#11 – The Expat Files: Life and Challenges in 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. So let's get started. I seem to be getting a lot of emails lately from first world people asking about the job situation down in Latin America. I touched on the subject a bit in the previous show, but people want me to expand a little bit more on the topic. So okay, I will. You might remember that I said that it's not a good idea to come down as an expat and think

[00:58] you're going to quickly pick up a job at one of the local businesses at anywhere near a first world salary, just because you have first world know-how, especially if you don't know any Spanish. Sure, local businesses would love to hire a first world person, that is for maybe 20 to 25% of what you made up in the first world. Now one first world lady sent me an email saying that she knew for a fact that every third world government has a website where they actively solicit outside first world contractors because they know the local talent doesn't have the capacity, the experience, or the proper tools to complete a really big job correctly or in a reasonable time. And that includes projects like infrastructure, urban planning, or environmental projects.

[01:44] And it's a well-known fact. Latin American governments are always hiring expats and first world companies that have the expertise that just doesn't exist in the third world, at least not yet anyway. For example, they like to hire outsiders for large scale urbanization projects and for big civil engineering jobs like airports, harbors, mass transit hubs, and super highways that connect with roads from other countries. And in the last few years there's been a huge push to try to computerize all their ancient paper filing systems that are sitting and molding in warehouses and deteriorating more and more year after year. Remember, we're talking about the third world here. And governments still have a thousand and one departments that still use old-fashioned typewriters. I'm not kidding, manual typewriters.

[02:31] Remember those? Yeah, we have them up north. In museums. In fact, right now, most of Latin America is still operating on paper. They're just starting to computerize. And all in all, they're doing a pretty bad job of it. Yep, they're being dragged into the 21st century kicking and screaming. And they need first world people and first world know-how to accomplish that and to do it right. The truth is, everybody in the third world who's got any kind of an education knows they have to computerize and fast. If not, the bloated bureaucracies and the chaos will only get worse. If you've ever been to a Latin American government office, it's common to see the secretaries and the clerical assistants behind computer screens, just like in the first world. But that's where the similarity ends.

[03:18] If you ever get a chance to poke your head in the back room, you're likely to see how the government is really organized, like straight out of the 1950s. Every government municipality, from the largest to the smallest, has multiple warehouses full of molding, rotting official documents stacked to the ceiling in overloaded shelves. And it's a monumental task to get this stuff scanned and put into a computer so it's finally secure. Because critical documents like land deeds and surveys can be in the files one day and mysteriously disappear the next. And that's why there's a big push to transfer everything over to computers. Because when they finally do, and they switch over, it's bound to eliminate a big problem, which is rampant fraud in the real estate business and in the property registries.

[04:07] As long as a government has a 1950s-style paper archive system, anybody who's got access to that is bound to get away with murder. But it's almost impossible if it's computerized. And believe it or not, they still use gallons of whiteout and truckloads of carbon paper. I'm sure some of you aren't even old enough to know what that stuff is. Anyway, Janie, who wrote that email, is right. Every year, third world governments award billions of dollars in contracts just like that to foreigners and expats like you and me. And she's also right about how third world governments have special websites where they solicit bids for government contracts. So if you know a little bit of Spanish, you can Google your favorite Latin American government website and check out the thousands of government contracts you can bid on.

[04:54] But if you do bid, you'll have to do it in Spanish. But is it worth it to get a government contract? Well, if you have any experience with government contracts up in the first world, you'll know that they usually pay at a snail's pace. You'll have to fill out reams of paperwork, and there'll be 101 federal, state, and local regulations that you'll have to comply with. But be aware that in the third world, if you happen to get a government contract, it'll be infinitely worse. That is, unless you or your company are such big players that the government will do anything to have your business. But the time-tested and preferred way to keep things rolling merrily along is to grease the palms of the politicians and the people in charge. And like I said in the previous program, bribes are called mordida in Spanish.

