#658 – Ecuador’s Tax and Health Care Changes for Expats

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 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 Hey, we've got some bad news for gringos and expats coming out of Ecuador. Yep, and it's breaking news just this week You've heard me talk about the various little things negative things that have been happening in Ecuador over the last couple of months and a big blow came to expats who

[00:48] Want to leave the country with any kind of money or assets at all you get taxed five percent on all that just for leaving But for the gluttonous Ecuadorian government that wasn't enough Until just this week. I did recommend Ecuador for expats with reservations and even a few years back I recommended it with no reservations at all because there were many good things that had to offer however after this week Well, it's off my list. And of course as you might have guessed. It's all about a greedy government. What else is new? Yep, they figured it out They see now one of the only ways to get a big leg up is to gouge The gringos that are piling in like crazy because after all for the last few years Ecuador has been rated as expat destination number one or two by those big rags like

[01:36] international living expats abroad Aarp magazine and so many expat blogs and websites and you longtime listeners Know that I always have said as soon as a country pops up on one of those lists It's on the radar as the next cheap ideal place for expats to live Generally, they'll say it's the next Costa Rica Which should be a red flag in itself because obviously if you know what happened to Costa Rica or have any kind of boots On the ground there, you'll know it's not a good expat plan B destination by any means man I'll tell you these expat newsletter writers and bloggers are almost always five even ten years behind the curve, man I knew Costa Rica was over 20 years ago

[02:22] I knew Panama was done over ten years ago, too And I've been warning you about Colombia for past what three four years now, right? Oh and as for Mexico that never began for me. That was over before even left the states 27 years ago, man Alright, so then what put the final stink on Ecuador? Well, let me read you this little email Just came in the box about ten minutes ago and funny enough. It was exactly on the topic I was about to discuss on his show so you'll get hit with a double hammer on this one Starts out dear Johnny. We've been listening to you for years Unfortunately, we didn't find you before we moved to Ecuador We've been here for four years now and we're considering getting our citizenship. We may still

[03:07] But I'm sure you've heard that the government has increased the ie SS That's the health care premium. It'll now be 17.4% of the minimum wage amount of a worker which is about 350 dollars a month And if you as an expat are on the plan It'll be 17.4% of the amount of foreign income you bring in each month to the country That was the amount that qualified you to get into the country as a permanent resident All right. Let me stop a second and clarify something here for you when you apply for residency in any Latin country We're talking about permanent residency not temporary And of course everyone wants permanent residency right away because if you just go for temporary which doesn't require any proof of income

[03:55] Then you have to wait a couple more years before you can switch to permanent which Extends the time of getting a passport from five to maybe seven or eight years So everybody wants permanent residency and to do that you have to prove to the Latin government you've got outside income generally from around 750 to $2,500 a month depending on the country Now when you're going for a permanent residency your lawyer or whoever is advising you will tell you don't try to just scrape by For example, if you need a thousand dollars a month to get permanent residency It's better and it'll work in your favor to be above that number makes sense And that's what immigration lawyers will tell you give yourself some breathing room. So you just don't barely scrape by So then what if you're getting a pension of let's say four or five or six thousand bucks a month

[04:40] Well, you'll put that down correct and you'll have the paperwork to prove it. Hey now, there's some real wiggle room No problem, right? Well, not so fast Well as of last week in Ecuador if you're bringing in a lot of monthly income in a way You're shooting yourself in the foot, but don't worry you'll have government health care coverage. Haha now since about 2013 foreigners like US citizens that had Residency in Ecuador could get on their national health care plan called the ie SS Now your longtime listeners will know I've said a million times You don't want to have anything to do with a country's national health care system. You've heard me say they don't have gloves disposables syringes clean water and routinely they have power outages and what happens if someone's in surgery when there's a power

[05:29] Outage well the emergency generators kick in right? Insert laugh track here. Well, you know in Latin America, especially with the government its maintenance It's not by design but by crisis. So again, you want nothing to do with a national health care hospital That's what I've been saying along, right? So then you might ask why would gringos who've got their residency in Ecuador buy into the national health care system Well, because you know what their national health care system is one of the better ones Maybe even the best since in the last few years. They've quadrupled their expenses on health care Which actually becomes the root of the problem. We're talking about right now Unintended consequences and all that So first world people have been told that Ecuador has one of the best if not the best Latin national health care system

