Episode Summary
In this episode of The Expat Files, Johnny Mueller dives into the challenges expats face with banking in Latin America. He highlights the prevalence of banks in major cities, noting that there are often 20 or more to choose from. Johnny emphasizes that banks are a necessary evil for expats who receive disability checks, social security checks, or pension payments. He also discusses the high cost of living in some Latin American countries, particularly for expats accustomed to first-world standards, and mentions specific countries like Belize and Uruguay as examples of places where living expenses are high.
Johnny advises expats to consider using US banks with favorable ATM withdrawal policies, such as Schwab, to avoid high fees. He highlights the importance of using the correct ATM machines and being aware of fees, which can be as high as 2% per withdrawal. He also touches on the risks of credit card use, including service charges, and recommends using cash for discounts at places like pharmacies.
In another segment, Johnny discusses the differences in retail and banking practices in Latin America compared to the first world. He highlights that while first-world franchises and stores like McDonald's and Sears are common, local businesses and mom-and-pop shops often offer cash discounts if asked. He then shifts focus to the high interest rates available in Latin American banks, using examples from Honduras and other countries to illustrate the potential returns. Johnny also warns expats about the risks of relying on advice from other expats, especially those who frequent expat bars, as they may lack the necessary local knowledge or experience to provide reliable recommendations.
In a separate segment, Johnny discusses the challenges of finding a reliable lawyer in Latin America, particularly for expats. He warns against selecting lawyers based on advertisements or recommendations from expat bars, as these often target gringo clients and charge high fees. He suggests that the best way to find a trustworthy lawyer is to attend his upcoming Latin American seminar, where he will connect expats with recommended professionals who speak English and offer more affordable services. He also touches on the experience of being off the gringo tourist trail, where expats can blend in with locals and avoid the typical tourist interactions, which can lead to a sense of isolation but also a deeper connection with the local culture.
Finally, Johnny discusses the class system in Latin America and its impact on how gringos are treated. He explains that gringos, especially those from the U.S., are often treated with more respect and are more likely to be approached and engaged in conversation. However, if someone is a short, brown person of indigenous origin, they are often ignored or not acknowledged. He then shifts the topic to bank CD rates in Latin America, warning that while some currencies have shown short-term gains against the U.S. dollar, they have generally lost value over the long term due to factors like corruption, debt, and mismanagement. He advises against investing in local currencies and suggests that CDs in U.S. dollars are a safer option, though they offer lower interest rates.
Topics
Banking in Latin America, Cost of living for expats, ATM fees and withdrawal strategies, Choosing between local and foreign banks, ATM safety, Cash usage, Credit card surcharges, Retail practices in Latin America, Banking and interest rates in Latin America, Expats and financial advice, Risks of relying on expat networks for recommendations, Finding a reliable lawyer in Latin America
Chapters
00:00:00 Opening 00:00:33 The Necessity of Banks for Expats in Latin America 00:01:51 Why Belize is Not Recommended for Permanent Expat Living 00:02:42 The Cost of Living in Latin America for First-World Expats 00:06:01 Challenges with Bank Transactions 00:06:40 Importance of English-Speaking Bank Staff 00:07:26 Need for a Lawyer's Advice on Bank Selection 00:08:33 Benefits of Using Bank-Connected ATMs 00:09:27 Cash as a Safer Alternative to Credit Cards 00:10:50 Credit Card Service Charges in Latin America 00:11:44 Retail Practices in Latin America 00:12:43 High Interest Rates in Latin American Banks 00:15:21 Importance of Trusted Lawyers for Expats 00:18:05 The Problem with Gringo-Focused Lawyers 00:19:38 The Best Way to Find a Good Lawyer 00:20:22 The Benefits of Being Off the Gringo Tourist Trail 00:23:51 Gringo Treatment in Latin America 00:24:22 Bank CD Rates and Currency Value
Transcript
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 as You might expect people are always asking me about banks down here in Latin America Let's face it. They're everywhere and I'd say that in every big city You've got at least 20 or more banks to choose from so then which banks should you go with?
