#293 – Expat Entrepreneurship in Latin America: From Coconut Oil to Chocolate

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

[00:00] South of the border down Mexico way That's where I fell in love when the stars above came up to play and now as I wonder Hello there all you expat wannabes I'm Johnny Mueller and you're listening to the expat files living in Latin America the show that tells you just what it's like to live Work play and or retire down here in Latin America It's a mix of the good the bad the ugly and the great, and it's all right here, so let's get started Now last week I wasn't able to finish the story about the expat in Nicaragua who started his own organic coconut oil business So let me refresh you a bit on how that went down since so many of you wannabes and guna bees Have the idea of coming down here and starting a business yourself

[00:48] And what I like to do when I discuss expats down here who've put together businesses that are successful and most you try Do end up making a good go of it I like to talk about expats who took a shot at something completely different non traditional businesses that is non Traditional to us first world people and that's because it's no fun talking about an expat who made a good go of it Let's say in a travel agency business or hardware store or ice cream shop down here You know traditional businesses that might be extremely exciting to those who might be making money in such a business But to the rest of us in expat file land stories like that boring boring boring We want to hear how? inexperienced wannabes come down here to Latin America and jump into a new business concern that They never would have dreamt about in a million years when they were sitting up in Cleveland planning to make the move down

[01:38] Now really when we much rather hear about expats who made a success Finding a niche down here and filling it even though they knew nothing about it in the first place I assure you there are a million in one expat success stories like that down here and over the years I've witnessed a few hundred of them myself and when you talk to these guys and gals They'll tell you it was almost like winning the lottery which begs the question How come so many expats win the lottery down here yet when they were back up north? They had no luck at all now You've heard the saying that you make your own luck right and I like what Benjamin Franklin said in his autobiography He said this isn't it funny that the harder I work the luckier I get what a guy, huh? They don't make him like that anymore. That's for sure Anyway, one thing you have to remember is that when you're down here doing business in Latin America

[02:28] the startup costs are so low compared to the first world that it's much easier to cut and run if things don't turn out the Way you plan in other words if things start going south You won't have to ride that dead horse and bury yourself in the process That's why so many expats. I know end up diversifying and getting their hand into a number of small businesses Many expats end up juggling two three four and even five projects at a time And that's basically because startup costs are so damn cheap And that's even if you buy an expensive first world franchise up north and bring it down Since the very low cost of rent and labor and so many other things down here can quickly offset that first world franchise fee Anyway, many times your initial investment is so low that you can cut and run early in the game if things aren't working out

[03:19] And then go on to the next bright idea or business adventure It's not at all like what happens up in the first world if you start a business up there Normally, you've got everything invested in it your house is mortgaged You've probably hit up your friends and families for personal loans, too And if it fails you end up flat on your back And it's tough to pick yourself up after that and try to start something new in fact years ago when I lived up in Chicago many of my friends shot their wads on a new startup business and when it went down the tubes like Nine out of ten do some of my friends never completely recovered that initial defeat Just sucked the life out of them made them Gunshied ever try anything like that again after that most of them just gave up got a regular job and started working for the man

[04:07] And that's one big difference. You'll find when you come down here to Latin America. You can't fail and pick yourself up quite easily Here's the thing for thousands of expats and dozens that I know Success came not with their first tribe, but with their second or third try at business So just understand that with such low startup cost there's a hell of a lot of wiggle room when you start a business Anyway, I like to tell you about expats that end up in businesses down here that they'd never be able to pull off up in The first world for any number of reasons and I like to talk about expats who've started businesses down here with basically pocket change In fact, I know of one Belgian expat who hit on his goldmine business after four different low budget startups And I mean really low budget startups like way under five grand seed money for each of those little ventures of his and get this

[04:57] All of a more brick-and-mortar businesses to not just a business where you sit with your computer all day in a cubicle and try to sell Stuff and put together deals on the internet though. You can come down here and do that, too I know plenty of expats who are doing it and making money and you know They could be doing that anywhere in the world in Europe the States Australia But then you've got the disadvantage of first world prices first world rents big brother heavy taxes, etc. Etc You know the story and that's why you're listening to this show, right? So anyway speaking of expats working down here starting businesses and making money by getting boots on the ground down here first and Spotting a product void or niche to jump into well in last week's show I mentioned that if you're a really health conscious person, you're probably buying a lot of extra virgin olive oil along with cold pressed

