#501 – The Expat Files: Navigating Latin America’s Financial and Cultural Landscape

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 wander 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 You know the other day I ran into a longtime expat who heard I'd had a radio show for some time and he said Johnny So you have a radio show. What's it about now? The thing is expats down here, especially long-term expats Don't listen to my show. They don't have to they made all the mistakes and now they're sitting pretty

[00:49] It's those short-term expats and green gringos that listen to my show a lot They want the inside dope on how to do things before they make those mistakes Otherwise, you just end up spinning your wheels for a couple of years. It's very predictable In fact, the majority of clueless gringos spin their wheels for a very long time often going in reverse Including when I first got down here yours truly so this old long-term expat said Johnny What's your show about and I thought for a second and I said it's about getting the message to first world people the Right kind of first world people that the American dream has taken a u-turn and it's now south of the border My mission to wake up the first world one zombie at a time that said let's see how many Zombies we can wake up with this email Larry from Oklahoma says Johnny

[01:37] I speak a little bit of Spanish and sometimes I do as you say try to improve my Spanish and at the same time figure out how things work in Latin America by searching the internet to locate some of the big Latin newspaper sites because they Like you say offer their daily newspapers for free on the internet It's an amazing way to really quickly learn bits of Spanish and learn about the culture in the country or the countries You might be settling into as an expat in the future so far so good But I can't help but notice almost all Latin countries have government bonds that they offer to the public Of course you have to have tens of thousands of dollars to invest if you don't have mega bucks the big banks in Latin countries offer CDs and much lesser amounts from a thousand bucks on up to a million or so and

[02:26] I can't help but notice that most of them have dollar Denominated CDs too as well as in the local funny money now those dollar Denominated CDs are always paying about four to six percent more than you can get for a dollar denominated CD in a local state-side bank For example, I could go to my bank right now and buy a ten thousand dollar CD and get about one percent annually Whereas if I'm in Panama or Honduras or Costa Rica, Colombia Whatever and go to one of their big banks I can get about three four even five percent on a ten thousand US dollar CD Now those kinds of returns seem amazing when I mention them to people up in my neighborhood in the states and sure everyone would love To get those kind of rates. However, most people don't have that kind of money laying around to invest in anything these days

[03:13] Now the few friends I have that could invest that kind of money Just chuckle at me when I mention the idea of putting money into a foreign bank To a person they think only a screwball would have their money in a foreign bank, especially a latin one They always say they want to be able to walk into their bank and visit their money They mean of course visit the sleight of hand printouts with the ones and zeros on them Yes, that's the mentality at least with my supposedly intelligent friends Not realizing of course or not wanting to know that their own banking system is on the verge of another huge collapse Yes, johnny. I too am surrounded by a large group of clueless gringos. Can't get away from them You might call them clueless when they land in latin america But they're infinitely more clueless up here as for me after listening to quite a number of your programs

[04:03] I would have no problem at all putting ten thousand dollars us into a cd in a latin bank Under certain provisos, of course It would as you say have to be one of the top three banks in a country It has to have been around at least 30 to 50 years And has a track record of conservative growth that you can look up And as you say if you don't speak spanish, then ask your latin lawyer. He'll know So putting your money into a latin bank cd at four five or six percent in u.s Dollars that might seem fantastic, but you should see the rates on their local funny money cds Yep, i've been checking those big daily latin newspapers. All right, it's easy to find what interest rates the banks are offering They're always advertising and printing out tables of deposits and the length of time and the interest rates

[04:52] Some of these banks in the latin countries I just mentioned are offering cd rates for investing the equivalent of ten thousand dollars or more in the neighborhood of eight nine 10 11 even 12 percent annual interest in the local funny money, of course Now I know a year or so ago you spoke about bank cds and their rates and you have advised against cds in the local funny money Due to currency instabilities and such All right. I get it johnny. I'm no gambler But why not give it a shot put some of your money into a high dividend funny money cd For just a month three months or six months and see how it plays out as for me I've got my expat eyes set on someplace in columbia I'm planning on going down there trying to make a go of it eventually So i'm thinking going down to columbia checking out residency and then depositing maybe ten thousand us

