#246 – Expats in Latin America: Crime, Cost, and Currency

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 My thoughts ever stray Hi everybody I'm Johnny Mueller and you're listening to the expat files Living in Latin America the show that tells you what it's really like to live work play and or retire in Latin America I tell it just like it is so let's get started You know I get a lot of emails from people asking me which places in Latin America I would never recommend for you to live work play and or retire as an expat now you all know that over the years I recommend you keep away from those high-volume tourist places like Costa Rica and Panama and anywhere a cruise ship stops

[00:48] Those are places where so many gringos have invaded that the gringo advantage is pretty much evaporated You're no longer that odd cool gringo like you would have been some 20 years ago instead now You're just a dollar sign, and I've also pointed out some countries that are just too damn expensive They're trying really hard to be first world and their governments have become huge And they're just about at the tax and spend levels of some first world countries case in point Argentina and Chile But you know every Latin country has its good and bad points and like I've said so many times before if you end up living In a town of 50,000 or under it would be practically like living in Mayberry or hooterville in the 60s back in the states Except you will have all the modern IT conveniences high-speed internet and cell phones and all that however There are some countries and two I can think of in particular or even moving to a small town like that

[01:37] It's not going to save you from something that we all really dread and that's general crime I mean it doesn't matter how good the internet or how cheap the food or rent or utility prices are If you've got rampant crime even in the small towns well forget about it now There's four countries that stand out at all levels when it comes to crime What I mean is you can't avoid it unless you wall yourself up in one of those guarded residential towers or subdivision afraid to take a walk to the local neighborhood store or barbershop because there's a real chance of getting mugged and Who wants to live like that and those four really crime-ridden latin countries are the Dominican Republic? Venezuela most of Mexico except for certain parts of the Yucatan area on the Caribbean side which isn't gonna last by the way and

[02:22] Finally all of Brazil is quite dangerous, too And you know I still get emails all the time from people asking me even arguing with me about my stance on Brazil Now if you've been listening to some of my past shows, you know crime is not the only reason why I don't recommend Brazil But for today, I'm gonna tell you once and for all and I hope it sinks in why Brazil is not a place I'd ever recommend unless you really have a hankering to see the beaches of Rio like the Copacabana and of course Ibanema But then still you'll want to stay in one of those all-inclusive resorts because it's not recommended that you walk alone on the public beaches In fact, there are signs all over the place even in the big hotels warning you to that effect, too Sounds like a nice vacation, huh? Now I know some of you have a real hankering to see carnival and I admit there's nothing like it in the world

[03:11] And you know Brazil's version of carnival puts the one in New Orleans to shame But remember if you're gonna check out the carnival festivities make sure you don't carry any money jewelry or valuables And once again, you don't do it on your own. So anyway once and for all right now I hope to dispel you of the myth that Brazil is in any way shape or form Ready for first world expats now what prompted me to go off on Brazil right now is an email I got from one of my new friends an expat wisdom seminar Attended named bill who sent me an email and a link to a YouTube video And I understand that Richard Martin talked about this on his show, too But since not everyone listens to both of our shows and since Latin America is my shtick I'll put in my two cents, too. So the email starts like this. Hey Johnny. Have you seen this?

[03:59] Here's a video that's gone viral in Mexico And he sent me the link and if you want it just send me an email at the expat files at gmail.com Or Johnny at expat wisdom calm, and I'll send it off to you Well build the videos not only gone viral in Mexico, but it's gone viral all over Latin America But unfortunately the video is in Portuguese and there are some versions with Spanish subtitles So I don't think too many first worlders are gonna see it unless it's in English They're just not interested, but really if you get a chance just watch it It's a TV news report of a drugstore robbery in Sao Paulo Brazil now I'm gonna give you the English narrative so here goes now Let me set up the visual the video starts by showing a well-known thief Mauricio Faril

[04:47] alias El Papita Leaving his car parked outside a pharmacy then he jumps out of his car enters the pharmacy and robs it now while El Papita is in the pharmacy and Another thief appears on the scene and steals El Papita's car And you can see all that in progress perfectly on the video and by the way the nickname El Papita means The seed like for example the seed in an avocado and another thing it seems like down here in Latin America Everyone's got a nickname every Latino male that is in fact the whole hierarchy of Latin nicknames is pretty amusing And I'm gonna do a show on that later anyway then El Papita Emerges from the pharmacy with a bag of stolen loot and he looks around and sees his cars been stolen

