#130 – The Expat Files: Privacy, Pensionnados, and Life in Latin America

Automatically transcribed from the original recording; names and wording may contain errors.

[00:03] 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, not the version they give you in those glossy travel magazines, or the picture they paint for you in those international traveler websites, where they're only trying to sell you something. What's it really like for expats living in Latin America? Well, it's time to take off those rose colored glasses and find out. So let's get started. I want to start out this program today by saying that one of the major reasons people want to get out of the United States and move to Latin America is to get away from Big Brother. Kind of lower your profile, get off the radar, get off of mailing lists and away from email

[00:48] spammers and cold callers. Get your name way down on the list of Google searches. Try to get it in the eighth or ninth or tenth page if you can. By the way, did you ever try to Google yourself? Go ahead, you'll be surprised. These days anybody with a half a brain can find anything on anybody. Divorces, car loans, credit ratings, marriages by mitzvahs, bankruptcies. Ah, but you see, when you move to Latin America or any third world country, you can if you want if you plan it right. Pretty much start off with a clean slate. And there's nothing strange or illegal about that, although people up in the first world might think you're nuts for even wanting to leave the comforts of Cleveland. And I think you'll come back with your tail between your legs when you come to your senses. When all along, you and I know that down here in the third world where I sit, with my pina colada in a coconut on my nice fancy beach chair, I can sit here nice and calm and watch

[01:36] the first world implode. And I'm far enough away so that the shrapnel won't hit me. Oh, I won't get away unscathed. I'll feel the heat and the breeze as the first world tumbles down. I might fall off my beach chair, but I'll have a soft landing in the sand. I'm far enough away to be pretty safe. And of course, you're not. And if you think you're ready for what's about to come down up in the first world, just ask yourself how self-sufficient you really are. What's going to happen to you and your family if your power goes out for two or three days at a time? I sure would be worried if I was living in a big city in the first world right now. Are you close to an area where a lot of the people are on public aid? What's going to happen with all those people in the projects when their power goes out and their water doesn't come out of the faucet anymore and their checks bounce? Are you going to be within walking distance of those folks when they get angry?

[02:24] What about your own neighbors? What's going to happen when they don't have gas for their stoves or their furnaces? What are you going to do? Dial 911? Good luck. There'll be 100,000 other people dialing 911 too, just as you're doing it. Meanwhile, I'm sitting down here in Latin America watching things deteriorate day by day up in the first world. While down here, things seem to remain the same. And when change does come, it comes very, very slowly, almost imperceptibly. Which is why I really don't understand why people send me emails still talking about Panama and Costa Rica as destinations of choice for them when they leave the first world. I always thought that people up in the states who chucked it all to come down here to the third world had just about enough of Big Brother and the nanny state that monitors every move that you make. So why would you want to come down here and face the same thing?

[03:11] Well, you'll be walking right into Big Brother's arms. If you go to Chile, Costa Rica, Argentina, and Panama, those four countries have high taxes, big governments, big deficits, and bureaucracies that are growing by leaps and bounds. They're in effect trying to copy everything first world because how else are you going to attain that status? At least that's how their governments view it. They think the fastest road to becoming first world is by copying everything they can get their hands on that comes out of the first world, including of course, Big Brother legislation. So meanwhile, if you relocate to one of those four countries, you're jumping right back into the frying pan. And admittedly, their version of Big Brother is not sophisticated like ours, not just yet. It's rolling along alright and increasing slowly but surely. And for all intents and purposes, it's still back, I'd say about where the United States

[04:01] was back in the 1990s, but it's catching up fast. And one sure way for a first world expat to jump right back into the Big Brother frying pan is to get into one of those pensionnado programs like they have in Chile, Costa Rica, and Panama. And I get emails about that stuff all the time. People talking about getting into those pensionnado programs thinking that you get some big time advantage by applying to one of those programs when what you're really doing is giving them all your detailed financial and personal information just to get your two year residency on a so-called fast track. And if you do that, you might as well put all that stuff up on Facebook because you're never going to get your privacy back. The pensionnado programs in those countries used to offer expats quite a few advantages. That was back when those countries were quite undeveloped and they needed an influx of first

