Episode Summary
In this episode, Johnny Mueller dives into the challenges of buying and building properties in Latin America, discussing substandard construction, the role of rebar in earthquake safety, and the importance of identifying poor building materials. He also shares humorous anecdotes about expat life, including small toilets, bidets, and the unique world of drug reps in medical complexes. Finally, he touches on the influence of drug companies and tax burdens across the region.
Johnny begins by discussing the challenges of buying and building properties in Latin America, highlighting the lack of adherence to architectural plans and building codes. He explains that while there are building inspection departments, they often lack resources and enforcement, leading to widespread shortcuts and substandard construction. Contractors often cut corners to save costs, resulting in buildings that may appear fine but are prone to collapse during earthquakes. He shares personal experiences and statistics to illustrate the severity of the issue, emphasizing the risks for expats and the importance of understanding local building practices.
Next, he discusses the importance of rebar in construction, especially in earthquake-prone areas, and warns about contractors cutting corners. He emphasizes the need for expats to be vigilant when buying existing structures, as many may have structural issues that are not immediately apparent. He also highlights the cost differences and quality variations in materials like skylights and cement blocks, advising expats to be cautious and informed when making construction or purchase decisions.
In another segment, Johnny provides practical advice for expats looking to buy property in Latin America. He emphasizes the importance of identifying potential issues in buildings, such as the use of asphalt shingles, drywall, and substandard plumbing. He warns that these materials and construction techniques are unsuitable for the region due to the intense heat, humidity, and frequent rainfall, which can lead to significant damage over time. He also highlights the importance of checking for signs of poor construction, such as the type of drain pipes and the size of sinks and toilets, as these can indicate broader issues with the building's quality and safety.
He then humorously discusses the challenges expats face with basic amenities in Latin America, such as small toilets and sinks that may not be suitable for the average physique. He also touches on the presence of bidets in upscale homes, often used for purposes other than their intended function, and attributes this to wealthy individuals who may have never used them or have adopted them for decorative or functional oddities. The segment transitions into a story about an expat named Eddie who proposes a sushi kiosk in a first-world medical complex in El Salvador, highlighting the opportunity for first-world gringos in the region. The story ends with an anecdote about drug reps posing as airline stewardesses in a medical building, illustrating the unique and sometimes deceptive aspects of life in Latin America.
Finally, Johnny discusses the role of drug companies in Latin America, particularly their use of attractive female representatives to influence doctors. He highlights the relatively low cost of medical treatment and drugs in the region, which limits the power of drug companies over doctors. He also touches on the tax burdens in various Latin American countries, noting that some have high taxes while others have low rates. The episode concludes with Johnny announcing upcoming seminars and encouraging listeners to follow The Expat Files on social media.
Topics
Building Practices in Latin America, Government Regulation and Enforcement, Risks for Expats, Substandard Construction, Bribery and Corruption in Construction, Rebar and structural integrity, Cutting corners in construction, Buying existing structures, Skylight materials and quality, Cement block quality, Construction materials and techniques, Identifying poor construction
Chapters
00:00:00 Opening 00:00:34 Emails About Buying Properties in Latin America 00:00:45 Building Specifications and Compliance Issues 00:01:49 Bureaucracy and Inspection Departments 00:02:24 Bribes and Payoffs in Construction 00:04:59 Statistics on Substandard Construction 00:05:37 The Importance of Rebar in Construction 00:06:43 Buying Existing Structures and Structural Risks 00:10:30 Cement Blocks and Their Quality Variations 00:12:00 Avoid Asphalt Shingles in Latin America 00:14:19 Why Drywall is a Bad Choice Down Here 00:15:18 Check the P-Trap for Plumbing Quality 00:17:18 The Wailing and Gnashing of Teeth When Duty Calls 00:17:50 Bidets in Upscale Latin American Homes 00:19:24 Eddie's Sushi Kiosk Proposal 00:22:42 Drug Reps Posing as Stewardesses 00:22:48 Drug Companies and Female Representatives in Latin America 00:25:32 Tax Burdens in Latin American Countries 00:26:58 Upcoming Seminars and Social Media Engagement
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 as I wonder My thoughts ever straight 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. I Get a lot of emails from people asking me about buying existing properties down here in Latin America They've heard what I said about architects designing middle and upper middle class houses and office buildings and stuff how they're always designed to meet international building specifications and the seismic
