Economic Storm Clouds Brewing for Argentina?

[sleslie23]

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.

I doubt you are going to find many Porteños who are going to pay rent in dollars. Maybe a year ago, but not today.

 

[citygirl]

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

I'm curious what you consider a "peso asset"?

 

[dennisr]

Citygirl, look at this HSBC fund. There are a few more out there.

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

 

[Gringoboy]

For those of us who earn in pesos, it feels like trying swim against a very strong current.
Our earnings are simply not keeping up with inflation.
I know I'm stating the bleeding obvious and that we are in the same boat as everyone else, but I have to say that I have never experienced anything like this before.
Last night, we again sat down at the kitchen table and scrutinised the household accounts, trying in vain to prune out what we don't 'need'.
Of course, this is pretty subjective. Do we need Cablevision and Fibertel? Do we need to eat?
Ironically, the only expense we could find that could be dropped is the $300 we pay every month to the 'bloke in the hut' on the corner.
I'm still scratching my head on that one.

 

[citygirl]

Gringoboy - same boat for employers and employees as you know. I'm pruning my suppliers and seeing what can be avoided and where costs can be cut.

On one hand, my employees are screaming about needing more money, on the other hand I have a global economy that is stagnant and everyone wants a piece of the pie.

It's no fun for anyone right now (although slightly more fun if you have USD coming from employment outside of Arg and access to blue market rates). At least the blue market dollar keeps the prices more reasonable and inflation less painful.

Denis - thanks. So Argentine peso assets, we're talking about funds? I wasn't clear on what we were identifying as peso assets. I just have no appetite for any investment here right now although I do have my eye on some real estate when the market corrects itself here. Not that I think it will be rock bottom prices but I think prices will be more realistic.

 

[earlyretirement]

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.

fifs2, you're absolutely correct. There are always people that come to the "party" too late. I don't think ANYONE thinks that Argentina is still cheap, especially Buenos Aires.

The most successful people are people that are able to move with the cycles. Everything moves in cycles. Nothing stays great forever and nothing goes down forever.

The key with Argentina I truly believe is taking advantage of these 10 year cycles and moving in and out with them.

Buenos Aires now is expensive. Nothing is too cheap there anymore. Taxis used to be ridiculously cheap. I still remember when the meters used to start below 1 peso and the meter moved very very slow. Meals used to feel like you were paying nothing. Now, many times I can pay more for a meal there than I can in any upscale restaurant in a major metro city in the USA. Some of my European clients tell me they eat cheaper in most of their home cities in Europe vs. BA.

I guess you can still live rather affordably if you own your property outright. Utilities are still cheap there but those will start going up now too. Same with expenses and HOA fees. If you can make dollars then you can live comfortably but if you have a peso based job.....forget about it...

It was worth putting up with all the red tape and BS in Argentina like waiting 45 minutes in line at the grocery store, waiting 1 hour in line to get a package at the post office, horrible drivers, corruption, lack of judicial system, lack of imported products, horribly expensive electronics, etc.... when things were dirt cheap.... But not so much when prices are more expensive vs. the USA or even Europe.

Don't get me wrong. I still love Argentina. Its a wonderful and beautiful country. But until they get effective, ethical and common sense leaders in place...the country won't change for the better and it will always be corrupt and run more like some far flung nation out in the middle of Africa.

The USA has it's fair share of problems but things just work here. People respect the laws, traffic is orderly, stuff at the grocery store is always fresh and efficient. And now everything is "on sale". Real estate is a bargain compared to the overpriced bubble prices during the peak years. Some desirable cities you can buy and pay prices 40% lower than just a few years ago.

Like I said...it's all about catching the cycles...

 

[GS_Dirtboy]

fifs2, you're absolutely correct. There are always people that come to the "party" too late. I don't think ANYONE thinks that Argentina is still cheap, especially Buenos Aires. ...

By what method are you using to consider whether BsAs is "expensive" vs. USA or Europe? Thank you.

 

[earlyretirement]

By what method are you using to consider whether BsAs is "expensive" vs. USA or Europe? Thank you.

