Episode Summary
In this episode of The Expat Files, Johnny Mueller discusses the current state of the real estate and tourism sectors in Panama. He highlights the booming real estate market, which is now at its peak and may be on the verge of a bubble burst. He also covers the statistics on tourism, noting that while the number of tourists increased, hotel occupancy rates dropped to their lowest since 2006. Johnny explains that this is due to overbuilding and the influx of tourists from neighboring countries like Venezuela and Colombia. He also warns about the potential for hotel bankruptcies and advises expats against investing in the hotel industry in Panama and Costa Rica. Additionally, he outlines the complex and time-consuming process of building commercial properties in large Latin American cities, noting that it requires approval from multiple government agencies.
Johnny Mueller then discusses the extensive bureaucratic process required to obtain permits for building in Latin America, highlighting the need for approvals from multiple government agencies and the associated costs and delays. He notes that while building near city limits can simplify the process, environmental impact studies are often used as a means for municipalities to extort additional fees. Johnny also touches on the broader issue of corruption in Latin America, referencing a recent article by Dirk Borkenstein that explores the systemic nature of corruption, including the disparity in salaries between public and private sector jobs and the entrenched culture of political favoritism. He concludes by shifting focus to the state of internet usage in Latin America, noting low penetration rates and the dominance of entertainment over research and study.
In this segment, Johnny Mueller discusses the internet usage patterns in the United States, noting that only about 5% of internet usage is for educational, business, and non-entertainment purposes, while the majority is used for entertainment. He then shifts focus to the situation of indigenous people in Latin America, citing data from the Inter-American Institute that 81.2% of working indigenous people are off the books, meaning they don't pay taxes or are registered with their governments. Johnny highlights the double standard in Latin America, where legitimate businesses are required to provide receipts (facturas) and report sales, but many indigenous people and expats prefer to remain off the books to avoid taxes. He also touches on the tax implications for expats living in Latin America, noting that while some may have internet businesses, most are off the books. Johnny concludes by discussing the informal economy and the reluctance of governments to enforce tax laws on those who don't pay, especially the indigenous population, who are among the poorest in the region.
Johnny Mueller discusses the increasing difficulty for U.S. citizens seeking residency in Latin countries, emphasizing the U.S. government's resistance to people leaving the country. He explains that many individuals attend his seminars with the goal of obtaining residency, and the process has become more stringent. He highlights the importance of a 'good conduct report' from local authorities, noting that minor misdemeanors such as DUIs, disorderly conduct, or public urination can disqualify applicants. Johnny also mentions that some Latin countries, like Panama and Paraguay, now require FBI reports instead of just state or local records. He provides examples of how individuals have navigated these challenges, such as using a different state's sheriff report to avoid past convictions. Finally, he notes that changes in U.S. state laws, such as Texas requiring third-party companies for criminal record reports, further complicate the process.
In the final segment, Johnny Mueller outlines the process for expats in Texas to obtain a criminal history record check for residency purposes. The process involves multiple steps, including using third-party companies, online registration, scheduling appointments, and fingerprinting. He provides detailed instructions on navigating the online system, including specific websites and steps to follow. Johnny acknowledges the complexity of the process and encourages listeners to stay patient and persistent.