[00:50] Conditions as well as the climate for the area and people who listen to this program now Understand that a huge percentage of people who build houses Contractors as well as individuals don't follow those plans now by all appearances The house might look exactly like the plans that were approved when they were submitted to the municipality Which is part of the building process down here in Latin America And that's pretty much the only time you ever meet up with government authorities on a building project at all when they want your money But that's the only time they do for example When you build a house and your architect hands in the plans to the municipality to get the building permit Which you'll tack to a post on the property, of course Anyway, when you're down at the municipality getting that permit the building inspection department will assess a one-time building permit fee
[01:36] And by the way, there's a building inspection department in every town and county and city Even though some of them don't even have a car or a truck to come out and inspect anything that's third world bureaucracy for you and at first Expats are just appalled by that a building inspection department without a vehicle to come out and look at things But in the end you gotta love it. Sure. You're on your own You're on the honor system when you build but talk about minimum government intrusion Come on now compared to the absolute big brother ism of the first world You just gotta love it really and of course I'm talking again about off the tourist trail here because if you're in Costa Rica or Panama They'll send out building inspectors and stuff and chances are they'll find something wrong that you and your architect never even realized Like for example, your wall is too close to the property line
[02:24] And whether it is or not, it's usually a bribe or a payoff to the local inspector Nothing tragic, of course fifty a hundred maybe two hundred bucks at most I've been through that three times on two different properties in Costa Rica So you heard it here first and you're hearing it from the horse's mouth And that was more than a dozen years ago. And guess what? I have friends living there still and they say it's much worse now But since building inspectors almost never come out and look at the property while it's under construction or even when it's finished building contractors take all kinds of shortcuts just to save the owner money and they always think they're doing you a favor because that's just what the Average Latin American who's building a house always inevitably asks them to do Why do you think when you drive through any Latin American neighborhood rich or poor you'll always see a few
[03:14] Structures that look half-built or a building where construction has stopped completely and it looks like it's been sitting there half Complete for a year or so up and the property looks abandoned These are people with such a cash shortage that they actually stopped construction Now you don't think that when the owner realized that he was gonna run out of money completely He didn't tell his contractor in a panic to start cutting corners everywhere Of course he did it's human nature, right? It's what poor mothers in third world countries do when they run out of money, too They watered down the baby's milk. That's their way of cutting corners It's the same one governments themselves let out contracts for government buildings roads and bridges and infrastructure Contractors who get those contracts always skim the project by taking massive shortcuts skipping on concrete
[04:01] Asphalt metal the thickness of walls and bases and footings you name it They'll cut corners on it always of course in places that are not obvious Otherwise they'd be shooting themselves in the foot The rule of thumb here is that the project only has to last as long as the politician is in office In other words two to four years before it starts falling apart Depending nice work if you can get it, huh? And it's usually a friend a crony or a brother-in-law who does get the work and even if an up-and-up Contractor does get the work. Eventually. They take the low road, too They become forever crooked because they always have to pay at least a 20% Skim to the politician or functionary that gave them the contract. So what are they gonna do? They're gonna cut corners by at least 20% right off the bat now
[04:49] I just ran into an interesting but rather pathetic Statistic about building construction down here in Latin America. Did you know that only 5% 5% now of Existing buildings constructed by local contractors actually followed the architects plan to the letter And I'm not just talking about moving a door or a window or a wall a few inches because of a certain on-site Necessity or condition that made it necessary I'm talking about substantial changes in design For example changing the thickness of the entire length of a block wall from six inches wide down to four inches wide And in the end after that building is finished and the walls are painted No one's gonna know the difference at all until it may be a nice big earthquake comes rolling along and you know
