Latin America Connection

By Mohit Joshi

The Globalization of technology and other knowledge services has been one of the hallmarks of economic activity in the past decade – with a humble start in remote development, this has now morphed into a $50+ billion dollar business (USD). In the United States (US), it is estimated that 80% of Fortune 100 companies have an active global sourcing program. Additionally, global sourcing has moved beyond technology to transaction processing, call centers, medical transcription, business modeling, analytics, research and radiology.

To date India has remained the hub for this activity, however as more companies adopt global outsourcing other countries are becoming viable candidates for establishing IT and BPO operations. For example, China brings a large educated labor pool to the table while Eastern Europe promises a highly educated workforce and proximity to key European markets. Finally, Latin America due to its proximity to the US and shared time zone offers significant potential.

For technology and business process outsourcing companies and US corporations, Latin America offers a very attractive option for global sourcing & delivery given:

1. Time-zone and physical proximity to the largest economy in the world – Mexico, Brazil, Chile and Argentina (the four Latin American giants) all fall in the EST +/- 2 hour zone. This is a significant advantage for activities that need to be done in US day time – an example is a developer taking requirements from business users. This could be done (and is being done) from an Indian programmer working night shift but over the long run there are morale and productivity issues due to such a stringent schedule. In addition to time zone, there is also physical proximity – the aforementioned developer based in Mexico for instance could fly to Dallas for a 1 day workshop in a couple of hours – his Indian counterpart would need to sacrifice an entire workweek to make the same trip.
   


2. Language skills – Hispanics are the largest minority in the US and this means a requirement for Spanish language specific skills. Potential offerings could include bilingual Call Center as well as programmers who can design user interfaces in Spanish.
   


3. Cost – Though more expensive than India, work done from the region would still offer a 35-40% discount over US rates.
   


4. Containing risk through truly global delivery - As corporations increase the proportion of services offered from India, a Latin America component could ease country risk concerns and allow them to use the model to a greater extent.

For Service providers, the fast growing local market (especially in the financial services industry) Latin America is also a big draw – as these corporations mature and develop sophisticated products and services, they need the developed market expertise that external providers can deliver. This would include large scale system redesign, new application development and consulting services for business process changes.

As we look at the options available from a sourcing and delivery perspective, four countries stand out in Latin America:

1. Brazil is the largest country (in terms of area, population and the size of its economy) in the region and one that also has a large local market. It is a low cost location compared to other countries in the region and has a large local talent pool. It is a Portuguese speaking country and English/Spanish speaking talent is harder to source.
   
   
2. Chile has been actively positioning itself as a springboard to Latin America given its robust legal and regulatory framework and the ease of doing business there. Santiago has a lot of potential to emerge as a major global delivery center given a large population concentration and top tier universities. It is a much smaller country (with a population of 16 million) and scale would be a challenge for service providers.
   


3. Argentina has long been known in the region for its well educated, English speaking talent. With the devaluation of the peso, it has also become a very cost effective location. The negatives for Argentina include an unfriendly regulatory environment and the fear that a Peso comeback would destroy the business case for a global delivery location (though the peso is currently worth about 30 cents, it had parity with the USD in 2000.)
   


4. Mexico has historically been known as a manufacturing and component assembly location with its “maquiladoras” located close to the US border. It has a large educated, technically adept population and an excellent private university system. The country has historically unfriendly business laws but is in the process of changing these to attract investments. On the flip side, Mexico along with Chile is a comparatively expensive location.

In conclusion, the Latin America region has significant potential to develop a knowledge based, export oriented industry. Service providers and corporations have been looking at the option closely and the next few years should see sourcing and delivery from the region becoming an important complement to work being done currently in India & China.

Mohit Joshi is the CEO of Infosys Technologies S. De RL De CV, the Mexico subsidiary of Infosys Technologies limited, a Global Business Consulting, IT services and Business Process Management firm. Mohit has been working with Infosys since 2000 in a variety of business development and client management functions. In his current role, Mohit is also tasked with working with Infosys Executive management in defining the firm’s Latin America strategy.

State of the US Economy and Globalization

by Bruce Fenton

An interview with Peter S. Cohan on the state of the US Economy and Globalization. Mr. Cohan has written seven books, produced one audio program, been featured in eight compendiums of modern management thinking, writes two online management and investment columns, and contributes to two blogs. Mr. Cohan also edits a monthly investment-oriented newsletter entitled The Cohan Letter.