[05:48] organic coconut oil to Now last week I also mentioned down here in Latin America You can get that olive oil for about what you pay up in the first world But you're gonna have a hell of a time finding a consistent source of coconut oil unless you have it shipped in from Amazon Then you're gonna pay twice the going rate in the States and though Amazon and almost everyone these days will ship to the third world You'll be paying extra taxes duties and shipping which in some cases will double those prices you pay in the States Especially on items that have some weight like gallons of coconut oil for example In fact, just recently a friend of mine down here had some night vision goggles shipped to San Salvador by ordering them on Amazon He ended up paying about 35% more than if he'd had him shipped to an address in the States

[06:35] Now the weight on those binoculars came in at slightly less than a pound So the charges were excessive but not that bad. But as soon as you're talking about an item That's a few pounds or more then the extra shipping weight charges really add up unless of course you do what I end up doing a lot of times that is having someone in the States order it from Amazon and Bringing it on down when they come to visit and if you order cold-pressed organic coconut oil from Amazon It'll cost you around 40 to 50 bucks a gallon and guess where it's originally coming from the Philippines No less so it's shipped halfway around the world just to get to you in the States Which doesn't make a lot of sense, but I'll get to that in a minute Now like I mentioned in last week's show I just received the news a few weeks ago that there is an expat in Nicaragua filling such a niche down there right now

[07:25] So at least some select group of expats can buy their organic coconut oil right at the source right where they live and not from the Philippines So the guys making his own top quality coconut oil But the problem is he's charging 55 bucks a gallon Which means you're better off having someone order the Philippine stuff from Amazon in the States and bringing it on down Which admittedly is asking a lot from a friend because you know hauling down a gallon or two of that Filipino stuff Not only takes up a lot of space in their luggage, but might just clog you up with TSA to who knows anyway If you remember last week I did the numbers on what it should cost to actually make a gallon of coconut oil down here at the source and I came up with around 15 bucks a gallon which is good news since you don't need a

[08:14] Manufacturing facility and that means a very low startup costs for anyone wanting to get into that business You can do what expat Jim does in Nicaragua and co-op it out to the old-time locals on the Caribbean coast that Make it in very small quantities Then you just collect it filter it get some quality control going and bottle it and put your own labels on it And that's the easy part compared to actually collecting the coconuts scraping them down And doing the real grunt work turning it into the oil You leave that to the locals who do it up in their own kitchens and know what they're doing that way Not only is your startup cost minimal But you're keeping the local small producers in the loop and you're helping out the local economy, too So anyway, I mentioned for anyone that gets into that business your cost would be around 15 bucks a gallon

[09:01] Which is very doable and actually pretty sweet because like I said in the states They sell a gallon for 40 to 50 bucks and health conscious gringos expanse and upscale lens are used to paying that price and more So right off the bat you're working with a very high profit margin just by selling it to health conscious people locally But the news is a lot better than that because like I said before you can buy coconuts individually down here for 20 to 25 Cents each at the pop areas, you know those little mom and pop hole-in-the-wall stores that I was talking about on the last show now When you think about it, why would you bother to buy coconuts at the local pulperita? He's the middleman and you should be buying direct now Guess what if you buy coconuts by bulk in other words cut out the middleman

[09:47] You can get them for less than 10 cents apiece so all of a sudden now you've knocked a third or five bucks off the production cost of a gallon of cocoa oil and suddenly you got a 75% margin to work with if you sell it for the same price as the high quality stuff on Amazon And that's coconut oil by the way that comes from the Philippines. Remember? So anyway, there's a little breakdown of an expat gringo who's done it He came down and from scratch created a brand new product and a market and a growing business That was sitting there all the time under the noses of the locals And they had just no idea how to sell more than a few pints of this stuff a week and get this if you go Down to the Latin Caribbean coast for a little trip yourself. You'll see the occasional old-time local still selling the stuff on a little street corner stand in discarded and recycled rum and wine bottles and

