"You're so 'money'...and you don't even know it"

OK...a blog entry about Uruguay. (gasp!)

One of the (first) interesting things that a newcomer notices when they arrive in Montevideo are the horsedrawn garbage carts doing battle with peugots, fiats, citroen's, city buses and large trucks in downtown city traffic.

My first evening in Montevideo, staying at a hotel on one of the busier commercial streets around 2 am I was woken up by the sound of clipping hooves on the pavement. Even as jaded as I am, it's hard not to smile when a horse trots by with a garbage cart stacked to the hilt -- looking a little bit like the grinch that stole christmas' overloaded sled.

Now, it turns out that these men are unfortunately jobless, and they dig through the dumpsters (dumpster dive) in order to find things to sell/recycle and are not part of the regular automated trucks which empty the dumpsters on a regular basis.

Almost invariably, *anyone* who has ever lived *anywhere* will wonder (usually outloud) why there isn't anyone given horsedrawn carriage rides for tourists. Now, certainly, Montevideo is not NYC, but during the summer months, the city is fairly overrun with tourists. I can't help but think that a couple of horsedrawn carriages could give *really* economical rides to a few tourists around a couple of strategically located neighborhoods and *clean up*.

There is obviously an ample supply of these horses (although i have yet to have anyone give me more than a guess as to where the homeless people get them or exactly how it works).

The Uruguayos are in general "ashamed" of the situation. I think their (generally) left leaning political beliefs see it as a failing of society. Since the left leaning politicians just recently retook power, horse drawn garbage carts could be one of those things that disappears from the streets of Montevideo.

Why in the world can't anyone here think even a little bit outside the box?

For all the conformity that gets driven into the skulls of Asians, I found all parts of Asia to have people who were *much* more enterprising than Uruguay.....Even communist *Beijing* two years after the Tiananmen square uprising...

I've actually heard younger Montevideans complain about the same thing. They say as soon as one person does something and it's successful, overnight you'll have 20 more.

The theories trying to explain this strange behaviour are multi and varied.

.....I've heard theories that they are "overeducated"/institutionalized.

Now, for me, I don't care. I find the slower pace of life, which i equate to Europe in the 1950's, quite charming, and frankly don't want to live in LA jr. or "the next Shanghai". However, most of the Uruguayos (especially the young ones) are NOT happy with the economic opportunities available them in the country. The foreigner with an imagination comes here and sees things as being "wide open". Meanwhile the local with commercial intiative and drive too often leaves the country to find opportunity elsewhere.

Hopefully (maybe) the Uruguayan inferiority complex is starting to recede a bit. For the first four or five months I was here I must have heard, "tell me fuBarrio *why* did you pick *Uruguay*?" (as a place to live). The intonation of this question was generally worded so that it could be interpreted as "why (in the world) did you pick uruguay (of all places. are you, like, a crazy person or something?)".....Since none of them had ever seen this blog, there was still some question as to my sanity.

By next tourist season, I'm going to convince (fund if necessary) one of these enterprising unemployed young people to get a couple carriages offering rides to tourists around the shoreline, the old city, parque rodo, a couple of the touristy neighborhoods or other parks....not like there is any shortage of people skilled at maneuvering horsedrawn carts through city streets....

The reason I'm letting the "cat out of the bag" and willing to lose my first mover advantage by posting here, is that I'm hoping someone else gets with the program and does it before me so I can focus on more important matters -- like finding a direct importer of twinky hostess snack cakes!!!

ciao,
fuBarrio

Is this a Buque or a Bus?

Wind whipped through fuBarrio's sundrenched highlights. His tanned face accentuated the impossible whiteness of his perfect smile as he steered his 40 ft Chris Craft Stinger with himself and Golden Lotus across the wake of a passing cruise ship. The boat lept majestically in the air repeatedly crashing down and sending a spray of warm ocean water onto fuBarrio and GL as cheesy sythesizers and guitars played in the background.

The wind generated by his vessel's 70 nauts quickly dried the moisture from his pink tank top and white linen jacket. Meanwhile the sun basked him in it's warmth, and he felt quite comfortable...all except for his feet, which he attributed to his leather weave "wicker" shoes. fuBarrio pushed the sleeves of his jacket up higher on his forearm to check the time.

"We should be pulling into Montevideo any second now," fuBarrio said to Golden Lotus as he pointed to his gleeming, oversized rolex.

