I am working for an engineering company that allows me to travel to different third world countries. I am quite certain their are plenty of investment opportunities such as in restaurant, chains, real estate, stocks etc. I was wondering what should I be cautious of investing in these countries, usually are their legal hurdles? What are the chances of being ripped off, as I might be going back to that place may be once in 10~15yrs? Any suggestions or advice would be appreciated.
2 Answers
I strongly recommend you to invest in either stocks or bonds. Both markets have very strict regulations, and usually follow international standards of governance. Plus, they are closely supervised by local governments, since they look to serve the interests of capital holders in order to attract foreign investment.
Real estate investment is not all risky, but regulations tend to be very localized. There are federal, state/county laws and byelaws, the last usually being the most significant in terms of costs (city taxes) and zoning. So if they ever change, that could ruin your investment. Keeping up with them would be hard work, because of language, legal and distance issues (visiting notary's office to sign papers, for example).
Another thing to consider is, specially on rural distant areas, the risk of forgers taking your land. In poorer countries you could also face the problem of land invasion, both urban and rural. Solution for that depends on a harsh (fast) or socially populist (slow) local government.
Small businesses are out of question for you, frankly. The list of risks (cash stealing, accounting misleading, etc.) is such that you will lose money. Even if you ran the business in your hometown it would not be easy right?
Basically, unless you are an investment professional, you should not be investing in a venture in a developing country shown to you by someone else.
The only time you should be investing in a developing country is if a "lightbulb" goes off in your head and you say to yourself, "With my engineering background, I can develop this machine/process/concept that will work better in this country than anywhere else in the world." And then run it yourself. (That's what Michael Dell, a computer repairman, did for "made to order" computers in the United States, and "the rest is history.")
E.g. if you want to invest in "real estate" in a developing country, you might design a "modular home" out of local materials, tailored to local tastes, and selling for less than local equivalents, based on a formula that you know better than anyone else in the world. And then team up with a local who can sell it for you.
Whatever you do, don't "invest" and revisit it in 10-15 years. It will be gone.
as I might be going back to that place may be once in 10~15yrs. Forget about it then. Even in developed countries you willn't be sure that your asset is still there after 10-15 years.