#729 – The Expat Files: Financial Strategies and Economic Realities in 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 up to play and now as I wonder Hello there all you expat 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 All right. Now, here's a little tip that's gonna save you a lot of grief I know how everyone's addicted to credit and debit cards I mean, you know, I see people putting McDonald's hamburgers even three dollars worth of Starbucks on plastic

[00:46] That is if you can spend as little as three bucks at Starbucks, I wouldn't know well, the fact is everyone's so used to using plastic that They do more the same when they're traveling through Latin America or anywhere else outside of the US Here's how I handle that situation. Sure. I've got a credit card or two I never use them except to withdraw money from an ATM machine or if I'm absolutely Forced into letting someone run the card through their machine like for example at a hotel or if you rent a car But even so I'm advising you if you can get away with it, don't do it So how can you avoid it just say to the car rental company or the hotel? How much do you need as a cash deposit? They'll almost always come up with a number

[01:32] Fact is I've stayed in tons of hotels all over the world first world and all the way down to well Just a kind of hole in the wall with a bed, but you know, it has to have its own bathroom That's my minimum standard in any event Almost all hotels will ask for a credit card impression just in case, you know Yeah, or to room service or raid the minibar or whatever And of course we do it without thinking just know you could save yourself a lot of grief by saying How about a cash deposit how much and normally in most hotels I've stayed and it's a hundred bucks Though in a couple of European hotels and that famous High Rock Hotel in Panama Very cool and an expensive place to stay by the way They hit me for a $200 deposit big deal, right? And the last time I rented a car they hit me for a thousand dollar deposit

[02:20] But I got them down to 500 funny thing to they usually take your money stick it in an envelope seal it up Put your name on the outside and room number When it comes to hotels and give it right back to you when you check out by then They'll know if you trashed the place or rated the minibar. Wait a minute. Let me add something here Like I said, I just use my debit card not a credit card to withdraw money from ATM machines Then I use cash practically everywhere I go. So that's my golden rule I use cash almost exclusively and 95% or more the time that I use a hotel room I give my cash deposit no credit card imprint Which of course means I never use a debit or credit card when I'm buying things at Walmart or a department store or

[03:06] Even at a restaurant Especially at a restaurant. Why? Chances are you'll find out if you travel through Latin America and use your credit and debit card with abandon like you do up in the states You're pretty much guaranteed to have a screw up for extra charges somewhere along the line And you know to straighten it out what a time waster and a hassle is gonna be So be prepared for a long and drawn out phone conversations emails and even maybe a fight with your credit card company Haggling it out over false or questionable charges. I'm telling you it's gonna happen to you Unless you follow my guidelines or don't have a creditor debit card at all, but that's not how the world works, right? I've been down here 27 plus years now and the whole time i've had debitor credit cards

[03:53] However, I never use them willy-nilly only to pull money out of an ATM And when i'm ordering things online from well-known companies like amazon or ebay Now I have to admit i'm ordering stuff from them all the time not because I can't get the stuff down here It's just that there are certain things like vitamins supplements and various specialty items You just can't get down here yet in latin america though. It'll come in due time or perhaps they are down here But I just don't want to run around fight the traffic and such Look, you know how much easier it is ordering online as compared to getting off the couch putting on clean underwear getting in the car Fighting the traffic and doing the mall thing. It's all about price and convenience, right? So bottom line, I only use my creditor debit cards to order online or i'd repeat

[04:42] Withdrawing the local funny money or us funny money from an ATM machine By the way, not once in that 27 years i've had creditor debit cards. Have I ever had a screw up on my bill? Meanwhile, it's 100 true that every latin american person with a creditor debit card Has had multiple problems with his bank and credit card company. In fact, i've seen a few of their monthly statements They're absolutely indecipherable I'm telling you the average latin american with a creditor debit card down here Can easily have 30 40 50 even a hundred different charges a month all listed practically indecipherable on the monthly bill So not only are these guys and gals getting nickel and dime to death on credit card charges interest and other crazy fees Besides that I was talking to a latin banker recently and he said about 75 percent of latin americans just pay

