#564 – The Expat Files: Banking, Legal Risks, and Life in Panama and Costa Rica

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 wander 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 Banking that is opening foreign bank accounts is a topic I get all kinds of emails on especially now in the wake of the Panama Papers thing And I know a lot of you gringos and expats even you're gonna be some wannabes are thinking that you have to open a bank Account down here sooner or later because up in the states. Well, you know, you get negative interest rates

[00:49] They've got bail-ins so it's not really your money anymore if things hit the crapper and of course they will anyway You know, it's a bad idea to keep your money in a bank up in the state So you have to get it offshore. So then how do you do it? Who do you trust? Where do you even start? What banks are good ones? Where can you find an honest trustworthy lawyer? I know that seems incompatible in the same sentence, but believe it or not I know if you who can help you with that without charging gringo prices or gouging you because they see you're a dollar sign That said here's an example of one of those banking emails. I've been kidding. This one comes from mr. D He says Johnny enjoy your podcast very much. Thanks for such an entertaining diversion a couple of times a week Here's my question. I've been looking into this voting with my feet thing now I've spoken with an attorney in Panama recommended by some friends in the sovereign man group

[01:38] And I was sort of shocked at the three thousand dollar price tag Just to help me open a bank account down there with by the way No guarantee that an account will actually be open I'd like to open an account transfer a small amount of money on a regular basis and eventually open up a company Can you recommend a reputable attorney who won't view me as a gringo ATM? I'd like to have a lawyer help me with banking permanent residency and potential formation of a company or an agricultural concern like fruit farms Etc. Thanks again. Johnny. Mr. D. Oh Mr. D. If you've been listening to my program for any length of time, you'll know I'd never recommended Panama ever I've been doing this show going on six years now, and I've never encouraged people to go there except on vacation

[02:26] It's a great vacation place. I've been there a lot of times myself, but I'll tell you this every time I get on a plane To leave the place I'm sitting next to someone who just can't wait to get the hell out or someone who's just Sold their property for four times what they paid for it thanking their lucky stars some bigger fool stepped in and anteed up the dough So again, let me explain a few things about Panama. It's gringo It's on the tourist trail and yes, they look at you as a dollar sign I mean, it's a financial capital of Latin America with over a hundred banks in Panama City alone Not to mention more casinos and nightclubs per capita than any other place in Latin America, too Have you noticed the Panama City skyline looks just about like mini Miami now? Owen you will get hit hard if you try to open a bank account or get residency in Panama

[03:14] In fact, I saw a website recently a lawyer's website that charges 8,000 US dollars for you to get your residency started and I've seen other websites lawyer websites That say they'll charge from three to eight thousand bucks, too Of course if you're in Panama meaning living there or staying there for many extended months and speak Spanish You could do it yourself for under a grand and you know, I'm really surprised at sovereign men I read their stuff quite a bit and I like it but Panama. Why did they keep pushing Panama? I mean look at international living they push Panama all the time, too I guess if you want hot you want to be with gringos and you want to pay gringo prices by all means Relocate to Panama. Oh and do open up that bank account there, too and be right in the cross hairs of the feds and the IRS and every other alphabet agency and

[04:01] These days anyway, you can't be any higher profile than to have a bank account or a SA corporation in Panama Oh and by the way talking about banks, you know You have to let your lawyer select your bank for you because there are just so many banks down here There's no way a gringo even one who speaks very good Spanish is ever gonna figure out if a bank strong stable can take a few Hits and stand the test of time more importantly has good reserves isn't loaded down with bad loans and derivatives and such and here's some I bet you haven't heard before now that worldwide shipping and the container freight business has hit the skids Pun intended turns out half filled what they call zombie ships down here is sending marine freight into the worst crisis in living memory Meanwhile Panama banks are holding a huge amount of shipping container debt because well

[04:50] That's the number one source of income for the country now because of the Panama Canal and the associated shipping Panama banks have always been a little looser and freer with those kind of That said nobody really knows or they're just not saying how many shipping companies have defaulted on those loans All that is known is that Panama banks are floating Titanic amounts of red ink and they won't pull the plug. Yeah. Yeah triple pun intended Instead the banks are quietly accepting that they won't have any debt service in the foreseeable future Instead they're forced to see if the ship owners and container companies will survive Meanwhile collapsing freight and shipping prices are blowing holes in Panama Bank balance sheets But we'll never know which banks because they're not saying and get this since Panama's got their own set of banking laws