Just general cost of living to include living in a good area and a good property. Quality property rentals in the best parts of Buenos Aires aren't cheap. Plus you have the hassles with dealing with some owners that want guarantees or pre-payment in advance, etc. Sure, there are exceptions to the rule but my point is that quality rentals aren't cheap there. Also, nice furniture and electronics are very expensive there vs. the USA.

And if you're speaking of buying...... Buenos Aires is more expensive to buy vs. most cities in the USA with the exception of New York City and a few others. But the cost per sq. foot is very expensive in Buenos Aires compared to the USA now. I sold a 2 bedroom apartment in Recoleta for $250,000 recently. You can buy an entire house in most cities in the USA for that. A friend just sold his 2 bedroom flat in Puerto Madero for $950,000 recently. Oh and his monthly condo fees were $1,500 US per month.

Dining out is also no super value in Buenos Aires vs. most cities in the USA. You can actually eat quite well in the USA now for not expensive prices and there are HUGE choices of the places you can eat and the types of food you can get. You name the type of food you want and you can find it in any metro city in the USA and usually very cheap as well.

Look at the grocery store and the prices you are paying in Buenos Aires vs. the USA and again BA is no value. Plus you can often times find rotting veggies or fruits in the supermarket in Buenos Aires (I know I did plenty of times). I often times saw meat in the supermarket that was expired. Just not a whole lot of quality and it's not cheap in Buenos Aires. I'm not saying the supermarkets in the USA are cheap. But you can go to places here in California like Trader Joe's, Sprouts and the like and it's not bad. And again everything is quality products.

Cars and insurance there aren't too cheap either plus you can't finance cheap like you can in the USA if you wanted to. I was paying more to insure my car in Buenos Aires vs. the USA! Plus the registration fees and annual taxes of having an import car in Buenos Aires are very high. Here in the USA now if you have good credit, they will finance for almost 0%. When I went to buy my wife's car we had the cash to buy it but they had 1.9% financing and if you used BMW financial they rebated back $1,500 so essentially it was a 0% loan.

Medical insurance in BA isn't so cheap anymore either. The amount I was paying at OSDE for my family coverage is about the same as I pay for private coverage here in the USA with an excellent plan.

And to be clear I'm speaking strictly from a consumer side. Not the employer side or why a company might want to hire there.

So from a pure logistics and common sense standpoint of housing, dining out, groceries, medical coverage which are the main elements/expense for most people... Buenos Aires is no bargain.

What method would you consider Buenos Aires cheap?

 

[fifs2]

By what method are you using to consider whether BsAs is "expensive" vs. USA or Europe? Thank you.

I don't like to join the cheap Bsas v the rest of the world debates so I'll stand aside on that one but in terms of affordability, as an employer you think first and foremost about the cost of doing business and the total cost of staff if you're running a services company as we are. It was hard to miss a good opportunity in 2001 when the same highly qualified staff in 2000 were on "offer" for a 3rd of the price. Having just hired 2 PMs in Spain we're now seeing the cost of a qualified resource here versus Bsas as still about 20% more expensive than Bsas but the long term potential and stability as greater. Maybe the 20% is worth it for peace of mind and not to have the nightmare 25% -30%- salary increase discussions and general sense of despair...

 

[citygirl]

. Maybe the 20% is worth it for peace of mind and not to have the nightmare 25% -30%- salary increase discussions and general sense of despair...

And the ability to accurately forecast out for more than 3 months in advance

I posted a while back - we stopped adding projects and HC in Arg b/c of the ridiculous costs of doing business here.

My latest - I had an employee that I had to let go. He wasn't performing on one project, and client wanted him off the project I offered him a transfer to the other project b/c he wasn't bad, just wasn't a good fit at the same salary. he refused so we had to terminate him even though really, he defacto quit b/c he wouldn't accept the transfer (again, same salary, same level of responsiblity, same title even).
Total cost of pay out: about 3.5 months worth of salary.

I had an employee quit. The law here says that an employee has to give 30 days notice. The employee gave no notice. Puts me in a terrible position since there was no work handover, client is upset, I'm upset, directly impacted my project.
Things I can do even though the employee broke the law and handled it completely unethically: NOTHING. Zero. And I still have to pay out the employee.

You have to be a masochist to have employees here. It's the sad truth.