[05:33] The minimum payment and that's exactly what banks love So they're paying outrageous yearly interest charges 50 75 even a hundred percent a year I can also tell you this i've asked a lot of latins if they go over their bill every month and most of them say It's so complicated. They just throw in the towel Look at the bottom line and pay the minimum monthly payment Of course if a massive charge shows up out of nowhere, they and their bank are obviously going to catch that But you've heard me say this many times before latinos are not into the details And I suppose there are plenty of people up in the states who are pretty much the same They get that indecipherable monthly credit card bill and they just pay the minimum payment Dream of winning the lottery and in lieu of that slog along in life knowing they're never gonna pay off the balance

[06:20] Man talk about stress, huh? So, you know, the problem is there are so many credit card fraudsters and cloning operations all over the world It's a ton of them in latin america I'm always wondering why in the hell people would just hand over their credit card to some guy in a restaurant or a little tien So it's about changing your mindset You're just much better off going to an atm machine and pulling out cash and using that exclusively And usually you can pull out up to 300 bucks u.s A day and the equivalent in the other local funny money and man if you can't survive on that Well, think about it 30 days in a month. That's 9,000 bucks a month you could pull out Well, that's enough for four people to live like kings queens and princes here in latin america

[07:08] Unless of course you're a complete idiot with money eat out at high-end restaurants every night Live on the tourist trail in gringo iced areas drink a lot Pay gringo prices and load up strictly on items imported from the states But why would you come down here at all if that's the kind of life you wanted to live? Oh and don't worry regarding spending cash here in latin america unlike up in the first world We're in no danger of eliminating cash funny money since 40 percent of latin america works off the books Meaning it's all cash. No receipts Oh, of course, there've been steps in all latin countries to try to ameliorate that with totally unacceptable results and heavy backlash So I repeat if you want to save yourself a lot of grief and anguish

[07:55] Don't make that typical latin american mistake of paying for everything with credit and debit cards And of course, I've noticed that when people come down just for a week or two to have a nice vacation in a tropical paradise They throw their credit and debit cards around with abandon too And in most cases not till they're back up in the states for a month or so when they realize something's wrong with that bill Hmm, what are all those extra fees and charges for at that moment? A lot of things go through your mind Yeah, I guess I drank a lot. I partied a bit. Maybe even overdid it a hell I was on vacation, but I don't remember buying 820 dollars worth of stuff at Julio's sex toy palace Hmm looks like i'm gonna have to dial that 800 number on the back of my visa card and have a nice Long stressful talk with a call center guy from india

[08:44] Hey, don't laugh I know plenty of first world tourists who've been in that spot Not to mention they've got lots of explaining to do when they get home and the wife or girlfriend sees in bold letters on the bill Julio's sex toy palace or worse Hmm in fact just the other day I was talking to an old-time gringo who has made a lot of trips here to latin america He said oh for the good old days of american express travelers checks. Remember those? Yep. I remember my dad before any vacation. He'd buy booklets of tens twenties fifties and hundreds Yep, those were the good old days the rat pack days well before plastic took off internationally By the way, you'll appreciate this tip concerning atm machines down here They call them cajas automatikos or cajeros automatikos

[09:32] Translation automatic cashiers, of course, you see atm machines practically everywhere here in latin america You'll see them outdoors back to back singly and in groups in cubby holes located in business and shopping districts And all the malls of course from the highest end ones loaded with suvs and bodyguards in the parking lot To the scruffy dingy looking malls and iffy neighborhoods the dead giveaway there the throngs of chicken buses stretching around the block Anyway, as mentioned there are many ways for thieves and no goodniks to steal or clone your credit card And one of them is when the bad guys place tiny innocuous scanners and readers right in the atm card slot I mean, come on. How are you gonna know? Now sometimes you'll see on the latin nightly news a couple of guys getting caught doing such stuff

[10:21] I'm always wondering who's got the tech or the balls to do that Well, funny enough just the other day on the six o'clock news They captured two guys in managua nikka raga installing such a device and guess what? One of the guys was a nikka raga one with a nice long criminal record and the other guy a russian Man those russians they get around, huh? Now we can guess where the tech and the hacking skills come from man the russians They've got a reputation for being able to work the system any system Scamologists to be sure I guess that's what 75 years of socialist totalitarianism will get you, huh? A couple of three generations of scammers yet idiots like bernie sanders still embrace socialism Hey bernie try reading a history book or two. I know I know people will say but johnny

