Source: Casey Research
By: Louis James
(Interviewed by Louis James, Editor, International Speculator)
L: Doug, we've gotten a lot of follow-up questions to our conversation on currency controls. People want to know more about Argentina and why you like it so much. So, let's talk about Argentina.
Doug: Sure. This is a good time, too, because I'm having a sort of house-warming party at the world-class resort we're building in Salta province, northwest Argentina. With the stipulation up front that I obviously have a financial interest in that project, I still think that, for a number of reasons we'll get into, Argentina is simply the best place in the world to weather the economic crisis. Yesterday is not too soon to start working on getting your assets and yourself out of harm's way.
L: Okay, so let's start with basics: why Argentina?
Doug: Well, I've been to 175 countries, most of them several times. I've lived in 12, defined as having spent enough time in the country to have rented a place to live or bought real estate and set up housekeeping. The thing is, technology has now progressed to the point at which any sufficiently motivated person can pretty much live wherever he or she wants. But most people still have a medieval serf mentality in this area, and tend to live in or near the place where they were born and grew up. And they tend to think that the country they were born in is the best country in the world...I guess because they were born there.
L: All evidence to the contrary notwithstanding. And the more poverty-stricken and backward the place, the more fiercely patriotic its inhabitants tend to be. I suspect this is a modern expression of tribalism.
Doug: I've noticed that too - you travel now as much as I used to, so I'm not surprised we see most things the same way. But, as you know, I've never had a tribal inclination myself. And having been to so many places, seen their pluses and minuses, it's all the more clear to me how ridiculous it is to see the world that way. Although, it must be said, the tribal way of organizing a society actually makes more sense than the nation state does - at least in a tribe you basically know everybody, typically have a blood or family relation with them, and almost certainly share values. The nation state is just a piece of geography controlled by a central government. This is another subject, for another time, but I believe the nation state is on its way out, and in the process of being replaced by what Neil Stevenson called "phyles" in his seminal book The Diamond Age.
Anyway, I asked myself, "Where is the best place to live, in order to enjoy life to the max, be freest, and enjoy the highest standard of living with the least amount of aggravation?" I looked at all the countries around the world, their pluses and minuses, and came to the conclusion that Argentina offers the best risk/reward and cost/benefit ratios of any country on the planet at this time.
L: Can you tell us more about how you came to that conclusion?
Doug: By a process of elimination. A couple generations ago, if you'd asked me where the best place to live was, I'd have put my finger on the United States. Back when it was still America, it offered a lot of freedom, a lot of opportunity, and had a lot of domestic capital. But things have been changing, and are changing very rapidly in the U.S. now. It's no longer what it used to be. So the U.S., regrettably, no longer makes the cut - at least not if you have some capital.
L: It's no longer the land of the free and the home of the brave. It's become a land of obedient subjects who allow the government's bread and circuses to distract them from the fact that they have been cowed.
Doug: Sadly so. And Europe is worse. It's hide-bound, constipated, heavily taxed and regulated, highly socialistic, and is suffering from what may turn into a demographic collapse.
L: My ex was from Germany, and she told me families were basically paid by the government to have children.
Doug: It's not working; few people are having kids. But there's massive immigration, primarily from Muslim countries.
L: Those people are often very hard working and entrepreneurial, but they are not assimilating.
Doug: They are not assimilating, and Europe is becoming less European. Worse, the cultural clash could turn into something more serious, given the increasing tension between the West and Islam. The Crusades never really ended - they just seem to have time-outs between rounds.
L: Europe could turn into the battlefield the Cold Warriors feared it might, but in a totally different war.
Doug: Yes. It's a conflict that goes back to the 8th century, and I don't think it will be resolved any time soon. So, I'd rule out living in Europe.
Doug: Completely hopeless for anything other than a hit and run speculation. Too much racism, too many other serious and deeply entrenched problems.
L: And the Orient?
Doug: I'm a big fan of the Orient - I really like it. But frankly, if you're of European extraction, you can have a great life in the Orient, but you'll never become part of society there. It's just not going to happen.
