#200 – The Expat Files 200: 200 Episodes and the Cost of Living in Ecuador

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 Got a few announcements today before I get started one is guess what? This is my 200th show on PRN never thought I had it in me And if anybody out there thinks I've run out of topics Well forget about it if you saw my desk right now

[00:48] You'd see on my right a stack of articles and notebooks and papers so big I could do another 2000 shows without ever stepping one foot out of my little portable studio deep in the heart of Latin America and where am I recording today? Well, I'm right between the edge of a jungle on one side of me There's a couple of dormant volcanoes and on the other side a giant coffee plantation All that and with a nice mix of parrots to cans or kids and all and you wonder why big city expats love it So much down here. It's a no-brainer talk about low stress levels And what are the downsides there must be downsides, right? Well, I guess it's those parrots they can get awful noisy in the morning when you're trying to sleep, you know And when those coffee beans start ripening the whole area from miles around start smelling like well

[01:38] Fresh roasted coffee. I guess you got to take the good with the bad, right? But you know what they say life is tough all over Anyway, I just like to repeat that as far as PRN goes I've been there two years now with 200 shows and you could get them all on the archives So if you're interested in some of the things we talked about in the past check them out Next I'd like to report that my expat wisdom seminar coming up in January is almost filled now as of the date I'm recording this there's only two spots left. That's two left out of the allotted maximum of 24 people that I'm taking So if you're interested in coming down for a real adventure Just go to expat wisdom calm and click on the seminar link Oh and by the way for all you ladies who are hesitant who are on the fence about coming down alone to the seminar because you're single

[02:28] I mean surely if you mentioned it at all You've been bombarded with negatives from your friends who've never been down of course And then there's that good old US State Department website malarkey Well, I'd just like to let you know that seven women have signed up for the seminar ready Which is just under a third of the 24 places allotted for the trip So you expat want to be ladies who are thinking about coming down to the seminar remember you won't be alone not by any means Now today, I'd like to talk about a subject. I get a lot of emails about that is living retiring or doing business down in Ecuador And why all the questions about Ecuador you might ask well That's because lately a lot of these big internet sites and internet travel magazines like international living have been touting Ecuador as one of the nicest and cheapest places in the world to live work play and or retire or just hang out doing the expat thing and

[03:21] Since in the last few years has been such a big push on Ecuador on the internet and from these magazines Naturally because of such positive marketing the gringos and the Europeans have been moving in in fact lately I've heard that more than three percent of Ecuador's total population are first world foreigners Nearly all of them heading for the three biggest cities why a kill Quenca and Quito now for me The only two city options that have all the creature comforts of first world person might like are Quito and Quenca And they're also at high elevations so you get pretty nice weather though for at least half of the year It's a little too chilly for some people and why a kill That's a busy seaport with a couple million people and personally I don't like it much at all simply because it's too damn hot all the time

[04:07] Why do you think they call it Ecuador that means equator right and the two hottest places on earth are? equatorial regions like Ecuador and deserts Now I ask you what first world expat in their right mind would want to live in a city that has 85 to 100 plus degree Fahrenheit temperatures all year round and during the rainy season Which is a half a year long you get that heat with nearly a hundred percent humidity though during the half of the year That's called the dry season. You just get the heat and not the humidity Anyway, you know my preference is the Altiplano those perfect little cities in Latin America that are over 3,000 feet in elevation and because of that they've got spring like weather all year round and Quito and Quenca qualified nicely in that regard now if you've been getting these international living reports and such

[04:58] Talking about that very low cost of living in Ecuador well I've got some news for you You can take those prices that international living's been talking about and toss them in the round file or the in a doro which is Spanish for toilet because prices have gone way up and what those big internet magazines have failed to tell you all these years is That nearly everything that's imported from the first world or the Orient except for China of course Which is a special case anyway? Most anything imported from the first world is gonna come in at around double the price you pay up in the first world for the same Thing in other words in that regard Ecuador is very expensive Okay, so what you say so I won't buy imported products. I'll move down to Ecuador and buy local well