[06:19] And lots and lots of gringo x-pads with residency signed on to that system because they were paying $70 a month for what was presented as full coverage medical care. No pre-existing conditions. No co-payments Now at the risk of tooting my own horn I gotta say I know a lot about Latin American health care and Latin American insurance and it helps a lot that I have a degree in electrical and Biomedical engineering and you know when people say gee, what's a biomedical engineer? Well, take a look in the hospital and you'll see it's all about machines electronics and computers, right? Well, who do you think designed most of that stuff? How about biomedical engineers? Alright, so I'm not just a wise guy with a liberal arts degree who never read a science book spouting out some crap. Well

[07:05] Maybe just a little crap, but I digress. Where were we? Oh, yeah Yep, it's true for a lot of Americans that extra push to get them to make that move to Ecuador What's the fact that they could pay 70 bucks a month and get that national health care package? Hmm. I still don't know why anyone would buy international health care even in the first world Well, I guess if you're young and healthy, you could brag about it all day long now Couldn't ya just like you could brag about your military if you were never a soldier in a war Hmm, you know, there are terrible downsides to even first-world national health care systems like Canada's You heard me talk about the 30-hour wait in some emergency rooms, you know If you're not suffering from a gunshot wound bleeding from an artery or having a heart attack

[07:51] Well in Latin America, it's more of the same and a lot worse to basically pathetic in most Latin countries However, you'll note that where there's a lot of gringos, you know Where the gringos are populating and settling the national health care hospitals are much better The government sets it up that way. They have to make a good impression for the gringos and tourists In fact, I've been to Cuba a couple times and you know what the only place where the national health care in Cuba That's the only kind there is happens to be near first world standards is right in Havana Where all the gringos and tourists hang and of course, we're all the middle and upper level government maggots and pus bags Hang so they and you if you get sick in Havana on vacation get first world or near first world medical care

[08:36] Meanwhile at a boon age you get aspirin penicillin some band-aids and a big dose of the Latin equivalent of Imodium unless of course you've got US dollars and the pharmacist will go behind the counter and bring out and all together different kind of stash But as far as the national health care in Ecuador some areas such as Santo Domingo and Iberia Report weights of up to two months to see specialists and huge shortages of medications Well, that's true throughout Latin American national health care hospitals And again, it's all about where you're located if you're in Cuenca or Quito or Guayaquil You'll have access to modern nearly first world medical care because that's where the gringos are and the high-level rat-breath politicians However in the rural areas you'll see there's not the same level of care at all

[09:23] And if you think that there's red tape with the US government's Medicaid and Medicare programs, man You should see it in Latin America. The government bureaucracy and red tape is Insurmountable, so imagine navigating through that system plus not knowing Spanish Oh, man now when you're at a private not public medical clinics or hospitals the doctors will always speak some English Now, of course a lot of gringos and expats in Latin America will pay for their medical expenses out of pocket That is they won't buy into the national health care program Which is almost always a good thing and they don't buy into those cheap insurance programs which provide very good coverage either Mostly because they don't know about them or don't know how to get started because all the ads documentation and literature are in Spanish

[10:09] Now about going raw that is paying out of pocket in most cases if you've done your homework and you're not going to doctors That'll gouge you for gringo prices You'll pay about a fourth to a sixth of what you'd pay for pretty much the same thing up in the first world In fact not so long ago. I went to a first world medical clinic with a gringo whose Spanish sucked He was on a private Latin American health insurance plan paying around 60 bucks a month this time it was a trip to the ophthalmologist not optometrist ophthalmologist a Specialist in his plan and I knew they would dilate his eyes and he wouldn't be able to drive home So I went with him and it didn't matter that his Spanish sucked because the doctor spoke some English Anyway, I saw a sign on the wall It says if you're with the medical plan like he was you'd have to fork over five bucks