Topics
Real estate market in Panama, Tourism statistics in Panama, Hotel industry challenges, Commercial property development in Latin America, Bureaucracy in construction, Corruption in Latin America, Internet usage in Latin America, Internet usage patterns in the United States, Indigenous people in Latin America and their economic situation, Tax evasion and the informal economy in Latin America, Expats and their tax obligations in Latin America, Government policies and enforcement in Latin America
Chapters
00:00:00 Opening 00:00:30 Introduction to the Panama Real Estate Market 00:00:44 Tourism Trends in Panama 00:01:34 Hotel Occupancy Rates and Overbuilding 00:03:08 Hotel Industry Bubble and Its Implications 00:04:54 Commercial Property Development in Latin America 00:06:18 The Bureaucratic Process for Construction Permits 00:07:03 The Complexity of Documenting and Approving Construction Projects 00:07:30 Simplifying the Process by Building Near City Limits 00:08:52 Corruption in Latin America: A Systemic Issue 00:11:44 Internet Usage in Latin America: A Growing Challenge 00:12:40 Internet Use Breakdown in the United States 00:13:02 Indigenous Workers in Latin America 00:13:50 Receipt Requirements in Latin America 00:14:38 Expats and Tax Evasion 00:16:30 Government Policies and Indigenous People 00:18:36 Residency in Latin Countries as a Goal for Attendees 00:18:46 U.S. Government Resistance to Emigration 00:20:20 Impact of Misdemeanors on Residency Applications 00:21:54 FBI Reports as a New Requirement in Latin Countries 00:24:13 Changes in U.S. State Laws Affecting Residency Applications 00:24:19 Introduction to the Process 00:24:54 Overview of the Steps 00:25:46 Detailed Instructions 00:26:45 Conclusion and Final Tips
Transcript
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 now certainly you remember in a very recent past show I mentioned that the Panama building and real estate boom is at its peak well today We've got more reason than ever to believe the pin is in sight and about to pop that bubble But first let's talk about the kind of people that are visiting Panama these days
[00:48] It just might surprise you and here's some recent info from the Prensa in Panama reporting that 46% of all tourists who came into the country last year 2015 came from Take a guess would you believe Columbia number one and second place you'll never guess this But it does make sense Venezuela and guess what according to Panama authorities guess What country is overstaying their visas the most? Venezuelans again, why not their countries falling apart and when wealthy Venezuelans can get out with some of their wealth They stay out, but let's move on the third most frequent visitors to Panama are Brazilians with Ecuadorians number four and Peruvians number five according to this article
[01:34] Panama tourism is up by a lot sounds good, right? Well, listen to this. It says however Hotel occupancy recorded its worst year since 2006 When they first made figures available. In other words, it's the worst recorded year of all And here are those occupancy figures. They estimated that in big hotels with over a hundred rooms 54% of the rooms went empty last year and for smaller hotels under a hundred rooms and mom-and-pop hotels Only forty six point six percent of rooms were occupied for the year now Here's the weird part the number of tourists who went to Panama in 2015 exceeded 2014 by ten point seven percent a record. So then how can hotel room occupancy rates be in the dumpster?
[02:25] Because they're overbuilding hotel rooms like there's no tomorrow. It's really amazing go to Panama City sometime You'll see at least 15 gigantic building cranes operating at any particular moment Yep, like lemmings to the sea in a boom cycle when you have people who've never seen the bus before They'll just keep on building themselves into oblivion. But by the way, that's fantastic news for renters and tourists Because if you remember in a recent past show I mentioned if you go on the internet and try to book a three or four star hotel in Panama You might pay a hundred to two hundred bucks a night However, if you walk in the front door In other words, you just arrive at the airport and start looking around you can get those very same rooms for 50 bucks Or less and now with a huge hotel industry bubble ready to pop analysts are predicting record numbers of bankruptcies and
[03:16] Restructurings on the horizon So all you expect gonna be some wannabes if your dream is to open a mom-and-pop bread and breakfast somewhere in Latin America Or anywhere in the world that goes for people with Airbnb's to don't pick Panama and don't pick Costa Rica either But you knew that already, right? Oh and you might be interested to know that US citizens made up about 18% of Panama's tourism last year and Canadians about 7% and Europeans counted for 14% So that means first world people accounted for about 40% of Panama's tourism last year and about 60% were Wealthier Latin Americans on vacation which by the way comes as a big surprise to some people who think that Panama's
[04:02] Tourism trade is all coming from the US and Canada Here's something most of us never knew according to the article the average break-even occupancy rate in Panama for a hotel hostel that would be a bed-and-breakfast or a small backpacker hotel They say just to break even they need 40 to 50 percent occupancy and for larger high-rise hotels and resorts They need 50 to 60 percent occupancy just to pay the bills So according to those earlier statistics, I gave you looks like everyone in the hotel business is losing money How long can that go on and with 2,000 more new hotel rooms coming on in the next year or so? This will end badly unless of course, you're the one on vacation in Panama Then if you play your cards, right?