[10:39] The oil itself if you hold the bottle up to the sunlight You'll see little things floating in it which instantly turns off about 90% of the tourist gringos that get a look at the stuff it's just too crude looking for anyone to take it seriously and your first thought is that it's Definitely not something you'd want to cook with and not only is that what you'd call a very bad Presentation for the product, but they only tout it as a suntan lotion in a skin cream again That's the gringo advantage, right? We see a crude little product like that as a great opportunity At least some of us do so anyway There's a perfect little business startup proposition for all you wannabes and gonna bees who might want to get into a business down here with Very little startup cost because after all in this case, you're not actually making the product

[11:27] You're just setting up a kind of a co-op with a group of people who will do the manufacturing process for you So you're basically the organized first-world businessman your job will be organization quality control marketing packaging and shipping you'll be doing everything that gringo expats are good at and locals aren't and Another thing coconut oil is a huge growth industry now So believe it or not, you can make a nice living just marketing locally meaning within the Latin country Your product is produced in and as more intelligent or fairly intelligent gringos and expats moved down to Latin America And as more upper middle class and upscale latin jump on the health care bandwagon You can predict that just the local demand for example in a medium to large sized Latin American city

[12:14] May just suck up all the coconut oil product you can produce because for example take Guatemala City Which has about a million or so people they have at least 20 large medium to upscale malls each with its own GNC and a number of first-world anchor stores like Sears Walmart Costco or Ace Hardware and Guatemala City for example has at least 50 or more health food and natural product stores that aren't part of a first-world chain So what I'm saying is that in any medium to large sized Latin City There are plenty of outlets to take your product and I guarantee you you can start making money right away I'm telling you your product will be the first locally or nationally made coconut oil That's for sure and for that matter the only pure organic coconut oil on the shelf and what does that mean? no competition folks and I don't know about you, but I like those kind of odds and

[13:04] Since we're on that hot subject of expats doing business down here better yet Expats who came down here with a specific business idea and found themselves going down a completely different road Like I've said before that's not the odd case either Expats end up taking that different road most of the time Once you get your boots on the ground down here and you see what's lacking and what niche you can get into you shake those stagnant First-world ideas out of your brain and you swim with the tide not against it So for example, I personally have had this coconut oil co-op thing and mass production idea in the back of my mind for at least Five years now pretty much exactly the way that expat in Nicaragua was doing things right now And I just know I can make it work. And what do I know about coconut oil about absolutely nothing But I do use it every day and so do a lot of my friends and I buy a couple of gallons a year

[13:55] Nearly all of it from Amazon coming from the Philippines And yes when I'm on the Latin Caribbean coast I do pick up a few bottles of this stuff from those old ladies selling it on the street corners But if I want a decent quantity like a gallon I have to put in an order and come back in a day or two you get the point What gringo is gonna put in an order and wait around like that? The gringo species is a much too impatient animal, you know, which is one of the reasons we can spot a nice opportunity here But let me tell you if I was really serious about getting into this coconut oil business Which I'm not by the way because I've got a few hundred other things on my plate right now But let's say I was then All I'd have to do would be to kick into first world research mode for about a week and scour the internet etc

[14:43] And I guarantee you after that week I'd be the expert and that by the way is the gringo advantage in something that 99.9 percent of latins will never attempt And even if they wanted to do some research They just wouldn't know where to start especially since most of all the good stuff on the internet is in english Now since we're on the subject of expats starting successful niche businesses down here that they never really planned on Here's another great idea That's going like gangbusters for a certain first world guy in his family who happened to spot a gaping hole of a niche And they jumped right in and started to fill it even though they had no idea how to even begin Now if you remember a couple of months ago I did a show mentioning how latin america surprised a lot of cacao for the rest of the world

[15:32] cacao That's the local name for coco and if you drive around in the boonies you're liable to see vast plantations of cacao trees Yet I mentioned that down here in latin america. It's almost impossible to find good chocolate. That's locally made Oh sure, you'll find that there's locally made chocolates and even places that sell hand-dipped chocolates But believe me, it's almost always waxy second-rate junk with way too much sugar And if it ever did make it up to the states It would be because of its packaging not the chocolate itself because sometimes they get the packaging right, but the chocolate forget it So if that junk did manage to find its way up to the states It would be the kind of chocolate that ends up in your closet or on the back shelf of the refrigerator for years And it never gets eaten except in a moment of chocoholic

