#659 – The Expat Files: Business Risks, Manufacturing Realities, and the Tuk-Tuk Dilemma

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 All right Let's talk about one of the most popular points of discussion for all expats down here in Latin America or Gonna bees and wannabes that is doing business once you get down now today I'm gonna talk about two very profitable almost no-brainer businesses that you could do down here and make a lot of money

[00:49] But I wouldn't recommend them sounds crazy right, but it's true But I say don't do it even though both of these businesses are easy to get into and very cheap for a startup In fact, you could get started in each one of these businesses for less than five grand And yes, they're both totally legal and with tremendous profit margins Even so I can't say I recommend them that is unless you're strictly about making money and that's it now I talk about the fact that when you get boots on the ground down here all kinds of business ideas start popping in your head Practically from day one. So what about the two businesses? I'm talking about right now. Do they qualify? Well one kind of qualifies and the other one well You have to be down here a long time before you stumble on that one or the opportunity stares you're right in the face

[01:35] So why am I bringing this up if I don't recommend either one of them? Well, because we're talking about the good the bad the ugly and the great here in Latin America and today's lesson There's always a catch to easy money and things aren't always what they seem now many years ago when I first got down here It was well before the internet and therefore there weren't no IT based businesses at all naturally So back then any kind of business a gringo or expat would get into it have to be brick-and-mortar Or at least you have to have some kind of workspace or office and nowadays Whatever business you get into you have some kind of internet presence a website probably Facebook and Twitter Facebook you longtime listeners. No, I could give a suck about that Anyway to do business anywhere these days

[02:21] You'll need at bare bones minimum an email address a bank account and most likely a PayPal account, too Yes, PayPal the company Everyone loves to hate who hasn't had a problem with them Don't get me started on that which is why I highly recommend if you have a business you should accept Bitcoin Oh and you longtime listeners probably remember that I recommended Bitcoin when it was under a hundred bucks I'll bet over the last couple of years. I've mentioned Bitcoin on the show at least 20 times I mentioned over and over that you just might want to have some of it and today. It's hovering at around 1700 bucks, you know a lot of people tell me Johnny this thing's going nowhere. It's not part of the system It's not backed by anything like anybody's fiat money in the world is they said it was a joke

[03:10] They said it was foolish. They were saying all this when it was around a hundred All I can say is I'm not gonna say I told you so. Well talk about the one that got away But did it really get away? I just spoke to a Bitcoin genius and I have only used that word twice in my life about people I know he says an upside of five to ten thousand is quite reasonable Hey, you know just passing that information on to you Remember he's the guy that told me to get in at eleven and I didn't and I waited Look, it's not like you had to drop 10 20 or 50 grand at one crack like a franchise fee You could buy it one or a hundred or a fraction of one, but let's not rub it in Anyway on a similar subject the other day guess what I was talking to

[03:57] Gringa expat she told me that she used to listen to her mother and father talk about the one that got away She was from Wisconsin remembered her mom and dad had a chance to buy into a business back in 1960 called McDonald's She said back then the cost of a franchise was around 12,000 bucks about a hundred grand in today's funny money Well for whatever reason they decided not to do it for them That was the one that got away and for this young gringa lady Bitcoin was the one that got away because she says she has a nerdy computer geek girlfriend Who's been talking about it trying to get her to buy in since it was 40 and she never did But then again, maybe it isn't the one that got away, right? Oh and I should mention that a McDonald's franchise today costs between a million and two point two million bucks

[04:46] And I highly recommend you see that new movie. That's out. It's called the founder story of Ray Kroc Played by Michael Keaton. He's one, you know that turned McDonald's into the pathetic monster it is today You know the guy was such a jerk He was always at war and fighting with his own partners the McDonald's brothers who created the whole concept Turns out through the whole movie. You're actually rooting for the McDonald's brothers Even though they're pretty much creators of the fast food junk food jungle that set the norms for Obesifying the planet yet in the movie you're actually rooting for them as if they were the underdogs Hmm, which is quite a feat, huh? So do see it. You won't regret it, but where were we? Oh, yeah

