#488 – The Expat Files: Colombia’s Oil Dilemma, Costa Rica’s Challenges, and Legal Tools for Expats

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 Here's something I bet you didn't know all you folks out there interested in Colombia Did you know that 20 to 25 percent of all the country's tax revenue come from oil drilling and exploration? Bet you didn't even know Colombia had oil. Well, they've got plenty

[00:48] They've always had enough for themselves and plenty to export However now since oil prices are at less than 50 percent of their peak Which was only about two years ago as usual in the case of all gluttonous governments when times were good They expanded and now they're very short on revenue and feel the pinch And so their answer is to increase oil production and guess what something else you didn't know Fracking has come to Colombia in a huge way. Now. Here's a recent quote from the president of Columbia's echo petrol Juan Carlos Echever he says quote we can't afford to stop fracking now Hey, who even knew they were doing it? Well, they have been Anyway, so far he says fracking is in motion and on the increase

[01:34] In fact, there are already seven fracking companies using this alternative method of extraction He says so then why with all the environmental problems now known with fracking as Columbia chosen to go that way Well one Manuel Rodriguez Becerra head of the Columbia National Forum for Environment and former environmental minister of Columbia says quote It's the government's decision to bet everything on the oil industry and thus fracking rather than improve revenues in other sectors such as Agriculture he says yes, it's true. The government revenues have dropped sharply with the downward pressure on oil But adding he says that he believes government is not being transparent on the issue and this is good He says we need to weigh the economic and social benefits against the environmental damage due to fracking

[02:25] He believes the environmental risks in Columbia are magnified Due to the enormous weakness of environmental institutions here He says quote the ministry of environment is too weak an entity to address the problem of fracking and lacks The technical resources to assess the issue not only that he says it has much to do with biological and geological risks here because our country has a greater seismic risk than the United States But not to worry. I threw that in he says there are only 12 chemical additives used in the fracking process here Most are found in everyday products such as toothpaste body soap and some medicines. Wow, that makes me feel a whole lot better How about you then the article stresses what is even more worrying?

[03:14] Some experts say is that fracking in Columbia generates a large heavy flow of industrial vehicles that destroy roads much more so than other industrial projects people complain in the US about the heavy increase in Traffic in areas where fracking exists and they have a large number of highways there Imagine that kind of traffic in Columbia where the streets are so very narrow Hmm, that's a new one, huh? Okay, little food for thought there for all you listeners thinking of going to Columbia Maybe to escape fracking up in your state only to find it's alive and well and down in Columbia, too Now in more Latin news, by the way, this portion of the expat files is brought to you by the fine folks at Monsanto

[03:59] Yeah, right Anyway, talk about the gringo wannabe syndrome on steroids. Listen to this Here's something few first world gringos now between 2010 and 2014 first world franchise fast food chains Saturated Costa Rica with an additional 244 burger and pizza joints and such you got that 244 extra fast food joints and now in 2015 the Wendy's Fast-food burger chain has decided to close all of its outlets in Costa Rica Why according to business demographic experts Costa Rica is now one of the world's most Saturated places for fast food outlets in fact most of Costa Rica has the same level of fast food joint saturation as

[04:47] Cities such as Paris in New York that according to the Costa Rican Chamber of restaurants What didn't even know they had one? So anyway, little Costa Rica with its 3 billion people has a total of six hundred and seventy-nine First world fast food restaurant joints. That's six hundred and seventy-nine So what does that mean to all us expats gonna be some wannabes? Well, it's obvious you don't want to start a restaurant business in Costa Rica. That's for sure In fact, the restaurant business is always a bad idea these days Unless you're way off the gringo tourist trail and have a very nice little niche and are offering something completely different And as far as bringing a franchise of any kind down from the first world Again, look for places off the gringo tourist trail because the fact is if there's enough foot traffic

