#1257 – The Expat Files: Labor, Exploitation, and the Hidden Realities of Latin America

Automatically transcribed from the original recording; names and wording may contain errors.

[00:00] South of the border down Mexico way That's where I fell in love when the stars above came out to play and now as I wonder Hello there all you ex-pad wannabes. I'm Johnny Mueller and you're listening to the expat files living in Latin America The show that tells you just what it's like to live work play and or retire down here in Latin America It's a mix of the good the bad the ugly and the great and it's all right here. So let's get started You know every time I talk about how cheap labor is down here in Latin America When I mentioned that your cleaning lady or gardener makes 12 to 15 maybe 18 bucks a day Not an hour a day and on the gringo tourist trail, maybe 20 or 25

[00:50] That is if they're working for gringos and expats not locals It seems every time I mentioned that I get a couple of emails from people saying that's just terrible Johnny Why do you promote that those poor people all those businesses down in Latin America? Take an advantage including all those transnational companies and gringos and expats who hire the locals are just perpetuating that poverty By the way, speaking of transnational companies moving to Latin America specifically in this case Mexico to take advantage of those lower labor prices those vastly lower labor prices Of course, everybody knows how all the big car companies are down in Latin America mostly in Mexico Brazil Argentina sure got it Detroit didn't it?

[01:39] But did you know that all the big US and European truck manufacturers are down in Latin America to mostly Mexico Argentina and Brazil once again For example Freightliner Kenilworth Navistar Hino International Dina man se that's a German company Mercedes Benz, of course is Zuzu Scania Cummings and Detroit diesel are in Mexico. Yep Detroit diesel has the balls to continue to call itself Detroit diesel when the majority of their trucks are made in Mexico How about that for hypocrisy? Though if you think about it, it does stand a reason that the big truck companies are now producing in Mexico That way they can put the secret compartments in Right at the source right where the drugs are being processed

[02:25] Hmm. You think so? But back to the subject of accusing gringos and expats of going south of the border south of south the border sometimes To take advantage of the poor people and their extremely low labor costs Well, just like most issues. This one's much more complicated than you think In fact, I got a little boots on the ground story that just might give you an idea how complicated it really is Seems one day not so long ago I got a call from a friend of mine who owns a couple of those Makilas, you know Sweatshop says they're known in the US media But let me assure you those big Makila factories when they're located in Guatemala in the Alti Plano They're the farthest thing from the stereotypical sweatshop You can think of because the weather is really nice in the Alti Plano and they don't need air conditioning

[03:15] So there's no sweating involved So in those big factories that keep the windows open and the fans going all the time and because it's perfectly comfortable They get a lot more production out of the workers. The secondary effect is everyone's happier seems to be as opposed to the Makilas and sweatshops and places like Jamaica or Honduras near the coast Talk about sweat. You don't have to move a muscle to sweat in those places, but in the Alti Plano It's completely different. Yeah, I might think I'm just saying that but you have to visit one of those places to see for yourself In fact with many of my Exped Insider seminars, we go right into one or two of those factories In Guatemala those so-called sweatshops and no one seems to be sweating at all But anyway, not so long ago. I

[04:04] Gringo Exped a Jewish guy from New York from the garment district By the way, I mentioned his Jewishness because he told me for a fact that about 95% of all the big clothing manufacturing factories Those so-called sweatshops throughout Latin America are owned by two different kinds of people New York Jews and South Koreans. So then you might ask why are there so many transplanted New York Jews owning Makilas here in Latin America? Well because traditionally the clothing business in the USA, which is the biggest in the world, right? Came out of the garment district in New York mostly historically owned by Jews So when the Asian and Indian competition started hornin in on their territory They started expanding their Makilas the Central South America and the Caribbean to they had to to survive to be more competitive

[04:55] You know that story it started with Clinton signing those free trade agreements You know that big sucking sound third-party candidate Ross Perot was always talking about It was Clinton who got that ball rolling on steroids So anyway, the major owners of all the Makilas here in Central and South America by a huge margin Have been South Koreans and Jewish garment district guys from New York. So anyway, one day I get a call from one of my garment factory owner friends. He says what are you doing Sunday? I said, I don't know And you pass life. He said why don't you come out with me on Sunday? You're gonna find this really interesting. I Said okay Sunday came he picked me up We drove out to a big free trade zone in Guatemala to a Makila area

