Episode Summary
In this episode of The Expat Files, Johnny Mueller reflects on his recent travels through Spain and Latin America, discussing the differences between Spain and other Latin American countries. He critiques the notion that many Latin American countries are progressing toward first-world status, arguing that only a few countries like South Korea and Singapore have achieved this transition. Johnny also touches on the concept of 'third world' and 'fourth world' countries, emphasizing that Latin American countries are unlikely to ever become first-world. He concludes by promoting his upcoming expat seminar in Guatemala, highlighting the unique weather and cost of living in the Alti,plano region.
Johnny also discusses the social and economic dynamics of Latin America, focusing on the perception of certain groups as more European or North American, and how this leads to classism and racism. He highlights that while these groups may appear more privileged, they are not necessarily better at governing their countries. He critiques the economic instability of Argentina, noting its history of economic collapse and the challenges of doing business there. Johnny emphasizes the prevalence of credit and payment plans in Latin America, suggesting a cultural tendency towards financial irresponsibility.
The podcast segment also discusses the severe inflation in Argentina, highlighting how the official inflation rate has been manipulated by the government. It notes that everyday goods and services are 71% more expensive than they were at the start of 2016, and that the peso is in free fall, one of the worst performing currencies globally. The segment also covers the challenges of accessing cash, the rise of a black market for currency exchange, and the government's attempts to stabilize the economy through aggressive interest rate hikes, which have failed. Johnny adds a personal perspective, emphasizing the impact of inflation on daily life and the historical pattern of Argentina's economic crises, including the creation of new currencies. He also touches on the potential of cryptocurrencies like Bitcoin as a crisis currency, referencing a statement by Argentina's president.
Johnny Mueller discusses the economic crisis in Argentina, highlighting the role of cryptocurrencies like Bitcoin as potential crisis currencies. He critiques the government's austerity measures and the impact on sectors like bakeries and education. The segment includes a detailed account of a bread giveaway protest by bakers and a teacher strike, both of which are framed as responses to economic hardship and government policies. Johnny also touches on the political and union dynamics in Argentina, comparing them to historical and international contexts.
Finally, Johnny discusses the challenges of living in Latin America, particularly Argentina, highlighting the impact of powerful public labor unions, high inflation, and currency controls. He warns expats about the risks of these economic and political issues, suggesting that moving to remote areas like 'gulps gulch' might be a safer option. Johnny also shares insights on real estate costs and construction in the region, emphasizing the potential for cost-effective housing. Additionally, he addresses security concerns, noting that expats often fall victim to pickpocketing due to poor travel habits, such as carrying valuables in back pockets or using expensive backpacks. He advises expats to adopt a more inconspicuous appearance to avoid becoming targets.
Topics
Johnny's travel experiences in Europe and Latin America, The concept of first-world, third-world, and fourth-world countries, Critique of the idea that Latin American countries are progressing toward first-world status, Promotion of Johnny's upcoming expat seminar in Guatemala, The unique weather and cost of living in the Altiplano region, Social and economic dynamics in Latin America, Classism and racism in Latin America, Economic instability in Argentina, Credit and payment plans in Latin America, Inflation in Argentina, Economic instability, Currency devaluation
Chapters
00:00:00 Opening 00:01:31 The Impossibility of Latin American Countries Becoming First World 00:02:48 The Contrast Between Tourist Areas and the Rest of Latin America 00:04:17 Promotion of the Upcoming Expat Seminar in Guatemala 00:05:38 Perception of Privilege in Latin America 00:06:38 Economic Instability in Argentina 00:11:02 Credit and Payment Plans in Latin America 00:11:19 Introduction to Argentina's Inflation Crisis 00:11:26 Inflation in Argentina is off the charts 00:11:29 Government manipulation of inflation rates 00:11:37 Historical context of inflation in Argentina 00:11:38 Inflation rates in Argentina 00:11:41 Impact of inflation on daily life 00:11:44 Cost of living in Argentina 00:11:49 Government lies about inflation 00:17:57 The Time to Buy is When There's Blood in the Streets 00:18:02 A Bread Giveaway Protest in Argentina 00:22:36 Teacher Strike and Political Motivations 00:23:33 Introduction to the Challenges of Living in Latin America 00:23:57 The Triple Whammy: Inflation, Bankruptcy, and Currency Controls 00:24:21 Real Estate and Construction in Latin America 00:25:55 Security and Travel Safety for Expats
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 out to play and now as 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 I'm back in the saddle again after about a month of Trekking through Eastern and Western Europe as usual. I spent some time in Spain the Latin American mother country in Spanish Latinos call it La Casa Matrice Translation the parent and of course, we all know there's a great deal of difference between Spain