Bruce Fenton: How do you feel the US deficit situation will impact the economy in the future?

Peter Cohan: The US deficit situation will need to be fixed through a combination of raising taxes and cutting government spending. This will probably happen in 2009 and 2010 at the beginning of the next presidential administration. The impact of this in the short-term will be an economic slowdown. However, in the longer-term, the reduction in the deficit will lower long term interest rates and lead to a stronger dollar.

Bruce Fenton: What about the trade deficit?

Peter Cohan: The US trade deficit is likely to reverse if the deficit declines and the dollar strengthens. A weak dollar is beneficial to US exporters who can charge less for their products in overseas markets. Conversely, a strong dollar creates incentives for US companies to operate more efficiently.

Bruce Fenton: What about China’s ownership of US debt? How significant is the current foreign (particularly Chinese) ownership of US debt? Is it benign passive ownership or potentially detrimental? What is your prediction about this?

Peter Cohan: China is America's second largest lender -- it owns $350 billion worth of US government securities. This ownership is not a problem as long as China continues to hold onto the securities. However, with the dollar declining in value, the return that China earns on those securities is declining. Meanwhile other currencies like the Euro and the Pound are strengthening. This creates an incentive for China to sell more US securities and buy those backed by the strengthening currencies.

The result of China selling US securities is a further weakening of the dollar. In order to attract foreign investors back into its securities, the US government will need to raise interest rates which will slow down the US economy,

Bruce Fenton: Many other nations and economic groups have a trade surplus how does this affect the US economy long term?

Peter Cohan: The trade surplus with the US will encourage income inequality. Workers in the firms which are losing ground to foreign competitors will experience wage stagnation and consumer price inflation. Workers in the private equity and hedge fund industries whose work is not being outsourced will use their access to debt to further enrich themselves.

But the long-term success of the US economy is at risk unless US firms are able to become globally competitive and reverse the trade surplus with these other nations. In the absence of global market share gains, increased borrowing is the only way to keep up in the short term.

Bruce Fenton: Rapid growth of India, China, Russia, Brazil and other areas is significant relative to US growth. Is this a problem for the US – are we losing our competitive advantage?

Peter Cohan: The US is losing its competitive advantage in many business activities. And the activities in which the US is losing its advantage are moving up the income ladder. While in the 1970s and 1980s the US lost its manufacturing advantage, it is increasingly losing its advantage in fields such as systems consulting, legal, pharmaceutical, and investment research. When the US starts to lose its advantage in private equity, hedge funds, and investment management the loss of competitive advantage government officials will pay more attention.

Bruce Fenton: 70 million baby boomers are reaching retirement in the coming 15 or so years – how significant of an economic impact will this have?

Peter Cohan: I am not sure these projections will prove correct. I suspect that many baby boomers will not retire -- they'll keep working until they drop. I think those boomers who do retire will have more money so they will keep spending at high levels. And when they sell stock -- both their own shares to finance their retirement and by cashing in the trillions they'll receive from their parents -- they will generate huge capital gains which will benefit the government.

Bruce Fenton: Is the dollar weakening? If so how much and how significant and what is the long term effect of this?

Peter Cohan: As noted above the dollar is weakening. It's likely to decline at least another 10% by the end of 2008. That's significant because it creates a cycle of weakening that feeds on itself. We finance our economy through borrowing money from Japan, China and others. But they are not willing to keep doing this if our currency depreciates in value. So they sell the debt which puts further downward pressure on the dollar -- leading to further selling.

Bruce Fenton: How do you see increased government spending of recent years affecting the economy?

Peter Cohan: Increased US government spending has been great for defense contractors and oil companies. An endless global war is great for workers and shareholders in these companies. It's not good for oil consumers or soldiers. This increased government spending will continue stimulating those industries until the next president cuts back on these expenditure categories. Then those parts of the economy will suffer.

Bruce Fenton: One of the US’s major exports is copyrighted material such as software and other intellectual property. Do you see copyright theft as an important factor in our economic future? What about the flipside of this that argues that overzealous copyright enforcement stifles competition and free exchange of ideas?