[04:49] world gringos to bring in some dollars and get some investing going. Twenty or thirty years ago, the Panama and Costa Rica pensionnado program actually did give expats who settled down there tax advantages and more, including national health care benefits and tax-free importation of cars, furniture, and household items and a short road to residency. But nowadays you have to jump through so many hoops to get into a pensionnado program that it's not worth it, really. Years ago, all you had to do was transfer some money down to Costa Rica or Panama. A hundred to two hundred thousand dollars would have done it twenty years ago. Or as an alternative, you could have started a brick and mortar business in one of those two countries like a bar, restaurant, or a tourist business, hired a few locals and you were in like Flint, because back then the government would bend over backwards if a foreigner came in and hired local help.

[05:36] Even if you had two employees and a brick and mortar business, you qualified for the pensionnado program. And I was in Costa Rica back then. All I had to do, my lawyer told me, was get a police report from my hometown in the United States saying I wasn't some kind of international criminal or fugitive. A simple letter from a local sheriff would have done it. But nowadays, look out. To get into those pensionnado programs, you're going to not only have to invest in the country, maybe buy a house worth a hundred fifty or two hundred thousand dollars, and or open a business for the same amount or more, but you'll have to prove that you get an outside income of at least two thousand dollars a month, coming from some kind of annuity or a bank account or a pension or a trust fund from a crazy rich uncle or something substantial like that.

[06:21] And you'll have to give them credit reports and references and police reports, even reports from the FBI saying that you're not an international fugitive, you're not on the run, you don't have any judgments or cases pending against you, and just a whole list of things you have to do to apply for that pensionnado program. So if you do go that route, you just put yourself at the top of the Big Brother list in one of those four Latin American countries whose government has decided it's a good thing to copy everything and anything that comes out of the first world, including Big Brother and the monitoring of its citizens. And here's something I bet you didn't know, guess what Latin American country has the most surveillance cameras per capita? And I'm talking about public surveillance cameras run by the government. Costa Rica. Do you know what country has the second most? Panama.

[07:07] Argentina is the third and then comes Chile. Does that give you an idea what's happening down there? And here's a little bit of news for you, did you know that Costa Rica just placed an order for 4,000 more surveillance cameras? And those are just for the traffic and transit division in San Jose, and that's a city of only about 400,000 people. I mean, look, Milwaukee, Wisconsin's got twice as many people, and Milwaukee's got less than half the surveillance cameras that San Jose, Costa Rica has. And talking about Panama, I don't know why it's such a big deal on those international traveler websites right now. The only thing I can figure is they've got some land and condos to sell you. To tell you the truth, I lived in Panama for a while and I just couldn't take it. It's just too damn hot. Sure, it's got some terrific beaches. And the great dream of everyone who lives up north in the United States snow belt is

[07:54] to live the life of Riley swinging on a hammock on a beach in the tropics. And of course, Panama fits that bill perfectly. But after you're down there about four to six months with a constant film of sweat on your body and 24-hour ring around the armpit, and if that isn't irritating enough, the only time you can get any real work done outside, if you're so inclined, is before nine o'clock in the morning and after five at night because it's so hot that when you have to go out, you spend all your time looking for shade trees to duck under. Because if you're in the direct sun even for 20 seconds, it's a killer. Anyway, that dream of laying around a tropical beach and sucking pina coladas out of a cut coconut shell. Well, that's a great fantasy, but I've done it, and believe me, if you don't have some kind of air-conditioned retreat to go to, at least at night, so you don't have a sweat-soaked