Just then, Golden Lotus, nodded and pointed out their white Ferrari Testarossa waiting for them onshore....fuBarrio flashed a smile back to her through his five o'clock shadow and wayfarer sunglasses....

Something was amiss however.

Why did fuBarrio have hair and straight teeth? Where did fuBarrio get enough scratch together for a $600k cigarette boat? Why did Golden Lotus have an afro and look like "Tubbs"? And, most telling, why in the world would fuBarrio be wearing *pink*?!?!

Suddenly, the boat lept up in the air off a monstorous wave and crashed down into the bay jolting fuBarrio awake.

It was nighttime. fuBarrio quickly looked in the reflection cast off of the inside of the window of buquebus seat 7d in horror.

Damn! Still bald!

fuBarrio saw his whisp of white hair, scraggly teeth and spotted grey skin looking back at him through his own empty grey eyes. Golden Lotus sat next to him in seat 7c, restored to her former beauty.

But, where was he?

fuBarrio found himself on the ferry boat/bus combination linking Montevideo to Buenos Aires. While mistaking the ferry ride for a drug running caribbean speed boat would have been a bit strange, the reality was this was the *bus* leg of the journey between Colonia and Montevideo!

The bus continued to course and cruise past anyone crazy enough to stay on the road, and power into the passing lane without regard to oncoming traffic anytime it approached anyone doing less than 75MPH in its path.

The lack of shocks on the BuqueBus meant that what might otherwise be regarded as small inconsistencies in the surface of the highway meant that the entire bus would jump and leap and lurch and bounce like a giant whale, or Don Johnson's boat from Miami Vice cruising through the harbor circa 1984.

fuBarrio rubbed his eyes with the back of a paw as the Bus neared Montevideo city. Still thick with a full day of travel and the fog of sleep, fuBarrio could have sworn that he saw Keanu Reeves leaning over and giving navigational advice to Sandra Bullock.

Regardless of the sharper turns, more traffic and generally tighter navigation paths, there seemed to be some sort of imperative that under NO CIRMCUSTANCES could the bus go under 50MPH!

fuBarrio imagined that Dennis Hopper had rigged the BuqueBus with a bomb that would explode if it dared slow down. But, when the bus glided to a stop at the tres cruces bus terminal, rather than gaining altitude during a leap across a highway overpass and thus defying the laws of gravity, fuBarrio assumed it was safe to "disemBus".

Alas, in the end, the adventure was captured on neither the small screen nor the silver screen....just another insight into life in Montevideo to be shared with all three readers of his forgotten blog (i added one last week!)

If you get motion sick easily, like Golden Lotus, beware the BuqueBus -- the "Bus" part. Believe it or not...the "buque" is pretty smooth.

(as an aside, I guess I found something that is better in Chile than Uruguay! While Uruguay's buses aren't that bad, Chile's buses are top-notch, comfortable, run on time and are VERY cheap relative to other forms of transportation there.)

Ciao for now,
fuBarrio

Suddenly fuBarrio realizes the value of a garage!

It's "desk clearing" time! All the photos I wasn't able to post while traveling I'll try to get posted in the next couple of days.

This picture was actually taken a couple of weeks ago after a relatively violent windstorm here in Montevideo.

The oak tree in question (outside my home at the time) had caught a disease and stopped producing new leaves. While there hadn't been any immediate urgency to cut it down, the windstorm that whipped through, downed a pretty mature branch.

I missed the damage, but what you can see hopefully) is the outline of where a car was parked on the side of the road underneath where the branch fell. oops.

ciao,

fuBarrio

fuBarrio's "back of envelope" Uruguayan Real Estate Analysis

Ok....

Probably the number one request from all my loyal readers (other than, "take down that "fugly" profile picture of yourself and put up some more of Golden Lotus") has been my take on the real estate market in Uruguay.

Since I know very little about Uruguay outside of Montevideo, I will confine my comments to the Montevidean RE market and single family residences.

In addition, since I'm *very* lazy and only have an hour or so before the daily "10:30 beatdown" in precious metals, I will just try to get my main point across without a lot of historical data to back up my point.

In the states, RE prices can be "back of the envelope" analyzed to be "overvalued" or "undervalued" based on a couple of metrics that tend to hold steady over time.

One of the most straightforward is a Rent vs. Own calculation. While local taxes, maintenance costs, Fed tax writeoffs for interest payments (which vary in value depending on your bracket) will make the calculation a little more difficult, it is usually pretty easy to see when the ratio is COMPLETELY out of whack. In Southern California (and a number of other locations I imagine) one can rent a house for about 1/2 of what it costs to "buy" (pay the bank for the "right" to pay taxes and maintain their home) a similar home. That is an example of "out of whack".

