Real Estate: Why Mortgage Loans are Lacking in Argentina

The availability of credit in Argentina depends on the level of savings deposited in the banking system.

Mortgage lending at present is limited in Argentina because the private sector of the Argentine economy has limited savings.  The situation is further aggravated by the fact that those limited savings often don’t enter the banking system.  Fears of having funds confiscated (as they were in the economic crisis of 2001) and a loss of real buying power drive people to buy US dollars and place them in a safe deposit box or under the mattress. Others simply transfer their funds outside of the country.

When internal savings are lacking, having external savings would be an alternative.  This would mean that foreigners, individuals and companies, from different countries, would deposit funds in the Argentine banking system or purchase national savings bonds.  Since the economic crisis of 2001, however, Argentina has difficulty attracting this type of foreign investment.

This reduction in both internal and external savings greatly reduces the availability of mortgage loans with affordable interest rates.  The limited amount of mortgage lending and the high interest rates most mortgage lenders offer is keeping many middle class families from acquiring their first home or upgrading to a larger home.

The only affordable mortgage loans are subsidized government loans that charge interest rates below market values.  Funding for these subsidized government loans comes from the government’s tax revenues and other revenue sources such as the recent nationalization of private retirement funds.  If government revenues drop, the supply of government loans declines as well.  Currently, the availability of mortgage loans with reduced interest rates is dependent on the government’s limited stock.

Lower income families that might qualify for these lower interest rate loans may still be reluctant to take on the payment responsibility.  An increase in unemployment, a decline in real buying power and an uncertain labor market makes many people put off spending.  They are particularly leary of getting into large debt, as required with the purchase of a home.

To get a sense of the current loan situation, the amount of available mortgage credit has dropped by one third from the year 2000 to the present.  This reduction in mortgage lending means that the vast majority of real estate transactions will most likely continue to be done in cash.

The proven Buenos Aires – Argentina lawyer professionals at the Kier Joffe law firm have experience working with foreign clients involved in all kind of cases in Argentina. Buenos Aires Argentina attorney professionals are knowledgeable in almost all the practice areas of law, to service its international cases in Buenos Aires Argentina. International clients will have the confidence of knowing that the case is being handled by an experienced and knowledgeable Buenos Aires  lawyer in Argentina.

www.kierjoffe.com

 

Real Estate: Why Now is the Time to Buy Property in Argentina

Just over a decade ago Argentina spectacularly unraveled with the biggest default in history—$100 billion. Dollar deposits were converted to pesos. Then, overnight, the peg of one-to-one with the dollar was broken. The unpegged currency immediately devalued. Savings were wiped out. Banks were set alight and locals took to the streets in protest.

That crisis created the biggest buying opportunity of a decade. During the fire sales you could have picked up a historic, high-end property in Buenos Aires or a vineyard in Mendoza for a song.

Today, Argentina is back in a bind. There is a strong possibility of another crack-up within the next year. And then we’ll have the same opportunity we had a decade ago. The signs are all there. The streets of Buenos Aires have recently seen the return of the backstreet currency exchange.

According to the official exchange rate, which is subject to capital controls, 4.4 pesos buys you a dollar. But on the street people are happy to pay up to 6.7. Inflation runs at 25%. The purchasing power of an Argentine’s peso savings is going down by one-quarter each year.

The government claims inflation is 9.9% and has outlawed calculating or quoting any other inflation rate. Forty percent of dollar deposits have been withdrawn from Argentina since last October. Now there are capital controls. You need special permission to move your dollars overseas.

To take a foreign vacation, Argentines have to apply to a bureaucrat for permission and explain where they got the money for the trip. And there are rumors that it will be made illegal to talk about the existence of the shadow market exchange rate for dollars.

But a lot of Argentines’ dollars and pesos don’t reside in bank accounts. Property transactions typically take place in special rooms in lawyers’ offices, and they’re a cash deal. There’s that much distrust of banks. They are fine for day-to-day things like paying your electric bill. Not for your savings, though.

