Global Real Estate Investment in Latin America Portfolio Diversification Strategies and Urban Development
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Masterthese zur Erlangung des Master of Advanced Studies in Real Estate Global Real Estate Investment in Latin America Portfolio Diversification Strategies and Urban Development Verfasser: Miguel Hernandez Cammardella Kalkbreitestrasse 134, 8003 Zürich [email protected] +41 76 220 93 80 Eingereicht bei: Mihnea Constantinescu, Clinical Associate Professor, NYUSCHACK Institute of Real Estate Abgabedatum: 12.08.2013 II Table of Contents List of abbreviations and acronyms................................................................................IV List of illustrations........................................................................................................... V List of tables ...................................................................................................................VI Executive Summary.......................................................................................................VII 1 Introduction................................................................................................................. 1 1.1 Motivation............................................................................................................ 1 1.2 Objective .............................................................................................................. 2 1.3 Delineation ........................................................................................................... 2 1.4 Approach.............................................................................................................. 2 2 Portfolio Diversification Management ....................................................................... 3 3 Structural and Political Overview............................................................................... 7 3.1 Urban Structures .................................................................................................. 7 3.1.1 Urban structure of Buenos Aires ................................................................... 8 3.1.2 Urban structure of Santiago de Chile .......................................................... 11 3.2 Urban Development ........................................................................................... 14 3.2.1 Infrastructural and environmental situation of Buenos Aires...................... 14 3.2.2 Infrastructural and environmental situation of Santiago de Chile............... 15 3.2.3 Strategic Urban Planning............................................................................. 17 3.3 Political Situation............................................................................................... 18 3.3.1 Political obstacles in Buenos Aires ............................................................. 18 3.3.2 Governance of the Metropolitan Region of Santiago de Chile ................... 19 3.4 Population .......................................................................................................... 19 3.4.1 The urban and rural population ................................................................... 20 3.4.2 The socio-spatial segregation of Buenos Aires ........................................... 21 3.4.3 The socio-spatial segregation of Santiago de Chile .................................... 24 3.4.4 Population prospects.................................................................................... 28 3.4.5 Shifting the cities' balance points ................................................................ 29 3.5 Market Situation................................................................................................. 33 3.5.1 Introduction ................................................................................................. 33 3.5.2 The Latin American decade......................................................................... 33 3.5.3 Economic data of Argentina and Chile ....................................................... 36 III 3.5.4 Total Factor Productivity of Latin America and the Caribbean.................. 37 3.5.5 Financial Crisis in Argentina....................................................................... 39 3.5.6 Global Competitiveness Index (GCI) of Chile and Argentina in LAC....... 39 3.5.7 Asset Qualities............................................................................................. 41 3.5.8 Obstacles and Risks..................................................................................... 42 4 A Real Estate adjusted analysis of the Enterprise Survey 2010 ............................... 46 4.1 Introduction........................................................................................................ 46 4.2 Method ............................................................................................................... 46 4.3 The Enterprise Survey 2010 for Argentina and Chile........................................ 47 4.3.1 General Governmental & Regulatory Compliance ..................................... 48 4.3.2 Legal Framework & Political Situation....................................................... 49 4.3.3 Market Improvement................................................................................... 50 4.3.4 Work Force.................................................................................................. 51 4.3.5 Socio-Cultural Effect................................................................................... 52 4.3.6 Real Estate Market ...................................................................................... 53 4.4 An overview of the companies' appraisals......................................................... 54 5 Summary and Results ............................................................................................... 55 5.1 Summary ............................................................................................................ 55 5.2 Results................................................................................................................ 58 6 Concluding Remarks ................................................................................................ 59 6.1 Conclusion ......................................................................................................... 59 6.2 Discussion .......................................................................................................... 60 6.3 Outlook............................................................................................................... 61 List of references ............................................................................................................ 62 Appendix......................................................................................................................... 70 IV List of abbreviations and acronyms AMBA Área Metropolitana de Buenos Aires AMS Área Metropolitana de Santiago AGBA Aglomeración Gran Buenos Aires BA Buenos Aires BRIC Brazil, Russia, India, China BRT Bus Rapid Transport CASEN Caracterización Socioeconómico Nacional CB Conurbano Bonaerense CBA Ciudad Autónoma de Buenos Aires CONAMA Commission Nacional del Medico Ambiente CPI Corruption Perceptions Index GBA Gran Buenos Aires GCI Global Competitiveness Index GDP Gross Domestic Product GNI Gross National Income IMF International Monetary Fund INDEC Institutor Nacional de Estadística y Census INE Institutor Nacional de Estadísticas Chile LAC Latin America and the Caribbean LP Linea de Pobreza NATM New Austrian Tunneling Method NBI Necesidades Basics Insatisfechas OEDC Organization for Economic Cooperation and Development PNUMA Program de las Naciones Unidas para el Medico Ambiente PPP Purchasing Power Parity PQMB Program Quiero Mi Barrio RMS Región Metropolitan de Santiago TFP Total Factor Productivity V List of illustrations Illustration 1: Latin America’s 198 Cities with a Population of 200’000 or more ..................................1 Illustration 2: Domestic and Global Market Risk ......................................................................................4 Illustration 3: Domestic vs. Global Efficient Frontier................................................................................4 Illustration 4: Diversification through Location Selection ........................................................................6 Illustration 5: Population Living in Urban1 Areas 2009 and 2025............................................................7 Illustration 6: CBA - The Autonomous City of Buenos Aires ...................................................................8 Illustration 7: RMBA - Metropolitan Region of Buenos Aires..................................................................9 Illustration 8: RMS - Metropolitan Region of Santiago...........................................................................12 Illustration 9: AMS - Metropolitan Area of Santiago de Chile ...............................................................13 Illustration 10: City Area Santiago de Chile.............................................................................................15 Illustration 11: Distribution of the Argentinian and Chilenian Population (in percentage)..................19 Illustration 12: Population living with Unsatisfied Basic Needs (NBI)...................................................22 Illustration 13: Metropolitan Area of Buenos Aires: Socio-spatial Organization.................................23 Illustration 14: Metropolitan Area of BA: Number of Plots & Houses in Gated Communities,