U.S. to Suffer Argentina's Fate?

Ever since George W. Bush's government started running record budget deficits (to go along with our record trade deficits), I've been comparing the United States' current economic situation as somewhat similar to Argentina's situation in the '90s. Today, John M. Berry, a columnist for Bloomberg, wrote a column stating pretty much the same thing. While one can certainly argue that the United States is not Argentina, there can be no doubt that there are signs of clear parallel between the two countries.

Perhaps the most important parallel are the attitudes of those in government in the U.S. today and in Argentina in the '90s. Right now the U.S. is running record trade and budget deficits, borrowing abroad to finance those deficits, and the government is doing nothing to try and remedy the situation. In fact, contrary to the historical legacy of fiscal restraint in the Republican Party, Bush seems to be going out of his way to bankrupt the country. Consider this, Bush has:

• never vetoed a single spending bill in his first term in office.
• proposed additional tax cuts, to further reduce the government's revenues.
• spent countless billions on wars and other international adventures.
• done nothing to encourage U.S. saving and investment, allowing our deficit to continued to be financed by foreign investors.
• proposed huge new spending programs, such as a moon base and a manned mission to Mars.
• proposed a "personal account" scheme for Social Security, which would add $1 trillion to the national debt.
• rapidly increased Medicare spending by adding a new prescription drug benefit.

Speaking as an independent, I wonder whether anyone with an economics degree (or how about even a degree in common sense) is working at the White House? I have no love for tax and spend liberals, but at least the tax part prevents the country from going broke. The Republicans have portrayed themselves as tax cutters and bureaucracy slashers, fearlessly out to cut the size of the Federal Government. However, Bush seems to have forgot about the second part -- the bureaucracy slashing. He's great at cutting taxes, but if you don't cut spending also, you end up bankrupt.

For the sake of the country, let's hope 2008 delivers us an administration that has at least one official who learned from their mother how to budget. Maybe I should send my mom over to teach them a few things.

Nightlife in Buenos Aires

I received an e-mail from a reader asking about the nightlife in Buenos Aires. As always, question and then answer.

Reader's Comment

I just started visiting South America in the last year. In about an 8-month timeframe I have been to Medellin, Colombia four times and Panama City once. I caught the Latin America bug. I feel the energy when I am there and I love learning new languages and experiencing different cultures.

I am thinking of doing some import/export with Argentina and that is how I stumbled across your great site. I am thinking of opening lounges/clubs too. Can you tell me what the nightlife is like? I have read from some formal sites that it is great. Do you LOVE living in Buenos Aires? Does the city has a great vibe?

Nightlife in Buenos Aires

I would not at all hesitate to say that Buenos Aires has a great nightlife. In fact, it would be more accurate to call it an early-morning life. People think nothing of staying out until the sun rises. I remember being out at a bar with a business partner and his then-girlfriend. We were doing tequila shots until 3:00 AM and having a good time. At this point I was finished for the night. They took me back to my hotel and I figured they were done for the night, but no. I learned later that they were out until 6:00 or 7:00 in the morning, still partying it up.

Last year, during our annual company get together, I took everyone to Bar 6 in Palermo Viejo. I believe we arrived around 10:00 PM or so and there was no waiting. By 12:30 AM, when we were leaving, there was a huge queue of people waiting to get in. People stay out late in Buenos Aires. The city is abuzz with activity all night long. It is certainly a different experience for me.

Rite of Passage: My First Spam From Argentina

The other day I got my first piece of spam e-mail from Argentina. I was actually pretty impressed. Whoever went to the trouble of culling the e-mail list did a good job, since the message was targeted towards English-speaking expats. Not bad.

The Spam

I would like to introduce my professional assistance. I am a BILINGUAL ARGENTINEAN PSYCHOLOGIST specializing in Cultural Literacy, Personal Development and Relationships. Fees are based on local standards. To contact me you can call me to my office: [number withheld] or you can send me an email to [email withheld].

Argentina and Psychoanalysts

Since we were talking about stereotypes yesterday, I thought it was very funny to share this little bit of stereotyping with all of you. If you don't already know, Argentina is famous for its psychoanalysts. There are more psychoanalysis per capita in Argentina than any other country in the world... similar to the situation with lawyers in the US.

I found it quite hilarious that I haven't even arrived in Buenos Aires yet, but already the psychoanalysts are after me! We always joke in the US about ambulance-chasing lawyers who are always after new clients. I wonder whether Argentina's psychoanalysts are always on the hunt for new patients? Maybe everyone in Argentina is already signed up, so they have to start looking at people who will be arriving within the next couple months and sign them up.

I've never had the need for psychoanalysis here in the US, so hopefully the huge demand for psychoanalysts in Argentina is merely a cultural thing. I'm hoping that Buenos Aires doesn't actually drive people crazy...

Argentina's Attitude Towards America

A reader wrote in today asking about Argentina's view toward America. Of course, I wish I had better news to report, but this blog is all about the truth, so that's what's going to get published here.

Reader's Comment

Can you tell me about how the average Argentino on the street views America? Are the feelings similar to that of Europeans right now? I've been living in Germany the last few years and I've found myself constantly defending the actions of my government. The US is really unpopular here right now.

The Hard Facts

I'm going to approach this question two ways, first by laying out the hard facts about Argentine attitudes towards Americans, as supported by research, and then I'm going to tell a few personal anecdotes about the conversations that I've had. After that, I think you'll get the picture.

In 2002, The Pew Research Center did a study on global attitudes toward America. When asked whether people had a favorable or unfavorable view of the United States, just 34% of Argentines reported a favorable opinion. You can compare that with Germany where 61% have a favorable opinion of the United States.

Argentina has the least favorable opinion of the United States in all of Latin America. The only four countries surveyed that reported lower opinions of the US were Turkey, Jordan, Pakistan, and Egypt. Even the people of Lebanon had a higher opinion of the US than Argentina, and it wasn't so long ago that they were blowing up our embassies.

America vs. Americans in Argentina

In the same survey, those in Canada, Asia, and Western Europe are likly to make a distinction between America vs. Americans. While they disliked America and America's policies abroad, they still had a favorable opinion of Americans. For example, in Lebanon only 35% of people had a favorable view of America, but 47% had a favorable view of Americans.

In Latin America, however, this was not the case at all. According to the study, "nearly every Latin American country assess "Americans" in the same terms or more negatively than they assess "the United States." This is pretty shocking. It means that, as an American, you have a higher probability of being liked on the streets of Beirut than the calles of Buenos Aires.

Some Personal Anecdotes That Support This View

At dinner once I was talking with some Argentines and when the topic turned to land and politics, someone mentioned with a straight face that many people believed that Americans were out to steal Argentina's water supply. I'm not joking. He mentioned how Ted Turner was the country's biggest landholder and that many people believed there was some kind of CIA conspiracy to steal the country's water. I really thought this was a joke, but they were dead serious. Apparently this is a common view held by some people.

In 2003 I was having coffee with one of my employees and we got to talking about September 11. I mentioned something about how the US had wasted a lot of the goodwill we got from the rest of the world after September 11. He told me, "You know, a lot of people here thought you deserved it. People said, look, they're responsible for killing millions of people all over the world and they deserve what they get."

This last Columbus Day, when I mentioned to one of my employees that American Indians often protest, she told me that people protest in Argentina on Columbus Day as well, but in front of the US Embassy. For the life of me, I couldn't figure out why people would protest in front of the US Embassy on Columbus day, other than the fact that maybe they're just so used to protesting against the US that they go there by habit when its time to protest something. In fact, she told me that they are protesting the "new colonialism" by the United States during Columbus Day.

