Caribbean tiddlers. Its economy shrank by 6.1% in 2009. Between the third quarter of 2008 and the second quarter of 2009, 700,000 jobs were lost, 260,000 of them in manufacturing.... “The recession turned a reasonable decade for Mexico’s economy into a dreary one....In the early 2000s Mexico boasted Latin America’s biggest economy, measured at market exchange rates, but it was soon overtaken by Brazil,whose GDP is now twice as big and still pulling away, boosted by the soaring real.” “Yet,” The Economist continued, “Mexico’s economy is packed with potential. Thanks to the North American Free-Trade Agreement (NAFTA) and a string of bilateral deals, it trades more than Argentina and Brazil combined, and more per person than China.” A positive trade balance and adept fiscal management since the appointment of Agustin Cardenas as central bank governor in January 2010 have enabled Mexico’s foreign currency reserves to increase 54% to $140 billion. In 2011’s third quarter, Mexico’s economy expanded more than economists’ forecast, up 4.5% year-to-year, led by growth in agriculture. Industrial production rose 3.6% in September and unemployment was substantially lower than in the United States, at 5.7%. Retail sales rose at an-above-estimate 4.7%. Mexico today occupies the second position worldwide in the number of Free Trade Agreements. It has gained preferential access to the markets of 43 countries, including the 27 members of the European Union and Japan. “Last year it did $400 billion of business with the United States, more than any country bar Canada and China.” Mexico’s investment rate, at more than a fifth of GDP, is well ahead of Brazil’s. In 2009, income per person slipped below Brazil’s, but only because of the real’s surge and the peso’s weakness. (During the past six months, the Mexican peso has declined 16%, the worst performance of any major Latin American currency.) “After accounting for purchasing power, Mexicans are still better off than Brazilians.... “The World Bank ranks Mexico the easiest place in Latin America to do business and the 35th easiest in the world, ahead of Italy and Spain. In Brazil (placed 127th) companies spend 2,600 hours a year filing taxes, six times more than in Mexico. Registering a business takes nine days in Mexico and 26 in Argentina. The working hours of supposedly siesta-loving Mexicans are among the longest in the world. “These strengths have helped Mexico to rebound smartly from its calamitous slump. Last year the economy grew by 5.4%, recovering much of the ground lost in 2009. Exports to the United States, having fallen by a fifth, have reached a record high.... Whereas Brazil sent 16% of its exports to its fellow BRICs, only 3% of Mexico’s exports went to Brazil, Russia, India or China. Industrialized countries receive 90% of Mexico’s exports.” Mexico has diversified its exports. “America’s share of them has fallen from 89% in 2000 to perhaps 78% this year and will fall further. “Sales to Latin America and Asia are growing twice as fast as those to America. The automotive industry, Mexico’s biggest exporter, is ahead of the trend; though exports to America continue to rise, they now make up only 65% of the total. In November, Honda became the latest carmaker to announce plans to expand in Mexico. “China’s low wages, which lured factories away from Mexico, are rising rapidly. In 2003, Mexican pay was three times Chinese rates but now it is only 20% higher. The rising yuan and the cheap peso accentuate this trend.” Also aiding Mexican exports, in July this year the U.S. allowed Mexican trucks to make deliveries in this country. The Mexican government reckons this will reduce firms’ shipping costs by 15%. In addition to its support for its business environment, Mexico also has been aggressive in protecting its biodiversity. Today, there are 12 million square kilometers in biosphere reserves, 1.5 million square km in national parks, 4.4 million square km in protected natural resources areas and 6.6 million square kilometers in protected flora and fauna areas. The country is the leader in the Americas in terms of UNESCO World Heritage sites, and it is ranked sixth on a global scale. It is ranked third, behind Italy and Spain, on a global scale, with ten cities that are World Heritage cities. Every year, Mexico hosts more than 400 culture festivals, including the world’s second most important international book fair, in Guadalajara. The Guadalajara and Morelia film festivals are among the top ten globally and the Festival Internacional Cervantino is one of the world’s top five culture festivals. Altogether, the cultural sector accounts for 6% of the country’s GDP, employing more than three million individuals. Forty-four million of the nation’s one hundred and twelve million registered population are considered economically active. Critical to the longer-term picture and contrary to many of the larger, developed nations where populations are stagnating or declining, Mexico’s workforce should increase by 40% to 62 million over the next three decades. Preparing for a more technically-sophisticated future, more than 790 thousand students are now enrolled in engineering and technology programs, representing the largest pool of engineering talent in America. Every year, more than 90,000 students graduate from engineering and technology programs, more than three times the number of such graduates per capita in the United States, according to UNESCO. But all is not rosy. In April, the U.S. Department of State issued a travel warning to inform U.S. citizens traveling to and living in Mexico about the increasing level of violence in some areas. Since 2006, the Mexican government has engaged in an extensive effort to combat transnational criminal organizations, known in government circles as TCOs. The TCOs, meanwhile, have engaged in a vicious struggle to control drug trafficking routes and other criminal activity. According to Mexican government figures, 35,000 people have been killed in narcotics-related violence in Mexico since December 2006. More than 15,000 narcotics-related homicides occurred in 2010, an increase of almost two-thirds compared with 2009. According to our State Department, most of those killed in narcotics-related violence since 2006 have been members of TCOs. There is no evidence that U.S. tourists have been targeted by criminal elements due to their citizenship. In 2010, the number of U.S. citizens reported to the Department of State as murdered in Mexico totaled 111 (up from 35 in 2007). More than one-third were killed in the border cities of Ciudad Juarez and Tijuana. “The fighting is highly concentrated: last year 70% of mafia-related killings took place in 3% of the country’s municipalities.” Since 2006, more homicides have occurred in Culiacan, the capital of Sinaloa state than in any other city in Mexico, with the exception of Ciudad Juarez. In Mazatlan, previously one of the most popular beach resorts for tourists, there were over 300 narcotics-related murders within the city, three times the number in 2009. On the other hand, in Yucatan