Ready2invest Guide To Property Investment In Argentina

Argentina overview

“With a mild climate, forgiving soil and vast areas of undeveloped land, Argentina is a prime beneficiary of the dash for growth by China, India and other emerging markets.” The Spectator, July 7th 2007

“Latins are tenderly enthusiastic. In Brazil, they throw flowers at you. In Argentina, they throw themselves.” Marlene Dietrich



+44 (0)1273 627900

www.ready2invest.co.uk

Argentina The Republic of Argentina stretches 4,000km from Bolivia in the north to the very tip of South America, taking in the Yunga rainforests, the arid plains of the Andes and the Perito Moreno Glacier on the way.

South Pacific Ocean

BOLIVIA

CHILE

BRAZIL

PARAGUAY

Resistencia

San Juan

Rio Para

na

San Miguel de Tucumán

Córdoba Rio Cuarto

Mendoza

Santa Fe Rosario

URUGUAY

Buenos Aires

ARGENTINA

La Plata

Ministro Pistarini Airport

Mar del Plata

Bahia Blanca Viedma

South Atlantic Ocean

San Carlos de Bariloche

Comodoro Rivadavia

Puerto Santa Cruz

Thanks to an agricultural export led economy Argentina was once one of the wealthiest and most powerful countries in the world. But decades of political unrest increased the country’s vulnerability and Argentina was hit hard by a series of external financial crises that sent the country into recession. Thanks to the leadership of President Néstor Kirchner, Argentina has restructured its debt and paid off all existing loans from the International Monetary Fund (IMF) totalling more than $100 billion. Taking advantage of previously subdued industrial capacity and labour, GDP has recovered remarkably quickly to grow annually by approximately 8-9% over the last five years.

How to get there British Airways fly direct from London Heathrow (stopping in Sao Paolo) to Buenos Aires’ Ministro Pistarini (Ezeiza) International Airport. A new 100,000m2 terminal is due to open there in late 2008. Approximate flight time to Buenos Aires From London: 16 hours From New York: 10.5 hours From Moscow: 22 hours (depending on connection)

Falkland Islands

Administered by U.K. claimed by Argentina

Ushuala

Argentina at a glance Population: Capital city: Area: Climate Average temperature July: Average temperature January: Official currency: Language: Time zone: Government:

40,301,927 Buenos Aires 2,766,890 km2 Mostly temperate; arid in southeast; sub-Antarctic in the south 15 ºC 30 ºC Argentine Peso (ARS) Spanish (some French, English, Italian & German) -2/-3 GMT Constitutional republic 

Why invest in Argentina? A country on the up Argentina’s economy famously collapsed in 2001 following three years of recession. But by 2003 the country was already recording GDP growth of 8-9%, which they have sustained for five consecutive years – a reassuringly solid and swift recovery. Although many predict the boom economy will start to slow, figures for predicted GDP growth still average 5% until 20121. Since the crash, the government has focussed on maintaining a stable macroeconomic environment to avoid the boom and bust cycle of previous years and to sustain future growth. More affluent population Argentina’s middle classes continue to thrive as a result of the economic upturn. More than 40% of the country now fit into the middle-class demographic; double the number from 20032. In Latin America, 15 million households improved their incomes to the extent where they were no longer considered ‘poor’. If this growth continues, by 2010 the middle classes will be in the majority. Supply vs demand In 2006 figures showed that there was a housing deficit of two million in Argentina, with the capital Buenos Aires suffering a 35% shortage alone3 – that equates to 700,000 new houses needed to meet demand. This is an excellent situation for real estate investment as the lack of supply keeps demand for quality housing high, indicating potential for strong capital growth and securing your exit strategy from the market.

The view of Iguazu Falls from Argentina

Increased exporting power Economy Minister Martin Lousteau is deliberately keeping the peso low against the US dollar in an effort to keep export prices competitive. Interest in Argentina’s commodity market has soared in recent years with exports of soy-based fuels increasing rapidly. Now almost 90% of the country’s biodiesel production is going abroad as low transportation and labour costs entice US buyers to purchase fuel from Argentina over Southeast Asian palm-based products.4 Increasing finance availability Mortgages are slowly becoming more available as the economy stabilises. Currently nationals can obtain up to an 80% mortgage over a maximum 20-year term as long as they meet certain income criteria. As the finance market establishes, mortgages will become more readily available allowing more people to buy their own houses further increasing the demand for suitable properties.

