At least John Boehner is optimistic about the fiscal cliff. All is well. Buy stocks.
At least John Boehner is optimistic about the fiscal cliff. All is well. Buy stocks.
Simon Black with his recommendation for living in Santiago, Chile.
by Simon Black
May 31, 2011
As I told Sovereign Man: Confidential subscribers on our monthly teleconference yesterday afternoon, I’ve been focused over the last several months on sniffing out the best deals in Chilean farmland for our planned resilient community. We’re definitely close.
My base in Chile is here in beautiful Santiago, however, and I wanted to take some time today and tell you about the real estate market in the city.
First, you should know that Santiago is a truly fantastic city. In terms of weather, you can hardly beat it: bright, blue sunny skies and a temperate, Mediterranean climate where it hardly rains. And yet, you’re no more than an hour or two from both world-class ski resorts, as well as the beach. (note: the city does have a problem with smog which is worst in the winter time)
Another ‘dreary’ winter day in Santiago, taken from my balcony in El Golf at about 11:50am this morning. High temperature today: 73F.
Furthermore, Santiago is just a nice, clean, modern, first world city… something like Madrid meets Chicago. It’s a pedestrian-friendly city with great mass transit and a privatized highway system. There are parks everywhere among the sprawling towers, and you see locals everywhere enjoying a coffee in the city’s numerous cafes and eateries.
(as an aside, Santiago has something you won’t find in too many other places in the world… a concept called ‘cafe con piernas’ or coffee with legs. Think of it as a combination of Starbucks and Hooters…)
Most of all, this place is civilized; Santiago is devoid of the sort of destitute squalor you would expect of a Latin American capital. Obviously some parts of town are nicer than others, but overall I find it every bit as nice as Europe or North America with every amenity you could ever want or need, and all at a pretty nice cost of living discount.
Compared to what I’ve seen elsewhere around the world, real estate in Chile (and Santiago in general) is a relative bargain. Bear in mind, I think about real estate in terms of square meters, which for our metric challenged readers is 10.76 square feet… so a 1,500 square foot 3-bedroom home is about 140 square meters.
My unequivocal, universal standard for ‘cheap’ residential real estate in big cities is $1,000 per square meter. It’s really hard to find this anymore in the world. Ecuador comes to mind– there are a number of good quality properties in Cuenca and Quito for $1,000 per square meter.
I’ve also seen a number of existing condos in Medellin, Colombia for this price, as well as parts of the Yucatan peninsula in Mexico (such as Merida).
In parts of Santiago, it’s possible to find some bargain properties for $1,000 per square meter. In the area around Parque Forestal near in the center of town and the Bellas Artes district, you can find some lovely older properties for between $1,000 to $1,200 per square meter.
The construction quality is excellent– these buildings are solid concrete, built to last… and they’re huge too. You can find many apartments in excess of 300 square meters (3,225 square feet) with a beautiful view overlooking the area’s numerous parks.
The neighborhood is undergoing a gentrification process and is becoming popular now with young professionals, the art crowd, and Santiago’s rapidly growing gay community… the triumvirate of a promising real estate market.
It’s also a protected, historic area, so the chances of a new eyesore going in anytime soon are slim.
Property taxes are a joke; owners might pay $40 to $100 per year in taxes on a reasonably-sized apartment, while rents command a 6% yield at present. I expect the rental yield to increase over the years, along with property values, as supply is constrained and demand is increasing.
In other parts of Santiago– the upmarket areas of Vitacura, Las Condes, La Dehesa, or Providencia, property prices can run between $2,000 to $3,000 per square meter. This is much more expensive than downtown, but it’s still quite reasonable to what I’ve seen elsewhere in the world, including in Argentina and Uruguay.
Even in Asia, which has some of the cheapest cost of living on the planet, it can be hard to find good quality construction for less than $2,000 per square meter. In Bangkok, many upmarket properties sell for in excess of $5,000 per square meter, no doubt a bubble fueled by cheap credit and Chairman Bernanke’s exported monetary inflation.
