#69 – The Expat Files: Costa Rica’s Crisis, Car Imports, and Customs Challenges

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

[00:12] Hi everybody, I'm Johnny Mueller, and you're listening to The Expat Files, living in Latin America, the one of a kind show that tells you what it's like to live, work, play, and or retire in Latin America. So let's get started. I'd like to start out today with a little news from Costa Rica, the so-called Switzerland of Latin America, and I've told you how real seasoned expats feel about that ridiculously overblown title. Anyway, for all you people out there who have a soft spot for Costa Rica, who for some reason always seem to be tourists and not permanent expats, the fact is die-hired Costa Rica lovers are usually people who have no in-depth experience in the other parts of Latin America.

[01:01] And after they spend a little time in Costa Rica in the tourist destinations, they think they're the experts on Latin America. It's kind of like Latin's after taking a trip to Disneyland, thinking that they finally got a handle on the people and the customs of the United States. Wrong. In fact, I often see ardent Costa Rica lovers offer as an example their superior and very inexpensive national healthcare system, as well as their supposedly top-notch pension and social security scheme, which is a pay-as-you-go system just like in the United States. And they copied our pension and social security model because, like I've said so many times before, Latin Americans think that the only way out of their third world doldrums is to follow in the footsteps of first world countries. You can tell by the way governments down here copy all the first world laws and adopt whole

[01:47] parts of our constitution, but in the end, they almost never have the manpower, the will, or the money to enforce any of those constitutional laws and statutes, but in theory it looks good to international organizations because to the rest of the world, it kind of looks like progress. It's good PR anyway, especially when they go to the IMF, the World Bank and the UN begging for money. Anyway, back to the case of Costa Rica, whose national healthcare and pension plans have been touted as models of efficiency and economy. But you see, like me and a lot of expats have been saying all along, don't believe it. It's all smoke and mirrors because, just this week, Costa Rica's president, Chinchilla, has announced a huge monetary crisis. In fact, she's announced that the system's gone broke. Sound familiar to anyone? And it's gone $175 million in the hole just this year, which doesn't sound like much in

[02:36] first world terms, but just remember that Costa Rica only has 4.5 million people, which is about the population of Chicago. So anyway, Costa Rican economists are saying their social safety net system is broke. So all you first world tourists who have gone back to the states, compressed with how well those Costa Ricans have put together their system, well, it was all facade and now it's irreparably broken and bankrupt. And the thing is, because the Costa Rican currency, the cologne, is not an internationally convertible currency, they can't just print their own money and trade it for dollars without creating a huge amount of inflation. And they, like every other Latin American country, have to keep big reserves of US dollars in their central bank for import-export trades. Since Costa Rica doesn't really export anything to the United States, the only way they can

[03:24] get those US dollars is by tourists spending their dollars, or by the government floating bond issues, or taking out international loans. And just one more thing about Latin American currencies in general. When you are in a Latin country, and you're spending their currency, you can't take it to a neighboring country or anywhere else and spend it like you could the Euro or the dollar. Just try to take some Costa Rica colognes, or lampiras from Honduras, or quetzales from Guatemala and try to spend them on anything up north. Or even try to convert them into dollars at a bank up there. Good luck with that. You'll find that the only difference between Latin American money and monopoly money is that the Latin money is prettier. Just remember that the Costa Ricans can't print their way out of the social security and healthcare mess. Not like the United States has been able to do, more or less successfully, until now that

[04:14] is, and it's about to go over the cliff and take the rest of the world with it. But that's another story. So the Costa Ricans can't print money because it'll cause a huge round of inflation and currency devaluation, and if they try to float a big bond issue to cover it, and try to lure international investors, the only way they'll be able to pay the interest on those bonds would be if they had a huge tax increase and they lowered benefits. And like I told you in a previous show, Costa Rica already has near first world tax rates, with the other two high tax rate Latin countries being Chile and Argentina. So what's going to happen to Costa Rica? Well you can bet in the short term there will be higher tax rates, IMF and World Bank loans, and cuts in pensions and social services. And already, all 48,000 of Costa Rica's healthcare workers have taken to the streets.