[11:11] Capitalism doesn't work. Look at the system now the u.s. 20 trillion in debt It's virtually bankrupt to which I say you're saying capitalism doesn't work Well, how would we know we've never really tried it the u.s System is actually crony capitalism with a touch of fascism thrown in but back to those latin american atms Now I don't blame you if you're skittish you're hesitant to use any atm in latin america at all after you've heard all that Well, I'll tell you you're pretty much Absolutely safe as long as you use an atm That's either inside of a bank Or right outside of a bank because you know a lot of banks will have a little cubbyhole Right near their front door with their own atm machines right there They're always well maintained and monitored with cameras and such so there's very little chance that someone's messed with them

[12:03] Other good places to use an atm include atm machines on the inside of well-known international franchises like for example Walmart costco ace hardware or any big well-known upscale mall or department store Also atms and lobbies of upscale hotels But stay away from atm stashed in little cubbyholes along the street as well as atms in low-end malls Or any atm you might see outside sitting all by itself out in the open now as for me I like to use atms that are outside but that are connected with a bank i'm talking about physically connected with a bank, you know part of the same building Oh by the way since i'm heavily into anonymity and privacy you long-time listeners know that already

[12:49] You probably also figure it out by now. I don't have my name on my credit card or debit card There's the name of a ubiquitous sa corporation on my card Haha So all the transactions that go through and the monthly statement and such are in an sa corporation not my personal name Which keeps me personally off of a lot of lists And that means the banks can't trade or sell my name in my debts to other banks or outfits that pay for such information as marketing tools That means I never get sales calls or cold calls from people addressing me by my name They just don't have it because I only give up my name when I absolutely have to Like for example when government pus bags slugs needed or requested, you know

[13:37] When it has to do with residency driver's license immigration stuff like that So that's one of the beauties of having an sa corporation. You can virtually anonymize yourself So coming down to latin america You have a second chance at getting back your privacy since for sure everyone up in the state is on a thousand different lists Government marketing and otherwise like expat eddie is fond of saying privacy is like virginity Once you've lost it man You'll never get it back which is 100 true if you're living up in the states or in the first world But when you come down to latin america, and if you've organized your plan b correctly You can get a huge chunk of your privacy back though Not all because you're always going to be stuck in some government databases I mean after all you have to go through customs and airports have government sanctioned ids and drivers licenses and all that

[14:28] But you can virtually wipe the slate clean when it comes to personal privacy regarding those foolish time wasting brain dead social networks twitter facebook The usual suspects by the way one of my pet peeves and i'm gonna sound like a curmudgeon here But it makes me cringe when I hear people say i've got 426 friends on facebook and sometimes only sometimes when I feel like expending the energy to make a point i'll say something like listen pal or Palette if that's a word if you were out in the boonies at two in the morning and you had a flat tire Unless you happen to look like sophia vargara. How many of those? 434 friends would come to your assistance. I bet Zero it's time you reevaluate who you think your friends are

[15:17] Because the ones you think you've got on facebook and twitter hate to tell you but those are virtual friends Just like if you win at monopoly and have got boardwalk and park place all sewed up You're a virtual millionaire, but I digress as usual. Where were we? Oh, yeah credit debit cards and atm machines I advise when in latin america use those credit and debit cards Sparishly or is it sparsely? By the way, you've heard me mention this before when you take money out of an atm machine Take the maximum amount because you're gonna get charged two bucks or so for the transaction Meaning if you're pulling out just 20 bucks a two dollar charge means you're paying 10 For the privilege of getting that 20. However, if you pull out 200 bucks you'll still pay two bucks, which in that case is a 1 fee for pulling out

