Mexico is Burning

bigstock-running-on-empty-225717-cleaned-upDateline:Outta Gas and Outta Patience

Mexico suddenly finds itself in dire straits. A number of things which were neither foreseen nor planned-for have suddenly occurred. Three years ago, sub-$100 oil seemed like an impossible fantasy, at least for consumers. A slowdown or reversal of globalization was seen by no one until quite recently, when Brexit shook the establishment. Trump was considered a long-shot candidate right up to the eve of the election. Worse, the peso has lost nearly 50% of its value over the last two years, recently exacerbated by the Trump victory. And the final blow, gasoline, which remains in plentiful supply on global markets, is now having trouble finding its way to Pemex stations across the country, even at newly elevated prices, which should theoretically stimulate supply.

Of course, the most pressing of these issues is gasoline. Even back in 2014 when I did my road trip, gasoline was a contentious topic in Mexico, having seen a steady upward climb in prices. Now it’s everything.  Given the recent, hefty, and indeed record-setting price hike in Mexico, combined with shortage, I decided to do some research to better understand the facts. I looked at DOE data on global production and pricing of crude, and domestic pricing of gasoline. I looked at historical Mexican gasoline prices, and I looked at the exchange rate. I even read through bits of Pemex’s 2015 annual report. I’ve also read many articles in the Mexican press about the situation.

I learned some interesting things. First, since 2010, the price of Magna (regular unleaded) has had one very minor dip (Jan 2016) in an otherwise uninterrupted rise. Mostly those rises have been around 1% per month. Sure, they add up over time, but any given monthly hike is not too big, so people grumble, but then move on.

Relentless Price Increases in Pesos

Relentless Price Increases in Pesos

However, the most recent hike was the biggest ever, 14% in a month for Magna, more for premium. That, along with shortage, has unleashed the simmering fury.

Poor Policy Making in Action

Poor Policy Making in Action

But the real culprit is not gasoline; it’s the USD/MXN (peso) exchange rate. Over a very long time frame, the peso has mostly only moved in one direction versus the US dollar: down. Sure, it’s not a perfectly smooth downward path, but the longer term trend is about as inexorable as any seen in finance. Historically it’s been a mostly gentle depreciation, with a few twists and lurches along the way. More importantly, it’s been manageable both for the economy and for Pemex.

One Direction: It's Not Just a Boy Band

One Direction: It’s Not Just a Boy Band. Pesos per USD Over Time

But things changed in the fall of 2014, when crude oil started to tumble in earnest and OPEC gave up trying to stop it. Suddenly the peso’s gentle, long-term swoon turned into a dive, creating a host of problems, particularly for energy and imported goods.

Gentle Peso Decline Turns into a Swan Dive

Gentle Peso Decline Turns into a Swan Dive. Source: Federal Reserve

Not only do currency traders view Mexico’s economy as dependent on oil, and thus vulnerable, but the picture for Mexican oil continues to worsen, well beyond the price of crude. In 2014, along with the global crude price, Mexico’s crude production began to decline at an accelerating rate. Add to this the fact that as the most liquid emerging market currency the Peso gets used as a proxy to short oil, and you have a pile-on to the poor Mexican peso.

Production Continues to Decline, Now at a Faster Pace

Production Continues to Decline, Now at a Faster Pace. Source:DOE

So the gasoline problem is really an exchange rate problem, exacerbated by political bungling, and crippled, inefficient Pemex. In USD terms, the price of gasoline in Mexico has fallen since 2014, which reflects the global reality of excess supply against relatively fixed demand. And prior to late 2013, gasoline was actually cheaper in Mexico than in the USA. Even now, the Mexican price premium is nothing compared to places like Europe or Japan.

gas-in-usa-vs-mex-in-usd-per-gal

US vs Mexican Gas Prices. Converted to USD/Gal at Avg Monthly Foreign Exchange Rate

As for political bungling, Peña Nieto hasn’t helped his own cause. During his 2012 campaign, he promised that the energy reform would spur foreign investment and lower the price of gasoline to consumers. Had he been able to wave a magic wand and immediately turn the creaky Pemex-controlled monopoly into a thriving, competitive marketplace, this might have come true. But given the reality of a very long lead time to that promise, it was nearly impossible that it would work out as expected. In order for him to have been correct, he would need to accurately forecast both the peso exchange rate and the price of crude more than three years out, an impossible task for anyone. Sure, he was correct in essentially saying that Pemex was wildly inefficient. But he erred in thinking he could foresee future prices.