Santiago has been much less prone to such speculative bubbles; the central bank here has taken rather steps to both hike interest rates and allow the peso to appreciate. In the face of coordinated currency devaluation and exchange rate games in just about every other country on the planet, these are undoubtedly bold moves.
The peso is now near its 10-year high against the dollar, and the central bank’s benchmark interest rate is 5%. In the Greek-induced financial system meltdown part II that I expect to occur over the next 2-years, Chile will consequently emerge as one of the safe havens (i.e. least scathed countries) because of the responsibility it is taking now.
Can anyone explain how Chile can run their country with such a low tax burden? After looking at this chart it is clear to me that increasing taxes will not fix anything. It’s the spending stupid.
Submitted by Tyler Durden on 05/23/2011 07:50 -0400
To all Americans complaining about high taxes, better keep your beef on this side of the Atlantic. According to a recent OECD report, captured by the Economist, when it comes to total taxes paid out by both employees and employers, the US doesn’t even come close to its just slightly more socialist European cousins. In fact, while total taxation as a % labor costs is about 30% in the US, comparable with Japan and Ireland, in France and Germany this number is nearly half of the total. Which explains why there is no greater threat to these two countries than the perpetuation of the status quo welfare state. Should Greece file Chapter, who knows what will happen to the Bismarckian ideal. Incidentally, on the other end: Chile, which pays out just 7% of labor costs to taxes. Per the article: “The report splits out the tax burden on employment which is paid by employers (in the form of social-security payments) and employees (as income tax and more social security). France and Germany have some of the most costly tax regimes—with people who earn the average wage taking home just over 50% of their total labour cost. The effect of fiscal austerity, particularly across Europe, has meant that the tax burden rose in 22 out of the 34 countries in the OECD from 2009 to 2010. Meanwhile real incomes for average-wages earners fell in 15 OECD countries. As the second chart shows, these reduced earnings caused by the world recession and subsequent inflation tend to have a much larger impact on incomes.” Also notable: these charts exclude any Value Added Taxes: another favorite European mechanism to fund the welfare state. Should that be included in the total and the take home may in fact drop to less than 40% in some cases.
Of course, one may say that the American perspective is certainly stunted, as among the chief taxes omitted are property taxes, city taxes, private medical insurance, not to mention sales tax. Perhaps a more objective analysis would confirm that the US is just as bad on the communism scale. One thing is certain: the global population is already taxed seemingly to the max. How the global population will be able to afford another round of imminent, austerity and/or debt ceiling debate induced tax hikes, is completely unclear…
Gonzalo gives his view on the Japan earthquake. He lives in Chile and experienced their big earthquake in 2010. He predicts a surge in Japan GDP based on the experience in Chile. It rejuvenated people. I think he is missing the demograpic piece. Only 3.5% of Chileans are over 65 years old. In Japan, 22.7% of the population is over 65 years old. In Chile, 25% of the population is under 30 years old. In Japan, the percentage under 30 years old is less than 18%. Youth is what drives an economy. Japan does not have youth.
Living in Chile, I experienced the February 2010 earthquake. That puppy measured 8.8 on the Richter scale at its epicenter. In Santiago, the earthquake registered about an 8.2—and I was on a 15th floor when it happened. Believe me, it was quite the experience. I wrote a first person account of the earthquake here.
Friday, March 11, 2011.
I bring this up in relation to the Sendai earthquake that rocked Japan this past Friday: It was an 8.9 (Richter), and wrought tremendous devastation. As I write, there is as yet no clear accounting as to lives lost, though it is likely in the tens of thousands. At least two nuclear reactor sites have been severely damaged; the Fukushima reactor #1 is close to melting down, and #3 isn’t in much better shape. Hundreds of thousands of people have been evacuated from the area, and further tens of thousands of people are homeless, following the tsunami. And millions of people are without electricity or running water.
This is a tragedy for the Japanese people—the worst crisis since the end of the Second World War.
