Economic Storm Clouds Brewing for Argentina?

[el_expatriado]

I'd disagree that small businesses are not impacted. Just here we 've seen restaurants, bars and even a candy store harassed and closed. Id never buy property or heavynequipment. I do agree there are a few businesses that stay under the radar doing wel here, but as someone who owns one of those, I constantly wait r the other shoe to drop. We can just go home but what about our dared employees?

You're not going to see a restaurant or small property-holder nationalized.

The biggest problem a small business owner has in this economy is what looks to be the recession that is on the horizon. But that means what it has always meant: the marginal players with small profit margins are going to go under. During a recession you have to cut prices. Efficiency is key. I am preparing today, cutting costs to the bone, etc.

Businesses that serve a particular niche (instead of mass market) are going to do better in a recession because there won't be so much price pressure. This is all old news for those of us who have been in business a long time.

 

[steveinbsas]

I'd disagree that small businesses are not impacted. Just here we 've seen restaurants, bars and even a candy store harassed and closed. Id never buy property or heavynequipment. I do agree there are a few businesses that stay under the radar doing wel here, but as someone who owns one of those, I constantly wait r the other shoe to drop. We can just go home but what about our dared employees?

This post doesn't make it clear that the candy store was closed by the owner, not the goverment though it was clear he was the intended target of extortion even though he claims that and probably was in full compliance of all regulations.

I don't remember any posts about bars and restaurants being forced to close. Is that what you meant to imply?

And please tell us what a "dared" employee is. I've never heard an employee called this before.

 

[genialf]

The company I work for has business in many countries in the world. We haven't been able to send profits to our head quarters in Europe for 6 months, something that used to be done every month. Also, we're not the most profitable company in the group (quite low, below average) due to very expansive work force and transportation costs with outstanding increases on regular basis. We do have a fantastic sales growth (both in quantity and money - transferring inflation to customer). We have 2 plants in Argentina, pay taxes, generate jobs and well, we're still screwed. If we manage to send the money out, it will be much less than people in Europe expected due to exchange rates being worse than when the profit was made. Of course we're using the money to finance our operations instead of having money come from the outside, but we do have to turn the profits sometime. I don't see how any company would want to invest here with this scenario.

 

[ghost]

There have been people on this forum posting meltdown predictions for the last 10 years. Nothing happened. Argentina has so many resources that not even the KKs can break it down.

Watch closely and even you will see it. [maybe]

 

[GS_Dirtboy]

If you are a foreign investor would you buy property here to rent? Would you do it now given the exchange rate? Would you be under the radar?

 

[earlyretirement]

The company I work for has business in many countries in the world. We haven't been able to send profits to our head quarters in Europe for 6 months, something that used to be done every month. Also, we're not the most profitable company in the group (quite low, below average) due to very expansive work force and transportation costs with outstanding increases on regular basis. We do have a fantastic sales growth (both in quantity and money - transferring inflation to customer). We have 2 plants in Argentina, pay taxes, generate jobs and well, we're still screwed. If we manage to send the money out, it will be much less than people in Europe expected due to exchange rates being worse than when the profit was made. Of course we're using the money to finance our operations instead of having money come from the outside, but we do have to turn the profits sometime. I don't see how any company would want to invest here with this scenario.

EXACTLY. I know many expats have been saying "the sky is falling" for many years. I disagreed with these forecasts years ago. But Argentina in 2012 isn't the same as Argentina just a few years ago. Just look at all the new restrictions and laws coming in place the last several months that weren't here before. That's a tell tale sign of the desperation.

You have to really be burying your head in the sand to deny there are severe severe problems in Argentina now and it's NOT a great place for foreigners to invest right now. I'm not saying there probably aren't opportunities to invest and make money. I just stand by my call that the risk/reward ratio for the vast majority of investments there aren't going to be good. Especially considering that Argentina doesn't have a working judicial system in case there are problems or disputes.

It's not even about nationalization fears. That is the furthest worry for small companies. It's just about survival due to all the controls and red tape involved with doing business in Argentina. Argentina, if you are running your business completely legal and white and paying all taxes is a VERY difficult country to make money in. That's the plain truth.

 

[citygirl]

There have been people on this forum posting meltdown predictions for the last 10 years. Nothing happened. Argentina has so many resources that not even the KKs can break it down.

No but there have been people (myself included) who have been posting for the last 3 years that the gov't numbers are a joke and a lie, that there hasn't been incentives for small businesses, tthat the onerous taxes for in white businesses are a detriment to growth, that there is no economic "model" or plan, that the lack of investment in infastructure, education would come back to hurt Argentina, and that the K's have put all of their eggs in 1 soja basket and that the growth is not sustainable.

Who has been saying "THE SKY IS FALLING?" I think smart business people have looked at the numbers for the last 2-3 years and seen the tsunami coming. I don't think any of those points mentioned above are invalid or haven't been proven to be true.

And I'm pretty sure that K*K have done nothing good for the economy or Argentina and will wind up leaving it in the same condition they found it in unfortunately.

 

[earlyretirement]

If you are a foreign investor would you buy property here to rent? Would you do it now given the exchange rate? Would you be under the radar?

Well the exchange rate really doesn't matter because properties in Buenos Aires are priced in dollars and have been for some time. So you will still pay in dollars not pesos.

The only place the exchange rate comes into play that is a positive is your expenses are all in pesos and you can exchange them at higher amounts today. Your income will mostly be in dollars as you wouldn't want to charge peso rents.

But honestly, there is a glut of rental apartments now vs. just a few years ago. It seems like everyone and their brother, sister, mom, dad, aunt, uncle and friends are renting out their properties.

Rental yields are still decent even renting out to Portenos if you can find good rental tenants and demand the rental payment in dollars rather than pesos. Plus on long term rentals, the tenant pays for condo fees, all utilities, and sometimes ABL bills.

Yields are still decent but keep in mind it's not as easy as it was a few years ago.

 

[el_expatriado]

The company I work for has business in many countries in the world. We haven't been able to send profits to our head quarters in Europe for 6 months, something that used to be done every month. Also, we're not the most profitable company in the group (quite low, below average) due to very expansive work force and transportation costs with outstanding increases on regular basis. We do have a fantastic sales growth (both in quantity and money - transferring inflation to customer). We have 2 plants in Argentina, pay taxes, generate jobs and well, we're still screwed. If we manage to send the money out, it will be much less than people in Europe expected due to exchange rates being worse than when the profit was made. Of course we're using the money to finance our operations instead of having money come from the outside, but we do have to turn the profits sometime. I don't see how any company would want to invest here with this scenario.

Your company should replace its CFO here in Argentina. There are still ways to get cash out of the country. Multinationals have dozens of options at their disposal: contado con liquidación, transfer pricing schemes, etc. Companies are sending cash abroad every day.

 

[el_expatriado]

If you are a foreign investor would you buy property here to rent? Would you do it now given the exchange rate? Would you be under the radar?

No. Foreign investors should be taking advantage of their dollars and buying peso assets, not dollar assets.