Taking Our Medellin Retirement Plan For A Test Drive
“This sure will make a great place to hang out in retirement, won’t it?” Lief mused Sunday afternoon.
For the past 17 years that we’ve been together, Lief and I have been working slowly, organically, year by year, to build the infrastructure required to support what qualifies for us as a dream retirement lifestyle.
Lief and I like to move around, and we appreciate change and contrast more than anything else, so our dream retirement isn’t about one place but several. For this phase of life, we’ll base ourselves in Paris, where we invested in an apartment about a dozen years ago. From that base, we’ll move around among other spots that appeal to us, including Panama’s Pacific coast… and Medellin, Colombia, where the two of us, sans children, enjoyed a quick escape this past long weekend.
Friday and Saturday were spent in business meetings (more on this in a minute). Sunday, we settled in to savor what Medellin has to offer.
We awoke early, opened the doors to the terrace and the windows all around the apartment to let the mountain breezes pass through. Then we brewed some tea and sat in the wicker rocking chairs overlooking the valley below us, enjoying the tea, the early-morning light, and the sounds of the first mass of the day (to be followed, we knew, by several more) at the little white church that is our next-door neighbor.
After breakfast, Lief changed some light bulbs, put new batteries in the kitchen clock, and tightened the screws in the loose electrical socket in our bedroom.
“Hmmm… I may need a nap after all this exertion,” he remarked in passing.
For my part, I was already installed on the sofa. I’d read the local paper and was now surfing around Netflix hoping something would catch my interest.
“We were thinking of walking to the mall to see a movie this afternoon,” I said to Lief when he passed through the living room again. “Would you mind if, instead, we stayed in and watched a move on television? I’d be very happy to spend the entire day here in the apartment.”
“Fine with me,” Lief replied. “I agree. It’s awfully pleasant here…”
We’re not ready for retirement, but we’re at the start of the transition to that phase. This past weekend, we took the Medellin piece of our retirement plan for a test drive.
Our ideal retirement is about moving around among very different places—big city, mountain hideaway, Pacific beachfront, etc. It’s also about mixing business with pleasure. In each place where we plan to hang our hats during our troisième age, we’ve worked to establish not only home bases of our own, but also communities of friends and colleagues who share our interests and with whom we can continue to explore new ideas and to develop new opportunities as long… well, as long as our limbs and minds hold out.
We’re still all out right now building our Panama City-based business. We’d love to hop the 50-minute flight from Panama City to Medellin more often but can’t justify the indulgence more than now and then. The impetus for this trip was the down Colombian peso. The current peso/dollar exchange rate makes Colombia more affordable for dollar-holders than it’s been in five years. As we remain bullish on this market short-, mid-, and long-term, this window of currency opportunity was too interesting to ignore. How else could we and should we be taking a position in this country, we wondered… and then we got on a plane to come find out.
We met Friday with our top resource in Medellin, attorney Juan Dario Gutierrez.
“The economy is booming,” Juan Dario replied when I asked for his take on the current state of affairs in his country.
“You must have noticed all the new development taking place in the areas you drive through from the airport to the city?” he asked.
Yes, we had. The Medellin International Airport is about 45 minutes outside Medellin. To get from the airport to the city, you drive down the side of a mountain through expansive green fields, pastures, and forests. Each time I make the drive I’m reminded of Ireland. This part of Colombia is green the way Ireland is green and pastoral.
This trip, though, I noticed that these wide-open green spaces are punctuated now by signs indicating development under way, along with sales offices and heavy equipment already at work in some cases. A series of private communities is being established along this corridor.
“The four or five new developments that have gotten permits and broken ground along that route are all strata 6,” Juan Dario continued. “That is, they’re very high end. And they’re selling. I visited the developments with sales offices on site, posing as a potential buyer, just to see for myself what was going on. When I inquired about availability, the agents showed me maps indicating that most or nearly all lots had already been sold. I could choose from among a handful of leftovers. They didn’t put it that way, but that was the idea.
“The middle class across the country in general and in Medellin in particular is expanding quickly, as are many industries,” Juan Dario continued to explain. “At the same time, foreign investment is increasing. We were so isolated for so long. The world was afraid of Colombia. For decades, nobody invested. Now that is changing. Indeed, I’d say it has changed. Foreign investors from around the world but especially from across Latin America are paying attention. They’re liking what they’re seeing, and they’re taking positions. It’s as though a lot of pent-up sideline interest is finally taking action.
“A client asked me recently if I thought Medellin is a bubble market,” Juan Dario said. “The question took me by surprise. I really had to think about it.
“Medellin has been growing very fast for the past six or seven years…”
“For sure,” I interjected. “We’re in the city every six months or so, and each time we return we see more apartment complexes under construction, new shopping malls, new health clinics, and new office buildings. Perhaps more telling, we’ve noticed that these places are all filled and busy not long after they’re in place. Medellin’s has all the signs of a healthy, active economy.”
“Right,” Juan Dario said. “Definitely, we’re enjoying a very healthy, active economy. Is it a bubble? I don’t think so for one important reason. Colombian banks are ultra-conservative. Foreigners can’t borrow, period. It’s just not possible. I wish that weren’t the case, but it is.
“And Colombians can borrow only up to 70%. Usually, the best home loan a Colombian can get is for 50% of the purchase price. And borrowed money isn’t cheap. Banks finance real estate purchases at 7% to 10%. A Colombian will pay interest of up to 20% for the privilege of borrowing from a Colombian bank for any purpose other than the purchase of real estate… again, if he can find a Colombian bank willing to lend to him.
“It’s hard to describe an almost all-cash market as a bubble,” continued Juan Dario. “What we’ve got here is legitimate economic growth that I believe is going to continue for some time to come.”
The next morning, Saturday, we walked from our apartment in El Poblado to Envigado for a lunch meeting with two other Medellin friends. Rich Holman and Joe Greco are American expats and entrepreneurs who’ve been running their real estate business in Medellin for eight years. Over a couple of cold bottles of Prosecco, the four of us revisited the question I’d put to Juan Dario:
What’s the current state of this market?
“Property prices have appreciated in Medellin 5% to 7% per year for the past seven years,” Rich began. “That’s solid, steady appreciation.
“Meantime, the U.S. dollar has surged against the Colombian peso. The dollar is worth 35% more today than it was five years ago. In other words, the dollar buyer can invest in this market today at prices from five years ago.”
Real estate is a big opportunity in this part of the world right now but not the only opportunity. Lief and I met with other contacts regarding financial investments (that we’re acting on) and agricultural plays (which we’re researching).