[16:09] 200 huge difference which is why you should always try to pull the maximum when you go to an atm Now just to point out how clueless careless and really Unconcerned latins are when it comes to matters of money finance and basic mathematics I can't tell you how many times i've been behind a latin person at an atm machine Watching the guy or gal pull out 10 20 or even five bucks in the local funny money In fact from what I can tell latin's almost never pull the maximum. Maybe they haven't got enough in their account I don't know but like I said when you pull dough out of an atm, they charge you around two bucks For the privilege. However, that's not true. If you use the atm machine that's affiliated with your bank

[16:54] But many times that's not an option unless you bank at a very big well-known bank Then they probably have a lot of their own atms around the country However, as mentioned in previous shows most latin countries have 20 or so banks and only the top one or two Have their own atm machines around town or around the country The rest of the banks are all connected to atms, of course, but they don't own those machines. So you pay a fee usually two bucks So you can just imagine how much extra money charges and fees those credit card and banks are making Since most every latino pulls out a tiny wad of funny money and pays a hefty 10 percent or more For that privilege again, it's probably because they don't have enough dough in their account to pull out the maximum

[17:43] But still they're getting nicked for charges left and right So don't let that happen to you either take out your dough from an atm. That's affiliated with your own bank Or if you're pulling from a universal atm pay the two bucks, but get the maximum two or three hundred bucks allowable However, there are a few first world banking and brokerage house affiliates like schwab who offer credit and debit cards With the advantage that wherever you are in the world if you pull money out of the atm machine using that card You'll pay no withdraw fees at all. No two dollar charge etc And even if that atm does subtract a two dollar or so charge schwab and a few other credit card services Reinverse you that's a good option If you remain up in the states and just visit latin america once in a while or you choose to continue to use the banking

[18:30] System up in the states, which by the way, I would never do Because uncle sam or any of the u.s. Alphabet agencies including the u.s Injustice system can lock up your bank account in a second with just a phone call no due process or court order necessary Whether it's a lawsuit bankruptcy divorce delinquent taxes child support alimony or school loans There are a hundred and one ways they could put a hold or a lock on your bank account However, that can only happen if you've got a u.s Account or if you have a foreign bank account and that bank has a branch in the u.s. So it behooves you Never really like that word behoove when you get that plan b going and get down here to latin america You should by all means open a bank account in one of the latin banks your latin lawyer recommends

[19:18] Because latin lawyers know all about the good the bad and the ugly banks within their country in any event You'll want to open your account in a bank that does not have a u.s branch That way no matter what happens up in the u.s If there's a judgment someone tries to sue you there's a divorce there's a tax lien whatever There's no way they can lock or block that account without getting a judgment in the states then sending out lawyers to your latin country Filing a suit there in court and it'll have to be in spanish And that could take a year or so, which is why it's rarely done. You have to be a really big fish But you knew that already, right? All right. Here's a question for you. Do you ever read the op-ed pieces in your local newspaper? Do you even read your local newspaper or maybe parts of the online version of it?

[20:07] Well, you know newspapers are still quite popular here in latin america lagtime effect and all that and as usual people just read the classifieds the funny papers the sports and maybe just a little bit on the front page to see if Buses flipped over in their neighborhood speaking of buses flipping over just yesterday another Chicken bus flipped in guadamal. I think there's 12 dead man. I'll tell you when i'm out in the boonies driving It never fails I'll be whipping along pretty fast 100 120 kilometers per hour That'd be around 70 or 80 miles per hour and suddenly in the rearview mirror You'll see something shiny sometimes neon because you know chicken buses are all lit up like that It's macho thing and man with a zoom and a puff of smoke A chicken bus will pass me on the right or left. It doesn't matter

[20:56] And as they go through the turns they teeter and sway so much you're thinking man They're gonna flip that thing and yep They do once in a while and now the reason you're really taking a chance if you ride a chicken bus In fact last year in central america, that's just central america now The dead count for chicken bus accidents was around 1200 Whoa, that'd be like a half dozen jumbo jets crashing You know anyway speaking of op-ed pieces whether you read them or not down here in latin america If your spanish is good enough and you can slog through them You can certainly learn a lot about the latin country you're in Listen to this one here. Very interesting coming out of the big costa rica newspaper latin asione You know a lot of these op-ed pieces are well written and you can tell what the intelligentsia in a country is thinking if

