#171 – The Expat Files: Real Stories from Latin America

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

[00:03] Hi everybody, I'm Johnny Mueller and you're listening to the expat files living in Latin America. The show that tells you what it's really like to live, work, play and or retire in Latin America. I tell it just like it is, not the version they give you in those glossy travel magazines or the picture they paint for you in those international traveler websites where they're only trying to sell you something. What's it really like for expats living in Latin America? Well, if you stick around a while, you'll find out. So let's get started. Hi everybody, Johnny Mueller back with you today and my voice seems to be in better condition than it was last week. I'm kind of recovered now from that seminar I just gave. And you know, I always hear people talking about the fact that they make maybe 30 or

[00:48] 40 or $50,000 up in the first world and maybe even have $100,000 in the bank or a house worth $200,000 or $300,000 and they're thinking if they liquidate everything, even if they can sell their house in this crappy climate, is it really the right thing they do? So many first world people who think it's time to leave and have been exploring some options in South or Central America, let's say, doing the majority of their research on the internet, of course, maybe really never having visited a Latin country apart from cruise ship stops and maybe Costa Rica and Panama and the other tourist destinations. And they're really worried if it's the right thing to do. They're worried about liquidating everything and they're afraid about losing that pension if they don't have their 20 or 30 years in on the job. They want to leave, but they're worried as hell about making the move.

[01:35] They're thinking, should I risk all of that losing that pension, liquidating everything and getting maybe half of what it's really worth, especially if they're only 45, 50, or 55 years old. I talk to these kind of people a lot and they really express some worry that their money, their nest egg, is going to run out in a few years, you know. After they've moved down to Peru, settled in, all of a sudden they're broke. That's what all new expats and expat wannabes have in the back of their mind, believe me. And it's a very difficult thing to sit down and try to explain to these people. It almost never happens like that. Whether new expats come down with five grand or five hundred grand, they all have secret or not so secret worries about money. In fact, I've seen dead lazy first world people come down here, beachcombers, you know.

[02:22] I've seen types like that make five grand last a year and more. And I'm telling you right now, once you've been down here about six months, if you're off the tourist track like I am, soon enough those business ideas just start flooding in. Even if you came down like me and didn't know a lick of Spanish, I know people who didn't seem like they had an ounce of creativity in them, who are doing just gangbusters down here after six months or a year. Because you're coming down here with advantages you didn't even know you had. You have first world sensibilities that the average Latin business owner just doesn't have. But still, when you first come down here, you're not thinking like that. I know what kind of fears you have, especially economic fears. I had them too when I first came down. I had those fears even though I had a nice little nest egg myself. I figured I could last 20 years without getting a real job.

[03:10] As long as I didn't spend money like a drunken sailor. But guess what? It's been 20 years now since I first said that to myself. And I still have enough in my nest egg to last maybe another 20 years without having to get a real job. How'd that happen? Well, it's not so hard to explain, really. When you're down here in Latin America and you see all the opportunity, you just don't lay in a hammock all day and wait for the sunset. If I'd have done that, and believe me, it's pretty tempting when you're down here, after 20 years the money would have run out and I'd have to go back to Chicago, tail between my legs, and reclaim my old bedroom at my mother's house. Man, that would have been a terrible letdown. Anyway, when you first get down here, those kind of thoughts do go through your mind. So you gotta wonder, what happened to me in the last 20 years down here in Latin America?