[05:36] Now he's confused by all that his cars gone And he kind of scratches his head and walks back and forth in front of the pharmacy for a minute then suddenly a third guy with a hood over his head appears walking down the street quite rapidly and he steals El Papita's bag of stolen loot He yanks it right out of his hand and takes off running in the same direction And you can see that very clearly in the video too now later El Papita got ID'd by cameras inside the pharmacy and ended up Getting arrested now at the police station when the cops heard his story They allowed a local television news crew into the police station for an interview So El Papita says to the news crew quote these days the violence here is so great That when you go out to steal sometimes you return poorer than ever

[06:23] People who do what I do can't even conduct a dishonest life. He says I Can't believe they actually stole my new car then the reporter asks them You mean to say you just bought that car then El Papita says no, I didn't buy anything man I stole that car yesterday Then El Papita goes on to explain to the reporter now Let me tell you how things are these thieves don't let one enjoy the things we earn with our own sweat That's just the way things are man Then the reporter cuts him off and says but wait if the car wasn't yours What are you complaining about and then El Papita gets all upset and says this robbery of my robbery is just a lack of respect

[07:08] sir Then the reporter says but the money wasn't yours either Then El Papita gets upset again and says, what do you mean? It wasn't mine, sir. It was my money I stole it. It's mine. So there you have it in a period of about 30 seconds And yes, amazingly enough that all took place in about 30 seconds See for yourself you get to witness three separate robberies two of them where thieves are stealing from thieves So bottom line all you expect wanna be is worth thinking about Brazil for whatever reason just remember El Papita's famous Last words he says that's just the way things are man on while we're on the topic I have to mention that terrible incident that happened April 2nd in Rio de Janeiro You might have seen that one in the news where an American woman was gang-raped and beaten aboard a public transport van

[08:00] Basically Brazil's version of a small chicken bus She was beaten and raped aboard this small chicken bus while her French boyfriend was handcuffed and hit with a crowbar Enforced to watch the attack which means of course that there should be a congressional ban on crowbars, right? You know what I'm getting at. Anyway, now This isn't a city that supposedly has cleaned up its terrible street crime problem according to government propaganda Of course and the government has said it's cleaning up due to the fact that next year They'll be hosting the World Cup and the new Pope is coming to town in July And by the way the couple that was mugged and assaulted were in that bus and on their way to the famous Copacabana Beach that everyone knows about that's another famous spot where tourists often get robbed

[08:47] In fact, I have a very good friend from Chicago who had a gun stuck in his face in Copacabana Beach And they took his wallet and his watch and that happened at 11 o'clock in the morning about 300 paces from his four-star hotel Now as far as that chicken bus rape crime I don't know if you knew this but there are gangs of thieves and ex-cops and government officials Operating clandestine fleets of those little mini chicken buses with a good percentage of them involved in organized crime Now Brazilian officials reluctantly admit there's a huge amount of crimes on their public transportation system many Involving sexual assaults and rapes In fact assaults on women are so prevalent that the Rio subway system now has Special women-only cars to try to minimize sexual attacks and muggings and the question is is it working?

[09:37] Well, according to government spin it is but according to lower and middle-class women on the street the ones that have to take public transportation to work and back They still say they're afraid every day when they ride the bus and that government crime statistics are misleading Since most women who are sexually assaulted never report it to the police and those that have been mugged and attacked Say they generally know their attackers and the criminal gangs that constantly ride the bus And even though these thieves and gang members are well known in the local communities The police do nothing about it and more often than not the cops are involved in various criminal activities themselves In any case you've been forewarned many times But anyway, you know, I still suspect I'm gonna get some email saying Johnny. Why not Brazil?