[08:42] bed every morning, anyway, if you don't have a certain minimum daily dose of AC, you get to start thinking that that kind of paradise is actually on the edge of hell. And sure, you can air-condition your house or your office or any place you want, but then you're looking at air-conditioning bills of a few hundred bucks a month, which, where a lot of expats, ends up being their biggest monthly expense. And another thing you find out in a hurry is that you don't have a lot of energy when it's hot like that all the time. Oh, the natives have plenty of energy, alright, and it's hard to believe how well they can take the sun. They've got it in their bloodline, and they've been down for generations and generations, just like we can take Chicago cold, and they can't. But you and me? Forget it. And if you don't believe that, Expat Eddie once made me a bet that I couldn't even cut my own front lawn when the sun was up with a power mower, and he was right, I couldn't

[09:30] do it. And the size of my front lawn was no great shakes, either. Now, all you people up there who live in the southern states, like Florida and Texas and South California and Louisiana, I know what you're thinking. You're thinking, I can take the heat, I live in the south, Johnny's just a wimp. Now, here's something to consider. Did you know that when the Panama Canal was constructed, there were two efforts. The United States finished it, but the French started it. And people say the French quit because they ran out of money. But in reality, if you read any of the books about it, it's because too many people died in the effort. And after the US finally finished it, a total of 27,500 people died in the effort. And less than 5% of those deaths were due to the dangers involved in actually constructing the canal. The other 95% died from sunstroke, exhaustion, insects and disease, mostly yellow fever and

[10:21] malaria. But of course, now we live in the modern world, and that stuff doesn't happen anymore down there. In fact, the Panama skyline is just filled with skyscrapers, and from a distance it looks like any modern city in the first world. And Panama City is a huge metropolitan complex, but you can't walk around during the daytime without frying your brains out. I mean, take a walk downtown Panama City, around lunchtime, and see the hordes of guys in their business suits walking out of their air-conditioned towers, onto the street below and getting hit with that hot blast of 90 to 100 degree air in their business suits at nearly 100% humidity. It's just impossibly uncomfortable, and these guys are sweating their asses off. Which brings me to a second great reason why it's not a good idea to move down to Panama, and why it's an especially bad idea to get into their pensionnado program.

[11:09] Now if you look at the Panama City skyline, you'll see dozens and dozens of high-rise towers. It seems like every bank, trust and insurance company in the world has built a tower down there. And why did that happen? That's because Panama, for so many years, offered one of the best, most air-tight bank secrecy laws in the world. Better than the Bahamas, better than the Cayman Islands, better than Luxembourg, Austria, And because of that, all the international banks came and put down their roots. Because you know, Panama really doesn't have an export-based economy. Instead, they have banking. In fact, they have the second biggest concentration of banks in the world, right after Switzerland. And for a little country of just over 3 million people, where 20% of them live on under 3 bucks a day, and half of the working population makes only 300 bucks a month, doesn't it seem

[11:58] a little funny that Panama City alone has over 75 registered banks, more than half of them where you and I could just walk right in and open an account, and with the other ones you just can't do that. They have offshore banking licenses, and they don't have any tellers or walk-up windows because they deal with international clients with large amounts of money. Those banks are intended for high rollers, not the common rabble like you and me. Okay, so historically, Panama becomes this huge banking center, the second biggest in the world. Why? Because they got tremendous bank secrecy laws, and in fact, if anyone in a bank ever did give up any information at all on one of the clients, there's a big prison sentence and a fine, and that's a law that was actually enforced. And the key word there is WAS enforced, because guess what? In the last year, under heavy pressure from first world governments, Panama has signed

[12:48] a tax information treaty with the United States, and actually it's called the Panama-US Tax Exchange Agreement Treaty. Which means as of 2011, there's absolutely zero bank secrecy in Panama. So all the US Treasury Department has to do is call up a Panama bank and say, please send me a list of every American citizen that has a bank account with you, and tell me how much money they've got on deposit, and how much interest they've earned since they've had an account. And don't forget to give us a list of every transfer and deposit that they've ever made, and in which bank and country that money originated. Now of course that sounds like a big can of worms that's being opened, doesn't it? But just think of this for a second. Because Panama has had such strong bank secrecy laws for so long, it's been on the IRS radar forever, and they're just waiting for a crack at those accounts.

