Sunday, October 17, 2010

Real Estate and Relocating /Investing in Argentina

Fernando - thought you might be interested in the Casey Research viewpoint on Argentina below....

What is your opinion?

Nick

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Hello Fernando - great blog that you have!  I thought that this snippet from "Casey's Daily Dispatch" today, written by David Galland, might interest you...            Best regards, Kris

Letters from You

In all of your Daily Dispatches, I have never seen any explanation as to why you picked Argentina as the fallback position to the US. Certainly the government there is far from ideal and besides suffering hyperinflation over the years, it is very socialistic and appears every bit as corrupt as most governments. What do you know that we do not?
In the November 25, 2009 edition of this service, I did go into some detail as to how I first came to the conclusion that I want to spend a lot of time in Argentina (and subsequently have).
Summing up the country’s attractiveness, it is that it’s inexpensive, cultured, physically beautiful, and homogeneous. Generally speaking, the Argentine people are lively, educated, and friendly. On my last trip, I got briefly lost in the middle of nowhere, and the people of the small town I stopped in for directions couldn’t have been more congenial or helpful. Then there was the time when one of my companions, playing ball toss at a local fair, so widely missed his target, he knocked the leg out from under a neighboring food concession booth – causing nothing but a heartfelt round of laughter by everyone involved, including the disadvantaged concession owner.
Then there’s the excellent food and, of course, wine, which, in the small wine-producing town of Cafayate, where Doug and I (and a lot of others) are currently building houses, is produced locally. The weather in Cafayate is excellent almost year around, and the living easy. A full-time live-in maid/cook is available for about US$200 a month, and happy for the work. As Doug likes to quip, the affordability of household help means that if you want a cup of coffee or a snack, a cup of coffee or snack materializes.
But your question, a good one, is more about the politics of the country.
First and foremost, there’s no question Argentina’s economy has been suppressed by its misguided politics. At the turn of the last century, the Argentine economy was the sixth largest in the world, but that all changed with Peron – after whom the country has been beset by a succession of dysfunctional populist/socialist/fascist governments. Given the country’s many natural attributes, which include abundant fertile farmland, bountiful waters, oil and gas, gold, copper, and all manner of other commodities, it is actually remarkable that Peron’s successors have managed to so successfully screw things up.
Make no mistake, this country has everything it needs – in spades – to be a real contender in global markets, and someday the people may come to their senses, in which case the subsequent bull market in all things Argentina will be something to behold. That said, the current government is better than many that have come before it, but that’s not saying it’s good – it’s just not as bad as some.  
That’s the big picture. But there is actually a positive flipside, because in addition to being “policy-challenged,” the Argentine government is generally ineffective. My first sense of that came during one of my first drives over the border from Chile, when I had to stand in line to fill out a small paper form, which the minor official then added to a big stack in a paper folder never to again see the light of day. It was all about process and had nothing to do with actually controlling the border.
In the U.S., by contrast, every move you make and every step you take is increasingly recorded and fed into databases that can be accessed at any time and for any reason – including fishing expeditions. That level of sophisticated surveillance may, in time, be implemented by the Argentines – but not in my lifetime.
Similarly, as a visitor to Cafayate, your Western sensibilities may be shocked by the sight of someone driving a motorcycle with a kid, or maybe two, clinging to them – and none of them wearing helmets. While many riders voluntarily do wear helmets and have their kids do as well, the government applies no such regulations. In the U.S. and other more developed countries, by contrast, it seems that pretty much everything you do is regulated – because it actually is. In Argentina, as long as you don’t bother anyone, you are pretty much left alone.
Furthermore, as a non-Argentine citizen, even when you do come across the occasional road block (which are especially in evidence during holidays to keep drunks off the road) or otherwise bump into a member of officialdom, the authorities have zero interest in delaying your journey. You are not one of their “souls,” and so they are polite and wish you well – happy that you are in their country spending money.
Of course, if you actually want to do business in the country or have to deal with bureaucracy in some official capacity, it will involve a lot of nonsense and time wasting, but no place is perfect – and that is, in my mind, a small price to pay for the general lack of day-to-day meddling.
I would also mention that I have done a fair bit of business in Mexico over the years and was rarely able to get anything done without first paying up to some local official. While I’m sure that sort of thing goes on in Argentina, I have yet to encounter it.
Despite their government missteps, the rule of law is considered good in Argentina, and other than Peron’s forced land sales to break up the massive estancias (in Salta, one family controlled over 2 million hectares), land expropriation is not part of the country’s history.
As for their periodic bouts of inflation, given that I would never trust an Argentine bank with anything other than money I anticipate needing for near-term expenses, it’s not much of a problem. The trick is to keep in mind the expatriate credo that your passport should be from one country, you should keep your money in a second (preferably, more than one), and your residence in a third.
Is life in a country such as Argentina perfect? Of course not. But if you are willing to put up with entirely manageable inconveniences, the sense of personal freedom and quality of life is exceptional. 