[05:31] Right now I'd say about a third of expats who have businesses have virtual businesses on the net Some offering services, of course, but others selling a physical product like orchids designer coffee leather goods You name it? Well, the beauty of it is that someone else usually the local Latin or indigenous producers will warehouse store it inventory I even ship it for you so in many cases you can run your business from your computer anywhere because it's other people with their facilities who are doing your manufacturing storage inventory Packaging and even shipping you see once you've had boots on the ground a while and you find a product or products You know will sell in the first world or elsewhere You just make a deal with whos ever producing it for the local market. Of course You'll add your own first world touches details and quality control. In other words in so many cases

[06:21] I've seen you're strictly marketing and sales and outside contractors are Manufacturing and assembling and doing everything else you'd be amazed how well that system works here in Latin America and why it works so well or works at all is because the Average person down here makes between 250 and 350 bucks a month and oftentimes out in the boonies much less than that Which is why it's almost impossible to transfer the manufacturing and assembly process to anywhere up in the first world The numbers would never work why because automatically you're be paying first world rents first world salaries Along with insurance and benefit packages and all that that just don't exist down here in Latin America And you know It's a microcosm of the problem that the US has right now in general the manufacturing that's left

[07:08] The US will never come back no matter what Trump or anyone else promises again because the numbers just won't work I mean really when the Chinese get what's it one or two bucks an hour at most to make iPhones and under Trump that work is supposed to come back to the states Come on, how would you feel about paying double what you're paying now for all your Apple products? and of course one of the biggest industries in the world is the automotive industry and guess what right now South Korea a Supposedly first world country exports more cars than any other country of its size average auto workers salary there $5.60 an hour with benefits around 10 bucks an hour That's less than what waiters and waitresses with liberal arts masters degrees make at Starbucks

[07:55] So then what's a u.s. Auto worker entry-level wage? 16 bucks an hour with benefits over 30 bucks an hour. Come on If anybody really believes big manufacturing is gonna come back to the US when in the rest of the world Skilled laborers are gladly willing to take between 2 and 10 bucks an hour who's drinking the Kool-Aid now, by the way for cars made in the US 25% of the cost is labor Which means a $20,000 car has five grand in labor built into it and in South Korea You know where they make Kia Hyun Do you and some others labor costs around 10% so a $20,000 car They're just two grand in labor, which means for an equivalent car They could drop their price by three grand and not even feel it and talk about China

[08:44] They're coming on strong with their automotive industry Experts are predicting their cars will be just as good as South Korean cars and Japanese cars and u.s Cars within five years following the same trend as those Korean companies who started out Exporting cars to the states in the 90s and Americans didn't quite trust them Their quality control sucked but they were cheap So some did sell it took about 10 years for them to solve their growing pains and technical problems But now they're winning awards the same pattern repeats as Chinese cars enter the stateside market People don't quite trust them, but they're much cheaper. They've got quality control problems They're not winning any awards yet and the critics are bashing them But they are selling as did Japanese cars like Toyota Honda and Nissan

[09:32] Back in the 70s and the 80s when they were considered pretty much laughable little toys But no one would ever say that about a Honda Mazda or Toyota today would they so bottom line Chinese cars are soon to be world-class quality like Japanese and Korean cars now and their labor costs between four and five Percent of the cars value. That means when the u.s. Makes a car for 20,000 bucks The Chinese can make that same car for sixteen thousand bucks. Actually analysts are saying more like 12,000 bucks because the cost of the cars raw materials at the source in China are so much cheaper and then there's India they'll be the next big manufacturing machine They got the talent and now you see their cars and trucks appearing everywhere

[10:18] And of course, they've flooded the world with those disgustingly annoying tuk-tuk's So with all that in mind only an uninformed idiot ie Politician could ever think that the u.s. Could possibly return to his former manufacturing glory You know those purulent carbuckles they need to read a book called engineering economics But they won't not enough pictures too many graphs and figures, but they're not big bottom hourglass figures Oh, by the way, speaking of cars in today's breaking news coming out of Argentina The headline says former vice president of Archigena Armando Bodo will stand trial today during which he will become the first former vice president to testify in Argentina's history he's being accused of falsifying the documents of cars