[05:43] In a columbian funny money peso six month cd Then i'd go back to the states to get my things in order And time that rollover six months later for when I come back down permanently because I will Need to use the columbian peso. No doubt about it. They don't take dollars in most places in columbia I know that so i'd be gaining in two ways one by the extraordinary interest rate Which is about twice what the us dollar gets down there now and secondly I'll be cashing in that cd in the local funny money And that's what i'll have to use to live and pay my expenses as opposed to if I had a us dollar cd At let's say four or five percent even though that sounds great compared to first world cd rates as soon as I cashed it out I'd have to switch it back over to pesos and lose about two to two and a half percent immediately on the buy sell spread

[06:34] Or I could keep rolling it over in a us dollar cd But the idea is for me to use that money to live on at least at first So even if I had a us dollar cd down there that was paying four percent a year for a half year I'd get two percent and as soon as I cashed it out and bought pesos. I'd lose that two percent I just gained in the buy sell spread So at least if you put your us dollars in a funny money cd for a very short term If things are fairly stable, you'll almost always do better than break even so my question is johnny Please tell me if i'm missing something here. Thanks. Mr. Lll long time listener larry Well larry funny. You should ask that question because I did exactly that when I first came down here 20 something years ago

[07:21] I bought myself a funny money cd in a latin bank too because the rates were extraordinary Now, of course, I did a little research before I invested a lot of good that did and here's why I asked some of the latin people I knew to give me a recent history on the currency and how it's fared over the last couple years and What the prognosis was for their funny money currency for the near future Unfortunately some time later. I figured out these were exactly the wrong people to ask because as i've said before but I didn't know it Then latin's absolutely love the us dollar and believe it's the gold standard However, the irony is that most latin families who receive their remissas From their relatives up in the states as soon as I get that wire transfer or money order, whatever it is in dollars

[08:06] Of course, so they switch it. The fact is most latins even very wealthy latins Don't put their money into us dollar cds. They put them into the local funny money cds Why again because they can't spend the dollars in their country They have to switch over to the local funny money and they always lose heavily on the buy sell spread Which can be anywhere from one to five percent? So anyway, I took out a cd for a year in the local funny money and after that year After listening to all the local idiot experts I got my eight or nine percent whatever it was and I actually did not lose money However during that time that country's inflation rate was around six and a half percent So in the end I did come out ahead But it was all about the luck of the draw had nothing to do with sound thinking or logical analysis

[08:55] Would I ever do that again? Nope In fact, if there's one long financial lesson i've learned over the past 25 years Is to never ever have too much of the local funny money currency in any one account or As a cd or an investment vehicle and I don't recommend you have big money in a us dollar account either But you have to have something some kind of pad at least a us dollar account that will cover your expenses for six months to a year Which in the states might be what 30 or 40 grand for a year down here? If you're single 10 or 15 grand would set you up nicely now I'm no financial planner or investment counselor, but I can tell you what so many astute expats do They don't have a lot of us dollars in the bank But they do have us funny money accounts

[09:40] That is the us dollar at a local latin bank and of course a local funny money account enough to cover Maybe two months of expenses and the rest they have intangibles gold or silver land housing, whatever So whatever they have in their us dollar account is kind of for emergencies Meaning a cushion or pad to cover six months to a year of their expenses Which is very wise and prudent to have a us bank account on foreign soil. Why? Well, it was just one week ago when I heard from a short-term expat He's been down here about two and a half years now He was freaking out because both of his us bank accounts were closed out without notice That is his bank accounts up in the states They said he was making too many foreign wire transfers The guy owns a small it company

[10:26] He's got to make foreign wire transfers and they were relatively small wire transfers a thousand dollars here and there a couple hundred But yet they closed his bank accounts by the way, most long-term expats I know Never dip into that dollar account because they're getting a pension from up at the states or social security and they live well enough on that Like I said, a single person can live like a king down here on a simple social security check So my advice based on the experience of so many long-term expats is not to put any substantial funds into any funny money investments Including local stock markets or cds government bonds, etc Now a long-term expat friend of mine tells the story of when he used to live up in mexico And to hear this story you'll understand why latinists believe the us dollar is solid gold

