#14 – The Expat Files: Bolivia, Gas Subsidies, and the Real Cost of Living

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

[00:01] South of the border, down Mexico way, that's where I fell in love, when the stars above came out to play. 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 some day. 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,

[00:49] 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. 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 today's show, we'll be talking about Bolivia, Evo Morelos, and why the natives are restless.

[01:37] But still, Bolivia is one of our best picks for expats. And then there's Venezuela and Hugo Chavez, and why his people have a love-hate relationship with the first world. And though a 12 cent a gallon gas in Venezuela sounds great, in reality, it disrupts the culture about an ancient blood sport, known as lynching, and how it's alive and well in Latin America. But the good news is, they don't lynch expats, at least for now. And now some news from South America. For some months now, we haven't heard a peep out of our old buddy in Bolivia, Evo Morelos. And now, all of a sudden, he's in the headlines all over South America. And for him, the news is not good. Since his upset election in 2006, he's been riding on a wave of popularity with the common

[02:23] man, the Bolivian locals. They just love him. And if you remember, he comes from the common man's stock, and he was once the president of a big union, in fact, the coca union. You've heard of coca, the plant they make cocaine out of? I mean, wow, that the president of a country was formerly working in the cocaine business. Some people still can't wrap their head around that one. Anyway, old Evo seemed to be enjoying high popularity ratings in his own country. That is, until a few days ago. Now his homeboys are all ticked off at him. And that's because he decided to remove his country's huge subsidy on gas and diesel fuel. What you might not know is Bolivia is one of the few countries in the world, along with a few OPEC countries, like Saudi Arabia, Kuwait, and Venezuela.

[03:10] And even non-OPEC ones like China. Anyway, they keep the price of gas and diesel artificially low for the locals. And in some cases, like Venezuela, they keep the price so low, 12 cents a gallon, that it screws up the laws of economics and completely distorts the whole economy. And that's what tripped up Evo Morales in Bolivia. He knew that for the last six years, the government of Bolivia has been subsidizing gas and diesel prices to the tune of $350 to $400 million a year. Now to a first world country, that's a drop in the bucket. It hardly even sounds like real money. But to a third world country with only 10 million people, that's a lot of dough. Especially since 2006, when Evo Morales took office, when he nationalized the petroleum industry and kicked out some of the world's biggest players, since then, Bolivia's foreign

[04:00] investment has dropped 70%. So there's not much money in the government coffers. Now it's not a secret in countries like Bolivia, where gas and diesel prices are far below the world market price, that there's a big black market. And the bigger the gap between the price of your gas and your neighbor's gas, the bigger the black market and the more ingenious ways people find to smuggle gas and diesel across borders to take profits on the price discrepancies. And for the last few years, there's been about a $2 difference in price per gallon between Bolivia and its neighboring countries, Peru, Argentina, Brazil, and Chile. In fact, for the last six years, it's become a way of life for Bolivians who live near their borders to get into the gas and diesel smuggling business. It's been said that at least half the truck drivers that live near Bolivian borders have

[04:50] had hidden gas tanks welded underneath their vehicles, and when they haul raw materials or agricultural products across the border to Peru or Brazil or Chile or wherever, they make their real money off the contraband gas and diesel. And there's always buyers, especially when there's a $2 a gallon markup in your own country. And it's not just the big trucks and 18-wheelers hauling the contraband. It seems that in the border towns, every little kid with a bicycle is getting in on the act. For example, if you take a ride on the Peruvian side of the border, in no time you're likely to meet up with dozens of little kids with bikes that are outfitted with baskets, and every young kid you see has a few 2-liter coke bottles filled with gasoline and diesel. In fact, it's not really much of a black market. That is, if the real definition of a black market is trying to sell something illegal

[05:39] secretly, because in all the small border towns and along the country roads, it's pretty much taken for granted and right out in the open. And even if you stop at a roadside vegetable stand, whether selling potatoes or cantaloupes or bananas or coconuts, if you look over the countertop and onto the floor you're bound to see 5-gallon jugs, liter bottles and fruit jars filled with gas and diesel. Now Bolivia is a landlocked country, so it's got a huge, impossible to control border. And it's been estimated that tens of thousands of the poorest Bolivians scratch out a living in the contraband, diesel and gas business. And last week, Yvo Morales tried to put an end to it, claiming at a news conference and rightly so, that only smugglers and crooks really benefited from the low gas prices.