[05:42] We pulled up to one that had Korean letters across the door. How did I know they were Korean? He told me Personally, I don't know Korean from Japanese from Chinese when looking at the letters. Do you so anyway to Korean guys Let us in the place was just filled with all kinds of different machines that manufactured clothing Old ones new ones crazy-looking Rube Goldberg ones Probably 50 maybe 75 different machines and stations for people to work But there were no workers just me my friend and the two Korean guys Well, those two Korean guys started talking to my buddy in really bad Spanish. I understood most of it but man, I'll tell you it was worse than mine and Every once in a while we'd stop at a machine and they'd switch it on it would do some kind of operation

[06:30] Like turn out the stitching on a belt make a hatband put some glitter on a t-shirt Fasten a zipper or some studs to a pair of jeans turn out little foam discs for shoulder pads Seems like every one of those machines had a different specific purpose. Yep. It was a real interesting experience All right, I'd say about three-quarters of more one-offs. In other words, they were custom-made Not something you could order out of a catalog That means that my buddy verified this an engineer a materials guy and a machinist had to get together With someone who really knew the garment business to come up with some of these things Anyway after that little factory tour was over my buddy told me he bought all those machines from those two Korean guys He said he'd made the deal a couple of days earlier, but just needed a show-and-tell then I said the logical thing

[07:21] You must be expanding right? He said nope. I'm just gonna store those things in one of my warehouses. I Said are you gonna sell him? He said no, I'm gonna hold on to him I said really he said yes because once in a while you get a weird order from someone out of New York They need to fulfill a certain kind of order right away Maybe it's a special kind of glitter or spangle on a t-shirt custom buckles buttons metal studs He said if you don't have a machine on hand to do that You lose the order if you don't have the right machine it takes time to put one together You have to either modify something that you have or build a brand new one So instead of getting the job done in 45 days, you can do it in 15 He said fashions change seasonally and it's all about timing. So you offer the best turnaround time you get the job. I

[08:08] Thought yep, that's right. It's logical every day you learn something, right? So that was that it wasn't your typical day Then about two weeks later on the second or third page of the Prince's Libre the biggest newspaper in Guatemala Something very interesting caught my eye By the way, if you're in Guatemala for any length of time, you'll know about the Prince's Libre for a long time I had a subscription to it. It's in Spanish course a hundred percent Spanish It was one of the ways I find tuned my Spanish by reading the classified ads anyway, about two weeks later I was flipping through the Prince's Libre and I saw a Photo of that very factory we'd visited with all those machines in it. There was a photo of the inside of the place It was completely empty No machines not a single one and there was a picture of the outside of the place the front entrance with about

[08:56] 500 people mulling around outside and cop cars there, too Now the article said basically 600 first-shift employees showed up for work on Monday morning to find that their jobs at the factory No longer existed the factory no longer existed The doors were locked the windows boarded and the Korean owners were nowhere to be found So I called up my buddy. What the hell's going on? I said You see the paper today the article about your Korean buddies. He said they're long gone They're in Vietnam now setting up shop He said they made plans to do that a couple of months ago after the Guatemala president and Congress voted to increase The minimum wage by about a buck a day So instead of the factory workers making I think back then 12 bucks a day

[09:44] They were making 13 now and that was enough to push those two Korean guys over the edge They set up in Vietnam or they only pay seven bucks a day. My buddy said I'm not shocked. I'm not surprised That's how the Makila business works. He said almost no one ever owns their factory They just rent in a free trade zone a zone of Franca So it's easy to just liquidate your equipment and pick up and leave He said dickhead politicians want to get elected or reelected are always threatening to raise the minimum wage They almost never do but this time they did in fact politicians harp on it all the time It's a surefire way to get the masses to vote for you now You might think Guatemala's minimum wage is rather low, but there are lots of other countries much lower than that like Vietnam In fact another one of my bikini buddies not an owner but an administrator a Jewish guy to working in the family business

[10:35] I think it was his cousin or uncle that owned the business. Anyway, one day he called me up and said you want to buy my car I'll sell it really cheap. I Said how cheap he said how about a half a blue book? I said I'll come over and have a look and guess what I went to his apartment in a really nice area of zone 10 in Guatemala City those guys really lived nice high on the hog. I walked in and the place was half empty He had everything boxed and packaged and said you want to buy a dining room table and chairs How about a 55 inch flat-screen TV? I said, wait a minute. Wait a minute. What's going on? He said we're shutting down the McKeelis in Guatemala. He said his uncle or cousin I can't remember which one is moving the operation to Vietnam. Where'd I hear that before and I'm gonna run the operation