And these transactions more often than not take place in dollars…if you pay in dollars you could get 25% off the price of property. The government has outlawed this, making the buying and selling of real estate in dollars illegal. Just one more rule Argentines will find their way around.

By some reports, if an Argentine company complied with all the taxes and tariffs it faces, they would eat up more than the company’s pretax profits. So the shadow economy thrives. By necessity, it seems, rather than greed to pay less tax. Middle-class day-trippers take the ferry to Uruguay to put their savings in deposit boxes. The rich spend millions on condos in Punta del Este, Uruguay (see sidebar below).

For Argentines, real estate is their bank. They understand inflation and expropriation from bank and pension accounts. If they have some spare cash, they’ll buy an apartment. Or a beach home across the Río de la Plata in Uruguay. Or a condo in Miami.

Now fewer Argentines are using local real estate as a hedge against inflation. New construction and permit applications have fallen off a cliff. They just want their cash out.

The government claims that the rate of outflow has slowed. But with every passing week, companies and individuals figure out new ways to get their cash out. For instance, companies buy financial instruments locally in pesos that they immediately resell in New York for dollars.

Argentines have seen it all before. When a government and a banking system take your life’s work with the stroke of a pen, you don’t forget. If you’re lucky enough to rebuild your savings, the next time you will be ready. And the harder the Argentine president, Cristina Kirchner, tries to keep assets in the country, the more they’ll be siphoned out.

Meantime, Argentina is all but frozen out of international debt markets. The government hasn’t reached a settlement with the group of creditors (known as the Paris Club) since its last default. So the country and the banking system desperately need these deposits to stay afloat.

But they continue to do incredibly dumb things. Two years ago President Kirchner seized private pension accounts. Now she is going to lend $4.4 billion of this money, at a rate of one-tenth the inflation rate, to new home buyers. A lottery will decide who gets the loans—not capacity to repay.

Argentina has major competitive advantages in beef production. But land under beef farming is contracting. Beef producers face large and complicated export tariffs and are forced to sell cheaply to the domestic market. Many have moved operations to Uruguay or switched to soya.

It’s one crackpot idea after another. And the cycle repeats. Expropriating your citizens’ savings or international companies like YPF (a subsidiary of Spanish oil company Repsol), which President Kirchner nationalized last April might buy you some time. But not much. The writing is on the wall.

In the last crisis, the trigger event was Argentina’s massive default on its sovereign debt. This time around Argentina doesn’t face that scenario. Government spending has to be funded from printing presses, taxes, and expropriation of personal or company assets. It’s hard to see how the government can collect more taxes. The printing presses are already causing the inflation and the rush to backstreet currency-exchange brokers. There’s a limit to what you can expropriate.

This time around the trigger event for a full-scale crisis will be the country’s running out of hard currency. There will be no money to pay for imports. Argentina can make do without more Porsches and Gucci handbags, but the country will grind to a halt if industry and energy-producers can’t get their hands on crucial imports. The factories will shut. Things will have to get really bad before we’re in a “buy” situation. Pay attention if you turn on your TV and see news flashes of burning banks and of factories that don’t have hard currency to buy raw materials, locking out their workers. If you turn on your TV a second day and see similar reports, then book your flight. Your dollars will go a long way.

Comparisons between the high-end neighborhoods of Paris and Buenos Aires are correct. It’s a world-class capital with a wealth of cultural activities, fine dining, and shopping. Buy when the Argentine capital is in turmoil and you’ll be sitting on prime real estate in one of the world’s finest cities.

If you’ve ever dreamed of owning your own vineyard, I can think of no better place than Mendoza, Argentina’s most famous wine-producing region. Mendoza sits at the foot of the Andes, 600 miles west of Buenos Aires. Soil and climate are perfect here for wine production.

