#15 – The Expat Files: Life, Remittances, and the Hidden Economy of Latin America

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

[00:08] 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. It's a fact that millions of Europeans and North Americans have already made that big move south of the border. You might know someone who already has, maybe it's your dream to do it someday. Well, it's a big move, and it's not to be taken lightly, and that's just what this show is all about. What's it really like for first world expats to live in the third world? Could be, it's just a low-stress, low-maintenance kind of lifestyle that you've always wanted. Or it could be your worst nightmare. How do you really know? On this show, we'll talk about things you never read about in those glossy travel magazines. As for me, 20 years ago, I took the plunge.

[00:56] I've knocked around all 21 Latin American countries, built a few houses, started a few businesses, and even found time for some romance. With this show, The Expat Files, I'll be giving you an unvarnished, realistic look at what it's really like to live as an expat down in Latin America. We'll be talking about everything and anything Latin American. And if you have your own questions, just shoot me an email. That's expatfiles at progressiveradionetwork.com. So let's get started. In this show, we'll talk about remisses, how illegal aliens send billions home each year to Latin America, and how companies like Western Union get filthy rich on it. Just who gets these billions in remisses, and how are they spent? You'll be surprised. And we'll talk about poor Latins and their version of the American dream, and how their

[01:43] version of it is not quite what you had in mind. And finally, we'll talk about how South Americans prefer to slip into Europe instead of the gateway, and how Europe now has a bigger immigration problem than the United States ever did. South of the border. Have you ever heard of the Spanish word remisa? In English, it means remission. And what it refers to is money that's sent back from the first world by non-native workers who are mostly illegals. So besides escaping to the first world to try to get a piece of the so-called American dream, sending back remisses to the family back home, whether it's Mexico, Guatemala, Peru, Bolivia, or Panama, or wherever in Latin America, it's the aim of almost every Latin

[02:29] American immigrant who somehow made it to the first world to send back as much money as he possibly can to his impoverished family back home. And whether it's 50, 100, 200, or 300, or 400 dollars a month, it doesn't matter. Nearly everyone sends something back every month. And it's part of the promise that they make to themselves and their family when they first set off on that journey to the first world. But how do you do that? I mean, if you're in a new country and you barely speak English, and you're most likely illegal, and your ID, if you even have one, is a bad counterfeit, how do you send the money? I mean, for example, in the United States, you can't open a bank account, not these days anyway, without a really good ID. Not a bad forgery. And on top of that, you'll need a social security number, some tax forms, maybe even a birth

[03:17] certificate. And with those restrictions, opening a bank account is pretty much off limits to at least 95% of all the people that immigrate to the United States from Latin America. I mean, it's estimated that there's 10 million or so illegals in the United States and Canada right now. So how do these millions of illegal immigrants send off their 50, 100, 200 dollar cash disbursements back down to their families in Latin America, when they have no way of getting a bank account? I mean, these people are illegal, and they take great pains to stay off the radar. They don't want to sign anything, not anything that looks official anyway. They live in a cash society, and most of them only dream of having a credit card or a checking account. And they're not about to flash around that fake ID, not likely, not unless they get absolutely

[04:03] backed into a corner. Can you blame them? And as street-wise, as most of the illegal immigrants are in the first world, they're not about to trust handing over their money to someone they know has a bank account and trusting them to send the money down to their family in Latin America. They're certainly smart enough not to do that. Enter the big, pseudo-anonymous, warrior transfer services, the biggest of all being Western Union. You remember Western Union, don't you? From the old classic Hollywood movies, anyway. Back then, everybody seemed to be sending or receiving telegrams, or even singing telegrams. And Western Union pretty much had the monopoly on all that. Now if you were to put some real thought into that, you'd think, how could Western Union even exist these days?

[04:50] It should have faded away like the buggy whip a long time ago. I mean, who sends telegrams? Not only have I never got one in my own life, but I never met anybody who's actually sent one. So why do you occasionally see Western Union signs here and there? And if you look closely, you might see that in bus stations and airports and train stations, they still have hundreds of little offices. Well you know how Western Union makes its dough these days? And how it's managed to not only survive, but it turns over tens of billions of dollars annually. And I said billions, not millions. In fact, in 2010, Western Union managed to transfer $10 billion to Mexico alone. And how did they get that kind of business going? And better yet, how did they capture the trust of all those millions of illegal aliens?

