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July 29, 2010 |
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| January 29, 2010 |
By: Mike Seemuth |
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he international trade sector of South Florida’s economy may have nowhere to go but up this year, especially if Latin American economic performance improves.
Credit rating agency Fitch recently forecast that the national economies of Latin America collectively will grow 2.9 percent this year and 3.4 percent next year after declining 3.2 percent last year.
“Last year was probably the worst year for trade in Florida” in the decade just ended, said Manny Mencia, a Coral Gables-based executive of Enterprise Florida, the statewide economic development agency.
But “both imports and exports were already showing signs of life in October and November. My expectation is that the recovery will accelerate in 2010. From my perspective, you see an improved international environment,” said Mencia, Enterprise Florida’s senior vice president, international trade and business development.
During the first 10 months of 2009, the value of imports and exports passing through South Florida declined to $64.3 billion, down 15.3 percent from the same period in 2008, according to Coral Gables-based publisher WorldCity.
The value of the U.S. dollar has been relatively low, compared to other currencies, an ongoing price advantage for South Florida exporters. Mencia said he expects no major change: The dollar, “despite some appreciation in the last month or so, will remain weak for the foreseeable future.”
At the same time, “the world economic recovery is feeding a high demand for commodities, particularly from countries like China and India. This is always a favorable trend for Latin America, which is a major exporter of commodities.”
Brazil has the largest economy in South America and a bigger impact on South Florida trade than most other countries. “But I also think you can expect very good [economic] performance from countries like Colombia, Peru and Panama,” Mencia said.
Trade with Costa Rica, the Dominican Republic and Mexico also shows promise. But Latin American countries won’t show uniform economic growth this year. Because they “have not promoted export growth and economic expansion, in countries like Bolivia, Venezuela and Ecuador, I think recovery will be slower,” he said.
If nothing else works, expect lenders to foreclose more properties
Unless they make greater use of alternative ways to resolve defaults, mortgage lenders will seize more foreclosed properties in South Florida this year than last year.
Peter Zalewski, a principal of Bal Harbour-based Condo Vultures, expects mortgage lenders to repossess at least 33,000 properties in South Florida this year, up from an estimated 30,000 last year.
His firm is seeing more owner-occupants than investors on the losing end of foreclosure cases involving South Florida residential properties. “Since ’09, they have tended to be real people losing their primary residences, as opposed to ’07 and ’08, when it was primarily speculators,” he said.
But Zalewski also said his expectation of increased foreclosure sales could prove too pessimistic, citing “some optimism that the number of formal repossessions is going to go down” if other approaches to mortgage-default resolution become more common.
Compared to condo flippers who long ago surrendered their properties to lenders, owner-occupants may have more motivation to negotiate short sales, modifications of mortgage loan terms and other foreclosure alternatives. And the Obama administration is encouraging banks to accommodate these borrowers.
“I believe that we’ll see fewer foreclosures” this year than last year “because I see more [loan] workouts taking place,” said Michael Y. Cannon, executive director of Integra Realty Resources in Miami. “There is a mandate from the feds to do more workouts with people, and that is happening on an increasing level.”
Default Research recently reported that filings to initiate foreclosure cases in South Florida fell last year, a sign that other means of default resolution are becoming more common. The firm, based near Pittsburgh, recorded a 13.6 percent decline in the number of foreclosure cases initiated in Miami-Dade, Broward and Palm Beach counties last year, following annual increases of 195 percent in 2008 and 177 percent in 2007.
“That’s definitely a good sign,” said Serdar Bankaci, CEO of Default Research. His firm analyzes “how many people are entering foreclosure versus how many houses are being sold at auction, so it’s a more forward indicator.”
But because so many South Florida foreclosure cases already are under way, “I don’t think the actual number of people losing their homes has peaked,” Bankaci said. In a Florida foreclosure, “it takes at least seven to nine months to go from the lis pendens [suit pending] stage an actual sale.”
Some taxpayers face a hazy regulatory landscape this year
Minimizing taxes, always an exercise in hitting moving targets, may be a more complicated task this year than in most others.
New legislation, recent court rulings and updated guidance from the Internal Revenue Service have raised important issues this year for certain types of investors and business owners.
In a newsletter published this month, the national tax office of professional services firm Grant Thornton identified what it called “top issues of 2009 to remember in the new year.” The following were among them:
Employers are supposed to report as income to employees their personal use of company-owned cell phones, but few do, and the regulatory outlook is unclear. The IRS asked Congress to approve legislation “that would remove any tax consequences for employees who use such phones for personal use,” Grant Thornton reported. But “there has been no indication that the IRS will no longer enforce current law, and no legislative fix has been enacted.”
Deducting incidental repair and maintenance costs is better for cash flow than capitalizing these costs as assets and depreciating them as over 15 years or longer. And now, making the switch to deducting from capitalizing is easier to do, thanks to a modification and clarification of IRS-approved procedures for requesting a change in accounting method.
Retailers should think twice before deferring revenue from gift card sales for tax purposes. Last year, the IRS advised field agents that a commercial taxpayer who directly owns one restaurant and manages others is ineligible to defer revenue from sales of gift cards redeemable at all of the restaurants. Clarification of the tax treatment of gift cards “is expected to be released in 2010,” according to Grant Thornton, but so far, “formal guidance has yet to be issued by the IRS or Treasury [Department].”
The IRS has increased its efforts to deter tax evasion among people in the U.S. who have bank or investments accounts with foreign financial institutions. All “U.S. persons” with more than $10,000 in foreign account balances are required to file an annual report of Foreign Bank and Financial Accounts, known as FBAR forms, with the IRS. Grant Thornton reported that the IRS last year “heightened its focus on FBAR compliance as part of its perceived mandate to curb offshore tax evasion.”
INCOME AND OUTGO: The Bureau of Economic Analysis will report the December levels of personal income and spending on Monday.
PENDING HOME SALES: The National Association of Realtors will release its December index of pending home sales on Tuesday.
PRIVATE EMPLOYMENT: Payroll processing company ADP will report its estimate of private-sector employment on Wednesday.
PRODUCTIVITY: The Bureau of Labor Statistics will report its estimate of U.S. labor productivity in the fourth quarter on Thursday.
U.S. UNEMPLOYMENT: The Bureau of Labor Statistics will report the nation’s unemployment rate in January on Feb 5.
CONSUMER CREDIT: The Federal Reserve on Feb. 5, will report December level of U.S. consumer credit outstanding.
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