[05:35] There's that steel Reinforcement rod called rebar that makes all the difference in the world whether your place is gonna remain standing or intact in the unlikely event You have a big one like a six point five or higher on the Richter scale Well, the fact is architectural plans call for lots and lots of that stuff and the more rebar you have cemented inside those block Walls the more resistant your structure is however That's one of the most expensive building materials and guess what you can't see it at all once the structures built It's all buried in the walls. So guess where contractors cut the corners, hmm Alright, so now that you know that information All you have to do is listen to my advice when you build down here you crack the whip from day one and you tell Your builder that he's got to build your building
[06:24] Exactly like the blueprint no deviations and using all the materials as spelled out No matter what he tries to talk you into in the hopes of trying to save some money Okay, that's pretty easy to do if you're building something. You just crack the whip on him, right? Your contractor will soon get the idea and for him the pays the same But what if you don't want to build you want to buy an existing structure? Especially since there are so many existing structures for sale and down here in many cities It's a mini real estate bubble just waiting to burst so there are gonna be a ton more buildings and houses coming online and they're gonna be Really dirt cheap to a real golden opportunity for expats So suppose you see something for sale that you like and the price is right. Well, first of all, I'm telling you
[07:13] 95% of the time the contractor did cut some corners Unless it's a big commercial center or high-rise residential building built by a first-world foreign corporation Then you know, they followed all the international construction codes That's a given but that's only the case for those big high-rises and commercial centers If you're buying a single-family home or a small office building then there's no doubt They did cut some corners somewhere along the way and it might not be obvious at all Even if you bring in an architect or another builder to inspect the place before you buy it being that most serious Structural shortcuts are difficult to find that is without actually chopping into a wall and checking for rebar and concrete strength And no owner is ever gonna let a prospective buyer hack away at his house. Would you?
[08:01] and here's a good example on how contractors take shortcuts that aren't obvious at all and you'll never even know it until a Sudden catastrophic failure if the place has skylights, which are highly recommended, of course But they are much more costly than putting in a standard rule for that skylight would be and by the way when I say costly I mean relatively costly because the skylight down here will cost you a quarter of what it'll cost in the States However, you can easily cut corners on skylights depending on what quality and thickness of the skylight you buy And they come in a variety of materials to like plexiglass and lexan and even a kind of fiberglass And the ones that are very good quality and long-lasting are the heavier gauge ones made out of lexan and they come in three or four
[08:51] Thicknesses and no one can tell the difference by just looking at them. Not when they're fairly new or even a few years old However, it's all about how long they last the very thick ones could last 30 years the very thin ones Six or seven years and the lexan ones will stay nice and clear for many many years and the plexiglass ones After four or five years, they start clouding up permanently But how you gonna know that well rest assured most contractors will install the very thinnest ones Because he'll be long gone and out of the neighborhood when those things start failing in about five to seven years And that's why he doesn't install the thicker much longer lasting lexan ones because they're about three times as expensive That's why when you build a structure, those are the ones you want to have installed
[09:40] And by the way, they rarely do glass skylights here And for that matter, they rarely do skylights that open like they do up in the states 98% of them are sealed down to the roof permanently and they cannot be opened for fresh air But there's nothing wrong with that really and you might wonder why that's because in Latin America They make really big skylights Which is good much bigger in surface area than you'll see in the states And if you were to make them that big in glass They'll be so heavy that they just might crack over the years and secondly in the cities of Latin America Many houses have common walls and therefore common roofs and glass is an easy target for break-ins and plexiglass and lexan About ten times as difficult to break almost impossible unless you have a lot of time on your hands
[10:29] Anyway, here's another thing I'm sure you didn't know regarding cement blocks, which is the material of choice for construction down in seismic zones Did you know that cement blocks like skylights are not created equal not by a long shot? Now when these things are fabricated at the plant the strength and resistance of those blocks is directly related to how much Cement goes into the mix when they pour it into the mold So, how do you know you're getting an adequate cement mix? Well, the common man on the street has no idea but contractors know there's more cement in higher priced blocks now if you can go to one building supplied place and buy a Standard concrete block for a buck and you can go to another building supply place across town and get a cement block Exactly the same size for 50 cents. Why do you think there's such a disparity?