America's Role In The Economic Crisis

Perhaps most importantly, many Argentines blame the US for their economic crisis in 2001. They accuse the US Treasury and the IMF of engineering their failure, lending money when they knew it'd be pilfered by corrupt politicians and wasted. They also point out that the US Treasury allowed Argentina to default, but bailed out Brazil, Argentina's northern neighbor, something they view as totally unfair.

The 19th century British Prime Minister Lord Palmerston once said, "Nations have no permanent allies, only permanent interests." Yet according to the Pew study, 75% of Americans believe that the US considers other nations' views "a great deal" when formulating its foreign policy. To be quite frank, what are these people smoking? Contrast that with the belief in Argentina, where just 16% of the population believes that the US considers their interests when it conducts foreign policy. In the case of the bailout of Argentina versus Brazil, we can point to the clear reason that Brazil received a bailout and Argentina did not -- multinational US bank exposure to Brazilian loans.

Just one month after former US Treasury Secretary Paul O'Neill scoffed at the notion of bailing out Latin America, saying that the money would probably wind up in Swiss banks, America, through the IMF, offers $30 billion to Brazil. US banks had a much larger loan portfolio in Brazil than in Argentina. The Brazil bailout was just another case of the US protecting its own interests, as all nations do. The result of this inconsistent policy, however, is resentment in Argentina, where people feel they've been given a raw deal.

Americans can certainly make the argument that its unfair for us to be blamed for Argentina's woes. After all, a country should take responsibility for its own spending and mismanagement of its economy. Nevertheless, as a people, we should understand that selfish decisions, made in Washington by officials at the IMF and the US Treasury, can impact the lives of millions of people a continent away. When our politicians decide who gets a bailout and who doesn't, they can literally determine whether someone in Latin America will keep their job or be able to afford the basic necessities of life.

That's a lot of power for someone you didn't elect to have over your life. More and more, people around the world feel they should have a vote in US elections because they feel the outcome of those elections can effect them personally in a very big way.

Implications For Expats

Despite all the seemingly negative news I've brought up, I will say that in the time I've spent in Argentina, I've never felt unwelcome or scorned. After reading all that, you might think that I get spit on every time I walk up and down the streets. This is not the case. Just realize that being American makes you a stereotype in Argentina -- the greedy yanqui capitalist who's out to exploit the people, steal the water, and turn Argentina into the next US colony.

Once people get to know you personally, they'll judge you not based on your nationality, but on your individuality. For a lot of us, this'll be the first time we're on the receiving end of a negative stereotype -- which will probably serve to give us a good lesson in humility and a greater understanding of what many others experience in our own country.

The Personal Costs of Becoming an Expatriate

I talk a lot in this blog about costs in terms of dollars and cents or pesos and centavos, but rarely do I go into the personal costs of becoming an expatriate. I'm not really a "share your feelings" kind of guy, but I'll do my best here to address the reader's question.

Reader's Comment

I was wondering how your loved ones in the U.S. felt about your expatriation. Emigration is such a huge event. What sort of changes does that have on personal relationships?

A Little Background On US Emigration

First, when discussing emigration from the United States, one has to realize that there's not a lot of it going on. In fact, type us emigration into Google and the answer you get is, "Did you mean: us immigration?" A little over a month ago, I was talking to an associate from Uruguay and I told him I had a site that was for expatriates and people from the US and Europe planning to move to Argentina. He asked me whether such people actually existed. He couldn't fathom why anyone from the US would want to move to Argentina.

In fact, the US Census estimates that the annual number of native-born US emigrants to be between 10,000 and 25,000. How many of these people are going to Argentina? According to the Argentina census of 1991 there are only 9,755 Americans residing in Argentina, a change of -12 from 1981, meaning net American emigration to Argentina is essentially zero. Of course, a lot has changed in Argentina since 1991 and my guess is that there are a lot more Americans here now.

The Personal Costs

Because of all this, when you tell someone that you're moving from the US to Argentina, most people can't fathom why. I went over my reasons for leaving in a previous post, so I won't get into that here. The reaction of my family and friends has been somewhat mixed. My father, an experienced world traveler and also the person most responsible for introducing me to the rest of the world as a child, couldn't be happier or more encouraging. Along with his wife and my brother, he will be visiting me for two weeks this November in Buenos Aires to celebrate Thanksgiving.

On the other hand, my mother is less than pleased. We were recently discussing by e-mail my problems obtaining funds for an apartment in Argentina. Her reply to me was, "Maybe this is God's way of trying to tell you that you need to live in the United States -- you could get a house here very easily!" Unlike my father, she has not planned to visit me. In fact, she hasn't travelled outside the country since my parents' divorce.

Like my mother, my girlfriend's parents have been less than enthusiastic -- going out of their way to try and convince her not to go with me. Neither of her parents own a passport and Mexican border/resort towns comprise the extent of their international travel. Based on my own first-hand observations, I've come to the conclusion that someone's attitude toward a friend or family member's decision to expatriate is proportionally related to the amount of international travel that one partakes in. The more international traveling one does, the better the attitude they'll have about someone else's decision to expatriate, perhaps even scheduling a visit.

On the other hand, if the only experience you have with other countries is from US newscasts, you're probably not going to have a very good opinion about places outside the country. The only time American news covers the outside world is when there's a war, civil unrest, or a natural disaster. Going by US newscasts, it would be easy to develop the opinion that the US is the only haven of stability in a world that's either falling apart or blowing itself to pieces.

Transitioning

I fully realize that moving to Argentina will mean leaving many things behind. I know that I will see my family and American friends much less often. In addition to leaving my country, I'm also leaving my culture, my language, and my sense of belonging. Since I've only spent a few months in Argentina, I haven't yet experienced life as a true immigrant, only an enthusiastic traveler.

Right now I'm traveling a road that many other people have traveled before and many others will travel after. I'm sure I'm having the same fears and hopes that others before me have experienced. Will I be able to learn the language and communicate? Will I be welcomed and accepted? Will I be able to forge new friendships and fit in socially? Will I enjoy my new life abroad? Will I succeed financially?

I'm sure that everyone contemplating emigration has asked themselves those questions. I don't arrive in Buenos Aires until May 15th, so I don't know yet what the answers to those questions will be. I'm certainly hoping it will be a resounding YES to all of them, though.

The Risks of Living Abroad on Foreign Currency

Today, a reader brought up a very valid point that I'd like to share with everyone and then discuss.

Reader's Comment

As an Argentinian I can say that I agree with what is stated in this post. The only thing I would like to say to this possible expat is that his U$S 1000 will be tied to the exchange rate against our local currency, the Argentinian peso. This is about 3 to 1 nowadays, but it could change. Most likely the peso will stay as it is now or will devaluate. But no one can give a 100% guarantee that will be the case...

Currency Risk

When you're living or doing business in one country, but your primary income is from another country, you have currency risk. If the value of your home currency declines relative to the value of the country you're living / doing business in, you're going to be in trouble. Even normal currency fluctuations are going to cause your income to go up and down on a regular basis.

My business faces this exact situation every month. I earn the vast majority of my income in dollars from US businesses. Then, each month, I have to do a foreign currency exchange from dollars to pesos. Thus, my Argentina expenses vary by a few hundred dollars each month, depending on the exchange rate at the time. Sometimes the rate swings in favor of the dollar and I pay less, other times it swings toward the peso and I pay more.

If I were a large multinational corporation, I'd probably buy a currency option with a bank to protect myself from these currency swings. I choose to risk it. International banks aren't interested in writing currency options for small businesses. If your sales aren't in the tens of millions, you really don't have a lot you can do about currency swings. Now, if I was truly worried, I could take 2 or 3 years operating expenses and convert to pesos right now, locking in today's rate. I don't want to tie up that much capital in pesos, however, so that's not an option for me.