Overlooking part of the Quebrada en Cafayate, Salta, Argentina



+44 (0)1273 627900

www.ready2invest.co.uk

The breathtaking landscape in Patagonia

Investment in infrastructure Argentina has also approached the World Bank to secure infrastructure funding. The government has set aside ARS1.2 billion for highway and railway works. Buenos Aires will receive ARS800 million alone5. Another sign of the country’s strength and commitment to development is the announcement of the new South American development bank, Banco del Sur; a joint venture with Venezuela, Brazil, Bolivia, Ecuador and Paraguay. It is expected to have capital of around $7 billion (€4.8 billion) with a remit to promote integration of the Latam countries by funding energy projects and improving infrastructure6. Tourism is growing The travel and tourism sector has also experienced rapid improvement in the years following the 2001 economic crash. The market has now steadied, enjoying gradual progress, which the World Travel & Tourism Council forecast to continue well into the next decade. Total demand is predicted to grow by 4.4% per annum7 between 2008 and 2017, increasing by 20% the number of people employed in the industry to around two million; a tenth of Argentina’s total workforce.

The bustling city of Buenos Aires 1. http://www.economist.com/countries/Argentina/profile.cfm?folder=Profile%2DEconomic%20Data 2. http://www.economist.com/displaystory.cfm?story_id=9645142 3. http://www.bainversiones.mp.gba.gov.ar/downloads/real_estate_eng.pdf 4. http://uk.reuters.com/article/summitNews/idUKSP33865120080115?pageNumber=1&virtualBrandChannel=0 5. http://www.reportbuyer.com/industry_manufacturing/construction/argentina_infrastructure_report_q3_2007.html 6. http://search.ft.com/ftArticle?queryText=banco+del+sur&y=0&aje=false&x=0&id=071210000565&ct=0&nclick_check=1 7. http://www.wttc.travel/bin/pdf/original_pdf_file/1argentina.pdf



Political overview Argentina, as part of the United Provinces of the Rio Plata, won independence from Spain in 1816. The following two centuries have been dominated by periods of political unrest and financial crises, the most recent of which sent the country into economic collapse. After going through four heads of state in just 13 days the country finally elected Néstor Kirchner to office. The President managed to expand Argentina’s economy by 50%1 and reduce poverty and unemployment figures by half in the wake of the crisis, in what proved to be an unexpectedly successful four-year term of office. He publicly backed efforts to prosecute officials responsible for the human rights atrocities committed during military rule between 1976 and 19832. Kirchner also signed into law a decree setting up a Joint Chiefs of Staff system, thus moving the country towards a defence model, used by most Western countries. In December 2007 Cristina Fernández de Kirchner succeeded her husband with 45.29% of the vote – 22% higher than her nearest rival – to become Argentina’s 55th president and the country’s first elected female leader. Her victory assures the continuation of the current positive economic model, which is excellent news for investors. She is also expected to devote more attention to foreign policy3 and relations with the US while continuing to maintain close ties with Venezuela and Argentina’s other Latin American allies.

President Cristina Fernández de Kirchner, elected December 2007

Presidential House Casa Rosada (Pink House) in Plaza de Mayo, Buenos Aires

1. http://www.economist.com/world/la/displaystory.cfm?story_id=10286016 2. http:/=/hrw.org/english/docs/2004/01/21/argent6979.htm 3. Global Insight Report: Argentina (Country Intelligence)



+44 (0)1273 627900

www.ready2invest.co.uk

Economic overview Throughout the 1990s, the Argentine government pursued a policy of trade liberalisation, deregulation and privatisation and for much of the decade Argentina enjoyed steady growth with low inflation. But in 1999 a 4% fall in GDP sent Argentina into a severe recession culminating in 2001’s economic collapse, leaving the country in chaos and owing more than $140 billion. In response to the crash, the interim President Eduardo Duhalde abandoned the fixed link between the peso and the US dollar, devaluing the currency and shrinking the economy by over 10%1. Ultimately however inflation was brought under control, and devaluation boosted Argentinean exports, enabling the country to return to limited growth as soon as late-2002.

Since Argentina’s economic collapse in 2002, the country has managed to return to growth with surprising strength… This was initially due to a surge in exports – breaking all previous historical records. Jones Lang LaSalle, Buenos Aires City Profile

Argentina’s recovery since then has been remarkable, averaging approximately 8% per year over the last five years. Duhalde’s successor, President Néstor Kirchner restructured and repaid Argentina’s debt to the International Monetary Fund allowing the country greater financial independence. The new administration of President Cristina Fernández appears to have recognised further foreign investment in the country and the lifting of some price controls is needed for economic growth to continue. The country’s anticipated energy shortages have been allayed by the biggest hydrocarbons discovery in recent years. Pan American Energy have announced that the find, near the existing Cerro Dragón field in the southern province of Chubut, potentially contains 100million barrels of oil equivalent2. Argentina is classified as an upper-middle-income economy by the World Bank and has the highest Human Development Index in Latin America.

The “Cabildo” In Plaza de Mayo, Buenos Aires

1. http://www.fco.gov.uk/servlet/Front?pagename=OpenMarket/Xcelerate/ShowPage&c=Page&cid=1007029394365&a=KCountryProfile&aid=1022763208173 2. http://www.ft.com/cms/s/0/3653bc3e-ce97-11dc-877a-000077b07658.html



Version R2i/ARG/ov/1.3 6/3/08