Buenos Aires Stay Apartments

Clients recently ask me about selling their real estate in Buenos Aires during next years run-up to the elections and thus provoke this article.  I think 2011 will be about fractious and divisive politicking during the  run-up to Argentina’s presidential election 2011 and a ‘wait and see’ attitude will prevail.

Often I write for potential clients and those considering investing in Buenos Aires Aires real estate sector keeping my advice for my clients a little more exclusive.

If you’re interested, I link below earlier articles about the Argentine real estate sector and the Argentine economy written February and March of this year:

The Argentine Economy, a Tango Revival & Real Estate

Property Investment – Why Argentina?

On that point, I get hundreds of emails and cannot answer specific questions on your Buenos Aires real estate purchase; there is not enough time in the day – my apologies.

With a run up to a 2011 presidential race, I have told my clients considering selling their investment real estate in Buenos Aires to do so now during the ‘positive’ 4-month window before 2011 or maybe wait until after October 2011 when the dust has settled and the Argentine people have elected (maybe) the best women for the job.

I am not giving away my political leanings and I would not say that the Kirchners’ economic model for the Argentine economy is 100% right or that the economy is travelling in exactly the right direction. Albeit, it strikes us as odd that nobody takes time to point out that some of what Cristina Kirchner is saying about wealth distribution, tackling poverty and import substitution has enormous merit.

However, saying and doing are two different things and the doing with state control and public finance at the expense of private investment is usually doomed to failure as demonstrated by the far left further north on this sub-continent.

Poverty & Crime Argentina

In fact, Argentines must know that tackling poverty whilst just over the forty million people, not allowing the problem to get any worse is essential to avoiding the horrible social problems and drug related crime faced by countries such as Brazil and Mexico.

When I look at the social problems, particularly poverty and drug abuse/running in South America, I cringe, because Mexico is in the midst of near civil war in some regions and Columbia backed by the US still cannot fully defeat the FARC.

A recent visit to Brazil, after a 5-year absence, worried me because of the horrible violence and danger in their cities I saw daily on TV – it was truly scary. Lula can pat his back all he likes, but it seemed to me the problems presented by violence in the favelas spilling over their tall plastic fences that shield major roads and seemingly, keep the poor from interacting with people from the more affluent areas will not hold for very long.

I read a report that homicides claimed the lives of more than 7,000 victims in Rio de Janeiro in 2009, a staggering figure the politicians were battling to deny. Most of these deaths attributed to the drugs trade. Nearly a score of people murdered daily! Worse, militias formed by off-duty and former law enforcers, prison guards, and firefighters have moved in to oust the drug gangs and install their own brand of extortion – the Argentine media give strong indications of police corruption and collusion with the drugs trade almost daily.

In my opinion, Brazil with its leaky borders and corruption is where the narco-paramilitaries have headed (they are businesspeople who seek to peddle misery to the poor and disadvantaged in their millions and Brazil most certainly is not short of that demographic), but no doubt they keep a watchful eye on Argentina.

I stopped short of my earlier aim and decided not to pursue an investment in Brazil (a most beautiful country and people) for reasons of poor security and my dislike for the daily dose of ‘horror TV’.  Even more worrying for me is Brazil looks in worse shape than United States of America 2008.  Credit, very expensive credit is behind their property boom and my tip is to sit tight and watch the fireworks when Brazilians find they cannot meet their borrowings – it’s going to happen!

I get the impression that some Argentines do not care enough about the poverty problem nor do enough NOW to stop generation after generation in some family groups living below the poverty line. I find a dog-eat-dog and survival of the fittest attitude sometimes prevails.  Going back to Brazil and Mexico, if Argentina fails to embrace the disenfranchised and deal with the issue of narcotics today, is that what the future holds for Argentina – I sincerely hope not.

That is not Buenos Aires in my modest opinion, but there are problems.

I see lots of international news about the Argentine economy and crime. Argentina is still a country that provokes lots of interest, mainly because everyone either loves the country or wants to travel to Argentina and so they should.  Although we recently see heinous, terrible crimes, the problems seem manageable and not out of control nor comparable to the problems faced by some countries in the region.

