Doug Casey is a well known investor/economist who's predictions regarding the worlds current and future economy have been both accurate and dire. He has written a number of interesting books and is a regular on MSNBC, Fox and CNN as they can always count on him to forecast doom and gloom as a kind of balanced, almost comic relief to their ever glowing predictions for the markets.
I first learned about Casey from a book he wrote back in the 80's titled International Man. I stumbled on it in a garage sale in the early 90's and it set me on the path of becoming the "international man" that I am today. Now it seems, the path I took that led me to build Valle Escondido in Panama is one he is now taking in Argentina with a project he calls La Estancia de Cafayate. The project is near a small town of Cafayete which is about the same size as our town of Boquete. There is an interesting audio interview with him where he talks about the reasons he is building the project, which I can certainly relate to having been there and done that.
Over the past 9 years it has taken me to complete Valle Escondido I have met many men who had the desire to create their own version of a perfect community. There is a strong force in some of us that is not satisfied with the world as it is and we have the vision, drive and stubbornness to try and create our own version of utopia. We usually select out of the way places where civilization is not so advanced and the natural world still plays a very important role in everyday life. These projects are invariably developed in an out of the way agrarian societies where we "feel" we have stepped back in time because of the laid back, down to earth inhabitants. We are reminded of our youth growing up in the 50's or 60's, just after the last world war and before the advent of big government, technology, pop culture, and the growing health issues facing our society today. But along with this vision of a bygone era we want the same amenities and lifestyle we have benefited from in the 21st century. Finding the balance of both of these attractions is extremely challenging, but it can be done. What follows are my ramblings of what I have experienced as one of these development dreamers in hopes it might help Mr. Casey and others in building their Utopia.
Doug chose Argentina for a variety of reasons he goes into during the interview. I too like Argentina very much and have had a home in Buenos Aires since 1995 where my family has spent a number of summers enjoying the lifestyle of that cosmopolitan city. A great advantage of Argentina today is that it is cheap for Europeans and Americans as the Argentine Peso has dropped from equal footing to the dollar in 2000 to about 1/4th making the cost of living very advantageous. This should translate into cost of land and construction to some degree.
I did not choose Argentina for a development because the market I wanted to attract was mostly from the U.S. and Canada and the distance was a factor. Doug talks about the climate of the high country where his project is located 800 miles north of Buenos Aires as being dry and mild at an altitude of 6000 feet, but Argentina's climate is similar to that of the U.S. except reversed where summer begins in December. Most of my clients would be looking for an eternal spring or summer in their golden years.
And unfortunately Argentina is well known for an ever ending cycle of busts and booms due to the corrupt policies of their politicians. Doug acknowledges this with the hope that this will change in the near future as they have apparently reached the bottom of the barrel with the current administration.
Argentina is not easy or cheap to access. Even from Panama with direct flights it is a 6 1/2 hour flight and costs over $1200 RT coach just to Buenos Aires. From the U.S. and Europe it is considerably longer and I would expect just as expensive. Then you must change planes and fly another 2 hour flight with associated costs to reach El Salta. But Doug's other country of choice was New Zealand which is much further from the U.S. or Europe so Argentina is just a stones throw by comparison.
As he says his project is selling well, so none of these negatives is apparently dissuading his clients from making the decision to buy, but there are many other challenges that await he who attempts to build a Shangri- la.
Quality of Life
Casey describes the gentleman's country club lifestyle he envisions within his project with a golf course, clubhouse, restaurant, wine bar, cigar library etc., which can certainly be built with enough fortitude and money, but lifestyle comes down to much more than what you can physically build. The fact is that we as developers can only provide a certain level of lifestyle within our community. When people really think about quality of life, they usually think of a variety of restaurants, various kinds of entertainment, quality health care, and access to things to buy such as quality goods and services. I can tell you from my experience of building in the middle of nowhere that these things barely existed when we began and have only come about after a number of years of the community growth where it can support these quality of life needs.
Lifestyle comes from both the existing local community as well as from the new community you envision, and this takes time. For real success the entire community needs a sense of place that evolves as both communities mature. In marketing a project in the boondocks, one must sell the location and local community as much as you sell your project. The developer will bring many folks who came to see his project and then opting to buy plots of land nearby. Not everyone wants to live in your perfect world. This is a good thing as the entire community grows rather than just the enclave of those who desire or can afford the designed lifestyle you envision.
