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January-February 2009
Vol. 23, No. 1
Travel
The Greatest Place Where No One Goes
Does any place still exist where the beaches are clean and the people are few? If you time it right, Uruguay can be that place. But the crowds may be getting wise to its charms.
Doug Casey is a contrbuting editor of Liberty.
It’s not that Uruguay is — necessarily — the next great thing. It’s simply that when it’s the dead of winter in the Northern Hemisphere, summer at the beach is a lot more fun. In this part of the world, that basically means either Brazil or Uruguay.
Argentina, of course, has a couple thousand miles of coastline, but not much in the way of beach resorts, besides Mar del Plata. The reason is that its latitude, combined with the curvature of the coast, means that the coast is washed by cold currents from Antarctica.
Brazil has lots of spectacular beaches, but it also has lots of poor people, which means lots of petty crime. Uruguay has almost no crime, and excellent beaches. So in January and February, Punta del Este, which is “the place,” is packed with vacationing Argentines, lots of wealthy Brazilians, a good number of Europeans, and a fair sprinkling of glitterati from all over the world.
I’m generally in Argentina from October through December but, with so much of the team in Uruguay, it seemed like a good idea to get an apartment and spend some time there too. I’ve been there numerous times over the last 25 years, taking the short flight or the pleasant three-hour ferry ride from Buenos Aires, but I’ve never really written about it. And it’s about time because, although Uruguay is unquestionably one of the nicest, safest, and altogether most desirable places in the world, it’s among the least known.
Let me start in the manner of Caesar: Omnes Uruguay in tres partes divisa est. These are Montevideo, the beach, and the pampa. Hmmm . . . and maybe a fourth, the banks.
The City
Montevideo is the country’s one real city. It’s a slow, somewhat down-at-the-heels kind of place, where you’ll still see quite a few horse-drawn wagons hauling trash. It’s a city where the maté gourds they sell in the shops aren’t for tourists, but still for local consumption. When I first visited in 1980, the place was truly in a time warp. They were still using those old black bakelite telephones. There were still a lot of cars from the ’20s, ’30s, ’40s, and ’50s circulating in daily usage; now they’re to be found as heirlooms in numerous classic car lots. When I was in college, in the ’60s, one of my Latin friends pointed out how cars were priced at about triple the U.S. level. The idea occurred to some of us that it would be worth the trouble to drive an appropriate model down, sell it, and catch a clandestine banana boat out of Dodge with the profit. It would have been a fine adventure.
As cheap as property is in Buenos Aires, it’s even cheaper in Montevideo. The problem is that Montevideo doesn’t vibrate. It’s just a nice, quiet place.
Even today, it’s easy to imagine the crew of the German pocket battleship Admiral Graf Spee sitting at the docks, desperately trying to make repairs to its fuel system after her battle with three British cruisers at the mouth of the River Plate in December 1939. It’s an interesting story. The Graf Spee couldn’t complete its repairs within the time limit for its stay. Its captain, Hans Langsdorf, took the ship just outside Uruguayan waters and scuttled it. That was partly because he feared that if the assembling British fleet came in to get him, it would result in needless damage to the city, and partly because he knew it was a battle he could only lose. In the two months it had been a commerce raider, the Graf Spee captured and sank nine ships, but never killed an enemy sailor. Langsdorf, reputed to have been quite an exceptional person, lay down on his ship’s battle flag and shot himself three days later, after negotiating terms with the Argentines for his crew’s internment. The ship is in the process of being raised, and will be part of a museum in Montevideo.
The Beaches
During January and February, Punta del Este is among the most happening places on the planet. The city — which has elements of places like the Hamptons and Rehoboth, with a touch of Atlantic City because of the casinos and high rises — has bumper-to-bumper traffic in some areas until 4:00 a.m. The other ten months of the year, especially in the winter, it’s a veritable ghost town, like summer beach resorts everywhere. Personally, I far prefer the off-season for a couple months on either side of the peak. Many of the facilities are still open, but the crowds are gone.
I’m confident that most beach resorts (and most ski towns) will increasingly become year-round communities. Today’s transportation and communication makes it possible for people with some money to live and work where they want. And they want to be in the kind of place they’d like to vacation in, where others like themselves are to be found. I suspect lots of boomers in the years to come are going to sell their main house (assuming there’s a bid) and transplant to their vacation homes. So Punta, and places like it, are going to do better than “average” places. Right now, condominiums on the beach go for about $300 a square foot, while detached houses are typically half that. This isn’t atypical in resorts; people like the security and convenience of the condo, even though a detached house is both cheaper and superior for living. If a place is rented, 80% of the year’s revenue comes in during the two months of the season. My guess is that both these things — whether in Punta or on the U.S. East Coast — will change, to the advantage of current owners.
