Investing in Argentina

[Jackson]

So the court said that the building association has a right to pass a rules regarding it's building. Isn't that how it works in every city in the first world? The building where I owned an apartment in Chicago did the exact same thing because the availability of short-term rentals lowers the resale value of the condos. Why wouldn't Argentines do the same?

In BA, prohibiting owners from renting their apartments to tourists will REDUCE the value of ALL apartments in the building, and if it becomes the standard, will reduce the value of all apartment properties in the city.

In other words, the Argentine government has found yet another way to fuck every foreigner who was convinced over the past few years to "invest" in Buenos Aires real estate.

Still, I'm surprised by the ruling because Argentina law as previously been strongly in favor of the rights of individual property owners to use their property as they wish, thus explaining why people apparently with few limitations may use their apartments as commercial offices and / or privados.

Thanks,

Jackson

[Tokyohomeboy]

A civil court ruling confirmed an earlier ruling that it is illegal to rent to foreigners on a short term basis (less than two years) if the building association has a ruling stating that short term rentals are prohibited. [/url]

So the court said that the building association has a right to pass a rules regarding it's building. Isn't that how it works in every city in the first world? The building where I owned an apartment in Chicago did the exact same thing because the availability of short-term rentals lowers the resale value of the condos. Why wouldn't Argentines do the same?

[TejanoLibre]

Invest in parking spaces. When I was told by a friend how much a parking space goes for in Buenos Aires, I about choked on my burrito: $16,000 US. We are not talking about a high end neighborhood. Maybe I missed something in the translation, $16,000 US for a parking space? Could this be possible? Guess I am naive about big city life.

I sure wish that I had bought a parking garage / lot downtown instead of a resto-bar!

All cash business, no headaches with cocksucker employees!

Just a few car dings occasionally!

You might pay a shitload of rent for the space but you will make a lot of tax free cash if it's in a good spot!

My bad luck is that I did NOT buy the building but I bought an existing business!

Shit!

TL

[Argento]

Thanks El Queso. Just dumbfounded by the cost of owning a car in Buenos Aires. There is a lot of people making a lot of money somehow in this crazy economy to afford their cars and parking spaces. Owning a car seems to be quite a status symbol.

The 'but' is what do you do if you have a wad of money? If you put it in the bank the odds favour that during the next crisis, the banks will steal the money. That's what banks do here. There is no stock market. The government bond rate is manipulated so your yield is in the shit from the beginning, a big, big chance of sovereign default, so they are not an option either. With property they take the view that they can sweat their tenants when the market is buoyant, never maintain them untill the point of collapse and when the crisis is over, they still have an asset. So it is either money off-shore with no yield, or last but not least, rental property. And with parking spaces, the tenant is the car park operator and I guess they work out a deal. And no maintainance. I would be too busy counting my fingers after we shook hands on the deal to know if it was good or bad.

Argento

[Damman]

I've seen spaces for sale much higher - as much as around $26K.

The problem is, you can only rent out spaces for between 350 to 800 pesos a month - I'm sure there are higher rents and probably higher costs as well.

I doubt that you will see too much appreciation on a parking space, but possibly. In the meantime, you won't be collecting much on rents.

Thanks El Queso. Just dumbfounded by the cost of owning a car in Buenos Aires. There is a lot of people making a lot of money somehow in this crazy economy to afford their cars and parking spaces. Owning a car seems to be quite a status symbol.

[El Queso]

Invest in parking spaces. When I was told by a friend how much a parking space goes for in Buenos Aires, I about choked on my burrito: $16,000 US. We are not talking about a high end neighborhood. Maybe I missed something in the translation, $16,000 US for a parking space? Could this be possible? Guess I am naive about big city life.

I've seen spaces for sale much higher - as much as around $26K.

The problem is, you can only rent out spaces for between 350 to 800 pesos a month - I'm sure there are higher rents and probably higher costs as well.

I doubt that you will see too much appreciation on a parking space, but possibly. In the meantime, you won't be collecting much on rents.

[Wild Walleye]

With rampant uncertainty in the marketplace on key inter-related issues such as inflation, interest rates and exchange rates, a peso next month is worth considerably less than a peso today.

