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Living, Investing, Banking, And Residency In Paraguay

23 Apr
Chaco Boreal Paraguay

Paraguay Will Be Rich Again

You can’t fly directly to the capital of Paraguay, Asunción—neither from the United States nor from Europe. Limited direct access to this city has been an option in the past, but today the demand’s just not there. That means anyone coming from North America or Europe has to really want to get to Paraguay. You’re looking at a minimum of one but likely two connections.

What would compel someone to make the trip? Certainly not tourism. You can count the number of tour companies in Asunción on one hand.

The big tourist attraction is Iguazu Falls, which, ironically, aren’t actually in Paraguay. They’re in Brazil, and Americans need a visa to cross the border. Paraguay’s Oriente region hides some charming colonial towns, lakes, and other places of interest, but nothing is easy to get to.

The best reason, I’d say, for a tourist to make the trip to Paraguay is so he can drop reference to the fact during cocktail party conversations for the rest of his life. “That reminds me of the time I went down to Paraguay…” A tourist could get a lot of mileage out of a line like that.

The attractions of Paraguay are not touristic. The main attraction historically has been more subtle—the country’s remoteness. This is a place to come to disappear.

Paraguay Draws Comparisons To Panama

Panama used to be a place Americans and others disappeared to. Before the economic upswing that started around 2003, few Americans who weren’t up to no good ventured to Panama, and the most wanted and the unwanted could take up residence in anonymity. Today, Panama is a hot spot of banking, investment, and retirement, very much on the world’s radar. Hard to hide out in a place like that. Also, Panama isn’t as cheap as it once was. Those on the run appreciate a bargain.

Paraguay offers many of the benefits of Panama—easy residency, quick naturalization, low cost of living (though you should note that you could easily live a First World lifestyle in Asunción, with its high-end malls and luxury-level housing options), and, most important for the wanted and the unwanted—anonymity.

Paraguay is a place where, still, today, you could disappear if you wanted to and live well, cheap, and happy.

Paraguay is also a land of opportunity.

One Paraguayan I met this week put it in simple terms: “Paraguay was the richest country in South America before, and we will be again.”

Surrounded by socialist countries and blessed with good farm and cattle land, one has no doubt that Paraguay could be a regional economic power. How difficult could be it to compete with Argentina economically? Still, Paraguay has a way to go to catch up.

Paraguay’s per-capita GDP is about 60% of that in Brazil and a third of that in Argentina. An estimated 65% to 70% of the population (hard to pin down these kinds of things in this country) is under the age of 30, meaning a number-one priority is creating jobs for all these youngsters. Paraguay needs to break out of agriculture and into making something.

Panama has its canal and, over the past 20 years or so, has created a banking and financial industry to boost its GDP. Paraguay could create a regional banking hub, but that seems unlikely. However, this country does have a more realistic opportunity to export electricity. Paraguay’s Itaipu Dam creates enough power that Paraguay is able to sell some of it to Brazil… at a very low price.

What if Paraguay kept all the power it produces itself? It could use its electricity to attract industry. Sell the electricity cheap to companies that invest in creating jobs in Paraguay rather than selling it cheap to Brazil.

I realize it’s all more complicated than that. Still, I’ve been making this recommendation to those we’ve been meeting with this week in Asunción. While Fitch raised Paraguay’s credit rating too BB in January of thisr, that’s still two steps below investment grade, which would open the flood gates to foreign investment. Nevertheless, the country’s growth rate has averaged 7% over the last five years (ahead of its neighbors) and is expected to be has much as 5% in 2015.

Paraguay would be a great place to disappear. More interesting to me is the opportunity I perceive here for making money. Hindered little by government restrictions or regulations, an entrepreneur could do well. This is a wide-open frontier.

Specifically, I’m looking closely at some agricultural opportunities. I’ll share details as soon as I can.

Lief Simon

Mailbag

“Lief, since the dollar/euro relationship is so healthy right now in terms of exchange for dollar holders, are you considering buying more rental property in Paris? I know you feel it is one of the best real estate investments around. Since you’re moving back there, I wondered if you plan to consider that? Or do you feel there are other, perhaps more diverse, investment opportunities that you are looking at? Other places in Europe?

“As always, thanks for the outstanding job you do in being an excellent resource for those who are interested in living and investing overseas.”

A.L.

No, we’re not looking to invest further in France right now but only because we feel like we’re well enough invested in that country. We don’t like to have too much money in any one country. In addition, France imposes a wealth tax that even non-residents who hold assets in France are liable for, and I prefer to stay below that threshold.

That said, with the euro so weak right now, investing in real estate in the euro zone does make sense. I’m looking at Portugal. When I’m there in July for our Live and Invest in Portugal Conference, I plan to look at apartments that would work for short-term rental and that my family and I could also use for vacations.

I do think, though, that Paris remains an attractive investment option if you’re looking to buy to rent, short- or long-term, to the international market. Yields are low at the moment, so don’t expect net returns much above 5%. However, taking a very long-term view, Paris is always a good bet.