I’ve got several emails like these about Doug Casey and would like to make a few points very clear. No, some people may not like what I have to say but that’s ok, got enough friends as it is.
First of all, understand this is about selling real estate in Argentina. If I’m trying to sell houses to Americans in Tailand, Venezuela or Uganda I’m going to tell them it’s the best thing in the world, nicest place to live in, cheap beautiful safe, etc. The only problem I see is when you … “twist” the truth so much it comes close to being lies. So lets get busy:
Summing up the country’s attractiveness, it is that it’s inexpensive, cultured,

This is simply a lie. Its cheaper to live in Miami than in Buenos Aires, and if you want to go small town you’ll find out that (keeping the same life standard) its cheaper to live in most of US states than in any Argentine provinces. Live spending 1000 bucks a month? Sure you can. But know that you’ll be living even WORSE than living in USA with 1000 bucks a month simply because basic services such as power, gas and food are more expensive than in USA. Let me make that clear, FOOD IS MORE EXPENSIVE HERE than it is in USA.
“physically beautiful, and homogeneous.”
True. It is a beautiful country in terms of natural resources, that much is true. But you’re a fool if you think its more beautiful than USA wild life, or that it offers better outdoors experience for the average person.

“Generally speaking, the Argentine people are lively, educated, and friendly.”
No, people in most US, specially the South, they are much friendlier than in Argentina. Even in the provinces you’ll always be an outsider, even if you come from another province within Argentina. In Buenos Aires people you come across during the day will hardly say hi to you most of the time. Add to that the general crime problem (crime isn't even mentioned here, and this is by far the worst problem Argentina has)  that makes most people here increasingly distrustful and you’ll understand better why people here are the way they are. Socially speaking, Argentines have a reputation for being dishonest and not to be trusted, which goes along with having one of the most corrupt countries in South America. People in general will try to screw you more often than not. The “fame” Argentines have among their neighbors isn’t entirely undeserved, and it’s the same story in the provinces. I’d say you’ll be more at home in big city Buenos Aires than in the small provinces this man promotes. At least in Buenos Aires people are more cosmopolitan and people wont hate your guts for being an outsider. But if in doubt, hey, be my guest, buy a nice house in Cordoba or Salta. 
 You’ll get all the smily faces until the deal is done and the money changes hands. Then you’ll see how polite people really are in your new neighborhood.
I’ve know of lots of people that just couldn’t stand it and left. Even one women that was born in Rosario, Argentina, but lived most of her life in Boston. She came back to Rosairio because of the crisis in USA, yet she regrets the decision and wishes she had stayed in USA. This woman was BORN in Rosairo and speaks the language perfectly of course. You think a “gringo” will have better luck?

“On my last trip, I got briefly lost in the middle of nowhere, and the people of the small town I stopped in for directions couldn’t have been more congenial or helpful.”
Possible. You can also get mugged, raped and killed in one of these small towns just as well like it so often happens to foreign backapckers. Oh, you better speak FLUENT Spanish, you simply will not come across ordinary people that speak English in small or big towns. Only in downtown Buenos Aires can you expect the average Joe you come across to speak English 50% of the time. In the provinces? In small towns? No, they don’t speak English any more than they speak Russian in small town America. Why the hell would they? You only learn English in expensive private bilingual schools or English institutes. And less than 95% of the population can afford either one.