[05:38] Easy, it's all about the ID. It turns out that every illegal alien knows through the grapevine that Western Union plays fast and loose when it comes to asking for the sender's ID. The fact is, Western Union doesn't care who sends the money. In effect, what they've done is they've made it possible to send small amounts of money from country to country anonymously. And that's a system that's tailor made for illegal aliens and anyone else who wants their privacy. And I'm all for that. But the fact is, Western Union charges horrendous fees for that anonymity. And is it worth it? Well only to Western Union. Now let me give you some facts. You'll know what I mean. If you go down to any one of those thousands of Western Union offices, if they even bother to ask you for an ID, they'll accept just about anything, including your Gold's Gym

[06:26] card. Practically anything you show them is good enough. And the receiver at the other hand, down in whatever country in Latin America, he only needs a tracking number and he can collect his cash within 10 or 15 minutes from the moment it's sent from the First World. And besides being extremely lax about the sender's ID, which is not really my gripe here, like I said, I'm all for anonymity when you can get it. The second very clever thing that Western Union did was to hook up with some Latin American big chain appliance stores, specifically one called Electra, which has thousands of retail stores throughout Central America. And they have at least one store in every Central American city. And by hooking up with these stores, Western Union was very smart. In the deal that Western Union made with Electra, the appliance giant Electra gives Western

[07:15] Union a small secure space in every one of their stores. A perfect little area for Western Union to do their business. Imagine the millions that Western Union saved because now they didn't have to buy any of their own land or construct any of their own stores. In Mexico alone, besides the Western Union's 3,000 telegraph offices, and yup, they still call them telegraph offices and that makes me laugh because I doubt if they even know how to send a telegram anymore. Anyhow, they're also set up in at least 500 Electra stores. But so what? Who cares, you say? Besides the fact that it's illegal aliens sending money out of the country. Does that bother you? It doesn't bother me. But that's really not the issue here. My point is that Western Union has gotten absolutely filthy rich, almost exclusively

[08:04] off the backs of illegal aliens. You see, Western Union charges a $10 fee for any money transferred up to $300, and a $30 fee for anything over $300 up to $3,000. And on the other end, the receiving end, in the Latin country, the recipient pays a 10% transaction fee. So if you send the maximum, which is $3,000, Western Union will get about 11% of that, which is not bad for a deal which takes about 15 minutes to do from start to finish. In fact, it's a license to steal when you think about it. Because if we just talk about Mexico alone, that they get $10 billion a year transferred through Western Union, 11% of that is a billion dollars in change from Mexico alone.

[08:52] Now we're talking real money, Bill Gates kind of money. And you might say, okay, Western Union did the deal, they set the whole system up so they deserve to make 10%. I mean, even a predatory capitalist has to agree that 11% on a 15-minute transaction is an obscene profit, and it would be a dream for any company to hook onto a deal like that. But what if I told you that 11% number was completely wrong, and that Western Union makes more like 20 to 25% on its transferred money? In other words, on their Mexican business alone, they make from $2 to $2.5 billion in profit a year. So how do they do that when I just went through the numbers on sending $3,000? Which like I said, works out to around 11%, which is bad enough.

[09:41] Well what they don't tell you is that the average transfer is about $100, not $3,000. And that's because the average illegal alien is lucky if he makes $2,000 a month. And he's living in the first world, so he's got first world expenses. So it's obvious he can't send more than he makes. Now let's crank out the numbers for someone who sends just $100 a month, which is the average money transfer amount. Okay, there's a $10 fee for anything up to $300. So on a $100 transfer, that's 10%. And then the recipient in the Latin American country pays another 10% for a total of 20% charged on that initial $100. Now imagine if you sent $50, which is in a month that's also commonly sent. And if you do the numbers on $50, it comes out to about 30% in charges.

[10:31] And the immigrants in the first world are glad to pay it. Or let's just say they've grown to accept that that's the way it is. And that's because of the cavalier way that Western Union handles the ID problem. Because you see if they started scrutinizing IDs with any diligence at all, the Latins would drop that service like a hot potato. Now I ask you on this remisa question, who's getting rich and why? And just as an aside, talking about the illegal immigration issue for a second, I kind of wonder why immigration and naturalization never seem to have their act together. I mean wouldn't it be a thousand times cheaper and easier if the INS just changed their tactics and instead of doing their famous stormtrooper raids on factories, farms, and meatpacking plants, I mean it's always about the money.

