Mortgages, Villas/favelas, And Gobbleygook

[julian63]

1. In my opinion it would greatly stimulate the housing market, create many well paying construction jobs, and stimulate many related segments of the economy (banking, electronics and furniture manufacturing, etc) if mortgages - hipotecas - were more commonly institutionalized as in other countries. So many home purchases appear to made with all buyer cash (including borrowing from parents) without a bank loan that home purchasing is rendered less affordable. An active housing market is key to a well performing economy. Inflation need not be an insurmountable problem as loan rates can be tied to a realistic inflation index.

2. Why doesn't the government exercise the right of eminent domain to purchase all the land now comprising villas, especially villa 31, scrap the surface clean (salvaging reusable building materials), put the land up for bid to construction companies for a combination of regulated mid-market and unregulated free market housing. The gain derived from the sale together with the enormously augmented ABL income would then be used to construct low income housing in suburban locations or at least locations outside the current villa locations of Recoleta and Puerto Madero. Mass transit (new bus lines) would be improved to provide for easy commutes by the displaced work force (to the extent it is a work force) to jobs in CABA. It would be a win-win result. People living in the slums would have better housing albeit not in swank neighborhoods and the augmented city tax base would allow government to serve all constituents better.

3. The rapid fire and incomprehensible gobbledygook incanted at the end of radio commercials is not only an annoyance, but a telltale sign of disrespect for the law (apparently requiring certain language to be included in a commercial). It is symbolic of a general acceptance to put form over substance in governmental functions and only serves to remind me of the failure of government to maintain sidewalks, police highways to detain and remove dangerous drivers, and collect taxes efficiently all of which need improvement. At least, government should not be so annoyingly transparent in its failure to enforce the laws. If the law requires certain language, it should be comprehensibly audible. Ditto for all other legal mandates.

 

[Ries]

The countries with the most mortgages are ones where the government allows the interest to be tax deductible- which means the government in subsidizing the mortgage. In some countries, the government outright lends the money. In others, they have set up special laws to allow things like building societies or credit unions, both of which are generally non-profit lenders.
So, for there to be more mortgages in Argentina, you would need government action, and, most likely, subsidies. Dont hold your breath.
Also, of course, it would require a stable government economic policy that people trusted enough to borrow and lend money for years on end. Again, not very likely.
Unless you were willing to borrow at 20% or more per annum.

Obviously, the government is not willing to kick a couple of million poor people out of their homes and then auction off the land to their olgiarch friends- it would spark riots, tire fires, and autopista blockages for years. People living in the slums dont have the money to pay market rents.
Much more likely to happen is a rationalization of the villas, with the government paying for real utilities, and then allowing the current owners to legitimize their deeds and become legal owners. This has started to happen a little bit, with Villa 31, for example, http://abcnews.go.com/amp/International/wireStory/argentine-capital-seeks-improve-iconic-villa-31-slum-47466038

 

[camberiu]

1) For mortgages to exist, domestic savings must exist. For every borrower there must be a lender. In Argentina there are no domestic savings that can be tapped for mortgages for two reasons:
a) No one in their right mind trust the banks, due to the government's past habits of outright bank theft.
b ) High inflation gives no incentives for savings at all. So no one saves.

2) People who lives in the villas not only vote, they are required by law to vote. And there are lots of them (millions). No politician in their right mind would do what you suggest. It would be a spectacular career ending move for the history books.

Welcome to Argentina. You have a lot to learn.

 

[julian63]

1) For mortgages to exist, domestic savings must exist. For every borrower there must be a lender. In Argentina there are no domestic savings that can be tapped for mortgages for two reasons:
a) No one in their right mind trust the banks, due to the government's past habits of outright bank theft.
b ) High inflation gives no incentives for savings at all. So no one saves.

2) People who lives in the villas not only vote, they are required by law to vote. And there are lots of them (millions). No politician in their right mind would do what you suggest. It would be a spectacular career ending move for the history books.

Welcome to Argentina. You have a lot to learn.

I appreciate your thoughtful reply. As an aside, I'm curious if you are a Porteno. It's my impression from living here on and off for the past 10 years that many Portenos are fatalistic and too quick to shrug their shoulders at attempts to institute effective change.

In any case, I readily concede that it would not be easy to execute the kind of urban renewal I have suggested, however, some form of urban renewal must/should be attempted somewhere, sometime. It is unfortunate that Argentina's bond default history makes borrowing via bonds troublesome. That as well as the lack of bank savings to fund mortgages would also make raising necessary financing more difficult, however things may still be manageable. Perhaps a small villa can be the first to retaken by the government - piecemeal if necessary. Displaced residents with evidence of title (whether by legal documentation or 'adverse possession") can be offered cash or alternative housing. (Some might even use the cash as a nest egg to return to their native countries to restart their lives.) The international funding sources referenced in the link provided by Ries above may be critical to the success of any attempt at urban renewal.

Decent low income housing can be built (with government incentives) for relocation of the displaced villa residents away from the posh Recoleta and Puerto Madero barrios. Simultaneously the villa land when acquired, can be auctioned off to private enterprise (even co-owned by a govt agency) for the construction of modest apts appropriate for low and middle income residents willing to revitalize their neighborhood - perhaps also with government incentives, e.g., deferred ABL, tax deductibility of mortgage interest payments, etc.
I would like to believe there are politicians with the vision to execute something along these lines. Hopefully, the "rationalization" of Villa 31 as referenced by Ries above can be successful in changing things for the better.

