Is Chile going to go into a recession??

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thisisreallycomplicated
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Re: Is Chile going to go into a recession??

Post by thisisreallycomplicated » Thu Aug 02, 2012 7:49 am

admin wrote:In fact, the government shifted last year from buying land for housing, to expropriating land for housing at rates 30% under market (can be challenged in court by the owners, but often is not), because the prices were getting out of control on the open market.
That's one of the other things that worries me about buying land where I don't understand much about how things work. So how does that work? You buy land. Gov't takes land at 30% discount? What are the chances of that happening? Especially if you happen to be living on it, and growing your food on it. Or have other plans for it.
“Now it’s conspiracy – they’ve made that something that should not even be entertained for a minute, that powerful people might get together and have a plan. Doesn’t happen, you’re a kook, you’re a conspiracy buff!” – George Carlin

thisisreallycomplicated
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Re: Is Chile going to go into a recession??

Post by thisisreallycomplicated » Thu Aug 02, 2012 8:01 am

eeuunikkeiexpat wrote:We seem to also have the USD/CLP will spike to 600-700 or more proclamations every 6 months or so and that has not happened either but I don't doubt that it could.
It seems to spike when the US stock market crashes, and there's a big shift in the supply/demand of USD. So wait for a crash, before converting large amounts of USD, and your USD will likely be in relatively higher demand.
“Now it’s conspiracy – they’ve made that something that should not even be entertained for a minute, that powerful people might get together and have a plan. Doesn’t happen, you’re a kook, you’re a conspiracy buff!” – George Carlin

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ABIII
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Re: Is Chile going to go into a recession??

Post by ABIII » Thu Aug 02, 2012 2:09 pm

in my un learned opinion,
unless you're very wealthy and have more than enough money to tide you over any crisis(es?, or crisi?)
buying because you think the value is going to go up and nothing else (aka speculation) is one good way to lose your shirt and then some.
if you're going to buy, at least buy something that's useful
as one poster said before, if things get sour, at least I can grow veggies on the property.

I have some friends who bought land in Valparaiso, they thought it was going up but they got in on the high end of the curve, and the location (location, location) was not prime, in three years, the value has remained stagnant. But again, location matters more than anything in choosing.
Just saying the south of Chile is as broad as saying I bought some land on the east coast of the United States.

It's also interesting that the New York times recently published an article with statistics on how certain parts of that city did not go down in value at all during the real estate crash, since the land was so scarce and demand just ebbed slightly.

It's related to the idea that you should try to buy the resource that is scarce (proximity to attractive urban center, protected view, water front, etc) and avoid the infinitely replicable ( parcelas divided from viewless country farms, or Las Vegas style tracts in general)
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Re: Is Chile going to go into a recession??

Post by admin » Thu Aug 02, 2012 6:29 pm

thisisreallycomplicated wrote:
admin wrote:In fact, the government shifted last year from buying land for housing, to expropriating land for housing at rates 30% under market (can be challenged in court by the owners, but often is not), because the prices were getting out of control on the open market.
That's one of the other things that worries me about buying land where I don't understand much about how things work. So how does that work? You buy land. Gov't takes land at 30% discount? What are the chances of that happening? Especially if you happen to be living on it, and growing your food on it. Or have other plans for it.
Then you hit the frigen jackpot in most cases. The government is required to pay market price or better. Historically, just to speed things along they pay more than market price. If for whatever reason they decide to pay under market, then you challenge it in court, the court sends out an appraiser, the fair market appraisal or better is what they have to pay you.

What I understand happened in the osorno cases, is everyone caught wind of the expropriation, and during the process jacked all the prices in the area up. Essentially the government was paying fair market price, just the market was not playing fair. Some of them I understand are still in court trying to get the artificially inflated price, others are just taking what they should have got in the first place.

In any case, expropriations or planned expropriations in an area must be public record, and they are registered both on a national and local level when you buy. Those certificates should be mandatory as part of any title search an attorney does in Chile before you buy.
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Re: Is Chile going to go into a recession??