L: Why is that so important? When I moved to Utah, people told me the same thing; the Mormons wouldn't invite me to their picnics if I didn't convert. But I didn't want to go to their picnics. I just wanted to be left alone. I loved it.
Doug: I understand, and value my privacy as well. But I enjoy going out to dinner with good friends at great restaurants. I like playing polo, and that's not something you can do alone. I like a friendly poker game once in a while. There are many benefits to society, and I enjoy them. But as pleasant and convenient as the Orient is, it's also pretty crowded; I like wide-open spaces.
L: You just don't want the cost of participating in society to exceed the benefits.
Doug: As a practical matter, that's right. There are moral issues as well, but that's another conversation.
L: Okay. So, eliminating the U.S., Europe, Africa, and Asia leaves Latin America and Down Under.
Doug: Oddly enough, as I speak to you (for free, on Skype - I love technology!), I'm in New Zealand. Rick Rule and I bought a big ranch on the ocean ten years ago, and I also bought a smaller ranch on the Clevedon River. I first came here, as you know from our conversation on the subject, for the polo. It was kind of a joke. People used to ask why I came to New Zealand, and I would say it was for the kangaroos. "But," people would say, "There are no kangaroos in New Zealand." "Yeah," I'd reply, "I was misinformed." But it was really for the polo.
New Zealand is a delightful place. I think I'll keep my ranch here, because I like it. But the fact is that, for all of its advantages, New Zealand is an island, and it's pretty much at the end of the road. It's not very sophisticated, quite frankly, and it's become quite expensive.
When I first moved here, and was recommending the place highly in the International Speculator, it was almost as cheap as Argentina is today. It was so cheap buying a meal in a restaurant, you'd almost feel guilty. But since then, the currency has doubled in value and domestic prices have risen more rapidly than in the U.S., so the general cost level is about the same as in the U.S. It's not a bargain anymore.
That's even more true for Australia, which is bigger, but isn't as pleasant, to my way of thinking. Entirely apart from the fact that everything that moves there, on the land or in the sea, tends to be deadly.
L: And that leaves Latin America.
Doug: Exactly. Within that, what do we have? Central America, to be brutally brief, is "okay." But those countries simply have no class. When it comes to South America, I'm very partial to Argentina, Chile, and Uruguay. Of these, I prefer Argentina. Why? Because it has a down-at- the- heels, but very classy, elegance. That kind of reflects the fact that, a hundred years ago, it was the major competitor to America for the best place to go if you were a European looking to immigrate to the New World. It attracted many of Europe's best and brightest - and their capital.
Argentina blew it, of course, transforming itself from having one of the highest standards of living in the world to an economic basket case over the course of the 20th century. But in spite of how monumentally stupid the government of Argentina is, with controls and regulations on everything, a big bureaucracy, and so forth, that's compensated for by the fact that the place is very, very inexpensive. Whether you're looking at real estate or day-to-day expenses, it's much cheaper than either Chile or Uruguay. Also, I've found that on a practical level, the government leaves you alone more than most.
Uruguay, of course, is just across the Plate River from Argentina. It's got some advantages, but it's rather like a backward, yet more expensive, province of Argentina.
L: Why's that?
Doug: It's a smaller country than Argentina, one tenth of the size, both in population and land area. It's long been known as a kind of "Switzerland of South America." It's a banking haven. Until recently, there was no income tax in Uruguay. Idiotically, they just slapped one on domestic income, but foreign income is still tax-free there. That draws a lot of rich foreigners, who have a disproportionate effect on prices. They bring a lot of capital, and the country's currency has risen about 30% against the Argentine peso in the last year. So, it's nice, but it's a quiet backwater - except for Punta del Este during January and February, when it's one of the most hopping places on earth. But Uruguay is considerably more expensive than Argentina at this point.
A lot of Uruguayans, if they're in a position to, tend to want to live in Buenos Aires instead of Montevideo. Montevideo is a place that still has horse-drawn wagons and gauchos standing around on street corners, drinking mate.