state, where tourists scramble around Mayan ruins, the murder rate is no higher than in Belgium. Although the number of homicides and the viciousness of many of the killings gains a great deal of press coverage both in and outside of Mexico, keep in mind that Mexico is about the size of Western Europe. There’s an area that’s bigger than Britain and Ireland that is not on the travel warnings. Seventeen out of 30 states in Mexico are not included on the U.S. State Department’s list, including the Yucatan, southern Baja (Cabo San Lucas), San Miguel de Allende, Guanajuato, and the Mayan ruins. Indeed, last year, the Washington Post had an article reporting that the homicide rate in our nation’s capital is four times greater than in Mexico City. Altogether, the murder rate in Mexico is surprisingly low: 14 homicides for every 100,000 inhabitants. Compare that to Washington D.C.’s 24 people per 100,000 inhabitants and New Orleans’ 52. Elba and I spend our winters in Puerto Vallarta, on Mexico’s west coast at Elba’s Rincon del Paraiso, “Elba’s Corner of Paradise. “ Located on the eighth-largest bay in the world, with one of the largest marinas in Mexico, Puerto Vallarta has been called by Conde Nast Travel magazine the “friendliest destination in the world.” There are a half-dozen high quality golf courses, lots of tennis facilities, over 1,000 restaurants serving a broad variety of cuisines, some of the best deep-sea fishing found anywhere, an excellent transportation network with over 1,000 taxis, and a very broad array of hotel and rental accommodations. Direct flights are available from many of the larger cities in the Intermountain section of the U.S., the Southwest, California, Seattle, Denver, Chicago, Kansas City, as well as Western Canada. Flying time from the Midwest or Intermountain region usually takes less than four hours on direct flights. From California, the trip is usually less than three hours. With an estimated 2 million foreign visitors to PV annually, English is pretty much a requirement for any employee at local hotels, restaurants, retail stores and art galleries. Most taxi drivers understand English, with many having made their investment in a taxi with money made while working in the United States. Puerto Vallarta is at the same latitude as Hawaii; thus, it shares the same tropical weather patterns. PV enjoys 300 days a year of sun with winter temperatures usually in the 78-85 degree F range during the day and 68-70 degrees F at night. Mild trade winds kick in around 3 PM daily, providing a very refreshing environment in the late afternoon. Humidity typically is a comfortable 55-60% in the months we are in Puerto Vallarta. Living costs in Puerto Vallarta vary widely, depending on your choice of housing. Our condominium is equivalent to the highest quality apartments we visited in Hawaii, Palm Springs, Arizona, and Naples, Jupiter and West Palm Beach Florida at purchase costs that were a fraction of those in these other locations. And, we are right on the ocean. For the average condominium Phoenix is about 29% more expensive, Miami, 62% and San Diego, 65%. In Portland, Oregon, it is estimated that 25% of the city’s children live in poverty conditions. In Puerto Vallarta, the number is even higher, as construction jobs and tourism have declined sharply since 2008. Generally speaking, similar to Portland and other U.S. cities, poverty tends to be hidden in Puerto Vallarta for most of us. Nonetheless, the 35,000-person expatriate community has become actively involved in alleviating some of the deprivations of Puerto Vallarta’s poor. Regular deliveries of food are organized by expatriate organizations and the Navy League and others distribute Christmas toys across the area. In addition, the community governments have been very diligent in addressing concerns about inadequacies in housing for local residents. Starting in the late 1980s, the city worked to alleviate the rapid growth in impromptu communities resulting from the in-migration of individuals from elsewhere in Mexico to Puerto Vallarta in search of construction employment or jobs in the tourist industries. Attractive, low-cost homes have been built in several areas. Additionally, national health insurance and quality medical care are available at low cost or free to Mexican citizens. Speaking of healthcare, there are two U.S.- owned hospitals in Puerto Vallarta and a very modern, Mexican-owned, Level 1 trauma center. They have mostly English-speaking staffs, use the latest technologies and accept health insurance issued in the United States. All doctors in the hospital a half-mile from our residence are U.S. Board certified. Puerto Vallarta has also been aggressive in providing access to the natural recreation areas to local citizens. Public beaches and sports facilities are well maintained and easily accessible. Puerto Vallarta’s drinking water is considered to be the best in Mexico, meeting U.S. standards and restaurants are regularly inspected for proper hygiene. In the six years we have wintered in Puerto Vallarta, we have not met anyone who has experienced illness due to the water or food. I.e., “Montezuma’s Revenge” is of little concern for travelers or residents in PV. Naturally, you are wondering about personal safety in Puerto Vallarta, particularly in light of the seemingly nightly reports of violence in Mexico on CNN and other stations. With Army, Navy and Marine bases in the city, a highly qualified tourist police force, local police forces in several residential areas and seemingly ubiquitous traffic and federal policemen, there have been very few major incidents. AOL Travel News considers the coast, stretching south from Puerto Vallarta to Manzanillo (about 2+ hours south) to be “very safe” as is the area ranging north up to and beyond Punta Mita, the home of the over-the- top Four Seasons and St. Regis resorts. AOL’s fear-factor rating for the area is among the lowest in Mexico. I cannot promise you absolute safety in Puerto Vallarta, no more than I can in Oregon, where in today’s Oregonian there were articles on seven violent crimes or extreme vandalism. But, I urge you to take a lesson from our experience in Spain. Furthermore, consider how many reports of homicides, physical attacks, burglaries, stolen cars, etc. occurring in your own community you read about each week. Then think of how frightened – or not – you feel about living in your community as a result. Then do some homework as to the real level of risk you will be accepting if you visited Puerto Vallarta and most of Mexico. All in all, there are few places as easily accessed by Americans and Canadians that possess the combination of great weather, appealing culture, universal friendliness, quality healthcare, myriad recreation opportunities, and diverse, very satisfying dining choices as does Puerto Vallarta. And, all available in an atmosphere of safety and at reasonable costs. We urge you to visit our rincon del paraiso. You might, like Elba and me, fall in love with Puerto Vallarta and Mexico and consider making it your second home. Thank you. Ralph Shaw

