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Argentina's economic woes prompt exodus to USA

Argentina's economic woes prompt exodus to USA

Posted by Shanelle Weir on December 06, 2014

 Ask Pablo Vilaboa when he started thinking about leaving his native Argentina, and he furrows his brow.

"Which time?" he says.

Vilaboa, a university professor in this capital city, says he first thought about moving to another country in 2001, when Argentina was jolted so hard by an economic crisis that lines of fleeing Argentines formed outside foreign embassies.

Now, Argentina is experiencing a different kind of crisis, one that has emerged gradually but is having a similar effect. Vilaboa says he's seen his students flee as soon as they receive their diploma. Australia. Holland. Spain. Italy. And increasingly the USA.

"It's a constant cycle," says Vilaboa, 45, who's researching a move to Canada. "A new government comes in, everything looks great, we all start buying things again, and then boom, we're back in the basement."

Pablo Vilaboa, 45, a university professor in Buenos

Pablo Vilaboa, 45, a university professor in Buenos Aires, is considering a move to Canada to escape the economic collapse of his native Argentina.(Photo: Alan Gomez, USA TODAY)

The world was reminded of Argentina's financial woes this summer when the government defaulted on its debt for an eighth time, worrying foreign investors and further eroding confidence in the country's ability to manage its fragile finances. Underneath the macroeconomic repercussions of that are everyday Argentines who have seen their personal bank accounts crumble and their security situation worsen, leading many to flee the country.

Enrique Gonzalez, an immigration lawyer for the Miami-based Fragoman law firm, says "we're seeing a wave" of Argentines rushing to the USA.

Many head to Miami, but they are spread out around the country, from technology hubs in Silicon Valley and North Carolina to more traditional immigrant havens such as New York and Texas. Immigration attorneys say they've been coming by the thousands.

As Juan Pablo Capello, founder of the Miami-based Private Advising Group, puts it: "There's a lot of one-way tickets being bought from Buenos Aires right now."

There are many reasons for the exodus.

Argentines complain of spiking crime rates as robberies, assaults and home invasions become commonplace.

Fernando Cuscuela decided to leave Argentina one day when he was driving with his pregnant wife and their infant son on the way to the movies. Two men on a motorcycle pulled up next to them at an intersection, pulled out their guns and took the couple's money, wallets and wedding rings. They even threatened to kidnap the family for whatever ransom their relatives could muster.

"Imagine my desperation," he says. "That gun in my face. That's when I said, 'I don't want my kids to live like this.' "

By the next year, Cuscuela and his two sons had moved to Miami, where the 36-year-old runs his technology company, Everypost.me.

"There are many of those 'express kidnappings' in Argentina now," says Cuscuela, who has since divorced.

Ariel Armony, an Argentina native who heads the University of Miami's Center for Latin American Studies, says rising insecurity is especially troubling in a country where people do not trust the banking system, leaving them with heaps of cash hidden around their house.

During the worst of the economic crisis in 2001, the government prevented people from withdrawing cash from their accounts, especially U.S. dollars, for a year to prevent a run on the cash flow in the country's banking system. Known as el corralito in Argentina, that event not only drove people out of the country but also reinforced a long-standing tradition of people keeping their money out of the banking system.

"Argentines always say, 'You hide your money under your mattress,' " Armony says. "But now there are robberies. So many robberies."

Some leave in an attempt to establish a viable "Plan B" in case the system completely falls apart again.

Gonzalo Lopez Jordan, an Argentina native who is the managing partner of the Miami-based American Regional Center Group, which helps foreigners secure investment visas in the USA, says his clients used to be primarily from China. In the past year, that has quickly switched to Latin American countries, especially Argentina, where people are worried about the futures of their economies.

"There are a lot of people who do this not to leave the country for good," he says. "These are people who are going to maintain their businesses, maintain their contacts, but they want to have the ability to live in between both countries."

Many of the developers at Nxtp Labs, a business acceleratorMany of the developers at Nxtp Labs, a business accelerator for start-up technology companies in Buenos Aires, plan to leave the country as soon as their companies grow large enough. (Photo: Alan Gomez, USA TODAY)

 

Argentines cite their country's downward economic spiral as the reason to leave for good — or at least try.

One of the most damaging aspects has been rising inflation. It's difficult to predict how high its gone, since the government was the first to be formally censured by the International Monetary Fund last year for not providing accurate inflation data.

The value of the country's peso hit a record low in September when it traded at 14.47 against the U.S. dollar on the country's black market, according to the newspaper El Cronista. The official exchange rate of 8.4 pesos per dollar is used only when absolutely necessary.

Maria Soledad Bancoff, 31, who works as a teacher and translator, said a bar of her deodorant cost 40 Argentine pesos last year. This year, it's up to 85 pesos. She pays 3,050 pesos a month for her apartment, but the landlord added a clause in the contract, so he could adjust that figure every three months if inflation rose high enough during that time.

"We told him, 'That's illegal,' but he said, 'Well, that's what everyone is doing now,' " she says. "Inflation is galloping right now, and our salaries aren't rising at the same pace."

The government struggles to keep Argentine money from fleeing the country. The central bank's reserves have fallen from a high of $52.3 billion in June 2011 to $28.2 billion as of Nov. 11.

To combat that cash flight, the government has resorted to protectionist measures that have made life even more difficult. Last year, for example, the government raised the tax on foreign purchases using a credit card to 35%, leaving many unable to afford cars, home appliances, computers or other foreign big-ticket items.

Still, as they always have, Argentines find ways to get their money out of the country.

Armony, the University of Miami professor, says there used to be a series of nondescript storefronts throughout Buenos Aires with no signs outside but people working hard inside.

"You'd take your money in cash. They would open a bank account, usually in Miami, and the money would get there," he says.

The storefronts may be gone, but the flow of money out of the country continues through new, more creative means. Buying real estate or opening a business in the USA is one way. Mitchell Fuerst, a Miami lawyer who has worked for companies operating in Latin America for decades, says he has seen plenty of other schemes to export their money.

For example, a Buenos Aires business owner looking to get $500,000 out of the country may order a shipment of auto parts from Detroit, overpay by $500,000 and that "profit" would be waiting in a U.S. bank account.

"Argentines are exporting their money as fast as they can," Fuerst says, "because if Argentina had it's way, it would pick up all of its wealthy citizens by their ankles and shake them until all of the euros and U.S. dollars fell out."

Amid the gloomy economy, some Argentines see rays of hope.

Ariel Arrieta, who has founded several technology companies and works as an angel investor for Argentine start-up companies, said the rush of talented Argentines to other countries will work as a benefit once the economy rebounds and they come back.

"That creates new business contacts and new trade routes that wouldn't have been there without these people leaving," he says.

Ariel Arrieta, who has founded several technology companiesAriel Arrieta, who has founded several technology companies and works as an angel investor, says most of the owners of the start-up companies he invests in plan to leave Argentina as soon as they can.(Photo: Alan Gomez, USA TODAY)

 

Arrieta says foreign businesses and venture capital funds are already planning for Argentina's economic turnaround after next year's presidential elections.

President Cristina Fernández de Kirchner is constitutionally barred from seeking a third term during those elections, and Arrieta says history has shown such a predictable economic turnaround when a new government comes in that those who can afford to are prepared to take advantage.

"These economic cycles have been concentrated in 10-year periods," Arrieta says. "It makes you feel bad to say it, but a lot of fortunes have been made like that. That volatility is difficult, but it creates a lot of opportunities."

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