[05:41] Mordida meaning bite or take a bite. So be aware that if you get a government contract, you'll pretty much be expected to pay someone a bribe somewhere along the line. Like for example, just in the last month, an expat friend of mine got a government contract to do a waste and sewage disposal system for a new government hospital. He told me that he had to make a payoff of 15% under the table on his contract earnings to one of the bureaucrats. So he was told to write a check to a certain corporate account, and it was cashed a month later and cleared through an offshore Caribbean account. And that's how the smart white-colored thieves do it, at least up till now. They don't take the mordida check in their own name, they don't deposit it in one of their country's banks, and it's cleared offshore, which makes it a little bit of a coordinated

[06:27] effort. Which means there's usually more than a few witnesses, who I'm sure get paid off too. Whereas just a few years ago, mordida payoffs were much simpler. You just handed over a briefcase full of cash to the right bureaucrat, and you were in like Flynn. But now, with all the new international money laundering laws, you just can't move cash money around like you used to. So as for your expat advice for the day, I'm advising that if you're an expat independent contractor, or have a small business, stay as far away as you can from third world government jobs or contracts. Because besides the fact that you'll likely end up paying mordida, or bribes, to some government official or other, there's always a very good chance that you won't get paid in full for the job you've done.

[07:13] So what's up with that? Do I mean the government's checks will bounce? Oh, they will sometimes, but you usually can re-deposit a week or two later and get your money. But what I'm referring to is the fact that Latin governments are notorious for just not paying out, signed contract or not, and especially if the payments are spread out. You're more than likely to get shafted, and one of those checks just may never come, especially if you're an independent contractor or own a small business. You just have to look at the way the Latin governments treat their own municipal employees. In fact, I've been witness to this many times in many big cities in Latin America. I'll be driving along in my car and come up to a roadblock, and nine times out of ten, it will be a strike of municipal employees, or teachers or public bus drivers, or nurses

[08:00] or public hospital doctors, and the reason? It's nearly always because the government hasn't paid their salaries in months. Now strikes in Latin America are called huelgas, and they're so common that practically no one pays attention to them, especially not the government. To them, it's just annoying that the traffic's being blocked. In reference to that, I'm looking at the Guatemalan newspaper for December 23, 2010, and the headline says various municipalities have not paid their workers for three months, and the photos that accompany it show four different cities in Guatemala where municipal employees are on strike, and they're blocking roads and in some cases actually asking for handouts. It says the city of San Irefonso owes three months back salary to 27 workers.

[08:46] The city of Tascisco owes three months in back wages to 300 municipal employees, and in the city of Chimalta Nango, almost 500 employees have not been paid since last June. And it says that in Guatemala's largest shipping port, Porto San Jose, 200 municipal employees have not had their salary paid for four months. And those are just the cases reported in the paper at the moment. And that's just news from Guatemala. You pick up the Honduran newspapers and you see the teachers are on strike because they haven't been paid. You pick up the Panama newspaper and you find that university professors are four months behind in their pay. It's the same in every Latin American country. And how do they get away with that? I don't know, but I can tell you this.

[09:32] You can be sure that the high-level bureaucrats never miss a paycheck. Just a little guy, the guy at the bottom, and not always the little guy either. Take doctors, professors, nurses, teachers. They've been through it so many times, they've actually come to expect it. You really got to wonder, how are they going to treat you, a foreigner, an expat, if you happen to get a government contract? Well, I can answer that because it happened to me twice. That's right. In Costa Rica, I was stiffed out of two paychecks by the government, and it wasn't for a lot of money, but it does make for a good story. So here's how it happened. Knowing that I've done a lot of radio work, a Costa Rican official approached me and asked me if I would do some voiceover work for a television spot that was being produced by the Costa Rican Tourist Board. So I went down to a designated studio and did the voiceover work.

[10:20] It took a few hours to do, and I was supposed to get paid at the end of the month around $500. And as the months rolled by and I still hadn't been paid, I'd place a call occasionally to the Institute of Tourism. And like every deadbeat slow payer the world over, they gave me a thousand and one excuses saying they had trouble with this and that, or someone had made some clerical errors. And of course they promised that eventually I'd get paid. Then one day about four months later, I actually walked into the office and demanded to talk to the guy in charge, the one that signed the contract, the guy I made the deal with. And to my surprise, he wasn't there anymore, and most of the office had all new staff. And after I explained my situation to the new people, I found out one of the most important