What Else Can Be Done

There are some things you can do to make this a less frightening situation. One of my office's biggest expenses is rent. I removed the currency risk from this expense by signing a lease in dollars with my landlord. See, some Argentine companies are also fearful that the peso could further drop in value, so they are willing to make a contract with you in dollars. When you do this, you shift currency risk from yourself to the landlord.

Since I earn my income in dollars, there is no risk for me to pay in dollars. The landlord takes the risk that the dollar will fall in value versus the peso and he'll be earning less in peso-terms, should the peso strengthen against the dollar. As the risk taker, he also has the reward should the peso decrease in value, relative to the dollar. In that case, I'll be paying more each month than I would had I signed a lease in pesos.

I don't care about this, however. As an technology consulting company, I don't care if I could have made some money by the peso's fall. I am not in the currency speculation business. I would much rather have someone else take potential currency gains in order to protect myself from potential currency losses. I like to have predictable and stable expenses each month. So, anytime I can pay for something in dollars, I jump at the chance. I'd rather have someone else take the currency risk than me take it.

Implications For Retirees

Retirees are going to be faced with this same problem. Their pensions are providing them income in dollars, not pesos. If the peso strengthens against the dollar, they'll find themselves with less spending power here in Argentina. Just like my business takes steps to lessen this risk, retirees can do the same.

First, retirees can ask to sign their leases in dollars. With the most recent bout of inflation happening, there's probably even more landlords willing to do this. As a retiree, your rent will be one of the largest expenses you have. Most people spend 25-33% of their total income on housing. By paying your housing expense in dollars, you've taken a large portion of your income off the table as far as currency risk is concerned.

You can also convert a larger amount of your money to pesos when you think the exchange rate is in your favor. Suppose it has been hovering along at 2.9 for awhile and it goes to 3.0. You could very easily convert 6 months worth of living expenses at that time and protect yourself for the next six months from any further drop. Keep in mind, however, that should the dollar strengthen even more and go to 3.1, you've just lost out.

The Good News

Unlike devaluations which rapidly cause a currency to sink in value, re-valuations take a lot of time. In 1991 when the Argentine government instituted the 1:1 convertibility program, citizens had to trade in their old australes at a fixed exchange rate for the new pesos. Similar to the conversion to euros in Europe, the prices of every good and service were also switched over from australes to pesos at the same fixed exchange rate (or maybe plus or minus a few percentage points in either direction).

After the switch over, the real buying power of all the citizens stayed the same. If the Argentine government were to ever try to re-value the peso, a retiree's buying power in dollars would still be the same. A return to 1:1 would be a very gradual process, much like the euro's strengthening against the dollar. First we'd see rates at 2.8:1, 2.5:1, 2:1, and 1.5:1 over a course of months and years. A retiree's buying power would be gradually declining over this period as the peso strengthens against the dollar.

Realistically, there would be no way for you not to notice. Each month you'd be forced to make larger and larger exchanges of dollars to pesos just to meet your basic monthly expenses. Eventually you'd decide that it was no longer affordable to live in Argentina and you'd have to find somewhere else to go where your $1000 USD would give you good buying power.

So, there is no need to worry that you might come to Argentina today and find that next week your dollars only buy 1/3 of what they used to. That is, of course, unless the USA suffers a huge and rapid devaluation. I won't get into that right now, since that is another topic all together...

Health Insurance in Argentina

A reader wrote in today about getting health insurance in Argentina. This is going to be a very important topic for everyone who moves here, so I'll do my best to address this.

Reader's Comment

I've heard the cost of healthcare is very low in Argentina, but I haven't been able to find out much regarding health insurance options for self-employed expats... Have you? Your site is always very informative.

Healthcare For Individuals

If you're an expat moving here on assignment for your company, you probably have to worry about health coverage -- you'll get whatever health plan your company is using. On the other hand, if you're moving here to retire or you're self-employed, you're going to need health coverage. The good news is that health care costs here are multiple orders of magnitude cheaper than what you're used to paying in the USA. Of course, if you're reading this from Europe, you're going to have to start paying for health care now. Argentina doesn't have the same kind of welfare state that you're used to.

US readers, however, will be very happy to hear that Argentina health insurance prices are priced at what I call a "chump change" level. Apparently the US health care insanity has not yet reached this far south (praise God) and ordinary people can afford health care here without going into bankruptcy. Just how cheap is health insurance here? Cheaper than your wildest dreams...

Unlike other employers, I give each of my employees a set allowance for health insurance and let them buy the plan they like. They can either go with the Cadillac plan with a high-end insurance company and use up all the allowance I provide, or they can pick the Kia plan and pocket the savings for themselves. My own personal philosophy is that each of my employees is better able to make individual decisions about their own health spending, so I don't pigeonhole everyone into the same plan. I asked a few employees in my office what they were paying for health insurance each month and what plans and companies they were with.

Read It And Weep!

One employee is paying $70 pesos ($25 USD) for a lower-end plan. Another is paying $130 pesos ($45 USD) for a high-end plan with a better company (according to him, anyway). Both of these prices are for men in their mid-twenties, however. My managing director is out for the day, so I couldn't ask her what she was paying. I do know for a fact that women pay more than men (due to maternity costs) and that older people are going to pay more as well.

Feel free to let your jaws drop open now. Yes, you can get top notch healthcare for less than $100 USD per month! How good is the health care here? Doctors will come to your house when you are sick and treat you in your bed! No, I am not kidding. Doctors come to you! I will never forget the conversation I had with my manager when I was first told about this. She told me she paid something like $15 pesos extra or something for the doctor to see her at her house. When I expressed shock at this, she couldn't believe we didn't have this service in the US. "But if you're sick you don't feel like getting out of bed to go see the doctor, so they should come see you." It sounds perfectly reasonable, but if you're used to US healthcare, this is a whole new concept (or at least a long forgotten one).

Every time I hear Bush on the TV saying that, "The United States has the best healthcare system in the world," I just laugh now. Its such a lie. We could solve the medicare crisis tomorrow by sending all our old people to Argentina. Clearly the people in charge of healthcare here have found a way to treat people cost effectively.

Health Insurance Resources

The following health insurance companies were suggested by my employees. It seems that each of them uses a different company, so there was no consensus in my office about which was the best. It all depends on what coverage level you are willing to pay for and what kind of services you want or expect.

• Sistema de Proteccion Medica
• OSDE Binario (in English!)
• Unión Personal
• Accord Salud

Again, I am not endorsing any of these companies, and I know there are more companies out there, but each of these companies are used by an employee in my office, so they seem fairly happy with them. As an American, I'm sure that any of these plans will be better in terms of cost/benefit than what you're using to paying in the States.

Working in Buenos Aires

A reader wrote in asking about seeking employment in Argentina. I'd like to address the question as best I can and then provide some other alternative recommendations. As always, comments first, response second.

Reader's Comments

I just returned from Buenos Aires yesterday morning and I'm already DYING to go back. I noticed your posts on blogspot are about a year old. How are things going for you these days? I'm extremely interested in relocating... the only problem is that I LOVE my current job. My friends have tried to convince me to apply for a Fulbright, but I don't speak Spanish.

Any advice you have on making a living down there for people who don't speak the language would be great.

Making a Living in Argentina

So, you don't speak Spanish, but want to try and find a job in Buenos Aires. I've received a lot of questions about this lately -- people who want to go to Argentina and then find work. Without Spanish language skills it will be hard to do. Since this is such a common request, I went ahead and contacted a few HR people I know to see if they'd look into this for me. Maybe it will be feasible to have a sort-of "reverse HR search", where recruiters try and match up employees to jobs rather than jobs to employees.