Argentina long held promise. In 1900 it was the world’s sixth-richest country—richer than the U.S. Immigrants flooded from Europe. The British came to build the railways. They brought along Irish and Italians. The Spanish came. What followed is text-book mismanagement. When it comes to a head again, we’ll have a full-blown crisis. And an opportunity to pounce once more.

How the Crisis in Argentina will Affect Real Estate in Uruguay

Real estate prices in Uruguay have raced ahead over the past three years, and Argentines are driving this market. Some have been looking for a beach home…but most just wanted a safe place to store their wealth. Multi-million dollar condo sales in Punta del Este were common.

Argentines are banking on another crack-up. They have seen it all before. Now the Argentine government has bullied Uruguay into agreeing to pass on information about Argentines who bank in Uruguay.

But Uruguay is still the closest haven to store savings and wealth. Geographically and psychologically, it’s close. Many Argentines will figure out a way to get around this. I expect to see a major jump in Panamanian corporations buying real estate there. My legal contacts are already reporting a six-fold increase in inquiries from Argentine clients interested in setting up Panamanian corporations that would circumvent the reporting requirements.

Even so, sales volumes in Uruguay are falling. In Punta I hear they are off by more than half. Transactions and volume were at record levels in the lead-up to Argentina’s latest crisis in anticipation of what’s now happening. Now demand will soften. Few sellers are desperate. They bought here to store wealth. But because buyers will be thin on the ground, if you can find a desperate seller, you’ll get a good deal.

 

 

Argentina Apostille

Argentina Apostille

If you are sending your documents to a country that is part of the Hague Convention, an Apostille certificate is used as proof of authenticity among the member nations.

Legalization – document authentication services for global trade document management

When your organization conducts business and trade transactions abroad, your documents need to be authenticated for use in other countries.

Depending on whether the country where you do business is a member of the Hague Convention, your documents will need to go through a certification process– either Apostille for Hague signatories or authentication (legalization) – a recognized process of legalization of documents for use abroad.

We provide Certificate Apostille for Albania, Andorra, Antigua, Argentina, Armenia, Australia, Austria, Azerbaijan, Bahamas, Bahrain, Barbados, Barbuda, Belarus, Belgium, Belize, Bosnia, Botswana, Brunei, Bulgaria, Cape Verde, Colombia, Cook Islands, Costa Rica, Croatia, Cyprus, Czech Republic, Denmark, Dominica, Dominican Republic, Ecuador, El Salvador, Estonia, Fiji, Finland, France, Georgia, Germany, Greece, Grenada, Herzegovina, Honduras, Hong Kong, Hungary, Iceland, Republic of Ireland, Israel, Italy, Japan, Kazakhstan, Kyrgyzstan, Latvia, Lesotho, Liberia, Liechtenstein, Lithuania, Luxembourg, Macau, Republic of Macedonia, Malawi, Malta, Marshall Islands, Mauritius, Mexico, Moldova, Monaco, Mongolia, Montenegro, Namibia, Netherlands, New Zealand, Nicaragua, Niue, Norway, Oman, Panama, Peru, Poland, Portugal, Romania, Russia, Saint Kitts, Saint Lucia, Saint Vincent, Samoa, San Marino, São Tomé, Serbia, Seychelles, Slovakia, Slovenia, South Africa, South Korea, Spain, Suriname, Swaziland, Sweden, Switzerland, Tonga, Trinidad, Tobago, Turkey, Ukraine, United Kingdom, United States, Uruguay, Uzbekistan, Vanuatu, Venezuela, Vietnam from Delhi, Mumbai, Chennai, Kolkata: India.

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Argentina Apostille

Argentina Apostille

Real Estate: In Argentine Development, Vineyards and Villas – Argentina

New York Times – By NICHOLAS GILL

TUNUYÁN, ARGENTINA — “I’m a Texas boy and love the ranch; this reminds me of that,” said Michael Brochu, a semiretired tech executive from Seattle who is awaiting the completion of his villa at The Vines of Mendoza, a development in the foothills of the Andes.