[11:18] I mean if they really wanted to go after illegal immigration, they'd monitor Western Union transactions and other remissive services and force stricter ID requirements. That is if they really wanted to go after the illegal immigration problem. Now why did I have to think of that? But actually I rather think they like to keep that giant bloated bureaucracy going. And I think another reason why is because companies like Western Union make billions off of these illegal aliens. And when you got that kind of money, you could buy a lot of expensive Washington lobbyists. I'll bet you never heard anybody talk about that issue in the major media. And I think it's way overdue for a media expose, don't you? So what happens when these remisses actually land in Latin America? I mean if you look at some of the recent numbers, you'll find that in Guatemala for example,

[12:06] in 2010 they received four billion dollars in remisses. And with their population of about 14 million people, and if you figure about five people in a family, that breaks down to about a thousand dollars a year in remisses for each family in Guatemala. Which is a typical example of the way remisses are distributed in Central America. Central America being all the Latin countries north of Colombia. And if you figure that the average Guatemalan family brings home about 2,000 to 2,500 dollars a year, you can see that that extra thousand dollars in remisses coming from the first world. Well that can make the difference between abject poverty and malnutrition and just plain old poverty. Now for the countries in South America, it's a different story altogether.

[12:53] As I said in a previous show, it's very difficult to migrate up to the United States or Canada from South America. You can't walk, hitchhike, take the train or the bus, like you can if you're from Central America. Because if you know your geography, you might remember that where Colombia connects to Panama, which is the only land bridge that leads north of from South America. You might also remember that it's the world's biggest and most dangerous swamp, and there's not a single permanent road that's ever been built through it. The geography and the climate and the topographic conditions are just too difficult. Building a highway connecting South America to Central America has been talked about for years and years and years, and someday they'll probably do it, but until now, well it's not been done. And because of that, there's a much smaller percentage of people from South America living

[13:43] in the first world, where for example one out of ten Guatemalans or Mexicans has at one time or another slipped into the United States illegally, the numbers for South American countries are less than half of that. The fact is, for a South American to get to the United States or Canada, they almost always have to go by air, which is an expensive proposition, and that means their papers and references have to be in order. And to get a visa at the U.S. Embassy, they have to prove they've had a job, a bank account, and good credit. And if they have all of those in order, there's usually no good reason to try to immigrate up to the first world. Because of that, the South Americans who can actually scrape up the money for the trip, well most of them prefer to go to Europe, and their first choice is nearly always Spain. Because at least for now, traveling to Spain doesn't require a visa for almost all the

[14:30] Latin American countries. And you guessed it, once they're in Spain, they're smack in the middle of the European economic community. And if you remember, the EEC eliminated its border controls some years ago, so anyone who lands in Spain, if he wants to, can either stay in Spain or travel to any other EU country. And there's really nothing to stop them from doing it. The hitch is, they're only allowed a tourist visa for 90 days, and it's not surprising at all that most of them prefer to stay. Well wasn't that the idea in the first place? And the same works for Brazilians, who have freed tourist privileges for 90 days in Portugal, the mother country. And most of them overstay their visas too and become illegals in Europe. So as for South America, the remisses that are sent back are a mix, partly from Europe

[15:18] and partly from Canada and the United States. So how many Latins are actually flooding into Europe these days? Well since there's so many separate countries in Europe, and the immigration chaos that followed the fall of the Soviet empire back in 1989, illegal immigration is becoming such a problem in Western Europe now, from all sides, that the politicians are starting to crack down. And there's been some European backlash on the Latin American immigration front. In the past few years, so many Ecuadorians and Bolivians have flooded into Europe and so many of them have overstayed their visit and are now illegal, that the European community cracked down on both those two countries by putting such harsh restrictions on their visas, that now it's almost impossible for Ecuadorians or Bolivians to visit or migrate to Europe.

[16:07] So how many illegal Latin born aliens are in Europe right now? Well like I said, it's a little difficult to determine, especially since they move around so much, but it's been reported that there's over a million Latin born illegals in Spain alone and another million total in Italy, France and Portugal. Now if you're looking at the Spanish number of a million, you might be thinking, a million? That's not so bad. Not compared to the United States, with their 12 million Latin American illegal aliens. But remember, the United States has 300 million people and Spain only has 40 million. And that means that in the United States, illegal aliens make up 4% of the population, whereas in Spain, illegal Latin immigrants make up 2.5% of the population.

