Chile Wealth, Inequality, and International rankings

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Re: Chile Wealth, Inequality, and International rankings

Post by admin » Mon Jan 28, 2019 7:00 am

funny story about that.

our housekeeper that has worked for us for years, tells us a month ago that she was giving us notice that she was going to quit. she had an opertunity to make a bunch of money picking blue berries. they pay good money for harvesting blue berries exactly because their is a shortage of people willing to do the work in chile.

she is like in her late 50's, and her two daughters were also going to pick blue berries.

I use pick all sorts of wild berries with my mother every year. it was just for the family. she was big on canning, so every year for a few weeks i picked berries with her. never anything paid or industrial. i remeber it being hard, hot, dirty work when i was like 10 years old, and it is hard get a 10 year old to run out if energy. I could not imagine our 50 year old housekeeper being able to do that for very long.

so we told her to go give it a try, and we would hold her position with us if it did not work out. we have another housekeeper that fills in when she is unable to work.

yep, that lasted a less than a week.

the point is, chile's wages and the type of work chileans are willing to do, are rappidly changing. low level grunt unskilled work done by chileans is rappidly becoming a thing of the past, even if there is still a demand.
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Re: Chile Wealth, Inequality, and International rankings

Post by admin » Mon Jan 28, 2019 7:49 am

when i first came to southern chile, i recall commenting to my wife what a shame it was that there was not more tractors and equipment on the farms. there were a few around, but not like you might say see in the midwest u.s., or european farms.

now you see tractors everywhere. drive in to any medium size town in the south and you will see tractor dealers everywhere. the entrance to say puerto varas must have 20 farm equipment dealers alone. osorno even more. all right next to eachother. everything from john deer to no name chinese copies.

the farm next my house, they grow hay and corn mostly, every year has bigger and newer tractors planting and harvesting. you don't drop say $50,000+ U.S. on a (even small) new tractor unless the money is there to at least make the payments. you also don't support a couple hundred(s)of dealerships and agro support companies in the south, unless there is millions of dollars in production to go with it. well, not for very long anyway.

but there is another back of the napkin smell test for just how rich chile is. let's say it makes no financial sense to spend say $50,000 u.s. on a tractor, unless you have at least 200 hectares of land to farm (just to be in the game). $100,000 u.s. tractor, you need at least 400+ hectares, and so on.

In otherwords, every tractor sold has a corresponding piece of land that is worth at least a millions of dollars, and a crop to go with it. you can very conservatively, expect every 100 hectares to correspond to about $1 million u.s. in land value (that is only like 7 million pesos a hectar ). FYI, that is just plane old agro land, ignoring any value as residential property or other potential uses.

41southchile can probably put more realistic numbers to that, but you see where i am going with that calculation. i have not been shopping for much more than a lawn mower in a long time.

however, pretty easy to get to over 67,000 u.s. dollar millionaires, just counting tractors in rural southern chile.

never mind the hyper expensive mega-industrial fruit and wine country north of the bio bio river where the real agro export industry of chile is at (for now). all those crop dusters are not flying tourist around, and everyone of them costs a million dollars. how many millions of dollars in fruit exports do you need, just to start the engine on one of those?

a friend that is a pilot once told me it coast him over $50 to turn over the engine on his single engine passenger plane, never mind other costs to fly it per hour.

we could do similar calculation with the logging trucks and logging industry. what does a logging truck and trailer run? half a million dollars? how many hectares of trees do you need to justify owning one? how much are the trees worth, without even calculating land value and appreciation over say 20 to 30 years it takes to grow those trees?
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41southchile
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Re: Chile Wealth, Inequality, and International rankings

Post by 41southchile » Tue Jan 29, 2019 1:10 pm

admin wrote:
Mon Jan 28, 2019 7:49 am
when i first came to southern chile, i recall commenting to my wife what a shame it was that there was not more tractors and equipment on the farms. there were a few around, but not like you might say see in the midwest u.s., or european farms.

now you see tractors everywhere. drive in to any medium size town in the south and you will see tractor dealers everywhere. the entrance to say puerto varas must have 20 farm equipment dealers alone. osorno even more. all right next to eachother. everything from john deer to no name chinese copies.

