Plight of the peso pinches some condo markets in US
Mexico's repeated devaluation of the peso is having a devastating impact on the condominium market in some parts of the United States.Skip to next paragraph
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A little more than a year ago, San Antonio real estate agent Gail Gilliam was capitalizing on an unprecedented flurry of Mexican condominium buying that seemed likely to turn into a bonanza.
Ms. Gilliam advertised in Mexican publications, hired a Spanish-speaking representative, and courted other real estate agents and investors from south of the border. She ran what was, for a time, San Antonio's only real estate agency dealing exclusively in condos.
And Mexicans were buying them fast, particularly luxury units - some built and others still in the planning stages.
''I'm planning on making a lot of money from Mexico,'' she said at the time. ''A whole lot.''
That same summer, San Antonio developer Kenneth Milam was about to start construction of a 23-story luxury-condominium tower. A twin was to join it by the end of 1982, both containing units ranging from in price from $60,000 for a studio to $525,000 for a penthouse.
More than 40 percent of the towers were bought by foreign investors before they were even begun, including some by ''pretty high-level folks in Mexico,'' whom Mr. Milam declined to identify.
Other Latin Americans were involved, he said at the time, noting that ''there's nervous money from the Rio Grande all the way to the Panama Canal.''
Now, in the winter of 1982-83, Mr. Milam's second tower has not even been started.
''My (Mexican) buyers are not buying,'' he says. ''They're unable to get their pesos out of Mexico. The ones still buying are having trouble meeting their commitment.''
All across Texas, the condos which Mexicans bought so eagerly in 1981 and before are crowding, hence depressing, the resale market. Construction once galvanized by the peso's northward migration has slowed and, in some cases, stopped in mid-construction.
Mexico has devalued the peso three times this year and just this week let the currency float to what had been the black-market rate of 150 peso to the US dollar. At the same time a fixed ''preferential'' rate of 95 pesos to the dollar was set for for vital imports as well as for interest payments on foreign debt.
Black-market dealers have been capturing the few dollars that were still coming into Mexico.
All of this means that a Mexican must be much more wealthy in order to afford what they could a year ago.
Moreover, Mexico's inflation rate for 1982 is approaching 100 percent. Given a foreign debt of $81 billion, believed to be the world's largest, Jesus Silva Herzog, the Mexican finance minister, is predicting an austerity program that he calls ''terrifying,'' but for which ''we don't have any alternative.''
Perhaps US developers should have foreseen Mexico's huge devaluations, Milam says, because ''oil is the only export of any magnitude they have. With the collapse of the worldwide oil market and the interest due on Mexico's public debt, people began to see there was no way that Mexico's petroleum production was going to pay the country's debt.
''They had mortgaged its oil production for 10 years into the future, thinking that everything was going to continue on the same upward plane,'' says Milam. ''It didn't.''
With the devaluations, ''the Mexican trade has decreased 90 percent,'' Ms. Gilliam says of the San Antonio condominium market.
Mexicans preferred condominiums to commercial property, because they wanted homes here or, in some cases, safe havens. And they preferred them to single-family dwellings, because maintenance was taken care of. Ms. Gilliam says San Antonio was especially favored because of crowding in Houston, the greater distance from Dallas to the border, and California's high costs.
''After last February's devaluation, that's when it started getting slower and slower,'' she adds.
''Then in August, when they devalued again and then nationalized the banks, it just about died. There was a lot of building due to the fact that there was so much of a Mexican market. There are so many condos in San Antonio now, there's some kind of glut.''