Post by admin » Thu Aug 02, 2012 7:20 pm

ABIII wrote:in my un learned opinion,
unless you're very wealthy and have more than enough money to tide you over any crisis(es?, or crisi?)
buying because you think the value is going to go up and nothing else (aka speculation) is one good way to lose your shirt and then some.
if you're going to buy, at least buy something that's useful
as one poster said before, if things get sour, at least I can grow veggies on the property.

I have some friends who bought land in Valparaiso, they thought it was going up but they got in on the high end of the curve, and the location (location, location) was not prime, in three years, the value has remained stagnant. But again, location matters more than anything in choosing.
Just saying the south of Chile is as broad as saying I bought some land on the east coast of the United States.

It's also interesting that the New York times recently published an article with statistics on how certain parts of that city did not go down in value at all during the real estate crash, since the land was so scarce and demand just ebbed slightly.

It's related to the idea that you should try to buy the resource that is scarce (proximity to attractive urban center, protected view, water front, etc) and avoid the infinitely replicable ( parcelas divided from viewless country farms, or Las Vegas style tracts in general)
Yea, some new real estate "experts" in Chile have been advocating this approach to real estate investment in Chile. I say, new gringos just arriving will never get it right. The cultural learning curve is far too steep for a new gringo to nail, and they won't know if their real estate "experts" are right or not for at least 5-10 years. Which most of them I am sure will no longer be around.
Spencer Global Chile: Legal, relocation, and Investment assistance in Chile.
For more information visit: https://www.spencerglobal.com

From USA and outside Chile dial 1-917-727-5985 (U.S.), in Chile dial 65 2 42 1024 or by cell 747 97974.

thisisreallycomplicated
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Re: Is Chile going to go into a recession??

Post by thisisreallycomplicated » Thu Aug 02, 2012 7:37 pm

admin wrote:
thisisreallycomplicated wrote:
admin wrote:In fact, the government shifted last year from buying land for housing, to expropriating land for housing at rates 30% under market (can be challenged in court by the owners, but often is not), because the prices were getting out of control on the open market.
That's one of the other things that worries me about buying land where I don't understand much about how things work. So how does that work? You buy land. Gov't takes land at 30% discount? What are the chances of that happening? Especially if you happen to be living on it, and growing your food on it. Or have other plans for it.
Then you hit the frigen jackpot in most cases. The government is required to pay market price or better. Historically, just to speed things along they pay more than market price. If for whatever reason they decide to pay under market, then you challenge it in court, the court sends out an appraiser, the fair market appraisal or better is what they have to pay you.

What I understand happened in the osorno cases, is everyone caught wind of the expropriation, and during the process jacked all the prices in the area up. Essentially the government was paying fair market price, just the market was not playing fair. Some of them I understand are still in court trying to get the artificially inflated price, others are just taking what they should have got in the first place.

In any case, expropriations or planned expropriations in an area must be public record, and they are registered both on a national and local level when you buy. Those certificates should be mandatory as part of any title search an attorney does in Chile before you buy.
How often does this expropriating happen? One of the reasons I decided not to move to Argentina, is because I read that it tends to happen there. I'd much rather not be forced out of my home, even if I did make a nice profit on the sale. If it was just a piece of land I bought as an investment, it would be different.
“Now it’s conspiracy – they’ve made that something that should not even be entertained for a minute, that powerful people might get together and have a plan. Doesn’t happen, you’re a kook, you’re a conspiracy buff!” – George Carlin

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Fugger
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Re: Is Chile going to go into a recession??