L: And the Graf Spee in the harbor.
Doug: [Laughs] I can't help but think of that when I'm there. The place is in a time warp, although a lot less than it used to be. When I first went to Argentina, in 1980, I felt I was taking a trip back to the 1950s. Then, when I went across the river to Uruguay, I felt I was taking a trip back to the 1930s. They still had the old black, Bakelite telephones. That's all changed, but these countries are still caught in a bit of a time warp.
L: And Chile?
Doug: Chile is the unsophisticated mining province that made good... It's modern, everything works, and the capital city of Santiago is clean and nice, if plagued by air pollution. But it's a lot more expensive than Argentina or Uruguay, and doesn't have the same charm. Pinochet, for all his faults, put the place on the road to success. It's estimated the average Chilean has more net worth than the average American now.
L: So it's Argentina.
Doug: Yes. For one thing, I like its wide-open spaces. It's like the western U.S. Argentina is the size of the eastern U.S., but it has only 40 million people, and about 40% of those are centered around Buenos Aires. So, once you get out of BA - which is one of the great cities of the world: sophisticated, marvelous, you can get everything and anything you want there, just one of my favorites - you really are in the countryside. In most places, you can drive for hours through incredible scenery, and not see another car. I like that.
Sometimes people, who haven't been there, look at me in a questioning way when I mention Argentina, because they've heard of the government. But it's not evil, or dangerous, like many. It's just corrupt, incompetent, and inefficient - which is actually much better than the alternatives, when we're talking about governments. But there are disadvantages, too. Through one of the most impressive acts of government stupidity I've ever seen, Argentina, a country world-renown for its beef, might actually end up having to import beef this year. It's insane. Like Saudi Arabia importing oil. But, that's what governments do.
Still, you can get the best beefsteak in the world for, oh, I would say a sixth of what you'd expect to pay for something equivalent in the U.S.
L: I've been to El Rey del Bife in Salta City and verified this for myself. One of the best steak dinners I've had, with salad and wine (I'm not religious about avoiding alcohol, and I wanted to try something local), and it was just over five bucks.
Doug: It's unbelievable. And I think I've found a place that's even better than El Rey del Bife, so we'll have to go there next time we're in town together.
L: I'll look forward to that. Did you start buying land all the way back in 1980, when you first visited?
Doug: No, I bought a ranch in Patagonia about a dozen years ago. One of my best Argentine friends said, "You'll make some money on that. It's okay for gringos, but if you really want something special, you'll go up to Salta province". I did, and he was quite correct. Patagonia is pretty, but it's not a center of culture.
L: It's mostly empty. I've been there. I think I saw more penguins than people.
Doug: It's basically a large expanse of wind-blown desert, except for a narrow band along the border with Chile, which is very pretty.
L: Because of the Andes.
Doug: The mountains, exactly. That's really it. So it's quite overrated and over-promoted. Salta, indeed the whole northwest area of Argentina, is much more interesting. Salta, by the way, was recently named in Frommer's Top Ten Destinations: 2010. I especially like Cafayate, a town about the size of Aspen, Colorado, and strikingly similar in a number of ways. It's got a beautiful central square, with lots of sidewalk cafes, a couple dozen nice restaurants. It's very gemutlich, very enjoyable.
L: And it's not overrun by leftist environmental extremists.
Doug: Definitely one of its great qualities. But as nice as it is, it didn't have everything I wanted in a place to live. I thought, "Well, I'll just have to bring the things I want here." So, some friends and I bought 1500 acres on the edge of town, and we're building a world-class resort.
We're very fortunate in that Cafayate is in a wonderful grape-growing region - that's one of the reasons it has so many nice things. All around the world, places that are good for vineyards are generally very nice places to live, as anyone who's been to Tuscany or Napa Valley knows. This is very much like that. It's a bit like Taos, New Mexico, meets Napa-Sonoma, California.