[04:48] You'll get a three or even four star hotel for the price of a fleabag backpacker hostel That's coming soon and I'll keep you posted. Okay, so let's talk about building commercial properties here in Latin America that means of course buying some land getting an architect having the plans drawn up getting the permits etc And finally getting the final approval to break ground on the project do note I'm not talking about residential homes here talking about businesses and commercial properties exclusively now after you hear this You're gonna think hell. I never want to build anything in Latin America I'll just rent or buy now regardless if there is a huge real estate bubble or not which there is you have to hear this if you're thinking about getting into a commercial construction project from scratch in a
[05:34] Big Latin American city and that's the key. That would be a city or municipality over. Let's say 300,000 people this Friends is what you're gonna be up against now note. We're not talking about putting together a business itself We're talking about just the building of the commercial property Turns out in most large Latin American cities you have to visit 13 to 15 Different institutions and government agencies in order to get the final approval to get your license to build for example In order to get a building permit from scratch in a big city like Lima, Peru Tagusi, Galpa, Honduras, Panama City, Guatemala City, Cali, Medellin, Cartagena, and Bogota, Colombia and on and on You'll have to get the following permits before you get your final authorization to start building
[06:23] You must have approval from the Ministry of Environment, the Ministry of Culture and Sports, the general property registry, the directorate General of Civil Aviation, the National Forestry Institute, the National Coordinator for Disaster Control, the Office of Territorial Control in the District Capital Department of Labor, the Commission for Historic Sites and Antiquities, the Commission on Environmental and Land Studies and last but definitely not least the Municipal Water Bureau and the average time to have all these Documents approved from two to six months yet. It'll only set you back maybe 500 bucks Thank Buddha for small favors, huh? And of course, you'll have to have the appropriate letters documents and signatures specific to each of these entities
[07:09] That'll keep your architect and your lawyer very busy now you listeners know I've mentioned many times that Latin America is the land of the stifling bureaucracy and of course every politician Promises in his election campaign that he's gonna streamline those processes But in fact things just get worse and worse, which is why in the end everybody ends up paying bribes But here's the good news if you're planning on building something right outside the city limit Could be in a beautiful subdivision just one block away. Suddenly all you're dealing with is a county municipality And that's true in small cities, too Then all you and your architect have to do is submit your plans to the local municipality. That's it Barring of course you decide to build right next to a river or a lake then you'll probably need an environmental impact study and all
[07:57] That really is is a way for the municipality to extort a few more bucks out of you This is the third world, you know, no matter what that study says you'll get your permit when you pay your money Why do you think so many mining companies have relocated to the third world because they can run roughshod over the environmental laws and just Pay off politicians. However, because mining companies over the years have ruined so much of the environment They're starting to get targeted by international environmental groups And some have even been kicked out of certain countries and run out on a rail So things are changing for the better in that respect Anyway, as far as building a commercial property from scratch my suggestion don't even try it I'd say only under very special specific circumstances would I ever consider building anything?
[08:43] I mean look with the real estate bubble ready to pop you'd be a clueless idiot to do such a thing Okay, that said let's talk about corruption in Latin America In fact, I'm looking at a very recent article right now from a big latin newspaper Written by and about a German named Dirk Borkenstein. He's a European political and economic Investigator analyst specializing in get this Latin American corruption in the article in Spanish Of course is entitled and here's the rough translation. Is there anyone who's not corrupt in Latin America? By the way, I've been asked that question on occasion myself and I always say I don't know I haven't met everyone yet Anyway in this expert first world Europeans opinion he says one of the reasons why you just can never stop the corruption in Latin America is because Latin governments themselves create and
[09:35] Perpetuate so many social and economic inequities, for example, and by the way, doesn't this sound familiar? He says when a regular trained secretary and the private sector makes $250 a month while a secretary with the very same credentials working for a congressman Makes five or even ten times as much up to $2,500 a month and does little or no real work and travels in high style That sort of thing he says is taken for granted and is so common that there will never be anything but corruption in Latin America As long as that prevails he says practically everyone but that tiny percentage of people already born with a silver spoon Would like nothing better than to work for government and when asked how do you change something like that?
