Economic Storm Clouds Brewing for Argentina?

[steveinbsas]

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.

Whether its a tsunami as a result of an earthquake or a tidal surge as a result of a (surface) storm, or even if the sky is falling as a result of an ET impact,the worst case scenario is probably a worldwide collapse of paper currency.

That's why I invested in land that has rich, fertile soil for growing vegetables as well as a variety of wild grasses and plants that goats thrive on. I have a tamarisco "forest" that supplies more firewood than I can use and next spring I'll also have more chicken eggs than I can eat on a daily basis. I'm happy that I'm living in an area where I can trade with my neighbors for any of the basics I can't provide for myself.

The 60 fruit trees I planted since my arrival are bearing more fruit each year.

If it gets so bad that even I can't survive here, then we're all doomed.

 

[genialf]

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.

Yeah, yeah. We are sending cash, just not what we're supposed to. There are ways, but you can only send so much cash, plus it's costly. In big sized operations, the costs of transferring money are ridiculous. Also, we're having so much trouble importing certain raws & packs. It's making us that much less unprofitable.

 

[el_expatriado]

Whether its a tsunami as a result of an earthquake or a tidal surge as a result of a (surface) storm, or even if the sky is falling as a result of an ET impact,the worst case scenario is probably a worldwide collapse of paper currency.

That's why I invested in land that has rich, fertile soil for growing vegetables as well as a variety of wild grasses and plants that goats thrive on. I have a tamarisco "forest" that supplies more firewood than I can use and next spring I'll also have chicken eggs as well and be happy that I'm living in an area where I can trade with my neighbors for any of the basics I can't provide for myself.

Argentina is actually not a bad country to be in if there is a worldwide meltdown. Lots of farmland, no real army, and not too many gun owners. Those of us who are armed will do ok here. Where was that farm of yours? Hahah.

 

[steveinbsas]

Argentina is actually not a bad country to be in if there is a worldwide meltdown. Lots of farmland, no real army, and not too many gun owners. Those of us who are armed will do ok here. Where was that farm of yours? Hahah.

In the event of a "meltdown" you will have to know the password to get past the puesto de control to enter my villa...or get near the local naval base.

 

[willwright]

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.

Can't say that I agree with this. The problem today is converting anything into dollars. If you want to sell there are very few buyers around with dollars, real estate transactions have dropped significantly. Doesn't matter what the yields you are getting renting if you can't convert them to dollars. The pesos you receive may be worth less than monopoly money in the near future. The only way this could possibly make sense for now if you are living here as you can pay your own expenses with the pesos generated. Even that's questionable in the future. When and if the crash comes all the rents people are collecting today are also going to crash, rents will fall dramatically. People are going to get badly burned and I wouldn't assume there is going to be another commodity boom to pull them out. In any event if you own property or a business you are in for the ride as its too late to get out now. If the crash comes you will have to wait for the rebound. This cycle has repeated many time here before as others have mentioned.

 

[dennisr]

GOT PESOS? Not a bad return. Do not think they can Nationalize? At least keep up with the dollar/inflation. http://www.bloomberg.com/quote/ROBACAR:AR

 

[chris]

In twenty years I have never seen anything like the current situation. It is obvious to me that the status quo can not be sustained forever. Cristina may be able to buy time but eventually (2-3 years?) inflation will be so out of control that a massive devaluation will have to occur. Property values will recover, though - same as they did after the last crisis. In the meantime foreigners who own property and want to sell may find it hard to get the money out of Argentina.

 

[earlyretirement]

In twenty years I have never seen anything like the current situation. It is obvious to me that the status quo can not be sustained forever. Cristina may be able to buy time but eventually (2-3 years?) inflation will be so out of control that a massive devaluation will have to occur. Property values will recover, though - same as they did after the last crisis. In the meantime foreigners who own property and want to sell may find it hard to get the money out of Argentina.

I totally agree with chris. For me it's not a question if...it's just a question when now.

I also agree about property values over the long haul. Real estate and land are the ONLY safe investments in Argentina for the most part. That continues to be true today and it will continue to be true after the eventual crash. It's the one place where people will store their wealth and can do so effectively and safely.

Look at what is going on. Yeah, sales might be slower but prices are still fairly high and much higher than the last time we had a crash.

I switched over and renting some longer term to some locals I know and locking the rentals in dollars and it's still been a decent investment but partly because I bought so many years ago and the prices were much higher. But the prices today are much higher now.

Bricks and land will probably always retain their value well in Argentina over the long haul.

 

[henryb]

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

Nationalized - probably not. But they can be driven out of existence by other less dramatic means: taxes, licenses, various regulations etc. Especially the regulations that are not really enforced, but only used as an excuse to collect bribes.

 

[fifs2]

Definitely there are many more challenges now vs. just a few short years ago. Much of the smart money is exiting Argentina now or recently have already. I'm not saying there will be a total collapse but historically there is some crises about every 10 years or so. They are due for another crises. The writing is clearly on the wall now, especially with this lunatic CFK at the helm. Who knows what wacko restriction will come next.

Many foreigners have either headed for the exits already or in the process of it. And I DEFINITELY don't see much foreign investors wanting to invest in Argentina now for good reason. The risk/reward ratio is just not there compared to a few years ago.

But there's always a few ill- researched late "adopters" wanting to jump on the "Argentina is cheap bandwagon" even if it's x years too late for that. I saw it in Ireland early 2000s when the multinationals started to scale back and redirect work and small companies were leaving there were still new companies proudly trumpeting their arrival in Dublin like they invented it...It's only because we're living and working so close to the Ar economy that we know what it's like. Don't presume others with a burning desire to invest in Latam have as much of a clue-in.