So instead of what he might have expected — a soft decline in the peso, and crude oil trading around $100/BBL — he got a collapse in both, exacerbated by steep production declines at Pemex. Worse, Pemex’s finances collapsed along with the crude price, thus cutting off a source of financing for the Mexican government. So by the time the Energy Reform was passed, and Mexico held its first auctions for oil drilling rights, the big, global energy producers responded with a collective yawn. Most of the drilling rights went unsold, leaving yet another hole in government finances. The majority of Mexico’s crude lies offshore, and it’s expensive to find and expensive to extract. Below $50/BBL it probably isn’t worth the hassle, especially when fracking costs onshore in Texas continue to plummet. Add to that the political risk of operating in Mexico, where the rule of law can be a variable thing, and a weak and bureaucratic justice system operates at glacial speed, and foreign oil producers stayed away.

As for Pemex, it is rapidly on its way to becoming a national liability instead of a national asset. It’s suffering perhaps the worst possible business nightmare of rapidly falling production, and a steep fall in the prices it can charge. Add to that enormous liabilities in the form of pensions and union contracts, and it’s in a tough spot. Oh, and the drug cartels have expanded into pipeline theft, stealing millions of liters of gasoline and disabling pipelines in the process. Add all that together and suddenly you have a state-owned albatross which can only be bailed out by radically higher oil prices, something not on the immediate horizon.

As for the immediate shortage, the above longer-term issues collided shorter-term with the law of supply and demand. While I have zero evidence to support the following thesis, it makes economic sense. Knowing that gasoline prices would be 14% or more higher in January than in December, Pemex and the gas station operators had every incentive in the world to “run out of gas” as December rolled to a close. Right? Hold your gasoline for an extra week or two and suddenly it’s worth 14% more. What sensible capitalist wouldn’t do that? Now, I don’t know if that’s what actually happened, but it seems to be the simplest explanation for sudden shortages around the country. And if that’s correct (and I have to believe it is at least partially correct), then policymakers erred big league in not foreseeing and addressing this problem, possibly via weekly price increases or some other measure.

But whatever caused the shortage, Mexican consumers are now mad as hell, and they feel betrayed once again by a government which is widely seen as rapacious and unresponsive to the needs of the ordinary people. Sadly and ironically, their protests are making things worse. Yesterday I read about a typical Mexican form of protest, shutting down federal highways. While such protests are, in my view, almost always misdirected, in this case they are almost comically misdirected. Not only are hapless drivers now wasting more gasoline idling on stopped freeways, but stalled gasoline trucks can’t make deliveries. Add to that the fact that people are trashing, burning, and sacking those gas stations, and any reasonable observer would conclude that this will only exacerbate the problem.

looters-in-toy-store

No Gas? Let’s Steal Toys!

Alas, Mexico is now in a tough spot. There’s zero confidence in the government. People are just angry, and acting out. There are reports now of looting all around the country. Toy stores, electronics stores, and other businesses completely unrelated to gasoline are being looted with abandon. Civic order seems to be breaking down in an unprecedented manner. Given the above, it’s hard to see a rapid resolution to the problem, even at higher prices. Gas stations will take time to rebuild, and as long as the highways remain blocked, gasoline won’t flow. Add to this misery the fact that the peso takes a dive every other time that Donald Trump issues a tweet, and you have a formula for more social unrest. As for the longer-term fallout, no one comes out looking good in this. The government manages to look incompetent, and possibly heavy-handed. The looters look just as bad as looters everywhere, and with handful of deaths to boot, Mexico just got another black eye.

At the root of the problem is the exchange rate as I’ve demonstrated, yet there’s little the government can do, though it is trying. Banxico, Mexico’s central bank, has raised overnight rates five times in 2016, for a total increase of 250 basis points. Each hike put a temporary floor on the peso, but ultimately did nothing to halt its slide. Mexico now has one of the higher overnight rates in the world, which should theoretically attract peso purchases.

But it’s not working. Thursday Banxico intervened directly in the market, purchasing one billion dollars worth of pesos, but the effect lasted all of six hours or so. Friday, Banxico intervened again with another billion.

Market Not Impressed With Banxico Intervention

Market Not Impressed With Banxico Intervention

This time it seems to have halted the slide, at least for now. But such intervention is not sustainable as it will chew up foreign exchange reserves in a hurry. And Mexico’s foreign reserves took a hit in 2015 and haven’t recovered. Moreover, central bank interventions in currency markets have a long and storied history of failure. If the market wants to take the peso lower, it will.

