On Monday August 25th, Mr. Gustavo Cisneros, Yucatecan Businessman and Real Estate Developer, published an article in the Diario de Yucatán: “Yucatán, Your Second Home”.
In Yucatan we have long sought the “big” project that would allow us to return to the economic prosperity of the early 1900’s that occurred through the exploitation of sisal (henequen). Today, I would like to consider a recent trend that could provide a development opportunity for our state.
When outsiders speak of Yucatan, they invariably think of all that our state has to offer: food, culture, safety, beautiful beaches, haciendas, cenotes, and above all, the warmth and friendliness of the Yucatecan people. The combination of these elements practically defines the term “quality of life” that Yucatan offers both visitors and residents of the state. So much, that the positioning of Yucatan as a desirable destination requires little marketing effort, since the association of “Yucatan” with “quality of life” is already well-established.
The competitive advantage created by this association is unique, non-erodible, non-imitable and fully sustainable. All these elements have aligned so we can exploit a well-planned strategy and focus on the type of people we want to attract to our state.
Clearly, Yucatan has become a magnet for foreign retirees and for buyers of second homes, both domestic and foreign. This phenomenon started slowly, more than a decade ago, and today it is common to find people from other states and other countries in restaurants, shops, supermarkets and in all activities of daily life.
The challenge for the Yucatecan entrepreneur is to identify the benefits and business opportunities created by these new arrivals to our State.
For example, Florida, Arizona and Spain were “sleepy” economies before millions of retirees moved to their territories and turned them into prosperous states or nations. In our case, the biggest factor will be the so-called “baby boomers” who are now reaching retirement age. The baby boomers are defined by the Census Bureau of the United States as the 78.2 million born between 1946 and 1964. Consider the following:
- Between 2006 and 2016 in the United States alone, people will retire at the rate of 10,000 per day and begin receiving their pension funds. Between 2016 and 2026 that number will reach 12,500 people a day.
- As the population ages, the number of Americans over 65 years will increase, reaching 71 million in 2030. At that point, one out of five Americans will be a senior citizen.
- In the next 30 years more than 100 million Americans will reach retirement age, and very few of them will be able to afford housing, good quality medical and dental services, or personalized nursing care if they stay in the U.S.
What might be the economic implications for our country?
- Estimates are that about 10 million Americans and Canadians will move to Mexico in the next 30 years.
- Their households will have incomes of between 75,000 and 125,000 dollars per year, with no need for schools, with low consumption of services (water, gas, electricity), and requiring first class hospital services.
- Each of these households can generate between 8 and 10 jobs in the state. In the U.S., the ratio is one to one in areas of high income, and one to eight in low-income areas.
- Consumers with high purchasing power will create a significant demand for restaurants, supermarkets, financial services and business development.
- Family visits will create demand needed to attract airlines.
- 20% of foreign second-home buyers end up using them as their retirement homes.
- When 70% are not interested in moving to another area, the retirement communities market becomes a natural extension of the second home market. This particular segment represents a whole new business opportunity for Yucatan.
- Yucatán already has all the elements that baby boomers seek: quality of life, hospitals, culture, geographical proximity to their place of origin, International Airport, etc.
- Mérida has a world class medical infrastructure.
- An established expat community that is estimated at between 13,000 and 15,000 foreigners, many running successful businesses.
- A unique attraction: the typical second home buyer visits the target property three to four times before deciding to buy; in Mérida, over 40% buy on their first visit.
- 70% of buyers have been referred by people who are already living in the state, the best kind of advertising.
I would like to propose a basic quantitative exercise, allowing us to estimate the benefits that such activity can bring to the state:
What if Yucatán could capture 1% of the 10 million people who are thinking of retiring to Mexico? This would amount to about 100,000 people, with an average of two people per household, or the equivalent of 50,000 homes.
Even with household income in the low range (less than $ 75,000 annually), we would still have an additional economic benefit of 1.1 billion USD per year, equivalent to 50% of the revenue budget for Yucatan in the year 2013.
This level of migration would generate between 50,000 and 400,000 jobs (under international parameters).
Why not try? The benefits are huge and we have all the resources to make it happen.
By Gustavo Cisneros
Gustavo Cisneros has a Bachelors degree in Economics by the Tecnológico de Monterrey, Monterrey Campus (Class of 1963). He is President and Board Director of CB Enterprises, SA de CV, a company dedicated to real estate, tourism and housing developments.
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