[05:37] You almost can't miss though. Let's face it You can't put your franchise in the middle of a cow pasture though I guess you could say there's a lot of foot traffic there, too Now I repeat if you bring a US franchise down and you have decent foot traffic You almost can't miss because like I've mentioned in past shows down here you pay your grunt workers You know the kitchen folks and stuff only about three hundred to three hundred fifty dollars a month Whereas up in the states you're gonna pay minimum wage at least plus some benefits which at minimum works out to at least 1500 US dollars a month not to mention in so many off the gringo tourist trail countries and cities You can realistically open a business for a quarter to a fifth of what it would cost you up in the first world

[06:23] However, if you've been reading those retirement blogs and rags and international living You could do what they suggest and go to Costa Rica Then open up a business with first world dough and more than likely crash and burn, but you knew that already, right? Now in more news that should convince you that Costa Rica is not the place you want to live work retire and or play Unless of course you're a surfer the net for vacations and get a nice slick week long all-inclusive package to tamarindo to me That's the only thing Costa Rica is good for a nice quick vacation But make sure it's all inclusive or you're gonna drop a first world bond. Don't believe me That said listen to this according to the Costa Rican Social Security Department. That's CCSS their central evaluation committee on disabilities shows that during

[07:11] 2014 the average number of days that each Costa Rican civil servant That's government employee was absent due to illness Turned out to be five times higher Then the average number of days each worker in the private sector was absent due to illness You got that? The very definition of postbrained lazy ass government slugs and you know, I mean that in the kindest way Now a spokesperson for the Costa Rican Social Security Commission says that quote things should not be this way It's hard to understand because you see the average Costa Rican civil servant that's government worker Has a lot more health care coverage and much better access to health care than the average private worker

[07:56] So it would seem therefore they should be healthier now Non-government analysts say the situation is clear What's really happening is widespread abuse by public workers who can and do go on long-term sick leave without Jeopardizing their job security or salary This is a job stability factor, which is not enjoyed by the formal private sector for whom getting sick simply means Loss of earnings whereas government workers in the public sector get paid sick leave Not to mention in Costa Rica civil servants earn on average 150 to 200 percent more than their counterparts in the private sector surprise surprise Now does that not sound familiar?

[08:42] Sounds to me like Costa Rica's bucking to be the 51st us state Now according to an article in Costa Rica's biggest newspaper La Nacional the nation the average Costa Rican government grunt worker That is a person doing labor at for example one of the ports He takes on average 29.7 paid sick days every year While Costa Rican government white collar workers, for example judges court attorneys people with desk jobs in the Municipality or the environmental division. They take an average number of 20 paid sick days per year so in Costa Rica government grunt workers take about six weeks of paid sick leave a year and white collar guys four weeks of paid sick leave

[09:28] So then who doesn't want to work for government? Now we all know that's pretty much exactly how it works in government in the states But get this according to this article many other Latin American countries are eyeing the Costa Rican model and governmental system Looking at it as their future model other Latin countries look at it as a fantastic success story They see the huge boom and expansion cycle that occurred over the last 20 or 25 years and they see that the cost of living And minimum wage is double that of most other Latin countries So now other idiot brain-dead Latin countries are thinking well, hey look at Costa Rica. What a success Let's copy it. The thing no one talks about is that Costa Rica is not self-sufficient It does not produce nor manufacture enough goods to sustain its own population

[10:18] It's got a huge imbalance of trade on the import side The boom and expansion cycle is based solely on first world tourism And if you know what we know about the coming bus cycle Tourism is the very first thing people cut out of their budgets. Oh and one final note on Costa Rica According to a Belgian newspaper Let me quote this it says in recent years Recurrent cases of the entry of drugs into Europe have been detected coming from Costa Rica Via the maritime route using pineapple or cassava exports as a smoke screen Ports such as Belgium the Netherlands and Spain are gateways for drugs sent from Costa Rica To which Costa Rican government spokesperson Laura Bonilla says quote. We have an action plan

[11:07] There is a responsibility on the part of our government and employers Initially, we will be working in this two ways setting up scanners and reactivating the drug control program of the united nations Meanwhile, we are training businesses so that they do not become implicated In illegal activities. All right, and we all know that's the usual government line But here's what you didn't know a shipment of commercial scanners Used to detect drugs were donated by china in get this 2008 and remained unused and in fact unpacked So then what does that tell us a lot? How stupid other countries are to donate anything to these third world governments?