the farm next my house, they grow hay and corn mostly, every year has bigger and newer tractors planting and harvesting. you don't drop say $50,000+ U.S. on a (even small) new tractor unless the money is there to at least make the payments. you also don't support a couple hundred(s)of dealerships and agro support companies in the south, unless there is millions of dollars in production to go with it. well, not for very long anyway.

but there is another back of the napkin smell test for just how rich chile is. let's say it makes no financial sense to spend say $50,000 u.s. on a tractor, unless you have at least 200 hectares of land to farm (just to be in the game). $100,000 u.s. tractor, you need at least 400+ hectares, and so on.

In otherwords, every tractor sold has a corresponding piece of land that is worth at least a millions of dollars, and a crop to go with it. you can very conservatively, expect every 100 hectares to correspond to about $1 million u.s. in land value (that is only like 7 million pesos a hectar ). FYI, that is just plane old agro land, ignoring any value as residential property or other potential uses.

41southchile can probably put more realistic numbers to that, but you see where i am going with that calculation. i have not been shopping for much more than a lawn mower in a long time.

however, pretty easy to get to over 67,000 u.s. dollar millionaires, just counting tractors in rural southern chile.

never mind the hyper expensive mega-industrial fruit and wine country north of the bio bio river where the real agro export industry of chile is at (for now). all those crop dusters are not flying tourist around, and everyone of them costs a million dollars. how many millions of dollars in fruit exports do you need, just to start the engine on one of those?

a friend that is a pilot once told me it coast him over $50 to turn over the engine on his single engine passenger plane, never mind other costs to fly it per hour.

we could do similar calculation with the logging trucks and logging industry. what does a logging truck and trailer run? half a million dollars? how many hectares of trees do you need to justify owning one? how much are the trees worth, without even calculating land value and appreciation over say 20 to 30 years it takes to grow those trees?
Yeah agriculture has changed a lot here even in the last 7 years we have been here, mainly for the lack of labour things are becoming more automated, especially the new generations coming through taking over the family farms etc (the under 50s I guess) they have a different mindset and can see the advantages that automation and technology offers.

Yeah agriculture land depends on location and soil and how much it has been improved, drainage, fertilizer applied over the years and soil quality and other infrastructure etc, but yeah 7 million would be a fair average around continental Los Lagos region.
On average the rule of thumb in NZ was about 1000 NZD per hp of tractor, it's probably similar here from what I've seen, 500 lukas per hp, , 30 to 35 million pesos would probably get you a tractor say a 70hp for a smaller farm (100ha or less). Aything less than that and you are not farming to make money, you have the farm as you inherited it and probably have another job or are not relying solely off the income from that, it can be done but you have to be working it yourself and be really on your game and operate efficiently to make money out of less than 100has.
If you have debts or mortgages forget it, less than 100ha won't cut it. With regards to machinery too it's not only the tractor you need but other equipment too, in NZ there are a lot of contractors that go around different farms doing the work with harvesting equipment (as the gear is so expensive), it makes sense or them to invest, rather than the farmer having so much capital tied up in machinery .
Here it doesn't work so much like that for a number of reasons so farmers here have a shit load of money tied up in their own equipment, also a lot of them have the iron disease and like to show off to the neighbours, but hey it keeps the economy going and the tractor dealerships in business, it's probably just not the most profitable way to run their business, it is what it is.

Some of the tractors and harvesters etc travelling down the ruta 5 to various jobs amd farms are well over 100 million pesos and I've seen a lot more in the last couple of years.
As for logging, that is truly mind boggling the ammount of trees on trucks on the road this last year or so. Go for a drive along the back roads along the coastal hills from about Osorno to past Concepcion , its prwtty much all forest, and the amount of cereals is also equally impressive, you dont see much from the Ruta 5, and despite the media attention about Mapuche the Araucania region pumps out a hell of a lot of cereal crops and forestry, isn't Arauco the biggest pulp and timber manufacturing plant in the world?
In the Lakes Region Chile for 6 years. It looks like New Zealand in some ways, and is nearly at the bottom of the world too, but there the similarities end.