“Then there was the time when one of my companions, playing ball toss at a local fair, so widely missed his target, he knocked the leg out from under a neighboring food concession booth – causing nothing but a heartfelt round of laughter by everyone involved, including the disadvantaged concession owner.”
Okk…  I’m not going to say this is BS. I’ll only say that based on how violently people usually react here, based on how POOR people are, this man losing his merchandize and laughing about it ? If it happened that way, it was because he came across the nicest guy in the country. Realistic terms? A) Expect insults, even a fist fight. B) Expect money to be demanded for the losses you caused.
“Then there’s the excellent food and, of course, wine, which, in the small wine-producing town of Cafayate, where Doug and I (and a lot of others) are currently building houses, is produced locally. The weather in Cafayate is excellent almost year around, and the living easy.”
Cafayate is almost owned entirely by the Kircheners. Its Kirchenrland so to speak. Its so expensive, even Argentines don’t go there on holidays, its cheaper for us to go to Brazil, even USA. Oh you can have all the wine and food you want, expect ridiculously expensive USD prices though. Of all the places this man has promoted in Argentina, Cafayate is by far the most expensive one. Please don’t get me wrong, if you’re a rich American you’ll have fun there, but then again if you’re a rich American there are far better places to live in… USA for example. If you’re not rich though, don’t even bother with Argentina, like I said Uruguay is safer, cheaper, just as nice, and a couple hours away from Buenos Aires and everything it has to offer, yet having the Plate river, the widest river in the planet, as a perfect natural barrier.
“A full-time live-in maid/cook is available for about US$200 a month, and happy for the work.”
Yes, I could even find someone willing to work for food. Does that mean this is a smart thing to do, even if you are a cheap b$"·!&d? No, its stupid, because people willing to work for so little are pretty desperate people, and what Doug and his buddies apparently ignore or chose not to say is that desperate people in Argentina will steal from you if you are lucky, or in the worst case scenario downright kidnap you for ransom or do a home invasion robbery. Usually the maid’s boyfriend/husband is more than willing to help. So no, been there done that, and so has every high and middle class person in Argentina: You do not hire help that is willing to work for peanuts. You will usually get what you pay for.
“But your question, a good one, is more about the politics of the country.”
Oh yes I’m sure. Can’t wait to see how you can explain buying real estate in a country who's president  is buddies with Fidel and Chavez, one that wont doubt in taking away private property from people, specially foreigners.

“Make no mistake, this country has everything it needs – in spades – to be a real contender in global markets, and someday the people may come to their senses, in which case the subsequent bull market in all things Argentina will be something to behold. That said, the current government is better than many that have come before it, but that’s not saying it’s good – it’s just not as bad as some.”
Jajaja!! Ok, this is ridiculous. We pretty much have a socialist dictator in power, someone that stole private pensions and would not doubt in stealing your “investment” in Argentina. I think this is a good case of “if you don’t have anything good to say, don’t say a anything”.  You don’t want to talk Argentine politics with a foreign investor, he just wont feel his investment is being made in a safe country. Argentina one day being something to behold? Well yes, we were something to behold in 2001 and we still are a mess.

“That’s the big picture. But there is actually a positive flipside, because in addition to being “policy-challenged,” the Argentine government is generally ineffective. My first sense of that came during one of my first drives over the border from Chile, when I had to stand in line to fill out a small paper form, which the minor official then added to a big stack in a paper folder never to again see the light of day. It was all about process and had nothing to do with actually controlling the border.
In the U.S., by contrast, every move you make and every step you take is increasingly recorded and fed into databases that can be accessed at any time and for any reason – including fishing expeditions. That level of sophisticated surveillance may, in time, be implemented by the Argentines – but not in my lifetime.
Similarly, as a visitor to Cafayate, your Western sensibilities may be shocked by the sight of someone driving a motorcycle with a kid, or maybe two, clinging to them – and none of them wearing helmets. While many riders voluntarily do wear helmets and have their kids do as well, the government applies no such regulations. In the U.S. and other more developed countries, by contrast, it seems that pretty much everything you do is regulated – because it actually is. In Argentina, as long as you don’t bother anyone, you are pretty much left alone. “
Changed my mind, I’ll stop being nice. This is BS, BS, BS.
If you think you have more freedom in Argentina than in USA because its inefficient you just don’t know what you’re talking about. Cuba is inefficient my friend. That does not translate into freedom. You have national ID in Argentina, you have mandatory vaccines here most people in USA haven’t even heard of. No, its not legal to ride a bike with kids or without a helmet either. It’s illegal to not wear your seat belt too by the way. Again, think Venezuela-type freedom. That’s what you’ll get here and inefficiency wont save you from it. I think the worst thing is, in Argentina you don’t have a RIGHT to freedom either. The constitution isn’t just ignored, its modified every once in a while by the current president to fit his needs. At least in USA you have a bill of rights, you have a second amendment, you have a culture of protecting people’s freedom. You don’t have any such cultural movement here. You don’t have a second amendment, you don’t have libertarians either. It simply does not exist. Politically speaking, Argentines are homogeneous in that regard: There is no political or social movement promoting or protecting individual liberties.
There’s a bunch of other stuff but I really feel I’m wasting my time with this. Basically every good thing mentioned here just isn’t so, except for the natural beauty which USA has even more of.
Politically and economically speaking, Argentina is a nightmare. And this translates into the society as well. You’ll see what I mean soon enough before next year’s presidential elections. Before buying, RENT in Argentina for a year or two. Trust me you’ll be saving thousands in the long run, maybe hundreds of thousands, because you’ll be able to tell the difference between marketing and sales pitch, and what things really are like here.
FerFAL

13 comments:

Anonymous said...