[03:57] Remember, I came down here not knowing a lick of Spanish, and not knowing anyone either. Did I just go into a cave and hibernate for 20 years and not spend a cent? Is that why I figured my nest egg will last me 20 more years? Not likely. In the last 20 years, I've found so many ways to make money, you wouldn't believe it. And even though all of my ideas weren't huge successes, there were one or two that really surprised me. But the biggest surprise is how little it takes to survive down here like a first world person. So, when people say to me, God, you know, if I liquidate everything, I've only got $250,000 between me and my wife, that's not near enough to abandon everything in the States and go down and live in Peru or Bolivia or Colombia. All I gotta say is if you're thinking that way, you're living in a different world than I am. Because I'm telling you right now, when you're off the tourist trail, living in Peru, Bolivia,

[04:46] Honduras, Guatemala, anywhere in Latin America, except for maybe Costa Rica, Panama, Chile, Argentina, and parts of Mexico, which leaves you 15 Latin countries, by the way, to choose from. Anyway, all I'm saying is between two people, a husband and wife, let's say, if you don't have a car and a house payment, you're gonna have a very hard time spending $25,000 a year. Unless, of course, you like to go out and eat steak and lobster a couple times a week and buy imported first world stuff in the shopping centers. I'm telling you, a single person could live on $15,000 a year where I'm at and still have a maid come in a couple of times a week in a garden or two. In fact, you could afford a live-in maid, you know, 24-7, but if you're just a single person, you'd have to be a pretty big dirt bag to give her any meaningful work to do.

[05:33] Because even the average slob like expat Eddie can only produce so much of his own grunge for her to clean. And by 10 o'clock in the morning, she's got nothing to do but watch the soap operas. My point is, you gotta stop thinking like a first world person in terms of your own economic situation. For example, if you have $250,000 cash in the bank up in the first world and that's all you've got, up there I don't think it could last two people more than two to five years. But down here in Latin America, that could easily stretch into 10 or 15 years or more, no problem. And I don't mean you have to lower your lifestyle and live like a local, I'm talking about living like a first world person does. What I'm saying is you got to change your way of thinking completely and I know it's difficult, I had trouble with it too, but you can live down here like a first world

[06:19] person does for 20 to 25% of what you spend to be stressed out in Cleveland. And still, I'm amazed by the fact that I have enough money now to live another 20 years without working another day in my life when I was thinking exactly the same way 20 years ago. So right now, technically, if my personal economic projections would have come true, I would be dead broke right now and living up in Chicago with my mom. And guess what? In the last 20 years, I've never had a nine to five job working for the man down here in Latin America. Sure, I've had a few radio jobs down here in various countries and syndication and stuff, but I never worked more than two hours a day for a maximum grand total of 10 hours a week. Now you call that working? And down here in radio, you don't make first world money anyway.

[07:05] So really, those jobs didn't contribute much to my income anyway. It's all those other little business ideas I had that really ended up making money. Sooner or later, us expats always end up doing something that makes money. Seems like we just can't help it. And 99.9% of the time, it's not working for the man. It's something that we do on our own, some kind of business idea that takes off or some kind of partnership we get into with another expat or a local. That happens to nearly all of us. And guess what? All of us secretly or not so secretly think we're not going to last when we first get down here. We all have our doubts and fears. None of us comes down here with a ball-buster attitude like I'm going to just kick ass. First of all, we get slammed with culture clash right away and our language skills usually

[07:51] suck. Kind of reminds me of the Koreans and the Chinese that come to the United States and make huge successes out of their businesses and they start out with the exact same problem. Culture clash and their language skills really suck. And they often succeed even though they have nothing near the gringle advantage we have when we're down in Latin America. And one of the reasons why I'm talking about this today is that I was listening to a download of a Richard Martin show of maybe a month ago where some guy called in and he said he and his wife were considering moving to Latin America but they only have about $300,000 or $400,000 after they liquidate everything. And they're having those same worries that we all have that we're going to run out of money. Well, I'm thinking $300,000, $400,000, you come down to Latin America, if you're having

[08:37] your doubts, what you should do is multiply whatever number you have in your nest egg by 4 because that's about the purchasing power you'll have down here in Latin America as compared to the first world. So if you have let's say $400,000 right now, liquid, times 4 that's a million six, well you can figure that's about the purchasing power you'd have off the tourist trail down here in Latin America. Well just think of it this way, would you be worried, would you have financial woes up in the first world if you had no debts but a million six in the bank? No I don't think with a million six in the bank up in Cleveland you'd be losing sleep at night worrying how long that money is going to last. And I know Richard Martin and I could talk about this till we're blue in the face. Now when you come down here you can live like a king for 20 or 25% what you spend up in