[00:46] I mean, even if you don't believe in banks, and I really don't myself first world third world or otherwise Unfortunately, they are a necessary evil, especially if you get a disability check or a social security check Or if you're lucky enough to be a trust baby or have a pension check Then you'll need a bank to have them direct deposit it so that you can get at all the funds Immediately when you're down here in Latin America as for Latin banks You're gonna have to end up using one or more eventually if you're gonna transfer money down or just to have an account for your Normal expenditures and of course if you have a business, so then some might say why can't I just use my first world bank? Well, you know, you can do that provided Of course the country you're living in the Latin country is using the US dollar as their currency like in Panama
[01:36] El Salvador Ecuador and Belize. Oh, and by the way, even though Belize has its own currency Everyone there takes the US dollar at two to one against the Belize dollar However, you know, if you live like a first world person in Belize, it'll cost you first world money Which is one of the many reasons I don't recommend Belize as a permanent expat destination however, it's a great place to go for vacation for a couple weeks and why is that because Unfortunately, Belize is right up there with Costa Rica Panama Chile Argentina and Brazil Not to mention most of Mexico and the big cities in Colombia, too There unfortunately, the cost of living has been creeping up quite dramatically Mostly because of first world tourism and the contamination of the gringo dollar
[02:22] What else yet another great reason to stay off the gringo and first world tourist trail Sadly in some of these Latin countries like Costa Rica Belize Chile and even Uruguay The cost of living for you to live as you're accustomed to as a first world person is even higher than living in certain Cities up in the States and in Europe So bottom line if you want to live work play and or retire in Latin America And you actually want to pay first world prices or more for that privilege Well, that's easy. Just look to places that are recommended by International living seems they certainly do know how to ruin a good thing Oh, and by the way for those of you who continue to email me about Belize What makes Belize even more expensive is that they've got no manufacturing there
[03:10] They have to import practically everything except food and basic construction materials So there you've got a double whammy, which is part of the reason why Uruguay is so expensive now They've got a double even triple whammy. They've got no manufacturing About a good third of the people in the country working for government Which is a huge tax burden and they've got a bum's rush of Argentine money coming in Flowing in from people with money who are trying to escape that self-destructive brain-dead Argentine government Which means you can cross Uruguay off your permanent expat list unless you like uncertainty and love Living in the center of a socialist society. It's not creeping socialism anymore. It's galloping But where were we? Oh, yeah banks. Well, here's what many expats do for a while. Anyway
[04:00] Until they get settled and have a better plan They use their US bank and have a debit or credit card to pull money out of ATM machines here And yes, a lot of gringos and expats moved down without getting a local Latin bank account for a long long time sometimes years or never Yes down here Latin America ATMs are everywhere and you can get out dollars and the local funny money and generally throughout Latin America You can pull out two to three hundred bucks a day And if you play the game right and use the proper ATM machines and you can tell by the stickers on them, etc You can generally limit your charge to about two dollars a withdrawal In fact many ATMs down here will ask you that question when you're trying to pull money out
[04:45] A window will pop up on the display and it'll say something like your transaction will cost you two bucks Do you agree or not and you answer by hitting a button and yes nearly every ATM machine has a button for English And why wouldn't they since all ATM machines are made in the first world? So yes There is a charge for taking money out of the ATM Unless of course you have a credit or debit card from one of those US companies that waves ATM charges And I believe Schwab is one of those companies But in most cases you will end up paying two percent every time you withdraw money That's why I always recommend people pull out the maximum two or three hundred bucks Whatever it is that way for example if you pull out two hundred bucks, and it costs you two bucks to do that
[05:30] It's a one percent fee That's all however if you do it the clueless gringo way And I see a lot of people do this especially backpackers They'll pull out rather small amounts like 20 or 50 bucks and of course still get charged the two bucks So think about it. You pull out 20 bucks that works out to a 10% Transaction charge duh so anyway like I said that can work for a while But what happens if you have some kind of problem at the ATM and your home banks up in the States or Europe? I mean I've had that happen before where you try to get some money out And it doesn't come on the slot or something doesn't jive on your withdrawal statement Any number of things can go wrong when you're doing bank transactions You know that that said if you haven't got a bank down here where you're living