[16:20] desperation If you know what I mean It just seems again that latin's don't quite have the touch that let's say the europeans have And I mentioned that in all my years down here in latin america I've never actually tasted any latin made chocolate that compared even to some of the mass produced Premium chocolates like Cadbury's coming out of england In fact their chocolate can rarely even stand up to your basic nestlies or hershey's Anyway, then after I did that show talking about chocolate a few months ago I got this email and i'll paraphrase this a bit to keep it rolling along It starts. Hey, johnny. Guess what? We finally found some decent chocolate in nicaragua made by el Castillo de cacao That's the brand name and manufacturer by the way and just as an aside here

[17:09] You should know that in latin america, they don't say brand name. They say maraca For example, the brand name tommy hill figure is maraca tommy hill figure marca and sony is not the brand sony It's marca sony if you want to remember it think of it as a trademark basically marca Anyway, let's continue with the email about that nicaraguan chocolate the email goes on to say the chocolate bars taste quite fresh Not stale at all even though they have no suspicious ingredients or preservatives of any kind Each bar is sealed up tight and nice packaging with decent label design They make only a few products so far but distribute throughout the major nicaraguan cities And i've gotten shelf space in la colonia supermarket chains

[17:54] The retail price is about four dollars us for a 5.6 ounce bar and you want to know who started this successful new latin enterprise? a dutch expat He started it in 2004 and he's now employing five latins on his production team plus three more in construction to build additional production space That's not even counting the additional locals needed to maintain the orchards and harvest a cacao If you want to know how this dutchman did it and hear him tell it himself He's written it up on a quick summary here at and then he gives me his website Then the email goes on when this dutch guy showed up The cacao trees in the area had been abandoned and the pods were just rotting on the ground Then the writer sums the entire email up with the following exclamation

[18:43] Go gringos and he doesn't mean go as in get out of here or gringo go home No way. He means go as in you got the gringo advantage. So use it And by the way, I know I mentioned this a long time ago But to people up north in the states the word gringo has always meant north americans including canadians They're north americans too, right? And that includes black americans too As long as you're from the states and you look and talk like a north american then to latin americans you're a gringo That is with some surprising exceptions. For example, get this the term gringo does not include Native americans, you know native americans i'm talking about that suppressed group of casino-owning indigenous americans formerly known as american indians and in john wane movies as

[19:31] Engines with a j and of course today that's considered totally politically incorrect now that we're such a kinder and gentler society Yeah, right just ask anyone who's been to afghanistan or iraq etc Or anyone who's been date raped at the airport by the tsa So anyway, technically the term american indian is politically incorrect Except down here in latin america where political incorrectness is not an issue yet. Remember down here It's all about the lag time. So political correctness hasn't really been on the radar yet In fact down here, there is no politically correct term for american indians. They're just called indios americanos which is a direct translation of our politically incorrect term So when you come down here and your spanish gets good enough for you to realize latins are being politically incorrect by first world standards

[20:21] Don't freak out. That's just the way it is And if you try to correct them, they'll look at you like you're nuts and wonder what the hell you're talking about And not that you'll find any great quantities of native american tourists or expats down here in latin america In fact in all my 20-something years down here. I've never met one not a pure-blooded native american Anyway, but who knows there has to be some tourists and expats with native american blood down here, right? Though so far it looks like there's not even a trickle Anyway, to latin americans the word gringo includes pretty much anyone from the first world including north americans australians new zealanders Europeans and even russians who as we know aren't quite first world yet and may never get there But since so many of them are tall light-skinned and even blue eyed and blonde

[21:09] That's enough for latin americans to refer to them as gringos And by the way, here's something a lot of people get confused about The definitions of first second third and even fourth world well, even your average first world slug has a pretty good idea What the rest of the first world is basically we're talking north america europe australia japan new zealand including singapore South korea and maybe even hong kong and perhaps a few rich tiny islands Then there's the united kingdom, of course, which is first world But i'm sure most people don't know is not part of europe But the average american thinks it is but did you know that the residents of the british isles? Do not consider themselves part of europe bet you'd have blown that jeopardy question. Am I right? And then there's the third world a term itself. That's become politically incorrect with certain people