Foreign Exchange Reserves Well Off Their Highs

Foreign Exchange Reserves Off Their Highs

So Mexico finds itself in a tough spot. Though the peso could bounce a bit from here in the short term given the recent bolus of bad news, I suspect that it will find lower levels before stabilizing. Trump indeed will build the wall. Though that shouldn’t affect Mexico’s economy directly, it will be a psychological blow for the country and its investors. Worse, Trump has already persuaded several high profile companies not to invest in Mexico. And whether he can actually carry through with his threats or not, we can be certain that any company which had been considering inbound investment in Mexico has to at the very least be delaying such plans to see what comes after the inauguration.

As for this gringo, I’m fairly convinced that now is not the time to be buying property in Mexico. The peso is likely to get cheaper in my view. Between higher interest rates, higher gasoline prices, likely increases in inflation, and a “Trump-nado” about to be released, Mexico is probably looking at a recession in the next year. Given the social fragility that this episode has revealed, one can only wonder what might occur during a full-fledged recession. Buckle up. It’s going to be a bumpy ride.


P.S. This post has been a couple days in the making. This morning’s news suggests that the worst of the rioting and shortages may be over or on the mend. Nonetheless, I believe my conclusion still stands.


P.P.S. For an earlier analysis of the Mexican Peso I wrote in January 2016, click here.

My Life, an Update of Sorts

insanity-2Dateline: somewhere between neglect and insanity.

Yes, it has been a long time since I’ve posted. In fact, it’s been months. A lot has happened since then, particularly lately, so I thought I’d write something of an update post. My last post, “Living in Ecstasy,” about my landlord’s Rolls Royce was meant to have a follow-up post, and perhaps I’ll write that some day. But for now, here’s what I’ve been up to.

In early May, just after being more-or-less dumped by Cupcake Boy, I met a real man (>35 y/o), “Luis,” who I’ve been seeing ever since. On our first date, we hit it off. Without prompting, he announced he doesn’t own a TV, loves NPR, especially Terry Gross’ “Fresh Air,” which he knows from having lived in Phoenix for a few years, and is also doing “A Course in Miracles,” something I’m inching through myself. Though younger than me, Luis is at least within shooting distance. If you use a twelve-gauge, that is. We’ve been dating since we met, exclusively, and things are going well, though we’ve had a few ups and downs, as is normal.

Luis is an architect, a Chilango, though not by birth. When I met him, he was working on a complex public works project. At the end of August, his contract was through, and he decided to come with me to Boston, just to help me celebrate my birthday, get a chance to see the place, and generally hang out. As for me, I needed to return to my native soil to do various errands around the house, pay certain bills, and generally look after the place.

After a few weeks, Luis decided he loved Boston and wanted to find a job there. It’s not a tough sell. We can live together in my house, the city has a ton to offer, and with the collapse of the peso, even a crappy job in the USA pays literally multiples of what he could make in Mexico. And unusually for a Mexican, he claims to love cold weather. Add to that his eligibility for an easy-to-get “TN” visa under NAFTA for qualified professionals such as architects, and it’s something of a no-brainer. He hasn’t found a job yet, but we’ll see what happens. So I’ve basically been in Boston since late August, though still renting my apartment in Roma Sur, CDMX.

Soon enough, the holidays rolled around, time for my annual trip to Northern California to see my parents, siblings, and old friends. Since it was no longer just me, the calculus of the trip, where to stay, and a bunch of other things changed. What to do? I defaulted to my normal first-order decision-making process: procrastination. So we spent a lot of time talking about flights, whether we should fly to SFO then to Mexico City, or go back to Boston. Luis was also starting to waver about the wisdom of working in Boston, so that added yet another element of uncertainty. Meanwhile, airline tickets were rising in price and starting to sell out. Rental car rates also had approximately doubled from last year.

What if we drive? Compared with a trip to Mérida on a variety of Mexican highways and byways, a coast-to-coast drive on US interstates didn’t seem all that challenging. And on a cost basis, it compared very favorably to flying two people and renting a car. On the other hand, it also seemed a smidgen insane. While we would not have to contend with narco-gangs, we faced a much more certain danger: snow. The default Google map directions would have taken us through Kansas City, Denver, then west along Highway 80, through southern Wyoming, then into northern Nevada, before having us cross Donner Pass by Lake Tahoe and then descending into the Sacramento Valley. My initial thought was that this would be doable for a few seemingly-good reasons. It’s still early in the season. In Boston, at least, snow is rare before Christmas. The places along the way get plenty of snow, so they’re prepared to deal with it. I had images of hourly plowing and salt application, with messy, but passable roads.

Our Trusty but Tiny Steed

Our Trusty but Tiny Steed, Parked in New Mexico Snow

As it turns out, all these reasons were pretty harebrained. A friend confirmed that west of Denver, there’re often debilitating blizzards that close the interstates. Some quick internet research confirmed this. I would also have been required to carry chains, something that I don’t own. Nor would they have fit. We decided to drive across country in my 230SLK, something the size of a Miata. As it turns out, every single square inch of trunk space was accounted for, and even then we had to gently force the trunk closed. Nope. I didn’t want to deal with chains. Or snow.