[05:01] They've closed down every public hospital and they're having what they call a huelga, which means national strike. And right now, as we speak, they're picketing, blocking roads, burning tires, and burning effigies of politicians. And personally for me, I've always liked the part where they burn effigies of politicians. It's always so ironic, because the people doing the burning are the same morons who voted the idiots in. So once again, for all you expat wannabes out there, here's another reason not to move to Costa Rica. And if you happen to be down there right now, don't get sick. To change the subject a little, I want to talk about something of special interest to all you expat wannabe women out there. Now, most people I know who come down here as expats, don't usually drive or ship their cars down here, unless they're going to live in Mexico.

[05:47] Because it's not much trouble to drive it down, or so you might think. And these days, if you do decide to drive your car down, it's becoming more and more dangerous and it's really not for the faint of heart. And if you're the adventurous type and decide to take your chances behind the wheel, make sure you know a little Spanish, you stick to the main roads, you only do your driving during the day, and you bring a lot of 20s, 50s and 100s down for bribe money. Especially as you drive deeper and deeper into Mexico, where they'll pull you over just because you don't have Mexican plates on your car. The federales know if they put a little pressure on, they can always get a little grease for their efforts. And it almost seems like they can smell a foreigner coming from a mile away. Well these days, it's so bad that it seems like every 40 or 50 kilometers, you get pulled

[06:32] over or stopped at a blockade. But if you plan on driving farther south beyond Mexico, surprisingly enough, things change rapidly for the better. You can go for hundreds of kilometers and not get pulled over. But when you do, you can expect to pay a bribe at least half of the time. Now a friend of mine just drove a 10 year old jeep down from Texas and he said he ended up paying about $600 in bribes just to drive his jeep straight through Mexico down to the Guatemalan border. Then he drove from Guatemala to Salvador, which he said was about an 8 hour drive. And it only cost him about $135 in bribes. It seems like the Guatemalan cops aren't near as demanding as the Mexican ones. Then he continued on driving south down through Salvador, which only took about 3 hours and he only got hit up for a $30 bribe.

[07:19] But Salvador is a very small country. Then he continued on down through Nicaragua, where he paid about $80 in bribes. And finally landing in Costa Rica, where the cops didn't hit him up for any bribes. But they did give him a $50 ticket for making what they called an illegal right turn. But there was no sign posting that a right turn was illegal. And the fact that they said he could pay his $50 fine to them directly, that was a sure sign that it's just a way to extort money from clueless foreigners. Because nowhere in the world do you pay your fines directly to the cop that gave you a ticket. So like I said, if you decide to drive a car down, you better be ready to pay a lot of small bribes to cops. Especially in Mexico, where the bribes that the cops ask for can be 3 or 4 times higher than they are in the rest of Latin America.

[08:05] And speaking of Mexico, for all the narco problems they're having and the beheadings and all those shootouts with automatic weapons that you read about every day, you probably know by now that I really don't recommend Mexico as a place where expats to move and settle down. It's not a good pick. So if you love your car a lot, the one you got up there in Cincinnati, and you want to bring it down to Panama, Costa Rica, Nicaragua, Guatemala, wherever, and it's true you can drive a car down from the states to all the countries in Central America. But not South America, because there's no highway that goes from Panama to Colombia. Because the Darien region of Colombia is so thick with a jungle and impassable swamp that until now they've never been able to put a road through. Though there is one planned and I bet it will be done within 5 to 10 years. Anyway, because you have to go through Mexico, I want to discourage you from driving your

[08:55] car down. Because even if you're the adventurous type, and you've actually done it before, let's say 5 or 10 years ago, things aren't the same at all since Mexico has turned into a war zone. And the only way to drive your car down, let's face it, is through Mexico. So don't do it. However, if you have a late model car up north and you really love it, and you want to bring it down, just go ahead and ship it. Because under certain conditions, there are some very good reasons, financial and otherwise, for shipping a car down. Any number of those big container companies like Maersk, or any of those first world or international moving companies will do it for you. In fact, I had a 3 year old, very low mileage Honda Civic shipped from Florida to Belize a few years back, and it cost me about $1200, which covered all the insurance and paperwork, and it landed at the docks in Belize in perfect condition about a week and a half later.