[13:36] They figure there's a lot of untaxed US taxpayer money stored there, and thus a lot of taxes and penalties to collect. So even if you innocently put some money in a Panama bank, because you went down there to retire or get a second home, after reading all those wonderful things about Panama and all those international traveler websites, and you've heard that it's cheap and the people are nice and all that, and that Panama of course offers that great pensionado program that we talked about, where you can get some tax and health care breaks, and it sets you on the fast track to residency down there. Well how about all those tens of thousands of Americans, who came down in the last 20, 25 years, mostly retired Americans, who came in on that pensionado program. Now here's the rub. When they came down, they had to transfer money into a Panama bank just to qualify for

[14:25] the pensionado program, because like I said before, you have to have an outside income of $2,000 a month or more. Not to mention the fact that if you bought a house or a condo down in Panama, you had to buy it by first transferring money down to a Panama bank to do the deal, or through your Panama lawyer's bank account, and when you bought that condo, house, or beachfront property, you most certainly wrote a check out to a Panamanian who you bought that property from, and the check went through his Panama bank to get cleared, because that's how you do land and property deals down in Panama. But since Panama banks were so high on the IRS radar for the past 30 years, because of impenetrable bank secrecy, well guess what? Now that they've signed that tax treaty, they've thrown their doors wide open and invited the IRS in, and now the IRS doesn't even need a court order, and even a court

[15:15] order didn't work in the past, but now they just need to make a phone call, so you can imagine it's only natural that everybody who's got a Panama bank account, even you innocent guys out there, are on the IRS hit list. They've got their fangs out for anyone who's got any connection at all to Panama, which is another good reason to stay away from that place, I mean as a permanent resident, except of course if you want a nice hot tropical vacation, it's a very good place for that. But like Costa Rica, if you want to be in the nice tourist areas and hang around with other gringos, you're going to pay first world prices, so don't expect to get a deal. Okay, now I'd like to move on to something else that comes up a lot, based on the amount of emails I get on a subject. Since I did that show a while back, talking about universities and colleges down in Latin

[16:03] America, explaining basically in a nutshell that the public ones are pure crap, the ones that are run by the state, just like their national healthcare systems, which are miserable too, because of course they're run by the state, but I also said there are some private universities that are absolutely first world in every way, and in fact some of the more expensive bilingual ones, expensive in Latin American terms that is, are pretty much indistinguishable from a good US private university, at about a quarter of the price, or even less. I've been getting quite a few emails on that subject lately, because people are astounded at the skyrocketing costs of college educations in the states and in Europe, and some people who have emailed me, who have young daughters and sons not yet ready for college, are wondering

[16:48] if they're ever going to be able to afford it when their kids are out of high school and ready to go. Since right now, the average yearly tuition of a public university in the United States is between eight and nine thousand dollars a year, and the average yearly tuition cost of a private school in the United States is now thirty thousand a year. Now the way I look at it, it's almost worth moving down to a big city here in Latin America, just to send your kids to college, to a select private school of course, because a lot of them are absolutely first world in quality, and some even have up to twenty-five percent of their staff trained first world teachers and professors. But forget about the public schools, they absolutely suck. I've never seen a single public university that even comes close to giving an education that's equal to your average first world state run university.

[17:35] Public universities on here are just falling apart. They need terrific amounts of maintenance, the water doesn't run, the bathrooms don't work, the windows are broken, everything's grungy and dirty around the edges, and the teaching staff is populated by people who got there not by having good credentials, but by who they know, who they're related to, or which politician or party they've sucked up to. And just like public schools in the first world, it's almost impossible to fire a teacher or professor, and worse yet, they make about twice or more what a private school instructor or professor makes. And I hope that convinces you that you don't want to send your kid to a public school down here, even though believe it or not, Latin American public university costs less than five hundred bucks a year, and you certainly get what you pay for. But the private universities?

