Latin America

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Good value in Latin America

Latin America is today’s big opportunity
Latin America offers good real estate value. Many currencies have partially followed the dollar down. Yet GDP growth is at Asian levels - in Colombia, Panama, Peru, Argentina, Uruguay, and arguably Costa Rica.

Latin America benefits from two strong upward pushes:

• Strong economic growth. Globalization is helping Latin America, and has increased the reward for sound economic policies. Currency devaluation worked wonders for Argentina and hence Uruguay. In Peru, Garcia has generated 9% growth at least partly by imitating Chile’s budget restraint and free-market reforms. In Colombia, Uribe’s defeat of terror and sound macro-management has bought huge payoffs in company profitability, capital investment, and exports. In Panama, the government is enlarging the canal and creating a Dubai-like offshore-centre.
  
  
• The retiree phenomenon. More US citizens are venturing abroad. They do so less than Europeans – there’s nothing comparable to the UK companies which offer mortgages in 45 countries. But Mexico, Costa Rica, Belize, and Panama benefit enormously from their US retiree haven status.

Many of these countries (like Argentina) have virtually no mortgage markets, so property is on lower Price/Rental ratios than in developed countries.

Columbia – colonial history, growth
Colombia has seen strong economic growth under Uribe, pushing its currency up sharply against the US$. Interest rates have fallen. Dwelling prices have risen sharply. Cartagena has large colonial sections which attract foreigners, Medellin has also been experiencing substantial renovation. Yields are very attractive, and roundtrip costs are reasonable.

Panama – hot money, construction, growth
Panama is experiencing an economic boom. Work on the canal expansion and enormous building projects have pushed GDP growth up to 9.2%. A refuge for hot money with a dollarised economy, Panama also has good beaches.

Peru – Garcia’s economic success may not win him the 2011 election
Peru is Latin America’s fastest-growing economy. It has experienced a dramatic turnaround under Garcia, who has learned his lesson and pursued fiscal stringency. Last year’s fiscal surplus was 3%, and the national savings rate has risen to 24% of GDP. Peru’s debt has been upgraded to investment-grade. However, president Garcia is unpopular with the poor, and the next president (after 2011) is likely to be Ollanta Humala, a populist former army officer.

Uruguay – stability, peace, growth
Uruguay’s main attraction for retirees is that it is next to Argentina, yet cheaper, safer, and with better beaches.

Nicaragua’s tourist assets could outweigh its tragic history
Nicaragua is a very poor country with a leftist president, Daniel Ortega. But it is right next to Costa Rica where US retirees have pushed prices very high. It has beautiful colonial cities and good beaches. Better infrastructure would bring in many more US tourists and retirees.

Brazil and Honduras for the long term
In Brazil and Honduras there is no compelling macro-economic investment case. But both countries have good beaches and are good hunting grounds for long-term investors, looking 15 years ahead.