Peter Cohan: We will not be able to get other countries to change their intellectual property enforcement practices. This will force content providers to change how they make money. They may end up needing to give away the content and make up some of the lost revenue through advertising. I don't think overzealous patent enforcement stifles competition. I think patents encourage innovation by protecting its profit.

Bruce Fenton: Do you feel the US is isolationist? Why or why not? Do you see our isolation or lack of it being a problem? Why?

Peter Cohan: The U.S. is involved in some way with most of the countries in the world. So it's not isolationist. But it does have an image problem with other countries. Fixing that problem will fall to the next presidential administration.

Bruce Fenton: Do you feel Americans generally have a lack of knowledge of Islam / Asia / other areas & cultures of the world? Will this harm us in the new global economy?

Peter Cohan: I think that American's lack of knowledge of other cultures is only a problem if the Americans lacking that knowledge are attempting to live in those other cultures or operate a business there. This is not a problem for the rest of the Americans who are ignorant of other cultures.

Bruce Fenton: How significant is Iraq War spending to our long term economy?

Peter Cohan: It is not significant to our long term economy because Iraq War spending will taper off in 2009.

Bruce Fenton: Do you feel commodity prices will increase? Specifically oil prices? How will this affect us and why?

Peter Cohan: Oil prices will increase which will create stronger incentives to come up with renewable energy sources and for consumers to drive less.

Bruce Fenton: The world public opinion of the US is not at its best. What are your thoughts on this from an economic standpoint with respect to trade agreements, tourism revenue etc.

Peter Cohan: I think most people around the world realize that the current administration is an aberration. Over the longer term, world opinion of the US will improve because Americans will elect an administration that raises the world's opinion of the US back to the high level it enjoyed in the 1990s.

Bruce Fenton: Any comments on US worker productivity?

Peter Cohan: US worker productivity is declining as a result of business' failure to invest in productivity enhancing technology.

Bruce Fenton: We feel that Sarbanes Oxley et al and the rise of US compliance legal and productivity costs are extremely significant. Do you agree with this? Do you feel that the increase in these areas is harmful to business?

Peter Cohan: No. I think that business is just whining because it believes it now has a sympathetic ear in the current administration. What is damaging to business is the lack of incentive for productivity enhancing technology investment. By reducing the tax rate on dividends, business is using its cash flow to pay coupon clippers and to buy back shares. This creates greater income inequality.

Bruce Fenton: Thank you for your thoughts.

Bruce Fenton is a financial consultant, a writer, and the Managing Director of Atlantic Financial Inc. Bruce welcomes inquiries, comments, and questions. He can be reached by contacting The Fenton Report.

China and America's Future

Business Leaders and Top Hedge Fund Managers discuss the latest issues facing the economies of the US and China

by Bruce Fenton

Recently I had the pleasure of attending this year’s Committee of 100 Annual Conference at the Waldorf Astoria in Manhattan. The Committee of 100 is a group of Chinese-American business and social leaders whose impressive membership list includes: Yahoo co-founder Jerry Yang, Cellist Yo-Yo Ma, and YouTube co-founder Steve Chen.

You don’t have to be a Committee of 100 member to attend the annual conference; the conference is open to the public at a very reasonable price, particularly after considering the incredible list of speakers in attendance. Individually, any of the dozens of speakers would be worth listening to for an afternoon. Featured speakers included: US Treasury Secretary Hank Paulson, New York City Mayor Michael Bloomberg, Quantum Fund co-founder Jim Rogers, Hedge Fund Legend Daniel Och, Hedge Fund Manager Richard Perry, and Yahoo’s Jerry Yang.

This year’s conference had an electric excitement with the smiling attendees extremely interested in the topic at hand. The audience members, like the speakers, were as diverse as any ‘who's who’ guide to business, but the subject was always the same: China and its growth, its economy, its change, its influence, its buying, its selling and its future.

Hearing our best and brightest speak about China can be quite whelming. The immensity of the information was so great that that during a few presentations I found myself entering a sort of "short circuit" mode and where I would then have to catch up. I began to look forward to having time to sit down after the conference and digest the magnitude of the ways in which China is changing the face of the globe.

One common complaint voiced by speakers was about China's lack of desire to both accept US investments and relinquish control to US investors. Top investment professionals, men and women who make the financial ground shake with their footsteps in New York or Chicago, have increasingly complained about getting a cold shoulder from Chinese companies. I wonder if this is a series of isolated incidents or if it is simply the fact that we in the US need China more than China needs us. Did French and English barons of previous centuries expressed the same frustrations as America became more self sufficient and less reliant on their capital?