[18:22] Like I said, a whole different story. Now take any fairly big Latin American city, let's say one that has about a million people, like Cartagena, Colombia, or Tegucigalpa, Honduras, or Guatemala City, Guatemala, or Panama City, or Valleparaiso, Chile. Now here's how the university thing breaks down for cities like that. Of course, they have their public university, which will have a number of satellites and extensions throughout the country. Just like for example, the state of Wisconsin has the University of Wisconsin Public School, which is seated in the capital city of Madison, Wisconsin. But all throughout Wisconsin cities, they have various extensions, in Racine, in Milwaukee, in Green Bay, in La Crosse. That's what happens in Latin American countries too. They have their big public university and all the extensions,

[19:09] located in the smaller cities and towns throughout the country. And like I said, a year's tuition there is under 500 bucks a year complete. But if you do attend, be sure to bring your own toilet paper. And a bucket of water and maybe your own toilet seat too. On second thought, to be safe, hit the john at your own place before you even go to school. And you should know that the public universities do have all the departments that any big university has, including architecture, engineering, medicine, history, mathematics, and languages. Everything you get in a first world university, but it is not first world quality. In fact, just a few weeks ago, I went to a big public university just to visit the languages department to talk to the English professors there, because naturally they offer university degrees in English. However, when I spoke to the head of the English department,

[19:56] she surprised me by having a very strong accent. The obvious problem with her, the head of the English department, was that she had no first world people like me to talk to, to practice on. All she did was learn her Spanish from other English speaking Spanish people, who learned their English from a book and from other English speaking Spanish people. And if you learn it that way, you never get the accent right, ever. And it wasn't that her English was poor, it was grammatically correct, but she wasn't speaking either British or American English. It was textbook English with a Spanish accent. And I looked around and asked, and I found that there were no teachers that came from the United States or Europe. No first world teachers on staff. And that of course means all the students that take English as their major, learn English with a terrible accent,

[20:43] because you really need native English speakers to converse with to get it right. And because of that, they never get our jokes or our slang either, because you can't learn that from a book. And the way I figure it and the way it looks, it's not that those public universities can't recruit first world English speakers from the States or Europe and put them on staff, it's just that the conditions in those public schools are so ratty, that it would be a big step down for a first world person to admit he even worked there. And I believe that if you took a job down there at one of those universities, sight unseen, through some first world exchange program, or by answering some kind of ad in an international newspaper or magazine, when you got down there and actually saw the place and walked around the campus for a while, I bet that after your first impression, and after you went to the bathroom,

[21:28] you'd jump ship in a hurry and look for a job at a private university instead. So the good news is, those medium and large Latin American cities also have good private universities. There could be a dozen, and the most expensive two or three of those private schools will have at least 20% of their staff filled by first world gringo teachers and professors. Because those two or three high end private schools in any big Latin American city market their universities as 100% bilingual, and they promote the fact that a certain percentage of their teaching staff is actually from the first world. And that's why when you walk around those campuses, people speak English almost as well as you and I do. And some of them actually get our jokes and our humor too, and our slang. And in those top universities, of which there's only about two or three

[22:15] in every city of a million or so, that's where you'll see kids driving nice cars, kids with blackberries and kindles and iPods and bodyguards, because that's where the children of the wealthy go. And most of those children will also speak very good English because they went to a private high school and grade school too, which were also bilingual. And they have been exposed to a certain percentage of first world teachers since they were in kindergarten. And because they are children of the wealthy, they've been to Miami and they've been to Disneyland. And because they hang around with other wealthy kids, a lot of them can be pretty damn snotty and pompous too, because they're in the upper three or four percent of the country's elite. And what do those high end private universities cost in Latin America? About $5,000 a year. About 20 to 25 percent of what you'd pay for the same kind of education