[05:38] They don't have to open their mouths about anything So as it stands right now Panama is looking at a real estate crisis The bubbles popping and we're seeing just the tip of the iceberg in the banking slash shipping crisis pun intended again Oh Johnny, shut up So you still want to move to Panama or bank there Well, that's cool If you're crazy enough to think the worldwide economy and thus the shipping businesses is gonna get better not worse just remember Panama is not self-sufficient agriculturally or Technologically, they import practically everything and have almost no manufacturing base either till now They haven't suffered at all because all that stuff comes through the Panama Canal duty-free However, when the next big worldwide economic panic hits and it will soon Panama won't even be able to feed its own population from its own resources now countries like Ecuador and Bolivia and Guatemala Honduras

[06:29] Etc. They not only are food exporters, but they have somewhat of a manufacturing base, too That said is Panama still your plan B. Good luck with that So then if opening a foreign Latin bank account is in your plan B and it should be how do you find that thing? Again, you should let your lawyer guide you on that one You'll certainly end up using one of his banks where he's a well-known customer and I'll just betcha He's using banks that have been around 35 to 50 years even more Yep There are banks down here that have been around a year or two and some that have been around 25 35 50 years and more So what's that say by the way down here new banks are popping up all the time too And you should avoid those like the plague especially ones that have only been around a couple of years Which means no real track record for sure. In fact right this second

[07:17] I'm looking at a full-page ad in a big Latin American newspaper that says congratulations Banco Azteca It's your ninth year anniversary Now that's certainly good news for the bank But as for you and me it should be a red flag personally I want to use a bank that's been around a couple of generations Which means it's weathered a few storms which brings us back to Panama Panama Panama It's all over the news and it ain't good, huh? Which is why I don't get why these outfits like sovereign man International living even Doug Casey have all this stuff about opening Panama bank accounts in their blogs newsletters and archives Not to mention Panama real estate, which is in a huge bubble and starting to bust right now In fact, I just read of a second round of defaults on some bond issues for some big property developments. Is that good?

[08:03] No way and here's something else. You didn't know the Panama Canal is facing 3.5 billion dollars. That's with a B in lawsuits based on claims made by Subcontractors in the recent canal expansion project some of these new sections By the way are cracking and deteriorating and leaking just months after they were completed and put in service And now the Panama Canal Authority is suing the Spanish contractor for hundreds of millions So how is this gonna end badly? I'm sure anyway, as I told mr. D in response to his earlier email That's why I recommend you come down to my July 2016 expat insider seminar There will hook you up with a solid network of people that can get you through all these hurdles and processes

[08:48] In fact, you'll meet a lawyer or two who will help you open up a bank account at the most solid of banks for around Two to three hundred bucks a far cry from that three grand Panama lawyers want and they won't even guarantee they can open one So how's it possible that lawyers in Guatemala can charge a tenth of what the Panama lawyers get? Well for one thing it's way off the gringo tourist trail so there's not enough of us gringos down here to gouge and I'll tell you if you're in or near a big city off the gringo tourist trail here in Latin America and you walk into any lawyers office and ask how many gringo clients they have a Bet the numbers between zero and the low single digits So when off the gringo tourist trail you could sit in your lawyers office all day and never see another gringo come through God, what a relief, huh? However, when you're in Panama Costa Rica most of Mexico, etc

[09:36] If you pop into a lawyer's office there, you're bound to see a few gringos moseying in and out So as much as it might be old home week when you run into some gringos in your lawyer's office Generally, it's not a good sign. Now. The fact is when Latin professionals start accumulating gringo clients That's when those gringo prices kick in so then how and why does that happen? Well, it's like this as they accumulate gringo clients So do other lawyers in the area and that only happens when a place is starting to be or already on the gringo tourists Trail so then what happens is this lawyers talk to other lawyers They talk about their gringo clients and what they charge for this and that and soon the prices rise to what the traffic will bear It's a kind of price-fixing and they know gringos have money and that they'll pay Meanwhile, there are other Latin clients will slowly dwindle away because they're not gonna pay gringo prices

[10:26] They'll go back to Latin lawyers out in the boonies if they have to far away from the gringo tourist areas where things are Becoming much pricier now suppose you come down to my expat insider seminar and I hook you up with my seminar lawyer and you say Wait a minute Johnny. He's got gringo clients because you're referring him to us and obviously he's taking care of gringo situations So why aren't his prices gringo prices? Why isn't he gouging gringos? Wouldn't that seem logical? Well, that just might happen if all the other lawyers in the area had gringo clients, too But you see we're way off the gringo tourist trail So he's got no other lawyers to commingle with that is to discuss gringo clients and prices and all that The fact is there can be no price fixing if there is no one to fix prices with and you got to know I'd never refer Lawyers to my listeners who would charge gringo prices. That's against my expat religion and personal Constitution