Another is the median income vs. median home price. This is primarily an artifact of someone's ability to repay on a standard 30 year loan (a loan whose popularity is still on the wane in the US) It is still enlightening (for reasons I'll explain later) -- even in a place like Uruguay where loans for residential RE are *very* rare. Typically, 3x median or so is a "safe" number. This dovetails with the "30% of gross salary" that banks used to use as a guideline to determine whether a borrower had the ability to repay a loan. If most people don't make enough repay on a note for a median home, most people can't afford the homes in the area they live. Upside can be limited ano further appreciation is driven by invetors, speculators, and 2nd home purchasers from "out of town".

Another interesting metric is the "cap rate". While different people calculate this somewhat differently, the basis of the calculation is "how much return will I get for invested capital?" For a rented unit (apt or house) an investor would look at the amount of return they could expect (absent appreciation) in the form of gross rent receipts. If the return drops dramatically below what the investor could potentially get elsewhere, it will limit investors, and the only new money entering a market will be speculators -- or people betting on a rise in the underlying asset's value to make up for limited return from rents.

OK....I could drone on and on (as anyone who reads this blog can attest), but I'm flying "slightly" blind in that stats on the Uruguayan RE market are hard to come by....While casas.com.uy can give you an idea on "asking prices", divided by neighborhood, I haven't found a good place that shows me cleared transactions for the city.

But, fuBarrio's "kentucky windage", back of the envelope number (both imperical and anecdotal) puts the median home in Montevideo proper somewhere above US$60k for a SFR (not apartments).

If you were to look around you'd have a DIFFICULT time finding anything fitting the description of "liveable" for under 40k actually, but locals tend to be more forgiving, live in neighborhoods that most foreigners wouldn't and subsequently own cheaper houses. Besides, I'm purposely trying to "lowball" the number to make a point here....

The median income for Montevideo I'm going to put at *around* $5-6k/year. This is at the highend (believe it or not) from everything I've read/heard.

So, of course, *where* you want to live in the city effects the cost of your home pretty dramatically.

For higher end city dwelling Pocitos or Punta Carretas are a couple of neighborhoods that foreigners and better paid young professional Uruguayos select.

"Tres Cruces" I'm going to use as my "middle class" Uruguayan neighborhood. It is close to services, but doesn't have any beach or outstanding features to lure many foreigners.

I'll use "centro" -- downtown -- as a lower end neighborhood. It'll be higher than the cheapest of the burbs likely, but it is not much more expensive than the cheapest of cheap neighborhoods and the cheapest a foreigner is going to feel comfortable in.


The median for a 2bdrm apt in Pocitos is $80k.
A house is little more than twice that (around $180k).

Tres cruces 2bdrm apt is $37k
Tres Cruces for a house is $70k

Centro a 1brdm apt is $32k
Centro a 2bdrm apt is $41k (this is used in place of "house" since there are so few houses in centro.

A quick "back of the envelope" will tell you that in a "middle class" neighborhood the median houses are selling for in excess of 10x median. If you look at a small 2bdrm apt, you are closer to 7-8X median.

If you also consider the fact that financing is rare for RE purchases, one is driven to the conclusion that the recent rise in RE prices is being driven by speculation and in large part by "second home" buyers with sources of income outside of Uruguay.

So what is the outlook for Montevideo Real Estate?

While MVD RE will still look cheap to an outsider, I think given the factors discussed above, the future price outlook depends *mightily* on economic conditions in western Europe, North America, and Argentina. And, further, I think the pricing depends *more* strongly on Real Estate conditions in North America and western Europe.

I *suspect* that a lot of second home buyers (especially those that don't rent the homes part time and just use them as partial year residences) are using equity withdrawal from existing RE in other parts of the world to fund cash purchases of Uruguayan Real Estate.

If the spigot gets turned off on the "equity locusts" you will see a necessary slowing of $200k+ cash purchases in the more "desirable" neighborhoods.

On the other hand, since Uruguayans, for the most part, purchase in cash the low to middle end apartments and homes continue to rent out for about 1/100th of their purchase price per month -- which is about right. They will continue to hold up, however, to accelerate upwards there would need to be a big lift in median incomes to support higher prices.

ciao for now,
fuBarrio