[09:44] Now here's the thing, after you ship a car down to any country in Latin America, it's going to be stuck in the customs house in the country it landed. And don't worry, if you don't pick it up right away, it'll be safe there. Really safe. And besides, when you ship something like a car, there's always insurance coverage that you've paid for. And here's where things get a little complicated, because you see, you'll have to pay taxes on that vehicle before you can drive it out of there, and a lot of times, you'll be at the mercy of those customs officials and what they want to charge you. And believe it or not, that tax rate is negotiable. And by the way, customs down here is called the aduana. And sometimes you'll have an aduana official that's on the up and up, and sometimes they'll highball you and they'll just be looking for bribes. And that's why, like I said, you really should have your own lawyer before you ever ship

[10:30] a car or a container of goods. Because in my experience, a good lawyer will always be able to knock a big chunk off your import taxes. And like I said before, if you bring a good looking girl with you when you're hanging around at the customs office and filling out and signing forms, I don't know why, but it seems like a sexy feminine presence always somehow knocks down your tax rate. Because remember, you're dealing in the customs office with almost all male personnel. And this is Latin America, a macho sexist racist society. So anyway, when your 1965 red Mustang convertible has landed down here, and the customs office gets ahold of the paperwork, the officials down there are going to arbitrarily assign a value to it, no matter what you say. And it really doesn't matter what you paid for that car in the States, even if you have

[11:18] the original purchase paperwork with you, they'll either pull up their own list and then assign a fixed value to your car based on that list, or they'll arbitrarily assign a value to it right there and pull a number right out of thin air. Like for my case in Belize, for that three year old Honda, they assigned it an arbitrary value of $5,000. And I believe at the time there was a 28% import tax rate on cars of that type and model. So my tax rate on bringing that used car in was 1,400 bucks extra. Based on that $5,000 figure, so now the total that I'd paid so far was the 1,500 to have it shipped by container plus the 1,400 tax, which makes $2,900, which is getting on the expensive side for a used car. Maybe I should have just bought one down here, right?

[12:04] Well, we'll talk about the pros and cons of that later and whether it's worth bringing your own well maintained car down here. So anyway, I had a $1,400 tax bill and I immediately gave it to my lawyer who called me up two days later and said, he negotiated it down to $800 plus there was a little matter of a $200 gift to be spread around between some of those customs officials down at the port. So here's another reason why having your own personal lawyer can be extremely useful to you. He just saved me $400 in taxes and I don't know how he did it and I really don't want to know. So anyway, now that your car is free and clear and out of the Adwana, there's another reason why you need a lawyer ahead of time. Because although you've got your car and you're out on the road, you don't have the proper Latin American license plates for that car and you haven't paid for that yearly tax sticker

[12:51] that goes on your windshield. Now you can drive around in a country down here without plates and without that little tax sticker for about a month, as long as you carry all the proper paperwork in your glove compartment that you got from the customs officials. Because one of those pieces of paper will say that your license and plates are in tramite. Now tramite means in process and because everything that government does down here takes so long as compared to the first world that is, that 30 day grace period where you're allowed to drive without plates is completely normal down here. So it might cost an extra $100 or $200 more to get that license plates and sticker stuff in order, but it's well worth it because if you don't speak very good Spanish you'll never be able to do it yourself. So have your lawyer do it, that's what he's for.