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Re: Chile Wealth, Inequality, and International rankings

Post by admin » Tue Jan 29, 2019 5:01 pm

isn't Arauco the biggest pulp and timber manufacturing plant in the world?
Think it is second largest, and almost became the largest in the World a couple of years ago, but a deal to buy a pulp factory and related forest in Brazil fell through due to Brazilian corruption scandal (it was part of the car wash scandal). Last I heard, they were going to take the money and expand their operations in Chile, after the Brazil mess, and I think that will bring them pretty close to the largest in the World.

Arauco is owned by Copec. Those gas stations pump out a lot of cash liquidity. In fact, so much liquidity I have a hard time keeping up on what they are buying next with all that cash. Last I heard they were buying a copper mine in Peru. last year they bought a gas station chain in the United States (like half billion dollars), while also trying to buy the pulp mill in Brazil (5 billion dollars). They own salmon farms, airplane fuel, bunker fuel for ships, they are developing residential real estate in Vina, they bought the rights to exon's "mobile 1" oil name in latin america, they sell consumer natural gas in Colombia and peru, along with gas stations. Think they own gas stations in Mexico still, but last I seen they were selling them (good thing, mexico is out of gas). All that, and they own a major chunk of real estate in the south of Chile that has probably not had a market appraisal in 20+ years.

I just keep buying their stock on the dip, and think of it like an ETF they are so diversified across industries and countries.

There is a Chilean company that the parts are definitely worth whole lot more than the stock price indicates.

Again another case of a Chilean companies playing poor developing little company, while flush with cash and assets in the billions of dollars. I have not looked through their recent annual report, but they got money.

Just for fun, I did a quick look on bloomberg. They have it listed as a market cap of about 17 billion dollars (think I got all the zeros in the conversion to dollars). :lol: :lol: :lol: :lol: :lol: :lol: :lol:

That is a rounding error in their assets. They probably got more than 17 billion dollars in trees in southern Chile, without counting the dirt they are planted in. Copec has turned in to a multi-national conglomerate, with a monster size appetite to buy anything in an industry that gives them a semi-monopolistic position across the Americas.

However, if your a hedge fund investor or running a sovereign wealth fund, not doing your homework in any depth on the ground, you do a quick look at bloomberg terminal and dismiss it as an investment target because it is just too small. In fact, you look at all the companies in Chile, and based on their market cap or just the public data points available, and they all look too small for any big serious investment fund to bother putting money in.

I bet the same goes on for these investment banks, and international organizations that issue their reports. Some intern, does a quick check of the bloomberg terminal, adds up the market cap of all these Chilean companies, and then dismisses Chile as too small an economy or puts Chile on the "fragil 5" list or whatever the bond scam of the week is.
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Re: Chile Wealth, Inequality, and International rankings

Post by admin » Tue Jan 29, 2019 5:13 pm

Put this in perspective.

My guess, and I have not done any hard number crunching, is that Copec alone is worth more than 100 billion U.S. dollars. Perhaps a lot more.

The official GDP of Chile was a bit over 300 billion in 2018.

Estimate of the economy is like 1 trillion dollars.

However, this one "gas station" company, and there are a lot more companies that are under valued, is a large percentage of the countries wealth? It's GDP?

And, yet all the economist and financial guys still like to talk like Chile would not exist if it was not for Codelco. Codelco is a frigen bloated dog of company that should be sold off, while it still has some copper and other minerals in the ground, and the government can just collect the royalties from whomever buys it.
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Re: Chile Wealth, Inequality, and International rankings