The Sensible Southern Route

The Sensible Southern Route

So we decided to drive the sensible, southern route. We left the morning of Wednesday the fourteenth, and over the course of a few days, passed through Hartford, Pittsburgh, Columbus, Indianapolis, St. Louis, Oklahoma City, and through the Texas Panhandle. We then spent the night in Shamrock, Texas, about 100 miles east of Amarillo.

Art Deco Gas Station, Shamrock, TX

Art Deco Gas Station, Shamrock, TX.  Photo Courtesy of Luis

From there, we drove west, hoping to pass through Albuquerque. Alas, the Goddess of the Road didn’t like that plan. As we reached Tucumcari, NM around 10:30 AM, we encountered a gate across the interstate. The highway was closed. No one seemed to know anything as to why, or when it might reopen.

Tucumcari, Gateway to Amarillo. Or to Albuquerque. Or maybe to nowhere

Tucumcari, Gateway to Amarillo. Or to Albuquerque. Or maybe to nowhere

Fortunately, it was early in the day, and we had come upon the gate probably less than a half hour before it was closed. So we turned around and went into Tumcumcari, had lunch, and tried to figure out what to do. At lunch, Yolanda, our waitress informed us that there was a 40-car pile-up beyond the gate. Given that the snow had been very light (less than 2″), and that we hadn’t seen a single cop in the entire state, we figured the road could be closed for a long time. We immediately booked a motel.

It turns out that was the smart move. As the day wore on, the town filled with trucks, truckers, trailers, and hapless automobile travelers such as ourselves. Motels sold out, and that evening (with the highway still closed) we found it almost impossible to get out of the Denny’s parking lot due to the enormous trucks everywhere we looked. In fact, it seemed like the entire town was full of big rigs.

The Truck Traffic Jam Within an Hour of Closure

The Truck Traffic Jam Within an Hour of Closure

The next morning dawned bitterly cold (-2°F/-19°C), but clear. Luis was happy that I had forced him to pack gloves and a hat. The highway had been reopened, but the traffic remained. But after we had packed and eaten breakfast, the worst of the jam was gone. So we continued on.

As we drove, we saw mangled trucks, crumpled cars, skid marks, and all the signs of past disaster. I was astonished that the authorities had allowed such mayhem to occur. Very little snow had fallen, but if the streets in the city were any gauge, someone was scrimping on salt and plowing. In all of Massachusetts, such a dusting would have hardly caused a fender bender. There, the authorities put down salt before snow even starts to fall, and then follow up every couple of hours as needed. But in New Mexico, laisser faire became a disaster.

Worse for me, while in New Mexico, I learned that my 88 year old stepfather was in the hospital, with a very vague diagnosis. His heart was weak, he wasn’t eating, and had swelling in his legs. Though it wasn’t shocking, the timing was a little surprising. He had sounded fine when I called on his birthday two weeks prior, and my mother had not mentioned anything unusual. His health had certainly been slowly failing for some years though. Tied to an oxygen tank, he suffered a constellation of problems common to some older folks: COPD; blood pressure issues; weak heart; several pacemakers; and the like. Indeed the fact that he had made it to 88 at all was something of a miracle. Suddenly, the need to get to California quickly became my dominant concern, and we pushed it, driving 700 miles or more a day.

After five days on the road, we made it to Redding, CA, where my mother and stepfather live. That was Monday the nineteenth. We hightailed it to the hospital. My stepdad didn’t look good, but he was happy to see me. I finally got to talk to his doctor. The prognosis wasn’t good. He had heart failure, which basically means the heart doesn’t pump enough blood. This leads to edema (swelling) of the legs, weakness, fatigue, and related symptoms. The doctor also said he likely had bladder cancer, definitely had internal bleeding, and the cancer had probably started to migrate to his pancreas. Not good.

Over the following days, various decisions were made. Surgery was out, as stepdad was too weak to survive it. Nor did he want any extreme measures to keep him alive. No fool, he had realized his time was coming, and he had put his affairs in order. After consultation with his own children, we all decided that he should come home, but under hospice care. We would try to make him comfortable, but would not treat him beyond that.