[11:06] rules of doing business with the government. I found that you should never agree to a contract if it's during the last year of a president's term. Because if you haven't been paid by the time the new president comes in, there's a good chance you'll never get your check. And why should that be? That's because when the new president gets in, he completely guts all the major departments within the government and fills them with his own boys. In the first world, it's called patronage. In the third world, it's called quayo. And when the new president comes in and all the departments have their changeover filled by his new boys, that new department starts at ground zero with nothing in the department's bank account and virtually no funds. In fact, that agency or department is usually deep in debt from heavy overspending because

[11:55] the previous department honchos, they knew that time was short and soon they'd be out of a job. It's the Latin American way. They always completely deplete the coffers of their department right before the new administration comes in. And that's just what happened to me. I made my contract in the last year of a presidential term. And the bureaucrat at the tourism agency said they would be glad to pay me, but they don't have any money. And the funny part is every once in a while, I'll see that commercial on television or on an airplane during the inflight movie, the one I never got paid for. Sheesh, talk about rubbing salt into the wound. And when I see it in the airplane and I hear my own voice talking back at me, sometimes I feel like going into the aisle, standing up and making an announcement and not a very

[12:43] nice one. And mine is a typical story when you do business with a Latin American government. So it's not recommended. I mean, imagine if you were to accept a big government contract and even get a third of the money upfront. I mean, some people do that. They put all their eggs in one basket and they always assume the government is good for it. I mean, it's the government and they're running things, aren't they? And you sign a contract with them, right? Well, suppose you don't get that last payment. If you try to take them to court, that can drag on for years. And by then you'll be into yet another presidential administration. Good luck. And yep, if you're dealing with Latin American governments, things like that happen every day. Even in Costa Rica, the Switzerland of Central America, talk about false advertising.

[13:31] You think the Swiss government would pull something like that? I don't think so. And that reminds me of another story from the so-called Switzerland of Central America. An expat friend of mine has a big storage business alongside the Costa Rican International Airport. And he was approached by a government bureaucrat saying that the government wanted to rent some of his storage space. In fact, all of his storage space because the tourism board, there we go with the tourism board again, was sponsoring a big international art show and that they needed to rent 10,000 square meters of floor space to store artwork that was being shipped in from 20 countries around the world. Well, the expat signed a contract and took a one-third deposit. And when the date approached for the artwork to arrive, nothing happened. Nobody came. Nothing was dropped off.

[14:18] Well, it turns out there was another personnel turnover at the tourism board and the event got canceled. But no one ever notified the expat who ended up losing out big time because he'd cleared all the space and he turned down a few important clients, long-term clients who wanted that space. And it took him a long time to recover. But he did learn his lesson. He'll never do business with the government again. Now earlier, when I mentioned if you drive down the street how it's common to see municipal employee strikes and nurses strikes and teachers strikes. Most often because they haven't been paid in months. Now imagine yourself for a minute. Up in the first world, you get your check and it doesn't clear at the bank. If you're like most Americans, you're likely to go ballistic and head down to the bank

[15:05] and make a pretty big stink about it. I mean, that kind of thing can happen in the first world too. But even once is one time too many. Now suppose your employer is late in paying you a week or two or three or even a month. Of course you're going to be absolutely furious. Chances are you'd be calling up your lawyer and your senator and your newspaper, anything to put the pressure on. And your next step would probably be looking for another job. But more practically, how long could you or your family survive if you haven't been paid for let's say a month or two or three or even four? Unfortunately, the latest reports say the average American family has about a month and a half stashed away in savings. And after a month and a half without a check, that's when things get really tough. What that means is the average American is about a month and a half away from insolvency.

[15:54] I know that sounds pretty depressing, but at least in the first world, there are social safety nets like social security, unemployment compensation, severance and disability pay, and as a last resort, welfare. Now let's talk about Latin America and the third world, where studies have shown that the average Latin American family has zero savings. In other words, you've got hundreds of millions of people living from hand to mouth. And the only reason why third world families can survive when paychecks are a month or two or three or four in arrears is that multiple generations of people live in the same houses, which means there's almost always more than one financial contributor to the family finances. So if somebody in the family hasn't been paid for a few months, which happens more often