[11:53] Wait a minute China's third world, right? What's china doing donating scanners to Costa Rica? Well, that's another story We'll never know the truth about meanwhile the useless mega expensive were on drugs, which was lost a long time ago Presses on and the only thing that will decapitate that multi-headed monster Legalization, but you knew that already, right? Oh and one more very disturbing article here from La Nación in Costa Rica Oh, you're gonna love this it says here the directorate general of taxation in Costa Rica has been given the power now to require Costa Rican professionals like doctors and dentists to provide information to the state Which can be relevant for tax investigation purposes

[12:40] Say what that kind of crap doesn't even exist yet in obama nation The article goes on to say as of july 27 2015 The directorate general of taxation dgt has the power to require professionals in Costa Rica to provide confidential customer information to the tax authorities Why you might ask money, of course It says the authorities of the Costa Rican treasury department are aiming to reduce tax evasion by the professional Segment of society and though according to the Costa Rican bar association They say they openly believe it's inappropriate for tax authorities to request such information from lawyers And that in fact, it may be illegal and unconstitutional

[13:28] Nevertheless, the legislation has been voted on and passed Okay. Now note that the Costa Rican bar association does not mention they believe the law is inappropriate for medical doctors or architects or accountants or engineers or dentists that is other professionals They've stated it's only inappropriate for lawyers How do you like them three holies? Oh and one more thing For all you gringos and expats who do live work or play in Costa Rica and those Unfortunates who have a business there. I'm sure you already know that the Costa Rican ministry of finance denounced in 2013 That by 2014 all businesses would be required to have electronic Invoicing it would be mandatory and with that the government says it intends to achieve

[14:19] increases in tax revenue Ranging between 20 and 25 percent that's over and above present tax collections However, because this is Latin America for the third time now The government has announced that this electronic invoicing process will be delayed at least another year to 2016 Why you might ask well, that's because in 2013 they purchased software it didn't work 2014 They purchased more that didn't work 2015 Changed governments changed software and supplier and maintenance again didn't work They brought in more government consultants and analysts and well, this is Latin America And now a huge mess you gotta love it. No matter how they try to copy the first world They just never get it right, but they do try don't they?

[15:07] And it always starts where in Costa Rica where all government roads lead to gringos and the extraction of their gringo dollars Okay enough about Costa Rica. I promise again a nice place to visit but i'd rather live in Cleveland Now I like to talk a little bit about the food situation down here in Latin America Now, you know, i've often mentioned these huge markets you can go to where the food's brought in every day Usually by little truck farmers so you can see that most all the stuff has grown quite locally And though almost none of it's labeled organic or non-gmo Why? Because it would be completely out of the question for a small-time farmer down here to go through the certification process And admittedly farmers do occasionally use pesticides

[15:53] Still there's just no doubt when you come down here and see it for yourself that the food in the produce markets Is in a different league than any of the stuff you're getting up north Not only is it absolutely fresh beyond dispute Everything's bigger by far and tastier too than anything you guys can get not to mention It's a quarter or less the price of what you're paying for it But the problem is you see I can go on and on about this stuff and talk your ear off But you really have to see and taste it for yourself So then why am I still talking about it? Well because I want to read you a little email that came from one of my latest new friends that came down to the Last expat wisdom seminar the one we finished about a month or so ago now note that when people sign up for this seminar I always ask them to tell me if they've got any medical issues

[16:39] And in this case he could have no gluten and had suffered from chronic intestinal issues So i'll read this it says dear johnny I'll let you in on something. I observed on my own dietary issue after my visit to your seminar in guatemala I was so worried that I would have a hard time finding food that was gluten free But to my surprise everything I ate my body accepted without issue I found that without all the first world chemicals and other additives. I had zero problems From the grain fed beef to the driveway chickens to the fresh vegetables. My digestive system handled it all Now as soon as I got back, I resumed my usual diet and I felt bloated and uncomfortable You know processed meat, etc Yeah, I have since been reading labels more carefully and i've been trying to avoid many of the foods I used to eat