Therefore, peso-denominated investment in long-lived assets may decline in value based upon the three, above-mentioned factors, regardless of the nominal sale price when compared to the historical purchase.

Therefore, I would recommend limiting long-term peso exposure, focusing on investment in short-term assets that (while denominated in pesos) are immediately enjoyed (consumed) by the purchaser. This instantaneous purchase and consumption eliminates future impact on these transactions by interest, inflation or exchange rates. These things are irrelevant because the asset purchased has been consumed and return or utility is measured in satisfaction, not ROI.

My recommended basket of commodities, on which I place a "strong buy" are: malbec, bife de lomo and fine Argentinian and Paraguayan chicas.

[Damman]

Invest in parking spaces. When I was told by a friend how much a parking space goes for in Buenos Aires, I about choked on my burrito: $16,000 US. We are not talking about a high end neighborhood. Maybe I missed something in the translation, $16,000 US for a parking space? Could this be possible? Guess I am naive about big city life.

[Wild Walleye]

I own two related Argentine stocks which trade in the US. Cresud (CRESY) and Irsa (IRS) They own huge amounts of land and commercial real estate. The biggest issue in my mind is whether you trust the controlling family to do the right thing by outside shareholders. They are very volatile so you may want to wait for pullbacks in price.

But you should not trust the controlling family to do right by investors. Conversely, you should expect them to do what is best for themselves. This holds true for most of the world. It is particularly true in markets that are not transparent and where there is ample history of such behavior being overlooked by authorities.

[Felipe]

Has anyone opened a brokerage account in BA? Any thoughts on buying stocks in Argentina.

Thanks

I own two related Argentine stocks which trade in the US. Cresud (CRESY) and Irsa (IRS) They own huge amounts of land and commercial real estate. The biggest issue in my mind is whether you trust the controlling family to do the right thing by outside shareholders. They are very volatile so you may want to wait for pullbacks in price.

[Facundo]

A civil court ruling confirmed an earlier ruling that it is illegal to rent to foreigners on a short term basis (less than two years) if the building association has a ruling stating that short term rentals are prohibited.

This ruling has two implications for foreigners:

1. If many building associations adopt the ordinance or enforce their building association rules and regulations, then it could result in a shortage of apartments available to rent.

2. If a foreigner is thinking of investing or already has invested in an apartment with the intention of living part time in Argentina and then renting the apartment while away then he might not be able to rent it out if the building association has the prohibited regulation.

Just in case one is wondering why this ruling came into being, here are a few of the details.

A Canadian purchased an apartment in Recoleta with the expressed purpose of living in it part time and renting it out the rest of the time. Last year the owner rented to rowdy tenants who made lots of noise and the neighbors complained and then filed a complaint. A judge ruled in favor of the neighbors or the building association, and at the end of this week the court affirmed the ruling.

Here is the article in Spanish from the daily newspaper, La Razon.

http://www.larazon.com.ar/notas/2010.../02148419.html

[Palermitano]

Hi,

Does anybody know if this 30% guarantee is still in place with the central bank, as two real estate agents told me it did not apply for properties, as long as they are you main residence. Of course, they may say anything to sell. And I dcertainly do not intend to carry 100,000 US in cash either!

Anyway, your feedback is most appreciated,

Thanks.

Palermitano

[Wild Walleye]

As far as the government is concerned, it is great for their political clout to be seen as anti-business. And their constituents lap it up like mother's milk! Argento

The people that lap it up don't realize that they are the ones being screwed, not the companies. They are the ones not benefiting from foreign investment dollars or Euros and jobs (and other benefits) that investment creates.

The multinationals can bestow their beneficence on some other country rather than take undue risk in Argentina.

[Argento]

This is an excerpt from Tenaris' Annual Report on doing business in Argentina. Though it is dated (2002) it outlines some of the problems and BS a multi-national corporation has when doing business in Argentina. Another interesting development with Tenaris is Venezuela's Chavez nationalized the Argentine subsidiary of Tenaris (Siderca) earlier this year and old Christina's knickers were in a knot. Do not think the thing has been resolved yet. Maybe she just got paid off. Read any company's Annual Report (Repsol) and one can get an insight on how difficult it is doing business here. Stick with wine, women and song.