[10:58] For every visit to the specialist and if you are paying out of pocket There was a whole 25 bucks for a visit now, what would that cost out of pocket in the states? I just looked it up average 125 to 150 bucks So yes for us gringos and expats were used to paying very high fees up in the states You can't decide to pay as you go That's a reasonable thing to do if you have a little excess money You know, maybe put a grand or two away a year in a fund just for emergencies better Yet buy into one of those oh so inexpensive Healthcare policies that are just getting online right now though since most gringos have pretty useless Spanish. You have to look out I've done some heavy investigation into this stuff and even wrote a hundred page healthcare report dealing with all aspects of healthcare here

[11:46] In Latin America, including insurance and I've noticed as these new insurance plans come online Something strange has been happening. If you go to a Latin American insurance broker, they're out here Of course and you say look, why don't you give me some quotes on five or six plans? Whatever you got in a week or two He'll come back with quotes that are two three four hundred bucks a month and you'll say wait a minute Johnny said you can do this for a hundred or under well I've seen some of these quotes and what they do is they look at you as a gringo who wants absolute maximum coverage Now they may be out to gouge you when you're on the gringo tours trail But I don't think that's happening off the trail. They just think you're a gringo You want everything deluxe and so they slap the maximum coverage on you They give one person more coverage than an entire hockey team needs. I've seen the numbers and I've duked it out with the brokers

[12:36] I've said look, why are you giving this guy a quote for a million dollars yearly coverage? That's ridiculous I'll bet you a thousand bucks. There aren't two people in Latin America Whoever went through a million bucks worth of medical coverage in one year In fact, he finally told me he never even knew a single person who used a hundred grand Worth of medical coverage in one year now remember up in the states That would be four hundred thousand to six hundred thousand dollars in medical claims for one person in one year up in the states with those numbers We'd be talking organ transplants, right? And when I say to the brokers, why are you doing it? Why are you blasting these guys out of the park and they always say well, you know gringos They want Cadillac coverage top of the line best of everything And I told him the problem is with you. You've been watching way too much US TV

[13:24] And then with one broker when I asked him if he even knew one person that ever used a hundred thousand dollars of coverage in one Year, he had to say no, I don't think so you get it So he's giving the gringo a quote on ten times as much So even a top out at a hundred grand a year, that's probably way too much That's a whole other story and why if you don't want to get sucked into that black hole You have to talk to somebody like me or my ex pet concierge ladies, and I'll work all that out for you How by dealing with those brokers and setting up the basic parameters? Because you know when a gringo hears that there's a full coverage plan for three or four hundred bucks a month, man He's almost always gonna jump right on that often never knowing he could get perfectly adequate coverage for 50 to a hundred bucks a month

[14:14] In fact just recently a new ex-pet gringo who went to an insurance broker down here off the gringo tourist trail The guy had come up with four or five plans anywhere from three to five hundred bucks a month and by the time I got Done rearranging some of those numbers. It was down to around a hundred and twenty five bucks a month Of course, the brokers don't like that because it cuts down on a commission Well, you know clueless gringos with crappy Spanish over by insurance down here all the time I know what you're paying for insurance up in the States And down here even when the brokers stick it to you, it can seem too good to be true For example full coverage no pre-existing conditions three to five hundred bucks a month minimum 8020 copay or even better with something like a three to five Hundred dollar yearly deductible seems like an old school policy from the 1970s or 80s doesn't it?

[15:06] And I'll tell you even though it's a family plan that sounds great You'd be paying way too much, but let's get back to this Ecuador problem So it's true Thousands and thousands of first world Americans came down and still are people on social security Bringing in only about a thousand to fifteen hundred a month They understand that living on a social security checkup in the States means you just have to find new and better ways to prepare cat food So they're looking at places like Ecuador as their plan B And they've heard they can get on the national health care for 70 bucks a month By the way, I believe residents have been able to get on the national health since 2013 Well that government promise lasted about four years and now that the government's built new buildings hired more doctors