While the conference was mainly about the big changes in China, perhaps most impressive is the "smaller" things, the little known and less quoted statistics that hammer home just how immense the growth of China has been. While many people talk about Beijing, Shanghai and Hong Kong, what might come as a surprise is the fact that China has over 100 cities with populations in excess of 4 million people each.

With such a staggering population, even the tiniest percentile of change translates into some very large numbers. One of the speakers, Wilbur L. Ross of WL Ross & Co, raised a few great points in regard to these vast numbers: if China’s automobile penetration per 1,000 citizens increases by 1% it would equal the total output of the US auto industry. Mr. Ross added that Chinese universities are now graduating seven times the number of engineers that the US: “Unless American engineers are seven times smarter”, he points out, “most future innovation will come from Chinese engineers”.

We are truly interconnected in a global economy and the US economy still influences both China and the rest of the world, but our influence is weakening relative to China's strengthening economic independence. The US Government indicates that China’s Gross Domestic Product (GDP) is roughly US$10 trillion and ours is US$12 trillion, in terms of purchasing power parity. Nominal GDP is also very close.

When asked about China’s decisions in managing the Yuan, US Treasury Secretary Henry Paulson said, “I have learned over the years not to ascribe motives. What I do is say they clearly see the principle.” He further commented, “It’s a big advantage for us if China does well economically” and “My own concern is that China has the right goal, which is stability; economic stability and growth.”

Most striking of all is a look at the Chinese trade surplus in comparison to the US’s increasing trade deficit. In terms of real dollars (when adjusted for currency value and debt), China’s surpassing of the US economy may not be in the 5 to 15 years projected by many economists, in fact it may have already occurred. Furthermore, China owns over US$380 billion in US debt, when this debt is sold it could surely harm the US economy greatly.

Given the magnitude of the discussion, it is no surprise that Committee of 100 attracts such an incredible list of members, speakers and attendees. In terms of the future of our global economy perhaps the audience should have had another million members. With the effect of China on our own future, maybe everyone in the US needs to learn more about this future leader of the global economy.

I am glad to have attended the conference; the question now is what to do about our place in the world relative to the world’s newest economic superpower? I suggest visiting the Committee of 100 website (www.Committee100.org) and attending next year’s conference. Additionally, perhaps we should pursue the often quoted advice of investor Jim Rogers: “Learn Chinese”.

Bruce Fenton is a financial consultant, a writer, and the Managing Director of Atlantic Financial Inc. Bruce welcomes inquiries, comments, and questions. He can be reached by contacting The Fenton Report.

Adventure Capitalist Jim Rogers on US Isolationism

China, Dubai, the US and Globalization from the man who may know it best

by Bruce Fenton (watch Globalization Video)

Like many things to do with global change, my conversation with legendary investor, adventurer and traveler Jim Rogers may be scary to most Americans. This fear is exactly the kind of thing Mr. Rogers sees as potentially harmful to the US. His thoughts make one wonder if the US is like the General who asks where his troops are so he can go lead them. As striking as the changes in our world are, even more striking is how few Americans are aware of and participating in these changes. Could isolationism cause the US to miss the boat? Worse yet, will it place us aboard a sinking ship?

The experiences of Jim Rogers seem to make him uniquely qualified for such questions. Co-founder of the Quantum Fund with George Soros (among the most successful funds of all time), Mr. Rogers is recognized by John Train in Money Masters of Our Time as one of today's leading investors. His extraordinary track record and insights set him apart from his peers but possibly most interesting is Mr. Rogers's view of the global economy and his Guinness World Record travel adventures.

In 1990-1992, Jim traveled over 100,000 miles on his motorcycle chronicling his adventures in his book, Investment Biker. At the turn of this century Jim and his wife Paige undertook an even more ambitious journey: 152,000 miles and 116 countries in three years. More than an exciting adventure: this trip was another learning experience for a man who already may have known more about our global financial system than anyone.

Jim and Paige saw up close the changes in our international economy, absorbing details and the feel for places that cannot be gleaned from economic reports. If an uneducated teenager with no investment background traveled such a journey, he would emerge a wise expert on the world. When you place a leading authority with a decades-long travel and investment record on such a journey, the exponential growth in Rogers's already extensive knowledge base is nearly incomprehensible.