[11:16] In fact, almost all of them believe fort nox is loaded with gold and it backs up the entire us monetary system By the way the other day I was driving along and I saw a latin armored car service whose name was get this Fort nox armored car service the words fort nox in english, of course and the rest in spanish talk about the gringo advantage, huh? What a bunch of idiots But they're not the only ones I understand that in nine out of ten on the street interviews We're talking any big city up in the states now. The average american believes exactly the same thing Oh boy. Anyway, my expat friend lee who used to live in mexico. Now. He's south of that border said that in 1975 he bought a very nice beachfront condo in the yukatan when the peso was

[12:04] 12 to one dollar at which time he put about 50 000 us dollar into a peso cd And he said to me he should have known better because it was paying 18 annually. So a year later in 1976 the peso had devaluated 25 against the dollar. So in effect he lost seven percent of his money. That's 25 minus 18 7. No, he wasn't stupid enough to roll it over Although the people in the bank tried to assure him that the peso was stabilizing instead He took his licking and changed it back into dollars and in the buy sell ratio and switching it He lost another three and a half percent So in the end he lost just a little over ten percent of his money by being in the peso

[12:52] And then he said in the following years the peso went into freefall. In fact, he said in 1993 they created an entirely new peso from then on one of the new pesos was equal to a thousand of the old ones That means the government dropped three zeros off of the old peso And today he says you can look up the peso to dollar rate and it's around 16.6 something like that But if you like my expat friend lee lived in mexico before 1993, you'd know it's not 16.6 pesos to the dollar in reality, it's 16 600 pesos to the dollar now that should scare the crap out of you And could be exactly what happens up in these days in a few years

[13:39] So don't want to be there either now, of course, that's an extreme example, but let's talk about a more normal case What happens in most other latin countries and let's exclude venezuela and argentina now because their monetary systems are out of control With their inflation rates at 30 to 60 percent a year. You don't want to be living there either That said I like to give the more moderate example of guadamala's monetary system Never had hyperinflation never dropped zeros off their currency In other words, their currency is a decent example of latin american stability When you talk to guadamalans over 50 years old, they all remember a time When the quetzal that's the local funny money was one to one with the dollar and all the people over 70 years old Remember when the guadamala quetzal was one to one with not only the us dollar but the mexican peso too

[14:29] All three currencies at parity nearly a half a century ago Which believe it or not is why today when you talk to an old-time guadamalan guy He still calls his local money to quetzal a peso For example, if you're at a convenience store or a food stand and there's an old timer waiting on you a guy over 70 years old He'll often say that'll be two pesos those pesos when he really means two quetzales Even though right now the peso is worth like about a half of a quetzal now over the last 30 or 40 years as the mexican peso went from 16 000 to 16 right now and the government pulled three zeros off the bills so that it didn't look like Zimbabwe money meanwhile over that period of time the quetzal the guadamalan funny money was never officially devalued sure

[15:17] Inflation wiped it out against the dollar that is The locals are well aware of the fact that since it's one to one parity with the dollar some 50 years ago It's lost 80 percent of its value against the dollar So these are all just stark lessons to anyone who considers Investments in the local funny money currencies, but latin locals even the smartest of them Even ones with degrees in economics and finance total loser careers If you ask me what they've never investigated or bothered to learn or no one's told him Is that the us dollar in the last 40 or 50 years that same period of time we're talking about now Has lost 80 percent of its value, too That's why in the 60s, you could still buy a brand new no frills car a general motors product for

[16:07] 2500 bucks or less whereas today a no frills car like that'll cost you 15 grand About seven or eight times the 60s price enough said about that now for a sad story Your long-time listeners know I like to go to those big wild chaotic crazy food markets I mean where else could you get four or five even six pineapples for a buck? Oh the wonders of latin america Of course if you go to walmart or cosco or any of the modern supermarket chains down here You'll pay three four five times that and the funny thing is upscale latins and latins moving on up Never want to be seen at those big markets because well for them It's too low class and scruffy and reminds them of their roots now That's not to say I haven't been parked right next to a gigantic