Mainstay Expat Jobs

The standard jobs for expats who don't have the language skills include teaching English, working in the tourism industry, or buying a tourism-oriented business like a hotel or tour operator. These are all common jobs that you could look for that don't require any Spanish knowledge. However, you'd probably be competing with a lot of other expats (as well as locals) for these positions. Remember, there are a lot of locals here that speak English and might be willing to work for less than you are.

Running Your Own Business

As someone who is self-employed, I've always found it more reliable to create your own position. If you don't feel comfortable starting your own business, there are literally hundreds and hundreds of businesses that are for sale in Buenos Aires. I've seen corner stores for sale for as low as $6,000 USD and restaurants for sale for as low as $20,000 USD. As an American, your US Dollar has a lot of buying power here. You could probably very easily buy yourself a job here.

Now, you may not find owning a corner shop or restaurant all that glamorous, but that kind of business is something that immigrants without language skills have done successfully all over the world. A lot of these corner shops are run by (let's be honest) fairly uneducated people who are in the country illegally. As a successful, educated, and motivated American expatriate with business experience, you could probably do very well for yourself and out-compete these people.

Using basic EOQ ordering, forecasting, and inventory planning models, you could probably squeeze out more profit from these little stores than the current owners are getting, buy/open more stores, and repeat. Soon you've got a little chain on your hands. Business in Argentina is not as professional or computerized as the United States. People still go to a main office and wait in line to pay their utility bills! Give me a break, this is the 21st Century... modernize already!

Let's look at something besides corner shops. My line of work, project management, has had a professional organization in the US since 1969, the Project Management Institute. The Argentina chapter of the PMI only just recently opened in 1996. While I'm sure that there were plenty of companies using modern project management techniques before 1996, I'm sure the drive to open a local PMI chapter was from American and European companies operating here.

A US or European businessperson coming here and bringing modern business techniques with them will probably have one leg-up on the competition. Let me clarify that this post is not meant as an insult to Argentine business people or other immigrant owners of corner shops. Its just that I've noticed that most of the major brands here are American or European brands.

Finding Argentina Apartments In English

Today will be a very short, but very useful post. I wanted to point everyone to ArgenProp.com, which now has an English-language search engine for finding apartments and houses. After clicking the link, click on the Apartments or Houses option on the side menu and you can search a database of thousands of apartments and houses for sale or rent, with prices displayed in dollars or pesos. This is truly a great site and should prove useful for anyone here researching apartments or homes to buy or rent.

Retiring in Argentina

I received a question today from a reader who wants to know about retiring in Argentina on a budget of $1000 monthly. As usual, first the question and then my response.

Reader's Question

I was wondering about how much of an income an unmarried, childless expat who doesn't cook would require to live a comfortable life in Buenos Aires. I want to know if I could realistically retire there on $1000 USD/month. You know, rent a 1 bedroom apartment in a safe neighborhood; have a plain dinner at an eatery a few times each week and a nice dinner every now and then; stuff like that.

Living on $1000 USD

I really do not see any problem with you living on $1000 USD per month in Argentina. You should be able to rent an one bedroom apartment for $175 USD per month. A basic plain dinner could cost you $3-4 USD. A nice dinner with wine, maybe $15 USD. You can get around the city cheaply as well. There's no need for you to own a car. Subways cost $0.25 USD per ride and a taxi ride across the city might cost $3-4 USD (for a long trip, short trips would cost less).

Let's try to put this in perspective. The poverty line in Argentina for a family of 4 is $266 USD monthly. At $1000 USD monthly, that puts you 3.75 times over the poverty line. In the USA, the poverty line for a family of 4 is $19,350 annually. If we multiplied that by 3.75, we'd have $72,562.

We can also compare your monthly income to local salaries. I went ahead and checked some employment listings to try and find figures to put things in perspective. Ads for entry-level office positions were offering $275 USD monthly. Ads for computer programmers were offering $500 USD per month. Ads for doctors were offering about $1000 USD monthly. So, as a retired person, you'd be having an income comparable to what a doctor here might be making.

So, what I'm saying, is that if you can't live here on $1000 USD per month, then obviously you're doing something wrong because most of the population lives here on a lot less than that. For even more bang for the buck, you might also consider places outside Buenos Aires. Just like everywhere else, prices get cheaper in less urbanized areas. Even so, there should be no problem for you living in Buenos Aires.

I should also point out that $1000 USD per month income will automatically qualify you for a residency visa, assuming you're not a criminal. So, your income is at a level where the Government of Argentina is willing to welcome you into their country with open arms. I would suggest contacting the fine people over at ARCA to learn more about your visa and immigration options.

Best of luck!

Learning Spanish On The Cheap

If, like me, you're heading to Argentina and you're serious about integrating into soceity, learning Spanish is going to be a priority. If you've been reading this blog since the beginning, you'll know that there are plenty of language schools in Buenos Aires. You can read my previous post on this issue if you want to learn more about them.

If, like me, you're busy and don't have time to take group classes, this could be a pretty large on-going expense. With the influx of foreigners into Argentina, language schools have raised prices and the going rate for private lessons is about $15-20 USD per hour. If you're like me and plan on doing 8 hours a week for the long-term, this is going to add-up quick. At $17.50, the price would be $560 USD per month.

You might be thinking I shouldn't be complaining about $500-odd dollars a month, but the businessman inside won't let me sit idle when I could cut costs.

Money Saving Idea For Group of 5-10 Expats

For $560 USD in Argentina, I could probably hire my own full-time Spanish teacher. The thing is... I don't need 40 hours a week of Spanish instruction. Scratch that... I probably do need it, but I'm not going to use it. I want to learn Spanish, but I want to have a life also. The thing is, I'm willing to bet there are 5 or 6 other expats out there who would like to improve their Spanish as well and would want 4-10 hours a week of private instruction.

Suppose 5-10 of us who were interested formed a pool. The pool could hire a Spanish instructor for, say, $500 or $600 USD / month. For the sake of example, let's say $600 since we'll be making this poor teacher travel all over town to each of our houses or offices. For $600 a month, we're buying 40 hours of instruction per week or 160 hours per month. Of course, we'd have to work the schedules out between everyone in the pool, but I'm certain that's something that could be accomplished.

By doing this, the group of us would cut our hourly cost from $17.50 USD to $3.75. That $560 monthly expense for 8 hours a week of instruction has just now dropped to $120 per month, a savings of $5280 per year.

Contact Me If You're Interested

As always, contact me if you're interested in something like this. We'd need a "group contract" or some other set of rules that everyone agreed to so that no one took advantage. We'd need to specify what happens when someone needs to go on vacation, cancel a lesson, or wants to leave the pool. Everyone would also probably have to pay a certain amount up-front. We don't want someone coming in the pool and then backing out after 1 week. There'd be a certain amount of logistics to work out, but that's not something that can't be dealt with.

I'd be happy to have my HR department to conduct the search, but we'd want to give everyone in the pool an opportunity to interview the candidates. This teacher would be teaching all of us, so we'd want to all be comfortable with the person we end up hiring.

An Investment and a Loan Source For Argentina Expats

To understand this investment idea better, read my earlier post on the lack of mortgage loans for expats. A few days ago I was thinking... Expats are having trouble going to banks to get mortgage loans, so why not get together and solve this problem ourselves?

Mortgage Pool For Expats

Suppose a group of expats and other investors came together to form a mortgage pool. We put the money together in a fund and then make private loans to other expats buy property abroad. If banks won't lend to us, why don't we work together to help each other as well as make a profit in the process.

