#311 – The Expat Files: Financial Privacy, Bitcoin, and the Hidden Realities of Latin America

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 And now we're gonna discuss something. I've never spoken about before in the air since in the past I've reserved this little bit for my seminar people only now as you might imagine during this seminar people can't ask me everything and anything I believe me they do and unlike on the radio show on the podcast where there's certain things

[00:48] I can never talk about or I'll get in big trouble Not so much from the big wigs who are in charge of the shows but from big brother Who else like I need to be on another government list I mean really I'm probably on ten times as many lists as any of you guys are on but I'm so far away and Comfortably anonymous which means I've got nothing and I mean nothing in my own name Which you could never pull off up in the first world, but down here, it's easy So bottom line as long as you remain a little fish the big claw of big brother Can't really do much of anything to someone who's a thousand or two thousand miles away from the homeland So as long as you have a tiny footprint and remain small potatoes the NSA and Homeland Security and all those other alphabet Agencies will just continue to pick on and harass the easy targets the ones within reach all you guys living up there within the borders

[01:35] Of quote the land of the free Anyway, one of the common questions I get in emails and always comes up multiple times from people at seminar is once a person's actually Made it down to Latin America permanently or semi permanently and once you've set up your essay Corporations and bank accounts and such and we've talked a lot about that before in the show anyway Once you've done all that just how do you go about getting your nest egg down here? Anonymously or away from the prying eyes of friends family and big brother I mean really there's no reason anyone has to know your business at all and Speaking of big brother after those NSA revelations in that Edward Snowden thing We all just have to assume the government knows everything everything you do on the internet any email phone call text message even photos The NSA has got it all and what that means is any capital or money that you transfer around from country to country

[02:26] Will be a big blip on Uncle Sam's radar, right? Or is it and of course there are a lot of gray areas here things that are illegal in one country But totally legal in others the fact is you'll have to come down to the seminar to get all the skinny on that But I can tell you this at my last two seminars when that question came up I told the attendees that one easy way to shift money and assets around if not Anonymously at least the important part of the transaction will be anonymous is if you converted some of your wealth into bitcoins Yes, I said bitcoins now bear with me a bit here on the Bitcoin thing at the seminar I recommended one of the ways to move wealth around is with bitcoins and then ship those things around anywhere you want because that part Of the transaction is completely anonymous and sure your purchase of the bitcoins will be registered

[03:14] And by the way, all of this is on the up-and-up But after that where you send them where they eventually land is your business No one else's and that part will certainly break the chain of many prying eyes And so what if there's a paper trail or I mean a digital trail leading to your purchase of let's say 50,000 bucks in bitcoins nothing illegal about that And then when your bitcoins landed you convert it back into whatever currency you want Or keep them in bitcoins and some months ago whenever I mentioned that part holding on to bitcoins That was the part people found hard to swallow. That's when I'd get the deer in the headlights Look now you see the thing is when I mentioned this little Bitcoin voyage certain people might want to take During my last seminar July of 2013 Bitcoin was about at 70 And in fact, it had been hovering between 50 and 100 for many months

[04:04] Fluctuating not wildly but rather slowly never jerking around like a buzzsaw at all And if you look at the historical chart on it You can see that back then anyway, if you bought it at 70 it'd hang right around that point for weeks at a time So the trick is if you were worried about the fluctuations in Bitcoin, you just get in and out within a day or two Anyway after I spoke for about five minutes on that Bitcoin thing not giving any investment advice, of course But just pointing out that it was a great way to break the chain of prying eyes Government and otherwise Well when I said that none of my attendees actually raised their hands or tried to argue the point with me either way But later on at dinner and during some of the boots on the ground segments I heard all kinds of feedback from the attendees all of them pretty much Pooh-poohing the idea of Bitcoin for any kind of use at all saying well

[04:52] You know the same thing that they're saying about Bitcoin right now And by the way as I record this show bitcoins at about 700 That's a thousand percent gain in four months, you know, but we won't let that influence us We're just talking about moving money around now not speculating or investing and like I said, I don't give investment advice I was just saying it's a good way to transfer wealth around as Anonymously as possible. In fact, I can clearly recall sitting with one of the attendees the day after the final day of the seminar He came right out and told me in a nice kind of way that Bitcoin was a play for idiots and he told me he knew this because he'd been in and out of various markets currency exchanges and Commodities and such for 20 or so years and he didn't see Bitcoin as having any impact at all