[09:26] the first world. However, you got to be off the tourist trail, that's a must. And you have to readjust your spending habits just a little. You know, basically don't buy imported products from the first world because you really don't have to. All the factories are down here. So when you buy Kellogg's Cornflakes or Heineken or Beck's Beer, they're really Kellogg's Cornflakes, Heineken and Beck's Beer produced right here in Latin America. So you don't pay those high import taxes. And not only do you skip the high import taxes, but the labor's so cheap down here in that Kellogg's and Heineken factory that the end products themselves are much cheaper to begin with. Same thing when you buy clothing down here. You know, it's all made here. They just send it back up to the States and sell it at Guess and Gap and Diesel in the

[10:13] Tommy Hilfiger store, right? But instead, down here off the tourist track, you can get all that stuff and more for a third or a quarter of the price which you pay up in Cleveland. Because remember, up in Cleveland, those commercial centers, they have to pay their help. The average stock boy and store clerk, at least minimum wage, which is seven bucks an hour or so. But down here in Latin America, stock boys, store clerks and floor walkers make about twelve bucks a day, which is about twenty to twenty-five percent of what they pay first world people for the same work. And that's why prices in Latin America are so scaled down, because they reflect the cost of labor and overhead. And by the way, rent down here and even the nicest first world style commercial centers is twenty-five to fifty percent of the first world cost for equivalent floor space.

[11:01] But anyway, just remember, everyone who comes down here, no matter how little or how much money they have or have access to, they have a fear that it's going to run out. That they're somehow never going to make another dime, mostly because of the fact that when they just get down, they feel like a fish out of water, they don't know the culture at all, and their Spanish really sucks. Well just remember this, I know a lot of people who were teachers up in the first world who came down here on summer vacation and liked it so much they came back more than once and decided to stay a little longer on a sabbatical, a year or two, and work as an English teacher in one of the private schools for three or four hundred bucks a month. And believe me, those English teaching jobs are everywhere down here. You don't even have to know a lick of Spanish, just look in any one of the local big Latin

[11:48] newspapers and you'll see ads in English. They're in there practically every day. Now here's my point, if so many tens of thousands of first world teachers can come down here to Latin America, take a job for a year or two paying only three or four hundred bucks a month, and can live on that, and keep renewing that contract over and over again, and believe me, these people aren't living like kings or even queens, but they're not exactly living like locals, they're living a notch above that, kind of halfway between the local life and the first world life. Anyway, think about it, even if they're making four hundred dollars a month, which is usually tops, that's five thousand bucks a year for a single person to live on, right? So suppose now you've got fifteen thousand bucks to live on a year. That's triple what these English teachers are making for their salary.

[12:36] These are first world people too, and they're satisfied with that. That means you can live three times as well as any one of these first world teachers does. And listen, I want you right now to burn that thought into your brain. You've got tens of thousands of very happy first world teachers working down here. You could live three times better than any one of those can for fifteen thousand a year. And that's well below the poverty line up in the first world now, isn't it? And coincidentally, that's about the average payout for a social security check recipient. About fifteen grand a year, which is about twelve hundred dollars a month. You wonder why so many social security recipients in the first world make that decision to come down here and live in Latin America?