This reminds me of the real estate speculators who sold worthless desert lots in the middle of Nevada to gullible American suburbanites in the 1950s, when Old West themed movies were all the rage. The lots were sold through ads in cheap magazines that touted the "benefits" of living in Elko, Nev, which is 200 miles from nowhere and where everything is hauled in by truck, including food and water.

The idea was that a suburbanite would retire to his very own Old West ranch, all 1 1/2 acres of it. The lots, as I've said before, didn't have electricity, didn't have water, didn't have access, didn't have ANYTHING! Now Elko County has a serious problem-there are 40,000 people in the county, but 50,000 of these worthless lots. There are a handful of people who live out there, with great difficulty. You can still find "rancho" lots for sale on Reno Craigslist for $2500.

The Old West Rancho racket is what Doug Casey reminds me of. He'll sell you worthless land in the middle of nowhere in a country that has no jobs or economy and is NOT welcoming to outsiders, just like rural Nevada. (Trust me, I've been there.) I really think that these real estate speculators and ripoff artists need to be held accountable. Eventually, Argentina will catch up to him, if he really lives there that is and isn't just selling lots from a PO box in the US.

ghpacific said...

Wow, great take-down of a b.s. artist! If Doug Casey is promoting real estate now he belongs in this list http://www.johntreed.com/Reedgururating.html Great work as always Ferfal.

Anonymous said...

Last year there was a blogger who claimed that American agriculture would soon dry up and blow away, and that America soon would experience a huge famine. His solution? Move to-that's right-RUSSIA! Russia, where drought and fire has destroyed most of their wheat crop, and has burned dozens of villages, and where people ARE starving, and DO starve, even when there's NOT a drought. So anyway, this blogger is now starving in Russia. IF he lives, he'll likely learn a lesson in trying to predict the future for fun and profit. And Russia and Argentina are NOT on my list of places to move to. My great-grandfather was from Switzerland, I might seek Swiss citizenship.

Patrick said...

I agree with your take-down of the Cafayate project, but I need to take you task on some of your facts as an expat who has been living in Buenos Aires for two and a half years.

The cost of living here is not greater than Miami, it is at least half of Miami's cost, maybe 35%. I rent a furnished, one-bedroom apartment near Centro for $630 a month, USD, plus maybe $500 in spending. I did a search of Miami apartments, downtown, and found rates over twice what I'm paying for a comprable, furnished, one-bedroom apartment:

http://www.apartments.com/Results.aspx?page=results&subarea1=y&area1=y&state=fl&rgn1=7&helicon=1&prvpg=5&Rent_Minimum=0&Rent_Maximum=99999&onebdrm=1&am2=0

Granted, inflation has taken a toll on the affordability of living here, I recently visited San Francisco and was surprised to be paying $2.50 for a bagel, $1.75 for a stick of deodorant, when the same would probably cost me 8 pesos and 6 in BsAs, not quite purchasing power parity, but close, especially when you consider the tremendous income gap. This is certainly a problem and I'm making my long term plans around Uruguay, any business that I'll be doing in BsAs will be limited to the next two years, maybe three.

Also, I looked into living out in rural Cordoba, talked to an old Yanqui living out there, and he told me pretty much what you're saying plus there's the mountanero-lite bands lurking in the wings to do the K's bidding whenever things get dicey. I could get a hectare for $10k USD out there, nice land too, but it's not worth it with that kind of collateral risk.

I think Uruguayo land is at a premium to Argentine land, and the general costs of living are higher, but would agree it's worth it.

However, I have to agree with the point about inefficiency affording a greater degree of liberty. You underestimate the mounstrosity of the US-technofascist state.

Bottom line, Casey should have bought land in Lavalleja instead of Salta, and ultimately the marketing won't cover the spread.

Anonymous said...

The slang expression "Swampland in Florida" came from the Florida land boom of the 1920s. Hurricanes in 1926 and 1928 put an end to this boom, and then there was the stock market crash of 1929 and the Great Depression of the 1930s (perhaps history is rhyming with today -- time will tell).

Real estate scams never change; only their geographic locations change as new generations of victims learn the hard way that what seems too good to be true usually is not true.

FerFAL said...