[05:38] In fact, he kind of laughed when I mentioned it then I remember saying to him Well, then why don't you just take maybe 10% of your nest egg switch it into bitcoins and pick a destination Send it there and then immediately Transfer them back into dollars or yen or euros or whatever Because you know one of the great things with Bitcoin is that there's only a five cent that's a cent Commission on a Bitcoin transaction at least it was back then as opposed to the way regular banks gouge people when they do wire transfers and PayPal is the worst of all seems like everyone I know except Elon Musk has a gripe with PayPal and I know I know you're saying bitcoins could just have easily have gone to zero just vaporize since they're an entirely new thing a Digital currency, but you see the thing that I knew when I first heard about Bitcoin when they were at less than $10 each

[06:28] What I knew about Bitcoin that 99% of you guys out there couldn't have known unless you were nerds yourself Is that when nerds and geeks are totally convinced about a new technology that the regular public hasn't even grasped yet? Basically never even heard of they're usually so far ahead of the curve that the rest of the world kind of just ignores them Until it's on CNN and Yahoo News and the brokers are starting to talk about it And don't get me wrong not that I'm a card carrying nerd myself, but having graduated from engineering school I know these guys, and I don't ignore them. I listen to them when they tell me something So yes, I admit it I have a lot of nerdy friends and over the years I had a lot of tips especially in the early days that I never took Like Microsoft and Apple Cisco systems, etc Not because I didn't believe these guys were on to something but because I didn't have any money

[07:15] And when my nerdy friends call me up and say hey Johnny you got to get some of this Bitcoin stuff Well, you know what that means that means that when these guys get hot on something new and technical like that It's time to jump in because the rest of the world has not caught on yet And I'm telling you these guys put their money where their mouth is too and Bitcoin is a textbook case now You can call it a bubble if you like if you look at the charts It certainly looks like it in fact the charts on Bitcoin are doing something very strange It's had three bubbles already now usually one big bubble is enough to kill any product scaring people away from it for years Just look at the US housing bubble that blue in 2008 and may never catch up to its past heights save for those synthetic markets like the one in Washington DC your tax dollar at work and special circumstances like

[08:01] Texas oil country and downtown, Manhattan But the fact is 95% of the rest of the US is never gonna recover from that blown bubble But if you pull out the chart on Microsoft or Apple or Tesla Motors, they all look like bubbles, too In fact hasn't Apple jumped up about 5,000% in its last run and if that's not a bubble But we know it's not right since Apple makes very cool products that the world is addicted to and it's true Bitcoins are jumping around all over the place and a lot of people just buy for speculation and ride it like a cowboy Now I'm not telling you to invest in them. I'm just saying it's perfectly fine to transfer money around with them That's pretty obvious But note that because Bitcoin has surged so tremendously in the last couple weeks and it's been fluctuating easily a hundred bucks a day You don't want to get in and out of that game

[08:47] It's too frantic a day or two waiting for a transfer to go through will just eat at your nerves If you do use bitcoins to transfer money, just wait a while It'll calm down and stabilize Look at the charts and wait for the line to flatten out a bit for a couple of months at a time At least for example if Bitcoin hangs around a certain price, let's say 400 for a month or two Go ahead get in transfer your money and get out right away I know a lot of expats who have done that without losing anything at all except the transfer fee a whole five cents Ouch, but admittedly that was before Bitcoin took off into the stratosphere in the last few weeks So right now using bitcoins as a means of just transferring money Well, personally, I wouldn't do it Like I said wait until the line flattens out But there's another very important point that I want to make about Bitcoin

[09:35] Bitcoins are not just about moving money around anonymously or as close as you're gonna get to it anyway And it's not about just speculating in some new technology that made a bunch of nerds with pocket change millionaires The fact is the big banks and investment houses are all pissed off about it And they've been putting out negative press releases and dissing it like crazy Which should mean to all you contrarian listeners out there That's something's rotten in Denmark and it's not the coins that stink but the banks and their PR machines and you know what big multi-billion dollar organization is Extremely pissed off at Bitcoin more than anyone else. These guys are furious and by the way, I'm talking about a fortune 100 company with 95% of their profits being derived directly from Latin Americans and Latin America

[10:22] That's why I'm bringing this up and I'll bet you a Bitcoin. You'll never guess who it is Now this huge company whose very 150 year existence is so critically threatened by Bitcoin that they're having Midnight powwows and panicky crisis management meetings to figure out just what they're gonna do if Bitcoin Refuses to go away. Well, the company is Western Union and of course, we've all heard of Western Union But you and I have probably never used it in our lives though for the ten or so million illegal aliens living in the US It's their main line to home Now listen to this Western Union's publicity department put together its own glossy glitzy Presentation and you can get it in PDF form called get this the dangers and the hazards of digital currencies