We could easily screen potential borrowers, checking their credit report in the US. We'd force them to put down a large down-payment on the property -- 30%, 40%, or more -- to protect against default. A local Argentina Trust Company could hold the actual mortgage on the property on behalf of the investment fund and represent the fund in Argentina. If the borrower stopped making payments, the trust company could foreclose and reacquire the property. Since the borrower put down such a large amount in the beginning, the fund likely wouldn't lose anything on a repossession.

Loans would be denominated in dollars, protecting fund investors against currency risk, and the interest rate charged to borrowers would be high enough to ensure everyone in the fund good returns on their investments without much risk -- mortgage loans are some of the safest loans you can make, after all.

I've discussed this idea with my accountant and there's even a way we can structure it so that fund investors would be earning interest tax-free. So, if 9-11% tax-free returns with very little risk sound good and you'd be interested in hearing more, let me know. If we can get at least 10-15 people who are willing to put up $10,000 or 20-30 who can put up $5,000, we could get a fund started.

Staying Connected While You're Abroad

Just because you're moving abroad doesn't mean that you can't maintain connections back home. In fact, with the power of the Internet, most people might not even know that you've left! Today, I'm going to provide my enthusiastic recommendation for some service providers that no expat should be without.

PayTrust

The PayTrust service allows you to issue payments (both by check and ACH) to anyone inside the USA. Even when you expatriate, there will still be bills you have to pay inside the US -- credit cards, loans, taxes, life insurance your accountant, etc. If you're a small business owner, this is even more valuable. In addition to my personal bills, I pay about 20 business bills each month to various service providers in the US.

With PayTrust, I can log-in, see my account balance from my bank, and issue payments to anyone in the United States. How is this different than your online bill pay with your bank? PayTrust actually gives you a PO Box that you redirect all your bills to. Your bills are scanned in and displayed online for you to view. They keep an archive of all your bills as well, allow you to create reports and keep things organized. Your online bill pay will usually not allow you to make tax payments, but with PayTrust you can make tax payments no problem.

I've found this service to be a godsend, especially with all the traveling I do. Even though I will cut down on a lot of US bills after expatriating, there will still be plenty of people in the US that I owe money to. PayTrust will be the way I pay them. The cost is reasonable at $12.95 for personal accounts and $19.95 for business accounts.

Paperless PO Box

Similar to PayTrust, Paperless PO Box gives you a PO Box address in the US. They scan all your incoming mail and then send you a copy via e-mail. If you're going to be getting mail from the US that you don't need a physical copy of, this is a great service. I use it to receive my bank & brokerage statements, signed contracts from customers, and even letters from family and friends (I'm sure you all have that grandmother who still refuses to use e-mail).

I don't like the idea of having my financial papers and other things sent overseas, so this is a great service for me. The scanning of mail is all automatic by document feeders, so there's no person there reading your mail. If you ever do need an actual physical piece of mail sent there, Paperless PO Box can send it to you by FedEx. They keep your originals for 90 days and then destroy them if you don't request them to be sent back to you. They also keep a backup digital copy of your mail that you can retrieve by logging in -- just in case an e-mail doesn't go through.

The cost of the service is $29.95 per month. If you have online bill pay with your bank, you could forgo the PayTrust service, have all your bills sent to your Paperless PO Box and then pay the bills through your bank.

The UPS Store

I keep a mailbox at the local UPS Store, which allows me to receive packages and any other mail. I have mail sent here that I actually need a physical copy of -- packages, replacement credit cards, applications or contracts where I need to physically sign the original copy. You'll find that there are a large number of retailers and online stores that refuse to ship goods outside the country. If you still want to shop online and buy goods from the US, this is an excellent choice.

The UPS Store can receive all your important mail and packages, and then re-mail it to your address in Argentina.

eFax

While these other three services give you addresses within the United States, eFax will give you a fax number in the US. Faxes received at this number are automatically sent to you over e-mail. This is an extremely valuable service, allowing you to retrieve your faxes anywhere. Not only does the service free you from owning a fax machine, it also costs less than the monthly service fee you'd pay to have a fax line.

There's more, though! You can also send faxes using this service over e-mail. Just e-mail your document to a special e-mail address and eFax will transmit your document to any fax machine in the world. You'll get a confirmation e-mail letting you know whether it went through successfully or not, so you don't have to guess whether the recipient got your fax or not.

Vonage

Vonage is a Voice Over IP (VOIP) phone service. It gives you a US telephone number that rings to a phone box they provide you with. Just plug any ordinary phone into the box and you get US dialtone anywhere in the world. Although not "officialy" supported outside the country, you can plug the box into any Internet connection -- including a DSL or cable modem in Argentina. It works. Give this US phone number to your family and friends back in the US and they'll be able to dial you up just like any other US number. You'll also be able to call US numbers without paying international rates as well, since your call is routed over the Internet and doesn't go through the phone network.

Vonage only works over broadband (DSL or cable) connections and it doesn't work well if you're browsing or downloading at the same time. So, if you get a phone call, make sure to stop using the Internet while you're on the call or the phone quality will be very poor.

Google E-Mail

E-mail is the ultimate communication tool for expatriates. No matter where you are in the world, you can get access to e-mail. Google Mail is recommended because its a simple web-based interface, no huge banner ads to suck up screen space or bandwidth, great spam protection, and is currently offering over 2 GB of storage space -- all free. Why's this so great? You can pop-in to an Internet Café anywhere in the world and have access to all your e-mail ever sent or received. Two gigabytes is a ton of space.

In addition, if you utilize these other services -- Paperless PO Box, eFax, etc, you'll have a lot of big attachments going to your e-mail. You need to know that you'll have enough space to store all this stuff. Without the need to actually throw stuff out, you'll have access to all your mail and faxes as well -- a great resource no matter where you happen to be in the world.

One thing that Buenos Aires is not short of is Internet Cafés. You'll find them everywhere. Every block. You'll never be far away from your e-mail in Buenos Aires.

T-Minus 30 Days and Counting...

Exactly one month from today, I will arrive at Ezezia Airport in Buenos Aires, having left my home in the US permanently. For the last couple years, I've been between countries -- spending time in Buenos Aires when I can, but always returning to the US. A number of things were always bringing me back -- the house, the business, the unfinished degree, all my stuff. For me, making the decision to expatriate was a long and gradual decision.

Very slowly, almost subconsciously really, I started removing the barriers to leaving. I sold my house last year, leaving me no property to worry about or take care of. I gradually worked on structuring my business to do most of my marketing by Internet, so I didn't have to be in-town to go after clients. Finally, I'm finishing my degree this May (graduating just before my departure date, in fact).

With that taken care of, all that was left to hold me back was all this stuff in my house. Could I take it with me? Would I have to sell it? Well, if you've been reading this blog for awhile, you know that I ended-up selling everything instead of shipping it. As I sit, typing this entry in an empty apartment, I can tell you that selling everything you own gives you a liberating feeling. I thought I would be a little sad to see everything I owned walk out the door with a new owner -- that hasn't been the case at all. What it does is make you realize what's truly important, what you actually miss and what you don't. I haven't missed much.

Two Types of Expatriates

I've always believed that there were two types of expatriates -- people who became expatriates because they had to, and people who did so because they wanted to. When your company asks you to take a foreign assignment, or your spouse asks you to follow them abraod, or you're being deployed with your unit, you're becoming a forced expatriate. Sure, one can always turn their employer down, tell a spouse to forget it, or disobey orders, but if you're a career-minded professional, a devoted spouce, or a loyal soldier, you go and make the best of it.

On the other hand, there are people who have an instinct to leave home, to explore, to get away from the familiar. As a young boy, I was lucky enough to have my parents take me all over Europe, giving me a look at places and people that were totally different than what I was used to. When I was 18, I wasted no time in leaving home. When I visit a city for the first time, I like to take a day just to walk around on my own and explore, with no particular destination in mind.

