Understanding and acquiring information about a market before investing is key in making any investment, so what drives the market in the Riviera Maya? What has made this one of the best and more sought after markets in the world?
Excess Demand in the Riviera Maya
Here is the answer:
In my last blog I left you with this thought – Excess Demand. Anyone with any business experience will be aware of this concept. But how does the Riviera Maya fit into this principal of excess demand?
There is one key thing that has driven this Peninsula into becoming one of the best markets in the world and no, it’s not tourism.
You know that in Mexico the currency is the Mexican Peso. But how is it related to the growth of the Riviera Maya? (Not just the Riviera Maya but most areas that see foreign investment in Mexico).
Without wanting to go into a full on history lesson, let’s keep it simple.
A sharp decline in international reserves forces the Mexican government to devalue the peso, increasing the dollar-denominated debt burden, mainly to US commercial banks. Despite the devaluation of the peso, Mexico is unable to stop its loss of reserves and runs out of cash. International reserves are only sufficient to cover three weeks’ of imports.
Excess demand – it is created when price is set below the equilibrium price.
Now what happened in the Riviera Maya in the 1980’s?
**Note 1978 – 1988
For the people that think development was thanks to NAFTA, that agreement wasn’t signed until 1994.
The Riviera Maya has seen exponential growth with each mark of devaluation of the peso.
The Riviera Maya is one of the most beautiful places in the world. With the largest extension of the Meso – American reef just feet from the shore line, Mayan history, the friendliness of the Mexican people and with the tourism industry that presently drives the local economy all adding to it’s allure. But that is not why the Riviera Maya is one of the best markets in the world, It’s because its AFFORDABLE (for the time being).
What creates excess demand in the Riviera Maya? A market that is payed for in dollars, but built with pesos. As a result, this creates affordable investments, affordable constructions and affordable vacations…with a luxury, and more importantly profitable, result.
Isn’t that something you want to get in on?
By Robert Gutierrez, Associate Broker at Virgin Realty Mexico
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