[06:28] That Bolivia's $380 million subsidy last year on gas and diesel only benefited smugglers and people with vehicles in Bolivia's four border countries. But what he didn't figure on was the reaction of his own people, who immediately went into protest mode and the very next day, the public workers, the taxis and the truckers went on strike, and they shut down all the public transportation systems. And in the chaos, a rumor started going around that the government was going to put an emergency restriction on US dollar bank withdrawals. So by the end of the first day, people started lining up at all the banks. And that's when Yvo's government got really scared. And in a surprise move, Yvo got back on television and he backed down, announcing that the subsidy

[07:17] would be reinstated, if that's what the Bolivian people really wanted, and of course they did. Even if it did cost the state nearly $400 million a year, he would listen to the people. But he did warn that the time would come, when the government would eventually have to remove the subsidy, and that the Bolivians would have to eventually pay the market price. Which at today's prices would be about $3.50 a gallon, instead of the prices that the Bolivians were used to paying, which had been about $1.80 a gallon. Now just a few weeks ago, when the gas subsidy problem raised its ugly head, the government also raised the minimum wage 20%. It was just the government trying to throw a few crumbs at the populace, trying to ease the pain of the coming 70% rise in gas prices.

[08:04] But the public didn't buy it, because the minimum wage in Bolivia was $82 a month, and a 20% raise only brings it to $92 a month. And here you thought that the Central Americans, with their sad minimum wage, which ranges from $250 to $275 a month, well if you thought that was bad, think about the poor Bolivians, who even with a 20% raise, only get $92 a month. No wonder they're rioting in the streets and throwing rocks at government buildings. They may be poor, but they're not stupid. But even with all the unrest that's been going on in the last few days, you have to understand that Bolivia is a very safe country, and it's way up there on our expat recommended list.

[08:50] In reality, it's a really great place for an expat to live, work, play and or retire in. Not only does it have a very low crime rate, in fact in all crime categories, including murder, it's much lower than the United States. It's also got one of the lowest cost of living indexes in the world. In other words, it's cheap living. And if you choose to live in one of the largest cities like La Paz, you'll find you can get just about everything you can get in the first world, or something near enough to what you really wanted that you'll more than likely be satisfied. That is unless you're finicky or a stickler for details, and in that case, you should skip moving to Latin America. So just remember that the local products will be cheap, and any things imported from the first world are going to be expensive. That stands to reason.

[09:36] And that's how it works in pretty much any Latin American country. So get used to it. And since we started this conversation talking about cheap gas, this might be a good time to remind you that the top ten countries in the world with the highest gas prices, ranging from five to seven dollars a gallon, are all in Europe, with the Netherlands coming in at number one, at about seven dollars a gallon. Which means that about 75% of the cost of gas in that country is strictly government taxes. And you'll find that every single country in Europe has at least a 50% tax on gasoline. Now I'm mentioning this to remind you that since the world runs on gasoline and diesel, it only makes sense that some of the highest consumer prices in the world are in Europe.

[10:24] And I'm just mentioning this as a contrast to Latin America which has some of the lowest gas prices in the world, which naturally translates to some of the lowest consumer prices in the world too. And since this is the XPAD files, and it's all about living, working, playing, and or retiring in Latin America, I just had to mention that. And for all you European listeners out there, well you know full well how really expensive it is to live in Europe, and that's why you're listening to the XPAD files. Am I right? And as far as living in Europe, sorry guys, but I don't recommend it. And just as an aside, since we're talking about the cost of gas and diesel, I think that everyone should be aware what the real cost of gasoline per gallon is. I'm talking about the refined product sitting in a tanker, not the price you pay at the

[11:14] pump where it's padded with taxes. The cost always varies a little day by day, but to find out, all you have to do is type into Google the words, Regular Gasoline New York Spot Price, and you'll find out what a real gallon of gasoline costs without any taxes on it. And if you do that, it's sure to make you mad when you find out how you've been cheated by either yours or someone else's government. I just now Googled the average national price at the pump in the United States, and it's three dollars a gallon, and the spot price internationally is two dollars and forty cents, which means that in the United States there's a little more than a twenty percent tax on every gallon. Does that make you mad? Well it should.