[05:47] That's a good plan, but sort of impractical now It's not that Ecuador doesn't make a lot of its own products or the neighboring countries Which have low tax trade agreements amongst themselves, but if you take a look around your house anywhere in the world You'll see TVs and appliances made by Samsung LG Whirlpool Sony Panasonic and all that stuff comes imported not to mention Ecuador doesn't produce cars So they're almost twice the price of what we pay up in the first world for the same thing, too and yeah, your basic raw materials like nails and wood and steel and concrete and Low-tech stuff like plywood bricks and plastic PVC tubing and wire of course are made locally in Ecuador So that stuff's gonna be cheap really cheap and food and produce cheap really cheap, too

[06:35] But not any cheaper at all then the rest of the Latin countries I talk about that are off the tourist trail like Honduras, Guatemala, Bolivia, Salvador, Nicaragua, etc However, when you buy imported products in those countries Let's say for example a computer a Samsung or a Toshiba or a compact or a Sony Well, then you'll pay just slightly more than the average first world price maybe 10 to 25 percent That's because in those countries import taxes are much lower than that of Ecuador same with cars In fact, sometimes you'll get the cars at the same price as they sell them in the first world Just remember the average first world person's house is loaded with first world high and medium technology I mean you wouldn't exactly call a trash compactor or a garbage disposal or a dishwasher or electric drill high-tech

[07:22] But Ecuador being such a small country of about only 15 million people does not produce any of that stuff themselves And don't think you can avoid it by shipping all that stuff down from your house in the States in a container that Containers got to go a long way Remember you're not shipping it to Mexico or Belize your shipping costs are more than likely going to be double Compared to shipping a container to Central America to a country like Honduras or Nicaragua So let me ask you this Can you justify paying an extra four or five thousand dollars to ship a container down to Cuenca? Just to get your TVs and your computers and your appliances in there to save the high cost of buying them in Ecuador Well for that extra five grand you could probably buy nearly all of those Appliances down in Ecuador brand-new and get the full warranty on them too because you're buying them new

[08:08] So yeah, do have to consider that My advice is for anyone doing the expat thing to South America forget about the shipping containers come on down and buy things here Now the cost of furniture furnishings artworks and decorations down here can be as little as 20 to 25 percent of what you pay For the same quality items up in the first world, but that's also true in the places I recommend in Central America So with that there's no advantage to living in Ecuador either now I noticed all over the internet these days that there are lists of the most and least expensive places in the world to retire and Ecuador always comes out as one of the least expensive places on that list and they give you a good number of cost of living Examples and all I've got to say is that data is not current Let me tell you what some of the consumer prices are this month in Cuenca Ecuador

[08:58] Not two or more years ago like international living and a lot of those other internet sources get their numbers first Let's talk about renting an apartment because let's face it That's what you're gonna do if you're coming down looking to be a permanent expat now in the city center close to the historic districts That's where everybody wants to be by the way because it is a UNESCO World Heritage site And it's very beautiful there kind of like an old 17th century Colonial cobblestone village that you'd imagine would be in Spain somewhere not in South America Anyway in those most desirable sections of town you're gonna be able to get a one-bedroom Apartment with first world or near first world style amenities for about 400 to 600 bucks a month now if you want to go cheaper You can go outside the city center And it gets cheaper fast about a 10 or 15 minute walk away from the city center

[09:46] You're gonna be able to get a one-bedroom apartment somewhat first world style for about 200 to 400 bucks a month and by the way about a third of these places will include your water and your cable TV And about a quarter of these places will include everything Water cable TV electric and garbage pickup now if you want a three-bedroom apartment in the city center first world style You're gonna pay anywhere from 900 to 1200 a month And it really drops off as you get 10 or 15 minutes out of the center You can get a nice three-bedroom for four to six hundred bucks on the outskirts of the city center But still within walking distance or a short cab drive away from it and as far as cab rides go I know that some of the websites say that it's between a buck fifty to three or four bucks a cab ride Anywhere in the city, but that's not true anymore. That's old information now. You're gonna pay double that or more

[10:38] So what if you want to buy an apartment or a house? Well it breaks down like this for a modern first world style apartment nothing fancy. You're gonna pay anywhere from 75 to a hundred dollars a square foot It's about the same inside or outside the city center for new construction And you might ask who are buying these things well It's not the locals because they only make about 300 bucks a month what you have is a lot of Europeans coming in and a certain amount of gringos because with International living and all those websites people are catching on and you know what just five years ago those construction prices I gave you like 75 to 90 bucks a square foot were half of that about 40 to 45 bucks a square foot So what's caused that change why the popularity with first world gringos and Europeans of course that gringo dollar chasing down high-end real estate