[16:53] Bulletproof suv in a parking lot near the big market With this snooty boss lady in the car sending her cleaning lady out to do some shopping to save some dough Because you know, it would be unthinkable for the boss lady to actually get out of the car and walk through that chaotic mess By the way, the boss lady of the house is called hefa. That's h e f a like heifer And of course the male boss is the hefei meaning boss or boss man Which is why when you're out buying things in those big markets or practically anywhere usually the workers will say see hefei Just like up in the states workers will address the guy they're working for as boss same thing But I digress as usual. Anyway, I was in one of those wild chaotic markets the other day and there was a lady selling chicken, of course, they were all plucked de-feathered and gutted

[17:41] And the half dozen or so live ones and crates under the table didn't seem to know they were next on the menu Anyway, she had this big wooden table with three separate large piles of chicken and chicken parts for sale Now the chicken pieces in the pile on the left look like they've been bleached in chlorox They had a look of a dead body that had washed up on the shore in a csi episode totally disgusting But only compared to the next pile of chickens in the center Which were larger much healthier looking for dead chickens That is the meat and the skin and the bones and the cartilage a wide variety of colors Unlike the pale cadaverous looking chickens in the pile to the left Then there was another pile of chickens to the right and they were even larger like small turkeys

[18:28] Now, let me set this up a little bit for you. It's a very crowd chaotic plaza There's a kind of makeshift roof over the place and when it rains Well, it seeps through everywhere and there's a small line of about five or ten people waiting to buy chicken Almost all of them lined up in front of the disgusting white cadaverous looking stuff the buyers mostly short brown indigenous ladies And the working poor now. Remember there's maybe 500 or more people wandering around this area And i'm the only gringo and to tell you the truth. I like it that way Now I was standing in front of the center pile of chickens and I asked the lady in charge She's got a big meat cleaver and some big arms, too. I said What's the difference between these three types of chickens and more to the point? Why are those ugly white cadaverous looking things so popular? Why are they selling like hotcakes and the others?

[19:19] Well, they're getting no action and she said And I said what and again she said And then she explained those were special chickens imported from the u.s Tyson chickens and they were selling for the amazingly low price of 75 cents a pound Now I hear you pay up in the states about a buck to a buck 50 upon for your chlorinated injected tyson chickens Which is why I don't get it or maybe they're shipping the extremely contaminated mutant chickens down here to latin america Could be just imagine one of those gigantic chicken farm warehouses that tyson has up in the states Where chickens are hatched live and die and never see the light of day not to mention The only time they get to actually walk out of their stalls is when they're making the death march

[20:07] Then I guess that's when they soak them in chemicals that make them look a lot like overripe waterlogged human cadavers Now I can imagine all the rejects are shipped down to latin america And still after all that shipping a couple of thousand miles in some cases Somehow the locals down here can still make a profit at 75 cents a pound and that's why they're so popular down here In fact at the local walmarts and coscos they sell those very same tyson chickens Only they're frozen and nicely vacuum packed Whereas those sad and pitiful tyson poeos I got to see were in big unpackaged heaps And by the way the chicken in the middle pile Was drive way chicken as I call them or what they call down here Patio chicken chicken from the patio which are not injected with chemicals and killed three months ago or so

[20:55] Then soaked in some other crappy brine and then flash frozen and shipped a thousand miles Nope, those drive way chickens in front of you are killed as needed with live squawking replacements rustling around under the table to prove it And what do they cost get this a dollar forty a pound just what the tyson crap costs up in the states Which is twice as much as the tyson chicken goes for right on the next slab. I don't get it How can you have drive way chickens that you rarely have to feed? They just peck away in the yard at insects and stuff. You don't have to ship them anywhere You just haul them to the local market a mile or two away How can tyson undercut them by half? That creates a big problem. You can see it's having a devastating effect on the local latin public

[21:44] They're not killing and eating the driveway chickens anymore Plus, of course a person or a family's got their own little plot of land and can have a few chickens around The millions upon millions of latin city dwellers can't do that They live in tight quarters now because most of latin america is so poor. It's all about the money imported Chemically injected chickens like tyson have become the chicken of choice for city dwelling populations and by the way restaurants etc And all those uppity gringo wannabes who go to walmart and costco prefer tyson cadaver chickens, too Because they're 100 imported gringo chickens and everything gringo is good The fact is you can't even get the homegrown equivalent of a driveway chicken in costco or walmart

