Work Abroad but earn in USD

Sunday, May 21, 2006

The Mundial Is Coming and Argentina Gets Ready

You can feel the anticipation. Everyone's talking about the Copa Mundial (or just "mundial), which is known to the English-speaking world as the World Cup. Mundial-fever is definitely something new for me. In the United States, I lived 25 years without noticing or caring about the World Cup. Advertisers are giving away tickets and trips as promotions -- it seems like everywhere I go, I've been entered into a contest to win a trip just by buying a soda, making a phone call, etc.

Not only are big businesses getting ready with promotions, but so are small ones. I noticed the corner café that I usually eat my lunch in has just installed a new 42-inch plasma screen. Apparently restaurants that do not show the game will be facing a severe loss of business during June. It wasn't just my local café, either. All over the city, new plasmas are going in.

The fever isn't just restricted to Argentina either. Last week in Brazil, the rioting prisoners of Sao Paulo demanded two things -- conjugal visits from their wives and girlfriends and plasma TVs to watch the World Cup. That just goes to show you how Latin Americans view the World Cup in terms of importance -- its right up there with sex.

In addition, I've been informed by people in my office that I should not expect anyone to be working should Argentina be playing during office hours. Since I'm American, apparently they felt the need to explain this to me explicitly, just so there's no confusion. I don't know how it works in other companies, but I expect that on the days Argentina is playing, there won't be too much work going on either.

So, get ready. Just 18 days until the start of the World Cup. If you're here in Argentina, its going to be the event for June/July.


Tuesday, May 09, 2006

The Undervalued Peso

I received a question today about the rumors of the peso being undervalued. Although I've addressed this issue in other posts, I wanted to make a very detailed explanation so that expats can understand what the issues are. The currency issue is an important one for every expat that's living here on a U.S. dollar-based income or pension.

Reader's Question

I keep hearing that the peso is undervalued and that the government is deliberately keeping the exchange rate with the dollar low. Is this true? And if so, how and why are they doing it? I thought now that the 1:1 fixed rate days were over the market is free.

The Peso Market

The days of 1:1 are over and now we're living in the days of 3:1. However, the market is by no means a free one. It is still tightly controlled by the government. The central bank controls all wire transfers going in and out of the country. Anyone wiring money in or out must show the government what they're doing and why.

Like the government of China, the government here allows the peso to float within a certain range with the dollar. Over the last few years that range has been between 2.8 and 3.1. However, many people here believe the true market rate of the peso is between 1.8 and 2.4. So, how does the government keep the peso down, why are they doing it, and can it continue?

Why The Peso Wants To Rise

There are several reasons the peso should be higher these days. First is due to the fact that there's more exports now than imports. When you have everyone selling abroad, the exporters get paid in U.S. dollars. However, they pay their bills in pesos, so they must turn in their dollars for pesos. If you repeat this process thousands of times you'll eventually have more people who want pesos than dollars and this causes the value of the peso to increase.

In addition, there's a lot of people with dollars who are coming here. All these expatriates, foreign investors, and tourists have dollars and they need to exchange them out for pesos to pay for things here. That puts more pressure on the peso. With such a demand for the peso and only a limited supply of pesos out there in the market, the price of the peso should go up.

Market Manipulation

The government, however, is preventing the rise of the peso. It wants to protect the exporters and the national industry. It does this by buying up all the dollars on the market and printing new pesos. By buying up all these dollars and supplying pesos to everyone who wants them, the government can keep the peso from increasing in value.

This strategy does cause some problems, however. Namely, inflation. By flooding the market with all those pesos, the peso's buying power would be reduced -- too much money chasing too few goods. The government knows, this, so they are countering this by borrowing back all the pesos they've just printed. So, the number of pesos in the marketplace remains more or less the same.

Nevertheless, this strategy is not sustainable over the long term. Although the government earns some interest on the U.S. dollars it is storing up, the amount it earns is less than what it has to pay out to borrow all those pesos. Eventually the interest payments on the pesos will blow a hole in the budget and the government will be forced to let the peso rise in value.