To those of us untouched by the direct effects of this tragedy, we should thank our lucky stars. But rather than gawk at the lurid images coming through the media, it would be smart for us at this time to analyze the likely effects of this disaster on the rest of the world’s economy.
Chile and Argentina sure sound like nice places to live. How fragile is our system when Texas has to beg Mexico for power? Simon Black gives some very practical advice. Peak oil is real. Food prices are at all-time highs. Drought and climate change are wreaking havoc. Our energy infrastructure is a mess. We haven’t built a nuclear power plant or an oil refinery since the 1970s. Our population goes up by 2 million per year. Our entire economic system is based upon just in time delivery of food, goods, oil, electricity, and services. One glitch brings the whole system to a grinding halt. Get prepared to be off the grid.
February 3, 2011
La Serena, Chile
The night skies of northern Chile are among the clearest in the world. I’ve been astounded here every evening by the sheer beauty of more stars crowding the darkness than I have ever seen in my life… it’s something that just about every human being can appreciate.
La Serena is a thriving coastal town, a vacation hot-spot in Chile. It’s about an hour’s flight north of Santiago and the gateway to Valle de Elqui, a fertile agricultural region nestled in the mountains where I spent a long weekend.
The weather here is also spectacular with an eternal, spring-like climate… so you can imagine I was feeling more than a bit guilty when I called my parents in Texas to check in on them this morning– Texas is suffering horrendous cold weather right now, like much of the US, and my parents were huddled in bed with the dogs trying to stay warm.
Thing is, authorities have initiated rolling blackouts across the state because demand from so many people heating their homes at the same time has proven to be too much for the system to cope with. So now, community by community, they’re shutting the power down for up to 45 minutes, possibly longer if the weather doesn’t improve.
You know the system is in bad shape when you have to import electricity from Mexico in order to keep the lights on… but that’s exactly what’s happening. Mexico’s Federal Electricity Commission is riding in to save the day, transmitting nearly 300 MW across the border so that Texans don’t freeze.
Fortunately my folks are pack rats and have an abundance of blankets, food, and water stashed away… but these events do certainly illustrate how fragile the system is and how dependent most people are on things that they have no control over.
With world food prices surging to the highest level ever recorded, energy demand increasing by the day, and the world population growing by over 70 million each year, I think it’s definitely time to reduce system dependencies. There are essentially two ways to do this.
First is to become a member of the elite… fast. Jerry Jones, the billionaire owner of the serially disappointing Dallas Cowboys football team, was able to get his shiny new stadium exempted from the rolling blackouts because the 2011 Superbowl will be held there this coming weekend.
Simply put, if you’re a member of the elite (like Jones), you have power and influence with the people who control the system. Personally I don’t like this approach because the elite’s benefits are often gained by taking value from others; in this case, Jones’ stadium has power while my parents wait to be bailed out by the Mexicans.
Regardless, I would tell you that it’s a hell of a lot easier breaking in to these circles overseas; in smaller countries, you can gain access to the elite without being a billionaire. I wrote about this extensively last year in our free ‘Network Infiltration Report,’ which outlines some of the tactics that have been successful for me in the past.
More importantly, I think increasing one’s self-reliance is the better answer to reducing dependence on the system– this could mean a lot of things: having a second residence in a more stable place overseas; installing solar paneling; storing extra food and water; diversifying your business infrastructure; planting a garden, etc.
I’ve been very vocal about this lately because I believe that system disruptions, political turmoil, social strife, and economic uncertainty are all interconnected, and increasing one’s self-reliance is critical to cushioning the blow of whatever may come.
Those who remain completely dependent upon the system– the politicians for their economic financial opportunities, the big Ag companies for their food supplies, the bureaucrats in the utility commissions for their water and power– are quite vulnerable.
Worst case– even in the event that some miraculous solution should wipe away all the world’s political corruption, economic insolvencies, and resource shortages (which is entirely possible at some point in the future with more advanced technology), you won’t be any worse off for taking measured steps to become more self-reliant today.
The U. S. Constitution doesn’t guarantee happiness, only the pursuit of it. You have to catch up with it yourself. — Ben Franklin