Argentina: If There’s a Crisis, Watch for the Opportunity

Wednesday, September 23, 2009

Casa Rosada is one of Buenos Aires’ landmark buildings

Dear Reader,

I left Uruguay on a brilliant morning, to take the relaxing ferry ride across the river to Argentina…the next stop on my six-month real estate scouting trip.

I confess that one reason for coming was to re-visit the fun and bustling metropolis of Buenos Aires. But more importantly, I needed to get a handle on the current economic crisis, and see how it could influence property prices.

Over the past year, the news headlines seem to carry a constant stream of bad news from Argentina.

The government nationalized pension funds and the flagship airline, Aerolíneas Argentinas. And Argentina has limited access to international credit, thanks to outstanding judgments from their last default in 2001. Export duties and taxes were increased to stabilize food prices, but this—along with a drought—caused a drop in agricultural production and significant social unrest. The government then called for early elections, but this backfired too…they fared badly and ended up losing power in congress.

Most predictions forecast an economic slowdown—but not a crash on the scale of 1999-2001. It’s likely that we’ll find out soon, as late-2009 is a key deadline, with around $20 billion of debt servicing due.

But despite the doom and gloom headlines, the unsinkable Buenos Aires carries on.

Founded by the Spanish, the city evolved into Argentina’s political, financial and economic center. Its style and charm remind me of Paris. Classical and Art Deco-style buildings grace the wide tree-lined avenues and plazas. The landscaped parks are perfect for exercising, relaxing, and enjoying life.

You’ll have to thread your way through the crowds on Avenida Florida, the main shopping street. I love the fact that this city is large enough that you can find all kinds of specialty shops. For example, I came across a shop called Mr. Brush that stocks nothing but brushes, from toothbrushes to hairbrushes to scrubbing brushes, in bewildering varieties. You’ll see a million and one confiterias (selling delicious pastries), tiny hardware stores, art galleries, shops selling hand-made suits and luxurious leather bags and gourmet Italian ice-cream.

Weekends are the best time to explore the city. The streets are empty, and you can wander along at an unhurried pace, noticing shops and restaurants you’d never see through the crowds during the week. Avenida 9 de Julio occasionally blocks off some lanes for events promoting exercise and well-being—boxercise marathons seem popular.

You’ll find eateries on every corner…basic pizza parlors, upscale steak houses, fashionable cafes…many with sidewalk seating, perfect for watching the world go by. Cafes are an institution here, each with its own clientele and atmosphere. Founded in 1858, Café Tortoni’s famous patrons included writers and poets, among them Jorge Luis Borges, and Luigi Pirandello.

If you’re looking for entertainment, you can catch one of the many live tango shows. Buenos Aires has a reputation as a party city—and enough bars and nightclubs to live up to that reputation.

The thriving cultural scene here is most evident in the sculpture-filled parks in Palermo, and the prestigious Teatro Colón, one of the world’s great opera houses. The city has numerous museums, and preserved homes of both artists and art collectors. The feeling of culture and history is hard to escape: even the apartment building I rented was on the site where Jorge Luis Borges was born.

The city’s neighborhoods share many of the same characteristics, but each has a unique ambiance…from the chic Palermo, the exclusive Recoleta, and the historic San Telmo.

My take on the current economic climate is this: Buenos Aires will always have an intrinsic value. It’s a world-class capital city, with a unique appeal, and people are always going to want to live here. An economic slowdown won’t change that.

And Buenos Aires’s past history shows us that a crisis here can bring lucrative opportunities for foreign investors, with sharp dips and quick recoveries.

But would I buy here right now? That’s what I’m here to find out.

Over the next two weeks, I’ll be looking at long term and short term rentals, some of Buenos Aires’s most popular markets, and a popular seashore getaway.

Next week, I’ll compare three apartments in different areas of Buenos Aires—and take a closer look at the rental market.

Margaret Summerfield