Impact for Expatriates

What this means for you is that you can't expect to have a cheap peso forever. While I fully expect that Kirchner will keep the current exchange rate policy when he's reelected next year, if he can't get the inflation problem under control, he may be forced to let the peso rise. Inflation has been the undoing of so many other Argentine presidents, I would expect that Kirchner is more obsessed with keeping inflation low than he is keeping the exchange rate fixed at 3:1. So, just keep an eye out.

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Monday, May 01, 2006

The "Nice Areas" Of Buenos Aires

There was an interesting comment from a reader, responding to another comment about how rents are going up in the "nice areas" of Buenos Aires. I thought I'd respond and hopefully get a discussion going about some of the different neighborhoods of Buenos Aires.

Reader's Comments

All this talk about "nice areas", what makes an area nice exactly? Selfserving opinions? Or has the citycouncil perhaps rated the Buenos Aires neighborhoods and put them into the five catagories "Very nice" "Nice" "Okay" "Not nice" and "Not nice at all" ???

Fact of the matter is that different people like different things and what one person thinks is nice the next person may rate as inadequate.

As far as I am concerned saying that Buenos Aires has three nice neighborhoods and that those neighborhoos are Palermo, Recoleta and Belgrano is just spreading disinformation and misleading readers.

I aint seen all of this city but pretty much everything I have seen has been pretty and I encourage those who are coming to Buenos Aires to see the following neighborhoods for themselfs Flores, Villa Crespo, Villa Urquiza, San Telmo, Caballito and Parque Chacabuco.

Living and Working in Buenos Aires' Neighborhoods

Over the last 3+ years, I've either lived in or had offices in the following neighborhoods: Villa Crespo, Caballito, Balvanera (Congreso), Recoleta, and Palermo. When you consider that Buenos Aires has 48 different barrios, you realize just how large this city is and how it is impossible to really know it all. In fact, there are entire sections of the city that I've never seen. For example, I almost never find myself going south of Rivadavia Avenue. It seems like everywhere I want to go is north of Rivadavia. I've asked friends about this and they tell me the same -- they hardly ever find themselves that far south.

Villa Crespo

When I made my first hire more than 3 years ago in 2003, the country was still recovering from the economic crisis, unemployment was at 20%+, and I rented an office in Villa Crespo for less than $50 USD per month. It was in an ugly Soviet-style building filled with small offices with metal doors. Many people in the building were textile workers. When you walked in, cell phones immediately stopped working. It felt like a bunker. It was really a terrible place. I have two employees who are working with me today who worked back when we had that office. Today we make jokes about how awful that place was.

You'll find similar places all throughout Villa Crespo. Back in the late 1800s, Villa Crespo was host to a large shoe factory. Today it still has lots textile workers and you'll find lots of auto parts shops, etc. You won't find many parks, squares, or green spaces in Villa Crespo. It really could use more.

I wouldn't recommend Villa Crespo for anyone, foreigner or local. Although Villa Crespo is a middle-class neighborhood (or perhaps lower middle-class), there are other nicer middle-class places for people to live and work. In fact, once my employees saw that our Buenos Aires office was profitable, they immediately approached me and asked for permission to move our office to Caballito. The rent was higher, but not much higher. The neighborhood and the office was much better, however.

Villa Crespo served its purpose. It was the first office I was opening 100% on my own, without money from a partner or financial backer, so it allowed me to operate on a shoestring budget and get a foothold in Argentina. Once we started making some money, however, we were out of there.


Caballito is a centrally-located middle-class neighborhood with plenty of shopping, residential, and commercial locations. It has parks, squares, green spaces, libraries, museums, and culture centers. Now, it has nowhere near as many as you'd find in places like Palermo or Recoleta, but it does have them.

Caballito has good and bad areas as well. I could take you in a taxi, drop you off in specific areas and you'd say Caballito was dirty, noisy, ugly and you'd have a very bad impression of it. I could also take you to an area that would make you think you were in a nice part of Palermo, with small residential streets that are quiet and clean.

We kept our office in Caballito for two years and everyone liked it. At that time, most of our employees lived in Caballito and it was easy to get to via bus or subway. Caballito also has easy access to downtown via the A-line subway that goes down Rivadavia Avenue. I have good memories of Caballito. It was a comfortable place to work, a very normal place.