[15:54] But more equipment and yes Dramatically increase the hospital bureaucracy of useless paper pushers Well surprise surprise the system is in debt and bleeding cash big time But back to the email it says Johnny with this new increase That means that most expats who came down on pensions or social security who enroll into the IES as health care system Will have an increase of three hundred to four hundred percent over what they're currently paying Oh, and now believe this Ecuador requires that insurance be maintained by visitors and Residency holders so she writes you used to be able to self-insure That would be pay as you go, of course, but as of now, it's either private insurance or that government plan

[16:46] So Johnny in the end I anticipate there will be a huge exodus of gringos who have only social security or a small pension Holding them here in Ecuador and surely there will be a large exodus by people who have a lot of money as for us We're only living on social security. So it could be quite tight. Sure. We could absorb that 17.4% charge. I'm not sure where you want to though This we feel is just the beginning and soon Ecuador will start taxing our US social security, too Then what well Johnny just wanted you to know what's happening in Ecuador now Wish we had heard you talk about it first But more importantly we will be making a trip to your part of the world Central America Although we can't afford attending your seminar right now. We're not afraid of traveling on chicken buses

[17:37] Then she writes lol Anyway, take care Johnny People will need to take a closer look at Ecuador social media is already saying that people are preparing to leave Oh, and by the way, if we did leave to go to another Latin country and get our residency there Would we need to get a police report from the US or from Ecuador? Thanks again, Johnny Mrs. B and mr. S. No, it's not BS. I wish it was I'm sure they do too Well, thanks for that sobering report guys And as far as that police report you'll have to get it from the country you've spent most time in over the last five years Now that's what they say, but it's not a hard and fast rule and nobody really checks

[18:22] Not too closely anyway And by the way if you ever have trouble getting a police report From a foreign country that you've been living in for a while like Ecuador Just ask your Latin lawyer or go to a local lawyer and tell them you need a police report And they'll usually be able to get it for you and record time Whereas it might take you some days and a couple of hours in line But when another thing about police reports here in Latin America, you'll generally get two unlike the states You'll get one for your local city or department or state and you'll get a second one That's considered a national report. Now. That's a little piece of information almost no first-world gringos know about so by all means get the local police report from the district or Department or state you live in and get the national report to that way you'll be covered for wherever you move next

[19:11] But remember when you apply for residency in another Latin country Those documents have to be no less than six months old So you have to apply for residency within that six month time frame or you'll have to go back To the country you're living in and get another set of reports. Not fun. Not easy. Not cheap And speaking of my next seminar, which starts July 8th 2017 You've got till June 1st to get in on the early bird discount That's a little over two weeks away from when this broadcast goes out on the 12th of May So sign up before June 1st and save 500 bucks Just go to www.thenewexpat.com and click on Johnny's Seminar link for all the sign-up details and information and also you still got time to kill two birds with one stone

[19:58] That is come to the seminar and get your Guatemalan permanent or temporary residency started Remember, it's one of the best least expensive and most flexible residencies available And as you've seen with Ecuador and in the past couple shows I've been talking about Colombia and Panama to Changes come fast here in Latin America You just got to get this residency thing going while the goings good And if you're just thinking about your plan B and don't know quite how to get it started Just go to www.expatplanb.com and sign up for my expat essentials course It'll help you get all your ducks lined up for your own plan B And of course I'm always available to help you out on a phone or Skype call for a one-on-one Consultation to help you work out the details and the particulars of your own plan B

[20:45] And you know, I charge for that However, I've done well over a couple hundred calls so far and I want people to be happy So I offer a money-back guarantee and guess what? There's never been a single person who's ever taken me up on that offer. So why not be the first just kidding So if you're thinking about a one-on-one call or Skype with me Just go to www.thenewexpat.com and download my expat Consultation form. It's got a lot of questions and suggestions that will definitely help you organize your thoughts Before we get on the call. So go there download that form and questionnaire to see what I'm talking about Hey, it's free. It'll get you thinking and give you some good ideas. Oh