[06:18] And there's no one to talk to face to face Who do you complain to your only recourse is to get on the internet and try to fight it out with your bank up in The States hopefully you can get a chat going good luck with that So you can see unless you're down for a short term Evocation or a month or two without having your own bank in Latin America even a slight screw-up could turn into a nightmare You really do need someone to talk to face to face and in English That's one of the reasons you should always select one of the bigger banks because you see at almost every branch There'll be someone there who speaks English and if none of the cashiers speaks passable English Just go to customer service or the international department. They always have someone there who does So with all those choices sometimes there's 20 banks or more in a city
[07:06] What are you supposed to do especially if your English sucks and you really do need to get a bank account? Well, of course the answer to that is get yourself a good lawyer right away He'll know exactly which bank or banks you should use Tell him you want to use one of the banks that he uses for his own account Though that's probably exactly what he had in mind already, which is good It's not at all like it used to be you can't just walk in throw your passport down and get an account Not like in the old days and one big tip here never use an ATM machine That's not connected to a bank or right alongside a bank and part of the premises Now I'm not saying you have to use exclusively the ATMs from the bank. You have your accountant. That's not necessary However, it does, you know offer another layer of security if there ever is a problem
[07:54] So to repeat and this is important when you pull money out of an ATM machine check and see what kind of people are standing around and in what kind of neighborhood you're in and Remember almost every ATM machine will accept your card by the way that said if at all possible do make sure that ATM is in a bank lobby or Connected to or on the premises of a mall right next to a bank because then you know That bank itself is the one that's loading up and servicing that machine every day It's part of their operation Then if by chance there is a screw-up or you don't get your correct amount or whatever You got someone to talk to face-to-face who's got skin in the game It's good to know you're right within a hundred feet of the people who are responsible for that machine
[08:42] Now though that sounds simple enough and I've mentioned it to countless people still I've heard stories from people down here who've had their cards swiped or their numbers cloned But nearly always as the story unfolds and the plot thickens it somehow always goes back to an ATM at an isolated location like a gas station or in the middle of a block somewhere or a credit card transaction at a restaurant or a retail place Now when gringos and expats tell me of strange things that have happened to their credit cards weird charges, etc They always have a good idea where it happened, which is why by the way So many long-term expats who kind of keep a low profile even under the radar Are on a 100% cash basis if you know what I mean
[09:31] So now of course you're thinking in Latin America, is it safe to carry that kind of cash around? Well, you don't have it in your wallet or your pocket or your fanny pack There are special places for it And by the way, there's very little reason to carry around any more than a hundred or a hundred fifty bucks in cash Of course, you'll have an emergency stash of maybe five hundred to a grand in your car or in your zipper belt Which is highly recommended or elsewhere There are a thousand great hiding places for little watts of cash, you know But ready cash to spend on things. All you need is maybe a hundred or a hundred fifty bucks That should easily last you a couple of days just bombing around maybe even a week depending on your spending habits Now, of course, I'm talking about if you're living down here in a fixed place
[10:17] Not just roaming around through Latin America like a tourist then you'll be paying hotel and transportation charges, etc As well as eating out at restaurants all the time So in that case maybe a hundred or a hundred fifty bucks is only gonna last you two days Who knows people's traveling and spending habits are infinitely variable Anyway, like I said the longer you're down here You realize it's a very good habit to be on a cash basis as much as you can I mean, you know, Latin's still gladly accept cash without ID even Cash is king and credit cards Well, they're just a bother and many times they'll add three four or five percent service charge on a credit card transaction, too So look out for that What I mean is keep your eyes peeled for a sign at the cash register that says there is a surcharge of whatever