[12:00] And in the Netherlands, where they have the highest gas prices in the world at seven dollars a gallon, that means that about seventy percent of the cost of a gallon is pure taxes. Now if that doesn't make you European folks mad, well you're a better man than I am. Now staying for a minute more on the theme of gasoline, we just have to talk a bit about Venezuela, which has one of the cheapest subsidized prices per gallon of gasoline in the world. In fact it is the cheapest gas in the world at twelve US cents per gallon. Wow, that's hard to believe isn't it? Now in Venezuela, when you top off a tank in the average car, it usually costs no more than a dollar and a half. Imagine living in a country where a bottle of water is fifteen times more expensive than

[12:45] the same volume of gas, or where a bottle of milk costs twenty-five times more than the same volume of gas. But what the Venezuelan people don't know is that cheap gas is not going to last forever. Some outside analysts are saying it can only last two or three years more at the most. Because you see the problem is not only about the smuggling. With massive amounts of black market gas and diesel going into neighboring countries like Trinidad and Tobago and Colombia and Brazil, Venezuela is having the same problems Bolivia had only on a much bigger scale. But for Venezuela, the bigger problem is that the national oil company foots an eleven billion dollar a year subsidy bill to keep the price of gas at twelve cents a gallon for the locals.

[13:32] And since Venezuela's thirty million people are taking advantage of cheap prices by using more and more and in fact wasting more and more gasoline and diesel fuel every year that it's gotten to the point where it costs more to subsidize that gas than the profits they receive by selling gas to the outside world. So suddenly it's a losing proposition for the government. And every politician who's even hinted at cutting off the subsidy has had his head handed to him at the polls. So how does all this stack up for expats? I guess you probably figured that Venezuela is at the bottom of the expat file list. And it is. And even if the gasoline was free, there are so many negative things about the country that it's just not recommended. But we'll address that stuff in a future show.

[14:21] It seems that lately everything Hugo Chavez tries backfires on him. For example, about a year ago he raised the minimum wage, about twenty five percent, to about five hundred US dollars a month. Which is pretty much double almost every other place in Latin America. And to most outsiders, it sounds like a big step in the right direction. Not to mention how happy the people of Venezuela were, the ones on the bottom rung, when they heard that news. Especially when they reflected on Colombia, a border country that they've always been in fierce competition with. Colombia's minimum wage is about two hundred and fifty dollars a month, which is pretty much the average minimum wage throughout most of Latin America. But now, when we move the clock up one year to 2011, you find that Venezuela has clocked

[15:08] in thirty percent inflation in one year, by far the worst inflation record of any of the twenty one Latin American countries. So that inflation rate easily wiped out to twenty five percent minimum wage increase that Chavez imposed a year ago. And then, just a few weeks ago, came another big blow. Chavez's government devalued the currency by one hundred percent, which effectively rolls back the minimum wage, back down to the level of everyone else's in Latin America. So back to the point, how do we rate Venezuela for expats? Well, when we compare them against the rest of Latin America, now let's see. They have the highest inflation rate, the highest crime rate, the most economic restrictions

[15:54] besides Cuba, the highest rate of media censorship besides Cuba, and the most restrictive rules on financial transactions besides Cuba. But they do have the world's cheapest gas. So if those other things don't bother you, and you drive a huge SUV or a Hummer, Venezuela just might be the place for you. But here at the Expat files, we give it a big thumbs down. But since we're talking about gas guzzling SUVs and Hummers, there's another thing I just have to mention. If you ever take a trip to the biggest city in Venezuela, Caracas, you're going to see billboards and posters with a lot of anti-American slogans on them. But the irony is, you'll also see parked on every busy street, tons and tons of Detroit

[16:42] heavy metal, and in beautiful condition. It's like stepping back in time. I'm talking about Cadillacs and Lincolns and Dodges and Chevy Impalas and GTOs. It's like you've stepped back into the muscle car era of the 1970s, I'm not kidding. And most of these cars are in terrific condition. And it's not like they're copying Cuba. Though they copy Cuba in so many other ways. Cuba has the pre-1960s vintage cars. And in Cuba, many of those 1940s and 50s classic cars are sitting in driveways, beautifully restored, but the people don't have the money or the gas to drive them. But in Venezuela, it's the 1970 vintage cars, the muscle cars, that the people are in love with.