[11:11] Why because they'd like to see it just die on the vine now in that presentation They highlighted Bitcoin and the other digital currencies now Of course, you know There are other ones that don't have anywhere near the volume or the market or media presence or penetration of Bitcoin So anyway in Western Union's glitzy presentation that completely disses Bitcoin all the other digital currencies, too They repeatedly hammer on its lack of liquidity market adoption and acceptance and the immature consumer interfaces as well as what they call murky Regulatory issues that need to be addressed before it will be ready as any form of international money transfer And by the way, they already know that it's being used for just that and that's why they're so very afraid of it So Western Union has come right out and pushed the panic button because their wire transfer business makes up

[12:01] 80% of its revenues the vast majority of which are a thousand dollars and under and the vast majority of which are being sent by Illegal Latins in the United States and there's more than 10 million of them at least half of them sending a payment monthly by guess who services like Western Union and of course these little payments of 50 or a hundred bucks or so are being Sent down to their family members in their respective Latin American home countries and Western Union's Panicking because for the first time in their history their revenues fell to 19% down from 25% for the latest quarter Now I ask you how many businesses do you know that consistently boast a 19 to 25 percent profit margin? Credit card companies and casinos. Maybe I can't think of any other business that's legal now

[12:51] As you know those payments coming down to Latin America from illegals up in the first world that called remisses I should correct that by saying not all remisses are coming from illegal aliens But the vast majority are and the Latins that are legally up in the state sending remisses down Well, those guys nearly all started out as illegal aliens. So you get the point anyway payment processors That's what they call themselves like Western Union and their competition. Yep. They have a competition, too Why wouldn't someone else want to get in the act? You know, anyway, the fact is they collect anywhere from 5 to 35 percent on every Transaction they're actually much worse than loan sharks because a loan shark will lend you money for a period of time Let's say 30 days and then charge you 30 percent interest But they're actually lending you their money in the case of money transfer businesses like Western Union

[13:41] You're walking in there with your own money already. There's no risk for Western Union at all But still they take a huge slice So they're making up to 35 percent on a single transaction that takes about two minutes without risking any of their own money so I'm sure you've figured out it's an unbelievably lucrative business for which a thing like Bitcoin was Specifically invented to transfer money around without middlemen like Western Union or banks along with ridiculously low processing charges Now if you do a web search, you'll find that Bitcoin transfer fees are get this about five cents And then you might ask what about bank-to-bank transfers? Well, it's like this traditional banks like Bank of America get 25 bucks for a domestic wire transfer

[14:27] with another $12 or so fee on the other end for the receiver and Fees for international wire transfers are even higher and by the way to do that You have to have a legit bank account there That means you have to whip out a real green card or a passport and they take your fingerprints and you know I'll bet you another Bitcoin that there isn't a single illegal alien up north that will go into a bank and let them take his Fingerprints but with those money transferring services like Western Union Well, you could practically whip out any kind of ID you want including a college school ID or a library card And there's nothing anonymous about those kind of wire transfers at all. So what can we learn from this? I'll bet you another Bitcoin that in the next five years brick-and-mortar banks no longer exist They won't need to and I wouldn't go buying any Western Union stock either

[15:12] People in the know are saying it's gonna be another case of the rise and fall of blockbuster video And by the way, did you know that every single brick-and-mortar bank in the United States has definitive plans to Drastically reduce the amount of branches they have brick-and-mortar branches that is except guess where in Latin America There are huge first world brick-and-mortar bank franchise expansions going on down there. And why is that? Well, that's because so very few Latin Americans count on or even trust internet banking And what that means is your convenient neighborhood first world bank in the mall is going to disappear and presto change. Oh reappear somewhere down in a brand new mall in Bolivia or Peru and Here's another little prediction for you

[15:58] The first international money transferring agency that starts doing transfers with digital currencies like Bitcoin once they get the bugs worked out They're gonna be the next Starbucks because it's a fact that Latins are tired of paying exorbitant fees So once those Latin Americans up in the first world figure out how to use it They're gonna dump Western Union and the traditional money transferring agencies in a Mexican minute and what's a Mexican minute? Manana, of course enough said about that. Let's get on to some fun Latin American facts. Here's one for you Did you know that the World Bank estimates that 80% of all that beautiful rainforest hardwood that's exported out of Latin America? You know mahogany teak Kaoba Paulo Blanco and it does another fine hardwoods that don't grow up north But you find in the houses of the rich and famous up there