[11:16] In fact when I do hear of gringos getting charged excessively I'll call them on it right away Now if you don't believe me all you have to do when you're off the gringo tourist trail That is is walk into any old lawyer's office. You see and ask the question How much will you charge me to open up an SA corporation for example? Well, he's gonna say 800 or 1,000 or 1,500 in that ballpark Which is what the next lawyer in the strip mall down the street or the big office building will tell you However, all you have to do is drive to what they might call a tourist town and walk into a lawyer's office in that City and you'll realize soon enough prices are high double even triple what you'll pay in the big city off the gringo tourist trail And it's true. Just like real estate if you're 30 minutes to an hour away from a tourist area Prices can drop drastically And if you don't think these big outfits like sovereign man and international living aren't sending you to their

[12:06] Specific little group of lawyers where they get a cut and those are the going prices down here Well, you ain't had boots on the ground. By the way, I've got more degrees than an anal thermometer But still I'm from Chicago. So I like to keep that word ain't alive That is outside the ghetto and the white trash community But I digress boy did I digress anyway about those international living and sovereign man lawyer referrals nothing wrong with that, right? I mean, hey, most likely they're referrals you can trust certainly a thousand percent better than throwing a dart at the yellow pages Yep, they still have yellow pages down here, but they are getting smaller and smaller now get this at last count I was told that international living has over 200 employees and sovereign man. Well, they've got some dozens of employees So, how do you think they pay their staffs and all that overhead by selling newspapers and Costa Rica and Panama reports?

[12:57] I doubt it. Well when they do referrals, everybody gets a cut along the way nothing wrong or illegal about that However, now let's take me Johnny Mueller. You know how many employees I have Zero, you know how big a staff I have zero Except when I do my seminars a couple times a year Then I have about five full-time people working for me for exactly one week Then after the seminar, I'm back to having no employees again So there's not a long line or any line at all of people waiting to get their cut once I do a referral In fact for all the people you meet when you come down to the seminar I get no referral fees or anything at all from these people Even if you end up bonding becoming best friends and doing business with them I've got no real estate business or land or business deals. I'm pushing you'll see that when you get down here

[13:45] now, let's say you come down and hook up with one of the expat concierge ladies because you need to find an apartment or you're Looking for land or out to buy a car Whatever after she finds you the best deal within your budget. Guess who gets a piece of that? Nobody, I don't take a finder's fee or a commission. Neither does the concierge lady She just gets a daily fee for taking you around But she or I don't take that 10 or 15 percent or the first month's ranch or whatever that remax or century 21 Or some other real estate service will take as their commission So again, you've got some very good reasons to be off the gringo tourist trail And when mr. D sends me an email that says lawyers in Panama will charge 3 grand to open a bank account I keep thinking that people just aren't listening or they feel they just have to be around gringos

[14:33] Well, that's alright, but then you're gonna pay now Do remember things are changing fast and throughout Latin America and the world now banks are not opening up new accounts for gringos However, you're honest trusted Latin lawyer who you'll have to find right? Well, he can walk you down to a bank that he already has an account in which almost always means it's a good strong bank Because he knows the weak from the strong. He'll help you fill out the paperwork and then he'll do the most important thing of all He'll be what they call a fia door or reference sort of an inactive Co-signer on your account with no power whatsoever So you will need a local Latin professional as your reference or fia door Now gringo is always asked does that mean he's a co-signer or has control of my account. Well, no, oh And by the way, here is another roadblock

[15:20] You'll never be able to surmount unless you have a fia door when you open a bank account They're gonna ask you for an address in the country And you won't have that if you're just visiting or coming in once in a while though You might if you're staying for a long time or rent or by a place However, most people who come down want a bank account right away and they haven't got a permanent address They're staying at a hotel. So your lawyer will provide that it'll be the address of his office or his home Or maybe he has a rental somewhere, but that's not all you'll have to supply a recent utility bill corresponding to that address So as you can see, it's almost impossible to do that on your own So even if you could turn the clock back a couple years when banks were accepting gringo clients You still have to have a permanent address and a corresponding utility bill now contrary to what so many gringos think you don't have