[11:18] It's all about how much cement went into the mix because that's the expensive part of block Fabrication so you can see the whole thing gets rather complicated There's a thousand and one ways to cut corners and it's difficult at first to pinpoint exactly where but I'll give you a couple pointers Now and how to determine if when you're looking at a building with the corners that were cut inconsequential or basically fatal Just because shortcuts were made that doesn't mean a building isn't worth buying often minor flaws are easily and cheaply corrected Well, here's a good rule of thumb if the house or buildings roof has asphalt shingles Like you see up north in the states all the time if you see that kind of roofing down here Don't even think about buying that building or house. Why because though up north asphalt shingles
[12:06] Alaska 15 to 25 years maybe even more down here The Sun is much more intense than the Sun up north and secondly the rainy seasons about five times as intense, too So in effect after about five years an asphalt roof starts fading and cracking and drying out That's when it starts looking really white trash and trailer court Okay, so that's tip number one tip number two is when you're walking through that house or building Tap on the walls here and there with your knuckles and see if it's drywall You can always tell by the hollow sound because real plaster and block is dead solid And it can actually hurt when you wrap your knuckles on it now If you start running into some of that interior drywall construction like they have in the states all over the place It's common there, but let me warn you if you run into it down here
[12:53] You're gonna have nothing but problems it could look good for two or three years All right, but you see that stuff cannot stand the least bit of moisture or water if it gets wet or moist It sucks it up like a sponge then slowly but surely the panels start warping and twisting and bubbling out It's just a terrible material to use down here in Latin America, but it's cheap now remember It's not like up in the states down here six months out of the year You get this intense rainy season and some long periods of very high nearly 100% humidity because of it And in time over a few years that just simply ruins your drywall and that's just from the humidity now Imagine if it actually comes in contact with physical water and that happens all the time It's almost impossible to walk into any house
[13:41] That's a little bit older and not encounter at least some water spotting on the ceiling or even some pretty extensive water damage down here Your average Latin just accepts water damage as a way of life But us expats have much higher standards if you pop a small leak through the roof a skylight or a window There's almost no way to go up there and fix it permanently till the dry season comes along So people just let it seep and drip and throw a few buckets down and typical for Latin's When the dry season comes around and they're able to fix the lake They usually just forget about it because it's not leaking anymore And the most they might do is slap some paint over the water damage out of sight out of mind, you know And that my friends is why you never want to build with drywall down here Even though up in the first world nearly all houses these days have it
[14:29] I'm warning you don't get sucked into that trap And if you're looking to buy a house and it's got drywall You know, they've really skimped out on the building and are taking some heavy shortcuts and not just with the drywall So turn around and walk away if you see drywall and thirdly another way to easily spot unacceptable construction techniques in a new or existing home is to have a look at the drain pipe under the sink the part that's called the P trap the curved pipe that leads from the drain in the bottom of your sink into the wall Now there's two things you should look for here in the old days They were made out of chrome and these days They're made out of white PVC because PVC is much less expensive than that metal chrome and easier to work with now a good way to tell if plumbing's been installed to first world code or
[15:18] Close enough to first world code to be acceptable is to grab on to one of those P traps with one hand and try to move It back and forth a bit the cheapest and crappiest PVC pipes are so flimsy That you know if you rock it or pull on it just a little too much It'll come right off in your hand not to mention a lot of plumbers who cut corners won't even attach a bathroom sink to the wall properly so when you pull back and forth on that PBZP trap the sink will actually pull away from the wall a very bad sign and you should think twice about purchasing a place like that because Obviously what's behind the walls in the plumbing department is even more substandard Now the other thing is that the width of those drain pipes under your sink should be one and a half inches
[16:03] Not one inch or one and a quarter inches those undersized jobs are so cheap and flimsy They nearly always spring a leak eventually at the joints And if you find something like that under the sink for all to see you can bet that the plumbing in the walls and under The cement slab are all undersized and definitely not to code and no matter how good a deal you think you're getting in a few years you're gonna be sorry, especially if you've got a family and there's more than one or two People in the house using the plumbing and remember if the plumbing is undersized You know they cut corners on the concrete on the block on the rebar anything and everything they could get away with now Here's another thing you should take note of if you're a prospective buyer of existing housing Check out the actual size of the sinks in the toilets because down here