Travel Channel star and Chef Anthony Bourdain says "travel makes one smarter". If so, Jim Rogers may be the smartest person on earth. In any event, his travels, insights as an investor and his uncanny track record make Mr. Rogers someone very worth listening to.

Jim's latest book, Hot Commodities, praises commodity markets and his view of their strong potential. Jim and Paige's daughter, born not long after their return from their journey in 2002, is now able to speak both English and Mandarin Chinese, the language that Jim Rogers believes represents the future of business in this century.

Jim's website, www.jimrogers.com, includes a chronicle of his adventures as well as some fascinating discussions with experts like the brilliant Daniel Yergin, author of The Commanding Heights: The Battle for the World Economy. Mr. Roger's books are available at Amazon.com or from his website.

Bruce Fenton: You may have seen our article about Dubai.

Jim Rogers: Yes

Bruce Fenton: One of the things that really surprised us was how staggering the misconceptions are. Most Americans seem to think [Dubai] is a terrorist state and they envision Al Qaeda.

Jim Rogers: You don’t have to tell me.

Bruce Fenton: Why do you think that is? Why is there such a staggering difference from perception and reality? And what do we do about it?

Jim Rogers: There is a staggering misconception about China about Japan, about Europe, about everywhere. Most Americans can't even find Japan on a map and don’t even know why they should be able to find Japan on a map. Most Americans can't find the Pacific Ocean on a map and don’t know why it's of any interest to them to find anything on a map. They can't even find Oklahoma on a map! [laughs]

It's unfortunate because of our history and our geographic location we are very isolationist and always have been, we have very little knowledge of the rest of the world. Our press doesn’t help. Most press companies don’t even have foreign offices anymore.

I mean, if the middle of Africa blew up we wouldn’t know about it for two or three weeks…the rest of the world might, but we wouldn’t.

Bruce Fenton: You see oil going up to $100 a barrel in the future; that seems to bode well for places like Dubai. What are you thoughts on Dubai and the rest of the Middle East?

Jim Rogers: Dubai doesn’t have much oil, you can see this from doing your homework, Dubai will be out of oil in five years or something. Dubai is doing their best to become a center for the Middle East: for shopping, for finance, for technology, for everything else, because they are running out of oil. Abu Dhabi has plenty of oil but that’s a different world. We'll have to wait and see what happens with Dubai.

They are certainly doing a brilliant job of what they're trying to do. As you know they have the best horse race in the world and the best golf tournament in the world and the best everything in the world. So it’s a question of "will it be successful down the road". I don’t know…who knows. I have no idea if all these massive investments are going to pay off in the end. You might be a better judge of that since you've been there more recently.

They are certainly investing large amounts of money on the idea that they will become the major center in the Middle East. If it works, then clearly it will be great. If it doesn’t work, or if there is a war, they are a sitting duck. I don’t know whether it's going to work. Bahrain is trying to do the same thing, Qatar is trying to do the same thing, Kuwait is trying to do the same thing so well have to wait and see. And all the others by the way have much more money than Dubai does because, as I say, Dubai is running out of oil, the others aren’t.

Bruce Fenton: Also Saudi Arabia has King Abdullah Economic City, and they are trying to copy it.

Jim Rogers: Well said. Even the Saudis are now trying to copy. Everyone is trying to copy what Dubai set out to do before. Dubai had to do it out of necessity because they were running out of oil. The others are trying to do it because they are now trying to compete.

Bruce Fenton: Obviously commodities are what you are recommending now. They are still terrifying to most investors and even most people on Wall Street. What would you say to those people? Are they really just missing the boat?

Jim Rogers: First of all I'd say that the fact that it's still terrifying to most people is a great sign because that means it is still an un-invested and untouched asset class. In the world there are something like 70,000 mutual funds containing stocks and bonds for the public and fewer than 50 for the public to invest in commodities. So this has a long way to go, a huge way to go.

And I would point out, as I do in my book, that you can invest in commodities the same way you buy IBM. If you buy IBM most people put up 50 or 100% of the money, well you can do that if you want to buy cotton as well. Most of the terrifying stories about commodities are because of huge leverage that people have used and gotten wiped out with short term fluctuations. So don’t buy it that way.