[11:07] He purchased falsifying names addresses and engine VIN numbers Linked to the Ministry of Economy's irregular purchase of 19 luxury cars Many of which he ultimately took possession of it says here They found false signatures and street addresses that don't actually exist as well as false DP eyes those are national identity documents In fact, one of them has an address that has no house or apartment, but it's just a sand dune on the beach Yes politics the world over draws out the sociopaths and the maggots Nope, there is no cure for the brain disease They have but there is a kind of a remedy term limits two terms one term in office and one term in prison

[11:54] I'll vote for that. How about you though? I digress again, but just a little point being Gringo's and expats down here doing their plan B who have businesses well about a third of them are strictly IT businesses with no inventory or Manufacturing at all and the rest of mix of IT and brick-and-mortar mostly brick-and-mortar Oh, and I should throw in the fact that about half of all Gringo's and expats I know eventually have some kind of business here Yep, even the ones that say they're fully retired and they're never gonna work again They say their plans are just to relax take it easy sit by the beach and suck on umbrella drinks Yep, that's what many of them say when they first get down here then talk to him a year later And they've changed their tune suddenly they're doing something that makes money

[12:42] They're in some kind of business not necessarily because they have to it's just that they've found a niche or two Identify it at some opportunity. They want to stay busy. So why not make a few bucks get Sally's cologne is lamp it is Bitcoin Or pesos at the same time, you know what most expats except some of them coming off government jobs That's in their makeup though A lot of them when they first get down will deny ever wanting to get back in the game You know, I could talk all day about having all that extra time on your hands You know, you got a cleaning lady maintenance guy, whatever imagine never having to do laundry dishes house cleaning or gardening again Extra time on your hands to sit around and do nothing. What a concept, huh? I guess it's that Contradictory thing about human nature Especially since every one of us has said probably countless times man

[13:30] I wish there were more hours in the day that way we'd have time to do even more and work longer and harder, huh? And when you occasionally hear about the odd person who can get by on two three or four hours of sleep a night At first you wonder how could that be then comes that tinge of envy? We all know people who said they just dream someday of doing nothing But the thing is gringles and expats who end up down here in Latin America They say that while they're still up in the States and on their treadmills But you see they're almost always the motivated Let's do it creative thinking types that end up coming down and doing their plan B And they're the same people that talk about needing more leisure invocation time and when they get it Well, it works for a little while to recharge the batteries Unfortunately, it's very difficult to change the speed of your internal motor as you probably know already creative thinking types

[14:21] Always need something to do their minds always active. Yep They have to do something and if it's not constructive it could be destructive Think not then you ought to head down to Costa Rica and check out all those case a day beer drinking so-called retired gringos Yep, even gringos who make it down to Latin America for vacation. I see it all the time They're sitting at the beach reading books paper or Kindle and plugging away at their devices So many of them are still tied to their offices up in the States and making deals that said Here's what I've observed about Latins in that situation when I'm at the beach or a beach resort And there are a lot of people laying around sucking up the Sun and some drinks, too I almost never see a Latin person reading a book now in the last few weeks

[15:07] I've been to a few busy Latin Beach resorts and in that time after seeing hundreds of people just laying around Catching some Sun I only observed now get this to Latin people Reading books and one of them happen to be a law student from Medellin, Colombia Doing her homework and remember we're talking about upscale Latins ones that are able to afford to go to resort That would be the top three to five percent of the population supposedly the high-end and the educated well high-end Yes educated know and digressing a bit more I have to say that long-term expats and gringos Sometimes makes the comment that it's very difficult to find a Latin person. They can have a deep and profound

[15:54] Conversation with which is why expat Eddie always says if you're an introverted Stateside American or if you have any kind of inferiority complex Latin America will cure you of all that now Eddie, you know is a very successful entrepreneur many many restaurants and Franchised out he's a self-depreciating guy describes himself as not brilliant not even smart But just average practical and a guy who writes things down He's had a lot of Latin employees over the years and he maintains The number one bad habit that Latins have that will always keep them from ever approaching quote first world standards Is that they do not write things down? They don't make lists

