Argentines Rush to Invest in Land as Economy Heads for Steep Recession
These are hard times for investors in Argentina.
An upcoming steep recession is forecast for South America's second largest economy. But land sales are flourishing as Argentines line up to buy hard assets to protect the value of their wealth.
That's the most recent observation posted on the Nasdaq.com
The NASDAQ site notes the market for home loans is still undeveloped. Home mortgages represent only 11% of Argentine banks' total lending compared to 67% in Chile. Most Argentines pay cash for their homes.
However, the Argentine government has launched an ambitious mortgage program aimed at increasing credit growth. The national pension agency is set to lend $4.4 billion dollars for mortgage loans through 2013.
The Ternium Corporation should benefit from the increase in mortgage growth and home construction, according to the NASDAQ site. The $4 billion manufacturer processes steel products for construction, home appliances and capital goods. Shares have gained 5.9% since the beginning of the year and pay a 3.8% dividend yield, easily outperforming the broader market.
NASDAQ notes a recent leading economic indicator, published by Torcuato Di Tella University in Buenos Aires, puts odds of a recession in the Argentine economy at 95% for a second consecutive month. Over the last 18 years, the indicator has forecasted recessions 4.3 months in advance and growth periods 2.7 months in advance, the website states.
Argentina's economy grew 8.9% in 2011, though inflation probably topped estimates of 24% following several years of hyper inflation.
"Economic figures coming out of the Argentine economy are suspect as the government denies estimates for inflation, reporting a rise of just 9% last year," the NASDAQ website notes. Economists expect growth to fall to just 2.75% this year,
"Capital flight pushed the government to institute a series of controls last year as the country is still largely shut out of international bond markets following its 2001 default," the Nasdaq site states. "Recent tariffs and laws on imports have caused tension with key trading partner Brazil as well."
On July 3, Argentina's Supreme Court reapplied a mining ban in certain areas of the Northern provinces. Parts of the ban were struck down by a lower court after the mining industry warned it would set back construction and development of the sector.
Barrick Gold operates a $5 billion gold and silver mine in the San Juan province and could be affected by the ban, the NASDAQ site states.
Also announced on July 3 was that the Argentine economy would need a $400 million loan from the Development Bank of Latin America, formerly the Andean Development Corp. to finance infrastructure projects.
The Global X FTSE Argentina 20 (ARGT) has followed the overall market down with a loss of 23.5% since the beginning of the year, under-performing most other country and regional funds, according to the NASDAQ site.
"The government has yet to propose a plan to address, or even acknowledge, its serious fiscal and economic problems," the NASDAQ notes. "The Argentine economy remains a high risk for investors and should generally be avoided. Speculators may take short-term positions in individual names but should book profits regularly."
The Nasdaq.com site states the views and opinions on its news site "do not necessarily reflect those of The NASDAQ OMX Group, Inc."