Work Abroad but earn in USD

Thursday, October 06, 2005

Argentina and Private Property

As part of this continuing series of questions, we move on to the next one about private property in Argentina.

Reader's Question

Does Argentina respect private property like it says in the Constitution? No taking of property, or is this a "wink-wink" unless somebody who has money and power wants the property, or a person commits an unpopular crime? Is it common for people to loose their homes because they can't pay property taxes?

In General, Property is Respected

Argentina has not seen the kind of nationalization and redistribution that is going on in Venezuela and Cuba. An ordinary person or small to mid-size business could come here, invest, and not worry about losing their home / business to government confiscation. Foreigners are legally permitted to purchase property and if you have a DNI, you are entitled to all the same rights as citizens (except voting), which includes the right to private property.

Probably the two biggest mistakes you can make is to either not pay your property taxes or not use a good notary when closing on your property purchase. If you don't use a good notary and there is a problem with the title that comes up later, you can lose the property. A good notary will do his research and find out anything funny with respect to the property.

On the other hand, if you don't pay your property tax, then you'll also be in trouble. Property tax is about 1% of the property's value and is paid annually. Where people get in trouble is that they forget to pay this. Unlike the U.S., you don't get a property tax bill in the mail here. You have to hire an accountant to submit a property tax return for you.

Just like all taxes, you get interest and penalties if you don't pay your property tax on time each year. So, suppose you bought a property, didn't pay property tax for 10 years, and then you go to sell it and oops, you have a mountain of penalties, interest, and late fees to pay that have totally eaten up the value of your property. It may look like "confiscation", but you wouldn't have owed all that money if you would have paid your taxes every year.

The Largest Private Property Confiscation

The largest confiscation of private property happened during the economic crisis when caretaker President Eduardo Duhalde confiscated $17.8 billion dollars of foreign reserves from the Central Bank of Argentina. These foreign reserves did not belong to the government, however. They were the legal property of all peso holders, who had the right to exchange their pesos with the Central Bank for dollars at any time they chose.

This wasn't the worst of it, however. The government later confiscated all dollar deposits at all banks and did a forced conversion to pesos at an artificial exchange rate. This action was later overturned by the Supreme Court and the government was ordered to pay back the dollars. The Supreme Court did not overturn the devaluation, however, despite the fact that it was legalized theft.

This is why I advise all foreigners here not to put their nest eggs in Argentine banks. Keep your money back in the U.S., where it is safe. In summary, I think its safe to say that there won't ever by mass confiscations of real estate -- people wouldn't stand for it and you couldn't cloak the taking of real estate as a financial austerity measure designed to spur a nation's economy.

I'll also point out that Title 22, Section 2370 of the U.S. Code provides for the total suspension of U.S. assistance to any country that seizes property owned by U.S. citizens. So, I do think this provides another measure of protection. If your goal is simply to buy some property here, an apartment, a vineyard, a farm, or just a place to call home, I wouldn't worry. Just make sure you have a good notary and pay your taxes and you'll be fine.

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Blogger ABA said...

You make excellent points EE. Your information is spot on. Last year, I probably bought more residential real estate in Buenos Aires than anyone in the world. I also do a lot of real estate consulting. I can tell you horror story after horry story of people that hired me to fix problems.

Having a good lawyer is essential. Some lawyers don't even do a title check. Very lazy and just not ethical. One client from New York City was going to put 30% down payment (boleto) and two days before he got nervous so he hired me. I reviewed the paperwork to discover the realtor nor the lawyer did a certificado de dominio (title check), there was a mistake with the address on the "reserva" offer and the person trying to sell the property didn't have power of attorney to sell it (it was owned under a corporate name).

Had he put the 30% down he would have had big problems. Remember, the realtor and lawyer don't get paid until you put down money. Realtors get paid at the boleto stage and the lawyers at the closing (escritura) so they many times push things through that shouldn't go through. Keep in mind all transactions are with cash over the table. Literally!!

In the case above, my client immediately fired his attorney and hired mine. Mine fixed the mess but it took 2 months. Just be careful. Buying here is NOT like buying in the USA.

El Expatriado is spot on. Property laws are respected here for foreigners. Keep in mind that foreigners over the past 3 years have gobbled up hundreds of millions of dollars of property here in Buenos Aires (and all over Argentina). Every day more and more of Buenos Aires is falling into the hands of foreigners. I don't see that trend slowing down. In fact, I see it speeding up with more foreigners purchasing here.

Last year I purchased tens of millions of dollars in real estate for myself and my clients. I expect to double that this year. I'm now getting big corporations and investment companies wanting to buy here. I'm not talking about a few apartments. I'm talking about big buildings and plots of land.

I totally agree with EE. A property seizure here by the government is very very very very very unlikely, especially with more and more foreigners every day owning real estate here. They are helping to drive the turn around in the economy.

Kirschner is a smart guy. Love him or hate him he is a smart guy. Those worried about his pal, Chavez....remember the u$s 1 billion in bonds Chavez bought. I remember reading about the u$s 500 million in savings he sent to Switzerland before the crash when he was a Governor of Santa Cruz (in South of Argentina).

Also, I also like the Title 22, Section 2370. You won't seeing any property seizures going on. I'm not worried at all.

1/14/2006 09:49:00 AM  

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