#480 – The Expat Files: Practical Tips for Living and Investing in 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 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 Okay, now here's something you really should pay attention to remember a few weeks ago or a few shows ago I was talking about how Craig's list has made it down here to Latin America in a small way Anyway, and of course, that's a very good way to find used items and sell things yourself, you know

[00:50] Bicycles computer stuff even advertise for example if you need a software guy to make you a website in Spanish Let's say of course You could never advertise for a cleaning lady or a gardener because they're just not on the internet However, do know that if you get on any Craigslist down here in Latin America You're talking to people that are very well tuned to the internet They're used to dealing with technology and that means gringos and first world gringo wannabes Of course, which leads to gringo prices at least more than you'd pay if you found Let's say a bicycle a rental or a piece of exercise equipment on one of those bulletin boards that I always talk about that you see In neighborhood Walmart's other grocery stores and malls, etc And by the way, those bulletin boards are self-selecting So for example, if you go in a high-end neighborhood and there's a local Walmart Costco mall or mom-and-pop grocery store

[01:41] And they do have a bulletin board almost everything you see on there all that's advertised Will be nearby in that same neighborhood within a square kilometer or two Why because people shopping there in the neighborhood will pin stuff up on that board And so will you if you got something to sell or you're offering a service? Who knows you might be offering to tutor English piano self-defense dog training gun safety reptile breeding stock market trading Whatever it's self-selecting because only the people in that upscale neighborhood are gonna see your ad and vice versa So in picking the right neighborhood bulletin board, you're automatically Eliminating the sweaty masses from the wrong side of the tracks if you know what I mean So like I said, the best deals are almost always found on those neighborhood bulletin boards

[02:27] But remember they'll almost always be in Spanish, too and just a tip here if you've got a product or service to sell yourself put your ad in English and Perfect Spanish and most importantly do make it a point to advertise that you are a gringo offering this service or selling something Whatever and thus let your gringo advantage do the work for you like for example, if you're selling a car Native Latins will always prefer to buy it from a gringo because they understand that gringos take care of their things much better than latin's Ever do anyway, the fact is unlike latin's gringos are actually known to do the occasional oil change But you knew that already right now My next choice for the best deals are the ones you can find in low-end Latin newspaper Classifieds notice I said low-end here because any big latin city will have five or so daily newspapers

[03:18] You'll have a couple of big fat highly circulated dailies for 50 cents or less and you'll have other much cheaper dailies thinner sort of scandal sheets that have soap opera stars and bikini clad girls every few pages a lot of sports and a Heavy emphasis on entertainment fluff though very dumbed down and loaded with brain-dead fluff The classifieds in these rags, which of course are all in Spanish often are loaded with tremendous deals Let's pick for example the country of El Salvador. It's got I think now about seven newspapers The biggest one being El Diario de hoy, which means the daily now or today's paper boy that says it all, huh? It's the biggest most widely circulated El Salvador newspaper

[04:03] Therefore the ads are gonna be a little more expensive than the other ones like la prensa graphical mundo Diario colatino El graphical El pais and El Faro the other smaller less Circulated rags anyway if you advertise or you're looking for ads in one of the smaller thinner newspapers You'll see the classified ads are about half the price or less then if you advertised in the big fat daily El Diario de hoy, so what does that mean to us gringos and expats well? Suppose you're a latin trying to sell a guitar or some exercise equipment and you put it in the big highly circulated More expensive newspaper Diario de hoy for maybe three or four days And if it doesn't sell you get kind of disappointed and you slip down to the prensa graphic or El Mundo

[04:50] Which means the world where it's less than half the price of that ad in the big paper Meanwhile if you don't get any calls, then you start getting desperate Then you might pull the ad and wait a couple of weeks or even a month Then run it again in one of the cheaper newspapers and finally maybe even simultaneously You put it on the local bulletin board at you know a Walmart or a Costco Whatever and at that point most of these folks will take pretty much what you offer because no one's biting and how do I know? Well, it's easy to tell because you look at those bulletin boards and often someone will put let's say an apartment up for rent And the ad will be a printout a couple of photos various views and on the bottom of that page There'll be maybe a row of ten little slips with the phone contact number on them

