Perjury as Part of Real Estate Purchase Process

#1
We are looking at making a substantial investment in starting a company in Buenos Aires. We would outsource computer and internet related services to the US and Europe. It seemed like a great idea based on the relatively low cost of talent and the apparently high quality of life.We have hit a snag, however, and I wanted to ping the forum to see if it is inevitable. We found an apartment we liked and wanted to buy, offered by a well known development firm, and shown to us by a well known real estate firm that markets heavily to expats interested in Argentina through sites directed at those interested in living internationally.The problem is, both the real estate agency and the developer are requiring us to commit perjury by signing written documents (I think they are sworn, but the real estate agent has not responded to our request to see copies) as to the price to be paid that materially misstate the price. If we don't agree to misstate the price in the official documents (by six figures American), the deal is off. The real estate agent emailed us that we have until tomorrow to agree to sign the false documents or we lose the deal (and perhaps, I suppose, the deposit we put down.)
We are long term expats, and understand that fraud is an option in business transactions in many countries. What has surprised us, and, quite frankly, put us off the whole idea of investing in Argentina, is fraud on our part being required by leading local companies as a basic cost of doing business in Argentina.Are we missing something? We are not going to file false documents, even if means putting our investment into another country, because aside from any moral qualms it could have material legal consequences for us under the law of our home country. Is committing fraud the standard, the more or less mandatory, way of buying property in Argentina? Is there a way around it?
 
#2
Old Guy, I just checked with a lawyer about this and they tell me that stating a lower price than the property is worth is a usual thing in Argentina but ONLY if both parties agree.
If one of the parties does not agree or has ethical issues with this, then don´t sign. There are plenty of worthwhile properties in Buenos Aires and most won´t require you to commit perjury.....
As you are the buyer you should be able to choose your own ESCRIBANO (notary) for the operation, who will defend your best interests (you shouldn´t let the seller choose the Escribano). Ask people for different ones and choose whoever you decide you trust more....
If you have put down the deposit for the property already be very careful as to get it back. Get an Escribano to look it over as there are technical hitches that could prevent you from getting it back.
And please if you have the time go to http://www.indextar.com/ba once you have solved this and rate the company that has put you in this situation so that other expats don´t go through the same experience.
Argentina is worth the trouble, it is just that one needs to keep one´s eyes wide open ....
Good Luck,
Victoria
 
#4
hi,

First i'll state right off what my job is so as not to be accused of having an agenda. Myself and my chilean girlfriend help foreigners buy property here ( www.realba.blogspot.com ) We're actually not going to be doing this for much longer as we're going to be moving to chile at some point in the next few months so we're not actively looking for clients anymore. However, if you think you need some help with what you're doing or you need more information then feel free to get in touch with us via the email address on the page mentioned above and we can see what we do.

yeah it's pretty standard to put a lower price on the escritura. illegal but standard. it's a way of avoiding tax and also a pretty effective way of laundering money. You, as the owner, will pay less tax (bienes personales) as the tax is based on the value of your assets in argentina. you'll pay 0.75% tax on the value of the escritura, not on the actual amount you paid.

Escribanos don't discourage this practice as they only pay tax on their official fee. Say you pay $100,000 for the property but the contract says $80,000. the escribano gets his 1% of the $100,000 but the tax authorities only know about his 1% of the $80,000. That's $200 to him, tax free.

The seller evades tax because the tax authorities only know about $80,000 that they have and not the full $100,000.

Some argentines refuse to put the full amount on the contract. Many foreigners are not comfortable with this and walk away. we always encouraged our clients to do things legally if they could. This includes bringing money into the country, something you need to be very careful with. The vast majority of foreigners are bringing money into the country illegally and most don't know that that's the case (often because agencies and individuals helping them don't tell them). Arranging to bring money into the country legally is probably the biggest hassle in what we do, but we think it's important as there are likely to be consequences down the line for those who haven't done so by the book.

as an aside, personally i would avoid buying new build in buenos aires. the standard of construction is generally not of a particularly high quality, even though on the surface things look ok. Also, if things go wrong with the property, it's extremely unlikely you'll get much joy out of the developers for compensation. they'll most likely be sunning themselves on a beach in the caribbean.

If you're unsure you want to do this then don't. You should not lose your deposit. If you don't go through with it demand your deposit back and don't take no for an answer. If your spanish isn't up to it then take along a native speaker who understands the process.

good luck,

matt
 
#5
This was new construction, and when we toured it the quality of construction was noticeably higher than in other buildings we visited. The amenities were also pretty over the top - two pools, two jacuzzis, a rooftop club, a tennis court, a zen meditation garden with gazebo for sitting, etc., etc., etc. It was expensive by BA standards but still fairly cheap compared to major cities in Europe or the US. The location was also quite nice - up on a hill with a view to the Rio, but also walking distance to major streets and the Barrancas park.
We were pretty psyched, but the whole experience has left us with a sour taste in our mouth about Argentina generally. Some contacts in the government who have an interest in driving more foreign investment have offered to invite in for a meeting the seller (who is the one demanding that we file bogus documents) and the real estate agent (who seems to us to just want a sale to close, whatever it takes, and whatever position it leaves us in). We are trying to decide whether to take them up on that or just shift our focus to Chile, which seems to operate on principles more familiar to us. While we are not investing at multinational levels, we would be putting enough money into the project that the dodginess of the process of just getting a place to live has us rethinking Argentina as a place to make serious investments.
 
#6
Well, i'll just say a few more things.