If you are really successful in getting the ball rolling, other development projects come into the area to take advantage of the traffic you have created and everything begins to flourish. At the height of our boom in 2007, I counted 42 projects of various sizes advertised in the area of Boquete. In a relatively short time of 6 years the expat community reached critical mass where bilingual schools, community theater, English newspapers and other much needed cultural norms began to materialize. The expat growth coupled with local community growth after 8 plus years has brought private health clinics, shopping centers, American franchises such as Price Smart, TGI Fridays, Do-it center and many others within a 30-45 minute drive. Although some may say this is what they wanted to escape, most everyone will end up appreciating and using them. We find that as much as we may want to leave the crazy world behind, it might follow us if we are really successful.
Construction challenges
The challenges for the developer are many, starting with what we would consider to be a backward culture where the people may be hardworking, but their agrarian lifestyle is not used to working 9 to 5. Their culture goes by a different clock that I call "seasonal" and it is usually adapted well to planting and harvesting, but not construction and providing services to a demanding first-world client. Where we need to build high quality homes and commercial structures, utilizing a number of inter-disciplinary skills of plumbers, electricians, masons, tile layers, woodworker and finishers, the locals probably have experience with one fellow in the community who builds their entire house and he is the plumber, electrician, mason, etc. Neither the volume nor quality of homes has been developed in the area to justify the division of labor and skill sets required to build the products the developer will demand. So to overcome this challenging obstacle he will need to bring in a few people with those needed skills and have them train the local population. This takes a great deal of time and patience and is a lot more expensive than he probably projected in his original cost analysis. Although the labor is "cheap" there is a very good reason for it. In addition, building supplies usually constitute what is available in the forest and fields and access to quality finishes for the homes he envisions is not right at hand and must be brought in at additional expense. This causes all kinds of delays in home finishing which translates into not getting paid and a challenging cash flow for the developer who may find it difficult or impossible to get bank financing as he is a newbie to the country and maybe a newbie as a developer. Of course deep enough pockets can overcome these challenges.
Local opposition to change
The utopia builder may also encounter local opposition who see him as a threat to their well being and may try to sabotage his efforts through lies, intimidation, social uprising, local government intervention or worse. I have encountered all of this and know of a number of projects that could not overcome these obstacles to their unfortunate demise. This part of the developing challenges takes thick skin, fortitude and "huevos grandes".
Should the developer overcome all of these challenges and actually complete the construction, there are several other challenges that he probably did not consider in those early dream years. Projects of any magnitude require a tremendous amount of maintenance and I have seen many projects that did not allow for this. They must have plumbers, electricians and other skilled personnel available 24/7 because it is usually not available in the local community. This requires ongoing management and accounting. In most cases you must also provide all utility services that usually would be the responsibility of the municipal government or available from private companies.
Enemies within the gates
One thing you might not expect, but in hind-site is understandable is opposition from some of your property owners. Any and all problems they may encounter will be your fault from poor local services to a water line break. After all, you sold them on the dream that they bought into, and they will come to you personally for a solution to problems they encounter. This may be OK for a while, but as the numbers grow it becomes unbearable and the Utopian vision can become a nightmare. In some cases their expectations may be different than what you have envisioned. I remember a well-healed developer telling me when I first began the project to never live where you develop. This may be sound advise for the developer who is in it to make money and then leave, but In the case of a visionary utopia builder this is unthinkable. As Doug Casey says in the interview, the main reason we build the community is not to make money, but to create our perfect world with like minded individuals who are seeking the same lifestyle.
Well, after having completed Valle Escondido and with over 150 homes sold and built I can say that most of the people who live here are like minded and have become good friends and acquaintances. But, like everywhere in life, it only takes a few unsatisfied people to make your life miserable as the dream builder. The unhappy will complain the loudest and may nastily trash your reputation. You overcome this challenge the same way you overcome local opposition; thick skin, fortitude and "huevos grandes". And, you must early-on develop a good set of CC&R's in order to avoid many of the problems that will invariably arise with some property owners.
Conclusion
The fact is that there are few successful projects of this type in the world due to the better-than average-odds that the challenges along the way grow to be too significant to overcome and the would-be builder of Eden gives up in frustration.
After listening to Doug Casey talk about his vision for his project in Argentina I thought it a good time to offer him some advice, from one pioneering developer to another. After all, he was the one that set me on this path back in 1995!