[17:29] Like Hemihead, Dodges, souped-up Malibu's, Chevelle's and Roadrunners. Personally, I've never seen anything like it. It seems like there's an anti-American sentiment for everything except 1970s Detroit muscle cars. And when gas is 12 cents a gallon, that's just the kind of car you want to drive. And my prediction is, in a few years, when gasoline actually creeps up to the market price in Venezuela, it's going to be a great place for an expat to go down and snap up some cheap vintage Detroit heavy metal. Because it's a sure thing that the locals will never be able to afford the gas. Not at market prices anyway. But then again, you probably won't be able to afford it either. But wouldn't a vintage GTO look good in your driveway? What do you think of when you hear the word lynching?

[18:22] The first thing you might think of is Hollywood cowboy movies in John Wayne. Or you might think of America's dark past and the civil rights movement. To me, it brings to mind the word lynch mob and the Ku Klux Klan. And how about you? What does it make you think of? And thank God it's ancient history, right? But ancient history is like two days ago when you're talking about Latin America. Because you see, lynchings, just like in the bad old days, are alive and well in Latin America. In fact, last year in Guatemala alone, there were 195 reported lynchings. And the number 195 is just the number that's been reported to the authorities. And some say it could be double that. Because if the victim escapes or doesn't die, there's no body to report. And that's no typo. I said 195.

[19:08] But if that makes you think twice about moving to Latin America, don't jump to conclusions. Because so far, there's never been a case of an expat who's been a victim of a lynching, though I've heard of a few close calls. And when first world people first hear about them, they always ask, what's up with those lynchings? How could that be happening in the 21st century? Now, you might not believe this, but I've actually had tourists ask me, when's the next lynching? And can I go see it? Well, it's not something you can buy tickets for. That's for sure. I mean, it wasn't so long ago when guillotines and hangings were considered public entertainment. And to think that that kind of entertainment has been replaced in our time with TV, video games, and the internet, you have to wonder sometimes, which is worse. I mean, come on, parents. Have you seen some of your kids' video games lately?

[19:57] Now, of the 21 Latin American countries, six countries in particular seem to be bent on this kind of extreme torture and punishment. And so far, authorities and outside international organizations don't seem to be making much headway at all in trying to control it. Every year, there's hundreds of lynching cases documented, especially in Guatemala, Haiti, Brazil, Ecuador, Bolivia, and Mexico. And since they always occur spontaneously and in the heat of the moment, it's rare for the local authorities to intervene once a lynching is in progress. And it's because Latin American law enforcement officials are so inefficient, in fact, mostly useless at fighting crime in the countryside and in the small villages, that lynchings persist. For the people in the Pueblo, it's all about taking law into their own hands,

[20:46] because they don't trust their own law enforcement officials, and they know they're corrupt and pretty much useless. Well, those are the basic reasons why lynchings persist. The fact is, no one gets lynched unless he's caught dead to rights in a crime. And that's not just an opinion of the locals committing the lynching. That's the standard opinion of law enforcement officials themselves. And in your average lynching, that is, if there's such a thing as an average lynching, the victim is nearly always a repeat criminal. And the general categories of victims include rapists, arsonists, child molesters, and incorrigible thieves. The classic victim profile being that of a repeat offender that gets caught over and over by the police, but never seems to do any jail time.