[10:25] And to that I say why not walk around Detroit with your wallet on your head Anyway a show or two ago I talked about good old Hugo Chavez and as you might expect now I'm getting emails from people saying hey wouldn't that be a great place to invest, you know, the place is falling apart They've just devalued their currency again. That means the bottom of a market maybe right? Well, you know what from the outside it might look like that But from an insider's point of view from expats who've actually lived down in Venezuela for a while They don't see it as an opportunity at all in a nutshell Here's what they have to say about living working playing retiring and investing in post Chavez, Venezuela Now as you know in the last 12 or so years since Hugo was in office

[11:12] he's discouraged the use of dollars down in Venezuela and Like I said in a previous show they actually punish you when you convert to boulevards the local currency When you go to a bank or a legitimate trading house However, if you change dollars to boulevards on the street on the gray market, you do get a really terrific rate However, there are a hell of a lot of counterfeit boulevard notes going around and to tell you the truth I was down there for quite a while and I couldn't tell the difference So I doubt the casual green expat or tourist is ever gonna figure that out That said all legal and financial documents in Venezuela are written in boulevards That's it. Just boulevards, which is not good for anyone holding boulevards since the country's had 20 to

[11:57] 35% annual inflation for the past couple of years and now they've had two official big-time currency devaluations Just in the last 50 days demonstrating the country's monumental fiscal incompetence Considering it's the largest exporter of oil in the Western Hemisphere That said it should be flush with petrol dollars But in fact, there's a huge shortage of US dollars there The fact is you can go to banks and change your dollars into boulevards at a crappy rate But they will not let you change boulevards to dollars That's an impossibility and more on that in a second Anyway, like I said, the only legal documents in Venezuela are written in boulevards and not in dollars or euros So if you're looking to do a property deal or sign a contract and the deal is written up in dollars or euros

[12:48] Well, it's not such a good deal at all because it'll be completely off the books and you might just be getting screwed Now I know some people who have signed loan agreements or personal notes or mortgages in foreign currencies like pounds and euros and dollars You know private deals on the side sometimes even signed in a lawyer's office often because they're trying to do something off the radar Not necessarily illegal, but just off the radar Anyway, if the seller or the guy taking off the loan doesn't deliver you have absolutely no legal recourse at all So basically even if you have a lawyer if the currency amounts aren't anything but boulevards Well, it's basically a handshake deal and a gentleman's agreement And you know, like expat Eddie says that might be okay between two gringos But if you've got any Latin parties involved at all

[13:34] Well in the end if you don't cover your ass, you're probably gonna get screwed now Don't get me wrong deals with Latins always start out with best intentions But with them a promise and a handshake's worth about nothing And if you think that's BS I can list a hundred cases where that's happened among my own expat and gringo friends and we learn fast And it's not the end of the world But our problem is we come down with first world values and Latins have theirs the fact is a great number of Latins don't honor their agreements even when they're perfectly legal and drawn up correctly and Intellectual Latins here when asked about that particular fault in Latin society They'll tell you it's one of the negative legacies of colonial rule since Spanish Kings governors and mayors weren't much good for their word

[14:19] either and the reason why you have so many Latins defaulting on agreements like that even when they're perfectly legal is Because the court system is completely broken and of course, I'm talking about the Venezuelan court system now Yes agreed and the rest of Latin America the court systems move at a snail's pace Even on a good day and everyone up the line is corrupt in their own way, including Supreme Court justices Now just as an aside here Supreme Court justices by the way can be bought off for five or ten grand Which is mighty cheap considering in fact, I know of a case exactly like that that happened to a friend of mine And he explained the whole Supreme Court payoff deal to me in great detail since he was involved in it and someday I promise I'll tell you exactly how it went down

[15:05] So basically what I'm saying is in the rest of Latin America the wheels of justice move at a snail's pace But they do move but they'll move at warp speed if you've got the doe ray me And I'm talking about the rest of Latin America as opposed to Venezuela where the legal system just absolutely doesn't work at all Especially for first-world gringos since Chavez has basically Poisoned the legal system against anyone from the states, which is not to say the Venezuelans don't love gringos, too They really do I'm talking in the common street level people But because of Chavez the legal system is antagonistic to anything gringo So on the street you do have that gringo advantage But when dealing with government or government officials being a gringo is a disadvantage now accordingly nearly all the gringos

[15:51] I know that live in Venezuela. They told me that for a variety of reasons not just the Chavez Anti-american sentiment they tell me that most foreigners including European foreigners do not adjust well to life in Venezuela Which is why if you actually decide to go down and you think it's hit rock bottom rent and don't buy a thing till you've been down at least six months and Venezuela is one country where the schools don't promote English at all English programs in public schools are vastly underfunded after so many years of Chavez Anti-american sentiment, which means if you go down to Venezuela You better learn your Spanish fast and to tell you the truth You probably will because you won't find many English speakers at all and as for the tourist destinations Oh, they're loaded with tourists