My advice, if you want a place on the beach, is to come down and take a look. Uruguay has about 500 miles of coastline, and most of it is deserted. And pretty cheap. One quite pretty piece I’m attracted to, close to a small beach town, is 400 acres, with about a mile of beach, for US$4.5 million. Until recently, anyway, that’s what some people were paying for hideous McMansions on a quarter acre in the United States. A lot of those McMansions have now been deserted, since few of the buyers could afford the mortgages — forget about the utilities, taxes, and maintenance. Not good. The beach is nice, however, because it’s always deserted.
The Pampas
Most of the country looks like Kansas or Nebraska, Missouri or Illinois. Not unpleasant, but mostly flat to gently rolling. Nothing there but endless fields. Some growing corn, or wheat, or soy, or alfalfa. But mostly they’re grazing cattle. Cattle alone, even at current low prices, amount to 35–40% of the country’s total exports. This leads me to remark on the published economic information on this country, which is, like that for most places, at once superficial and misleading. Most statistical compendiums say Uruguay’s economy is on the order of 10% agriculture, 40% industry, and 50% services.
Forget what you read in statistical compendiums, especially if their source (as most are) is the government. Or at least treat them with skepticism. Who knows how the dog’s breakfast of numbers is really being put together, and for exactly what reasons? I far prefer to eyeball the situation personally and draw my own conclusions, rather than letting a reporter interpret the spreadsheet put together by some clerks. Anyway, kicking rocks is more interesting than culling through questionable numbers.
So in that spirit, we were fortunate to chance upon a small fair featuring a rodeo, more or less in the middle of nowhere in the pampas. Pretty much the type of thing you can still find in Colorado, Wyoming, or Alberta, with livestock and handicrafts. What was different was that, with the sole exception of ourselves, it wasn’t overrun with tourists. Everybody was either a gaucho, or a member of a gaucho’s family.
I go to rodeos in the United States and have got a lot of respect for cowboys. But these gauchos are something else. When cowboys ride broncs, if they’re not using a regular saddle, the horse at least has a saddle pad and a cinch around it that a rider can grab onto. And he gets on the horse in a pen. The gauchos simply hold on to the horse’s mane, after just jumping on it while it’s tied to a post — much harder. Cowboys have a standard uniform, consisting of Stanley boots, Wrangler jeans, a western shirt, and a Stetson or Resistol. So do gauchos: soft black leather boots, bambachos (a very loose-fitting pant), a shirt with blousy sleeves, and a flat brimmed hat. Cowboys sport two-inch-wide belts with flash buckles; gauchos go to a much wider belt, similar to the type lifters wear at the gym. One big difference is the gauchos do their bronc busting wearing their knives in their belts. And they always wear spurs. I was impressed. These hombres do this stuff for day-to-day work, not just to win prizes on the circuit.
An aside. Have you ever wondered how cowboys keep their Stetsons on during a rodeo? Very often, they use chewing gum to snug the fit.
Back to Uruguay. The climate is excellent year round. And there are only about 3.5 million people, most of them concentrated in Montevideo. The industry here is almost all related to harvesting, processing, and shipping beef, hides, dairy, grains, and wood pulp. The services are mostly dependent on exactly the same things. Plus the sale of real estate, which is treated like just another commodity here. The exceptions are banking and tourism.
Banks, Money, and Taxes
Uruguay has always been Latin America’s answer to Switzerland, at least as far as bank privacy is concerned. Latins are notoriously averse to paying taxes. More than most places, the daily news in these countries amounts to a recitation of government stupidity; few people want to subsidize it with their own money. And most people with any money, prudently, want to keep it out of the reach of their own governments. So Latins have historically shipped as much spare cash as possible to — mostly — either Switzerland, the United States, Panama, or Uruguay. In today’s world, however, very few will be sending more money to the United States. They have seen what’s happened to the U.S. property market, they don’t trust the dollar, and they don’t even want to visit the United States anymore. Especially for Argentines and Brazilians, Uruguay is a convenient and neutral place for their capital.
It would be good as an alternative for Americans, too, except that, like Switzerland, banks here simply don’t want American business. Seriously don’t want to touch it. Example? A South African friend of mine, who’s living down here, wanted to open an account with a large international bank, but they wouldn’t do it until he signed an affidavit stating that he was neither a U.S. citizen, nor a U.S. resident. It’s apparently standard operating procedure, even though he showed his South African passport. The small local banks will take U.S. accounts for the purposes of normal expenditures, of course. But the message emanating from the Empire is quite clear.
The bank privacy this country offers is anomalous at first glance. You wouldn’t expect a socialist welfare state that has destroyed its currency as aggressively and consistently as any country in the world to be a bank haven. The answer lies in the fact Uruguay started out as a haven for Argentines and Brazilians much the way Switzerland did for the French, Germans and Italians. It just took a wrong turn in political philosophy. But since banking was such a cash cow, the government left the sector alone. It’s one of the two intelligent things the Uruguayan government has ever done that I’m aware of. The other was not having an income tax. Actually, let me rephrase that. It was not a question of doing intelligent things, but — and this is basically the most one can hope for from the institution of government — not doing really stupid things.