I guess the best way to describe it would be to say that just as some people find themselves "drawn" to a place, I find myself "drawn away" from the US. Something inside tells me that I need to leave. Before I settled on Argentina as a new home, I knew I wanted to go somewhere -- Mexico, Panama, Costa Rica -- I thought about each one.

Reasons for Leaving

Even though I've spent a lot of time there, I still don't know entirely what to expect once I'm living in Argentina full-time. I'm not sure whether or not I'll find what I'm looking for, probably because I don't know what that is yet. Even though I have a business in Argentina and I tell people that I'm going because of work, that's not really the whole truth.

I'm going there because I can't stay here anymore. But I don't say that because I don't think most people would understand. Though, maybe some readers here will...

Finding Short-Term Furnished Apartments

A reader wrote in asking about how to find a short-term rental apartment (furnished, of course). I went through my blog and was going to refer him to my article on that, but it looks like I never addressed that topic. So, I'm going to address it now.

Its actually quite easy to find a furnished apartment online to rent. There are plenty of sites online. Make sure you pay attention to whether the prices are listed in pesos or dollars. Also make sure that you are aware of the fee the rental agency charges. Some sites will say the fee is included. Others will say that you'll owe an additional 10-15% to the rental agency once you arrive in Buenos Aires. You don't want to show up and be surprised.

Some sites will take credit cards to reserve your reservation, other sites will expect you to pay cash on arrival. Make sure you know what the payment policies are. Here's a list of some sites to check out.

Short-Term Rentals in Buenos Aires

• Homes.com.ar
• Apartments BA*
• BYT Argentina*
• Alojargentina
• * signifies that I have personally rented an apartment from this company

This list is by no means complete, nor is it in any particular order. If you start looking through these sites very closely, you'll note that some apartments are listed on several sites! The reason for this is that the owner of the apartment is renting it out through several agencies. You can save a little money in this case by renting the apartment through the agency that has a lower agency fee.

Good luck apartment hunting!

Blacks in Buenos Aires

A reader wrote in today wanting to know about how blacks are perceived and treated in Buenos Aires. Let me first say that you don't find many blacks in Buenos Aires. The reason for this is rooted in history. Unlike the Portuguese in Brazil, the Spanish who settled in Argentina did not bring in large numbers of African slaves to work plantations. Therefore, today, you don't see very many black people in Buenos Aires.

I must admit that as a white guy and an expat, I'm not really able to discuss the Argentine people's feelings towards blacks. Since the reader's question also deals with immigration, I asked Lorena Gallardo of Argentina Residency & Citizenship Advisors to respond to the reader. Not only is she an expert on immigration law, but she's also Argentine, so she's going to be much better equipped to answer this question than I am. The question and the response are both below.

Reader's Question

I'm a Caribbean immigrant who grew up in New York, mostly Brooklyn, but now make my home in Manhattan. I'm not a citizen here, even though I've been here since I was two years old. Lately I've been on the lookout for a place to which to expatriate myself. NYC is the only place in the U.S. I'd want to live, but it's too expensive! Paris is another such place--thoroughly cosmopolitan, but unaffordable, especially if I plan to be a "semi-retired" expat. I've been considering Buenos Aires. It's like Paris, New York and Rome mixed into one, but at a fraction of the cost!

I was just wondering what it's like for blacks in Buenos Aires. I'd read that there aren't problems socializing, but there may be problems getting employment unless one is a dancer or musician; I am neither. I do not, however, plan to be looking for work in Buenos Aires. I'm considering it as a permanent expat home because it seems that I could live well on less than $1000USD/month. Also, are there complications to getting permanent residency because my citizenship is with a Caribbean country?

Lorena's Response

Black people are not often seen in Buenos Aires. Argentina was not a country with many immigrants from Africa. But the blacks that you can see around are mostly from Brazil. The cultural relationship between Argentina and Brazil is incredibly good. Argentines love to travel to Brazil during holidays and enjoy the beautiful beaches with their warm waters, and Brazilians love traveling to Argentina as they love our winter ski-season (which does not exist in Brazil.

What I want to point out is that Argentines do not have anything against black people. They respect them. I should also let you know that women in Argentina love black men from Brazil, so you won't find racist problems here. These problems appear not with color, but mainly with "origin". For example, in Argentina they do not accept kindly people coming from Paraguay, Peru, Bolivia. These people are often treated as inferior. However, the fact is that this happens because these immigrants come to Argentina without documents and to steal jobs from Argentine citizens. You could compare this situation to the treatment the Mexicans get who illegally cross into the American southwest.

I can say that, at least for the time I have been living here, I have seen that there are between 5 and 10 different neighborhoods built by different communities: Paraguay, Uruguay, China, Japan, Israel, Greeks, etc, and each community respects the other one.

Now, about getting a job, that is something that you won't be able to do. First of all, you need a work permit and you must enter the country on a work visa in order to work here. If you do find a job, they will pay you less than to any other Argentine worker, since you would be working in the black market (and when I say less, I am talking about a very very low salary -- surely you wouldn't be able to put up and maintain yourself in Buenos Aires on such a wage).

I should also point out that as a retired person, it would be even more difficult for you to find employment. There are millions of young people without jobs that you would be competing against. So, the principal option I can see for you to live here legally the pensioner visa. Assuming you can transfer your pension or social security to a bank account here, you would be able to live quite comfortably and maintain yourself at a very good standard of living. Feel free to contact me by e-mail or contact ARCA for help with your visa.

Property Investments in Buenos Aires

A reader wrote in with the following comment, which I will post and then address. With all the posts recently about the negatives of investing in Argentina, I think there may be a little spell of pessimism going around.

Reader's Comment

I'm really enjoying your writings on your blog. I'm learning so much. Just today a local merchant/friend warned me not to invest in any property in Argentina because a friend of hers had her farm consficated by the government.

Safely Investing in Property

Although I don't know the details of the reader's friend's farm, I can only wonder whether all the taxes were paid-up and whether the land was being put to productive use. Foreign farm ownership is a very touchy issue in all of Latin America. Wars and revolutions have been fought over farm ownership in Latin America. United Fruit Company, anyone?

Despite all the negative things being said about real estate in Argentina, allow me to put forward a few positives. If you deal with reputable professionals, you will greatly reduce your risk. Make sure you use a good notary who will validate the title of the property. You want to make sure you will be getting proper legal ownership. If you are renting apartments, it may be smart to go with a management agency. These companies will investigate the tenants and require them to obtain a guarantee of payment. I went through one of these agencies when renting our office and believe me -- they really do check you out.

When signing contracts with local companies, make sure that as a foreign person or foreign company that you will have legal standing to enforce contracts within Argentina. I was surprised to learn that foreign individuals without a DNI essentially have no rights within Argentina. That's one of the main reasons I got my DNI -- to ensure that I would have the same rights and legal protections as citizens.

Get a second opinion. Ask around and see what people think about an investment idea you have. Have a knowledgeable third party look over the investment numbers and see if it makes sense. Before entering into any investment, it may not hurt to pay a lawyer $100 to look over everything and get his or her advice.

Doing business in a foreign country can be risky, but also very rewarding. Don't just write-off the country as "too risky". If you do your homework (or pay others to do it for you), you can limit your risk on any investment. Jumping into any investment without proper research is a good way to lose your shirt, no matter where in the world you happen to be. So, let's all not be so negative on Argentina. There is risk, but not so much more than anywhere else.

Working in Argentina

I received a question the other day from a reader about working in Argentina, and I'd like to make that today's topic. I forwarded the question to Lorena Gallardo of Argentina Residency & Citizenship Advisors, who handled my residency visa and is much better able to answer this question than I am. So, today at Expat Argentina, we are going to have a guest author.