Friday morning, the 23rd, we took delivery of a hospital bed, and various other paraphernalia associated with home care. For lack of any other good place, the bed got set up in the living room. Stepdad came home a few hours later, but wanted to sit in his favorite armchair instead of being in the bed. His son came up from the Bay Area, and neighbors dropped by to visit. He even ate some ice cream, a small victory for us. Things looked like he’d have a few weeks to a couple months at home to slowly die and say good bye. Only days before, the doctor had given him 4-6 weeks of expected remaining life.

But the fates had their own plans. And maybe they were better than ours. Within six hours, stepdad had managed to slip out of his chair and onto the floor a couple of times. It was surprisingly difficult to get him back, as he had no strength of his own. He pulled out his oxygen line a couple times too. By 10:45, Luis and I were watching television with him when I noticed that he was unusually quiet. I went to look at him. His hands were cool. No pulse. No detectable breathing. Six hours after getting home, he was dead.

The next few hours involved various phone calls, a nurse visit to certify a natural death, and then a pair of creepy undertakers an hour later. My mother, who typically falls asleep in front of the TV by 8:00 PM was up until 1:30, utterly exhausted. We too were a little frayed, still recovering from the 5-day drive.

Now we’re all trying to deal with the new reality. I’ve told my mother that I’ll stay here at least six weeks. Beyond that, we’ll have to see what works for everyone. My mother is elderly too, 86, and I question how much sense it makes for her to live alone. For now, though, we are just grieving and recouping our strength. I’m fine, but my mother caught a bad cold and is still recovering. I’m doing my best to pamper her, cooking and cleaning, running errands, etc.

As for what the future holds, we’ll see. For now, we can thank the mysterious forces that conspired to make me drive here, leaving me with a car, flexibility, and an open-ended return.

Saludos and thanks for stopping by.

¡Feliz Año Nuevo!


P.S. If you comment, please keep in mind that my mother reads this blog.

Living in the Spirit of Ecstasy

Dateline: The Terrain Between Luxury and Decay

As I sit here writing this blog post, not thirty feet from me sit not only one, but two parked Rolls Royces. This is curious for fairly obvious reasons. I’m in a nice neighborhood, but not a super-rich one. In my neighborhood in Boston, a far wealthier place, no one has a Rolls. And I seldom see anyone driving one in Boston, though it’s not uncommon to see Bentley Continental GTs, Ferraris, Maseratis, and other super-expensive cars. But the Rolls Royces, if they exist there (and they surely do) are remarkably shy about showing their Spirts of Ecstasy. And here? I’ve never once seen one on the street anywhere in Mexico.

One of the Rolls Royces here, an ’87 Silver Spirit, belongs to my landlord Rafael, and is parked in the courtyard. I pass by it every day. The other one, an early 70’s Silver Cloud II belongs to his friend, Tony, and is parked on the street, where it has sat unbothered for a couple of weeks now. Rafael borrowed it a while ago, because for a spell he had no working cars, and needed something to get around in.

At the time he borrowed his friend’s Roller, Rafael was in possession of approximately five, non-functioning vehicles: the Rolls; a Pontiac Fiero in the workshop that’s in the process of being converted into a Testarossa lookalike; a late 90’s Range Rover, which is his daily driver and most recent casualty to mechanical failure; a Lamborghini Murcielago parked out front, which lacks an engine among other critical parts; and a large, graffiti-covered van/bread truck, also parked on the street. The bread truck looks abandoned, but it’s not.

Tony's Rolls Royce

Tony’s Rolls Royce

Of the bunch, the Rolls is the most interesting, or at least the most storied. When I first rented the place, I noted the Rolls’ presence. It was covered with dust and apparently not working, a sad testimony to bygone better times. As I got to know Rafael, I came to learn the Roller’s colorful history.

He bought it six years ago in Miami and drove it from there to Mexico City. With an EPA-rated 10 MPG highway mileage, I’m sure it was an expensive trip. Gasoline at the time was fetching around $4 USD/gallon. I marveled at the sheer chutzpah of such a trip and asked him if he wasn’t nervous about crossing the border in a Rolls. At the time, sometime in 2010, the northern states of Mexico were a virtual battleground between various drug gangs and other criminals, the police, and the Mexican military. Ciudad Juarez was more dangerous than Baghdad, and large parts of it had been deserted. The border area didn’t seem like an auspicious place to drive through in a Rolls Royce, even if it wasn’t new. But Rafael was undeterred and sailed through with nary a problem. Hearing this only made me feel a little ridiculous remembering my own fears about such a border crossing. In the spring of 2014, a much calmer time, I also crossed the border, only I was in a rusty 1989 Toyota pickup. Ha!

