Argentina—Where Your Dollars Still Buy a Lot of Land

Saturday, March 15, 2008

Read more about investing in real estate overseas in International Living Postcards—Saturday Edition

The buy today in Argentina is land. This is one place in the world where it’s possible to buy big for very little money—as little as $50 per acre and less—but to get that price, you need to buy tens of thousands of hectares.

If you come to Argentina to shop for an expansive spread of your own, here’s something you need to know: Argentina is keen to protect both its borders and its natural resources (with which it is well blessed).

To that end, the country recognizes what it calls “security zones.” Unlike in other countries, however, where these protected zones are typically consistent country-wide, Argentina’s security zones vary by province.

Note that, not only must you, as a potential foreign buyer, go through an approval process to buy in a security zone, but so must Argentines. However, for nationals, the process is little more than a formality. In fact, thanks to recent changes to the legislation, the approvals process for foreign buyers has gone from being an administrative pain in the neck to posing a potentially serious obstacle to investment.

Historically, this process for foreigners has taken five or six months. Changes last year, though, mean you’ll now wait a year or longer to find out if your security zone purchase has been approved. One escribano I spoke with believes that some applications could take three years or longer.

This adds an uncertainty and a new risk to the purchase process. You now must be willing to wait indefinitely and maybe for years to find out if your intentions as a foreign buyer have been approved, knowing there’s a real possibility the ownership request could be denied.

There is a reliable way to avoid this. Purchase the property through an Argentine trust with an Argentine trustee. The trustee still must go through the approval process, but everyone I’ve spoken with agrees that the only way an Argentine’s request would be declined would be if he had a felony record.

Remember, the security zone isn’t set at a specific distance from the border country-wide. You must investigate the details of the security zone in any province where you’re interested in buying. Most, if not all (unfortunately, there is no central list), of the departments in provinces bordering Chile, Paraguay, and Uruguay have security zones, for example. The entire department of Malargue is considered a security zone (because of its wealth of natural resources), while Mendoza City (in the same province) is not.

Your due diligence review process should be the same if you’re considering buying a small lot in the security zone as it would be if you were looking to buy 50,000 acres. The scrutiny of your application will increase, though, as the size of your potential purchase increases. If the piece of land you’re looking at actually borders another country, expect even more red tape.

The initial review of the file is done by the provincial border police. If you pass muster with them, you stand a good chance of getting approved. Still, the file has to go to Buenos Aires for final approval by the Justice Ministry...which is where the backlog arises.

If you’re willing to wait for final approval, you can title the property in your own name temporarily. The risk is that if you aren’t approved, you’ll have to transfer ownership of the property to someone else...or a trust…very quickly. This could be a reasonable risk for a small lot in a sub-development where the government isn’t going to be too worried about national security. It’d be foolish, though, to try to buy a large tract of land in a security zone this way.

Lief Simon
For International Living

Editor’s note: Don’t forget to check out our St. Patrick’s Day sale this weekend. We are offering you 20% off our favorite IL Bookstore items. If you would like to read more advice from Lief, now is your chance to get $70 off How to be a Global Real Estate Investor. In this report, Lief explains everything you need to know to get into the international real estate market.

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