[13:38] Now one thing I've noticed is that a lot of expats will bring their own receipts down that show the price that they bought for things, especially for expensive things like cars and other motorized vehicles. Like ATVs, dune buggies and wave runners, and kit cars and things like that. In other words, when expats ship things down and they end up at the aduana, they'll often have receipts that say they paid a very low price for whatever it is or that they bought it used. Because if you can prove that you bought something used it always has a lower import tax. So in fact a lot of expats up north who know how to use Photoshop will scan and alter some legitimate receipts knowing that they're all in English and that when they bring them down to the aduana, down here in the Latin American country, no one at that aduana is ever really

[14:24] going to be able to check the legitimacy of that receipt. In fact all expats know that most low level government employees, men in the aduana that is, have only a sixth grade education. And these aduana guys not only don't have internet at home, they don't even have computers at home. They can't afford them. So they're not at all savvy about looking things up on the internet and are practically useless when looking up anything in English. So even if you have completely bogus receipts, no one at customs or the aduana down here is ever going to know that. And even though a sixth grade kid in the first world can run rings around you and me when it comes to anything on the internet, well a sixth grade education down here ain't like a sixth grade education in the first world. Because most of these guys in the aduana are over 25 years old and have been on the job

[15:11] for quite a while. So they got their sixth grade education 15 or 20 years ago before there even was an internet down here. And most of these guys never even put their fingers on a computer keyboard until they got that job at the aduana. So in fact you're dealing with a very uneducated class of people who only get a few hundred dollars a month which means they're also very susceptible to bribes. And I've heard from a number of sources that almost everyone who works at the aduana has two sources of income. The legitimate government paycheck and what they can scam out of people who are shipping things down here, that is the odd thing that goes missing, as well as the occasional bribe. And that's just the way things are down here. And that's why if you go to any customs office in any Latin American country, you'll find their staffs are chocked full of friends and relatives.

[15:58] And that getting a job down there has everything to do with back scratching and nepotism. And that way everybody's cut in on all the ways to make extra money. And everybody's either a friend or a relative, so nobody wants to rock that boat. So if you do pull that little scam with fabricated receipts, like a lot of expats do, just hand those bogus receipts over to your lawyer and let him handle it. And as far as the danger of being caught red handed with bogus receipts, I've had lawyers tell me not to worry. Because if the guys working at the aduana have reason to suspect any receipt at all, they just disallow it and assign their own arbitrary value. Which of course is always going to be higher than the number on that bogus receipt. But that's the end of it and there's nothing more to be said. Now where those bogus receipts can really come in handy is when you ship down a special

[16:46] vehicle, like let's say a dune buggy or one of those kit cars. You know, like an MG or a Mercedes sports car clone that bolts onto a Volkswagen Beetle chassis. They're not the real thing, but they look like it, at least from a distance. To me they're kind of tacky, but some people like them. And when one of those things comes through the aduana. Most guys looking at those items and assigning tax rates have never seen anything like that before. So if you bring in a lowball receipt, that's the only thing they have to go by. And it'll almost always work in your favor. Now let me make a disclaimer here, I'm not recommending you do any of these things. You know, using photoshop to alter receipts or any of that stuff. But I'm just telling you what some people do to save on import taxes. Okay so you've got your very own car down here, the one you used to drive up in Cleveland. Why would you go about doing that when you could buy the same damn thing down here at

[17:35] one of the car dealers or from a private party? Now I have to go into a little background on first world car ownership before I can give you a decent answer on that. So listen up. You see, when you buy a brand new car up in the first world, in the back of the manual, it has the maintenance schedule for you, the new car owner, printed right there for you to observe and follow religiously. At least that's what you're supposed to do. In other words, you bring your car in for regular scheduled maintenance and checkups, usually at the first 500 miles, 1,000 miles, 3,000 miles, 5,000 miles and so on. And your mechanic signs off on the back of your manual saying that you had those services performed. So every time you buy a used car up in the first world, all you have to do is look at the manual and see if that car has had regular maintenance, according to the manufacturer's

