Foreigners in Dubai hit by downturn

Denay and Jesse Vargas met as teenagers, working as lifeguards at the Fiesta Texas water park in their hometown of San Antonio. They fell in love, married at 20 and moved six times while Jesse worked as a manager at amusement parks around the U.S.

Last year, Jesse accepted a job with what promised to be one of biggest amusement parks in the world. He would make almost triple his $80,000 after-tax salary and wouldn't have to pay any income tax. That would help with the couple's medical bills from Denay's unsuccessful attempts to get pregnant.

The catch: It was in Dubai.

The plan: stay a year, maybe two, and make enough money to go home in style.

"We were searching for opportunities. We wanted to move up quickly. We wanted to buy a house and pay off debts," Denay Vargas says. "We figured we could live anywhere for a year."

Now, she admits, they are not sure it was a good idea.

This emirate known for extravagant projects, such as the world's tallest skyscraper and an archipelago of 300 manmade islands shaped like a world map, has been hit by the global recession and a building slowdown.

'A champagne lifestyle'

The American Business Council of Dubai says hundreds of thousands of foreigners over the past six years have been lured to this desert land by the massive construction boom and money to be made — until now.

An increasing number of newcomers like the Vargases are losing their jobs as projects are canceled or put on hold. Once that happens, people can quickly lose their residency visas and the right to stay here.

"There is not one expat get-together where conversation does not turn to this subject," Denay Vargas says, adding that she goes to at least one goodbye party a weekend.

"This place was built on dumb optimism and blind faith. It was all about a champagne lifestyle," explains Alexander McNabb, a British public relations executive who has been here since 1993.

David Hackett, an Irishman who has been in Dubai six years as a production manager for a large construction company, is worried about his job.

"Everyone knew that one day Dubai would be in trouble, but no one thought it would come this soon," he says.

Hackett's last project — the $600 million Trump Towers — was suspended. It is still unclear whether his next project — the $272 million expansion of the airport at Jebel Ali, meant to begin in June — will happen either. He is scared he won't get back the $400,000 he paid in advance for an apartment in the half-built Sports City complex.

The famous megamalls now seem empty: No one was waiting in line one recent afternoon to slalom down the Mall of the Emirates' indoor ski run.

A local animal charity called Feline Friends says 20 to 30 cats and dogs are abandoned every day because of the exodus of people who can't afford to send their pets back home.

'We're like Britney Spears'

Many citizens, however, brush off what they say are alarmist portrayals of the situation here.

"The Asians and Europeans who came to Dubai in the '60s and '70s are not going anywhere," says Sultan bin Saud Al Qasimi, an academic, writer and art collector who is also a member of the ruling family the neighboring emirate of Sharjah.

"It's the ones who came five years ago who are leaving," he says. "They came on unrealistic expectations and believed empty promises."

He argues that there is still lot of money and opportunity in the United Arab Emirates, saying growth is between zero and 2%.

"Dubai is like a celebrity," he says. "When a star goes through trouble everyone wants to hear and exaggerate the things that go wrong. That's us. We are like Britney Spears. … But I would not worry too much."

Nonetheless, there could be an ever bigger exodus come June, when schools let out and before the unbearably scorching summer arrives.

The Jumeirah English Speaking School sent a notice asking whether parents are planning to re-enroll their children next year.

The Dubai British School and the American School of Dubai have been calling parents to ask their plans, says one parent, Anna Charters. "It's like a game of dominoes," she says. "One thing is affecting the next, and everything is about to fall apart."

Paul Dyer, a researcher at the Dubai School of Government, says the government should allow those who are laid off to stay here longer than a month, to contribute to the economy.

"I know the government is looking for ways to adjust," he says. "They have to."

The theme park that Jesse Vargas came to work for, like other amusement parks under construction, has been put on hold. The couple, both 35, worry that they could be asked to leave the country empty handed, possibly even deeper in debt.

"We are living with constant uncertainty here," Denay Vargas says. "It's nerve-racking."