“Big open spaces,” he said. “It’s like Napa 30 to 40 years ago.”

Mr. Brochu first heard of the development, on 400 hectares, or 1,000 acres, when he purchased eight hectares of vines several years ago through its vineyard estate program.

According to the development’s Web site, more than 100 investors have already planted 280 hectares with 18 varieties of grapes, like Malbec and Syrah. A team of experts is available to help guide owners, and to produce wine at the development’s own facility.

When Mr. Brochu heard that the company would be building villas adjacent to the vineyards, he jumped at the opportunity. “The key for us is the whole concept,” he said. “We can participate as little or as much as we want. We drink wine, but we didn’t want to be in the wine business. It’s more of a lifestyle.”

The one- and two-bedroom residences — made of wood, brick and concrete — range from $350,000 to $900,000, depending on the layout and size of the plot. (Many real estate transactions are done in Argentine pesos, but developments seeking international buyers generally price properties in dollars.) Twenty-two villas are scheduled to be completed by the Vendimia, the grape harvest in March.

But The Vines of Mendoza — established in 2005 by Michael Evans, an American entrepreneur, and Pablo Giménez Riili of a well-known Argentine winemaking family — is far from being the valley’s only new development.

While several projects, like the 310-hectare Valle de Uco, were put on hold in the wake of the 2008 global downturn, most are preparing for their first residents.

At La Morada de los Andes, near The Vines of Mendoza, 83 lots are under development on more than 400 hectares of vineyard. Land prices range from $90,000 to $160,000, with construction costs estimated at $1,600 a square meter, or $150 a square foot. The first structures, including the clubhouse, are expected to be completed by the end of the year.

Title transfers involving residential property are much simpler than those for farmland, said Steve Rosberg, the founding and managing partner of Ushay Investments. “The lots are residential, not agricultural, and this is an important distinction,” he said. The development company owns La Morada, as well as the sleek Fierro Hotel in Buenos Aires and Los Arbolitos, the for-profit vineyard investment trust that owns the vines around La Morada. Its grapes are sold to area wineries, with the trust supervised by Mr. Rosberg’s son Andres, president of the Argentine Sommelier Association.

Homeowners at La Morada may invest in Los Arbolitos, but even if they do not, small amounts of the wine will be allocated to them and sold in the clubhouse to help offset their expenses. Also, the developers say there will be opportunities to defray their costs through rentals.

“We will provide full property management services so that they make revenue from their non-occupancy time,” he said. “We estimate that a gross 8 percent return as a very conservative projection.”

Spanish and Italian immigrants planted vines in the Uco Valley as early as the 1920s, but the valley, which is 70 kilometers long, or 45 miles, was considered too far from Mendoza, the provincial capital in central Argentina. Most of the region’s wine production was concentrated closer to Mendoza, in Luján de Cuyo and the Maipú Valley.

In the early 2000s, when Argentine wine began to take off on the global market, top names like O Fournier, Achaval-Ferrer and Catena Zapata decided the valley had the potential to produce intense wines with relatively low acidity.

Surrounded by snowcapped Andean peaks, the region often draws comparisons to the Napa Valley, north of San Francisco, for its tourism potential, which includes outdoor activities like skiing, biking, and horseback riding.

While wine is a central element to all of the Uco Valley’s developments, some, like Tupungato Winelands and Algodon Wine Estates, are becoming lifestyle complexes, with golf courses, polo fields, boutique hotels, spas and a country-club atmosphere.

“For the Mendoza wine and real estate market, the first thing that has to be said is that it has been growing steadily for 15 years now,” said Andrés Ostropolsky, a Mendoza-based sales associate for Sotheby’s International Realty. The agency lists many properties in the region, ranging from vineyard estates at Casa Palmero to Casa de Uco, a vineyard complex where private home sites, as well as a hotel and spa, are under construction.