[21:58] Especially with the north american liberal intelligentsia. And if you wonder why that is It's because the term third world always seems to conjure up pictures of a region or a government that are corrupt dirt poor and forever struggling And that's why you hear the politically correct term developing world or developing countries so much more often these days Since a developing country more or less signifies a country that's trying hard to pull itself up by the bootstraps And it's true the term developing country just sounds so much more positive, doesn't it? Whereas for those of us who actually live down here in the so-called developing world. No, it's just bullshit phraseology Now I know there's a lot of very smart listeners out there But I still bet if you were on a jeopardy panel more than half of you would blow the definition of a second world country

[22:49] Which is technically a country that was in the former soviet bloc Like for example hungry lithuania poland and now russia itself and you know I know a lot of smart so-called highly educated latins down here too And everyone i've ever asked that question too has also failed the test Meaning there's no latin jeopardy wiz kids here either. So what's considered a fourth world country then? Well, the consensus on that is all sub-saharan african countries accept south africa Did you know that now you do but now let's get back to what a gringo is and what a gringo isn't So to latins if you're from the first world you're a gringo except if you're a native american Confused yet, and if you're tall light-skinned or fair haired, you're a gringo, too

[23:37] Even if you come from outer mongolia unless you're from spain Then you're an espanol from the motherland though. Everyone else in europe would be a gringo go figure, huh? Oh and another thing the other exception to the general latin interpretation of what's a gringo and what isn't Involves people who come from japan or south korea, which we know are totally first world countries To latins if you look asian at all you're a chino even though folks from japan or south korea Are in no way chinese. It's just that latins use a blanket term for anyone. That's asian They're all chinos to latins But you know years ago when I lived back up in chicago Almost everyone I knew who hadn't traveled much used the same blanket phrase. They'd say that anyone with an asian

[24:26] Look was chinese. It didn't matter if they were from indonesia japan south korea Or even the philippines and that's the same way latin americans label asian people, too And here's another odd thing If you're an asian american born in the states, you're a us citizen and you speak Perfect us english when you come down to latin america on a trip to latin's you're still a chino The same thing goes for middle eastern americans Even if you were born in the states and you speak perfect american english and your family's been living in cleveland for 10 generations To latin americans you're an adobe. In fact, no matter what middle eastern country you come from to latin americans You're an adobe So the bottom line if you're a totally americanized asian

[25:14] Middle easterner or from a native american tribe You're not a gringo and if you're not confused by now Anyway, it takes a few years of boots on the ground for the average gringo to figure this stuff out And if you're not a good observer, you never do But we were talking about chocolate now, weren't we? So anyway this dutch guy that started making chocolate in nicaragua back in 2004 to latin's he's a gringo Just to set you straight on that now. I did check this dutch guy's website out and he's got an expat story here That speaks volumes. It's worth repeating. So here's a little snippet He starts out by saying when my two kids my wife and I arrived in nicaragua in 2004 We already knew there was no good chocolate available So we packed at least 50 bars of 75 percent cacao to take with us on our three-year visit to nicaragua

[26:06] Hoping that 50 bars would last us until our first visit from friends who might visit us from abroad Meaning we'd strictly have to limit our chocolate rations now as true chuckleholics We feared the time when we would have to resort to m&m's or snickers to calm our chocolate cravings However a few weeks after we arrived in nicaragua We were taking a detour with our kids and we ran into a number of abandoned cacao trees The unharvested cacao pods were actually rotting on the ground It was obvious that something needed to be done. So we went into a research mode We bought cacao in the market and roasted some in a pan It worked great for cookies and we munched away happily for a few weeks Then we heard of a man making chocolate somewhere in the mountains an hour's drive away there

[26:54] I found don guillermo castellón in the small village of la dalia He had a few blocks of cacao laying in his dusty shop I bought the whole bunch and right away that afternoon. I started experimenting But how was I gonna turn these foul tasting blocks of milled cacao into chocolate? How was that gonna work by the end of that afternoon after throwing away at least three batches? I had something passable Oops, sorry about that folks, but after babbling on a bit and getting off track, what else is new, huh? I'm at the end of the show again. So be sure to tune in next week to get the end of the story I promise i'll finish it You've been listening to the expat files living in latin america coming to you twice a week from somewhere south of the border

[27:43] Email me the expat files at gmail.com And don't forget to check out expat wisdom.com to sign up for your free reports on latin america See you next time nos vemos