[16:53] And Spanish authorities claim the numbers would be more than double that and much higher than the United States if it wasn't for the fact that Spain has free and open borders to so many other countries in Europe. In other words, Spain is considered just a gateway, a first step for illegal aliens to travel to other European countries. So to all you US listeners out there who think your country's been overrun, with 13 million illegal aliens on your soil, you've got nothing on Europe. When it comes to illegal immigration, Europe's been hit with a quadruple whammy. They've got a big problem with Latin American illegal immigrants, a problem with African illegal immigrants, a problem with Muslim illegal immigrants, and a big problem with illegal immigrants from the former Soviet Union and her satellites.

[17:41] And nobody has the answers, especially not me. Now when you talk about Latin American remissas, you often talk in generalized numbers, like how the average Latin American family receives $100 a month in a remissas. And of course that's not really true. Some families don't get anything, and some families get 3, 4, 5, and in some extreme and unusual cases, even $1,000 a month. And because the quantity and timing of the remissas sent back home are so inconsistent from one month to the next, unfortunately for most families, it's feast or famine. That is, when the relative up north has a steady job, everything's fine and the money comes regular. But in these days of financial crisis, all bets are off. And to prove the point, there's been some huge economic dislocations in Latin America,

[18:31] and you can see it in action as plain as day, with Latin families that are used to receiving a monthly remissa. And now in the midst of this financial crisis, they've suddenly been cut off, and they've fallen on hard times, I mean really hard times. For example, when a Latin up north has a decent job, and he's sending back maybe 2, 3, even $500 a month, and he's been doing it on a pretty regular basis, often he'll instruct the family back home to buy some land in the old hometown, hire a contractor, and start building a house. In fact, that's pretty much the Latin American dream. The Latins that do immigrate illegally into the United States and Canada, send money down just for that purpose so their families back home can have some property and a house, something

[19:18] the majority of them have never had before. So when a family member or two make it to the first world, and the remissas start flowing back, well from an expat's point of view, strange things start happening when a dirt-poor family suddenly has money. It's funny, but sometimes when you're driving through a small town, you'll suddenly see a construction project or two smack in the middle of a dozen tin shacks. And if it looks way too nice and way too modern for the area, you can usually bet it's being funded by first world remissa money. Because instead of building a house in a nicer neighborhood in a nicer part of town, or even buying a nice new existing house somewhere, the families who have that remissa money coming in are virtually locked into their neighborhoods and wouldn't think of living anywhere else.

[20:06] And even though that remissa money could dry up at any time, and families are well aware of that, depending completely of course on the family member up north, his job prospects, his liquidity, and his own expenses, well as long as the money keeps coming in, all that doesn't seem to matter. Latin families still go on spending sprees, and it doesn't seem to matter that next month they might not have a remissa check. I guess when you're that poor, you just live for the moment. And just like in the first world, they do it mostly to impress the neighbors. Because for a Latin, even if he lives in a tin shack and doesn't have hot running water, if he can go to McDonald's once in a while, and be the first on the block with a DVD player, that'll impress the neighbors and probably make him jealous.

[20:52] Latins are hot-blooded, and with them, jealousy, envy, and pride are a big part of their lives. And sometimes I actually think they invented the concept of keeping up with the Joneses. And because of that, you'll often see a family who's just scraping by, suddenly get a remissa payment, and splurge on something they don't even need, useless things. Things to impress their poorer neighbors, especially around Christmas time. In that way, Latins are a lot like North Americans. To them, you are what you own, and they make sure the neighbors know it. Speaking of remissas, another sure sign that the remissas are flowing in the neighborhood, I mean that there's a remissa construction project going on, is when you notice that a house has one complete floor done, and right up above it, where there should be another

[21:39] level, there's a skeleton of a second or a third floor, with pipes and tubes and rebars sticking out at all angles, and staircases going to nowhere. Because these houses are constructed in fits and starts, according to how the remissas are coming in. So if the remissas stop, so does the house construction. And when the remissas start up again, so does the house. Because you see, at this level of Latin society, there's no such thing as anyone getting a bank loan or a construction loan, or any financing at all, because these people have no credit. It's a sure bet that anybody sending back remissas is probably sending back to their family who's subsisting on minimum wage or not much better. And at that level, most people don't even have credit or debit cards.