[23:04] up in the first world in a private school. But are these schools really equal to a first world private school education? Yes, they really are, because they have a certain percentage of first world teachers that maintain that standard. Now, of course, they're not on the level of MIT or Berkeley or Stanford or the University of Chicago or Harvard or Yale or Princeton. And they never will be, because these are smaller schools that don't have the money to do big time research. And without a lot of research, the professors don't have much to publish. And you know that all the big universities in the first world pride themselves in how much their professors publish. But you don't get any of that down here. But these high end private universities can hold their own with any big first world private university in the middle range. So the bottom line is this, if you're living up in the first world

[23:51] and you have a kid or two about to start university and you're thinking about sending them to a private first world university, a middle of the road one will cost you about 30,000 a year. But you could send them to one of the top schools down here in Latin America, which are very much equal to the middle of the road private school you had in mind in the first world, except for maybe the football and basketball team. They don't have those down here. Anyway, for a mere 5,000 bucks, you can get a really good education for your kid. And as a bonus, your kid's going to learn Spanish. Not to mention being in a foreign country, he or she is bound to get a little bit more worldly than you in the process. So really, as far as I see it, it's a very good option. So even if you and the rest of your family don't plan on coming down here as expats, you really can't go wrong if you send your kid down here to university,

[24:36] provided you select one of the top three in a medium size or big city. If you do that, it's a win-win situation for you and your kid. Now I mentioned that the top three private schools in any big or medium sized Latin city run around $5,000 a year for tuition. And I also mentioned there are other private universities. Medium and lower tiered ones, distinguished by price. And those less expensive private schools will not have any first world teachers because they just can't afford to recruit and pay them. Not that the top three expensive private universities can pay first world teaching prices, they just can't. They'll only pay about $500 to $1,000 a month for a university professor. But even on those poverty wages, you'd be surprised at how many first world professors accept a year or two down here just to get the experience of being in a foreign country

[25:25] and putting that on their resume. And you'd be even more surprised at how many of them stay down here after their contracts up because they like the lower stress style of living and the weather and the very cheap cost of living. And when they balance all that out, to them, $500 to $1,000 a month isn't that bad at all. And guess what? It doesn't take long for them to find out. They have that special thing I call the gringo advantage, which applies to them too because they're from the first world. As long as they're not teaching at a university in or near a high volume tourist area. Now in talking about those other private universities that are lower priced, well the average tuition in those universities is anywhere from $2,000 to $3,000 a year. But I wouldn't recommend a first world person selecting one of those universities for his kid

[26:10] unless your kid is a pretty good Spanish speaker already. Because those schools, like I said, won't be bilingual schools. They'll be teaching everything in Spanish. Sure, they'll have an English department, and everyone there will be required to take some English, but all the rest of the classes will be in Spanish. My suggestion is just stick to the top three private schools and you can't go wrong. And the cool thing is, if you do send your kid down, he or she is going to have that gringo advantage too. And I'll just bet, if your kid was a nerdy, introverted kid with glasses up in the first world with not too many friends at all, he'll be the talk of the campus and Mr. Popular once he lands down here in his new school in Latin America. And remember this, if he's going to one of the top three private schools in a Latin American city, he's going to be rubbing elbows and becoming friends with the kids of the wealthy,

[26:59] the upper class movers and shakers in the country that he's in. And contacts like that can do him a lot of good when he finally graduates, believe me. Like an American friend of mine once told me about his kid who went to university down here in Honduras. He said it didn't hurt that his roommate's dad owned the Coca-Cola franchise and the biggest cement company in Honduras. And that his new Honduran girlfriend was heir to a chain of hotels and a dozen McDonald's franchises and the biggest soccer stadium in the country. I don't think your kid's going to luck out with friends like that at Nebraska State. Do you? South of the border, down Mexico way. You've been listening to The Expat Files, living in Latin America, coming to you each week from somewhere south of the border.

[27:45] And don't forget you can email me on anything at all about Latin America, theexpatfiles at gmail.com. Once again, theexpatfiles at gmail.com. See you next time.