Post by 41southchile » Tue Jan 29, 2019 6:13 pm

I went for a sunday drive the other day, I like to go exploring the back roads in the summer , I.e where the tourists don't go, especially the idiot Santiago drivers who don't seem to be able to de stress even down here, and drive like maniacs. Anyway I went to through Osorno and up to where the Rahue river meets the Rio Bueno, in the northwest corner of Los Lagos region and then came back through coastal hills and San Juan de la costa township, in that circuit I probably passed about 10 cars in the nearly three hours I was driving.
What I did see where lots of plantations of pine and Eucalyptus and even quite a lot od state investment, the roads were good, unsealed most of it, but some good paved sections ,, rural health clinic/hospital in San Juan. Then driving back through Osorno, this is Osorno, nothing to write home about, several apartments and high rises being constructed, many many renovations and restorations of shops and businesses, it's the same in Puerto Varas, but that's to be expected as its got the touristy , reputation thing. I've noticed now even out in the rest of the region now more activity , Puerto Montt is also picking up with multiple high rises and building activituy going on, money is being spent all over the region. It didn't really grind to a halt in the MB years and there were still things happening, but now it's a lot more.
When we first lived in Osorno in 2013 there were a few industrial things along the highway, now it is grown a lot along to the South, it's the same between Puerto Varas and Puerto Montt along the Ruta 5 that is spreading out fast. From mere observation there is a lot of activity and big spending going on.
In the Lakes Region Chile for 6 years. It looks like New Zealand in some ways, and is nearly at the bottom of the world too, but there the similarities end.

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Re: Chile Wealth, Inequality, and International rankings

Post by ghibli » Tue Jan 29, 2019 6:26 pm

You must be buying stock on the chile exchange. i don't find a us listing.

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Re: Chile Wealth, Inequality, and International rankings

Post by admin » Wed Jan 30, 2019 12:10 pm

yea copec is not listed in the states, and hope they never do. chilean companies use to list in the u.s. due to liquidity in chile. but now the chilean exchange has good liquidity for at least the big companies. some are even starting delist from the u.s., because it is a regulatory hassel.
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Re: Chile Wealth, Inequality, and International rankings

Post by admin » Wed Jan 30, 2019 12:19 pm

yea, my wife and i have been talking about exploring that osorno coastal area for while. we also like jumping in the 4x4 on a sunday and poking around the less traveled nooks and cranies of southern chile. there is a lot of it, that no santiago person would even consider trying for fear of never being found.

what is realy fascinating is how nice the roads in the middle of nowhere are in the south now. i mean 100 km from the nearest town, and you could open up your Porsche on a sometimes nearly perfect paved road with no traffic. i have to work at it now to find something that really needs a 4x4.
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Re: Chile Wealth, Inequality, and International rankings

Post by admin » Wed Jan 30, 2019 12:36 pm

we went to visit a few weeks ago a property we bought years ago that is pretty remote (when we bought it at least), near inter lagos.

there was frigen garbage service now, and it looked like they were getting ready to pave the road in front. all the neighbors had city dumpsters in front of their properties. down the road a few km they had built a new rural clinic, school, and a municiple mayor's office. there were 4 cell towers on the mountain side down the road from our property, and full bars for all the major cell companies. i don't get that good of a signal in downtown santiago.
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Re: Chile Wealth, Inequality, and International rankings

Post by 41southchile » Thu Jan 31, 2019 9:53 am

In Llanquihue township, the closest town to us, there is currently aprox 10 to 12 million USD of investment going on at the moment building a new municipal building, new footpaths, parks and plazas, new wharf and lakeside area and other projects, plus the US250 million dollar wind farm investment up the road, this in a comuna with 17000 people. There is also a state funded training institute being set up and already operating known as CFT( centro formacion tecnica) they provide technical training for anyone in los Lagos region, not just younger school leavers, that's going to bring up to 350 students to the town, and many more millions with new constructions and money flowing in, we are currently working with one course from CFT on a project now. To be fair , it was the socialists that got a lot of this rolling, nothing like a bit of government money thrown around.
In the Lakes Region Chile for 6 years. It looks like New Zealand in some ways, and is nearly at the bottom of the world too, but there the similarities end.

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Re: Chile Wealth, Inequality, and International rankings

Post by mem » Thu Jan 31, 2019 5:57 pm

Most and least corrupt countries report just came out. Chile fell some points from before, but still relatively high on the not so corrupt list. Not sure why they thought Chile is somehow more corrupt than it was before. Perhaps they mistook inane bureaucracy for corruption.
That being said, I wouldn't mind the ability to grease some bureaucratic wheels with some CLP lol as long as there are not shakedown road checkpoints like in some other places.

https://www.zerohedge.com/news/2019-01- ... st-rampant

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