Argentina's premier wine-growing region, Mendoza, is also Latin America's first. In this part of this country, you find row next to row of vines, neat, orderly, tidy, stretching on as far as you can see in all directions. In all, there are more than 350,000 planted acres and 500 wineries in Mendoza province, which accounts for at least two-thirds (some sources say 80%) of total wine production for the entire country.
You've likely heard of San Rafael and San Martin, but you may not know the Valle de Uco, this province's valley most recently given over to the production of grapes intended for the vintner's vat. Vines were first planted in this part of Mendoza in 1994. Before then, the Uco Valley was high desert, dusty and scrubby. Irrigation and investment since mean that, today, the grapes being grown here (malbec, tempranillo, cabernet sauvignon, chardonnay) are in growing demand.
The region has the four distinct seasons required for quality grapes for wine. The mild winters are cold enough to make the vines go dormant but not cold enough freeze to cause damage. And the high desert setting turns the requirement to irrigate into an opportunity to manage the amount of water received by the vines season by season.
It is in this Valle de Uco region where Steve has focused his efforts. His vineyard here has been planted with different varietals of grapes in stages over the last four years. As Steve explained to the Wealth Retreat group last week, one important reason to plant in stages is because most of the grapes grown in Mendoza are still picked by hand. With different varietals, you get different harvest times. If all the grapes matured at the same time, there wouldn't be enough labor to pick the grapes when they needed to be picked. Planting different varietals also helps diversify the vineyard in case some grapes have an off year due to the weather or other variables.
The grapes harvested from Steve's vineyard are picked and shipped off to various wine makers including some of Argentina's biggest names, including Clos de Siete and Chandon. One interesting part of this process (at least for me) is how the price of the grapes is agreed.
Grapes are harvested March through April. The harvest weight for each type of grape is recorded and then the grapes are shipped to the wineries. The wineries begin work immediately to turn the harvested grapes into wine. Then, sometime in May, the vineyard owners sit down with the winery owners and start negotiating price.
It seems counterintuitive to be negotiating price after the buyer has already used the product, but who are we to question a generations-old tradition? Certainly, global wine markets have evolved and thrived in the face of it. As Steve explained, each side has a vested interest in playing nice with the other side. The wineries will need more grapes next year just as much as the vineyards will need to sell next year's harvest. If either side walks away from these negotiations feeling taken advantage of, the other side runs the risk of losing next year's business...and all business forever thereafter.
Once the price is agreed, then the winery makes some payment to the vineyard; however, full payment comes over time. The wineries generally make 10 monthly payments to each vineyard from which they purchase, meaning they're paying straight up until the next harvest season.
I found these inner workings of the vineyard industry interesting, as I said. More interesting, though, is the cash flow the entire process can result in for an investor.
At Steve's vineyard in Valle de Uco, the cash flow has begun, with grapes harvested last year and this. That said, the vines won't reach maturity for a couple of more years. That's when the full potential of the vineyard will be reached and the investor yields will increase.
Steve began selling investor units in the vineyard a few years ago; today, a handful remain available. With the development risk out of the way (as the vineyard is both fully planted and already producing), the overall risk associated with this investment has decreased considerably, making this a very appealing opportunity to get into a fully managed agricultural investment.
Of course, you still have production risk, price risk, and country risk.
I've been paying close attention to Argentina for almost 20 years. Yes, things can and do go wrong, sometimes spectacularly wrong in this country. On the other hand, the Argentines always find a way to correct their course.
The expectation is that the coming presidential election in 2015 will bring positive change. No matter. Argentine politics aside, Argentine wines will continue to be sought-after in the international marketplace, as they are high quality at an excellent price.
If you'd like to speak with Steve about the particulars of his vineyard investment opportunity, you can inquire here. It offers several levels of diversification while allowing you to enjoy wine from the grapes you've invested in!
Argentina is the fifth-largest wine producer in the world. Chilean wine may be more known in the United States, but that is largely because, until recently, Argentina consumed most of the wine it produced itself. Over the past decade, however, Argentine vineyards have grown and expanded, and exports have increased in turn.
As the vineyard industry in this country is maturing, it is also expanding to include wine country tourism. Many vineyards in Argentina now offer tours, wine-tasting rooms, and restaurants. One winery I visited last year had been designed specifically for tourism and as a venue for special events, with a bar, restaurant, and even an art museum. The winery building was laid out to maximize tour potential, while still being efficient and functional, showcasing the Argentine vineyard lifestyle.
A colleague, an Argentine, is also tapping into the expanding vineyard tourism industry. He has conceived and is well into building a vineyard surrounding a residential development in Valle de Uco, one of the biggest wine areas in Argentina, about an hour-and-a-half from Mendoza City. Mendoza in general is Argentina's most important wine producer thanks to its unique terroir and Andean snowmelt irrigation. This is a region of extraordinary natural beauty, clean air, and 300-plus days of sunshine each year.
The design for La Morada de los Andes has incorporated residential lots among 1,000 acres of vines, 4.5 acres of which have been set aside for lot owners. As an owner here, you will be able to reap the rewards of the wine the grapes from these vines produce, which should be about 5,000 bottles annually.