[16:07] To have your name on that utility bill at all The bank doesn't care as long as the utility bill corresponds to the address and by the way You have to go through the same rigmarole if you sign up for an internet contract or for that matter a cable TV contract You'll need an address and the corresponding utility bill not to mention you'll need that fia door, too And that's one of the reasons your lawyer or one of the assistants at his office will accompany you to the bank or the phone Cable or internet company your expat concierge lady will do all that for you, too By the way, and of course it'll all be in Spanish by the way You don't have to come down to my expat insider seminar for me to hook you up with a good honest lawyer that can do these Things for you or with one of the expat concierge ladies for that matter But do note they will not be available when I'm running my seminars That's when they'll be with me and the rest of the attendees now get this when I was living on the tourist trail

[16:57] I did that for around two and a half years of my 26 years down here it took me a while to find out lawyers there charged deflated gringo prices and they'd gouge you to and just pretty much make up phantom Charges because they knew you didn't speak Spanish and gringos have a high degree of trust in Professionals so lawyers would take advantage of that price fixing on the very high side was the norm because lawyers all had gringo clients And they'd get together and simply inflate their fees and for the locals It seems there was another price schedule altogether about half of what they charge gringos or the locals seeing that the gringo Is got preference because well they always had money and paid on time, etc They'd simply switch lawyers in a part of town where there were no gringos or farther out in the boonies By the way, let me tell you a little story about when I was on the gringo tourist trail searching for lawyers now

[17:45] I mentioned in the show a long time ago I had two lawyers in Costa Rica one a straight honest guy who wrote poetry and taught at the university and another young slick Sleazebag lawyer because you see in the third world occasionally you have to pay bribes But they don't call them that what I mean is you simply have to grease some pumps sometimes to get things done And there are lawyers on the gringo tourist trail straight arrow lawyers who won't do that But they always know a lawyer who will so they'll work in conjunction with you one guy doing your paperwork all on the up-and-up Let's say you're buying a car or you're renting a place or buying a house or some land Whatever and if along the way he runs in some bumps and has to pay off some people Well, he might not do it, but will refer you to a lawyer who will Now my favorite scumbag lawyer in Costa Rica ended up

[18:32] I found out later ripping off a lot of gringo clients, so he didn't rip me off not really He'd nickel and dime me to death But he never truly ripped me off in a big way like he did others Why because I was a friend of his gringo wife before she married him now I think he would have ripped me off like the others But his gringo wife would have come down on him like a ton of bricks so lucky me huh now I'm not saying he didn't gouge me. I know later. He did that in fact I get a phone call every two or three months as my residency papers were in progress and he'd tell me about all the problems and delays in the immigration office and I'd have to kick in another Three or five hundred bucks to get my application to the top of the pile and all that crap And I did because I didn't know any better and my Spanish really suck and later I found out he did that with all his gringo clients whose paperwork was in process for this or that

[19:21] When he needed extra dough he'd phone everyone up and say they could get to the top of the pile if they slipped Them a couple of hundred bucks, and they all did yep clueless gringos all of us We all start out that way so here He was a young slick Latin lawyer a super gringo wannabe and one time we were at his house sitting in his den And he had a tiny fishing tackle box on his desk And I said ah so you fish huh and he laughed and he opened the box up and passed it to me and inside We're about a dozen or so ballpoint pens There were some regular cheap plastic ones and some nice expensive metal parkers in Mont Blancs And each one had a little piece of masking tape on it with a date, and I said what's this for? He said oh That's my and my dad's collection of contract pens in case we have to backdate or alter anything

[20:09] We can use the very same pen that we used when we wrote up the initial contract And I said really you got to be kidding he said no this is Costa Rica You know and with that he gave me his special snidely whiplash smile Now I forgot all about that little incident till just the other day when I was reading the book The Wolf of Wall Street You know the one in Scorsese made a movie about and DiCaprio played the lead Well in the book The Wolf of Wall Street talks about his mentor an old brilliant successful investor who knew all the ins and outs of Wall Street and all the SCC regulations and laws and he said in the book that he always kept his old pens from Contracts and documents in case he had to backdate or alter things later That was he said how the FBI caught people who backdated

[20:57] Documents through the ink in the pen if they ran it through a gas chromatograph They could tell if it was a different pen even if it was the same ink and model however if it was the very same pen So when I was reading that the other day struck me that this lawyer 20 years ago in Costa Rico was doing pretty much the same thing of course in a third world country like Costa Rica They'd never use a gas chromatograph to try to prove that a contract or a deed was altered Probably isn't a guy in the country that could maintain one of those things So like I said down here in Latin America lawyers come in many shades of gray For example a common payoff or a bribe just might get your paperwork whatever it is to the top of the pile Though maybe not you can never be sure However, when you're going for residency or getting your building plans approved, whatever