[17:29] Going organic as is suggested to do If you do another show on food, please feel free to share my experiences for all the celiac sufferers out there Those of us with digestive issues can definitely benefit from the natural way of growing food versus the processed way So thanks again johnny looking forward to my next visit down So there you have it a personal testimonial as to what the food's like down here From someone who's very sensitive to the purity of the ingredients And by the way, he's one of those guys that came to the seminar who's never been south of the border I remember him saying he's been to canada quite a few times but south of the border No And it always strikes me funny That so many people coming to my seminars have never been south of the border before or to another latin country

[18:18] Especially you women who come down alone. I really have to give you credit for that Obviously you're in good hands when you come down to the seminar We hold your hand all the way through it But still almost all single women coming down tell me that they kind of hide the fact From a lot of their friends that are going down to guatemala or other forbidden latin place Because when they do tell a few people they always get that strange look Sometimes a worried look Anyway, my hat's off to all you single people who come down here who have never been south of the border before But you know all the articles and videos and youtubes and blogs and podcasts in the world Can't prepare you for what it's really like when you get boots on the ground So for all you listeners up there who are still on the fence I don't get it when there's so many single ladies with a determination to come down and all by themselves

[19:08] Some who've never been out of the us before most of them by the way who don't speak spanish Somehow that makes all the fence leaners and tire kickers out there seem a little wimpy, huh? And here's another email. I just have to read. It says hello, johnny My husband and I were recently listening to one of your podcasts where you were speaking about the government and inheritance taxes You had mentioned getting yourself an essay corporation. I don't think I spelled that correctly Would you mind giving us some more information on this? We are gringos in canada But i've been traveling to latin america belize and costa rica. We're planning going to panama this winter Down the road It may be in the plans to purchase property in one of these places and would be interested in understanding more about the corporation aspect

[19:56] You mentioned that essay corporation We enjoy your podcasts your knowledge and common sense tips are great. My husband loves your theme song, by the way See you next time sylvia and jed Well guys two reasons. I read that email one is you made me laugh when you said essay Corporation and the other of course is because you love dean martin's version of south of the border the best version. I think He's so smooth and swab and natural He can kind of laugh through a song and you're right in there with him Unlike so many other stiff old crooners from way back when now I guess everybody up in the states and canada has heard that term essay Especially if you watch any of those gritty ghetto street dramas Anytime you see a scene with young working class latinos that word essay pops up everywhere now, doesn't it?

[20:48] Which by the way loosely translates to hey, man But I gotta fill you in on something south of mexico. They don't use essay. They never do That's just a mexican thing And since you know Maybe 80 to 90 percent of all the latins in the u.s And canada are of mexican origin naturally their street terms become common in the big cities in the states Now it's different south of mexico in central america and south america often they'll use the term Esso sounds like essay, but they're completely different For example when you hear latin people speaking to each other especially young ones the under 30 crowd When something cool happens or they're surprised in a pleasant way Let's say for example Someone's trying to open a jar or a beer bottle and just can't get it and finally it pops success

[21:35] Someone just might say esso like great Cool, you did it unlike the similar sounding mexican word essay Which like I said before means loosely. Hey, man, what up? Now as far as essay corporations, which are really s period a period corporations Those are those great little legal tools that you use down here in latin america to protect yourself from lawsuits Also used as a mechanism to sell real property or to transfer real property or a business without having to pay taxes Now like I said in a recent past show less than five percent of latin americans know what an essay corporation is and probably less Than two percent have one those are always the upper middle class and the wealthy

[22:21] Seems only educated folks and their lawyers know how to use these things As a basis of comparison, they're very similar to us style corporations Though they're much much more flexible and they're anonymous And that's stated right in their title S period a period stands for society that's society Anima that's anonymous. So it's an anonymous society anonymous meaning If you want you can set it up so that your name is not on that corporation in any way shape or form Not anyway as registered with a government agency like the municipality or within any bank or banking system Of course, you could put your name all over it if you want, but it's not necessary