[10:24] He said you can't it's part of Latin culture Then he goes on to say everyone knows that politicians appoint people with virtually no Qualifications to everything from cabinet posts to department heads and all levels of management in government He says once you've entered the political space you're immune and protected adding Corruption in government trickles down and his grandfathered in and that he says infects the whole of Latin society He says to begin the process of straightening out a corrupt state first You must reduce the unequal financial incentive between jobs in the public and private sectors But like he said that will never happen government workers He says are accustomed to frequent promotions and pay raises Regardless of the performance of the economy man doesn't that sound familiar then he says unlike in the private sector
[11:15] government workers never experienced pay cuts or Downsizing so bottom line what he's explaining is the textbook definition of a disease a cancer called government and sure he's talking about how governments cause a kind of Universal corruption or at least a kind of toleration for generalized corruption throughout the whole of society in Latin America Meanwhile the same kind of things happening up in the first world only on a much bigger scale Okay, changing gears This should be of interest to any of you listeners out there who are planning on coming down and starting an internet business here in Latin America turns out in an interview with the owner of a large Latin IT service called tech for mobile He says depending on which Latin country you talk about internet household penetration is between 15 and 20 percent
[12:05] He's talking about people at home who have a 24-7 connection note He's not talking about people who use smartphone for internet connections. He says unfortunately 95% of all the internet use in Latin America is for entertainment purposes only Facebook Twitter sports was up YouTube Whereas only about 5% of internet usage is for reading research studying Educational purposes business and banking applications and other non-entertainment formats That makes you wonder what the internet use breakdown is up in the States That said let's switch gears again Now as you know many Latin countries have a very high population of indigenous people for example, Peru Bolivia
[12:54] Guatemala Honduras Salvador Brazil, etc And in some cases they make up more than 40% of the total population Now according to data from the Inter-American Institute, they're saying that 81.2% of all working indigenous people work off the books That means only 19% of indigenous workers pay taxes or are registered in any way with their governments Social-security and health care system oddly enough. They prefer it that way. They don't want to get on the books They don't want to be on government lists and they don't want to pay taxes Well who does right now that huge 81% off the books figure really makes me laugh Why because there's a tremendous double standard here because you see throughout Latin America every so-called
[13:44] legitimate business or storefront you walk into has a little sign on the cash register that says Be sure to demand your factura. That's a receipt. It's the law Then there's an accompanying toll-free number you can call to report the seller if you don't get that receipt Now if you remember here in Latin America, the receipts are all numbered and they'll be at the name of the business and its registration number Called the NIT number that's n-i-t number and the business owner will have to turn in his copy of those receipts every month To the government tax office or his accountant will then he'll pay the government 10 12 15 or 20 percent Whatever the value added tax is for that country. That's how Latin governments collect sales tax dough Now that means if you don't get a receipt the seller can skip paying taxes on that why because without a government registered receipt
[14:36] There's no record of that sale Which is why so many so-called legitimate businesses love selling things to gringos because we don't give a damn about those receipts Especially on the gringo tourist trail because most people are on vacation and they don't give a damn about any receipts By the way The only time those receipts come in handy for us gringos and expats is if we have legit Latin businesses Then we can write off that stuff on our taxes oh and another reason to keep the receipt as if is for a high buck item like a TV or a Microwave for the guarantee or warranty you might get with a device by the way Believe me when I tell you that when expats live down here permanently Most of them that do have businesses are off the books and don't pay taxes either though some do and who are those expats doing? Work off the books well I'm not saying specifically but I can tell you most of them have internet businesses because their clients can be anywhere in the world and
[15:26] They collect our income by way of a bank account under the name of a SA corporation But you knew that already, right? So then you might ask is this illegal or not? Well, yes and no depends what country you're located in and how long you live there among other things since for example If you're in Latin America, you don't have to pay any taxes on outside income only income that comes from within that country However, that's not true for US citizens. They have to pay taxes on all outside income But they do get that hundred thousand dollars or so for an earned income tax exemption, too That is if you spend at least 330 days a year in a foreign country Now I have gone into great detail on that in past shows go back in the archives and check it out So bottom line my advice obey the tax laws, but down here in Latin America almost no one does
[16:17] Why because all politicians are scumbags in their corrupt and businesses are loath to support that crap with their hard-earned bucks And when you consider about eighty one percent of all indigenous workers are breaking the law, too Well, who are you or I to judge especially when the indigenous people are the poorest Latin Americans of all? They're on the bottom of the totem pole. So the government gives them virtually nothing So imagine asking one of those guys to pay his so-called fair share in taxes. What a joke, huh? Meanwhile at your local tien there store that's on the books There's a sign that says you're supposed to report him if he doesn't give you one of those facturas or receipts Talk about a social and economic disconnect, huh? So Latin governments will punish businesses who are on the books people
[17:05] They know they can extort money from yet They won't touch anybody in the informal gray economy that pay no taxes because they know they'll have a riot or even a revolution on their hands Remember those indigenous people have the numbers and they have machetes, too Okay, speaking of Latin American salaries. Here's something that almost made me want to vomit Gringo has always asked me about that fallback position either English teacher or call center working Here's an ad I'm looking at a full page ad by the way from a huge call center operation Located in various big cities in Central America now in their ad they show here a young beautiful trendy 20-something girl that looks completely gringa. No Latin features at all and Guess what it says in the title line. Do you have 85% English or more make up to?