The Spirit of Ecstasy

The Spirit of Ecstasy

For a few years, life with the Rolls was automotive bliss. Rafael drove it around Mexico City without incident, either mechanical or otherwise, though he did have a few adventures. One day he was out in the Rolls with one of my predecessors, a Swiss guy who had rented one of his units. As they were driving around one late afternoon, Rafael got lost. I’m not quite sure how this happened as Rafael is a Mexico City native and seems to know all the backroads. But they ended up in some iffy neighborhoods, and the Swiss guy began to get nervous. After all, there are plenty of places in the USA where you probably wouldn’t want to take your Rolls. A questionable barrio in Mexico City? Yeah, I’d be nervous too, especially given the danger of being stopped for long periods in the ever-present traffic. But apparently Rafael laughed off any notion of danger, much to the Swiss guy’s chagrin.

One of the more notorious iffy barrios here is Tepito, just North of the Centro Historico. I can’t tell you how many times I’ve been warned by people, especially my ex, “F,” not to go anywhere near Tepito. “They’ll rob you down to your underwear there, and you’ll leave nearly naked. That is if you’re still alive.” Those were the kind of anecdotes F loved regaling me with. As a result, I’ve always steered clear of Tepito.

Well, Tepito is exactly where Rafael and the Swiss guy ended up in the Rolls. At this point, according to Rafael, the Swiss guy was in a state of near-panic. But of course he couldn’t abandon ship, because that would only have been falling out of a very plush frying pan and into the fire. And then a very strange thing happened. People started making way for the Rolls, pushing pedestrians out of the street, saluting Rafael and the Swiss guy, and cheering. Apparently they thought he was one of the BIG bosses, come to check up on his network of pirated DVD sellers or some such errand. And soon Rafael found his bearings, and he and the Swiss guy floated to safety without so much as a scuff to the Rolls.

For years Rafael has driven the Rolls all over the city with nary a problem, something that still amazes this Gringo every time he thinks of it. Sadly, this automotively blessed state of affairs ended about two years ago. The Rolls fell under some kind of mysterious mechanical malaise and stopped working. Rafael was forced back into the relative penury of his Range Rover.

Elegant Decay

Elegant Decay

As you might imagine, finding a competent Rolls mechanic in Mexico City is even harder than finding some oddball type of Gringo convenience food. And to put it politely, Rafael tends to bargain hard when he buys things, which ruled out taking it to the Rolls Royce dealership in Polanco. So the Rolls then spent months and months and months shuttling between various incompetent mechanics, losing bits and pieces along the way, but never regaining its ability to elegantly glide over the potholed streets of Mexico City. After several mechanics who could not deliver the goods of functionality, it was finally towed back here where it sat for a maybe another year before I rented my unit.

Sad, dust-covered, and dejected is how I came to know Rafael’s Rolls. But little did I know that I was to become a player in the Rolls Royce Resuscitation Project. But that’s a tale for another post. For now, saludos and thanks for stopping by.

Penthouse Fantasy

Home Sweet Mexico City_MG_3898 Low ResDateline: From Fantasy to Reality?

I have a weakness for real estate. No matter where I go, I want to see what’s for sale, for how much, what kind of style, and what kind of amenities are available. Here in Mexico City, I’ve literally been window-shopping real estate for years. OK, make that a decade. And given what prices have done, I should probably have stopped fantasizing and actually bought something when I first had the idea. But as some of you know, I’m not the kind of person to come to big decisions quickly.

But I’ve now lived here for six months, and I’m loving it. The city is constantly pulsing with life, and there’s a ton of stuff to do. The climate remains close to perfect, though it has been quite rainy of late. But only in the afternoons. And I’ve met someone (Luis) who I’ve been seeing pretty steadily for the past three months. (Part of the reason there’s been a dearth of posts here, haha.) And I’ve also discovered that my Bostonian friends, who were formerly begging me not to leave, mostly seem to have quietly gotten on with their lives without me.

So I’m getting a bit more focused about actually buying a place here. And I’ve found a place perfect enough to really make me start to seriously consider taking the plunge. The object of my fantasy is an eleventh floor penthouse, located basically right behind the US Embassy, a terrific spot in many ways. It’s on a quiet street, but nearby there are tons of restaurants, bars, theaters, and a couple blocks away, across Avenida de la Reforma, lies the Zona Rosa, Mexico City’s gay central. There’s a Superama, Mexico’s upscale supermarket a couple blocks away, and various other shopping options also near to hand. The Insurgentes subway stop is 5 blocks away, and there’s a Metrobús stop about equidistant, though I could pretty much walk to wherever I’d want to go.  In short, the place is ubicadísimo, fabulously located.