[11:27] I should say it's not really high-end elegant, but the locals sure can't afford it now Here's something I have to mention if you talk to any one of the locals even the middle and upper middle-class Locals the ones who wear suits to work and have white color jobs They'll tell you that their city and their country has become very expensive lately compared to just two or three years ago And they're not at all happy about it one friend of mine a local lawyer who lives down there says this he says I love my country and I love Cuenca But the prices are so high on property and rentals these days that it seems to be getting impossible for some of my American clients receiving social security checks to retire in style down here and Initially a few years ago. That was why they came down in the first place He says gringo land is slowly invading the cities in Ecuador and many of the condos and apartments that were only

[12:19] 250 to 400 dollars a month two or three years ago are now 700 to 800 dollars a month and that's just for a two-bath and two-bedroom of course those prices are all relative The costs and prices. I'm giving you right now seem very cheap up in Boston or Cleveland now Don't they probably less than half of what you're paying I bet but you see the point I'm getting at is that Ecuador is no longer that Absolutely dirt cheap place one of the cheapest in the world to retire like all those internet blogs and articles have been saying for The last couple years in fact I can prove that there are actually cheaper places to retire in Latin America than Ecuador But we won't be splitting hairs here sure it's still a great deal But you can get just about the same deal or even better if you're in Honduras, Nicaragua, Guatemala

[13:06] Belize Bolivia Peru Just about anywhere off the gringo tourist trail, and that's the key phrase off the gringo tourist trail So as it stands right now as a retirement haven There's nothing special about Ecuador the fact is Ecuador is slowly becoming a destination on the gringo tourist trail And you know what that means and that's easy enough to prove now You might say there's not many gringos or first world Europeans there yet since first world foreigners represent just slightly over 3% of the population Well just consider this statistic then did you know that only a half of 1% of the people living in Nicaragua our First world foreigners in other words Ecuador has more than six times as many first world foreigners Living permanently in the country than Nicaragua does so what kind of influence does that have on the general economy in?

[13:58] Nicaragua very little effect, but whatever that effect might be it's six times as much in Ecuador You see what I'm getting at the same thing goes for Guatemala Bolivia Honduras Paraguay Belize Salvador and nearly every other Latin American country off the tourist trail in all the countries I just mentioned less than 1% of the total population Consists of foreign first world expats so they virtually have no influence on the economy except in the tourist areas now For example Bolivian Peru are considered very inexpensive But since Peru gets a lot more first world visitors because of Machu Picchu in the Inca ruins It turns out that Bolivia because it gets so few gringo tourist dollars is a bit cheaper than Peru its neighbor in almost every way

[14:45] And when you do get to the tourist areas like Machu Picchu look out That's where the first world prices kick in whereas in Bolivia the only first worlders I ever ran into down there were the occasional European Backpackers and the odd first world European and American Businessmen who were there because of the minerals and the oil and mining industries But first world businessmen are only there for their transnational interests, so remember this Bolivia like its neighbor Paraguay is way off the tourist track There's so few first world gringo tourists or first worlders living there that they don't affect the economy much at all That's why Paraguay and Bolivia remain so amazingly inexpensive to this day Anyway, let's get back to Ecuador now. Here's some interesting inflation numbers. Did you know that overall in 2009 prices went up 12% and

[15:34] in 2010 they went up 13% and in 2011 they went up 16% in 2012 another 15% that's over 55 percent inflation in four years by government statistics And you know governments they always lie and underestimate bad economic trends like inflation And though to first worlders things in Ecuador still look very cheap right now Relatively speaking, but if the trend continues in another three or four years, it'll be another 50% inflation So what's the cause of all this inflation? Well for one since the year 2000 Ecuador has been using the US dollar as their currency which is the ultimate in funny money and always steadily losing purchasing power itself and Secondly a few years ago the Ecuadorian government passed a new series of heavy import taxes

[16:25] And like I said Ecuador is a small country of 15 million and they don't produce any medium or high-tech Items themselves that stuffs all got to be imported For example, if you want to build a first world style house or apartment and you want some nice Dependable sinks and faucets and window and door hardware that stuffs all imported So if you want a Yale or a slag lock or an American Standard or a coal or sink You're gonna pay twice as much down here Then you're gonna pay up in the first world for the very same thing and that's even when you consider that Argentina Brazil Colombia and Chile all do have transnational manufacturing facilities in those countries They actually produce products like Whirlpool Stanley and American Standard But still Ecuador hits them hard with taxes because they're imported now as for the cost of living for expats in Ecuador