[18:23] requirements. And a lot of people in the United States are perfectionists about their cars and not only perform the routine maintenance that's required by the manufacturer, but they go above and beyond the call of duty and wouldn't be caught dead if their car wasn't clean waxed and polished at all times, and god forbid if their car ever had a ding or a scratch. Now that's completely opposite from the way Latin Americans take care of their cars, and in fact all of their personal items. So the bottom line is, first world people take care of their cars and Latin Americans almost never follow the routine scheduled maintenance, even with brand new cars. So when you do look at a used car down here, and flip the manual open, you'll see maybe two or three scheduled maintenance is performed, but after that the pages are basically blank. And worse yet, if you're looking at a used car from a private party, all you gotta do

[19:10] is look in the trunk, the back seat, on the floor, and in the glove compartment, and the chances are you'll see all kinds of dirt, grime, grease, beer cans, McDonald's wrappers, and maybe even a few roaches and a condom or two. And that's from a person who's actually advertising that he's selling his car. Imagine what that car looks like on a bad day. So the bottom line is, a three year old Honda that you've had up in the states is not gonna be at all equal to that same three year old model if you buy it down here in Latin America. They just have much lower maintenance and care standards down here, and that's the way it is. And that pretty much goes for anything that Latins buy or sell. So X-Pats, if you do have a low mileage, beautifully maintained car that you'd like to bring down to Latin America, figure that if it's between three and five years old, you'll probably

[19:56] pay between $2,500 and $3,500 for the shipping, the taxes, and get it in and out of customs and licensed and on the road. And if the car is in really good condition, you're probably not gonna be able to find a similar one down here. And even if you think you've found a nice one at a dealership down here, just remember, dealerships have their own detailing services. And when they get a car in on a trade, they spend a lot of time cleaning it up and making it look as good as possible again, just like they do in the first world. So beware of an extra clean used car down here at a dealership, because in Latin America, that's just not normal. So if a used car looks too clean, and in fact, first world, you have to be a little suspicious. And there is another reason why a lot of X-Pats bring down their own cars from the states,

[20:41] and that's especially true of X-Pat women. And that's because 90 to 95% of all the cars sold down here are stick shift manual transmission cars. And that's been the tradition down here ever since cars have been on the road, and you have to wonder why. Well, for one thing, way back when, only men drove down here. What can you expect from a macho society? And secondly, cars with a stick shift are always cheaper than cars with an automatic transmission. And thirdly, manual transmissions are much cheaper and simpler to repair than automatic transmissions. And since the roads are so bad down here, it rains so much, and cars are likely to get stuck in ditches, trenches, and holes, a driver with a stick shift has a much better chance of wriggling out of a predicament if he's stuck somewhere on a bad road.

[21:28] In fact, every guy knows that if he uses a clutch and a stick shift properly, he can get out of almost any mess. But that's not so true with an automatic transmission, where if you're stuck in mud, snow, or ice, sometimes those wheels will just keep on spinning. And so for the past hundred years, ever since cars have been down here, the general public is totally accustomed to a stick shift, including women. They all know how to use them down here. And it's been only in the last five years or so that dealerships are starting to offer cars with automatic transmissions, and of course, they're more expensive. And if you don't believe there's a huge shortage of automatic transmissions down here, just look at the classified ads selling used cars and you'll see exactly what I mean. So because of that fact, a lot of expats, especially women expats, have their own cars

[22:14] from up north shipped down. Because not so long ago, that was the only way to get an automatic transmission down here. Unless you bought a high-end car like a Mercedes, a Range Rover, or a BMW. They always have automatics on their showroom floors. But up in the first world, things have changed and people aren't used to using a clutch. Only about 20% of men under 50 years old can drive a stick shift in the first world, and less than 10% of first world women know how to drive a stick. Okay. Now here's another thing you just have to know about buying and selling cars down here. Now when you look for cars for sale in the classified ads, you'll often see cars for sale followed by these two words, Deahensia. Deahensia. And that just means when they were originally sold as new, those cars were sold from a registered car dealership or agency down in Latin America.

