Argentine Real GDP

With private expenditure and GDP growth, Wells Fargo sees signs of a recovery in Argentina.

The buzz about Argentina seems to be having an impact on investors of all stripes. After Sunday’s 3-1 defeat of Mexico, global betting sources say the Albiceleste’s odds of winning the World Cup improved to  15/4, third only to Spain and Brazil. Whether sports gambling qualifies as “investing” is certainly open to debate; however, a more sober cadre of long-term investors are also starting to take note. San Francisco-based financial giant Wells Fargo featured an unlikely subject for this week’s front-page Economic & Financial Commentary: Argentina. The analysis showed Argentina’s 7.9% growth rate in the 4th quarter of 2009 followed by a healthy 6.8% year-over-year rate in 1Q10. Meanwhile, Argentine private consumption expenditures which rose a mere 0.5% in 2009, grew 7.3% in the first quarter of this year alone. The nation’s spending recovery is also reflected in the current trade balance, as imported goods and services jumped 30% in the first quarter. Unfortunately, exported goods and services only rose 4%, although Wells Fargo notes the strength of the Brazilian economy as a contributing factor in Argentina’s recovery. While over-dependence on Brazil’s fortunes is a concern, the ongoing China soy conflict highlights the need for 1.) less federal government intervention and 2.) cultivation of more international trade relationships in the Americas, the Euro-zone and Asia. To read the full Wells Fargo Securities report, click here.

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Global Wine Production Cost Comparison

Let this ferment: Grape price and yield per acre are the key variables global vintners must consider.

Global investors must weigh a variety of factors like country risk, capital controls and transparency before choosing where in the world to invest. But what about winemakers? The number of wine producing countries (70) is over twice the number of teams playing in this month’s World Cup (32). Plus global grape production (675 million quintals last year) was widely distributed across Europe (44%), Asia (26%), Americas (21%), Africa (6%) and Oceania (3%). With so many choices, what’s a future global vintner to do? Focus on the key metrics, grape prices and yield per hectare (1 ha = 2.47 acres), says Davidson Viticulture, a leading Australian viticulture consulting group. When it comes to grape prices, three of the world’s most attractive markets are Argentina ($2,354/ha), Chile ($2,480/ha) and South Africa ($2,051/ha). At 15-20 tons/ha, California leads the global ranking in terms of average yield compared to 10-15 tons/ha for Argentina and Chile; yet, factor in California’s six-figure cost per acre and South America vineyards begin to make more sense for those seeking lower initial cash outlay and quicker ROI. Furthermore, Davidson says advanced technology and irrigation techniques give growers in regions like California and Australia “no real advantage” over the world’s other warm climate regions like South America and South Africa. For more Argentina wine and vineyard news click here, and for a closer look at Mendoza vineyards for sale, download the July edition of InvestBA Privada.

Argentina Internet Penetration

LCD sales may taper off post-Mundial, but WiFi growth means more broadband accounts in Argentina.

Sales of LCD TV’s in Argentina are currently up 150% over last year, but many analysts say those numbers will taper off once the World Cup is over. The growth of new Internet subscribers, however, should continue its upward trajectory as more Argentine residents and businesses seek broadband access to online content. According to infobae.com, over 700,000 new residential users signed up for Internet service between March 2009 and March 2010 raising the number of online households to 4.1 million. During the same period, the number of Argentine businesses adding Internet service increased 48% and the number of broadband accounts grew 58%. One number moving in the opposite direction is the number of e-mails sent, as Argentines sent 7.7% fewer correos electrónicos compared to one year ago. This statistic partially reflects the growing preference among Argentines—individuals and businesses alike—for communicating via social media platforms like Facebook, Twitter and blogs. ADSL accounts for 62% of Argentine broadband connections, and cable modems represent another 24% of users. As we’ve noted previously, the rapid growth and popularity of WiFi has prompted the rush to broadband in Buenos Aires and other major cities in Argentina. The most recent rankings of global Internet usage show 49% of Argentines have Internet access compared to 50% of Chileans, and 36% of Brazilians. (Full Story in Spanish)

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Montevideo Aerial

Luxury projects are being built in Montevideo neighborhoods like Punta Carretas, Pocitos and Malvín

Earlier this month InvestBA reported on the recent gains in the Buenos Aires real estate market: closings up 37%, total value of all sales up 57% and median prices up 15%. Now the news from across the river is equally encouraging and offers more evidence of regional strength following a weak 2009 for both countries. Uruguay’s National Statistics Institute released housing data for the first quarter of 2010, and the total number of closings is up 18% compared to 1Q09. The total dollar amount of all 15,015 real estate transactions in the first quarter of 2010 also rose 32% compared to 1Q09; yet, when adjusting from U.S. dollars to Uruguayan pesos the increase was a more modest 9.3%. (As evident on this XE.com chart, the U.S. dollar has fallen 18% against the peso over the past year.) Looking at the most recent month of available data, the most real estate closings took place in Montevideo (34%), Maldonando (13%), Canelones (12%), Cerro Largo (6%) and Colonia (5%). The median price per square meter of all transactions in the first quarter rose 6% over 1Q09, while the Construction Cost Index (construction costs less land value) posted a modest 5% gain over 1Q09. News was also positive for property owners in the Uruguay rental market, as average rental prices rose 6% in the first quarter to US$342. The three most expensive markets for renters were Punta Carretas, Pocitos and Malvín with median rental rates of US$418, $394 and $387, respectively. (Full Report PDF in Spanish)

algodon-suite

A suite at the new Algodon Mansion hotel being built by New York City developers in Recoleta.

While new hotel construction slowed in Argentina in 2008-09, the sector is starting to come back to life thanks to a more favorable peso/dollar exchange rate and the determination of international investor groups, according to Ellen Hoffman of Hotel News Now (HNN). The current 3.8 peso/dollar exchange rate, about 20% higher than two years ago, has helped New York-based developers like DPEC Partners get new hotels across the finish line. Their project, a beautifully restored 1912 property in Recoleta called Algodon Mansion, is a prime example of the type of ultra-luxury boutique hotel opportunity awaiting foreign investors in BA. Private investor groups continue to target the high-end by renovating historical in-town landmarks, while large international chains like HoJo and IHG continue to explore new opportunities in the suburbs and surrounding provinces. According to government sources, hotels under construction in Argentina represent US$1.7 billion of investment; HNN says 59% of those funds are for new hotels in Buenos Aires, while the remainder are going toward new projects in cities like Mendoza, Cordoba and Bariloche.  Hotel research firm STR Global says 690 guestrooms are currently under construction in Buenos Aires, while HVS reports a 71% occupancy rate (1Q10) for BA’s 5-star hotels, an 11% increase over 1Q09. In other BA hotel news, the Park Hyatt Buenos Aires will play host to the 2010 Masters of Food & Wine three-day event next week. Click here for more information.

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