[16:39] than you think, the others pick up the slack. And that even includes teenage kids and adolescents. One old expat I know, an 80 year old guy who's been down here for 40 years, he tells me that the way the Latin families are structured reminds him a lot of the way things were back in the 30s, 40s and 50s in the United States, when you had three generations of family living under the same roof, which was pretty much the norm back then before we invented the concept of old age homes in retirement communities. But these days, you almost never see grandma and grandpa living in the same house as their kids. Not up in the first world, you don't. Now I know you're wondering how Latin American governments can get away with not paying their employees for months and months. How does that happen? Well, it turns out it's a combination of things and the problems can be traced directly to

[17:29] the government accounting departments that are in charge of dispersing the funds. To start with, the departments are loaded with political appointments, especially the administrators who are usually friends, cronies or family of the people in power. And because of that, they're almost never qualified for the job. And these people tend to hire their own friends and family for the lesser positions in the department. So in addition to unqualified and under trained people, they have secret slush funds, phantom payments, phantom employees, massive levels of white collar crime, padded expense accounts, pilfridge. They have constant computer problems with bad software. That is, if the computers are working at all. And of course, they have terrible accounting practices and they rarely get audited, at

[18:17] least not by anyone from the outside, anyone who's truly independent, that is, which means once they get their slice of the federal budget deposited in their department's bank account, there's practically zero oversight. So it's almost impossible for any outsider to get a handle on it. And they like it that way. You heard me. I said zero oversight. Now wouldn't we all love to have a job working for a government agency with zero oversight, like a kid in a candy store? Well, I could go on all day about Latin American government corruption and how often it is that they don't pay their own employees and how they keep getting away with it. But let's just say the way Latin American government bureaucracies have it worked out, the right hand never knows what the left hand is doing. And that's just the way they want it, which makes for generalized chaos.

[19:05] And on top of that, there's the general reshuffling of upper management every year or so. And that's when a new group of friends and cronies walk in the door and it's more of the same old thing. And that's why when first world governments donate large sums of money to Latin American governmental organizations, they hand it over with great fanfare and a nice photo op, but they'd rather not know the details on how the money was spent, because it might interfere with that warm and fuzzy feeling they get when they donate to poor third world countries. Okay, it's time to talk a little bit about that huge country, Brazil. Now there's something I just don't understand. Lately, in all the international papers, I've been seeing all kinds of statistics about Brazil.

[19:52] And you could say most of it is positive, uplifting and very optimistic. But you always have to be wary of propaganda coming out of government sources, especially in Latin America. And in this case, especially from Brazil, which we know is a World Cup destination in 2014. And in 2016, Rio is going to have the Summer Olympics. Now it's true that most first world people know absolutely nothing about Brazil, except how they've seen it represented in Hollywood movies, and the occasional news coverage at Carnival Time in Rio, when it looks like the greatest party in the world is going on, and we missed it. Now Brazil happens to be so far off the radar that the average first world person, even a pretty seasoned traveler, will probably never make the trip to Brazil

[20:40] as much as he or she might want to. First of all, round trip airfare from any place in the first world will usually cost well over $1,000, maybe $2,000. So there goes the vacation budget. Especially these days, when for a grand, you probably could go for a week or two on a nice Royal Caribbean cruise where everything's included. So we learn what we do about Brazil from bits and pieces we pick up in the media. I mean, how many of you first world people actually know someone who's ever been to Brazil? How many of you actually know a Brazilian? And that's another thing. You rarely see a Brazilian up in the first world, unless he's pretty well off or an exchange student. Because in reality, Brazil is a very poor country, despite what you may have heard.

[21:27] You've heard the stories that it's a huge economic powerhouse with a massive biofuel sector, with millions of cars and trucks running on ethanol and biodiesel, which practically makes them free from dependence on OPEC and foreign oil imports. That's the latest media hype, anyway. Man, it all sounds so great. But before you quit your job, put your house up for sale, and book a flight down there, let's talk about a few of those things and see if they're really what they're cracked up to be. Let's start with the great news that's in all the papers about the Brazil unemployment rate, how it's dropped to 5.7%, which is the lowest unemployment figure since the government has kept records. You know, when you hear news like that, it makes employment rates in the United States and Europe look pathetic.