[22:27] So they'd never have any real collateral to put up for a loan. And so they pay for everything in cash, including any construction job. And the funny thing is, when you see a house that doesn't have a complete second or a third floor, and you notice it's been that way for a long, long time, maybe years, well that's a pretty good sign that their family member up north is either doing jail time, got picked up by immigration and deported, or came back voluntarily. Anyway, something bad must have happened to him. Because if the remissas are no longer coming, well, there goes the construction project. That is until him or somebody else in his family can sneak back up north and start the process all over again. And oh yeah, there's another strange thing that I want to tell you about when remissas are used to finance a construction project down in the third world.

[23:15] Now you have to remember that most of the people getting these remissas down in Latin America are not only dirt poor and living in tin shacks, but they're often poorly educated and live from hand to mouth. For instance, the average remisa recipient might have a tin roof with a dirt floor, use firewood for a stove, and have no glass in their windows. And sometimes it's not unusual to see the whole neighborhood washing their clothes in a nearby river. And sometimes you'll see all the ladies in the neighborhood gathering down by an outdoor communal wash basin, which is nothing more than a row of cement tubs and a couple of spigots. And that's how poor they are. Is there any wonder why a young guy doesn't drop everything and try to sneak up north? And that's life in some of the small Latin towns, where everybody pretty much makes the minimum wage or not much better.

[24:02] Now if the remissas start coming in from a family member up north, and if it's more than a few hundred dollars a month it's like mana from heaven, and more often than not a brand new house will start going up. So far so good, but here's the catch. Ask any expat who's been into one of these houses, like me. Sure they look good from a distance, from a half a block away, but when you get closer and you actually step inside you notice there's something very strange about it, and though it might even look almost first world. You'll see the people are still using firewood in the kitchen. It seems that these buildings, especially in the small villages, look like they've been made by amateurs. The windows and doors don't quite fit right. The locks don't quite latch, and the plumbing is inadequate, the pipes are exposed, and

[24:49] you can see exposed electrical wiring hanging out of junction boxes. It's a wonder to me and all the expats I know, that hundreds of people aren't electrocuted a year in their own houses. To any fresh visitor from the first world, these places look dangerous. And the funny thing is, no matter how apparently modern the home is, they're still washing their clothes in an outdoor basin by hand. I guess old habits die hard. And it beats me that even in brand new houses, there are water stains, mold, and humidity in almost every closet. It seems that in Latin America, everybody's house leaks. Even brand new ones, and it's to the point that nobody really cares. And it's especially bad with the remisa houses. Not to mention the goats and the chickens and the dogs, and maybe even a cow or two

[25:38] in the yard. And more often than not, in a few years, even a brand new remisa house starts to fade into the landscape. It just turns into a 2,000 square foot version of the same little tin shack that the family had before. It's a very odd phenomena, and you see it all the time. Especially at night when you're driving through a small town. You see what looks like a nice middle class first world house, and as you get closer, there's just one bare 25 watt light bulb burning in the kitchen or living room. And to an expat, it's kind of depressing. But to the people who own that house, they're happy as clams. And man, you look at their faces, and they're as proud as can be to be living in that remisa house. They live in the Latin American dream, and the neighbors are jealous, and that's how

[26:24] it should be. They're moving on up, and who might argue with that? And hey, whoever came up with that term happy as a clam, who says clams are happy? But what I do want you to understand about what I just said, about Latin Americans, mostly illegals, sending money back from the first world, down to their families in Latin America. Not everybody follows that same pattern. Not every family blows their remisa money on frivolous things. Not every family builds a substandard house and lets it go to seed. A lot of people spend their remisa money educating their kids in private schools, or buying needed health care for someone in the family. I'm just trying to give you an idea of what's common in Latin America. What expats in Latin America see every day.

[27:10] Things that are right in your face. Things that we can't change, and things that make Latin America Latin America. And because expats are good observers, we pick up on the contrast right away. So here at the expat files, we report on the good, the bad, and the ugly. And if you want the nice, clean, and happy tour brochure version of this, you won't get it here at the expat files. You've been listening to the Expat Files, living in Latin America. A one of a kind show, produced and compiled deep in the heart of Latin America. And of course you can always email me with any of your questions about Latin America. expatfiles at progressiveradionetwork.com. See you next time.

[27:57] Nos vemos.