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.
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.