[21:41] There is such a group The title is costa rica the luxury of misery Boy, that tells a lot right there. He says with 19 percent endemic poverty 10 open unemployment and 40 informal employment That means non taxpayers and the highest electricity rates and gas prices in latin america Costa rica remains bathed in the luxury of misery unless you work for government and i'll paraphrase a bit here It says for a so-called capitalist country Costa rica is the land of state-owned companies one of the last statist holdouts from the 70s and 80s It says the bureaucracy of costa rican government and the state-owned companies therein continue to renumerate their employees as if they were first world

[22:29] And they continue to protect their jobs and privileges which are utterly out of place in today's competitive marketplace Because costa rica does not have the investment capacity or know-how Necessary for development of the latest generation of renewable energy products or technology Though it has all the necessary primary conditions on wind and thermal energy Nevertheless state companies still hold the monopoly on all energy production Now here's the part you have to hear Everybody hears worldwide in international press releases Costa rica continuously boasts that the largest percentage of all energy consumed comes from renewable hydrothermal resources Which underpin the image of costa rica as a leader worldwide in environmental protection

[23:19] But what they do not say, of course that the price paid by consumers for this so-called clean energy Is the most expensive in all of latin america? Why again because the costa rican institute of electricity? Ice is a wholly owned state-run costa rican company. So a big paradox exists The world thinks costa rica is on the cutting edge of producing energy from renewable resources Yet the weight of such high government taxes tariffs and inefficiencies only serve to undermine and penalize costa rican businesses and consumers A persistent and perpetual drag on the economy for sure That's always the scenario when utilities are under the control of governments

[24:05] By the way, it says did you know that costa rica failed to receive more than one billion dollars in direct foreign energy? Investments from solar and wind companies since costa rican law Does not allow investors to come in and spend on solar plants and sell energy to customers on a large scale The law prevents it in costa rica private investors are prevented from building power generation plants Even using clean natural renewable resources. Why because the government costa rican institute of electricity Owns all the electric distribution and power producing plants Then he says the government just does not want to let go They never learned their lesson from the breakup in 2010 of the costa rican telecommunications

[24:54] Monopoly held by the government readers will remember in 2010. The government was forced to give up its monopoly and sell the spectrum At the time of the government monopoly costa rica had the worst slowest yet most expensive Telephone and it sector in latin america. So under heavy protests from the tourism and business sectors They were forced to sell off the spectrum Which significantly improved the development of that sector and the infrastructure in general also generating high levels of technical employment Meanwhile just the opposite is happening with energy production. The state holds that monopoly As always the government bureaucracy and state-owned companies Continue to protect their high-paying jobs perks and privileges

[25:41] So when will it all end perhaps when all the productive jobs in the private sector? Either disappear or relocate to more favorable adjacent countries. All right me johnny again You know, I never recommend costa rica for a plan b Though it's a very nice place to visit for a short vacation You've heard me mention that it's the absolute definition of the gringo tourist trail inundated with gringos and jaded locals too as a result it's first world expensive Well, I just thought i'd give you a few more unrelated reasons Why costa rica is just not the place to be now i've said about that now Speaking of op-ed pieces out of latin newspapers How about this one coming out of panama the title is is panama burnt out economically?

[26:30] And i'll make this short It says one of the best parameters of the strength of any economy is the amount of businesses it creates year over year in panama Believe it or not There were 47 fewer companies created in 2017 than in 2016 That's a huge economic step backwards. The piece says here that 2017 was a Every bad year for panama and if it continues that way They'll be perilous times ahead. It says in 2017. There were record slowdowns in trade tourism construction and real estate Not to mention a double digit increase in unemployment Closely linked to the number of notices of construction project cancellations Citing large increases in the cost of electricity and utilities

[27:17] Hmm sounds familiar having significant impact on the closing of companies All right. There you have it more solid proof that if you're thinking of panama as your plan b destination Looks like that bubble we've been talking about is starting to pop south of the border This is the expat files living in latin america If you want me to help you out with your own plan b just schedule a one-on-one consult Send me an email the expat files at gmail.com And if you want to learn how to move forward with your own plan b from right up there in the states Go to www.xpatplanb.com and check out my three videos. See ya nos vemos