Once again, Latin American tourists -- benefiting from their countries' strong currencies and a weak U.S. dollar -- are flocking to Miami and buying up whatever they can.

It's good for Miami, and it's good for the visitors, but the whole thing makes me nervous.

I've seen this happen before, and it didn't end well. Mainstream economists say this time it's different, but readily admit that the story may not have a happy ending.

Much like in the early 1990s, when South American tourists were known as "dame-dos" (give me two) by Miami merchants because they used to buy two sets of whatever they liked, there is a big increase in Brazilian, Argentine, and other Latin American visitors to South Florida.

According to the Greater Miami Convention & Visitors Bureau, tourism from Brazil has grown by 15 percent during the first six months of this year, while visitors from both Argentina and Colombia have risen by about 10 percent over the same period. Arrivals from Latin America have risen even more steeply over the past three months, other tourism industry sources say.

The tourists can be seen carrying heavy shopping bags along Lincoln Road and through Dadeland and Aventura malls, or lining up at real estate firms to inquire about the prices of condos that are being sold at bargain prices because of the U.S. housing crisis.

A staggering 80 percent of all condos sold in downtown Miami this year have been bought by foreigners, says Jenny Huertas, of Condo Vultures, a real estate brokerage that keeps track of local condo sales. If real estate prices haven't plummeted further in Miami, it's thanks to international buyers, she told me.

The reason for the latest surge in Latin American visitors is clear: Most Latin American currencies have become increasingly stronger, and the U.S. dollar increasingly weaker.

Brazilians are coming on weekend shopping sprees. Aventura Mall is reporting a 30 percent increase in Brazilian visitors during the first six months of this year. Prices for many items are cheaper than they find at home.

Trouble is, some of the most recent Latin American financial crises have been preceded by years of strong currency appreciations. Before Mexico's financial collapse of 1995, the Brazilian and Colombian crises of 1998 and Argentina's meltdown of 2001, these countries' currencies had become increasingly stronger.

Are we in front of a bubble that will burst once again? I put that question to several economists this week. They said most Latin American countries are more resistant to external shocks than they were in the 1990s, because they are managing their economies more responsibly, and because there is a new factor that is helping South America: the appearance of China as a massive buyer of commodity exports.

But economists also warn that if Latin American countries allow their currencies to keep appreciating, it will become increasingly difficult for them to export -- especially non-commodity goods -- because their products will be too expensive in world markets.

"When currencies are too strong, it tends to hurt exports," says Eduardo Lora, chief economist of the Inter-American Development Bank. "If exports go down, you would eventually see a drop in growth, a reduction of jobs in the formal economy, and a shift of newly-unemployed people to the informal economy."

My opinion: We should celebrate most Latin American countries' economic growth, and recognize that they have been more financially responsible in recent years. But I'm worried that we may see new financial crises in the region unless countries move faster to diversify their exports and come up with new and better products to sell abroad.

To do that, countries should invest more -- and invest more smartly -- in innovation and education. Currently Latin American countries together account for less than 2 percent of all world investments in research and development of new products, according to the Ibero-American Science and Technology Research Network.

If most countries in the region added a big push for innovation, science, technology and education to their generally sound economic policies, we would all breathe more easily, and could expect to see flush Latin American shoppers traveling to Miami for a long time.

 

Available at Amazon.com:

The Great Gamble

At War with the Weather: Managing Large-Scale Risks in a New Era of Catastrophes

 

 

(C) 2010 Andres Oppenheimer