Update from the Equator

"I came to Ecuador with sea lions, mantas, and sharks on my mind... I left wide-eyed from the profit potential I couldn't help but notice during my stay."

Dear International Living Reader,

A taxi ride for 50 cents? A night in a four-star hotel for $75? Sushi for $4.50?

If all of that sounds too good to be true, rest assured...I personally struck all these bargains last week in Ecuador.

Located right on the equator (hence the name), Ecuador is a place of astounding natural beauty. Despite covering a mere .02% of the world's land mass, it's home to 10% of the world's plant and animal species. I came to Ecuador because of these natural attractions, not in search of an investment opportunity. My thoughts were with the sea lions, the mantas, and the sharks that inhabit the waters around the Galapagos.

But moving around this country, I couldn't help but notice things that could prove the seeds of solid investments.

To start, Ecuador is incredibly cheap.

Granted, the taxi ride in Quito wasn't 50 cents, as I mentioned above. It was $4--but that gets you a 25-minute cab ride from the airport to the hotel, including tip…for the same price as I would pay in London merely to board a cab. (That taxi trip for a half-buck did happen. That's what I paid for the water taxi to take me from the Galapagos' capital, Puerto Ayora, to my hotel. Compare that with the price of a water taxi in Venice!)

And remember: Ecuador is one place where the U.S. dollar is not losing value right now. After the late-1990s debt default, Ecuador decided to tie its currency to the greenback. The dollar is the official currency...so there's no currency risk.

Another plus: South American airlines are now in much better shape than their U.S. counterparts. As a local told me, in South America, most airlines are still state-owned and heavily subsidized. That's bad for the local taxpayer, but it's great for foreign travelers.

I booked a local airline to take me from Quito to Guayaquil and from there to the Galapagos. To my great surprise, the plane turned out to be a brand-new 737. I have been on worse planes traveling around Europe. Actually, the American Airlines plane that took me from Miami to Quito was more ramshackle--no surprise as the U.S. airline industry is perpetually teetering on bankruptcy.

As an investment destination, South America is currently largely ignored. The continent's reputation is still reeling from those debt defaults of the 1990s.

But eventually South America will get back on its feet. As we remind you often, boom and bust cycles can be extreme in this part of the world. In South America, people either have no money...or LOTS of money. During a bust, you can pick up assets for pennies on the dollar. When things recover, the market is suddenly awash in liquidity, and prices soar.

In economic terms, South America has much to offer. Not only is it rich in resources, but it also has a big and growing base of young people. Consider how bad demographics are influencing growth rates on the European mainland, and you realize just how critical a factor that can be.

It won't be long before I head back to South America. I see here opportunity to get into overlooked and forgotten assets at rock-bottom prices. Brazil is home to the second-cheapest stock market of the world, to give you one example. Only Russia's is cheaper.

Sven Lorenz
For International Living