[16:41] They don't carry a pen or a pad or even a bar napkin to write on he says He's driven with many upscale Latins in their own cars, and they've got all kinds of other useless junk and garbage But you'd think they'd have a pen one that works Funny thing Eddie says they write fantastic resumes works of art sometimes He means of course Latin supplying for his supervisory or management jobs ones that have had some college in fact Eddie swears They must have a mandatory resume course at every university or how else could they crank out those things so beautifully done bottom line He says that's one thing they excel at although you can never check their references her past employment histories in Latin America That's almost impossible In fact Eddie says more than once he's looked a candidate dead in the eye and said man

[17:30] If you're half as good as this resume, you can have my job and I'll work for you Anyway, Eddie says the very first thing he teaches his supervisors and managers Is that they must carry a pad with a pen that works and they must take notes, so do they get to point well? They do in the moment, but then it fades away again He says so you just have to keep pressing it But I did start off this segment talking about two great businesses to get into that I would never recommend for gringos and expats hmm sounds crazy Yeah, and again the only way to plan a business here in Latin America is to get some boots on the ground You can't do it from up there in Toronto or Cleveland Well you can but most people who do without the boots on the ground part misfire badly Make a lot of mistakes lick their wounds and move on and speaking of boots on the ground

[18:18] I got to get this plug in there You've got about two more weeks as this shows going out on May 14 To sign up and get the early bird discount for my July 2017 expat insider seminar Being held in and around Guatemala again and 90% of the time will be so far off the gringo tours trail The only first world people we might run into would be backpackers and do-gooders Go to www.thenewexpet.com and click on Johnny's seminar link and while you're there check out the famous John Galt pre-and-post seminar trips And I'll tell you if you're looking for business ideas you just have to go on those trips Also, you heard me say it takes about a month to get your paperwork together up in the states To apply for permanent or temporary residency in Guatemala if you're planning on killing two birds with one stone

[19:06] So don't wait till the last minute sign up before June 1st That'll give you a little over a month to get your paperwork together if you're planning on going for residency a very good idea Especially since those rules are changing all the time and by next year guaranteed There'll be more hoops to jump through not just in Guatemala But in all Latin countries and finally if you just can't get boots on the ground right now Your next best bet is to take my expat essentials course just go to www.expatplanb.com and be sure to put the www in there because I've been told that sometimes if you don't put it in it doesn't like to connect once you're there You'll get three free videos. Yep I said videos check it out and find out how to get all your ducks lined up for your own plan beat and finally

[19:54] Go to the new expat.com website and download my plan B Consultation questionnaire the one I use when I do phone and Skype consultations with people It'll give you a nice set of guidelines to follow if you're thinking about Discussing different aspects of your own plan B with me on a phone consult So download it and have a look at the new expat.com website Now, you know, I've mentioned tuk-tucks before they're one of the four big things India's noted for right behind call centers curry and the Karma Sutra Now if you travel the world much you'd think they've penetrated everywhere Hmm, I'm talking about tuk-tucks now Alright, if you get any kind of boots on the ground out in the boonies here in Latin America

[20:40] You'll know that when you spot a tuk-tuk way in the middle of nowhere There's got to be a town within three to five kilometers Now if you have a lot of boots on the ground You'll notice there are a lot of small and medium sized towns that do not have tuk-tucks at all The question is why some towns and not others So then who notices those things and who even cares? Well Gringo's looking for business opportunities, of course every once in a while some Recently arrived expats with some boots on the ground. Well, call me up. Send me an email whatever and say. Hey Johnny I've located a couple of towns that don't have tuk-tucks and could surely support a fleet Hmm. Does that mean there's a niche? Is it a good business? Can I make some money? Yep?

[21:26] It's million question time for Johnny, which is why I do all those phone consultations, by the way Well, first of all, if you're Spanish sucks, you're not gonna find out that pertinent information on your own And you know coincidentally I actually did all the research on doing the tuk-tuk thing myself and some years ago I noticed the same thing. There are many many little towns that don't have tuk-tucks So I found out where to buy the things where to get parts get them maintained Got my friend leave Latin lawyer involved to figure out the permits you'd need and man What a business listen to this the way it works out best You buy the tuk-tucks and you rent them out by the day to local drivers They supply the gas and those things get around 70 miles to the gallon and you supply the maintenance which means you just do a