Royal Dutch Shell runs a refining, distribution and a mixed ownership group of petrol stations throughout Argentina. During a shortage of fuel, Nestor Kirchner wanted the oil companies to sell their fuel below cost. Shell said no. The government response was to accuse Shell of poluting the river that runs into la Boca and got a court order from a tame judge, (aren't they all? that closed Shell down instantly. Being the only refinery in the south of BA, (there being only one other at Zarate in the north) naturally the country ran out of fuel. Shell refused to compromise and suggested to the government, when they threatened to imprison the company president, that they would pull out of Argentina. The government responded by saying that Shell was a parasite in Argentina and that it was their moral duty to also explore and develope oilfields. Shell naturally said that had not been their understanding of their business responsibilities and also that they had no intentions in Argentina to be more than their existing business. Shell refused to give the government any face-saving way out and eventually the government admitted there had been no polution caused by Shell. Their trustworthy judge, gave the all-clear for Shell to resume operations.

So buying shares in Argentine companies is not a good idea. One day they are a rooster and the next day a feather duster. Depends entirely on the wim of the illogical government. And I have a 100 similiar stories.

As far as the government is concerned, it is great for their political clout to be seen as anti-business. And their constituents lap it up like mother's milk!

Argento

[Damman]

This is an excerpt from Tenaris' Annual Report on doing business in Argentina. Though it is dated (2002) it outlines some of the problems and BS a multi-national corporation has when doing business in Argentina. Another interesting development with Tenaris is Venezuela's Chavez nationalized the Argentine subsidiary of Tenaris (Siderca) earlier this year and old Christina's knickers were in a knot. Do not think the thing has been resolved yet. Maybe she just got paid off. Read any company's Annual Report (Repsol) and one can get an insight on how difficult it is doing business here. Stick with wine, women and song.

The Argentine government has historically exercised significant influence over the economy. In response to the current crisis, since December 2001 the Argentine government has promulgated numerous, far-reaching and sometimes inconsistent laws and regulations affecting the economy. We cannot assure you that laws and regulations currently governing the economy will not continue to change in the future, particularly in light of the continuing economic crisis, or that any changes will not.

Adversely affect Siderca's or Tenaris's business, financial condition or results of operations. Due to the current social and political crisis, investing in companies with Argentine operations entails risks of loss resulting from:

• taxation policies, including direct and indirect tax increases;

• potential interruptions in the supply of electricity, gas or other utilities;

• expropriation, nationalization and forced renegotiation or modification of existing contracts;

• restrictions on repatriation of investments and transfer of funds abroad;

• civil unrest, rioting, looting, nation-wide protests, road blockades, widespread social unrest and strikes; and.

• changes in laws and policies of Argentina affecting foreign trade, taxation and investment.

Several of the steps taken by the Argentine government as described above have had and could continue to have an adverse effect on the ability of Siderca to make payment of dividends or other amounts to us. Pursuant to certain decrees and implementing regulations of the Argentine Central Bank, Argentine individuals and companies, including Siderca, are subject to restrictions on the making of certain transfers of funds abroad and to the prior approval of the Argentine Central Bank. Until February 7, 2003, transfers by Siderca of U. S. Dollars destined to the payment of dividends outside of Argentina were subject to the prior approval of the Argentine Central Bank. For example, on December 4, 2001, Siderca distributed a dividend consisting of cash and shares of Siderar S. A. I. C. Instead of distributing the unregistered Siderar shares directly to holders of the ADSs, the depositary, pursuant to the Siderca American Depositary Receipt, or ADR, deposit agreement, chose to liquidate the Siderar shares in the Argentine market and deliver the cash proceeds to holders of Siderca ADSs. However, due to the Argentine government's emergency measures, the depositary was prevented from transferring out of Argentina either the ADS holders' cash payments or the proceeds from the sale of the Siderar shares until March 3, 2003. If restrictions of this kind were to be imposed again in the future, Siderca's ability to transfer funds in U. S. Dollars outside Argentina for the purpose of making payments of dividends or other amounts to us and to undertake investments and other activities that require payments in U. S. Dollars would be impaired.