 

My husband and I used to stay at the Marriott Casa Magna located next door to Shangri-la. We watched Shangri-la go up and were extremely impressed as it is a STEEL beam constructed project, not the rebar you see in all the other projects going up in P.V. We originally bought in the 3rd tower, corner unit, 6th floor. We wanted higher but nothing was available. My husband asked Alexis if anyone wanted to sell a center unit, on a higher floor, to please call us back. We thought there was no way we would hear from them as they were sold out. To our utter amazement, Alexis called us back with a unit in the 4th tower, center unit, 11th floor and only charged a nominal fee for the upgrade (high floor, center units went for much more than the other units). The Silva brothers have been kind, professional, and helpful with every step in our purchase. We consider them part of the family. Our unit is perfect and we have had very few issues with it. We were so impressed with the service and construction, that we bought in Tres Mares, another property managed by the Silva Brothers. I would not live anywhere else, especially if the Silva Brothers were not involved. We have owned in Shangri-la for 5 years. If you are looking for a perfect location, and to deal with people who understand your wants and needs, along with wonderful service, there is no other place in P.V. that can or does it better. Doug and Dorsay Einung

 

My wife and I own one of the beautiful condos in Shangrila. We are from the US and we were on vacation in Puerto Vallarta. We were looking for a 2nd home in various locations and decided to look at a few properties in the area. We were met at Shangrila by Alexis. This was our first experience purchasing property outside the US so we were a little uncertain. We believe that Alexis understood our buying apprehension and he displayed professionalism, confidence in the project, and gave us his assurance that he would be side by side and step by step with us though the entire purchase process. He definitely lived up to that expectation and delivered a truly positive experience. In the end we have a wonderful property and the true friend. Aug 26, 2010 Bob and Leona Markovich

 

Having been a resident at Shangri-La since the very beginning and having dealt with the Silva brothers from day one I can only say that they were extremely helpful and supportive at all times in many different ways and are responsible for the fact that Shangril -La is the premier development in the bay. I have enjoyed working with them as they always made you feel like that they had a personal interest in you and that was very comforting when dealing in a foreign country. Thanks for all your help and support, Julian, Alexis and Diego. John Klassnik

 

Having purchased a Condo four years ago in SHANGRILA, it has been with great satisfaction to see the project become a premier development in the Marina. My dealings with the Silva Brothers was very positive. At all times I found them to be dependable, honest and their integrity was beyond reproach. They made the entire experience worthwhile and I always felt that they were in my corner. Thank you Guys.

 

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