[22:15] Contract or some kind of deal with a local motorcycle mechanic you set up the routes pay the licenses cheap as dirt You put out the word with the locals that you're looking for tuk-tuk drivers And they'll be standing at your door ten deep the next day And here's the deal you buy a brand new tuk-tuk for let's say 4,000 US dollars and you read it out the driver pays you normally around 15 bucks a day I figured a tuk-tuk would be in service about 300 days a year So that means for just one tuk-tuk you'll theoretically make around 4500 bucks a year then you subtract let's say $500 a year in maintenance that means your tuk-tucks paid for in one year a hundred percent return on your investment Simply amazing a license to steal who in the world gets a return like that on a legal business

[23:04] So what could go wrong well you do a test first buy a few tuk-tucks get the routes going all right So some years ago I investigated all that did the numbers and at the last minute I did not go through with it And since then about every six months or so some gringo gets a hold of me has the bright idea of doing exactly the same Thing and then I explained to him what I just told you saving the best for last Which is something I found out from sending my gardener slash maintenance guy out to personally get the scoop from tuk-tuk drivers himself Turns out with practically every tuk-tuk business There's extortion even in the nicest cleanest little towns in barrios where people are tough on crime and sometimes Guy will beat up his kid in front of everyone in the town square just because he stole some candy at the local tien de

[23:55] Well, it doesn't matter in the tuk-tuk business Extortion is everywhere and it works because the tuk-tuk drivers pick up everyone and a bad guy that wants to extort Will jump in a tuk-tuk tell the driver he's got to be 25 or 50 bucks a month Or bad things will happen to him his family or the tuk-tuk The bad guys live somewhere in the local area right and so does the tuk-tuk driver in his family And that means every time you see one of those smelly noisy tuk-tuk The drivers getting extorted for 25 to 50 bucks a month and I understand in Mexico it could be double that So there you have it a fantastic little business that'll produce up to a hundred percent return on your money One you don't have to manage yourself or keep close tabs on it all yet

[24:40] I don't recommend you even try to get into it sure you could do it. You're a gringo You could beat the pants off at any competition chances are you won't even have any competition You could be the tuk-tuk king But the sad fact is you don't want to be around guys that are being Extorted because the next line in that path leads right to you doesn't it and you know a couple of years ago I mentioned the tuk-tuk business, but apparently not enough listeners heard that show because still just last week two gringos Who've been down maybe seven or eight months now? They had this great idea they wanted to talk to me about so we met a little coffee shop They showed me a map of three far away little towns each had around 15,000 people. They said see this Johnny We just hired a lawyer and we're gonna bring tuk-tuk's to these three towns

[25:28] Yep, unlike any Latin American. I've ever seen they actually had a business plan at the numbers nicely calculated great presentation great Enthusiasm to ask them what their plan was when the extortions start coming They looked surprised and then I did a little news search on the internet in Spanish I quickly pulled up a few articles were tuk-tuk drivers had been extorted and shot for refusing to pay Now how would these two gringos have ever pulled up those articles? Since the only place you're ever gonna see that kind of news is on the Spanish language news sites So again great business on paper problematic in real life Oh and a lot of times, you know There'll be a small town of maybe three or four thousand people and another town of 15,000

[26:16] Maybe three to five kilometers away and the tuk-tuk's will work the little towns and they'll stream between both cities So there's a long stretch of boonies between these two towns And that's where the extortionists like to hang far enough out away from the action where they can do their dirty business without being seen by onlookers and Still it turns out when there are openings for tuk-tuk drivers There are lines of people waiting to get the job even though they know they're gonna get nicked by extortionists Well, just like mob extortionists in the restaurant business up in the States Drivers down here just figure it's a cost of doing business So they build it into their rate structure and pay up like a tax In fact exactly like a tax because isn't it a fact that taxes are exactly that?

[27:07] Governments extorting dope and if you don't pay up bad things will follow oops, we're getting towards the end now tune in next show and I'll tell you about a Fantastic business idea. It'll make you a ton of money. It's amazingly cheap to get in Tremendous profit margins. It's totally legal, but I don't recommend it for gringos or expats Tell you about that one next time This is the expat files living in Latin America If you want me to help you out with your own plan B Just schedule a one-on-one consult send me an email the expat files at gmail.com And if you want to learn how to move forward with your own plan B from right up there in the States go to www.xpatplanb.com and check out my three videos. See ya nos vemos