Firstly, if you buy now you're buying at the peak of the market. I've been saying to prospective clients for the past 2-3 months that the market is peaking. Prices in the popular areas (eg recoleta, barrio norte, palermo) are now rising at around 3-8% a year. next year i'd expect to see about 1-3% and in 2008 a downswing followed by a partial collapse in 2009-2010. I'd expect property to lose 20-35% of its value between 2009 and 2012 before things start to move up again with the new government. There was a large article in Clarin in the economy section on sunday about the housing market bubble and the owner of Toselli estate agency came out and said exactly what i said above. there have also been numerous articles stating that the boom is pretty much over and prices are 'stabilising' (which basically means stagnating).

We're slap bang in the middle of the latest economic cycle here, there have been absolutely no structural changes to get out of the boom and bust cycle, the government is the same as ever and president kirchner is turning into the archetypal argentine caudillo. Unfortunately, it would appear that argentina hasn't learnt the lessons from the last century of 10 year boom and bust economic cycles. It's a real, real shame as this country could be a success if it started acting its age and not like a pimply adolescent.

We're moving to chile because it's a country with real prospects; low corruption, a strong base economy and sensible economic policies. it's a pretty expensive place to live though and santiago is a truly horrible city (the rest of the country is great).

It's with a heavy heart that i'm leaving buenos aires; it's a city i love like no other but it just doesn't hold the possibilities that chile does and now i'm approaching my 30s i need to concentrate on making a real living that's not based on short term cycles.

Setting up a business is very hard in argentina. we tried and gave up after a few months, tired of the bureacracy and corruption at every turn. that's when we became involved in real estate. now the real estate market is dying a death it's time to move to a country that holds more possibilities and where things just work without so much hassle.

argentina can be worth the trouble and hassle but it can also wear you down after a few years. there are a lot of people out there who attack anyone who has a bad word to say about argentina. i'd venture a guess that the attackers are people who aren't actually living within the system, rather they're living above and around it (ie living off foreign savings, working as an english teacher or working for a foreign company that organises everything for them). once you get right down into setting up a business and trying to work with the system here, you can start to go more than a little crazy. On the flip side, argentina has been an incredibly great learning experience and a real eye-opener. I've learnt so many tricks and ways to get things done under difficult circumstances that living anywhere else will be a breeze...

if you want to meet up to talk about business in argentina and chile then get in touch.
 
#7
Old Guy,
My two cents.
Regarding the purchase of property, what your government contacts propose will probably be effective..if it is your wish to purchase the appartment... or property here.
Regarding what I suppose is the core reason you are here, the business investment, There is a chamber of commerce called CESSI (Chamber of Information Technology Companies) which may be useful to you in terms of seeing what is being done here and probably advice also on business, and for networking. They are very active http://www.cessi.org.ar/main_en.htm
Also there is the Amcham in Argentina http://www.amchamar.com.ar/ which has some 50 members in the It sector (several of US origin in the sector you are looking into, Outsourcing of IT services).
Additionally the Local Economic/Trade section of your Embassy should advise you as to the investment climate and factibility of this country and give you their viewpoint on existing business practices and how to best handle them....
rgds,
Victoria
 
#8
Hi all, I don`t have time to read up this entire lengthy forum, but as stated it`s perfectly normal to declare much less than the actual amount on real estate sales. In a nutshell: the government authorities are always skimming off a percentage of our taxes for their own personal benefit, so we are morally obliged to make sure the funds they can get their hands on are the smallest possible amounts. In other words, by paying taxes here you are automatically guilty of unwittingly providing the funds which these crooks steal so by minimizing that amount you minimize your responsability in these crimes. At least that`s what Í would declare in court if I ever had to.!! In other words, what`s more moral, you keeping it in order to provide more jobs, or giving it to them to spend on more prostitution and corruption? This is the typical paradox of an underdeveloped nation.
 
#9
I'm really impressed by the quality of the responses my question got, and grateful to those who responded. We're still up in the air, waiting for the official papers from the developer, and confused about whether this would be a good investment and whether BA would be a good place to do business.
 
#10
"realba" said:
We're slap bang in the middle of the latest economic cycle here, there have been absolutely no structural changes to get out of the boom and bust cycle, the government is the same as ever and president kirchner is turning into the archetypal argentine caudillo. Unfortunately, it would appear that argentina hasn't learnt the lessons from the last century of 10 year boom and bust economic cycles. It's a real, real shame as this country could be a success if it started acting its age and not like a pimply adolescent.

Setting up a business is very hard in argentina. we tried and gave up after a few months, tired of the bureacracy and corruption at every turn. that's when we became involved in real estate. now the real estate market is dying a death it's time to move to a country that holds more possibilities and where things just work without so much hassle.

argentina can be worth the trouble and hassle but it can also wear you down after a few years. there are a lot of people out there who attack anyone who has a bad word to say about argentina. i'd venture a guess that the attackers are people who aren't actually living within the system, rather they're living above and around it (ie living off foreign savings, working as an english teacher or working for a foreign company that organises everything for them).
This is a truly superlative post. The country's in the middle of another boom-and-bust cycle, no question about it. The problems that have afflicted the country for the last 90 years are still very much there -- lack of industry, lack of consistency in policy, inhospitable business environment, corruption -- and it's questionable whether Argentina's "leaders" are even cognisant of these problems, or understand the international arena in which the country has to compete. So the country continues to lurch from crisis to crisis.
The paucity of such posts is one reason why outsiders come to this country with rose-colored glasses on.