Hey Patrick, the comparison was made a few months ago in Telenoche, and at least I found it to be true comparing my budget (wife + 2 kids) to what I would spend in Texas.
Maybe your current lifestyle allows you to do certian things, lets jsut say that my spending is pretty different, just taking into account the school (private) and heatlth (Swiss Medical Group)
Renting isn't everything. In fact I think these days its the least of your problems. With the recent increases in power bill prices there are other things that worry em more.
By the way, I've got pretty solid info on 2001 happening all over again before elections next year. I'd say 60% chance of happening.
I lived in Cordoba for 2 years, dont even bother with it. Uruguay is pretty solid, chaper and just better in general terms. Its much cheaper to live in Uruguay! not the other way around.
Fer

Wabano said...

Yes, that Casey bugger is spamming my mailbox with forty junk letters a day!!!

We spent two "winters" down there in 1983 and 1984 "fighting fires" with Canadairs in Bariloche.

The situation was already so dire
that old folks where handing their wallets to cashiers as the
25,000 pesos needed to buy a dollar worth of stuff was beyond
their comprehension.
(Weren't three gold pesos enough to buy you a car?)

Our mechanic was so upset with everything that he got a perforated ulcer and he had to be flown home on a stretcher.

Could not figure why millionaires where jetting all the way down there to see the Llao Llao and the Tronador when they
had the same in Banff thirty minutes away...but millionaires will be millionaires!

What impressed me the most where the Andean forests we where tasked to protect.

They are a thousand years old,
with no new growth as the billions of sheep and cattle eat all the young growth and all the antique
oaks now only have a few scruffy leaves...when they die the
country will turn into an arabian desert.

And we where told that 90% of these cattle actually die of old age due to government interference with ranchers.

Kind of remind you of China and Japan, really. You believe in the "Yellow peril"? Soon to be
a ninety years old peril, as they all shrivel up
with no new generations!

Anonymous said...

I think by by 'homogeneous' he meant racially pure as in 'white'. A racial code word.

Don Williams said...

1) The Rich are different from you and I --and it is not just a matter of having more money, although there is a relationship.

2) If you are very wealthy, then a corrupt government is not a bug --it is a feature. What is the point of being rich enough to bribe government officials if no one will take the bribe? But How else can you ensure that you are above the law that applies to the common people?

3) Of course, you need to protect your fortune from seizure by keeping your money in a different country -- as Doug Casey recommends.

4) Plus the USA is not all that clean -- it merely disguises it better. Both the Republicans and Democrats get several $Billion dollars each election. How much of that is willingly given by businessmen -- and how much is coerced by the threat of retaliatory legislation?

5) The US federal government has a debt of $13+ Trillion. Of our 110 million households, roughly 50 million are too poor to pay anything on that debt. Divided among the remaining 60 million households, you get a debt of $217,000 per household.

6) Which means the middle class savings in US 401Ks/IRAS are toast. If the Democrats intended to make their rich patrons pay, then they would have enacted a tax hike on the Superrich in the past year while they were in power with huge supermajorities.

7) The GINI indexes for BOTH the USA and Argentina are very high -- the two countries have some of the most inequitable distributions of income on the planet. Both are equally predatory kleptocracies, in other words.

FerFAL said...

Anonymous said...

I think by by 'homogeneous' he meant racially pure as in 'white'. A racial code word.

Yes, I thought that too. Sounded like an attempt to get a few sales with the nice racist people. Their in for a surprise though because they are going to be surrounded by people either from Bolivia, Paraguay and Peru or even natives from around here that aren't exaclty white. Half the people you come across in the provinces are short, darker skinned, somewhat like Mexicans, of native American bloodline. You see, when you hear that Argentina is 90% white, its becuase they consider those guys white as well. Not a big deal if you dont judge people by their skin color, but a big deal if you are picky about the "homogeneous" thing....

FerFAL

ghpacific said...

Groucho Marx lost all his investment in Florida swamp land even while making the movie 'The Coconuts' about land swindling in Florida! He has a great line "You can get stucco, oh how you can get stucco."

Anonymous said...

Casey is an anomaly. He has his name all over Gold and Investment Conferences. He's highly praised by folks like Jim Puplava and Richard Russell. I don't get it.

Casey is smart, no doubt, but that doesn't mean he's honest, honorable or not selling snake oil.

Caveat emptor.

JS said...

This part:

"Furthermore, as a non-Argentine citizen, even when you do come across the occasional road block (which are especially in evidence during holidays to keep drunks off the road) or otherwise bump into a member of officialdom, the authorities have zero interest in delaying your journey. You are not one of their “souls,” and so they are polite and wish you well – happy that you are in their country spending money."

...is really disgusting. I would be ashamed to live somewhere where the authorities treated me better than their own citizens. Now, this may not really be true, but that this person uses it as a selling point is just shameful. How can someone write something like that?