[16:51] they actually come in a couple of different versions normal size like we're used to up in the states and What I call child size or three-quarter size not a good fit for the average American But let me tell you now sometimes they put in one of these pint-sized sinks because the bathroom is just really small Just one sink like that in an isolated bathroom shouldn't rule out you thinking about buying that house But if every sink and toilet in the house is kitty sized you got a problem Because when the folks come down from Cleveland to visit I guarantee there will be some wailing and gnashing of teeth when duty calls Now you have to remember those pint-sized toilets and sinks do match the average Latin American Physique quite adequately considering the average Latin American guys about five foot four and a hundred forty pounds
[17:37] Until they discover that cheap junk food then all bets are off in the keister department Anyway, do keep an eye out for pint-sized toilet facilities That should throw up a red flag for you And now I would be remiss if I didn't mention just a little bit about bidets Sometimes when you're looking at upscale houses in Latin America ones that at first glance seem pretty first-world inside and out Anyway, every so often you'll find at these upscale houses have jacuzzis and bidets. Actually, they're jacuzzi clones I've never actually seen a jacuzzi brand name down here Rest assured if they got a jacuzzi clone in a bidet They're plumbing and all the water pipes were constructed to first-world codes all the way And by the way, Latin Americans even wealthy Latin Americans don't know what a bidet is for
[18:24] Even though there might be one or two of them in the house In fact, I've been into some nice older Latin houses that had bidets and in one of those houses The bidet was serving as a receptacle for a nice potted palm and in another house in the same neighborhood By the way a wealthy neighborhood. I saw the bidet being used as a stand for the parrot cage So the question is why do some wealthy people have bidets yet? They're either never used or used for very odd purposes Well, that's because wealthy folks who occasionally travel to Spain a trek back to the homeland, you know You see in old world Europe There are a lot of old stately homes with bidets and wealthy lands who are all about the show have to keep up with the Jones's Or the Garcia's so they get their own bidets installed even though you can bet they really don't know what they're for
[19:13] But the nice thing is if you do see one of those things in a home that's been put up for sale You can bet that house has been built the first world code Okay, enough about that. Let's move on Now it's time for a little story the other day expat Eddie wrote me into going with him to see his doctor in a big Medical complex in El Salvador now It really wasn't about him seeing the doctor not for any medical treatment. Anyway, you see Eddie has this idea in the main lobby of this Big medical complex. There's a pharmacy a tiny little coffee shop and a small little one-person branch bank Now Eddie had this brainstorm. He wants to put a little sushi kiosk in that lobby Now there's a ton of traffic in this medical building It's got about seven floors and even has an outpatient hospital and I counted about 50 different
[20:03] Specialists who have their offices in that building. So it's got a ton of traffic and Eddie really does have a good idea It's all about that first-world gringo advantage again. He sees an opportunity where no one else has anyway Eddie says we have to visit this certain doctor It's that this doctor is an original investor in this medical building and he's on the board of directors So Eddie's there to bounce his sushi bar proposal off this guy because he's the one that can make it happen Though Eddie will probably have to cut this guy in for a percentage because that's the way it works down here Now I have mentioned this is a very upscale medical complex only a couple years old and first world all the way It's all private with nice late model cars in the parking lot Just a kind of market that Eddie knows works well for his little sushi bars
[20:50] After all only first world wannabes with a little extra spending money even know what sushi is Like Eddie says his little sushi bars are not about stuffing yourself to get full There are more places to see and be seen rather than chow down Eddie serves the same market as the gringo wannabes who hang out at Starbucks and like Eddie says unless the foods free No one ever stuffs himself at a sushi bar. He's got a point there, you know So anyway, we're sitting in the lobby of this doctor's office on the sixth floor It's mahogany and glass first world all the way with a spectacular view then suddenly two very hot-looking Airlines stewardesses walk in you know pulling their little luggage carts behind them Navy blue matching uniforms and all and they sat down a couple of chairs away from Eddie and I
[21:37] Taking their turns waiting to see the doctor too. Oh and I forgot to tell you this is a plastic surgeon's office And of course Eddie elbows me and says under his breath in English Ten bucks says one on the left had a nose job one on the right boobs and lipo and I turned to him and said Good call Eddie. What else would they be here for a shave and a haircut? The So anyway, we're sitting there for about five or ten minutes And I noticed through the glass window out in the hallway by the elevator There were two more good-looking stewardesses pulling their little suitcases along and when Eddie saw those two ladies out in the hall He turned to the two that were sitting with us and he said to them in Spanish, of course Is this like stewardess Tuesday or something? I mean, I count four of you on this floor alone Then one of the ladies just started to laugh