The neighborhood, Colonia Cuauhtémoc, is a mix of houses and apartments mostly from the 1920’s and 30’s, with a few tall buildings, and increasing numbers of newer 3-6 story condo/apartment buildings. According to my sources, there’s now a height limitation on new buildings of 6 stories, so my view would never be obstructed.  In terms of quiet, aside from Río Lerma, which is full of bars and restaurants, there are not a lot of stores or businesses.  The neighborhood is safe, and the presence of the US and many other embassies probably helps that too.  So it’s a great place to live, quiet, but close to everything you’d want.

Colonia Cuauhtémoc in Red

Colonia Cuauhtémoc in Red

The penthouse itself is 220 square meters or about 2,400 square feet, the only unit on the floor, with three bedrooms, two-and-a-half baths, and a maid’s quarters with its own bath. So I suppose you could call it four bedrooms and 3.5 baths. The kitchen is fully enclosed (no open plan here, thank God!), decent sized, and has a spot with plumbing where I could put a dishwasher. (Since I have no desire to use the maid’s quarters for its intended purpose.) The kitchen and baths were remodeled within the last couple of years, and are fairly nice. The building was built in the 1970s, which is why the apartment is so large and why it has an enclosed kitchen. Most of the apartments that are being built today are about half the size and not nearly as nice. Oh, and it has two covered parking spaces inside the building, behind a security gate. (Though I’ve been living quite nicely without a car these last six months, it’d be nice to at least have the option.)

The drawbacks? The building, while in decent shape, needs to be painted, and it needs a little exterior plasterwork. Nothing major, but it does look a smidgen dowdy. I don’t know if the other owners have paid their monthly dues, which is apparently a common problem in Mexican condos. And there are a few other things I need to research.

A smidgen tired, but OK.

A smidgen tired, but OK.

Alas, the biggest drawback is me. I’m having a very hard time pulling the trigger. My biggest worry is the exchange rate. Though the peso is almost back to all-time lows, I can easily envision it going lower, especially if Donald Trump wins in November. But in all fairness, when I first saw the place in late April the peso was in the low-to-mid 17’s; now it’s pushing 19 to the USD, a nearly 10% move. Meanwhile they dropped the price of the apartment from 6.5 million pesos to now 6.3. This means that without any further negotiation, the USD price has seen a 12% drop, from about $377K to $334K USD. And per square meter, the price is quite reasonable.

I’ve been told by a few agents that real estate here tends to keep pace with the USD and whenever there’s a big drop in the peso, foreigners rush in to buy. I’m a little skeptical about that, and have wondered if most of them have already blown their wads. But current prices for places comparable to some of the properties I’ve looked at in the past in Condesa or Roma Norte do seem to mostly bear that out. And the location of this penthouse should be fantastic for appreciation. The pace of tower construction on Reforma, 2 blocks away, continues apace, and there seems to be no further development of either roads or public transit. Which means that the premium for living close to work can only increase.

I guess the other thing is that while this place is close to perfect, it’s not 100% perfect. I’d still like a roof deck or some kind of outdoor space. But I’ve wondered about buying the cuartos de servicio on the roof, knocking them down, and building a roof deck. I need to investigate this.

But I’m happy in Mexico City. Even if I don’t give up my Boston home, I love it here. I’ve spent enough time over the last ten years, and now having lived here for six months, I can truly say this is a place I could happily live a long time.

So maybe I should just take the plunge. What do you think? Please tell me in the comment section. Thanks


Here’s a video of the interior the realtor put on YouTube. I downloaded it and replaced the Spanish narration with my own.

 

The Plumbing is Out to Get Me!

leaky-faucet-290Dateline: at the junction of two leaky pipes.

I’ve discovered the secret purpose of the various bits of infrastructure in my apartment here in Mexico City: it’s to make me look like a fool. This only dawned on me yesterday, but the more I think about it, the more convinced I am that I’m right. And I’m feeling pretty foolish right about now. Circumstances are making me look bad. Not merely bad, but kind of high-maintenance, whiny bad. If you’re a guy who considers himself pretty handy around the house, this isn’t a good thing.

By infrastructure, I really mean plumbing and electricity. Shockingly, electricity was the first to ambush me. Shortly after moving in, the power went out early one morning. Noting that the electricity was on elsewhere in the building, I went to the breaker box to reset it. It didn’t appear to have been tripped, but I flipped the switch anyway. Nothing happened. I tried a couple of more times, again with the same result. So I broke down and called Rafael, my landlord and explained the situation. He came out in his pajamas, flipped the circuit breaker on and off once, and Lo! There was electricity. I was mortified and apologized while simultaneously re-explaining that I had done the very same thing.