[05:37] Interested parties can pull off and take with them. You've seen those things in the states a hundred times I'm sure now if you're checking out bulletin boards often like I do you'll see a lot of times No one even after some weeks has pulled a single tab For example, you might see a nice apartment for and for 500 bucks a month, and there's just no interest in it That's when it's time for you to pull one of those tabs call up the guy look at the apartment If it's nice make an offer a very low-ball offer now if it was me looking around a place I'd go over and see it and if I liked it I'd say how much you want for it He'd say 500 and I'd say three and I'll give you six months in advance and I'd bet you we'd come to some kind of arrangement Remember, we're talking to kind of a desperate guy here because he's got a place that is vacant and he's making absolutely nothing on it

[06:27] So whatever you offer him is better than nothing and remember you have to be willing to just walk away But you know, there's a little trick that expat Eddie showed me a long time ago early on back when he was renting He'd walk into a place really low-ball the guy almost insult him with the offer Then as the guy turned him down he would pull out a fat wad of cash that looked like maybe 5,000 US dollars And in fact, it really wasn't was just a few hundreds wrapped over some fives or tens and a wad and then he'd say to the Guy it's just too bad We couldn't come to some kind of arrangement because I need to get a place today And I've got about three more stops to make now if you ever want to see a Latin guys jaw drop You ought to pull that one sometime and Eddie says and I believe him because I've seen this in action

[07:14] You've got about a 50-50 chance of the guy running after you as you go to your car Or you'll get a call within an hour or two saying hey, come on back. I think we can work something out now, of course that kind of negotiation almost always takes place in Spanish because well when you're off the gran go tours trail like I am Almost no one speaks English except of course professionals like doctors lawyers architects and the spoiled kids of the stinking rich attending those helicopter schools So then what if your Spanish really does suck that said there's a little game you can play You can go check out a place as a stupid gringo. Don't make any offer at all Just play dumb play the clueless gringo And if you need a refresher course on vacant brain syndrome, just watch a few minutes of the Kardashians

[08:01] Anyway, play the dumb gringo and if you really like the place you contact your trusty lawyer and you explain the situation to him And you say look I like this place, but I know he's gonna nail me with gringo prices Could you go down and negotiate the deal for me and you tell him look? Here's what I want to offer and don't budge and of course your trustee latin lawyer will do that Or he'll send one of his secretaries or legal assistants down to make the deal for you And don't forget to give your lawyer that big wad of cash Even if it's just fives and tens in the middle to evoke that always amusing cash in hand Latin jaw drop reflex Because like I said almost no one in Latin America ever pays six months or a year in advance in cash But you knew that already, right?

[08:47] So then you might ask what's your lawyer gonna charge you to do that deal and draw up the contracts and all that Fifty to a hundred bucks maybe and it's worth ten times that believe me now I'll tell you a lot of gringos and expats that come down who don't speak Spanish or have very little knowledge of Spanish They'll resort to Craigslist for just about everything and anything because it's in English or mostly in English And yes, it exists down here in pretty much every Latin country However, I know that even in Latin American countries It's almost always gringos or first world types that are searching Craigslist So you're almost never gonna get a real deal not to mention although they have all the categories It's very sparse and there are very few listings and note latins who are on the local Craigslist are first world types Who know a lot about the internet you're not gonna get any deals out of them either

[09:36] Talk about scant few listings if for example, you're looking up exercise equipment or pets You might see three or four listings. That's it even in a city of a million or more So you can't check it out, but you probably won't be very happy with the results though I understand Mexico is one of the few Latin countries that does have a pretty extensive Craigslist But then again, Mexico is sort of unofficially part of the US now, isn't it? My advice forget about Craigslist instead in almost all Latin countries now There's a service that I mentioned a few shows ago called olx.com. That's olx You could say it's the Latin American version of Craigslist on steroids and believe me Latins are piling into this thing like crazy