[23:03] In other words, when they were brand new, those cars were sold off the showroom floor and not cars shipped down used from the United States. Now those two words, Deahensia, are very important to Latins. Because if it doesn't say Deahensia, that means the car was not purchased new down here, but was imported as a used vehicle from the United States. In other words, the car somehow made it down here as a used vehicle and not purchased as a zero mileage new car down here. Now when a car says Deahensia, it's always a little more expensive than when it doesn't say that. And that's because cars that come from the United States used have a certain nefarious reputation which I'll explain to you right now. You see, the vast majority of cars that make it down here from the first world, as used

[23:51] vehicles, are not the cars that expats ship down for their personal use. Instead, those used cars that make it down here are bought by astute latin used car dealers that go up north a few times a year to the southern United States, right across the Mexican border. And they show up at those car auction houses and they buy cars that are damaged or wrecked, some of whom very low mileage that have been totaled. And they have them fixed up in the United States just enough so that they're able to drive them down to Mexico, Guatemala, Salvador, Honduras or whatever, where they have large body shop operations, where they can make these cars look almost as good as new for about 20% or less of the labor cost that they'd have to pay up in the United States. Because professional body workers up in the United States make anywhere from $15 to $30

[24:38] an hour. And down here in Latin America, you can get excellent body men and mechanics for about $10 or $20 a day, not an hour. So that's why when you're driving around Latin America, especially in a big city, you'll often pull behind a car or a van or an SUV and on the back door panel or somewhere on the license plate holder, it'll be the name of the dealership in the United States where that car, truck or SUV was originally purchased brand new. Like for example, yesterday I saw a car that said on the back panel, Town and Country Auto, Libertyville, Illinois. Now when I see something like that, I know that car was a wreck that someone bought at an auction, brought down here, completely redid it and resold it to the present Latin owner. And when a car like that makes it down here from up in the first world and eventually

[25:25] gets repaired and resold, it always ends up being about 20 to 25% cheaper than the exact equivalent used car that was purchased down here originally, brand new from a car dealership agency. And there are two reasons for that. One is, most people know that a car that's made it down here from up in the first world will not come with any kind of guarantee or any kind of maintenance history or even a manual because most of these cars were bought at auction as crashed vehicles or total wrecks. And secondly, car dealerships and mechanics down here only carry replacement parts and tools for the car models that they sell directly from the new car agencies. And a lot of these cars that are coming up from the first world, repaired and resold, are coming from states like California, Texas and Illinois that have a great amount of environmental

[26:11] and emission control equipment on the engines. While down here in Latin America, the dealers can sell cars which strip down emission control equipment because laws down here are very weak to non-existent when it comes to emission control standards. Which means if a car in the United States does not pass emission standards, they could just drive it down here to Latin America and sell it instead of spending $2,500 and getting new catalytic converters and stuff. But that can be a double-edged sword because it also means if you have a car brought to town from the United States and have engine trouble of your own, those emission control add-ons for states like California, New York and Illinois can be so complicated that the local mechanics down here won't know exactly how to fix them. Or they just won't have the parts on hand.

[26:56] So some of the cars that they bring down are actually orphans that mechanics have a hard time dealing with when something goes wrong. So should you have your car shipped down here? That's a good question. And my advice is, if you have a very well-maintained car with low mileage, it could be a good deal for you to bring it down, but only if it's a very common model worldwide, like for example a Honda Civic or a Toyota Corolla or a Nissan Sentra or a Volkswagen Golf. For common cars like that, they'll always have parts and know how to fix them. But if you have something like a Skoda or a Saab or an Alfa Romeo, I wouldn't ship or drive one of those down because you could be in trouble. You've been listening to The Expat Files, living in Latin America, and don't forget you can email me on anything at all about Latin America.

[27:44] The Expat Files at gmail.com. That's theexpatfiles at gmail.com. See you next time. Nos vemos.