[11:20] I don't want to go there. He said but the money's too good to pass up and They're closing up shop within the next couple of months and as much as I like even love Guatemala I'm too young to retire and I got to do something and Then we sat down and had a few drinks I should say he had a few drinks and he almost shed a tear and I thought wow This guy really loves Guatemala. He really doesn't want to leave and when I mentioned that to him He said I'm not choking up because of that I'm choking up because you see my brother was in the Vietnam War and got killed by the North Vietnamese And now I'm going back to the scene of the crime to start up a business I'm gonna be hanging with those guys. He said I'm having a hard time dealing with that so anyway The point of this little rant is that every third world country and every first world country too has a minimum wage and

[12:10] It's arbitrarily or somewhat arbitrarily determined by corrupt governments Are there any other kind and it's used as a political tool to get pustulant ass wipes selected and reelected The fact is if you ask anyone making minimum wage in a third world country They'll tell you they absolutely hate their government. They ought to be all fired and or put in jail But when election time comes around and they see that politicians promise goodies freebies They still believe they all but should be shot or put in jail But they'll vote for the guy who promises to raise the minimum wage every time They never ever think about the secondary or tertiary effects Like for example employers might not be able to afford that so they're gonna lay off people instead or close down or

[12:56] Leave for green or cheaper pastures People don't want to hear about that. But our stories still incomplete Are you wondering why those Korean guys just up and left sold their equipment and never gave their employees a heads up that they were Closing down not even on Saturday the very last working day of the week. Yep. That's right You probably know already here in Latin America people work on Saturdays because you know in Latin America almost everyone Especially the minimum wage workers work a half day on Saturday Did you know that down here? It's not a 40-hour but a 44-hour work week an important point to remember if you ever hire a local Anyway, those two Korean Makila owners were clever they were playing a little game that lots of factory owners play if a Company's got to go out of business for whatever reason or stay intact by doing business elsewhere and leaving the country you're in

[13:47] The sneaky way is to tell no one just do business as usual Till the day you close your doors and on Sunday just pack everything up and leave get the hell out of the country When Monday morning comes in the workers show up let them discover in that moment that they no longer have a job I know I know it's a very unjust and cowardly move, but they do it for a reason Because all governments even third world governments have labor laws and when you close down a factory for example in Guatemala Or any place in Latin America you have to pay your employees in Denonization which can in some cases depending on how long an employee has been working there can be a year's Severance pay so just imagine if you've got 600 workers and you're closing up shop

[14:34] Some of them might be do a couple of months severance, but some would be do a year's severance pay And here's how the law works if you close up shop And you can't pay severance to everyone the government locks up the owners assets that would be in the building Remember though most Makila owners just rent their space so that won't apply, but then there's the equipment They'll impound that but often as it turns out on those fateful Monday mornings when things like this do go down When the cops finally get the doors open there's often nothing left not even the toilets or the bathroom sinks So there you have it just a little reality check for all you doogers out there who continually beat up on third world countries We're having such a low minimum wage Just remember those minimum wage jobs are very fluid and companies especially transnational companies are always looking to cut the bottom line

[15:25] Now if you're lamenting the loss of production jobs and manufacturing facilities in the states That's exactly what happened to the US auto steel and heavy industry. We all know that story all too well You know they say be careful what you wish for in this case be careful who you shame By the way, speaking of scams and strange things going down in Latin America. I was visiting one of my Latin American buddies He lives in an upper middle-class neighborhood, which is solidly middle class in the states It's a nice peaceful neighborhood called the colony down here or Colonia with decent three and four bedroom houses big yards Gated guarded community almost all the property owners businessmen professionals and scumbag politicians, you know

[16:10] The usual mix of people who actually work for a living and the assorted government slug The salaries for the folks in that neighborhood are people making from 25 to maybe 45,000 a year You know that supper middle class here in Latin America But if you make that kind of money up where you and I come from You wouldn't own you'd rent on the wrong side of the tracks, too But I digress anyway I was at my Latino buddies house visiting in about a year ago and we were sitting on the front porch I think was a Saturday afternoon and suddenly we heard some racket people were screaming at each other a fight had broken out in The house next door sort of a yelling match a couple screaming at each other for who knows what I said to my buddy It sounds like the neighbors are on the warpath. What's up with that? He said yep. They're at it again

[16:58] I don't know. They fight like that at least once a week He said I've talked to the guy a couple of times seems like a decent type. He's a lawyer, but no class He said I'm thinking someday it's gonna escalate one of them's gonna kill the other one and the cops will be there and hmm It'll be the end. He said I really hope they move out before it gets that bad But so far he said no such luck Then my friend said looking at the two nice cars parked in the driveway. He said, you know how he makes his money He's a loan shark. I Said a lawyer loan shark. How's that work? He said being a lawyer you get a higher class of people borrowing money from you They have better jobs. They're more stable and are more likely to pay you back on time I thought about that for a second and said yeah makes sense Then I said to my buddy. So being a lawyer loan shark, that's legal, huh?