[21:33] And within a day or two, he's back on the street and at it again. And finally, one day he gets caught in the act, and the mob mentality kicks in, and there's a lynching. And that's not to say the only victims are common criminals. There have been cases when crooked judges and crooked policemen and crooked politicians have been lynched too. But you'll almost never see that in the big cities. Lynchings occur almost exclusively way out in the hinterlands. It's a small town phenomena, and only in towns that are heavily populated with indigenous tribes. I'm not talking about pure Latinos here. I'm talking about the indigenous people. The short dark people you often see wearing multicolored indigenous clothes. And because these indigenous people are so tight knit,

[22:20] and because they have hundreds if not thousands of years of tribal history and customs, they're not at all afraid to take the law into their own hands, just like they've always done. Because as an unempowered group, they're so used to being snubbed by the politicians and ruling classes in the bigger cities, where the power elite are almost exclusively of Latino blood, and the indigenous people have been purposely excluded, mostly because chronic racism runs rampant in Latin America. It seems to be that lynching is a legacy of exclusively indigenous people who've always been marginalized by the people in power. And of course they still are. With the one exception being Evil Morales from Bolivia, and he's the only Latin American president of pure indigenous stock. But even in Bolivia, where they have an indigenous president in power,

[23:09] there are still dozens of lynchings a year. I guess old habits die hard. Now present day lynchings are not hangings. And though in the first world lynching is synonymous with hanging, in a third world Latin American lynching, nobody throws a rope over a tree, puts a guy on a horse, and slaps the horse in the rear end. Latin American lynchings are not that organized. Instead, they parade the guy into the street with his hands and feet tied, then the gathering crowd insults him and kicks him around a while. And then the damaged party gets in the first few licks, either with rocks or sticks or some well placed kicks. The damaged party, or parties, being a child, mother, or father, who've been robbed, kidnapped, assaulted, or whatever.

[23:55] Then the crowd moves in for the kill, and they either stone him, beat him, pour gasoline on him and light him, or some combination of the above. And it seems that in most cases, the police like to stay well clear of the area, till it's all over. They're not too interested in jumping into the fracas, because they know in the past, some police themselves have been lynched, trying to help a criminal get away from the mob. And according to statistics, more than half the time, the victim survives. But usually not without permanent damage, such as burns and scars and broken bones and severed fingers. And it shouldn't come to any surprise to you, that the vast majority, perhaps 90% of the people who are lynched, are young men between the ages of 14 and 25.

[24:41] You know the type, young, stupid, and high testosterone. And back in the big cities, what do the so-called modern and civilized Latin American people, what do they think about the lynchings that are going on in the provinces? And what are they doing about it? And what are they thinking when they pick up the newspaper, and they see the typical photo of a young man laying in the pavement, stoned to death? Well, I've been at a lot of social events and parties, where the topic of lynchings has come up, and usually off the record. Intelligent Latin people with college degrees, people in positions of power, will admit that it's an unfortunate business. And they almost always say, it's the public's one option, when you have a corrupt and inefficient police force. And they come right out and admit it. It turns out that those small towns, with the occasional lynching,

[25:30] well, they happen to be the ones with the lowest crime rates per capita, in all of Latin America. And as one old indigenous lady told me, in her town, they have six fat, useless policemen, who sit around in their commissary all day. But she said, that doesn't matter, because the town's safe, even if the police are useless. She said her town has only one or two lynchings a year. And that's enough of a deterrent to keep the town pretty much crime-free the whole year round. She said that women and children can walk around anytime night or day, without any fear. And they have none of the chronic crime problems they have in the big cities. And I asked her, what happens to someone who's lynched, who survives? And she made me laugh when she said, when someone does escape, they never hear from him again,

[26:16] and he never shows up in any of the neighboring towns either. And since word travels fast, the town's people have reason to believe that anyone who escapes, eventually sneaks into the United States. Now that's comforting news, isn't it? You've been listening to The Expat Files, living in Latin America with me, John Mueller. Be sure to tune in every Monday and Wednesday at 8 p.m. Eastern Standard Time for The Expat Files, a one-of-a-kind show produced and compiled deep in the heart of Latin America. The only show on the air that takes an honest look at what it's really like to live, work, play, or simply retire in Latin America.

[27:06] And don't forget, all the shows are archived. So to download any previous show for free, just go to the Progressive Radio Network homepage at www.progressiveradionetwork.com and click on the archives. And of course, you can always email me with any of your questions about Latin America, expat files at progressiveradionetwork.com. See you next time. Nos vemos. It was fiesta. South of the border.