But there wasn't a polo field, so we're putting a couple in, in our resort, which is called La Estancia de Cafayate. We're also putting in 40 miles of hiking, biking and jogging trails, an 18-hole, world-class golf course, tennis courts, a lap pool, a Gold's-type gymnasium, and a spa. The clubhouse will have everything from a cigar bar, to a billiards room, to a library, to a bocce ball court, to a quiet place where you can play go or chess. I don't think we've missed a single element, providing what a civilized person could want. We've got about 200 acres of grapes, so all the home owners will get their own allotment of wine. Grapes are very aesthetic, which is the big thing, but we want to keep running costs as close to zero as possible - and they're a big help.
L: Okay, so be honest with me here. We had a conversation about spas, and you went to great lengths to distinguish between little wanna-be spas, where you can get a massage and they put cucumber slices on your eyes, and a real spa, which is a total living experience that includes diet, education, sports and physical training, as well as the saunas and massages, etc. Are you really going to be able to provide that kind of world-class spa experience?
Doug: Well, slowly, slowly, catchee monkey. So far, about 130 people have bought lots, and about 30 houses are under construction. More will be built over time, and that will get us to the level at which we can sustain a spa such as I described. It's a software issue. We'll have the physical facilities soon, but it will take a while to build the clientele that would justify having the people there who would provide the services. My intention is to start next year, hiring a couple Thais, or Filipinos, who are multi-talented. They'll know how to teach Tai Chi, Qui-Gung, do proper Thai cooking, and give proper massages.
As far as the spa cuisine is concerned, we're well on our way, because almost everything we'll eat grows in the valley. A wide variety of fruits and vegetables are being planted on our own land right now. The chickens and the beef and the milk are all local and organic.
With a little bit of luck, we'll eventually be as good as the Canyon Ranch or the like. You know, it takes a little time to develop the software. But I think it's very important to have the facilities for a full life. Mens sana in corpore sano, as the Romans said.
L: How much is ready to use?
Doug: We've built the golf course and golf club house. The construction of the social clubhouse, gym, tennis courts, etc. should start next month. It should all be pretty well done within a year. By then, there should be 40 or 50 houses built, or under construction, and it will be a delightful place to live.
There's one really interesting, perhaps unique, thing about this project. I've lived in, and been to, a lot of communities around the world, and sometimes you like your neighbors, and sometimes you don't. It's the luck of the draw. In Aspen, the chances are that I wouldn't like them; these days it's just drawing the wrong crowd, from my point of view. But I like all the folks I've met who've bought lots at Cafayate and are planning to spend time there. It's a generally laissez-faire, smart, get-along & go-along crowd, drawn from 14 different countries. It's really becoming a bit of a Galt's Gulch.
It's been a pain, having to build it myself, but there was simply no existing place in the world that I knew of that had everything - or even just most of what I wanted.
One sign of how real this is, is that many of those who've bought lots at Estancia de Cafayate are Argentines - which shows that the pricing is right.
L: And they pay cash.
Doug: Everyone pays cash in Argentina. That's why land prices are real and so low - they are not inflated by borrowed money. There simply is no money to be borrowed for real estate in Argentina. None.
L: And you say Argentina has a very European flavor?
Doug: Yes, at this point, Argentina is more European than Europe is. You know what they say: an Argentine is an Italian who speaks Spanish, thinks he's British, and lives in a French house. That last refers to the gilded age buildings, of which there are thousands. Apartment buildings in La Recoleta generally have 14-foot ceilings and walls two feet thick, because that's how they were made, back in the day.
You know, I talk about how bureaucratic and stupid the government is, but I think there's a chance that the place will reform for the better, much the way New Zealand did in the mid-1980s. In other words, you can be so stupid, for so long, that eventually you have to throw in the towel and try being less stupid. There are several candidates running in the next presidential election, which will take place in 2011, who are reasonably market-oriented. If the same thing happens in Argentina as happened in New Zealand in the 1980s, it will boom.
L: With clear consequences for Argentine real estate.