I would also point out that everybody knows a lot more about commodities than they know about stocks. I mean nobody had a clue about dot com stocks: what they were, what they did or anything else, yet they were rushing out there buying them in a big way. Most people don’t even know anything about IBM or Toyota for that matter. Toyota's got hundreds of thousands of employees and operations all over the world etcetera.

Everybody before they get to work uses most commodities. Before you get to work you use sugar, coffee, orange juice, rice, wheat, corn, rubber if you go running, wool, cotton silk, zinc, lead, gasoline. We know what this stuff is. It's a lot easier to analyze commodities than it is stocks. I did not say it was easy. I just said it was a lot easier. So people have no reason to be terrified, in fact they should be embracing it enthusiastically. They'd probably make a lot more money.

Bruce Fenton: Now on to China. Most of the focus has been on how China will change. How to you see us changing? Do you think that there will be a lot more Americans like you daughter learning to speak Chinese? Are we going to change or will we remain the same and shrink global market share?

Jim Rogers: A little of both. Certainly more Americans are going to learn Chinese for many reasons partly because so very few speak Chinese now. But I'm afraid we'll go the way of Great Britain. The UK: in 1918 they were the richest most powerful country in the world; their currency was the major world's currency at the time etcetera, etcetera. Well, they sort of were over the top. They were over extended and there were many flaws within the underlying system. We're sort of there too at this stage: over extended in every way and unfortunately I don’t see anything that’s going to change. Certainly no attitude here: you've already pointed out some of our shortcomings and that’s going to get worse, not better.

The best opportunities I know are in Asia and in commodities. Learn Chinese and start investing in commodities. Commodities are the single best way I know to protect yourself from the things you have come up with in your analysis. That’s where the money is going to be made in the next 10 or 15 years. If you're clients don’t invest in commodities, they should be. There are plenty of ways to do it, you can buy indexes, you don’t have to buy specific commodities. These days there are a lot of structured products in commodities where your principal is guaranteed if your clients are worried about that kind of thing.

Urge your clients to get their money out of the US Dollar, whether that’s commodities or foreign currency or what. I've told you where the opportunities are.

Bruce Fenton: Thank you very much for your time, we appreciate it.

Bruce Fenton is Managing Director of Atlantic Financial Inc., which specializes in investments and global wealth management and is based outside of Boston, Massachusetts. Atlantic Financial advises corporations, endowments and individuals on international investing including Asia and the Mid East region.

Bruce welcomes comments and is available for speaking engagements, interviews and consultations. Bruce can be reached at 800-559-2900 or email Bruce Fenton.

Please Note: Commentary in this interview may not be appropriate for all investors. Always consult an investment professional before investing.

This information does not represent a recommendation to buy, sell or hold any security. The views and opinions expressed are the author's own and not necessarily those of Cantella & Co., Inc., there is no implied endorsement by Cantella of any advice or trading strategy.

Please carefully consider your own investment objectives and all risks, charges and expenses before investing. Cantella & Co., Inc. does not offer futures or commodities.

Dubai: The Biggest Story in the World

Including the biggest mall, biggest airport, tallest building…

See Also: Dubai Radio Interview, Dubai FAQ, and the Middle East 2.0 Video

Download Article PDF

by Bruce Fenton, Editor

Could the world's biggest story slip by the world's most powerful nation? Wake up and smell the (Arabian) coffee America. Our world is changing and the memo didn’t get through Customs.

The story begins in the Middle East we don’t know: Dubai City. While Dubai has meaning to billions of people, aside from a passing mention of the world's finest hotel or Tiger Wood's Golf Tournament, it's practically unheard of here in America.

Day One: "You're going where?"
My journey to this city of contrasts launches from London with the excitement of a Club Med charter. Instead of the aging businessmen I expected, my flight buzzes with energetic young families and Euro hipsters. Brochures depicting smiling Western vacationers prove truth, not marketing fluff: tourism yields over three million visitors a year and growing. Fast. Tourism in the Mid East? An incredible concept to most Americans. Before departure, friends offer protection tidbits like "get a good security firm" and "stay in the safe zones". Ten minutes research shows any American how patently absurd this thinking is. Dubai's safety ranks with Tokyo or London and a good deal safer than Washington D.C. Crime is almost non-existent in this ultra modern city, one of many facts that confound the iceberg of American misconceptions about the region.