[13:22] Actually, once you get over the fear of leaving the good old US of A, it's a no brainer. And that's all it really is, is fear of the unknown. And like expat Eddie says, coming down to Latin America and making a decision to stay here is a lot like how you feel the summer between high school and your first year of college. I mean, you're excited to go to college and the new adventures and stuff that are going to obviously come up. But you have a real fear that no matter how smart you are, you just don't have the right stuff and you're not going to make the cut. In fact, Einstein actually said that in his own biography. He had a real fear of not being able to get through college himself. Because as he explained it, he would find himself daydreaming a lot and didn't have much of an attention span. Go figure. And by the way, I do have a little example here to prove to you once again,

[14:08] just how low the cost of living is down here and how little it takes for the locals to get by, which of course is a great indication of how little it takes for us to get by. Now, listen to this. I'm looking at a company. It's called DeNero Express. It's like a local, purely Latin American version of Western Union. You know, where you can send money from person to person. But in this case, the service only allows you to send money person to person between Latin American countries. Anyway, let me read you a little bit of what it says in this ad. Of course, it's in Spanish, so I'll translate it. It says, you can use any of over 160 agencies in Colombia alone to send your money from person to person. 365 days a year, open from eight in the morning to eight at night.

[14:54] But here's the kicker. The minimum amount when translated to dollars that you could send from person to person in any one of the 20 Latin American countries is, get this, three dollars. Now, if I were to have told you that there's an agency in the United States, like Western Union, in fact, it could be Western Union, that sends money from person to person, and you could send as little as three dollars, you would laugh at me. You'd think it was a joke. I mean, who in their right mind would wire transfer someone three bucks? I mean, in the United States, most people wouldn't get off the sofa and answer the door for three bucks. But in a way, you see, it says it all about the cost of living in Latin America. Because if you can ship as little as three bucks around 20 different countries, some two and three thousand miles apart, there obviously must be quite a lot of people doing

[15:43] just that, or they wouldn't offer the service, right? In fact, get this, the average amount of money sent through that service is 38 dollars. So when you think about that, they're living in a different world. When I lived back in Chicago 21 years ago, I wouldn't drive across town for 38 bucks. Well, maybe I would. Back then, gas was only about a buck ten a gallon. But let's move on to something else. Let's talk about Argentina again, a country that I don't recommend for a lot of reasons. One is, because it's so unstable economically. Having had severe bouts of hyperinflation and currency devaluation three times in the last 25 years. Anyway, bad things are happening again on the economic scene down there. Did you know that Argentina just slapped some more exchange controls on the US dollar?

[16:33] Now, you know, everywhere else in Latin America, except for maybe Venezuela and Cuba, you can have multiple currency accounts and banks, you know. You could have it in the local currency, or US dollars, or the euro, or all three. Though the euro accounts mostly exist in South America, by the way. And nowadays, practically no one's recommending having a euro account because of the imminent destruction of the euro in Europe. And that pretty much assures that the rest of the world will use the dollar as the reserve currency for the foreseeable future anyway. We'll see. Anyway, in Argentina, they've done it again. Turns out the president of the Central Bank of Argentina signed an edict last week that prohibits Argentine citizens from buying US dollars with Argentine pesos and putting those dollars into personal savings accounts.

[17:21] And they're also prohibited now, as of last week, from buying or selling real estate in dollars. It's got to be in pesos. And that's not all. The Argentina Central Bank also passed another edict that said that you can only use foreign currencies, that is dollars or euros, in the tourism industry or when you buy imported products like boats and airplanes and scientific equipment, the stuff that's not made or produced in Argentina. But surprise, surprise, after they announced that you can't use the dollar anymore for bank accounts or for buying real estate, suddenly a brand new black market has popped up that allows Argentinos to buy and sell US dollars at a peso exchange rate a lot higher than the official exchange rate. For example, just this week the official bank rate is 4.55 pesos per dollar.