Reader's Comment

I'm a recent journalism graduate from Florida, and I was thinking of working in Argentina. I only want to go for a few months. Maybe five or six months. I don't know anyone in Argentina and don't have much money to start out with. I was wondering if it would be unrealistic to show up in Buenos Aires and find a job within a few weeks. It doesn't have to be a job in the journalism field, as I imagine they're incredibly difficult to find anywhere. I'd just like to find a decent job to get by on. Maybe teaching English, working at a restaurant, etc.

Is it very difficult to get a working visa?

Anyway, your thoughts and suggestions are appreciated. I don't mind the adventure or risk of attempting such a thing---but I want to be somewhat realistic, too, and realize what I'd be getting myself into.

Response From Lorena

What you are proposing -- arriving in Argentina on a tourist visa and then finding employment with a local firm -- is illegal. A foreigner who wishes to work in Argentina needs a work visa. While you may be able to find employment in the black market, you would have no rights or protections and you would be violating the law.

Once you get to Argentina, you will find that for foreigners with dollars, living here is not too expensive. ARCA has helped retirees from the USA immigrate here and they live comfortably on a $1000 USD per month pension. One thing you can do is arrive here with some savings (a budget of $1000 USD per month you plan to be here should be fine) and then search for a job when you arrive. If you find an employer while you are here, you will then need to get a letter of appointment from them, return to the USA, and we can then prepare a work visa for you. You could then re-enter the country using your work visa and you would now be authorized to work legally.

Update: Poverty in Argentina

Since I did an article so recently on poverty in Argentina, I wanted to point out that a new article by United Press International indicates that there are now 15 million Argentines below the poverty line (making less than $772 pesos ($226 USD) per month. Another 6 million Argentines are making less than $354 pesos ($122 USD) per month. With the increase in inflation recently, the price of the goods in the Canasta Básica Total (CBT) or "Total Basic Basket" now cost more, pushing the poverty line higher and pulling people who were just at the edges of the old poverty line below it.

In a country with a population of just 40 million, this means that now, about 38% of the population is below the poverty line. This is quite a different figure from what is indicated in the CIA World Factbook, which lists 51.7% of the population below the poverty line as of May 2003. I find it hard to believe that the economy has turned around so quickly since May 2003 that almost 14% of the population was pulled out of poverty. I'm assuming the CIA must be using some other definition of poverty besides the the CBT.

Poverty in Argentina

A week or two ago, a reader asked me about information on poverty in Argentina. I apologize for not getting to the issue sooner, but yesterday I read an article on poverty in Argentina in Clarín, Argentina's largest newspaper, that the reader will find valuable. First, the comment...

Reader's Comment

Do you know anything about the poverty level in Argentina? I know things are worse since the financial crisis, but do you have any hard info or numbers?

Poverty in Argentina

There are two poverty lines in Argentina. A family of four making $772 pesos ($266 USD) per month or less, are considered poor. If that same family makes less than $354 pesos ($122 USD), they are considered indigent. Argentina uses two "baskets" of goods to define the poverty -- the Canasta Básica Total (CBT) or "Total Basic Basket" and the Canasta Básica Alimentaria or "Basic Nourishing Basket". The total basic basket accounts for things like clothing, housing, services, etc. The nourishing basket is the basic food/drink requirements for one to feed his or her family. So, in March, it cost $772 pesos to obtain all the goods/services in the total basic basket and $354 pesos to obtain the goods in the nourishing basket.

This does not tell the whole story, however. I was speaking to an Argentine colleague of mine today about this story and she told me that there was a recent documentary made in Argentina about this very subject. Similar to the movie "Supersize Me" in the US, an Argentine filmmaker spent a month eating all the goods that were actually in the nourishing basket. Instead of gaining weight, however, he dropped 13 lbs in one month, his blood pressure went haywire, and he suffered bouts with insomnia, nervousness, fatigue, and became aggressive at home.

The argument of the movie was that the government sets this nourishing basket artificially lower than the true amount needed for actual nourishment. They do this in order to diminish the number people who show up as indigents in the statistics. Clearly the items in the nourishing basket are not sufficiently nourishing.

The CIA World Factbook reports that, as of May 2003, 51.7% of the population of Argentina is below the poverty line. I would assume that they are referring to the CBT or "Total Basic Basket" when they are stating this figure. They do not list their reference, but I imagine they use official government reports.

Staying Safe When Using Taxis / Airport Transit

If you mention to a porteño that you plan on taking a taxi somewhere, they'll likely advise you to only use Radio Taxis -- which are taxis that you call by phone first. They always advise against picking up taxis on the street (unless, perhaps, they don't like you). If it is necessary to take a taxi on the street, always try to take a Radio Taxi that you see driving by. What's the reason for this? A common scam is for criminals to set-up fake taxis, pick-up tourists, rob them, and then drop them off in the middle of nowhere.

A New Airport Scam

Today, an Argentine friend of mine told me about a new scam that was just pulled off at the airport. Ezeiza International Airport is about 22 miles southwest of downtown Buenos Aires, so virtually all international visitors are going to have some distance to travel to their actual destination, whatever it may be. There are plenty of ways to get to where you're going from the airport -- taxi, shuttle, private coach, etc.

The criminals in this scam posed as tourists and booked a shuttle along with all the other tourists. They told the driver their stop was very close to the airport. The shuttle driver pulled off the road well before Buenos Aires and the criminals proceeded to rob everyone in the shuttle -- the driver and the tourists. They then siphoned the gas out of the shuttle and left it stranded in the middle of nowhere, well outside Buenos Aires city limits.

So, when you arrive to the airport, you may want to be careful about who you decide to share a shuttle with, if you must use a shuttle. For $20 or $30 USD, you can have your own private driver and coach, arranged in advance, and waiting for your arrival. They'll take you to wherever your destination is in Buenos Aires. Don't gamble with your safety just to save a few bucks.

Inflation Returns to Argentina

On April 5 Bloomberg reported that Argentina's annual inflation rate jumped to a 21-month high in March. Consumer prices are rising at an annual rate of 8.6% now -- above the government's target of between 5% - 8%. However, inflation has been rising very rapidly in the past few months -- 1.5% in January, 1% in February, and 1% in March. Inflation could top 12% this year if this trend continues.

The Public Is Not Concerned Yet

I made a few calls to associates & other business owners and people are not yet concerned. They tell me that only prices for basic products have increased. Prices for services are still holding steady. Additionally, wages have been effectively frozen since last year. Without increases in wages, inflation can only grow so fast.

Additionally, the people I spoke with are confident that the government's measures will prove effectively. Inflation does have a large psychological component and if people are convinced that the government's actions will bring inflation under control, they will not engage in behavior that will further aggravate the situation. I should also point out that somewhere around 40% of the population is currently below the poverty line, making rapidly-rising consumer spending unlikely.

Impact on Argentina's New Bonds

For all the bondholders reading this blog (yes, there are a few), you'll be happy to know that despite some of the comments you may have read here, the new dollar-denominated bonds are safe from this inflation. Let me first reprint the user's comment and then I'll address it:

Reader's Comment

They can indeed print pesos and then buy dollars to pay them off. This will have the same effect as with the peso bonds: high inflation and devaluation of the peso, since there will more pesos in the market and they will not be backed with gold or Central Bank dollars. The main advantage of the bonds being in dollars is that they are not subject to the peso devaluation, something very likely to happen if Argentina can’t pay them (people will not trust in the peso and will start buying dollars again, sending the peso straight to the bottom).

