Napa vineyards like this one have struggled while Argentina growers gain market share.

Napa vineyards like this one have struggled while Argentina growers gain market share.

There’s nothing like a recession to test the limits of discretionary spending and consumer willingness to downshift to more affordable products and services. This has been especially true for U.S. wine lovers who, according to Bloomberg’s Dan Levy, are often passing up Super Premium and Ultra Premium wines in favor of “cheaper imports from countries such as Chile, Argentina and Australia.” In light of shifting preferences, the Wall Street Journal recently featured a video taste test of several “good $10 bottles of wine”…many of them malbecs from Argentina. To be sure, 2009 was a banner year for the Argentine wine industry where—despite the recession—global exports actually increased 10% to $585 million while U.S. sales jumped 20%.  Sales of bargain wine imports have had an impact on Napa Valley where Bloomberg says land values have fallen 15% since 2007 and no fewer than 10 wineries will change hands this year in distressed sales. Still, don’t expect the recent drop in Napa’s property values—average price of $150,000 per acre planted with red varietals—to erode Argentina’s attraction for foreign investors and wine enthusiasts. For the same $150,000,  you could buy a 7-acre vineyard in Mendoza complete with five-year old malbec grapes, Internet access and homesite with underground utilities for your private villa.

For more information about investment opportunities in Argentina wine country, send your inquiry to in@investba.com.

Foreign investment in Uruguay rose over 400% from 2004 to 2008. Much of it came from the U.S.

Foreign investment in Uruguay rose over 400% from 2004 to 2008. Much of it came from the U.S.

That’s how Josh Spero describes Uruguay for readers of Spear’s Wealth Management Survey. In the current Tax & Trust section, Spero offers one of the most sophisticated and accurate depictions of  the “Switzerland of South America” and “Argentina’s kid brother.” The narrative begins with a description of Uruguay and Switzerland’s shared advantages for foreign investors: Banking secrecy laws? Check. Favorable tax regime? Check. But the present-day similarities end there considering that Switzerland is knee-deep in recession while Uruguay emerged relatively unscathed having already beefed up its banking system and capital ratios almost a decade ago. Proof of confidence is evident in the country’s direct foreign investment numbers: From $397 million in 2004 to $2.2 billion in 2008 with Spain, Argentina and the United States accounting for the bulk of the funds flowing in. “Part of what has been driving this foreign investment,” Spero says, “is Uruguay’s seductive taxation rules, both for individuals and corporations.” And after spending time in the capital city of Montevideo, the financial reporter is left with one undeniable takeaway: “There are opportunities for entrepreneurs everywhere you turn in Uruguay.” Spero lists commercial real estate development, telecoms and land for “property, pleasure and space” as three of the most attractive investment opportunities. For more information about Uruguay and investment opportunities along this portion of The Tango Coast, send your inquiry to in@investba.com.

Sebastian Piñera becomes Chile's next President in March. He ran on a pro-business, foreign investment platform.

Sebastian Piñera becomes Chile's next President in March. He is pro-business & foreign investment.

2011 will be a critical presidential election year in Argentina and aspiring candidates would do well to look at neighboring Chile and Uruguay for lessons in economic transformation. Both countries have elected presidents who ran on platforms prioritizing pro-business, foreign investment solutions over government programs and additional bureaucracy. Uruguay’s new president, Jose Mujica, takes office in March and “begins an international campaign for enticing investors to the country,” according to UPI. “Mujica said Uruguay needs more investment to create a greater number of better jobs and his government would ensure the right conditions are created for investors to be drawn to the Uruguayan economy. He realized the economy could not be improved only with legislation and that investors needed to have faith in Uruguay’s economic future.” And if Uruguay stands as the emerging model, Chile on the opposite border is the veteran shining star with a solid, twenty-year track record of attracting foreign investment across industries.  Building on that success, Investor’s Business Daily says the election of pro-free market Sebastian Piñera is a symbol “that an already prospering country (is) preparing to soar.” What has been Chile’s recipe for success? It’s really quite simple says IBD: “Instead of blaming the gringos and waging class warfare in Che Guevara T-shirts, they balanced their budget and respected private property. Instead of squandering a $19 billion state windfall from soaring copper prices, they managed it. They continued free-market privatization of pensions without reflexively opposing its origins, and signed free trade pacts with any nation that asked.” If it wants to remain relevant, much less competitive in the global economy, Argentina had better get its act together and do the same.  (Full IBD editorial)

Argentina and Uruguay were the top 2 Latin American destinations in IL's Annual Quality of Life Index.

Argentina and Uruguay were the top 2 Latin destinations in IL's Annual Quality of Life Index.

January’s headlines out of BA were either steeped in controversy (The debt row and Central Bank standoff) or sexual scandal (Fake Viagra from China and Cristina’s pork promotion.) Yet, despite all of the infighting and innuendo, there was one very positive piece of news that merits repeating for those contemplating relocation to Argentina. For the second consecutive year, Argentina and Uruguay were the two highest ranking Latin American countries in International Living’s annual 2010 Quality of Life Index. (Click image to enlarge) On the 1-100 scale, Argentina received its highest marks in the categories of Risk & Safety (100), Climate (91), Freedom (83) and Health (82). Of the 194 countries surveyed, Argentina ranked #26 sandwiched right between the United Kingdom and Slovenia; however, Argentina’s Cost of Living score (61) was actually 2x better than the U.K.’s (30). Neighboring Uruguay, another InvestBA favorite along the Tango Coast, garnered the #19 spot on the IL 2010 Index, sandwiched right between more expensive and significantly colder European competitors, Finland and Hungary. In a related story, data released this week from Argentina’s Tourist Ministry suggests a record number of foreigners traveled to Argentina in January “buoyed by an improved global economic situation and competitive prices at the country’s different destinations relative to those of its neighbors.” The entire 2010 Quality of Life Index ranking is available at InternationalLiving.com.

Falabella is betting that Argentine consumers are ready to get waist deep with new purchases.

Falabella is betting Argentine consumers are ready to get waist deep with new purchases.

Sales of consumer durables have always been a good gauge of market sentiment and overall consumer confidence. An even better barometer lies in the capital spending plans of major retailers who supply the stainless steel refrigerators, 42″ LCD TVs and the increasingly popular lavadoras de carga frontal. According to Reuters, Santiago-based Falabella (Chart), plans to spend $1.72 billion in Argentina and three other countries between now and 2012. With stores in Argentina, Colombia, Chile and Peru, “Falabella plans to invest around $492 million this year, $620 million in 2011 and $632 million in 2012, Reuters notes, “Falabella invested $280 million in 2009, when the financial crisis hit consumer pockets in Latin America.” A retail analyst at Banchile put the announcement in perspective: “In our opinion, the aggressive expansion plan will allow Falabella to reinforce its solid market share and postion the company to take advantage of the consumer spending recovery we anticipate in the region.” The 2010-2012 Plan will allow Falabella, the South American equivalent of Best Buy, the chance to expand existing retail floor space by 45%. Time will tell if the average Argentine consumer’s confidence matches the retail giant’s, but it’s an encouraging start to the new year.

 
© 2010 InvestBA, S.A.