[22:23] She said we're not airline stewardesses We're drug reps and she opened up her little suitcase and it was loaded with drug samples and she explained She was working for Sandoz and her friend was working for Burroughs Welcome to the biggest international drug companies in the world and as we started talking to them We realized this was one of the best scams we ever heard of something that never could have taken place up in the first world Anti-discrimination and equal opportunity laws with just never have allowed it turns out these drug companies hire these beautiful female Models and turn them into drug reps because they know that doctors will drop everything when a beautiful girls knocking on the door Yep, you gotta hand it to those drug companies. All right, they've got the pulse of the macho Latin world
[23:10] That's for sure And I did ask those ladies what it was like being a drug rep down here and I found out they make about 800 to a thousand bucks a month, which is a lot of money in these parts And yes, they do have expense accounts to take doctors to lunch and give them little gifts Just like up in the first world, but it's not near the sophisticated bribery and coercion that goes on up in Boston and Cleveland The doctors don't get free trips to Maui or Jamaica or get comped for golf weekends at international resorts Because of the extremely low cost of medical treatment down here as well as the very low cost of drugs and the fact that doctors Aren't into prescribing a lot of medications. The drug companies do not have a stranglehold on doctors In fact, they don't have much of a hold on them at all Sure They hand out freebie samples of these drugs that these beautiful drug reps push
[24:00] But the drug rep and doctor relationship is not at all sophisticated like it is up in the first world Whereas we all know doctors up there actually get kickbacks from drug companies depending on what brands of drugs they push But due to the usual lag time phenomena that stuff just hasn't happened down here yet Not that the big drug companies aren't gearing up for it They are but remember Latin America is the land of dirt cheap generic drugs So these big monster drug companies like Novartis Sandoz and Abbott's laboratory really have their work cut out for them But they do have a foolproof plan now, don't they? I mean what doctor wouldn't make a little extra time in his day when a girl like that knocks on his door Remember, this is macho Latin America. It's easy to brush off a nerdy guy with his suitcase full of drug samples
[24:50] These Latin doctors are dedicated professionals, but beneath all that there's still Latin males So anyway, did Eddie finally make a deal with the doc to put in his sushi bar? Did he have to cut the doc in for a piece? Well, it turns out that day. We never did get that far Why because it was getting around lunchtime and guess what those two beautiful young girls took precedence over the likes of Eddie and me Go figure so that doc rescheduled with Eddie and made his apologies But there was a lesson learned next time Eddie says he's bringing his girlfriend and being that she's a model a Swimsuit model Eddie believes he'll have that sushi bar project in the bag. Oh and before we finish off today I've got some news about taxes in Latin America according to the Inter-American
[25:36] Economic Administration Commission they put together a list charting the average tax burden for all 20 Latin American countries Just like you might have figured the countries with the very highest tax burdens are chilly Panama Costa Rica and Argentina With their people having a combined tax up from 32 to 34 percent of their income and that includes all taxes combined income tax vat utility taxes and gas taxes and alike which is still below the more than 50 percent combined taxes the average North American and European pays But the big surprise is that Brazil also appears as a high-tax Latin country It comes in at 34 percent combined taxes for the average Brazilian Now the Latin countries that appear at the other end of the spectrum the very low combined tax countries
[26:26] Those countries are the Dominican Republic, Guatemala, Nicaragua, Honduras, Salvador, Bolivia, Paraguay and Peru and these countries have a very low combined tax rate of between 12 and 13% of the average taxpayers income yet another good reason you should be making your plans to come on down But it is a good idea to avoid Chile Panama Costa Rica Argentina and now Brazil now before I finish here I'd like to make an announcement or two due to a little unforeseen schedule shuffling I have two maybe three openings for my Latin American seminar that takes place in mid January So if you're interested go to expat wisdom calm and click on the seminar link and just a quick update to loyal listeners If you want to listen to and read more about the expat life
[27:14] Especially how to live the good life off the tourist trail Just touch base with our growing expat community and search for expat wisdom on Facebook or Twitter It would be great to have you guys following along on those sites, too So again, just search for expat wisdom on Facebook or Twitter South of the border down Mexico way That's 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 See you next time