Post by Fugger » Thu Aug 02, 2012 9:20 pm

admin wrote:The economy is at or near full employment. 6.6% unemployment numbers just came out yesterday. Some parts of Chile, the lakes district for instance, are at around 4% unemployment in the middle of winter (tourism and agriculture are big seasonal employers here). The central bank might very well raise interest rates. We are running better than 6% growth.
Just to put the INE stats in perspective, I compared the occupation rate numbers and also the employees with AFP contribution ("cotizantes"), the picture is a little bit less rosy. Low occupation rates remain an issue and actually the rate slightly decreased compared to 12 months ago. Those with occupation actually increased slightly less (1.3%) than the overall working age population (1.5%), so the occupation rate decreased marginally. The good news is that the salaried with AFP contribution have increased (note that this excludes "cotizantes independientes" which at this stage would add another 99'000. Still formal employment with AFP still represents only about a third of the working age population.
chile_employment_metrics.png
chile_employment_metrics.png (10.03 KiB) Viewed 1622 times
Source for INE data is http://www.ine.cl/descarga.php?archivo= ... odPJ7aBQmv and source for AFP data is http://www.safp.cl/safpstats/stats/.sc.php?_cid=44 (May data as June was not yet available)
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fraggle092
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Re: Is Chile going to go into a recession??

Post by fraggle092 » Tue Aug 07, 2012 10:55 am

IMHO Its only a matter of time.
http://www.emol.com/noticias/economia/2 ... julio.html

It took a couple of years for the effects of the Asian crisis to be felt here, but 2001-2002 were not good years for local businesses. I suspect that the government will try to counter the effects of the global recession this time round by increased spending, especially in view of next years presidential elections.

But I could be wrong :)

However, this guy seems to think as i do...ex president Banco Central:

http://www.latercera.com/noticia/negoci ... para.shtml
Après moi, le déluge

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eeuunikkeiexpat
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Re: Is Chile going to go into a recession??

Post by eeuunikkeiexpat » Tue Aug 07, 2012 11:17 am

One is only as good as their last call. The prudent thing is to approach everything with eyes and mind open and not bet the farm/parcela/condo/empresa for one outcome (because this time its different, because the consensus says so, because the guru said so, because the government said so, because he/she/it who has a certain direct interest - revealed or not revealed - said so, because I said so ...). :alien:
Generally, just a SPAM KILLER. You are on your own in this forum. My personal mission here is done.

BUT when necessary, by way of ridicule and truth revelation we shalt do war.

--eeuunikkeiexpat

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Re: Is Chile going to go into a recession??

Post by admin » Tue Aug 07, 2012 6:22 pm

Here is the thing. Is it impossible for Chile to go in to recession? No. Is it likly in the near term or even medium term? No

Why?

A bunch of things. None of them really have to do with real estate. A price collapse in real estate in Chile will be a symptom of a bigger implosion, not the cause of it. Historically what Chileans do in those cases, is simply sit on their real estate. They will wait 4-5 years, even 10 years, for something to sit on the market until they get the price they want. So, real estate is not what you should be watching for the health of the Chilean economy.

First, Chile will have to loose 4%-6% yearly growth from where it is now. Just like it does not happen overnight to put that 4-6% growth on such a small economy, it does not come off the top either. In China, a 4% growth rate is effectively a recession, because of the size of the economy and development stage. In Chile, it is for the exact opposite reasons.

Then, because of the current interest rates, given that Chile has been raising rates while everyone else has been desperate to cut rates, we would need to work through 5% percentage points of interest rate cuts from the central bank. This is not the United States or Europe, where the central banks have already burned through through the bottom of the interest rate trick bag, and in to negative territory.

O.k. so, after that there is another $15 billion in sovereign reserve funds sitting on the sideline. That is money Chile can throw at the problem, before turning to the open market and borrow money. Borrowing money in a market with historically low rates, and Chile with a credit rating better than most of Europe right now.

So, they have to burn though all that to get to 0. Once at zero, let's say it is another 3 quarters of negative growth to be in a proper recession.

Here is a big one that is missed, or at least not obvious.

