Work Abroad but earn in USD

Wednesday, March 02, 2005

Argentina Swaps Debt, Foreign Investors Are Screwed

Surely most readers here know about Argentina's economic problems. Well, today Argentina's president declared victory, since apparently the majority of the foreign bondholders accepted their debt swap offer. What this means is that the foreign investors will turn in their old bonds (which Argentina is not paying interest on) and get new ones (which they will pay interest on). The catch... the new ones are only worth 20-30% of the value of the old ones. I'm very sorry if you bought one of those things.

This should be a lesson for expatriates living in Argentina... keep your money out of this country. People have asked me about how to open a bank account when they arrive, transferring their savings here, etc. Just don't do it! Keep only the money you need on a monthly basis. Don't think about putting your life savings in this country.

Now, I'm not saying that you shouldn't invest in Argentina. Lots of people are making money on real estate, businesses, etc. But don't take your liquid assets and put them in banks here. Argentina is not the place for your nest egg. Did you know that some banks require you to buy private insurance against government confiscation of the money in the account? I'm not joking.

Before you consider an investment here, realize that you are investing in a high risk environment. There are certain things that are safe here and certain things that are not. It seems like every 10 years or so Argentina has a financial meltdown... which means we have another 5 years to go until it happens again. So, just be vigilant. You don't want to be the next foreign investor that loses their shirt.

If you have an idea for an investment or business and you want me to give you an opinion, let me know. I won't do a thorough analysis for free, but I'd be happy to give you a gut-check opinion. I'm familiar with what kinds of things are going to work here and what's going to be difficult/risky.

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3 Comments:

Blogger Robert said...

Investing always carries risk, & regardless of IMF poster child reviews, I don't think most people examined Argentina's situation thoroughly enough before buying in. Signs were present even in 1998... then there's the issue about Italian banks pawning off their bonds to retired investors. Anyway, it's hard for me to be too sympathetic to anyone other than my Argentine friends & family who were affected by the crisis. Capital comes & goes, takes advantage of favorable situations, then flees without assuming any responsibility. Hardly humane. At least investors are getting some minimal return rather than none.

Good info on the blog. With the hordes of yanquis moving here, this could be a great resource. Looking forward to further posts.

3/13/2005 07:05:00 PM  
Anonymous Anonymous said...

My husband and I are seriously considering investing in some Argentina real estate and taking up permanent retirement residency there. We own our own company here in the US that will provide us with more than enough of the required monthly amount necessary to qualify for residency, and can pay for whatever land/home purchase with cash. Our question is, how "safe" is it to invest in real estate there? Obviously we would go about any purchase made via an international realtor and intrn'l attorney, but we want to buy in the near future for retirement years from now without having to worry about losing our property from some unforeseen government upheaval, or something of that sort happening. What's your 'gut-check opinion' regarding real estate purchases?

Love your blogs, too, by the way. They're very informative!

5/25/2005 09:51:00 AM  
Blogger Jim said...

I am considering the purchase of an operating winery in the Mendoza area. Any thoughts on this?

MC

9/12/2008 10:31:00 PM  

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