[18:11] While you can go on the street just a block away from any big bank and get 5.97 pesos per the dollar. How do you like that? And that's an instant 25% gain in your money if you change pesos to dollars on the street. And you know what that means, don't you? Every time governments do that, when they force very hard exchange controls on you like that, that means the board and the head of the central banks know there's something terribly wrong structurally in the banking and finance system within the country. And that's almost always a signal of the coming huge inflation, a currency devaluation or a gigantic downturn in the economy, which often involve bank holidays, bank collapses and bank runs. So you don't want to be in Argentina, which means you don't want to be in Uruguay either

[18:58] because its entire banking system depends on deposits in dollars from Argentinos. You see, smart Argentinos who were burned a few times in the past currency crisis decided they'd like to bank outside of their country, which is a smart thing. Unfortunately, they put their money in Uruguay, which is a tiny little country of 3 million or so, and Argentina's got a population of over 40 million, which means Argentina's got more than 10 times the population in wealth. So when Argentinos start pulling their dollars out of those Uruguayan banks, which is starting to happen right now, we can look forward to some banking collapses and an economic crisis in Uruguay. It's as simple as that. And by the way, the same thing that's happening in Argentina, as far as currency controls, is happening in Venezuela too. You can't buy or sell real estate in dollars or euros there either.

[19:47] You have to convert your dollars to the funny money boulevard, which up to a year or so ago had two official rates, by the way. An external rate and an internal rate, which confused everyone internationally and screwed up the exchange rates on everything. Then when big daddy Hugo Chavez decided to combine the two boulevards again into one, in other words, fix the problem he created in the first place by creating two different boulevards in 2008. Anyway, when he combined the two boulevards again last year, it took an instant 25% hit against the dollar in the global market. But you see, Hugo and his boys can screw around with a currency like that because they think Venezuela is a special case, that it can defy the market because they've got big oil. But the fact is, everybody who's got a brain who's watching from the outside

[20:33] wonders how a country like that with such huge oil reserves and such huge dollar influxes can have a 35% inflation rate year over year. Well, the answer is simple. Governments cannot defy the market. And when they do, the market slaps them right in the face or kicks them in the balls, which gives you the kind of pain you get when you have 35% year over year inflation. Bottom line, expats should keep away from Venezuela, Argentina, and Uruguay by extension. But if you do live in one of those countries and you have your dollars elsewhere offshore, then when the economy crashes and real estate hits rock bottom, you can do like you could have done in Argentina a number of times. Come back in with your dollars when the dust settles and buy things at 20 cents on the buck.

[21:20] However, there is a problem with that. The problem is the governments in these countries just never learn. They keep taking their citizens on these terrible economic roller coaster rides. And so what if you get in at 20 or 25 cents on the dollar? You'll have a nice beautiful penthouse view of the ocean, but you'll also have a ringside seat to the next economic whipsaw. And you know what? All the signs show that Brazil is in for another economic whipsaw too. Don't believe that Brazil powerhouse hype, believe me. They're getting set up for a big fall too. Changing the subject once more, I'd like to bring to your attention a phenomenon that I've observed for a long time when traveling off the tourist track. Especially in those very inexpensive areas, where on occasion you run into the odd backpacker looking for a great cheap deal.

[22:09] As all backpackers do. I mean, that's the point of backpacking, right? So when you get back home to your hostel at night, you can share your low budget adventures with the other nine people you're bunking and sharing a bathroom with. E. Gadd, whose pubes are gracing our communal sink today? You'll never know, and it's not a guessing game you want to play. But par for the course in a backpacker hostel. Anyway, what I've noticed in a lot of far out of the way off the tourist track destinations, where there's a lot of nice sites to see, mountains and volcanoes and rainforest canopy tours and archaeological sites. And here I'm not talking about so far out in the boonies that there are no people or villages around. I'm talking about where there's towns of maybe even 5, 10, or 15,000 people. Maybe more. Anyway, what you'll find when you're way off the tourist trail,

[22:55] sometimes the backpackers and the pseudo hippies have actually found a place. It's on their map. And these aren't exactly your credit card toting tourists I'm talking about now, who insist on 3 and 4 star hotels. Anyway, in these off the beaten track places, what you'll find is there's always a small group of backpackers who have kind of settled there and who've opened little low budget sidewalk cafes and coffee houses. And eventually enough of them show up and the place gets a little bit known, then someone gets the big idea to put out their own monthly English language newspaper or magazine focusing on new age and tree-hugging philosophies. You know, vegetarian recipes, articles on crystal energy, recycling and pyramid power, nutrition and organic farming and natural health techniques and acupuncture and chakra healing.