Balvanera is more commonly referred to by its three zones: Congreso, Once, and Abasto. In fact, I've never heard anyone say that they live or work in Balvanera. They would always say either Congreso, Once, or Abasto. Our office is currently located in Congreso (just a few blocks from Congress) and is an ideal location that is close to downtown without actually being in downtown. For me, that's important, since traffic is always a nightmare downtown. The traffic in Congreso is much, much better.

Balvanera has several important sites, such as Plaza Miserere, the National Congress, the Abasto shopping mall, and the University of Buenos Aires. Balvanera is also a little infamous because near the Once train station, many of the old warehouses have been converted into offices, dance halls, or residential lofts. In late 2004, República Cromagnon, one of those dance halls, went up in flames and 194 people were killed.

Balvanera is a better neighborhood for working rather than living. Most of the zoning is commercial, in fact, and the residential spaces that do exist almost always have a shop or business on the first floor. If you need to be downtown often, but not too often, Congreso is a good place to have your office. In fact, when I used to live in Recoleta, I would walk the 10 blocks from my apartment in Recoleta to my office in Congreso each morning.


Recoleta is probably Buenos Aires' best-known neighborhood and most of the tourists who come here end up staying either in Recoleta or nearby. I lived in Recoleta for more or less 9 months when I moved to Buenos Aires. It is the neighborhood I'm most familiar with. There are plenty of things to like about Recoleta: Nice squares, parks, plenty of museums and culture, french-style buildings with impressive facades, lots of restaurants and shopping, and one of the safest spots in Buenos Aires, even at night.

I own an apartment in Recoleta that I'm currently renting out as a tourist rental and, for tourists and newcomers to Buenos Aires, it is a great and very comfortable place to be. My two favorite things in Recoleta are The Village, which houses the best movie theater in Buenos Aires (I'm a nut for the cinema) and the Recoleta Cultural Center, which is a constantly-changing exhibition of art from both established and new artists. I like to hit the Cultural Center at least bimonthly.

Palermo (Hollywood, SOHO, Chico, Viejo, etc)

Palermo is the largest barrio of Buenos Aires and is subdivided further into various smaller Palermo neighborhoods. This is where I live now and, if you're under 40 and single (or married and still like to go out), Palermo is the place to be. Block after block of restaurants, bars, and clubs line the streets.

Palermo is lower density than Recoleta and Caballito and this means that many times you'll walk more living in Palermo than other neighborhoods that have things closer. In Palermo you'll find lots of 1-3 story buildings. There are residential buildings which are called "PH", which are long horizontal buildings that have a long hallway entrance leading to the various apartments. Most of the times there's no doorman or security with these buildings, so living in Palermo is somewhat less safe than Recoleta.

Palermo is also home to an enormous amount of green and open spaces (the most inside the capital) -- the parks on Libertador, the Buenos Aires Botanical Garden, the Buenos Aires Zoo, etc. You'll also find the race track, polo fields, and La Rural (an outdoors exhibition and convention area).

My own opinion is that Palermo is also home to the best and most varied restaurants in the city, especially if you like ethnic food. You can find food from France, Spain, Italy, Scandinavia, Asia, North & Central America, etc. You could go out for a month and just eat at restaurants in Palermo and not miss out on anything.

Now that I'm here, I really couldn't see myself living anywhere else.

"Nice Areas"

Now, back to the reader's comment. You are right that while I may consider some areas "nice" and other areas "not nice", we are all entitled to our own opinions. In fact, although this reader was responding to a comment made by another reader and not to me, I generally agree with what was said. I don't think it is self-serving to recommend to people to live in Recoleta, Palermo or Belgrano. It is just one person giving advice to another.

The fact is, Recoleta, Palermo, and Belgrano are some of the most expensive areas of the city and if you are a foreigner and you're coming here with dollars to spend, you can probably afford to stay there. But by no means should you avoid the other neighborhoods of the city. You might find something you like much better. The best thing is to rent a place for a month in each of the different neighborhoods you think you might want to try out. Pretty soon you'll figure out what you like and what you don't.

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