[10:21] Even latins who are too broke to have an internet connection are posting things on this site In fact, there's almost nothing you can't find there For example, I'm looking at the olx.com site in Peru right now Looking up rentals and housing. They've got over 10,000 listings and in pets for sale Over 6,000 listings all of them very recent too. So here's what's been happening lately This is worth repeating people put their ads in the expensive newspaper expensive by latin standards Not ours, then they put them in the cheaper latin newspapers. Then they go to the bulletin boards Then by hook and crook they end up at the olx.com website. Why? Because it's free And oddly enough people are piling in who don't even have internet

[11:09] Remember only 15 to 20 percent of latins have a permanent internet hookup at home For the vast majority of latins a contract internet plan is too expensive Now it's true that almost everyone who's got a phone down here can have access to internet if they want nowadays Even the cheap 15 to 20 throwaway phones are what you might consider smart enough So even the so-called poor sweaty masses with their smart enough phones Are tempted to get on the internet for a couple minutes a day Text like crazy and do connect to ludicrous social media like facebook twitter and the most idiotically named service of all What's up, whatever that is And now middle class lands and even some poor latins are becoming addicted to social media

[11:59] Though the truth is they might only connect a few minutes a day because when a cheap Prepaid phone connects to the internet it runs through your prepaid dough faster than a chicken salad salmonella sandwich Wow, try saying that three times after a couple of tequilas The fact is 80 percent or more of latin americans don't actually surf the net but for a couple minutes a day Though they're always being tempted by text messages to do so as for me as usual I do not get on social media sites. In fact, if there was an anti-social media site, I probably would use it Hey, how about it? Johnny's anti-social media site. See you there Anyway having a peek right now at the olx.com site for guadamala

[12:44] I'm looking at real estate now and it's all in spanish. There's get this 51 000 postings 51 000 of course only maybe 10 of those are worth looking at but that gives you an idea The difference between oxl and the local craigslist for guadamala in english Now when I click on real estate for craigslist, I get get this 40 listings That's four zero. So Obviously the way to go is oxl.com In whatever latin country you're in and note you'll find a lot of desperate sellers there, too Oh, and by the way, i'm looking at the craigslist here. And yes, those are gringo prices So you're not going to find any deals sitting on your sofa up in cleveland searching craigslist down here in latin america

[13:33] But it's a completely different story if you go on olx.com However, if you don't speak much spanish, you'll be sol But there is a bright side if your spanish sucks because gringo's and expats have told me if they go on Olx.com and spend some time searching through the categories that in itself is a very good way to learn practical spanish You'll expand your vocabulary and the methods of wheeling and dealing down here Oh, and by the way, whatever latin country you happen to be in if you put in Olx.com it automatically comes up to that site within your country Which logically brings me to the next topic Why should anyone bring a container down and pay heavy insurance shipping and taxes when you can buy 95% or more of everything

[14:20] You might need down here retail or you can pick it up on a site like olx.com And the rest the odd stuff you can't get down here like special vitamins or supplements There's always amazon ebay and more So again based on my own experience is an experience of other expats trying to ship things down No matter where it is in latin america. I always recommend to sell all your junk up there and Bring down boxes and suitcases yourself as you fly in even if you have to do it a couple of times And really the only way it's worthwhile to ship in a container or a car Is if you come in under pensionado status That's residency as you probably know by now in latin countries where you prove that you've got a retirement income coming in a monthly income

[15:06] Coming from the outside and that's usually set depending on the country at a very minimum of 800 bucks a month to maybe 2500 a month which I believe now is the rate for being a pensionado in costa rica now nearly all pensionado residency programs allow you to bring in a car every five years with no taxes and One container full of furniture and household items in the first year So you'll have to pay the shipping and insurance on a container and generally people bring in 40 foot containers There are 20 footers too, but if you're going to bring one down and you get a tax free I recommend a 40 footer shipping a bigger one like that is only about 20 percent more. Nope. It's not double just 20 percent more Now you could easily fill the contents of a 1600 to 2000 square foot house in a 40 foot container

[15:57] Unless you're a pack rat. Yep. When I first came down I filled a container myself It was a 2000 square foot house and at that time I had a lot of junk, but still there was room to spare Now depending on which latin american country you plan on setting up housekeeping The shipping and insurance on a 40 foot container could run anywhere from around 2000 to maybe 3500 bucks Now if you're on a pensionado program, that's a very good deal Then you don't pay import taxes Which if you weren't exempt could run anywhere from 3 000 to 7 or 8 000 bucks. That's just the taxes Again, depending on the latin country you're going to locate too So again, it's only worthwhile to ship a car or a container down if you're in the pensionado program because then you can bring them