[21:30] And mrs. B and mr. S say I'm behind in my youtubes Well, I am but not that much getting caught up got the famous Jen Galt Working her way through them and hopefully we'll get caught up within a couple of weeks. At least that's what we're thinking Nothing. That's really worthwhile is easy. You know, anyway Just to reinforce how really pissed off gringles living in Ecuador are about this huge new healthcare premium increase You need to hear some excerpts from this article that just came across my desk entitled get this expat meeting turns rowdy This from May 5th out of Cuenca, Ecuador It says expat meeting turns rowdy as Social Security officials announced fee increase to quote equalize

[22:16] That would be subsidized the costs for the average Ecuadorian minimum wage worker who pays a tiny amount into the system It starts and I have to lab officials of Ecuador's Social Security The I ESS system were forced to cut short a Friday meeting with foreign residents in Cuenca, Ecuador When some members of the audience became disruptive the meeting held at a government office was called to explain The national health care fee increase and other changes and I'm paraphrasing here It says most Ecuador foreign residents who are I ESS members joined because of the system's National health care benefits and now the monthly fees will be triple or quadruple or even more The outbursts were completely unacceptable. That's how an I ESS

[23:06] Representative described the gringos shouting and shoving that followed the announcement of the fee increase Most of the audience were well behaved but soon enough there were some that went out of control Then he said we had more issues to discuss with the group But we were not able to because of the disruptions The I ESS announced the fee changes earlier in the week in keto saying they were necessary to correct quote Inequalities that occurred during the 2013 expansion of the system's membership program according to I ESS That's the Social Security and health care. The revisions affect thousands of foreign residents from about 20 countries and according to an unnamed source Thousands of other mostly Ecuadorian citizens had not been paying into the system over their entire working careers

[23:57] But were receiving benefits beginning in July 2017 all members will be required to pay an amount equal to 17.6% of their income to participate in the health care system Now here's the part that Splains the whole problem in the case of expats whose residency visa is based on a recurring monthly income such as a pension annuity rental income Trust annuity or social security income. They will be required to pay 17.6% of the income certified on their residency application as it was used as a Basis for their residency. Then it says other permanent residents such as those with

[24:44] Investors visas will need to provide proof of that monthly income and will be assessed 17.6% of that that says for example under the new calculation of foreign resident with a monthly income of $1,500 would pay $264 a month as opposed to the $70 a month he or she used to pay On the other hand, let's say a person recorded a monthly trust income of $6,000 and that amount appeared on his residency application He'd be paying slightly over a thousand dollars a month for the privilege of IESS health care benefits Then it says rates for dependence of permanent residents covered by IESS will also be increased

[25:29] Currently it says most members pay a percentage based on Ecuador's national minimum wage of $375 a month and here's the socialist kicker an IESS spokesperson in keto said The adjustment is simply intended to make payments fair for all members and fully fund the system So while the average foreigner with permanent residency would pay well over $200 a month for the health care benefits the average Ecuadorian with a $375 a month wage would pay $65 a month. That sounds fair Then it says the disruption of the meeting by rowdy expats caught many at the meeting by surprise Cuenca expat Martin Simmons said he was embarrassed saying I had heard about the ugly Americans in Cuenca

[26:18] But I'd never seen them this ugly before not until this morning The meeting was a hot topic Friday on several expat forums with many comments Condemning the actions of the disruptive expats one commenter Reported that gringos went batshit crazy and started shouting and complaining and demanding answers to questions and information That had yet to be presented. Well, you know what if my insurance premiums happen to go up 400% at one whack I'd go bat poop crazy, too. How about you? Oh, by the way, if you're an expat working a legitimate job on the books in Ecuador Let's say administrator at Walmart call center worker, whatever Good luck with that because you're already permanently in the IES s system and the extra amount will be automatically deducted from your check

[27:05] In other words, if you work for a company in Ecuador and receive a payroll check, you'll see that 17 plus percent Deducted every paycheck talk about copying everything that's bad about the US Funny thing is that just doesn't start happening until the gringo start piling in because they know gringos obey laws and pay taxes Whereas with latin's tax evasion and giving the finger to government are two long-standing and sacred national pastimes 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

[27:51] www.xpatplanb.com and check out my three videos. See ya nos vemos