[23:45] And these first world new age types that come down are a complete mystery to the locals. And you know there's nothing wrong with that, but the locals who've been doing things the same way pretty much for the last 500-600 years, well they think us Gringos are nuts. Because here we are, supposedly first world people, transplanted to their community, dressed up like a bunch of rag pickers, greasy hair and stinking of BO, rejecting meat and giving classes on vegetarianism. Meanwhile, the poor indigenous locals would give their right arm for a juicy steak. In fact, you lay out for any of the locals some butter, some cream and a big fat slab of bacon in some pork shops and that'll last about 30 seconds and they'll do such a good job on it. You won't have to wash the plates when they're done.

[24:31] You give a shoeshine boy a 50 cent tip. He doesn't run to the store and buy a sack of whole grain rice. He buys a bag of Doritos. Yep, the locals think a lot of us Gringos are nuts for eating tofu and alfalfa sprouts and doing yoga poses on the porch. Talk about culture clash, huh? I mean, how do you convince a young local kid of seven or eight years old who doesn't ever have any spending money? Because his dad only makes $2.50 a month. How do you convince a kid like that? That it's much better to eat tortillas, beans and brown rice than a happy meal at McDonald's, when all he really wants in his life is that happy meal. So yes, they think we're nuts. But remember, we all went through our junk food phases too. I mean, when we were 9 or 10 years old back in Cleveland or Boston,

[25:17] we didn't sit down at dinner and have a huge heaping portion of bean sprouts, unsweetened yogurt and tofu now, did we? Chances are we were the happy meal crowd too. But the only difference between us and them is that we were first world kids and our parents could afford to give us the money for a happy meal whenever we whined enough. So just remember this, when you're way off the tourist trail and you run into some backpackers firmly planted in a small town or village, sometimes that's the only taste of gringle society the locals have. For better or for worse, those guys are our gringle representatives. Funky clothes, greasy hair and all. So the locals often think we're just a little nuts. But they know us as all around good natured nice guys and gals. Though sometimes they stand a pace or two back when they're talking to us.

[26:05] Not out of natural timidness but because sometimes we just stink. Not me of course because I'm not a backpacker. But for backpackers, especially European backpackers, hygiene is not very high on the priority list. Oh and another thing when you're way off the tourist trail, occasionally you'll run into groups of happy healthy idealistic gringo high school kids coming down with their church group from the first world to save as many short brown barefoot indigenous people as they can in two weeks. They come down and invade a little village, pass out the grub and build a few outhouses for Jesus. And they head back to Duluth, all happy and diluted. Thinking that they've really made a dent in the poverty in that area. I guess that's okay as long as they feel good about it. At least they got some good Kodak moments now didn't they?

[26:51] And I do hate to sound cynical about it. But the only way you make a real dent down here is if you stay six months or a year and show them some first world tricks. Like how to manage their sewage and purify their water for example. And try to teach them it's not a good thing to have chickens and goats in the house. If you know what I mean. The problem is if you only come down for two weeks they're going to revert right back to the old ways. As soon as you're gone. But then again as long as they've got a good power point to show the true believers back in Duluth. I guess from their point of view it was mission accomplished. And you wonder why long-term expats are so cynical. When they see those busloads of squeaky clean Christians and their kumbayas and their guitars. You've been listening to The Expat Files.

[27:40] Living in Latin America. Coming to you each week from somewhere south of the border. And don't forget you can email me on anything at all about Latin America. The Expat Files at gmail.com. Once again The Expat Files at gmail.com. See you next time. Nos vemos.