Doug: Exactly, although the place has always had wild fluctuations in prices. When I was first there, BA was more expensive than London. Before the last crisis it was about like New York. Argentina suits me as a speculator, it suits me as a freedom-lover, and it suits me as a place to live. All things considered, of all the countries in the world, I honestly just can't think of a better one.
And if you want to live there, they are very mellow about it. You don't need some sort of residence permit. For years, the practice has been to let anyone in for three months, and if you overstayed your tourist visa, even by a couple of years, you only pay a fifty peso fine. And you can come right back in again. Try that in the US and see what happens...
L: What if I wanted to stay more than three months?
Doug: You just take a boat over to Montevideo, get your passport stamped, and come back. Or maybe drive up to Bolivia, or across the mountains into Chile, or maybe Paraguay for a weekend trip. This can be, and is done indefinitely, with no problem. Cafayate actually isn't a bad place from which to get to know the southern half of the continent. But I don't like to leave once I'm there.
L: Okay, so it's no problem to prolong a tourist status, but if for some reason, I wanted to acquire a more permanent residency status, would it be difficult, or expensive?
Doug: No, but you'd be wiser to do it in Uruguay. As an Uruguayan, you can cross over to Argentina with much more ease than even Canadians used to be able to cross over into the United States. They are both Merco-Sur countries, and residents of those countries can move between them freely. You can become a citizen of Uruguay after only two years - it's not as good a passport to travel on as an Argentine one, but that's the way to do it.
I should also remind our readers that they don't want to keep any money in a bank account in Argentina. It's not a good place for that, but bank accounts and real estate are two totally different things.
L: Anything else? More investment implications?
Doug: I think what's going to happen, given the demographics we spoke of in Europe, is that thousands and thousands of Europeans are going to come to Argentina. Not poor ones, the kind who immigrated a hundred years ago, but wealthy ones. They'll see that the lifestyle is better in Argentina. It's less crowded and vastly cheaper - maybe 20%, or less, of the cost of living in Europe. And they can live there tax-free. As more and more Europeans discover this, you're going to have a lot more of them piling in. This is going to happen with Americans too, though they won't gain the same tax advantages. The IRS will still want to tax them; nevertheless, I think we'll see more of them moving down there. It's very popular with Canadians as well.
With the good things happening in Colombia, Brazil having finally turned the corner, and the problems clowns like Chavez in Venezuela are running into, there's a chance that South America, in general, could be the next sleeper that may soon awake to its day in the sun.
So, it's a place with a future. And any person who does not diversify his or her assets and physical presence, geographically and politically, in today's world is a fool. If they see what we see and don't take action, they'll get what they deserve.
It's especially important for U.S. persons to do this now, before we see foreign exchange controls in the U.S. making it impossible, or very costly, to get your wealth out of the country.
L: What's the first step, for someone who hasn't really thought about these things seriously before?
Doug: I'd like to urge anyone reading this to join me, and my friends, at the open house we're having at Estancia de Cafayate from March 25 to 28. It'll be a great introduction to Argentina. Just be warned that you may not want to leave; it's that pleasant. And late March is a good time to leave the tail end of Northern Hemisphere winter behind. Also, most of the Casey group is going to be there, and we're going to have a half-day investment seminar for those who come down.
L: That's what I'll be doing: hitting BA, then setting out to look for opportunities to invest in gold and silver projects in South America.
Doug: I'll enjoy seeing you there, and given the type of person who will actually take my advice on diversifying his or her assets out of their home country and come check Argentina out, I'm sure I'll enjoy seeing them, too. I hope a few of our new readers come on down.
L: What's the best way for people to get details on the event?
Doug: Email Harvest@LaEstanciaDeCafayate.com, let them know you're interested in the Harvest Celebration, and they'll send you the info.
L: Sounds like a plan. ‘Til next week.
Doug: Next week. We did say we'd talk about movies, and I think there are important ideas to discuss in that topic. Movies are really the literature of our era.
L: Right then. Next week.
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