[16:44] In tax free. That's one car. I think every five years and one container Once in your life, otherwise if I get about it and sell your stuff and buy it down here When by the way since we're on that subject of the pensionado programs i'd like to repeat this one more time Most latin american countries have a pensionado program But let me correct a statement I made in a past show when I said if you're in the pensionado program Unlike a regular permanent residency program It will not lead to citizenship and then a passport Well after checking out more details on that I found that it's true for most latin countries However, i've discovered that there are two out of those 20 latin countries where you can get a pensionado status And yes, it will lead to a passport in five or so years and those two countries

[17:33] Guatemala and ecuador now a lot of people have asked me about panama because it's easy to get a rentista or pensionado residency visa But note in that case it does not lead to a passport Now all you listeners must know that in the future a second or third passport will be all important if you're a us citizen Because you know, the u.s is bankrupt and as the tax base dries up Do mostly to unemployment and people voting with their feet What's the true figure at now a hundred million people unemployed? Anyway, make no mistake about it There will be efforts by the us and the irs to seek out and tax all that dough that left the country That's now out of uncle sam's greedy reach because remember there are over 10 million us citizens

[18:19] Living abroad now ever increasing year over year and us officials are very worried about that People are escaping voting with their feet And one way uncle sam will be trying to haul in all that cash and capital that's overseas All that dough that's out of reach now is to block your passport and bring you back to the states And if your passport's blocked you'll be technically illegal in the latin country that you're in Some of you expats can look forward to that Now if you have a second or third passport It really doesn't matter if they block your us passport does it? But if you only have one passport your us passport and they block it as soon as you go to an airport And try to take a flight somewhere You'll probably be deported back to the us And maybe i'll go more into that in another show but enough said about that for now

[19:08] Now I mentioned guadamala and ecuador as two latin countries where you can get that pension auto status And have the benefit of getting a car and a container in duty free as well as some other perks And unlike other latin countries you can still after five years get your citizenship and a passport now speaking of ecuador Here's a little fact that startled me now. You might know I do private phone consultations You just go to expatwisdom.com click on the telephone consult and you can have a half hour an hour with me That's a way to talk about your personal situation instead of generalities like on this show Anyway, now this came as a surprise to me and it probably will shock you too But guess what fully eight out of the last 10 phone consults i've done over the past few weeks

[19:55] That's four out of five Came from expat guanabes and wannabes whose plan is to move permanently To guess where ecuador and by the way, most of all are moving in or around quenca Now I admit i'd be the last one to dissuade you from that idea. I like ecuador But I absolutely don't like what i'm seeing for the future Problem is you see international living has really put ecuador on the map Which means the usual flood of gringos and gringo prices on the way sure You'll have a nice couple of happy inexpensive years But when international living in aarp and yahoo travel news To name just a few put ecuador on their top five list for retirement havens

[20:43] That just means gringos mcdonald's kentucky fried and starbucks are on the way Bringing with them of course a nice big ever expanding real estate bubble, too Which is good if you're going to be a renter because that's a fantastic situation for a renter's market A vast oversupply of vacant places for sale with not enough people to buy them And the time to buy of course is if you spot a desperate seller and there's going to be a lot of those coming up Of course just like at the end of any real estate bubble, but that's not all There's another big problem happening in ecuador right now since they depend mostly on oil exports The price of a barrel of oil has dropped about 50 in the last year as you know tax revenues are way down So the government has slapped a huge tax on imports

[21:31] Now from what I understand and I talked to a couple of expats who've been to ecuador lately If you bring in a container or have some boxes shipped or order off of amazon You'll be hit with a 45 to 75 percent import tax immediately Which has pretty much killed the once flourishing amazon ordering trade in ecuador Oh and speaking of ordering from amazon or ebay in a general sense Yep, they'll all ship directly down here to latin america But it's always better like I said in a past show to have them ship to a miami Forwarding service and you'll pay as little as three to five bucks a pound now You could have amazon ship directly But it'll always cost more because they'll be shipping it by fedex or dhl or another courier service