[11:06] Percent for using a credit card. Now, of course, it'll be in Spanish, but you'll get the idea It's not hard to figure that one out. And by the way, when you have cash you often get great discounts, too So don't forget to ask for example There are huge chains of pharmacies in Latin America and almost all of them will have big signs on the outside that say 25 or 35 percent discount off retail, but that's only for cash So in that case you'd be nuts if you didn't pay cash and believe me Pharmacies aren't the only places in Latin America that give big discounts for cash You can usually get a nice cash deal out of almost anyone the only real exceptions being first world franchises and first world department stores like Sears or McDonald's subway Kentucky Fried pretty much all the first world retail names you recognize from up north if they're down here in Latin America
[11:58] No cash discount prices are fixed However, when you're dealing with Latin businesses and mom-and-pop shops You can almost always wangle a cash discount out of them nice to know but you have to ask now as long as we're talking About banks remember the good old days when you could put your money in a past book savings account and get four or five percent Back when you could get a bank CD and get even six seven or eight percent. That's ancient history You know pre millennium stuff Well, I know some of you younger listeners out there probably weren't even born when that stuff was going on And that's why when new green gringos come down to Latin America and fresh expats They're often shocked when they walk in a bank and they see that they can get quite high Interest rates like that
[12:43] Anyway, what we'd call unusually high rates these days in the land of zero or one percent or even negative interest rates For example, i'm looking at a big Honduran newspaper now and at one of the local banks a big bank That's got branches all throughout latin america. Probably a couple of hundred of them. It's a bank called bac back Go ahead and look it up. It's very big Let me read you right now what they're paying on CDs in the local currency in Honduras That's the limpita It starts out by saying five thousand limpita's to fifty thousand limpita's is the low end that you can put into a cd A certificate of deposit now figure there's more or less 20 limpita's to the dollar That's a cd where you have anywhere from 250 to 2500
[13:30] Now if you take out that cd for 180 days half a year, you'll get an annualized rate of four point six percent Now if you take it out for a year, you'll get five point one two percent annualized for two years Six percent annualized and the list goes on suppose you were to put 500 000 limpita's to a million limpita's in a cd That would be getting a cd in the range of 25 to fifty thousand dollars now For 180 days that pays six and a half percent annualized for one year. It's paying seven point five percent And two years is paying eight percent Now at the high end it says here if you put a million limpita's to whatever
[14:16] Which is about fifty thousand us and above if you take out a cd for 180 days a half year It'll pay seven percent for a year seven and a half percent two years eight point six percent Wow, have you ever seen bank interest rates like that? And I know that makes it sound like we're living on another planet down here But those are today's rates if you do it in the local funny money And if you happen to be in another country, let's say, Nicaragua, Costa Rica, Salvador or wherever You'll get pretty much the same rate in their funny money and because these are such high rates comparatively Many many expats with extra cash asked me if it's worth getting into, you know, what are the downsides? Again, your lawyer will know which are the two or three strongest banks around you know ones that have been around
[15:07] 25 to a hundred years Yes There are a few banks in every country that have been around that long without a single bust Or any notable problem to speak of at all and obviously those are the banks us expats want to use That's why I repeat you always have to hook up with a trusted lawyer. And how do you do that? Well, you could ask some of your new drunken gringo friends you met at the expat bar Which by the way is what most expats do when they first get down here But let me tell you if you're looking for references that way you're really throwing the dice Believe me the scruffy gringos you meet at expat bars are not the guys to ask about things like that There is a certain mindset with expats, especially the ones that hang with other expats at expat bars. Sure. It's true
[15:54] They're always happy to help out a new gringo in distress Even though their advice and recommendations often suck Because you see these guys on the gringo tours trail and in expat bars off the gringo tours trail They don't get around much They hang around with other gringos almost exclusively which keeps them out of the real swing of things And because of that they're often marks for latin scammers who are out trolling for just such clueless gringos Now i'm not saying you'll always get bad information and bad leads at expat bars But you really are throwing the dice So those gringo expat bars are no place to find a dentist a cleaning lady or even a mechanic Though you might find a good lead that way you'll probably pay twice as much as you have to