[17:15] Here's a statement from a long-term expat gringo friend. I know who lives down in Cuenca He says that gringos and European expats are almost always responsible for jacking up the prices of housing units and rentals He says from what he sees gringos are stupid when it comes to rentals They generally pay 20% or more than they have to they just don't know how to bargain They don't come from a culture of haggling So they accept the price as it's dated in the paper or in the real estate listings when it says apartment for rent $550 he says a local can almost always get it for 400 and the northern European immigrants are the same They too generally end up paying the going price, but the southern Europeans the Portuguese Spaniards Italians and Greeks

[18:00] There are no pushovers. They know how to haggle anyway As a result landlords with high-end properties the kinds that gringos and first-world Europeans will rent They almost always overprice them in the market they know fresh new gringo and European expats are bound to pay their price because compared to American and European housing and rental prices they still look like a real bargain and my friend says he heard from one of the real estate guys He knows that 20% of all the apartments in Cuenca are owned or rented by gringos or first-world Europeans and though that doesn't sound like a big percentage Think of this only about 30 to 35 percent of all apartments in Cuenca are actually Suitable for first-world people that is they have all the first-world amenities and they're in neighborhoods that are safe have good parking security

[18:51] And are close to nice secure convenient shopping So that means over half of all the first-world style apartments in Cuenca are occupied or rented by first-world Europeans or gringos Already which means there's tremendous upward pressure on prices as compared to let's say living in the city of Managua Nicaragua there are so few expats and gringos and first-world people living there that the first-world style Apartment and housing markets are virtually unaffected by gringos and their dollars in fact in Managua Realtors will tell you that less than 5% of all the first-world style housing and apartments are owned or rented by foreigners That means 95% of the high-end first-world style rentals are occupied by upper-middle class and wealthier locals

[19:37] Not foreigners, which means little or no price pressure or speculation coming from the outside Now I'm not saying that Ecuador is going to become the next Costa Rica Panama It's impossible. It just can't with the distance and the logistics and the cost of the airfare It's just not going to happen But it just shows you what the power of internet marketing can do in the last few years They've marketed the hell out of Ecuador just like they did Panama Costa Rica and Uruguay and now it's a supply and demand issue There's more demand for first-world housing than supply so my suggestion is if you really want to move to Ecuador and it is a great place really and Still much cheaper than anything up in the first world Well, I suggest you buy land and you build but build a duplex or multiple unit because it is a supply and demand issue

[20:24] So why not play it smart and be part of the supply instead of the demand since for now the equation is so lopsided Though as a counterpoint to this I have to say that one of my friends in Ecuador is telling me he believes that very shortly There will be enough supply because a lot of high-end housing units are coming online He says a lot of smart narco cash monies coming in from Venezuela, Colombia, and Peru and that cash money has to find a nice Easy convenient place to settle and the shortage of high-end units in the cities in Ecuador is just the place for it So it's your call if you want to build a multiple unit there or not But for my money for the next couple of years, it does look like a very good idea And another question that often comes up if you want to buy or build is can you get the Ecuadorian banks to finance?

[21:09] Yeah, well normally if you walk in as a gringo, even if you've got a nice big bank account there and put 30% down You're not gonna get a loan But if you have a good relationship with a local lawyer and you've created an SA corporation Your lawyer will introduce you to the right people at his bank and since your SA corporation will have accounts at that bank, too Despite what you've heard you often will be able to get bank financing. However, it's not such a great deal You have to put at least 30% down and you'll pay 8 to 12 percent interest per year on a 5 10 or 15 year note Now I don't know about you But the ideal goal of every expat is to have no debt no credit card business house or car debt, etc So why in the world if you're escaping that first world treadmill, would you want to jump on another treadmill down here?