[21:44] What if your lawyer did say for two three or five hundred bucks he could get your paperwork to the top of the pile Now suppose he said by doing that he could cut your processing time by two three even four months Well in that case, of course, it's your call Now I can tell you about my own specific case concerning a bribe in Costa Rica I couldn't get a construction permit approved unless I paid off the zoning board And I think there were maybe 10 on that board and it cost me a grand So for a hundred bucks apiece, I got my plans approved Now, of course, I personally didn't hand out the bribes myself My lawyer called me and said we'll need a thousand bucks and he didn't hand out the bribes either He just called another lawyer and he did it now My lawyer did say that we could go to court and win that case Which would put the project back an estimated five months. He said that was the backup in court

[22:34] He said we could get to the top of the pile there too for probably five or six hundred bucks And we could have the case heard in about a month But then there might be a delay or someone might not show up and they'd reschedule it again So bottom line either grease the wheels or sit on your dead ass for months and months at a time waiting for a court date So the corruption payoff thing down here isn't so simple Because you see if I tell just the first part of that story that I had to pay off the zoning board to the tune Of a thousand bucks the average gringo who hasn't been down here and had boots on the ground might say Why that's illegal johnny if the zoning board rejected it. There's something wrong with the whole project Well, yes, that might be true up in the states or at least it might have been in the 70s and 80s Anyway in a gringo's mind i'm the bad guy for paying off the zoning board

[23:22] But when I tell them the rest of the story that the whole thing was about to pay off And that if I took it to court i'd win the case hands down However, doing that would delay my project five or six months That's when the new fresh clueless gringo gets the picture on how government corruption works down here So bottom line for many gringos and their business projects and such you just let your lawyer handle everything It's a case of ask me no questions and i'll tell you no lies Then if palms have to be greased, you might not even have to hear about it So again, am I advocating doing anything illegal? Well, i'm just telling you what it's like and what sometimes you have to go through to get things done down here Which reminds me of that best-selling book that came out a few years ago up in the states called three felonies a day Written by boston civil liberties lawyer harvey silvergate by the way. Have you met your felony quota today?

[24:12] Don't worry. You got time. You could fit one or two more in by midnight, but I digress as usual Okay. Now we have some strange but true latin news Here's an article right out of a big panama newspaper Now get this 95.3 percent of the rural population in latin america Still use firewood for cooking so it's not just the indigenous people out in the boonies who are cooking with wood It's pretty much all the latinos too or 95.3 percent of them. And here's some statistics. It says in mexico 158 million tons are burned a year in nicaragua Six million tons in panama eight million tons a year guatemala 16 million tons are consumed each year Honduras seven million tons in brazil

[25:00] 200 million tons and you wonder why the rainforest is disappearing by the way some do-gooder engineers up in the states recognize that problem Some 10 years ago or so and they've developed three or four different types of tiny little stoves that use get this One-fifth as much wood as just burning it the regular way like almost everyone does down here Now though there are a hundred thousand plus of these high efficiency little stoves in use down here now That's a tiny little fraction of the total population So then why aren't they in general use everywhere? Because they cost from 50 to 100 bucks For the very poor out in the boonies that could be a month's salary And by the way, these low-tech high efficiency wood burning stoves Are one of the few things that indigenous people will actually use forever and ever if you give it to them for free

[25:49] Now normally in the third world if you give poor folks things for free They'll end up as flower pots or weights to hold down the tin roof in a storm or even indoor outhouses Nope, don't need to dwell on that one too long after a while free stuff becomes almost anything But what it was intended for but indigenous people really do love these stoves because they only have to gather A fifth as much wood every day even more importantly. There's 80 less smoke in the house Now due to the constant fumes given off by burning wood in the house respiratory problems are endemic in families That said any of you died in the world do-gooders out there who want to get into a project that really works It is this efficient stove project In fact if you come down to one of my expat insider seminars

[26:35] We'll be going to a couple of places where you'll actually see these things in action Enough said about that except to say you can still sign up for my july 2016 expat insider seminar Just go to www.thenewexpat.com Click on johnny's 2016 seminar link to get the full info and sign up details And if you do come down you'll want to spend some extra days here with boots on the ground and get the whole layout Or as much as you can that's why I highly recommend you hook up with john gault And take one or both of his pre and post seminar trips that said i've been getting some emails from people asking me What's so special about those trips? Well, i'm just reporting on what john gault's previous trip attendees have been saying in fact even seasoned world travelers Have been telling me that john gault's trips are amazing and who can argue with that?

[27:22] Okay Now that we're at the end of the show i'd like to remind you once again That you can go to my youtube channel and see the slides and photos that go along with the show do 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 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 es vemos