I don't buy the raw trade deficit numbers that came out this month (i.e. copper exports down, something like a 300 million dollar trade deficit). What we are seeing, personally in our business, is millions of dollars of capital goods flowing in to the country (e.g. mining equipment, other machines), bought and paid for by companies outside of Chile (e.g. U.S. company buys Chinese loader, imports it to dig copper, gold, whatever in Chile). There is a distortion in the reporting, because there are distortions in the customs and private investment reporting systems. The government is not seeing the whole picture, or at least they are berried in the stats somewhere. It is not a bunch of Chilean housewives buying Chinese crap that is moving those numbers (well, it takes a lot of them to equal say one half million dollar piece of equipment). The money spent on those capital goods, are being counted as Chilean money flowing out of the country to buy foreign goods, when in fact they are really foreign investment funds flowing in to Chile to develop resources. Those machines are never leaving Chile again. They will be put to use building the country up, mining whatever, and making things that will flow out of the country as exports. Those numbers, if they are ever reconciled, will not happen for at least another year until the operations are up and running. Right now, I am not talking about one or two, but ships full of millions and millions of dollars of equipment (China is having a bit of fire sale right now it seems). Yea, the cash for the machine went to China, but the machine did not go to the United States or Europe. It came to Chile. It was Europe and the U.S. that had a loss to Chile.

So, the 2008 financial implosion did not do it. The 8.8 earthquake did not do it. Europe has not materialized in to anything (so far).

What could do it? What would keep me up at night? A full implosion of China that takes Asia with it. A full implosion of Brazil, that takes the region with it. The other possibility might be a sustained spike in oil (not just a couple month pop, but multi-year new normal), caused by the Iran thing going really badly for a long time.

Meanwhile, back at the ranch, there is nothing to rent anywhere around the Lake where I live in the south (in the winter time). Finding employees is getting hard (again, in the winter time). If this far flung corner of Chile, with relatively limited economic impact on the country is running at full steam (again, mostly seasonal agriculture and tourism), the rest of the country has to be doing pretty dam well overall. If the economy is doing anything in Chile right now, it is overheating.

Inflation might be a bigger concern. Which if inflation is the concern, real estate might not be the worse place to be parking money.
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Re: Is Chile going to go into a recession??

Post by nwdiver » Tue Aug 07, 2012 6:38 pm

thisisreallycomplicated wrote:
admin wrote:
thisisreallycomplicated wrote:
admin wrote:In fact, the government shifted last year from buying land for housing, to expropriating land for housing at rates 30% under market (can be challenged in court by the owners, but often is not), because the prices were getting out of control on the open market.
That's one of the other things that worries me about buying land where I don't understand much about how things work. So how does that work? You buy land. Gov't takes land at 30% discount? What are the chances of that happening? Especially if you happen to be living on it, and growing your food on it. Or have other plans for it.
Then you hit the frigen jackpot in most cases. The government is required to pay market price or better. Historically, just to speed things along they pay more than market price. If for whatever reason they decide to pay under market, then you challenge it in court, the court sends out an appraiser, the fair market appraisal or better is what they have to pay you.

What I understand happened in the osorno cases, is everyone caught wind of the expropriation, and during the process jacked all the prices in the area up. Essentially the government was paying fair market price, just the market was not playing fair. Some of them I understand are still in court trying to get the artificially inflated price, others are just taking what they should have got in the first place.

In any case, expropriations or planned expropriations in an area must be public record, and they are registered both on a national and local level when you buy. Those certificates should be mandatory as part of any title search an attorney does in Chile before you buy.
How often does this expropriating happen? One of the reasons I decided not to move to Argentina, is because I read that it tends to happen there. I'd much rather not be forced out of my home, even if I did make a nice profit on the sale. If it was just a piece of land I bought as an investment, it would be different.



Don't worry and don't buy the next tract over from a suburban housing tract, which would already be priced for subdividing and very expensive for a small farm plot. You want a small farm go look at 7-10 ha plots in the Bio Bio valley (south cheaper than north and south faceing slopes) lots there and many don't need irrigation.
It's all about the wine.

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