[17:56] $600 a month and then in big letters on the bottom It says if you know English you can get an awesome salary Oh, no, they're using the a word if you listen to last week's show, it was all about the fact that normal Latins 98% of them anyway have never heard of or used the a word Except for gringos and rich helicopter school kids. I've never heard anyone use it down here But now I'm looking at it in the paper today in bold letters staring me in the face Where is the nearest vomitorium now? I'm forced to change the subject as you know A lot of people who come down to my latin insider seminars end up getting Residency in a latin country that's part of the purpose of their trip So weeks sometimes months ahead this seminar
[18:42] they'll ask for information and what they have to bring down to get their Residency started and like I've said in so many recent pen shows the US does not want its sheep to leave the barn So they're making it harder and harder for you to jump through the hoops to get the necessary Paperwork to start residency in a foreign country. I'm not kidding at all about this It's not that the states are making it harder little by little. They're making it incrementally harder For example, here's part of an email. I just got the other day. It says hey, Johnny Based on the stories from others who have successfully or unsuccessfully gained permanent residency in latin countries What typically happens as I understand it is first you get that quote good conduct report from your local sheriff And if all is clean you send it to the state authorization people, etc
[19:31] However, if they're checking with out-of-state sources, which I would assume they would to validate everything Isn't it true that they might often pull up one or two misdemeanors, etc from years past such as a DUI disorderly conduct or public urination or perhaps a restraining order as a result of a previous Romantic relationship gone sour seems like we all have a friend or relative who's been in that soup Thus if there are even minor misdemeanors or felony charges on one's good conduct report, which would make it a kind of a bad conduct report How might these things hinder your latin residency application? What have you heard about this stuff Johnny? Well to tell you the truth I've heard a lot of stories and most of them aren't good For example, I understand now if you have a DUI charge on your so-called good conduct report
[20:20] It will not pass muster in most latin countries, which would rule out getting your residency bottom line You have to pretty much have a clean record So how do you know you even have a clean record because a lot of that stuff? Misdemeanors and things that might have happened in those halcyon days when you were just a snot-nosed Shoplifting high school punk who got busted with two joints in his sock at a Ted Nugent concert now Who knows if that stuff might be on your record still? so if you have any doubts do go down to your local sheriff's department and ask Barney Fife for a copy of your good conduct report and If it's clean, you'll still see a disclaimer on it saying something like no evidence of a criminal record shows up in this state However, we can't vouch for other states and jurisdictions It's kind of a very general qualifier saying well, you know, you're okay in this state
[21:10] But who knows about the rest no matter Qualifier or not a county sheriff report like that is just fine Pass muster perfectly in some latin countries like for example Guatemala at least for now But that's bound to change in the future since every latin country is slowly But surely changing that requirement and making it a lot tougher asking for an FBI report and of course things are changing at the strong request of the US State Department because you know the US hands out free grants and Money to cooperating friendly third world nations, right? Like for example Panama and Paraguay who now require FBI reports In fact for Panama it says right on the counselor website for US police records Immigration now requires FBI records instead of just state or local police records for any residency visa
[22:02] Application from US citizens or residents etc. Etc. Oh and by the way, it also says on the Panama Consulate page get this Note that the immigration office will turn away applicants that are not dressed appropriately Men must wear long trousers a sleeve shirt and clothes toed shoes Wow, try saying that one rapid-fire closed toed shoes Then it says and women shall not have bare arms wear shorts flip-flops or sandals Which of course has long-term expats recognized as the standard clueless tourist gringo uniform So anyway, you might ask what's the difference between an FBI report and a sheriff's report? Well, the FBI is nationwide all states all districts and the local sheriff's report Just a person's state and county record if any now