Within hours of landing, I know that I have never seen such a thing in my life. Of course I haven't. No one has. The growth and scale of business in this land of unbounded potential is like nothing else in modern history. Dubai represents no less than the creation of a major new world center, the transformation of a region and therefore the entire world. Welcome to Middle East 2.0, the city of the future.

Dubai City is located in the Emirate of Dubai, within The United Arab Emirates (UAE), a wealthy oil producing nation bordering Saudi Arabia and Oman with excellent relations with the west. The mega wired city is the planet's biggest construction site, yielding the world's largest per capita concentration of cranes and Caterpillar's biggest customer. Its landmarks include the Burj Al Arab, the worlds first seven star hotel. Dubai hosts over 50 major projects, all with sub projects that each dwarf almost anything we can conceive: a Manhattan-sized palm tree shaped peninsula visible from space, 300 man made islands in the shape of the Earth, the world's tallest tower, tallest residential tower, largest airport and a dozen cities within a city, each with tax free treatment, infrastructure and special benefits for international corporations. The desert magnet has attracted Microsoft, Cisco, Sun, Reuters, Virgin Airways, Donald Trump and Martha Stewart. Not just business brings people to Dubai; in a word the place is fun. Supreme restaurants, golf courses, hotels, malls and nightclubs pepper the beachfront skyline.

Dubai's diversity rivals the zenith of New York's immigration boom. At my hotel, women in Abayah's, the traditional head to toe black dress, sit poolside next to bikini clad Europeans. At mega malls, men in traditional robes push strollers carrying babies with Superman caps past trendy students, Asian businessmen and stores that sell everything from Mont Blanc pens to Persian rugs to Chinese pottery and the latest Sony laptops. What Dubai has achieved is a peaceful and universal melting pot of the world- a land where hundreds of dialects are unified by the international languages of business, hospitality and entertainment.

The Visionary
If every story needs a hero, this one's is Crown Prince Sheik Mohammed bin Rashid Al Maktoum, known locally as Sheik Mohammed. Ever since 1776 when we fought King George III for independence, Americans have been unenthusiastic for royalty and have judged people based on their accomplishments rather than family connections or title. But by even by the most cynical American standards, Sheik Mohammed has accomplished enough to not only truly deserve our deepest respect but to ensure his place in world history. Perhaps, even with great natural talent and intelligence, only one born with such opportunity would be able to dream so large. One cannot help but admire Sheik Mohammed when asking "What kind of man looks at a small desert town and decides to create the greatest city on earth? What kind of man looks at the ocean and resolves to create miles of islands in the shape of the earth and palm trees?"

Faster than a bird or a plane…
The "Speed of Dubai" is a few clicks past the speed of the tech boom I saw with the founding of my Internet investment company in 1994. Everything here moves faster than a speeding bullet and Superman. My business meetings and taxi rides move quicker than any during my days in New York. Outside my hotel springs a development with 50 skyscrapers: by day three of my stay, five of them have the entire outside walls completed, transforming steel shells to the outline of landmarks they will be. In three weeks the view will be entirely different and in a year, unrecognizable. Like breeding a prize winning stallion, something this crowd knows better than anyone on earth, Dubai uses a "best of breed" approach for the construction of this super-city. The world's best advisors are recruited to design everything from the stock exchange which is modeled after the US and London exchanges to Dubailand, a gargantuan theme park and the Middle East's answer to Disneyland. Other projects are modeled on nothing more than guts and creativity including the worlds largest man made marina and a massive indoor ski resort. At the Mall of the Emirates you can step from 100 degree weather to a 30 degree snow covered domed artificial mountain watching children of all nationalities throwing snowballs and sledding.

We don’t know what we don’t know
Dubai is truly international, representing over 160 nationalities in all income and job categories. Most noticeable to me is the lack of Americans. Others in town simply lump us together with the British, of which there are plenty. Of the few Americans that are here, most are engineers almost none are tourists. To the American mindset, the Middle East just isn’t a place where one considers a vacation with the family. Even American companies here are typically staffed by Londoners or Middle Easterners. Our misconceptions about the region are so great that it is both embarrassing and inconceivable. The locals I speak with are still stunned over Congress's decision to block US port ownership by Dubai Ports. Even long-term American residents I meet have forgotten just how many and how deep our misconceptions about this region run. Indeed it is easy to forget: within days I'm so accustomed to the buzz of this place that I must remind myself how few of us have heard of Dubai let alone can point to the UAE on a map. Many Americans tend to lump the region together like one giant country, thinking that Afghanistan, UAE, Saudi Arabia and Iran and Iraq are all similar economically, educationally and politically. This is like thinking that San Salvador, Guatemala, Haiti, Houston, Atlanta and Boca Raton are similar because of their geographic proximity.