The idea is for lot owners to be able to enjoy the entire living-among-the-vines experience, including enjoying the fruits of their own vines, without having to make the investment of time, money, or effort to run their own vineyard operation.
If you've been reading my reports for any time, you know that one of my regular recommendations is to buy what you see. In this case, the developer put in the infrastructure before he started selling lots. Buying what you see, therefore, means buying completed roads, water, electricity, and even access to a beautiful clubhouse, in a dramatic setting, with the Andes Mountains as the backdrop.
In addition, the vineyard has been fully planted.
One of the best parts about the Mendoza region of Argentina is that it is, on one hand, remote and private, yet, on the other hand, lively and full of opportunities for distraction and diversion. In February is the annual folklore festival; in November is the Fiesta de la Tradicion; and, probably of greatest interest in this part of the world, come March are the annual harvest festivals.
Day to day, you could go hiking in the Andes, mountain biking, horse riding, even skiing in winter, though you'll have to travel a bit for that. The city of Mendoza, with a population of more than one million, has restaurants, theaters, and, on the weekends, an artist fair on the main square (I bought a custom-made knife on my last visit).
What does it take to buy into this lifestyle? Lots at La Morada de Los Andes start at less than US$100,000, and all lots are more than Â½ acre. With just 83 lots in total, you'll have neighbors, but you won't feel crowded. And again, the infrastructure is in, so you could begin building your house right away. The developer can manage the construction for you, or you could arrange it on your own.
The best part is that the developer doesn't need cash from sales to put in the infrastructure. As a result, he's able to offer very flexible financing packages. You could buy your vineyard lot today with no money down and payments over two, three, or four years at 8% interest. Finance a US$100,000 lot over four years, and your payment would be less than US$2,500 a month. Or you could make a down payment, and the developer would finance the rest at no interest.
HOA fees are expected to run about US$165 a month, but the developer is waiving those until 2014. As an owner, you'll enjoy the annual wine allocation I mentioned earlier, which is 30 bottles per year for each lot. Any surplus bottles will be sold to help offset the HOA fees.
On top of that the developer is offering Live and Invest Overseas readers a US$5,000 discount, at least for the first 20 lots purchased. Nine lots have already been sold, meaning the next 11 buyers can save US$5,000.
Argentines enjoy their wine and their parillas. Once you've experienced the lifestyle that goes along with these things, you'll understand why. For more details, you can inquire here.
Lief SimonContinue Reading:
You've likely heard of San Rafael and San Martin, but you may not know the Valle de Uco, this province's valley most recently given over to the production of grapes intended for the vintner's vat.
Vines were first planted in this part of Mendoza in 1994. Before then, the Uco Valley was high desert, dusty and scrubby. Irrigation and investment since mean that, today, the grapes being grown here...malbec, tempranillo, cabernet sauvignon, chardonnay...are in growing demand.
In Mendoza for the weekend to visit a friend with a vineyard of his own in this now-fertile and dramatically beautiful valley, Lief and I have been indulging in the delights of the table this part of the world is so well known for. Yesterday, we feasted on a four-course lunch with two wines, red and white, at the Bodegas Salentein, the first established in this valley and, though I've not yet seen others, what I'd say must be one of the most architecturally impressive and dramatic. The Dutch grape-growers behind the enterprise have erected a winery that resembles a fortress, in the shape of a cross, and that is supported by an events venue, a bar, an art gallery, and the five-star restaurant where we dined but a couple of feet away from the vines.
We've arrived at perhaps the most exciting time of year in this part of the world, as the harvest is under way. Some vines have been picked clean of their clusters; others await their turns. The grapes here are picked by hand, just as the vines are planted and the earth is de-stoned, all by hand.
We're not alone. At the Bodegas Salentein yesterday, for example, we arrived just following a group of 200 classic car enthusiasts. Their vintage vehicles, shining in the midday sun, lined the stone drive leading to the winery, one of five stops on the Rally de las Bodegas (Wineries' Rally) following Argentina's famous Wine Route.
Hotels in Mendoza City are full, and coming and going from ours we've overheard wine-related chatter in French, Italian, English, German. The Fiesta de la Cosecha attracts tourists from around the world.
We're here not as tourists, though, but scouts. As I mentioned, a friend has planted a vineyard of his own in this region's Valle de Uco. Vines now grow on 300 of his hectares, vines heavy today with grape clusters being harvested and carted off to Mendoza wineries to be pressed, fermented, aged, and bottled.
Our friend is four years into his undertaking, and his harvest this year will generate a healthy return on his investment to date.
Vines planted and producing, infrastructure established, including roads, electricity, and water, he is now turning his attention to the next phase of his plan. Lief will have more on this soon.
P.S. What else this week?
"This former Inca capital, former Spanish capital, and current UNESCO World Heritage Site is the intellectual heart of Ecuador and one of the world's real treasures.
"Today, it's also home to about 1,500 full-time residents from North America. This is not a large number compared with some Mexican destinations, but Cuenca clearly qualifies today as an expat-friendly city, offering one of the most interesting retirement lifestyles you'll find anywhere.