[22:30] So you've got hormone injected cadaverous chickens coming down in mass quantities from the first world Being snapped up at half the price of the local stuff So I can see why in the time i've been down here 25 years now The latin population in general has grown much fatter and have had many more health problems than they did years ago Back when their diets didn't consist of cheap junk food daily and now on top of that crap There's tyson and years ago There was no such thing as an addiction to soft drinks because latin's just couldn't afford him But now every young latin kid with some change runs out and gives themselves some cheetos and coca-cola clones In fact 20 or 25 years ago the average kid down here had a coca-cola or an orange soft drink once or twice a week

[23:17] And mcdonald's wendy's and pizza hut only existed for birthdays and special occasions And now the city kids and adolescents are addicted and though the story is a sad one. There is a positive side Driveway chickens are still available and probably always will be but what was in that third pile of chickens? Well, it turns out those are the most desirable chickens of all roosters or Gaillos in spanish and local latins have a million different ways of preparing those things And most famously they make a rooster or gaio soup or caldo in spanish. That's c-a-l-d-o Now personally, I don't like rooster meat or gaio soup. Whatever. It's way too tough Anyway, a pound of driveway rooster will cost you about a buck 60 a pound

[24:04] Oh, and let me warn you about one thing if you get invited to a regular latin person's house And they tell you they've got a special treat Caldo de patas on the menu. That's caldo de patas beware You're gonna be served chicken feet soup and to me it's one of the most disgusting looking things i've ever seen Imagine a dozen or so stinky chicken feet swarming around your spoon So not only are you suddenly completely without an appetite You're stuck listening to a whole table full of latins crunching away on that stuff Nope, it ain't pretty yet with some families even wealthy families. It's a specialty of the house, especially on sunday I know I know it's a cultural thing You like what you were brought up on reminds me some years ago when I live in england people said how could you eat that?

[24:53] Disgusting peanut butter. Most Brits can't stomach it Now if you can find a jar of peanut butter in england and eat it in front of a Brit They'll usually make a disgusting face in front of you It's the same kind of face you'll try to suppress when you're offered a heaping helping of that chicken feet soup What do you do? When faced with such a dilemma Well when no one's looking I always kind of fish the feet out and definitely Toss them one at a time under the table where there's always a willing dog or two Or you can join the happy crowd and crunch away And now a few special announcements now, remember I mentioned last week that i'm no longer with the expat wisdom.com website Instead i'm affiliated with a much more active website called the new expat.com

[25:39] It's run by a good friend of mine. Mr. John Galt who came down to one of my first expat seminars and now he's down here permanently So go to www.thenewexpat.com For some really excellent boots on the ground information from an expat who tells you exactly what it's like to be a new expat Stumbling with way through paradise and of course you'll see my stuff on there, too So check it out now the new expat.com is a work in progress But do note our webmaster. John Galt Has now put together a slideshow to go with each of my expat file shows So it's really worth it just to go to that site and see the slides that go along with each show I'll say it again. Mr. Galt very well done

[26:25] Oh and note when you go to the new expat.com website up near the top of the main page You'll see there's a link for johnny mueller's 2016 latin american insider seminar So do click on that link if you want more information on my upcoming january seminar and remember if you sign up by november 1st That's almost a month away. You get a 500 per person discount and of course all you people who signed up for the gold membership program some time ago You get an additional hundred dollar discount if you attend And by the way, those of you who plan on coming early or staying on after the seminar like so many do My seminar coordinator donnie and my translator ladies will set you up with a fantastic Itinerary that your average touring gringo would have no idea even existed

[27:12] Even better if you come early or stay on a few days or even weeks past the seminar Mr. John gault himself has promised to lead the way as a guide You won't find a better more enlightened and more entertaining guide. So anyway along with our seminar secret weapons our translator ladies We have mr. John gault himself and of course yours truly South of the border You've been listening to the expat files living in latin america coming to you twice a week from somewhere south of the border Email me the expat files at gmail.com And if you want me to help you sort out your own latin american plans schedule a one-on-one consult with me Just send an email and let me know at the expat files at gmail.com. No, it's famous