[23:06] Which is the real beauty of those things for gringos and foreigners? So in latin america at least you can still hold on to some of that privacy that doesn't exist up in the states anymore Now, of course your latin lawyer will know all the ins and outs of those latin essay corporations And of course, you need a trusted lawyer to set one up and the cost once again Depending on the latin country you're in can be anywhere from a thousand dollars to two thousand dollars for the startup With a monthly fee to keep it active anywhere from fifty to a hundred bucks So in the end after you got the corporation that could cost you twelve hundred bucks a year By the way that fee is to pay for the accountant who will be filing with the government tax returns Quarterly or monthly depending on the country you're in and you know a lot of people say well What if my essay corporation just for example owns a house or a car or a boat and nothing else?

[23:55] In that case, it might not even have a bank account associated with it. In other words, no income or expenses So if it's just holding property and doing nothing else Then why do I continuously have to pay that 50 to 100 bucks a month to keep it in good standing? Well in the end, it doesn't matter that there's no money movement in the corporation The fact is it's got to file tax forms Anyway, now, of course when you get that corporation through your lawyer you'll use his accountant. That's part of the package Now most latin lawyers have put together many many of these essay corporations and some of them have their own in-house accountant That does all the paperwork he'll file the forms and keep the corporation active Now more than a few gringo expats have said to me johnny, you know, my spanish is really good I have an essay corporation and it owns a house or a car or whatever

[24:43] How hard could it be for me to file those tax forms every quarter or monthly whatever as needed? So then I asked that question to one of my favorite latin lawyers and he said yeah You can fill out those forms for yours or anybody else's corporation. It's simple bookkeeping But the problem is when you hand those forms in every month or quarter, whatever it is They have to be signed by a certified accountant in the country you're in called a perito Contador And the fact is anyone in latin america with a simple one-year bookkeeping degree is a parito Contador and he has his little rubber stamp and seal kind of like a notary public up in the states And there's the stumbling block. You could do the paperwork. All right, maybe it'll only take you half an hour a month Who knows maybe much less but you don't have the stamp and seal and the signature of a registered account in the country

[25:32] So forget about doing your own corporate taxes and remember because taxes are so Uncomplicated here in latin america. In fact, I was looking at the entire tax code booklet for honduras the other day And it only comes in at around 78 pages. That's it In fact, the book is pint size too if you took a regular eight and a half by eleven sheet of paper and folded it In half that's the size of it So if it was printed on a standard sheet of paper you're looking at more like a tax code of 39 pages versus what? 78,000 pages now with the irs tax code and that folks is why there is no h&r block down here in latin america The taxes down here are so simple and easy to do any sixth grader could easily fill out the average form

[26:17] Of course, you won't have the stamp and the seal so it won't be legal, but you get the idea Oh and one more thing as far as h&r block guess what about it a year and a half ago h&r block up in the states Created a division to handle expats tax forms Since there are over 10 million gringo expats and counting now There are lots of tax forms to do and most expats even living on a crappy fifteen hundred dollar a month social security check Will still have to file u.s taxes because they make over the minimum amount, which I believe now is Ten thousand five hundred dollars for a single person per year So if you're down in ecuador who's going to file your tax forms for you? Oh, and by the way, I guess this year now Because of ovomit care you have to file a form Stating if you have your own private insurance or you will be on ovomit care for the year

[27:04] Now I don't know the details on that but i'll find out So anyway for those you listeners who might be worried once you move down to latin america about who's gonna file your tax for you Who's going to help you with that special case of living as an expat in latin america? Well, if you can't find a local tax guy down here or your tax guy up in the states can't handle it Like I said h and r block has now got an expat us tax branch who'd have thunk, huh? south of the border 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

[27:52] See you next time nos vemos Ah, she was a picture He knows spanish