According to Mr. Ostropolsky, the asking price per uncultivated hectare ranges from $12,600 to $39,000, while the price per hectare of vineyard ranges from $35,000 to $98,000, depending on the location. In comparison, the price for a prime hectare of vineyard in Napa Valley ranges from $500,000 to $750,000.

“This growth has not been explosive, but continuous over time,” Mr. Ostropolsky said of Uco Valley prices. “The average rate for the appreciation of the land has been around 6 percent” a year.

Foreigners have not been allowed to buy large tracts of land in Argentina. “Recently the Congress has issued a law that allows a foreigner to buy up to 1,000 hectares,” Mr. Ostropolsky said. “In terms of vineyards, that’s a huge number. A big vineyard can be one of 150 to 250 hectares at the most.”

The proven Buenos Aires – Argentina lawyer professionals at the Kier Joffe law firm have experience working with foreign clients involved in all kind of cases in Argentina. Buenos Aires Argentina attorney professionals are knowledgeable in almost all the practice areas of law, to service its international cases in Buenos Aires Argentina. International clients will have the confidence of knowing that the case is being handled by an experienced and knowledgeable Buenos Aires  lawyer in Argentina.

www.kierjoffe.com

Real Estate: Investing in Buenos Aires-Argentina Property

There are many investors in this world, and each has his or her own investment style. That is, some choose to diversify and invest in multiple markets, others choose one market specifically, and still others stay liquid for much longer than the typical investor.

Investing in Buenos Aires Property – Evaluate Prices and Risks

With so many different markets to choose from, and so many different ways to invest, it’s no surprise that there has always been a great debate about the best way to invest. Typically, it comes down to financial assets versus property. This can be a tough debate, and frankly, it usually results in agreeing to disagree.

Many variables go into an investor’s decision. First is the investor risk aversion. Secondly, each investor has a differently structured investment portfolio, which will affect his or her future decisions. Finally, different investments require different amounts of liquidity.

Most experts agree that a good distribution of the portfolio is the best idea, as the saying goes: don’t put all your eggs in one basket. For example, while a bond may be much more liquid than real estate, it also carries certain risks that are not found in property investments. And this is no trivial point when in a country where defaults and seizures have become a regular part of recent history.

On the flip side, many argue that buying property relies too much on finding and keeping good, responsible tenants who not only pay on time, but return the property in the condition they found it in. Upon all that, there are also the costs related to getting tenants into the property, and the standard exit costs.

When investing in a financial asset, many choose to avoid the traditionally volatile Argentine options and set their sights abroad. This strategy can easily be applied to property, as well. For example, Uruguay is a just across the river, and is a great opportunity for an alternate investment.

The other major issue for any type of investment in real estate Buenos Aires has to do with the capital to be gained, and the price of entry. That is, if an asset is unusually low and has a projected rise in its future, it is more than just as asset; it also offers capital gain income. However, the state can often distort the price of entry. For example, 2002 brought many property sales because becoming liquid was the best way to go, as construction costs were unusually low, and liquid assets meant building opportunities.

But the world has changed greatly since then, both internationally and in Argentina. The international financial crisis also affected the cost of property, and locally, relative prices have been greatly distorted. Prices are too low for sellers to be comfortable selling, the market has simply become a more complicated place.

In short, neither financial assets nor physical ones win the battle, but it is important to evaluate the risks of any investment, even property investment, before taking the plunge.

The proven Buenos Aires – Argentina lawyer professionals at the Kier Joffe law firm have experience working with foreign clients involved in all kind of cases in Argentina. Buenos Aires Argentina attorney professionals are knowledgeable in almost all the practice areas of law, to service its international cases in Buenos Aires Argentina. International clients will have the confidence of knowing that the case is being handled by an experienced and knowledgeable Buenos Aires  lawyer in Argentina.

www.kierjoffe.com