That’s past tense. Until last year, there was also no income tax here. The election of the new government in 2004, the Frente Amplio, composed of a bunch of refugees from the ’60s and ’70s — ex-communists, ex-Tupamaros, current Greens — was centered on “reforming imbalances” they saw in society. Which, as everywhere, translates into more power to the state. People assumed it would just affect “the rich,” but — what a surprise — now almost everybody has to file forms and pay up. Some can even see that it will leave “the rich” with less money to make investments and employ people than would otherwise be the case. It would seem people voted for the Frente mainly because they were neither the Blancos (equivalent to Republicans) or the Colorados (Democrat-equivalent); anything other than the two parties that were responsible for many decades of economic stagnation seemed like a good idea at the time.
Will the Frente be reelected in 2009? On the one hand, the average guy is unhappy about the new income tax his rulers have imposed, and may want to kick them out. I can only think of one time in all of history when a government repealed an income tax (the United States, over Lincoln’s dead body, after the Civil War), so I’m not holding my breath. And since commodities have boomed, so has the local economy, boosting the Frente’s popularity. It’s a lot like the Americans when Clinton was in office; he didn’t cause the boom — in fact he was a drag — but he got to take credit for it.
This provides an interesting object lesson in the supposed link between education and voting. Uruguay is among the most educated countries in the world. If education correlated with intelligent voting, then the place would be a paradise. But there’s no reason to believe that education — or lack thereof — correlates in any way with the choices of political candidates. Rather, it’s a matter of psychology. Or to be more exact, the degree to which people feel driven to dramatize their psychological aberrations. Which, unfortunately, seems to be a constant across both time and space.
However, the imposition of tax on locally earned income needn’t be a pressing concern to you because, even if you become a permanent resident, foreign earned income is exempt. They understand and appreciate rich foreigners in Uruguay.
The Bottom Line
Here’s a place that should have been on top of the world. A small but highly educated and demographically homogeneous European population. Crime free. Great climate. Hundreds of miles of empty coast. Perhaps the world’s premier beach resort. Socially liberal. Religiously agnostic. Huge agricultural production. A tax and bank haven. Next door to two big and vibrant neighbors. What’s not to like?
The answer lies in another question that will inevitably arise as you spend time here: why, with all its apparent advantages, isn’t Uruguay one of the richest counties in the world? The answer, as almost everywhere else, is the same: political stupidity. In so many ways — size, climate, ethnicity, economy, ambience — the place resembles New Zealand. Including in mistakes and stupidities.
In good part because of its high level of education, Uruguay was influenced by the Fabian socialists, who specialized in capturing universities and subsequently corrupting the student body. As a result, Uruguay became the first “socialist democracy” in Latin America at the turn of the 20th century. That was the start of the slippery slope.
Next, the country placed itself under embargo. It did this by enacting some of the highest duties and quotas in the world on imports. That effectively cut it off from knowledge and technology from anywhere else. That’s bad enough if you’re a big country, but it’s death if you only have a couple million people.
As a result of the social democracy and the self-imposed embargo, any bright, ambitious person with enough money to go elsewhere did so. Uruguayan doctors, engineers, and other professionals with transportable skills left for the United States or, at least, Buenos Aires. Uruguay, perversely, with its educated population, and indirectly because of it, has always suffered from a brain drain.
That’s exactly what was happening in New Zealand until the country reformed in the mid-1980s, out of desperation. Kiwis with at least a lukewarm IQ and cash for airfare would take off for Australia (if not the United States or the UK). And it’s exactly what happened in Ireland, until it reformed out of desperation. Irishmen with any moxie headed for London, New York, or Boston. Like Uruguay, these countries were rapidly transforming themselves into the shallow end of the gene pool.
The speculation is that, not being completely oblivious to reality, the Uruguayan government may go in the same direction. I’m not looking for, nor predicting, a free-market revolution. I just think that, after having tried every cockamamie collectivist scheme that came down the pike over the last 100 years, lightning may strike or desperation might set in. The next government just might look at what happened in New Zealand and Ireland, see the completely obvious similarities, and put two and two together. Stranger things have happened.
Even if that doesn’t happen, my guess is that, as in Argentina, you’re going to see much more immigration of wealthy Europeans, deserting that sinking continent. Emigrants are always the best, which is to say the most opportunistic and freedom-seeking, people. And because Uruguay is so small, they’ll have a proportionately much bigger effect than on their neighbor to the south. The prognosis is very good. The place stands a high chance of transformation from a quiet backwater into a booming hotspot.
I expect to do more things there in the future. But if Uruguay is tomorrow, Argentina is still my choice for today. The nice thing is that they’re just a ferry ride across the Plate from each other.
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