[16:37] All right But Venezuelan tourists and not gringo or European tourists speaking English though the one place there is a decent Contingency of English speakers is on Margarita Island and I spoke about that in some detail on a recent show So check it out in the archives So anyway, if you think about investing or buying a property in Venezuela Well, you can go on the internet and you won't find many companies from the states doing that But you will see some real estate and brokerage companies actively promoting properties in the UK and Europe but it'd be nuts to buy anything sight unseen from the internet and by the way My sources tell me that today if you go to Venezuela and actually try to find some of these European properties and projects you'll find most of the companies that were promoting such things just a few years ago have Disappeared and you will find a lot of incomplete and abandoned first world style projects

[17:26] And that's why a lot of people think Venezuela has hit bottom But I for one don't believe it even though the local real estate people and the real estate ads are saying this is the best time to buy Always be leery when real estate guys lay that on you because anyone who knows the true fiscal and financial Circumstances of what's happening in Venezuela and the grave problems that have led up to the two huge monetary Devaluations just in the last 50 days. I'll tell you Venezuela has by no means hit bottom yet The Venezuelan government has announced officially that exchange controls will be imposed basically forever And they think that'll put a damper on the capital flight That's been taking place already in a big way and new laws have been passed that will make large unofficial currency exchanges

[18:12] Completely illegal meaning you'll have to change your dollars and your euros at a bank at the official exchange rate as opposed to changing It on the street on the gray market where you can get almost triple your money exchanging dollars for Bolivars Oh and here's another thing The Chavez government has started taking over empty private land and apartments and turning them over to people he deems more Deserving so there's two problems here if you buy attractive land and you decide to sit on it You don't develop it for some years and people do that all the time all over the world waiting for land prices to go up Or a more convenient time to develop, but you're taking a chance if you try that in Venezuela You just might come down to visit your property and see some public housing on it And there's a second problem

[18:58] You might buy a nice piece of property build a nice house or office building not Realizing that beautiful mountain view right across the road from your house or your business that beautiful empty and undeveloped land well, it could at any time be confiscated by the government and turned into a housing project a very low income housing project or worse In fact, I personally know a case like that And yes, if you have dollars, there's an easy to locate gray market where you can at least double your money But don't under any circumstances unless it's an absolute dire emergency Use your credit card down there. I'm talking about an international credit card That's issued somewhere else since when you get back home and get your bill or check it on the internet You'll find they exchanged your dollars for the official Bolivar rate

[19:45] And you probably got screwed out of at least half of your money But if you have a visa or a mastercard drawn on a Venezuelan bank Then it won't matter because your account will be in Bolivar's and you'll get screwed by at least 50% Using your international debit card or credit card to get Bolivar's out of an ATM machine And by the way, unlike the rest of Latin America You can't get dollars out of an ATM machine in Venezuela everywhere else You can accept Cuba and by the way, they do have ATMs in Cuba if you can find one that works But you'll have to have a credit card that's drawn on a non-us bank. If not, they'll block your transactions So let me give you a brief rundown on the ongoing currency and exchange problems for expats in Venezuela In fact, the financial system has been an absolute chaotic mess for the last 10 or 12 years ever since Hugo took over

[20:36] But you can't blame him completely because it was a total train wreck before he got in there, too In fact, that was one of his big campaign promises to fix it Oops Okay, so here's Venezuela's recent monetary history and as I hit the major points in this ongoing disaster You tell me if you want to live your life under these conditions Okay The worst of it started in 2005 when the government assessed large fines and jail terms for those caught Violating the new dollar Bolivar exchange laws The only saving grace back then was that it wasn't going to affect anyone in the country for less than 180 days Basically so as not to scare off the tourists who automatically get a 90 to 180 day tourist visa on entering Now right after that in 2005 Chavez by government edict increased official wages by 25 percent on may 1st