[21:58] Sure, it's a slower nicer treadmill But nevertheless any kind of mortgage is a treadmill now, isn't it? But you know with all the emails I get from people asking me about bank financing and credit in general Obviously, there is some interest in jumping back on that treadmill now, isn't there tell you the truth. I don't get it I believe if you really take the expat leap don't sign on the dotted line for more interest payments The point is to rent a little while at least six months and get a good idea. What's your new country's like? Especially the real estate market and like I said down here throughout Latin America a lot of the medium to big cities have their own little mini real estate bubbles going including Cuenca and Quito and True, these bubbles are nothing like they were in the states

[22:43] But there has been heavy overbuilding in the middle to upper middle class segments of the housing markets in dozens of Latin American medium to big cities and that means a big over supply of first world style housing which Translates to lots and lots of unsold and empty units. So my advice again is to hold on a year or two before you buy anything There's gonna be a lot of desperate sellers out there. Believe me. It's starting already Just have a look at all the foreclosures that are starting to appear in the big Latin American daily newspapers I never saw stuff like that three or four years ago, and it's a sign of what's to come So my advice come down rent sit back and wait a while Even now the desperation is setting in with some people and great deals are to be had But you're not gonna find any of that stuff on the internet

[23:30] You have to come down here and get your boots on the ground and take a look around and sniff things out for yourself And by the way, your lawyer will be a very good real estate connection to in his business and all the people he deals with He'll hear about desperate people and foreclosures too often before they ever hit the papers So just tell him to keep his eyes open for you He'll know when something good comes along, but let's get back to the cost of living in Ecuador Let's talk about common usage things now. How about beer? Well, you can get a domestic beer still at a restaurant for a little over a buck and an imported beer for about two bucks And that's at a downscale or middle-range restaurant now beer may be cheap But if you buy coke or a Pepsi or bottled water or coffee or a cappuccino

[24:15] You're still gonna pay anywhere from a buck and a half to 250 cheap compared to first world prices But not cheap compared to other Latin American countries about the same or even more expensive in some cases but then again as you get out of the big cities those prices will often drop to a third less and Like I mentioned in a past show if you go to a McDonald's or any transnational franchise You're gonna pay the same prices as they are in the States like three to four bucks for a combo and by the way I never recommend those fast food joints Anyway, the local homegrown mom-and-pop restaurants here have great fresh unadulterated food at half the price of those fast food restaurants now a liter of milk will cost you a buck 25 a loaf of bread about 250 a dozen eggs about 250 fast internet service about 50 bucks a month. No great deals there, right?

[25:06] Complete utilities for a one-bedroom apartment about 50 bucks a month a pair of locally made leather shoes Maybe 30 bucks and a pair of real Nikes about a hundred bucks No deals there either, right a pair of locally made jeans 20 bucks a pair of real Levi's are known brand name Maybe 75 to 100 bucks. That's because imported stuff is expensive and your local telephone calls on a prepaid phone call About 20 cents a minute though They have certain days where you get three times the minutes for your money and gasoline Like I said fluctuates between four and five bucks a gallon and to ride the city bus It's about 25 cents for a trip, which is about the same throughout Latin America We're talking basically chicken buses here, which I don't recommend as you know

[25:53] Now at the grocery store you're looking at two and a half bucks a pound for chicken breasts about 60 cents a pound for tomatoes The same for potatoes and about two and a half bucks a pound for the local cheese Which by the way a lot of us expats can never seem to get used to it's not like a solid brick of parmesan Monster or cheddar cheese. It's more like this crumbly stuff that falls apart in your hands not the kind of cheese We're used to and if you want to join a first world style health club It's gonna cost you about thirty dollars a month And if you go to a first-run movie It'll cost you four or five bucks and almost all the new ones out of Hollywood are in English with Spanish subtitles So as you can see prices are a lot cheaper than they are in the first world But not much of a deal at all compared to other Latin countries off the tourist trail

[26:38] But I have to admit two or three years ago. That wasn't the case They were noticeably lower than most all of Latin America. So would I pick Ecuador as an expat? Well, it's nice. All right, but not the dirt cheap country You've been reading about and one more thing there's a rumor going around that there's two women for every man in Ecuador You hear that rumor about every Latin country, but funny thing is it's never the Latin country you happen to be in for example I was told more than once that in Dominican Republic There were twice as many women as men and when I passed that rumor on to expat Eddie He took a side trip to Santo Domingo, but the people there said you must be confusing us with Venezuela So Eddie took a trip to Caracas and the people said no not here. You're confusing us with Costa Rica

[27:25] Now Eddie says it's like that pot of gold at the end of the rainbow. We all know the story, but nobody ever collects 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 See you next time She was a picture