However, the negative coverage provoked by Argentina’s appallingly self-interested political players and some sections of the media portrays this country at its worst.  I foresee a horribly confrontational and divisive election year 2011 that may exacerbate Argentina’s image problem.

As a child, my older brother foolishly let me watch Jaws. It took numerous dives to resolve my fear of sharks – ok – they still scare the hell out of me when face-to-face. The slogan, ‘just when you thought it was safe to go back into the water…’ seems an appropriate slogan for Argentine politics with the latest dust-ups with a media giant and its executives over Fibertel and an irrigation project in Cordoba.

The Argentine Economy & Poverty

The Argentine economy is unbalanced, short on industry, crying out for investment and Argentina is, after lots of attempts to industrialise since the 1920s, still a food and raw materials exporter.  Argentina needs to sell product. To sell product Argentina needs industry and investment is the key to industrialisation.

To tackle poverty you need an educated workforce and job creation, and to create jobs, Argentina must be serious about attracting investors.  Businesses need security. Security and jobs mean a healthy economy – the government and the opposition do nothing to create that feel-good-factor and inspire investment.

However, Argentina is as an emerging market and there are so many positive things both politicians and media could be telling the world, instead an incessant war of words and legal actions prevail, reasonable on the face of it, but tainted by allegations of gerrymandering and corruption.

In addition,  comparisons or arguments for and against the Kirchners economic model using the ‘mature’ economies of Europe or the United States as benchmarks for ‘sound economic management’ is somewhat pointless, more so when one considers the dire state of their economies and the world economy because of the United States and Europe.

The model for Argentina and its economic management is somewhat in a flux.  I read lately on the Internet  comparisons to the earlier Chinese model maybe because ideas of state intervention to promote industrial development, a competitive currency, increased money supply and solid dollar reserves seem to be the basis of the Kirchner model – I do not agree – but who knows – only time will tell, this is uncharted waters.

Inflation – ‘yer’ – we all hate it, but the reality is that Argentine wages and prices are bouncing back into the real world and public services and utilities are losing heavy subsidies. Some of what we see is a necessary adjustment.

I like the idea of social inclusion and more money in peoples’ pockets so they can afford food and housing, it is good for the people, the economy, and as we predict, the property sector, particularly at the low end of the market.

The big-spend-gamble by the Kirchners I pointed out in my earlier articles on the Argentine economy and my predictions for growth are, so far, reasonably accurate. At this point, I have to say that a competitive peso by way of printing money to hoard dollar reserves may be the undoing of the Argentine economy if inflationary pressures as opposed to necessary adjustments combine with the upwardly moving market to overheat the Argentine economy – is that happening now.  Who knows when you cannot trust government to provide accurate economic indicators?

Corruption

It is not enough for Cristina Kirchner to talk-the-talk; the government must tackle the perception of corruption internally and externally before it’s too late (I mean before it’s October 2011). It is time to lead by example, throw corrupt government officials to the wolves.  Tidy up institutions and create an environment where both Argentines and international business people want to invest with government.

Start from the top, make people proud of their institutions and maybe they will start to feel socially inclined (want to pay taxes without the perception their money is being stolen) and that ‘dog-eat-dog’ attitude that sometimes prevails might adjust.

Oh! Please do something about Argentina’s image – Argentina, no Argentines, shoot themselves in the proverbial foot when talking about their country, it’s very funny that me, an outsider, feels a lot more positive.  A negative image is bad for business.

Back on point

The politician who seems best able to maintain economic growth whilst tacking corruption, poverty and crime should win the next election.  At this point, there seems to be only two viable candidates and they are both from the Victory Front.

Clients who recently asked me about selling their properties in Buenos Aires next year provoke this article, because I think next year will be about fractious and divisive politicking and the ‘mind’ of the market will most certainly be on the election – it will be ‘wait and see time’.

In the run-up to the 2011 presidential race, I have told my clients considering selling their investment real estate in Argentina to do so now during this ‘positive’ 4-month window before 2011 or maybe wait until after October 2011 when the dust has settled and the Argentine people have elected (maybe) the best women for the job.

We recently acquired Tierra estates and if you are considering selling real estate in Buenos Aires and Argentina there is a 1% sellers’ fee for the next three months when fees will increase to 3%.