Some months later, after more power failures, and some alarming sizzling sounds coming from the breaker box, we found out what the problem was. The circuit breaker itself had a loose connection inside the box. Once replaced, it has worked fine ever since. Though I was indeed vindicated, the fact of the matter is that impressions of idiocy don’t really wear off that fast. Especially when they keep getting refreshed.

So once the electricity left off tormenting me, the plumbing took over. Take the water supply, for example. In my apartment it stops with alarming regularity. Of course it’s the typical, failure-prone Mexican system, where water slowly flows from the city pipes into a cistern under the patio. From there it’s pumped up to a tinaco on the roof from where it flows leisurely into the pipes via gravity. The whole setup runs on electricity and a set of cantankerous float valves, electrical sensors, and relays, all of which suffer from the same “Transylvanian” maintenance schedule. Which is to say that they are replaced or serviced only after they fail. Of course when there’s no electricity, the whole system runs on borrowed time anyway.

Only a few weeks after my electrical run-in, the water stopped and I called Rafael: “I don’t have any water.”

“Don’t worry; the system is back on. You should have water in 20 minutes,” he replied confidently. I was relieved he was already onto the problem. Twenty minutes later, I tried the faucets.  No water. I merely heard a gentle sucking sound. The system was pulling in air as water somewhere below me flowed out. I tried all the faucets. Same result. I waited another five minutes and tried again. Same result again. So I went downstairs to talk to Rafael, who happened to be in his shop.

“It’s working,” he insisted.

“No, it’s not,” I replied. “I just tried it before I came down here. There’s no water.”

“Let me show you,” he said, walking toward the sink in his shop. He turned the valve and to my horror, water flowed out exuberantly.

“Yeah,” I said, “but that’s just water that’s already in the pipes. There’s no water in my apartment.”

“It’s fine,” he insisted. “Go back and check it again.” Meanwhile the water kept flowing out of the faucet. I could feel my embarrassment rising and hoped I wasn’t blushing.

Sure enough, I returned to my apartment and the water flowed almost as if nothing had happened. I felt foolish and could almost hear the pipes quietly snickering to themselves, “foolish gringo, hahaha!” It’s nasty when plumbing makes fun of you,  but I figured this was to be my last insult. After all, how many times can this kind of weird, intermittent problem occur? And to me, who normally has such good mechanical Karma?

Ah, if only! Recently, my toilet flush valve started leaking. Intermittently, of course. Again I notified Rafael, who sent up his handyman, Arturo. Since I couldn’t see anything wrong with the valve, I persuaded myself and Arturo that the problem was the flush handle getting stuck against the tank lid. He duly replaced it. That was about six weeks ago. But it turns out that wasn’t the problem. So Arturo came back and looked again, and we both decided it really must be the valve. I felt rather foolish at having misdiagnosed the problem initially, but Arturo was too polite to comment. But he did go buy a valve. Meanwhile, actually installing the valve seems to have fallen by the wayside, and guess what? Now the toilet appeared to have fixed itself. But don’t tell anyone as they still think the valve needs to be replaced, and my plumbing credibility is hanging by a thread.

Oh, and I had an intermittent problem with the hot water too. Like in the middle of a shower, suddenly the hot water would slow to a trickle. Mind you, the cold still worked fine. That was such a weird problem even I couldn’t imagine what was wrong. Later, after my cold shower, I’d check the hot water and it’d be fine again. But now when I told Rafael, he didn’t believe me. “Maybe the hot water doesn’t like you,” he said, chuckling. It took me a week of hot/cold/hot showers to persuade him that I wasn’t imagining this problem. When he finally looked into it, he apologized and said I was right. That particular problem now seems to be fixed.

Then about a month ago, my shower started leaking. Not a lot, but definitely leaking. So, figuring I’d give Rafael all the facts and let him decide what to do, I stuck a bucket under it to measure the flow and then sent Rafael an e-mail: “my shower is leaking about 1.5 liters a day. I personally don’t really care if you fix it or not, but I’m letting you know.” I never heard back from him, figured he didn’t care about a small leak, so I resigned myself to a leaky shower.

Since I don’t particularly like to waste water, I left the bucket under the leak and started to use it to flush the toilet. But the sound of the dripping water began to annoy me, especially as the bucket in the shower stall created an odd sort of resonance, making the sound MUCH louder than anyone might imagine. And then, perhaps fortunately, the shower began to leak in earnest earlier this week. Now it was leaking 3 liters an hour, and even using the captured water to flush the toilet, a lot of it was ending up going down the drain. So this time I messaged Rafael on WhatsApp, and he agreed to send Arturo around on Monday.

So what’s happened since? Yesterday the shower fixed itself, and now it’s not leaking at all.

As for me, I’m busy looking for a hole to crawl into.