[17:46] He said probably not but you know, they don't enforce things like that down here There's a loan shark or two in every neighborhood Everyone knows who they are and the cops don't do a thing about it in some neighborhoods The cops are their best customers My buddy said that lawyer just happened to be a loan shark for a higher caliber of customer Then I asked what's his interest rate? He said he gets 40% a month. I Thought to myself no wonder he's got such nice new cars and all his money's tax-free, too. That's about 500% interest a year Wow, who wouldn't want a piece of that? Then I said if they don't pay I'm thinking he's not in the business of breaking people's legs How is a guy like that put the pressure on it seemed to me a guy like that's too high profile to get really tough

[18:32] With people so I wonder how he gets dead beats to pay. My buddy said he collects. All right He doesn't have to worry about not getting paid guys like him He's a different kind of system than the loan sharks on the street Think about this his clients. They're all working on the books and get paid by a direct deposit Twice a month in their bank accounts that are attached to a debit card I said wait a minute unconfused me explain that again He said the lawyer will only make a loan to a person who's working a full-time job and getting paid by direct deposit Through a local bank that has a debit card attached to the account Then I thought yeah, that makes sense. That's how all bank accounts work down here You open a bank account to give you a debit card that's automatic it happened to me when I opened a bank account and if you get a direct deposit from a company you work for or

[19:22] If you're on a pension or you're a gringo For example who gets Social Security the way most everyone down here gets their money out is to go to an ATM and use That debit card then my buddy said here's how the lawyer is guaranteed to get paid on those loans Let's say a working-class guy comes to him and wants to borrow a thousand bucks He loans him the thousand bucks forty percent a month and he takes the guy's debit card as Collateral and he gets the pin number from him, too And at the end of the month he texts the guy who owes him and says Do you want to pay the interest or the interest and some of the balance or maybe even all the balance? Then the lawyer takes that debit card goes to the ATM and pulls that amount Now when he said that I had to think about that for a while

[20:09] I thought you mean people give up their debit card and their PIN number. Isn't that awful risky? Yeah, I guess it is But if you're desperate enough for dough that you'll pay 40% interest a month I guess anything goes besides the fact that when the guy takes out a loan like that. He's desperately broke That means he's got no dough in that bank account. That's attached to the debit card Anyway, not to listen player deposits his salary It only gets topped off every 15 days when they get their paycheck Remember that most everyone here in Latin America is now being paid by direct deposit. That is everyone who's working on the books So the fact is like up in the States almost no one down here in Latin America uses checks anymore Unless you're in the informal economy selling stuff on the street. It's all direct deposit Anyway, sounds pretty crazy to me, but that's how loan sharks are working things these days

[20:57] they get your debit card and your PIN number and they take their dough right out of your account through an ATM and Then if and when you pay off your debt you get your credit card back Obviously you want to change your PIN number which you can do at any ATM, right? By the way That's not the end of the story with that couple next door having that scream fest If you remember all of this happened about a half a year ago when I was visiting my Latino buddy Anyway about a week ago. I stopped by my buddy's house again. We were sitting on the porch admiring nature once again And I noticed that the house next door which was about a hundred feet away There was something definitely wrong. It seemed like every single window was broken or cracked The yard was unkempt in the house looked abandoned and I said to my buddy. What the heck happened over there

[21:43] He said Johnny you're not gonna believe this. He said remember last time you were here They were having a scream fest and I said I wish to hell they'd move out Well, my buddy said about three months ago. They had another big scream fest She threw his clothes and everything out in the front yard. Apparently he was cheating on her He left at least I ever saw his car parked there again. Then about two months later. That's about a one month ago She knocked on my door. She seemed a little bit drunk and out of it. I let her in She started crying and told me the story of how her husband was cheating on her She wasn't crying about that. She said she was crying about the fact that about two days ago Two policemen and a guy from the bank came over to her house knocked on the door told her she had three days to vacate