Straight Talk For Bondholders

The scenario the reader outlined here technically possible, but is still of no concern to bondholders who own the new dollar-denominated bonds. A devaluation of the peso, whether gradual through inflation or rapid through a crisis) will still have no effect on bonds denominated in dollars. You will be getting back interest and principal in US Dollars, so the value of the peso does not matter. You only have to worry about Argentina's ability to repay. The numbers you should be watching are government expenditures, GDP growth, and tax receipts. As long as the government is collecting enough money to pay the bonds and the economy is growing faster than increases in government spending, there is no problem.

Impact for Expatriates

If you're being paid a salary in pesos by your employer, now might be the time to negotiate with your employer for inflation-indexed increases. This is especially true if your HR department is located abroad in the US or Europe back at corporate headquarters. Corporate HR may not realize the situation you are facing as an expatriate.

You need to educate whoever is responsible for your salary that, as an expat, changing economic conditions is not be one of the risks that you signed-up for. You have enough to deal with learning a new language and fitting in to a new culture. Your salary and quality of life should not be left up to fate. You can refer your HR department to this Forbes Article or this Bloomberg Article.

If you're being paid in dollars or euros, this is probably not a concern for you. If hyper-inflation returns to Argentina the exchange rate should adjust in your favor, preserving your spending power.

Religion in Argentina

A reader wrote in today with a question about religion in Argentina. I will try to address this the best I can.

Reader's Question

Upon thinking about the death of the Pope, I am curious as to the state of religion in Argentina.  Is it a predominately Catholic country as I would be inclined to think?  How is the Pope's passing being handled in Argentina?

Religion in Argentina

According to the CIA World Factbook, the breakdown of religions in Argentina is:

• 92% - Roman Catholic
• 2% - Protestant
• 2% - Jewish
• 4% - Other

According to NationMaster only 25% attend religious services on a weekly basis, however. Much like other developed countries, church attendance is pretty low. Just about the only place church attendance is rising is in former communist states, where religion was once repressed and is now being allowed to flourish.

The Passing of the Pope

With the passing of Pope John Paul II, Argentina remembers the pope fondly. In the late 1970s and early 1980s, when Argentina and Chile were both ruled by military regimes, the pope personally negotiated a peace treaty between the two countries to stop an imminent war over disputed islands in the Beagle Channel. And in 1982, in the final days of the war over the Malvinas Islands, the pope visited Argentina to comfort the people.

Since the pope's passing, churches have been filled all over South America and there is speculation that the next pope may be South American. We'll just have to wait and see.

Just In Case You Didn't Believe Me The First Time...

Continuing in my series of responding to the two very longcomments made by several Argentine readers, I begin today with soccer. Let me first display the readers' comment below for everyone to see.

Reader's Comment

Well let me start with my comments. The first one must inevitable be related with your "Porteños and their Soccer Madness" post. I would ask you nicely but firmly, that you put the proper name of my football (there is only one real use of the word football) team, "Boca Juniors", at least when you refer to it for the first time in your writings. You can continue to refer to it as "Boca" as long as you have previously referred to it as "Boca Juniors" at least once, whenever you are writing about "us".

It is important to mention that this rule only applies to the greatest and ever best team of Argentina: again "Boca Juniors". I would also encourage you to presence a Boca - River match in the Boca Juniors Stadium. I am sure that you will be able to see and "feel" the difference quite notably, having been in the Gallinero (namely the River stadium, sorry no link!). It has been labeled as the number 1 world sport event from the 50 sporting things you must do before you die by The Observer/The Guardian, one of the most important newspapers of the UK.

Another Argentine Reader Responds

As for the post above mine, please delete all those links to "Boca". I will hate to see your nice endevour turned into an argentine spam house.

So, The Soccer Madness Has Arrived At My Blog

I'm sure everyone can see by the first post that they take their soccer very seriously south of the equator. I will also inform the first reader that I have indeed seen a soccer match in the "Boca Juniors" stadium. Although I didn't see them play River (or "River Plate" for purists, I don't want to be accused of favoritism here), I did see them play Chile. I was surprised to learn later that River fans would prefer to see Boca lose to a foreign team rather than see an Argentine team beat a Chilean team. Quite the rivalry these two teams have going here.

I'm not sure what would be easier... getting Muslims and Jews to live together in harmony in Jerusalem or getting Boca and River fans to sit together in a soccer stadium without barbed wire separating them. It's probably a toss up...

Argentina Investment Ideas: Update

I had several great comments over the past few days and I'm going to be addressing them in a series of new posts. The first will address the old investment ideas post from back in May 2004. I was considering two ideas for investment in Argentina: taxis and apartment rentals. Two readers, both Argentine citizens, pointed out some key issues with these ideas. Their comments are below:

Taxi Comments From Readers

"I have a lot of friends who got caught on the "taxis money-making-machine deal" and I can refer to them if you like. Things look very good from outside, but it is when you get into the business that you start to see the reality. Just check other "trustable" sources and you will find the other "truth". I would recommend that expats stay away from the Taxi business."

"I will not delve into the details of why the taxi business (did anyone mention mafia?) ... may fail to meet expectations, but just think how the heck one of the richest countries in the Planet -resources wise- had not one, but 2 hyperinflations in the last 15 years and declared bankruptcy in 2001. That will give you a jump start on what means to be an argentine.

My Research Into Taxis

Like any good investor, I started by getting a second opinion on the taxi business. I spoke to several people "in the know" and they told me the same thing that this reader did... the taxi business is controlled by the mafia and it is not a clean business -- certainly something I would not want to involve myself with. And so I didn't. I decided not to pursue the taxi business any further.

Apartment Rental Comments From Readers

Many decades ago, while under Peron's protectionist laws, we were paid coins ANNUALLY by one of our tenants. Yes, that is correct. Our annual proceeds from our investments were less than a dollar a year. It took us 27 years to get rid of that and other tenants. More recently, we still have to face headaches in this dpt., with our 2003/4/5 tenants. In addition, we lost properties by the handful in litigations with mortgage owners. Not to mention the suits we had to face in the business world and lasted not 10, not 20, not 30 but 40 years and that outlived both my grandfather and my father.

My Research Into Apartment Rentals

After researching apartment rentals, a lot of people told me the same thing that this reader did... it is very difficult to evict deadbeat tenants. I spoke to one person who owned apartments who told me that he didn't rely on the courts at all to deal with deadbeat tenants... he relied on off-duty cops with billy clubs.

Again, this is not something I wanted to get involved with. I can just see the headlines now... "Yanqui Businessman Puts Family Out On The Streets". I fully realize that Argentina does not respect the rights of foreign investors. If a court won't evict an Argentine family when an apartment is locally owned, they're sure not going to evict them when the apartment is owned by a foreigner.

Conclusions

I'm still not giving up on the idea of apartment rentals, however. Since the beginning, I was always looking into renting to other foreigners on vacation or on company assignments, not locals. As an American, I realize where my expertise lies -- marketing products and services to fellow Americans, a culture I know and understand.

With my own Internet company, I do most of my selling to American businesses. If we have interest from a local firm, my Argentine manager takes care of the sales call. I don't even speak enough Spanish to have a conversation above the 4th grade level, so I'm certainly not going to try and sell products and services in the local market on my own.

I was in Honduras about 8 months ago and signed-up for a snorkel/kayak trip on the island of Roatan. Once I arrived, I found that the business was owned by Americans and the guide was a New Zealander. As I've traveled it seems like I always run into travel businesses that are owned by Americans or other expats. They're doing what they know -- selling services to people like them, people they understand.

I would recommend the same to other expatriates who are looking for business ideas or investments. Stick with what you know. As a foreigner, you're going to have difficulty selling to a local market that you don't understand.