[16:40] If that's all right with you, so be it but forever after you'll be a mark The problem is expats and gringos want to be friendly to other new expats and they'll often turn you on to a bad Lawyer, for example, just because you're asking and it's the devil they know For example about a half a year ago expat eddie and I were talking to one of these expat barflies About that very subject lawyers and he proceeded to tell us about his lawyer and said he'd be glad to give us his name and number And when eddie asked him if the lawyer was a stand-up guy If he never ripped anyone off or could be trusted with big money The guy scratched his head and said well, he's been in and out of a few jams. So I wouldn't let him handle big money He's latin, you know, so you do want to keep your eye on him
[17:27] Then he added, you know, he does speak good english and has a few gringo clients As if that's supposed to be the big selling point, you know Well, as a matter of fact clueless gringos that come down Do believe those are the two best selling points a guy with gringo clients and a guy who speaks english You know what that's no way to select a lawyer First of all almost all young lawyers guys under 50 Let's say speak some english and the ones that advertise in the newspaper and on the internet english spoken here Those are the guys it should be a little leery of not that that automatically makes them crooks But you're going to be paying gringo prices because you see what they're doing is fishing for gringo clients So there you have it the perfect example of how not to get a lawyer
[18:17] The fact is you'd be surprised how many fresh gringos go to the expat bars and ask tipsy expats they meet for professional references Honestly, it'd be better off throwing a dart at the lawyer section in the phone book And yes, they still have phone books down here and they're awful thick. Remember that lag time thing I told you about Anyway, so how do you find a good latin lawyer who won't rip you off? Won't charge you first world money and will look out for your interests at all times Well, first of all, let me warn you that when you're on the gringo tourist trail Those kind of guys are hard to find but when you're off the gringo tourist trail, it's a very different story But still even off the gringo tourist trail There are some bad ones in the bunch and some that are much better or worse than others
[19:05] I mean after all these are lawyers we're talking about not altar boys So the question is how do you find a good one? Well go back into my radio archives I did quite a few shows on just that subject But the easiest way by far is to just come down to my next latin american seminar, which is in january I'll hook you up face to face with some highly recommended latin professionals So if you're worried about that lawyer issue or how to find good doctors and hospitals and accountants and professionals, etc Everything an expat needs the works Well, i'll tell you the best and most surefire way is to come down to my latin seminar So have a look at the details go to expat wisdom.com click on the latin seminar link and get all the information
[19:50] So as of this recording you've got about three months till launch time plenty of time to work out your schedule, etc So once again, go to expat wisdom.com click on the latin seminar link and do sign up It's a way to get in on the fast track to learn exactly what it's like to live down here as an expat And like I said meet my recommended group of professionals Oh, and by the way, they all speak english and they all come at third world prices. Why? Because we're off the gringo tourist trail. That's why So what's so special about being off the gringo tourist trail? Well, there are a lot of great things about it, including the fact that the gringo advantage is very strong But besides that one of the advantages i'd like to cite is that you could be in a city of a half a million or a
[20:37] Million people walk around all day and not see a single gringo save maybe the odd backpacker or mormon And I mean walk down busy city streets and even in shopping centers and malls As long as you're not at the airport or in a convention center. You'll almost never see a single gringo You're kind of a lone ranger, which believe me once you get used to it is a very good thing Now once in a while you will think you see a gringo, but more often than not It's just a local latin in the upper class the creoio class That's creoios the one or two percent of latin americans who own about 90 percent of the land and most of the massive Basic consumer products down here like cement sugar coffee coca-cola and beer franchises, etc
[21:28] So these creoio guys and gals do look exactly like your first world stateside waspy american Tall white and well gringo looking and they do their damnedest to appear that way So note if you're off the gringo tourist trail And you do see one of these guys and gals and you think he's a gringo and you walk up and say hey Where are you from bud? Which by the way is the usual greeting when you're off the tourist trail and you run into a gringo suddenly It's old home week and your best friends for 10 minutes Even though he's from maine and you're from cleveland a thousand miles away Such is that weird attraction we have for fellow americans? That is for many of us who've been off the gringo tourist trail for a long long time And that's a phenomena that usually strikes early in your expat career