America is a great nation with so many natural resources and attractions that we tend to be isolated in our world view. Our best and brightest tell us of the new 'flat world' and global economy but other than a smattering of India and China investments what are we doing about it? Dubai is not only a center of a new global economy but also center of the region we understand least. Islam being the primary religion of the UAE and the area causes even further misunderstanding or outright false perceptions. For example, many Americans do not realize that Islam condemns terrorism or even that Muslims believe in Jesus. Many Americans do not know that Arab and Muslim are two different terms with two different meanings. A religion larger than Catholicism has been condemned by many Americans based on the actions of two dozen fanatics. Few realize that there are peaceful nations in the region with standards of living and per capita wealth near our own levels. When we hear "Gulf War" many Americans associate the entire Gulf region with war, terrorism, poverty and violence. Most would be so shocked at the contrasts in Dubai that they would regret even making a comparison. Sadly, many American journalists cannot write or speak about the Mid East without speaking of terrorism, even though the nations are as different as Georgia and Cuba. Dubai shines as the antithesis of everything wrong in the region, for this small area is in some ways more in line with our values than our own country. No longer is it possible for a third world resident to jump on a plane to America and become a cab driver who sends his children to medical school. This dream now lives in Dubai where working visas are still obtainable, even encouraged; millions of workers now call Dubai home. The state's expatriate population has grown to 80% of the residents, making its religious and language composition far more diverse than our own. If investment prosperity and world peace require us to understand and embrace the changes in our world, there may be no better place to start than Dubai.

The stars are aligned
One key to the success of Dubai is its strategic location: equidistant between London and Beijing, nearby India and at the center of the Gulf region. Dubai is home to the region's largest port where reselling goods is surpassed only by oil and tourism in revenue. Dubai is blessed with oil wealth but less of it than some of its neighbors, sparking the desire to work hard to diversify revenue. A singularly focused and pro business government with ample funding and offerings of huge infrastructure and tax benefits combines well with the can-do attitude of the area. One of my hosts sums up how obstacles are dispatched, "In Dubai, we make things work." And working it is; the speed of this development has left even some who follow the story in the dust: by the time we speculate if it will work, it already is working. Yesterday's concepts are up and running today. In half the time we have plodded along with Boston's Big Dig or other major American projects, this city has completed two dozen equal or larger scale undertakings. The world's skepticism at this nation's ability to build a world financial and economic center is already obsolete and outpaced by the speed of Dubai.

The stunning growth of the city is transforming the region, and therefore the world. Already the UAE's more conservative neighbor, Saudi Arabia, has asked Dubai construction firms to begin work on King Abdullah Economic City, a super city and economic zone created in a similar model to parts of Dubai. Dubai is now an international hub and free work zone to which millions flock seeking a better life. The energy and focus here is massively positive, an experiment in goodwill that shows how well people get along when focused on building, creating and having fun. American smart money is already here but not in nearly the scale we could be. How can we, the greatest nation on earth be participating so little in this incredible spectacle?

A colossal metamorphosis is indeed occurring in the Middle East and here the change is not from bombs or guns but from handshakes and construction crews. In its quest to become the world's greatest city Dubai doesn’t need to submit a memo to the desks of America: Dubai doesn’t need our permission. This story is occurring with or without our participation. Middle East 2.0 is here to stay.

A new global economic center has been born. The question is, will America remain in quiet isolation and trod to our sunset retirement home or will we come to the nursery and celebrate this birth with words of congratulations? I choose the latter. I hope, for the sake of our nation and our world, that my fellow Americans will join me. Welcome to the world's big leagues Dubai, it’s a pleasure to meet you.

Bruce Fenton is a financial consultant, a writer, and the Managing Director of Atlantic Financial Inc. Bruce welcomes inquiries, comments, and questions. He can be reached by contacting The Fenton Report.

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