[16:45] Anyway, the World Bank estimates that 80% of all wood exported out of Latin America is cut and sold illegally Now that's not to say if you see a huge truckload of wood rambling down the road They won't have a completely legitimate permit for it because you see if they get stopped by the cops That's what the cops will ask him for so if 80% of the woods cut illegally, how do they get the permits? Well, that's because 80% of Latin American government workers are corrupt too though. I'm being kind I think it's more like a 95% anyway if you and I for example walked into any Latin American Environmental or forestry department at least their version of it. How much do you think it would cost you to buy yourself a permit? Well lately I've heard that it's anywhere from 25 to a hundred dollars a tree And if you remember in a past show I mentioned that your average hardwood tree down here goes for at least

[17:35] 5,000 bucks anyway Just to let you know that a big bloated lumbering blunderbuss of an organization like the World Bank actually takes a look at stuff Like that so you might ask if the cops are so corrupt too if you have a load of hardwood like that Why don't you just take your chances without a permit? And if you get pulled over pay the bribe give the more Dita to the cops because normally that'll work every time However, the fact is in lumber country the cops know that a truck with five or ten logs on it is worth a fortune Maybe 50 grand so they're not gonna ask for $20 more Dita. They're gonna ask for more like a thousand dollars more Dita They know the driver of the truck has a hell of a lot to lose including the truck if he doesn't pay up Well, that's why these illegal hardwood cutters find It's so much easier to have someone on the inside that could bribe at the forestry office

[18:22] Then it'll only cost him maybe 25 or 50 bucks a tree Anyway, nowhere near the grand the police will want in bribes if you don't have a permit Well, and by the way Another game they play with permits is to add a few more logs that aren't accounted for in the permit since the cops that might Pull you over are so lazy. Once you show them the official permit and the seals and the signatures They just wave you right on by anyway Most cops wouldn't know a $200 pine log from a $5,000 mahogany one anyhow So there's all kinds of musical permits going on to cutting out in transporting hardwood logs Mostly illegally is huge business down here and I've seen dozens of big trucks Loaded down to the gills with giant hardwood logs driving through the boonies at two and three in the morning now What's that all about? Why it's all about the fact that on that shift most cops are sleeping

[19:09] They just can't be bothered with pulling over a truck like that Oh, and here's a quick story for you One of the guys I know down here who works for a lumber yard a latin guy, of course He told me that when the trucks come in from the boonies delivering logs Occasionally, they'll be one hardwood log short up in the states. We'd call that breakage, right? Well down here they call that more Dita to this guy said that occasionally a guy driving a big truck like that full of logs Out in the boonies will get stopped by the cops papers in order, of course obtained illegally or not Anyway, sometimes the cops will screw with him and his paperwork Anyway, especially if the paperwork was issued in a faraway section of the country So the scam here is for the cop to say I don't like your papers You'll have to go back and get them reissued now What that is is a direct invitation to a payoff and when you're way out in the boonies like that

[19:57] Sometimes when confronted with that situation the truck driver will end up slicing a big chunk of log off for the cops The log itself is the bribe the more Dita So the driver cuts a chunk off and the cops and he throw it in the back of their pickup truck And now they've got a sizable piece of wood they can take down to their local lumber yard and trade it in for what would be a month's salary to them a nice round Number would be 500 bucks But you know that only works if the cops have enough gas to haul that log to their friendly lumber yard But you get the point there are hundreds of ways to do scams like that down here Which when you think about it is kind of funny here You've got truck drivers hauling logs that are illegally obtained with guys from the forestry department issuing bogus permits for money, too Meanwhile the cops are on the road trying to shag these guys down so they can get their piece of the pie, too

[20:44] Oh, and don't forget when I get to the port of call and needs to be shipped out by boat There will generally be some bribes paid out there, too So think of that next time you admire your fine mahogany hardwood dining room set and while we're talking about some of the stranger Unknown things in Latin America Here's another little piece of news that may or may not come as a surprise to you But it certainly tells where the world is heading anyway according to a Spanish funded education committee out of the University of Madrid 68% of adult Europeans over 18 who are not in a university read less than one book a year and for the United States 76% of adult Americans who are not in university also read less than one book a year And if that's not depressing enough now for the pathetic Latin American statistics, did you know that?