[22:18] And you could easily pay triple meaning about 15 bucks a pound Anyway, I understand in ecuador now amazon's gotten hammered by that huge increase in import taxes And by the way throughout latin america It's just gringos and upscale latins that use services like amazon Now to the other 95 of latin americans amazon reminds them of the three p's that's python's piranhas and poisonous darts So anyway with that new ecuadorian 45 to 75 import tax, there's a type of gray market Gringos living down in ecuador are hooking up with gringos through the internet up in the states who soon are traveling down to ecuador They're making deals with those stateside gringos to bring some items down with them

[23:05] So the people in ecuador don't have to have them shipped down and pay that high tax Because you see if you're flying into ecuador no one cares or taxes you on what you carry in They only hit you with that high tax when you ship things directly In fact, I just spoke to a gringo up in california this week on one of those consult calls He did just that he brought down two suitcases full of stuff for people He didn't even know the upside of that for him was when he got down to ecuador He met up with a lot of diverse gringos living down there and found out a lot of good info He said he carried down and delivered small items for over 50 different people So anyway, that's what you can look forward to if you move to ecuador Now remember with a recent huge import tax increase like that

[23:52] Obviously that means that eventually all import articles that hit the shelves electronics and stuff from china indonesia Whatever will eventually reflect that price increase So soon enough you can expect gringo prices on probably everything but food However, if you've got a nice retirement nest egg or maybe a pension of 30 grand or more a year You'll do fine in ecuador the advent of creeping gringo prices shouldn't bother you that much And now of course, you can live a very first world style life on a simple social security check down there Don't expect that to last too much longer So thank you aarp and international living for setting the stage for that. Okay, so let's take inventory here International living has helped gringoize costa rica panama police

[24:39] It's in the process of doing it to nicaragua ecuador columbia and chile now, let me think did I leave anything out? Oh, yeah, I forgot the first domino to fall was mexico now don't get me wrong I'm not picking on international living. They provide a really nice service and have a lot of great articles It's just that with a couple of million subscribers When they put out their top retirement picks Well, just know that you certainly did not get in on the ground floor I mean, let's face it when you're in new york chicago or cleveland and the taxi driver tells you how he's going to retire In a year or so and he's going to move down to nicaragua or ecuador You can forget about that fantasy of the untouched paradise Okay, now a couple of words about doug casey's favorite place argentina. Did you know that these days?

[25:28] argentina's inflation rate is 50 times higher than the average inflation rate throughout the rest of the world Now official government reports are saying that for 2014. It was only 30 percent that year, but real world Non-governmental economists are saying it's more like 50 percent now. Think about this when you go to argentina The biggest bill you can get is the hundred peso note, which is worth only get this seven us dollars Now that means for example, if you go to walmart and buy a big screen tv for let's say 400 bucks Wait a minute. You can't really get a big screen tv for 400 bucks in argentina. Let's say 800 bucks That's more like it prices are about double for electronics and other imports

[26:13] As compared to prices in the states and many other latin countries for that matter So anyway, if you're gonna pay cash for an 800 TV, you know what that means you'll have to carry 114 of those hundred peso notes because remember like I said, that's the biggest denomination they have Now according to official government sources They're not going to make any larger bills Because then the government would be throwing in a towel and admitting that they were on the edge of hyperinflation That's what happens to countries with massive inflation The first thing they do like zimbabue is to create larger and larger denominations of funny money Now, of course in argentina, they have other funny money denominations, too But nobody really wants to use them. In fact about 70 of all bills circulating are at the largest denomination

[27:00] A hundred pesos and as far as argentine coins. Yeah, they got one five ten twenty five and fifty centavos That's cents, but almost no one even bothers to pick them up when they hit the ground I mean really why should they when one cent one centavo? Is worth less than one tenth of one us cent which is why most Non-government economists are saying that argentina is once again on the edge of financial collapse Nice place to visit but I wouldn't want to live there. Not yet 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

[27:46] 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