[22:50] There are still a few Latin countries that accept a local sheriff's report and believe me There's a lot of flexibility there because I know of one particular case For example, where two restraining orders and some other misdemeanor stuff showed up on his Minnesota County sheriff's report So switching to plan B he visited his brother who lived in the adjacent state of Wisconsin Then he went down to the Madison, Wisconsin County courthouse Dragging his brother along for moral support and possible backup and later he found out he didn't need him there at all Then he asked for a police or good conduct report on himself from that County and since now he was Temporarily living at his brother's house or so. He said he got himself a nice clean police report How about that? So is that legal? Well, technically I guess because he was living at his brother's house
[23:40] Even if it was for only a couple of weeks, he said when he got his reports No one ever asked how long he'd been living there. So yes, he got lucky, but those options are not gonna last For example, listen to this recent case. It's an email that I'll paraphrase a bit. It starts dear Johnny My original intent for sending you this email was to explain the process of getting my Residency steps in Latin America, but wouldn't you know it someone threw a wrench into the works? Texas has now changed the process for obtaining a state-issued Criminal records report you can no longer go to the sheriff's department directly as in the past Now we have to go through a third-party company then register online
[24:26] schedule an appointment at a local operator have Fingerprints collected and then send all this information to the Texas DPS. That's Department of State for Verification and a report. So in fact, I've written down the links for folks in Texas who need to have these reports for residency Yes, it can be maddening. Just keep in mind as you maneuver your way through the many steps Eventually, you'll be allowed to schedule an appointment for the fingerprinting The good news is I've started the process and I'm working my way through the mess. So are you ready for this? Here's the process. Number one. You go to morpho trust USA website and then he gives the website number two Once there go to identity services tab identical services drop-down box then number three go to
[25:17] Ident to go.com then he gives the website then select your state go to the online Scheduling link number six the next page ask for the service code which you don't have So click on the don't know your service code hyperlink and now you'll get one Then it will redirect you to the go appointment scheduling website. He gives that website to number eight We are now finally on the ident go Texas registration page Application ID process then you select from a drop-down box reason for fingerprinting Number nine select a or option B type of fingers to be printed. I guess that would be human, right? Number ten it says do I know my ORI you select no there number 11 again?
[26:06] Asking for a reason of the request for a criminal history record check select other purpose personal review Number 12 fill in your personal information number 13 They will then bring up a location for you to search an office in your area that offers the fingerprinting services click on schedule Number 14 go to the established location at the assigned time and date number 15 pay 25 bucks Number 16 your information will then be sent to the DPS That's Department of Public Safety in Austin, Texas Then he says in caps do not at any time hit the return to start or back button Because it'll return you to the beginning and you'll start over. Hope this information was helpful. Cheers, Johnny
[26:52] Okay, so I guess he forgot to list number 17. It's optional which is take a cyanide pill Okay, don't just see what's happening here before you just went to your sheriff's department in 20 minutes You were finished and now well you see what it's turned into. Okay, we're getting towards the end now So let me remind you again go to www dot the new expat calm for all that great Information and those blogs coming from John Galt himself and of course I'm on the site too and don't forget along with this show you can follow along with the visuals on my YouTube channel Just go to YouTube and type in expat files and don't forget to subscribe. It's free 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
[27:42] Email me the expat files at gmail.com And if you want me to help you sort out your own Latin American plans schedule a one-on-one consult with me Just send an email and let me know at the expat files at gmail.com. No spamos