[21:35] 96% of adult Latin Americans who aren't in the university Read less than one book a year. So what's that supposed to tell you? Well, that just means it's not a good idea to open a bookstore in any country now This might surprise you the two first world countries with adults that read the most are Spain and Germany Hmm can it be more than a coincidence that this study came out of Madrid? Anyway in Spain and Germany only 60% of the population read less than one book a year So does that mean that 60% of the adult population may have cracked open a book and just never finished it? Who knows even so I'd skip the bookstore business idea Since even with ebooks and kindles and PDFs and Moby reading a book from start to finish is not a growth industry

[22:22] And notice I didn't say reading one from cover to cover either because ebooks don't have covers only virtual covers And speaking of Latin who actually read books and there aren't many I was at a party the other day with some so-called Latin intellectuals meaning they read more than one book a year Whoopee, huh? And believe it or not this time for a change. I actually heard a very interesting conversation That wasn't a repeat or a rehash of something that I heard before from another gringo or something I saw on the internet at least it sounded to a few of us other gringo expats who are present to be fresh and original Which is saying a lot for any Latin get-together even one loaded with so-called Latin intellectuals Who are in fact sometimes so pretentious you just want to vomit and for all of you who might be thinking Johnny? How can you say that you better have some proof for that? Well, I do and plenty of it

[23:12] In fact, they prove it every day Like I said in a past show They're the ones who treat their cleaning ladies and help like they're not even there that they don't even exist and I'm talking about Upscale Latin parties now not your neighborhood barbecues and get-togethers in middle-class Latin America And it's funny these intellectuals who write books and articles Deploring the classist and racist system in Latin America are the same ones that pay their cleaning ladies 150 bucks a month and treat them like second or third class citizens not to mention they make them wear these demeaning Fluffy maids outfits that went out up in the first world with the Cold War and black-and-white TV So the question is when you get invited to these soirees should you go or should you stay home now like expat Eddie always says What have you got to lose? They always have good food and great booze and believe me when you get invited to one of those things

[24:01] You really get to see how the other 1% lives and a screen goes by the way We call it the bubble nothing to do with a real estate or financial bubble We just call it the bubble because that wealthy 1% are living in a protected little bubble of bodyguards and maids and bulletproof cars And if you're from the first world it grates against you a bit and Eddie he's more of a go-with-the-flow kind of guy So when he tries to drag me to these things and when I do agree to go along He's been known to give me a little pep talk before we go in. He'll say something like so Johnny Don't say anything to get us uninvited. Okay, I do business with this guy So try not to offend too many people which means a lot of times I just sit on a sofa surrounded by a bunch of pretentious lens and play along like I'm really paying attention

[24:46] So as to amuse myself instead of listening to their mindless blatherings I just smile and nod when necessary because what they don't know is that I've got an earbud stuck in my ear And I'm stealthily listening to my iPod clone. That way I can listen to some real adult conversation Like Richard Martin or John B. Wells from coast to coast AM or maybe I'll just queue up an audio book So for me at least it's not a complete waste of an afternoon or evening Now note that when you've got one earbud in you can still be half in or half out of the conversations going on around you Just in case by odd chance you pick up on something interesting Like at this particular party and it all started when one of these Latin intellectual types said to the other Don Julio How long do you think it will take Venezuela to convert itself into an oil rich version of Cuba?

[25:38] Because I know you agree that that's the path they're following and the guy he was talking to said I think maybe two years and we'll see the results of that experiment But here's my question How long will it take Argentina to turn itself into a Venezuela because like it or not? It's on the same trajectory and the other guy said yes I can see it Argentina's already like a smarter more worldly Venezuela, but without the oil We'll see how that experiment turns out after they default once again And they will shortly mark my words then the other guy answered him by saying Well, then how long do you think it'll take Brazil to turn itself into another Argentina? Since all the economic and social indicators show that's what's happening there, too Then another guy in the group butted in and after hearing him in an earlier conversation

[26:28] I knew he was a dyed-in-the-wool Socialist and a University of Guadalajara Mexico social sciences teacher. I'll never forget that because at that party I heard him tell at least five separate people his impressive third world credentials whoopee Like I said pretentious. He should have walked around with a neon sign And by the way public school Socialists like him are just the type to get a lone gringo in the corner and slam him if they can and Eddie and I well We were the only two gringos in the place to attack So we figured he might try to set us up and he did try So he turned and looked at us and said I have a question for you guys How long do you think before Mexico turns itself into another United States then after a good long pause? Eddie said you got an ass backwards mister. It's the u.s.

[27:16] That's rapidly turning into another Mexico not vice-versa Just ask any one of those 20 million of your illegal brothers who've snuck in then after the guy's jaw dropped I said Eddie not bad. I wish I'd have said that except you wouldn't let me remember You've been listening to the expat files living in Latin America coming to you twice a week from somewhere South of the border 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