[21:28] another 15 on february 1st 2006 another 10 in september and another 20 on may 2007 30 more in may 2008 10 more in may 2009 10 more in september 2009 Which only succeeded in killing a lot of marginal businesses and increasing the cost of living over? 100 percent in four years and that cost of living rose for everyone But the problem was a lot worse for foreigners and other expats dealing in dollars since if they had their dollars wire transferred From the outside to venezuela the dollars were automatically switched over to bolivar's 40 lower than you could get on the street So foreigners and expats who receive their income and dollars from overseas like retirees getting social security

[22:18] Their cost of living rose not 100 over those four years like the locals, but more than 150 percent now by february 2009 The black or gray market exchange rate was double the official rate and by august 2009 The dollar crisis worsened and on the street you could exchange your dollar for a hundred and fifty percent more than the bank rate then in january 2010 the government announced a 100 devaluation of the boulevard which meant for a while if you traded dollars on the black or gray market You could get 60 more than the bank rate. And by the way by january 2010 Venezuela imported the majority of its food durable goods and medicine while the three mainland countries that border it

[23:04] Guiana brazil and columbia were all net exporters to venezuela And if you were to ask the average venezuelan on the street, what are the country's top exports? They'll always tell you one oil two cocaine three people and four international beauty queens And believe me, that's no joke Then by 2012 the dollar rate on the street settled into 100 more than the official bank rate then on october 7 2012 Just as shaves was reelected in direct response to that the black market simply exploded and you could get 400 more boulevards for a dollar on the street versus the bank rate

[23:49] meanwhile all through 2012 the government kept denying the rumors of devaluations then about two months ago on february 9th 2013 the government announced guess what a devaluation of 33 percent Which meant if you went to the bank with a dollar instead of getting four point three boulevards to the dollar you got six point three And now on april first and this is no april fools joke except for people living in venezuela The government once again announced a huge devaluation This time in selling boulevard denominated bonds So we've yet to see what's going to shake out on the street Some economists are saying the only way the government's going to see any headway at all is if it devalues another 100 percent it brings the boulevard to about 12 to the dollar officially even though on the street

[24:39] You can still get about 15 boulevards to the dollar now That's the fifth official currency devaluation in a decade and what's left unsaid is that they're devaluing Their currency against the u.s. Dollar which in the last 10 years has lost 50 percent of its value So in reality who cares if venezuela's gdp has been increasing four to five percent a year when inflation is 25 to 35 percent a year believe me the place is in utter economic chaos and you don't want to be there Now for some final sad facts about venezuela You know that about 80 percent of the country works for the minimum wage of about 115 bucks a month Which you get this is the real street rate if you convert boulevards into dollars because they're paid in boulevards

[25:25] However, if you go by the government official rate, they're actually making about 350 to 400 bucks a month And that's why if you look up minimum wage statistics on the internet It actually looks like venezuela has made great minimum wage and employment increases But you see when they publish those statistics They do the conversion to dollars using the official bank rate, which is absolute crap so when you've got guys like oliver stone telling you in his Documentaries that shabbos has increased the standard of living for the common man by leaps and bounds It's all really smoke and mirrors and even managerial and professional salaries are not much higher than the minimum wage now the standard salary for a doctor or an accountant or a bank manager is about 3500 to 4000 boulevards a month which converts to about

[26:11] 200 bucks a month at the street rate but around 600 a month if you use the official bank rate So believe me bottom line venezuela is no place to start a business and no place to build or buy a house But just like the rest of latin america The only way to make a decent level of income by our standards our first world standards is by starting your own business And starting your own business is quite easy and cheap to do Except in venezuela since venezuela under shabbos has become such a paperwork nightmare Because he's more than doubled the size of government since he's been in office Not to mention starting a business takes quadruple the amount of paperwork. It took just 10 years ago And by the way right now in venezuela There are a ton of businesses for sale and even more on the verge of collapse

[27:01] So if you do decide to go down there right now You'll have your pick of the litter and things will be very cheap. However, you'll be buying into an economy That's riding the rim of the crapper and looks like it's about to get the power flush And for those of you who might be thinking hey now, there's an opportunity I'll bring a ton of dollars down there and exchange them on the street and get an instant three or four hundred percent gain Well, that'll work if you can actually get the physical dollars in the country But it won't work if you do a wire transfer because you'll get that crappy bolivar bank rate You've been listening to the expat files living in latin america coming to you each week from somewhere south of the border And don't forget you can email me on anything at all about latin america the expat files at gmail.com

[27:51] See you next time most famous Don't