I’m writing to you from Argentina – a country that boasts the highest GDP per capita in Latin America. It may sound impressive, but the nation’s glory days are long past.
In the early part of the 20th Century, Argentineans claimed the highest wealth per capita in the world. It was a resource and agricultural powerhouse, exporting goods to much of Europe. Back then, the phrase “rich as an Argentine” was part of the global lexicon.
Fast forward to today, and the buildings are crumbling from neglect. The streets are filled with potholes. All that prior wealth has slipped through the cracks, and capital is being stifled.
So who and what’s to blame for Argentina’s fall from grace?
The “Haves” and “Have Nots”
Most members of the dwindling middle to upper-middle classes of Argentina have few positive things to say about the country’s government. Operating under a mandate of populist policies that rely on taxes and regulation, it takes from the haves and gives to the have-nots… or to government coffers and officials.
The latest effort to inflict financial pain on the “haves” is the introduction of exchange controls, which make it harder to swap pesos for dollars. As a result, the foreign exchange black market is once again active, and the savvier investors are holding onto as few pesos as they can, for the shortest possible duration.
With all of this artificial meddling and scheming, a devaluation appears to be on its way. A few years ago, the black market for foreign currency was dormant, and spreads were less than one half of a percent between the buy and sell price. Today, that number is greater than 4%.
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In general, the economic situation here doesn’t leave a lot of opportunity for investment. And when Argentineans do invest, they buy land.
Why? Simple… Despite the numerous failed governments, the rampant corruption, the default on sovereign debt and exaggerated populist policies, the Argentine government has never confiscated land. It’s simply too inefficient to acquire, operate and administer.
Which leads me to why I’m here in the first place…
Landing a Sweet Argentinean Deal
One of the purposes of my trip is to investigate real estate investments, both in Buenos Aires and in other provinces. There are many opportunities, especially if you’re interested in places that resemble Napa or Jackson Hole – but for a fifth of the price. It’s a place for investors to park money or enjoy a second home.
Another goal of my visit is to see the growth of one particular company in person. Though based in a neighboring country, it has significant operations in Argentina.
It’s an opportunity that’s part and parcel of the nation’s decline, the rise of Brazil and the general increase in wealth across Latin America.
You see, Argentina may be on a downward slope, but that’s not the case for the majority of the region. The new emergence of a Latin American middle class is going to make investors in certain sectors very, very wealthy in the years to come.
Ahead of the tape,