"Cuenca is most attractive for those seeking a captivating experience on a small budget. The cost of both living and of real estate in Cuenca have been for some time and remain the lowest I've found in any attractive city anywhere in Latin America..."
"So when I say that Uruguay stands up well to the other options in Latin America, it's not just my sense of hometown pride talking. It's because I've looked long and hard for a better option, and I still find Uruguay hard to beat.
"And that says a lot for Uruguay. Because as a place to live, retire, or own a second home, it has changed quite a bit since I first saw the country. Yet its appeal is bigger and broader than ever..."
Most of us have TSA horror stories. And we've all heard the far more horrible stories of extraordinary rendition by the CIA in the name of the War on Terror...the stories of torture by U.S. soldiers at Abu Ghraib prison in Iraq...the stories last weekend about the 16 Afghan villagers killed by an Army Ranger...
Those stories are sad and upsetting, but they're far away. Over the past six weeks or so, I've been watching as a story that's not nearly as horrific as 16 innocent people dying but that is much closer to home for me has been playing out...
For, to get a good deal, you must shop beyond the Internet market, and, to do that, you must have feet on the ground, either yours or those of a reliable local contact you trust...
Also This Week...from Resident Global Real Estate Investing Expert Lief Simon:
Yesterday, Kathleen gave you some advice on how to find a rental in a new country. She pointed out that you can't do this long distance over the Internet...not if you want to avoid surprises. Unfortunately, sometimes, even if you're on the scene searching and scouting in person, you still can have trouble.
This was the case for Sam, an intern who came to work for us a few weeks ago.
Sam showed up in Panama and checked himself in to a Panama City hostel, where he planned to stay until he was able to find longer-term rental accommodation.
At first, it seemed Sam was in luck. His first weekend in the city, he connected with a local landlord. He found the guy on the Internet, on Encuentra 24, which is the go-to site for just about anything you want to buy or sell (or rent) in Panama.
Sam found his would-be landlord over the Internet, which can be dangerous, but he was already in Panama City and, so, able to arrange a face-to-face meeting. Which he did. The guy showed Sam the apartment, which seemed acceptable. However, it was the week before Carnaval, and the owner explained that he would be away, in the interior, for the holiday. He'd take the deposit now to hold the apartment. Then Sam could move in "after Carnaval."
Carnaval came and went, and Sam followed up and followed up, but the owner was one excuse after another...
"I've decided to stay in the countryside a couple of more days and will meet you to give you the keys when I'm back in Panama City on Thursday..."
Then, on Thursday, "The apartment is being painted, but you'll be able to move in in a couple of more days..."
On and on until, finally, the owner stopped answering his cell phone...and Sam began a search for a new apartment.
Our staff has been trying to help Sam to get his deposit back, but Alberto, our driver, the most Panama City street smart among us, says there's little chance of this. "Sam got hooked up with some gangsters," Alberto says solemnly, shaking his head, every time the subject comes up.
The guy who has stolen Sam's money in the form of a rental deposit for an apartment that may or may not belong to the guy...and that may or may not be available for rental probably isn't actually a "gangster." But he is a scam artist. You need to know how to spot these guys, because you find them everywhere.
Sam is a smart kid who has been traveling around the world for some time. In other words, this isn't his first experience in a new country. As he put it, though, retelling the story over drinks at last Friday's staff happy hour, "I was naïve."
Everything's clearer in hindsight. The red flag here was the "owner" asking for a cash deposit on the spot without a contract to sign and without handing over keys. Seeing the apartment you think you're renting isn't enough. The apartment or the room or the house can exist. But without some kind of paperwork, you don't know that the guy offering to rent it is in a position to do that...and, should something go wrong later, without any documentation, you have no recourse.
This can be tricky, though, because it's not uncommon for short-term rentals most anywhere in the world, even those managed by an agency, to be paid for in cash. Owners don't want to pay credit card processing fees...and, in some cases, don't want any paper trail because they don't intend to report the income (because they don't want to pay taxes on it).
All landlords and agencies anywhere are going to want some deposit up front, meaning you're going to have to hand over some payment, perhaps in cash, before taking up occupancy. So, again, it's tricky. Pay attention to your instincts. And don't make a deposit or any payment without some receipt and without receiving keys (that you know fit the lock in the front door to the place you're intending to rent!).
Whenever possible, leave the deposit by credit card or Paypal. Many agencies in France, Italy, and elsewhere in Europe, for example, want you to wire your deposit to secure the rental in advance. This can be ok if you're dealing with a reputable agency. It's not something I'd recommend for an apartment you found on craigslist.com or when dealing direct with an "owner." Central America doesn't have the monopoly on rental scams.
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Kathleen Peddicord is the founder of the Live and Invest Overseas publishing group. With more than 25 years experience covering this beat, Kathleen reports daily on current opportunities for living, retiring, and investing overseas in her free e-letter.
Her book, How To Retire Overseas—Everything You Need To Know To Live Well Abroad For Less, was recently released by Penguin Books.
Read more here.
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