 

[camberiu]

I appreciate your thoughtful reply. As an aside, I'm curious if you are a Porteno. It's my impression from living here on and off for the past 10 years that many Portenos are fatalistic and too quick to shrug their shoulders at attempts to institute effective change.

I am not Porteno, Argentine or fatalistic. I simply have been in LATAM long enough to know that the solutions you suggest are not realistic. It does not mean there are no solutions, it means that the path to get there is far from what you are proposing.

Perhaps a small villa can be the first to retaken by the government - piecemeal if necessary.

You preach a top down approach: The central planner will fix things. That does not work here. The path for Argentina and for most of Latin America is a bottoms up approach. It is the rise of incomes driven by economic growth, and work done at the local community level that will solve the issue of the villas, not some decree from an ivory tower bureaucrat sitting at the Casa Rosada.

In the video from the link bellow you'll see a practical example of what I am talking about. If you don't want to watch the whole thing, skip to 04:26 into the documentary. That is what works here. It is slow, painful, but this is how the population gains a sense of ownership and vested interest on their community and eventually, their country. There are no shortcuts. They need to own and guide their own destiny, instead of hoping and waiting for the "salvador" to come fix things. That is the path that Latin America, Argentina included, must follow.

http://youtu.be/OCDStAykPmw

 

[julian63]

You preach a top down approach: The central planner will fix things. That does not work here. The path for Argentina and for most of Latin America is a bottoms up approach. It is the rise of incomes driven by economic growth, and work done at the local community level that will solve the issue of the villas, not some decree from an ivory tower bureaucrat sitting at the Casa Rosada.

In the video from the link bellow you'll see a practical example of what I am talking about. If you don't want to watch the whole thing, skip to 04:26 into the documentary. That is what works here. It is slow, painful, but this is how the population gains a sense of ownership and vested interest on their community and eventually, their country. There are no shortcuts. They need to own and guide their own destiny, instead of hoping and waiting for the "salvador" to come fix things. That is the path that Latin America, Argentina included, must follow.

http://youtu.be/OCDStAykPmw

Maybe your proposed solution would "work" (however you define that word in this social context), but I have reservations. Preliminarily, I don't think it fair or accurate to describe me as "preaching" anything. I was proposing a possible solution to the existence of villas, specifically villa 31 and the one in Puerto Madero (don't know its name). I'd like to think I didn't come across as sanctimoniously preachy.

As I understand it, the problem with your proposal is that it seeks to "institutionalize" the referenced slums albeit with a slightly improved infrastructure. In my opinion, the locations of villa 31 and the PMadero villa afford a better solution. I don't believe it is sound social policy to encourage a slum to preempt valuable land especially if those who are relocated get better housing and fair government treatment, e.g. adequate services and opportunities for an improved life. Planned urban renewal occurs as a matter of course in many metropolitan areas around the world. Puerto Madero is itself a good example of successfully turning around a neighborhood.

Rising incomes are a great idea, but I don't think superficial improvements to the slums in question nor "work done at the local level" whatever that may mean cause economic growth. Building steps on a path that leads up to shacks may make daily existence easier on those occupants who have to shlep clean water home (ala Rio de Janeiro where I lived 10 years) and /or steal public utilities to get by, but it doesn't generate income growth. Income growth comes from the creation of jobs and jobs are created by a robust housing market, amplification of construction related trades and other manufacturing areas, and incentives for private enterprise - at least, in a capitalist economy.
p.s. Not to sound Trumpian, but it would also help if Argentina changed its immigration policy for the time being. It's very difficult to have both open borders and generous state subsidies and the country is not now capable of both.

 

[ben]

3. The rapid fire and incomprehensible gobbledygook incanted at the end of radio commercials is not only an annoyance, but a telltale sign of disrespect for the law (apparently requiring certain language to be included in a commercial). It is symbolic of a general acceptance to put form over substance in governmental functions and only serves to remind me of the failure of government to maintain sidewalks, police highways to detain and remove dangerous drivers, and collect taxes efficiently all of which need improvement. At least, government should not be so annoyingly transparent in its failure to enforce the laws. If the law requires certain language, it should be comprehensibly audible. Ditto for all other legal mandates.

By no means an Argentine problem. Radio in NY does this all the time. It's the audio equivalent of fine print.
And it's prevalent enough to be parodied ad infinitum.

 

[julian63]

By no means an Argentine problem. Radio in NY does this all the time. It's the audio equivalent of fine print.
And it's prevalent enough to be parodied ad infinitum.

Never heard anything similar on radio outside Arg. Your example, parody or not, is not equivalent to the Argie gobbledygook. Not even close. Got an example like the crap on Argie radio?

 

[ben]

Correct, in the case of the tequila joke it's there for people to actually hear and understand it.

Haven't listened to much of, much less recorded, US/Canadian radio in over 10 years, and I'm not about to start now.

But the rapid-fire stuff at the end of ads definitely was (and probably still is) a thing. Definitely on the news radio - think 1010 WINS in NY, or 680 in Toronto.

 

[BsAsCommuter]

@Julian #changethefinancesystem You're not a candidate in Sunday's elections, are you?