[22:14] I mean, we've all heard that the employment rates are hovering around 10% in the first world, and that the way the governments manipulate statistics is more likely closer to 20%. Wow, 5.7% in Brazil. What they don't tell you is that that 5.7% government statistic only includes official workers. I mean, citizens who are actually on the tax rolls. They don't say a thing about the 30% of the working population of Brazil who are in the informal economy. In other words, people who work strictly for cash. Anyway, along with that official 5.7% unemployment rate, you'll hear stories about how there's not enough qualified workers to go around. They say that there's huge shortages of high-tech workers, white-collar workers, and skilled blue-collar people.

[23:02] And that really is true, but it's not so much because the Brazilian economy is booming so much that it's overheating. Nope, what they don't tell you is that the average Brazilian adult has only five years of formal education as opposed to adults in the first world who on the average have 12 to 13 years of formal education. So you tell me, how are you supposed to train an adult with five years of formal education? I mean, what's he qualified for? A white-collar job in a bank? A software job? In an accounting firm, maybe? Not likely, but more likely, Walmart or McDonald's. So beware of those government statistics, really, especially when they come out of Latin America. And another thing you hear in the news lately about Brazil

[23:47] is that they've raised their minimum wage. In 2010, it went up to $270 a month, which works out to a hefty $70 a week. Well, that's nice. That means when you do get that entry-level bank job, you'll be making 70 bucks a week, guaranteed. And if any of you have ever been to Rio, you'll know it's not all beaches and bikinis and girls from Ipanema. In fact, if you stay at one of the hotels on the strip, that famous Ipanema strip, you'll be warned by the Hotel Concierge and you'll see the signs that say you should never walk on the beach at night or during the day when you're alone. And these are four-star hotels on the strip that are giving you that advice. But wait just a minute, you say. In all the international papers lately,

[24:32] Brazil seems to be cracking down on crime. I mean, just in the last month, didn't they have a joint military police effort to clean out the slums called favelas? In Rio, didn't you see it on CNN? The troops, the armored vehicles, the house-to-house searches, the water cannons, the tear gas, and the arrests? Well, again, if you think that's going to make a dent, you've never been down to Rio. Because if you have been, you know that Rio has two parts, a built-up commercialized center nucleus surrounded by tin roof slums as bad as you've ever seen in your life. And worse yet, each little section is run by a street gang, and they're especially on the lookout for wide-eyed tourists who in general are clueless about how really dangerous it is.

[25:19] And every big city in Brazil is like that. And regarding the economy, if you're overly impressed by the seemingly marvelous economic statistics coming out of the Brazilian government these days, I mean how Brazil has become a virtual manufacturing dynamo. And how this giant country of 190 million people has a currency that it's appreciated 100% against the US dollar just in the last few years. Man, if you live in Brazil, that really sounds great. But what they don't tell you is that if you lived in Brazil back in 1994, which really wasn't that long ago, well, if you lived there back then, inflation was a thousand percent a year. I said a thousand percent. Which means that every month, prices on everything would just about double.

[26:06] Now people who live up in the first world have absolutely no concept of what that would be like. Though with all the economic problems in the first world, they might get their chance to find out. Anyway, though it is true by some miracle, Brazil did manage to lower that thousand percent inflation rate down to about five percent today. Well, with their history of fiscal irresponsibility, how long do you think that's going to last? I don't know. But I wouldn't count on it staying historically low like that. Since for the last 50 years, it's almost never been in the single digits. But if you're doing business down there right now, people are saying it's the best it's ever been. And there's one big reason for that. Brazil doesn't need anybody else. It's completely self-contained. It has all the natural resources it needs.

[26:52] And it doesn't really have to import anything. Not even oil, at least for now. And it does big export business with all the countries around it, which means they're not much affected by what happens in the rest of the first world or with the other third world manufacturing dynamos, India and China. And because they have their own stable market and manufacturing base, they don't have to bow to first world pressures, economic or otherwise. But does that mean it's a good place for expats to set up shop? Well, for expats, there are some very good places in Brazil. But I'd stay away from the real big cities like Rio and Sao Paulo. In a coming show, I'll explain my favorite picks. So stay tuned. You've been listening to The Expat Files, living in Latin America.

[27:38] 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. Los Remos.