[22:29] Because the mortgage had not been paid on the house in six months She said that can't be the house is paid for the banker said not true and pulled out a document the second mortgage That was signed for a hundred seventy thousand bucks 170k in the local funny money, of course The banker pointed to hers and her husband's signature on the document So piecing the story together her husband forged her name on the document took the money and went to the United States with his new girlfriend Well, the crazy wife just flipped out. She was irate. She said he forged my signature I never signed it and the guy from the bank said well, the mortgage hasn't been paid in six months We can't find him but we found you you're legally married to him and your name's on the document If you think he forged your name, you have to take that up with a judge none of our business

[23:15] You're six months in arrears. You have to get out in three days We're taking possession and as she was telling that story to the next-door neighbor my buddy She said something about living with the relatives out in the boonies somewhere wherever that was She had just one day left and she had to leave then my buddy said that night in the middle of the night He heard windows cracking and breaking turns out She took a hammer and went around to every window in the house and broke it She smashed up the walls the plumbing the woodwork packed a bunch of junk into her car and took off That was a couple months ago He said and still the bank hasn't got around to fixing the windows. I'll have to do that before the rainy season Man, was he right about that? So as of right now, my buddy said they're both fugitives From a civil case a vandalism case with the bank and the cops certainly aren't gonna enforce that one

[24:05] No one's gonna be looking for her or him unless they kill each other. That's quite possible The moral of that story is well, I don't really know what the moral is, but I can tell you this My buddy told me just a couple of days ago his kid who's around 19 years old I guess my Latino buddies kid thinks she's on the Latin Cupid dating site Using filters, of course, but he thinks he recognized her on her a different name. Apparently, she's pretty hot. So she'll get some hits So it looks as though there just might be a sequel to this story. I'll keep you posted in the end There you have it that Latin Cupid site rears its ugly head again a refuge for scoundrels All right, let's take an email this is from mr. JC a Great guy in our next pet insider seminar alumnus. He says Johnny a Latin American lawyer

[24:54] We know kicked ass at the closing of our property in Antigua, Guatemala Turns out he said we got the property at 80% off the listed price Just like we were told at the seminar. He says anyway Johnny. I was wondering if you've thought about the following scenario in Our case we're using an echo filto water filter by the way, if you don't know what that is It's a certain water filter that's been developed in Guatemala It's won all kinds of international awards a gravity feed filter highly recommended Just put it on your countertop throw in some tap water or even river water It's a three-in-one ceramic filter carbon filter and it's impregnated with colloidal silver Highly recommended, but they're kind of fragile, you know, they're made out of ceramics

[25:40] So if you drop them or manhandle them too much, it'll break though perfect for drinking water one cup at a time Anyway, he says we're using an echo filter though. We probably don't need it where we currently live But it's recommended that you change out the inner ceramic clay pot once a year, but why yes It still drips just fine and it's not like the nano silver impregnated layer can never go bad Though maybe the silver does oxidize somehow that's reducing the effectiveness on the killing of bacteria What are your thoughts on it Johnny? By the way JC's a brilliant engineer and I'm sure he's thought about this more than most Now JC if you remember we went to the echo filter plant during the seminar, right?

[26:26] now I've taken that tour a number of times and I remember that question being asked and I recall the owner or one of The engineers said if you're just using it in your house to filter tap water. The filter should easily last three years However, if you're dumping river water or coca-cola or mud in wood It'll get pretty clogged up and run slow. That doesn't mean it's not doing its job it just means you have to do a little maintenance like taking out the inner pot and Scrubbing it down a bit with one of those non-metallic scrubbing pads Same thing you would do if you had a ceramic cartridge filter that gets clogged You just pull it out and scrub it down, you know get the surface color gunk and slime off of it I think I'd do that once a year or maybe every six months depending what kind of water you're filtering

[27:11] But to answer your question Even if the insert on the package when you buy it says changed a pot inside the inner pot once a year I've heard it from the horse's mouth a number of times at the factory that three years is a good average lifespan I've even heard people at the factory say they've got some running five years with no degradation and quality your call though You've been listening to the expat files living in Latin America If you need some help with your own plan B We can schedule a one-on-one phone or Skype consult Just send me an email the expat files at gmail dot com And if you want to get on the waiting list for my next week long expat insider seminar in Central America Where you're guaranteed to get a two to five year head start on your plan B Send me an email the expat files at gmail dot com