[22:17] A kind of a craving to speak to other gringos face to face After you've been off the gringo tourist trail for six months to let's say two years Now I admit it happened to me too, but after about two or three years I got over it and so will you and I found that the quickest way to get over that is to learn your spanish a bit Now note if you are off the gringo tourist trail and have a gringo craving You could always pump over for a gringo fix at the nearest tourist spot Or buda forbid one of those tacky expat bars i'm always dissing And believe me you don't want to get addicted to those places They're dead ends better yet jump on skype or mumble and connect with your favorite loser relatives and friends up in detroit
[23:02] After that you'll probably swear off gringo contact for a long long time So why am I bringing this up? Because so many long-term expats that I know will tell me that they're getting more and more Impatient with the crap and complaints they hear from their relatives and friends up in the states on skype and such and worse yet When stateside friends and relatives come down to visit or said expat takes a short hop up to cleveland or l.a That expat often has enough of the relatives and friends after about two or three days Which proves the old adage that visitors are like fish after about three days. They start to stink But I digress. Where was I? Oh, yeah, I was talking about those creole guys You see off and down here that aren't gringos at all, but sure look like them
[23:51] So anyway when you're off the gringo tourist trail and you think you see a gringo if you say hi bud Where are you from? There's a very slim chance. You'll say atlanta boston or cucamonga Instead he'll say something in spanish. You probably won't understand now He won't be rude not at all because you're a gringo and you've got that gringo advantage going for you However, if you happen to be a short brown person of fairly obvious indigenous origin If you said hey bud, where are you from? He'd probably look right through you as if you weren't there Such is the inflexible nature of the class system in latin america, but let's get back to these bank cd rates So i'm looking in the paper Like I said if you got fifty thousand bucks or more and you put it into the local funny money
[24:36] If you hold a bank cd for a year or so, you can get up to nothing percent annualized interest But note the rub here is that it's in the local funny money Which is always up and down against the dollar mostly down Although do note that in the last two or three years a lot of the latin american currencies for example, like the brazilian real Have increased 10 or 20 against the us dollar but don't be fooled note That's actually pretty much a fluke in the trend because if you look over the last 20 to 50 years You'll see that nearly every single latin american currency Has just been killed by the us dollar For example, just 20 something years ago. The guanamal in quetzal was one to one against the dollar and now it's about
[25:23] eight to one Duh, how'd that happen? Well, try this simple formula terrible corruption in government gargantuan debt mismanagement on a massive scale and stupidity Also on an epic scale sound familiar It should because that's the state and federal government game plan up in the states, too Now the story i'm telling you about the guanamalan currency is not a rare occurrence in latin america either It's more the status quo. Think of it A quetzal that was worth a buck 20 something years ago is only worth 12 cents now And adjusted for inflation It's worth about five cents because the us dollar has lost more than 50 of its earning power in the last 20 years or so
[26:11] But no one down here in latin america ever talks about that because like I said in the past show latin's consider the dollar a benchmark Unshakeable and good as gold talk about an incomplete education, huh? So the guanamalan quetzal has lost 80 of its value in the last 20 some years as have nearly every other latin american currency, too So if anyone tells you that a certain latin currency is rallying against the dollar That might be true in the very short run, but in the long run they always lose So the general recommendation is never to put your us dollars into the local funny money and then put it in a long-term cd Yep, you'll get very high interest rates comparatively But it's a losing game in the long run unless playing the currency markets is your bag then well, that's another story
[27:00] Now get this you'll find that most latin american banks will also give you cds in us dollars Yes cds in us dollars But as it works out They pay about half the interest rate of the equivalent us dollar amount in the local funny money cds Sometimes even a bit more now as you might imagine many many expats are interested in doing bank cds down here in latin america And on the next show we'll be talking all about it. So stay tuned south of the border Down 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
[27:46] And don't forget to check out expat wisdom.com to sign up for your free reports on latin america. See you next time nos vemos Ah, she was a picture He knows spanish