[00:50] Supposedly first world country and the rest of Latin America all of which are third world countries Though if you ask anyone from Chile Costa Rica or Argentina They'll tell you with their noses jacked up in there that they're not like the rest of Latin countries They're more like second world countries on the fast-track to becoming first world Which right away tells you that that person has an incomplete education because the definition of a second world country is a former Soviet Republic go ahead look it up. You'll see I'm right Oh, and by the way the definition of a fourth world country, that would be most African countries So it's true a country can transition from fourth world to third world as in the case of some of the oil rich Northern African countries But it's impossible for a third world country to transition to a second world country though in a very few cases like South Korea and Singapore
[01:39] They have actually made that jump to first world status. That means they've made the jump from third world to first world So why am I bringing this up? Well, sometimes we'll be sitting in a room with some people who are educated or slightly educated or think they're educated Latins that is and they'll tell you about how their country's been progressing in the last few years Especially with technology cell phones the internet and all that insisting that sooner or later their country will become first world That means they obviously don't know there's only been two cases in history Where third or fourth world countries have popped into first world status and I just mentioned them and none of them I might add were Latin countries I mean look at Puerto Rico It's had the best chance of all the scratching its way out of a third world hole being that it's a US Protectorate a US territory and Puerto Ricans have US passports and USA and bailouts and all that
[02:26] But still even before that unfortunate hurricane incident Most of the places there except in the tourist areas were completely third world and the government completely bankrupt But you knew that already, right? Anyway, like I said, it's pretty much an Impossibility that any of the 20 Latin American countries is ever gonna achieve first world status None have ever done so yet Of course every tourist area in Latin America looks completely first world until you get a couple blocks outside The Sun and fun and business and hotel districts then many of the neighborhoods start looking like Detroit Which begs the question will the US remain a first world country? Not likely if you're looking at the trends in fact recently I ran into a couple upscale gringos from Detroit These were people that never lived directly in the city. And you know what to a person they said Detroit is coming back
[03:16] Coming back from what? And you know just like practically all big Latin American cities They're either good the bad in the ugly areas and wealthy people congregate and upscale first world style subdivisions and neighborhoods So if you want you can completely isolate yourself from the bad sections of town And that's what a lot of people do and it's especially true in Latin America too if you move out to the suburbs of a big Latin City and you longtime listeners might recall that I spent a couple of Shows talking about moving to the suburbs of a big Latin City Talk about living the good life and that Latin prices too well as long as you stay clear of the tourist areas It's almost as if parts of Minnesota were airlifted to Latin America Imagine Minneapolis with mangoes and palm trees. I'm not kidding. You have to come down here and see it for yourself
[04:04] Yep, and you listeners were signing up for my July 2018 expat insider seminar You'll get a big taste of that You know a good healthy dose of the good the bad the ugly and the great Oh and speaking of the upcoming seminar Again, it'll be in and around Guatemala Central America smack dab in the middle of the Altiplano region You know where there's springtime weather all year long and you do not need heating or air conditioning Talk about tiny utility bills which people find hard to believe and till they actually Visit the Altiplano and see for themselves as opposed to what's typically on the minds of most first world people when they think of Central or South America. They're thinking hot and humid Just laying around a pool and surrounded by umbrella drinks weather true for the beach in coastal areas
[04:52] But the Altiplano you see is upwards of 4,000 feet Which tempers the weather dramatically and people coming to my July seminar will get the full effect By the way, you can still take advantage of the early bird discount prices I'll be running those through the end of May So you still have a couple of weeks to sign up and get in on the discounts For all the info and sign up details, just go to www.thenewxpat.com and click on Johnny's seminar link Now speaking of Latin American first world country wannabes, I'd be remiss if I didn't mention Argentina Now it turns out Argentina Chile and Costa Rica are the three Latin countries where you'll see the most obvious European mix of blood. In other words, you'll see an awful lot of people that don't look like stereotypical Latinos that means a bit taller lighter skin lighter hair and a lot fewer pure indigenous types
[05:44] And believe me the Argentines Chileans and Costa Ricans Really capitalized on that and thus think in a lot of ways They're a cut above all their Latin country neighbors In other words, they're a bit more racist and classist than the rest of Latin America and believe me if you're down here long enough You'll see it in action However, just because a good percentage of the population look European or North American does not mean they're any better at running their own countries In fact, they really suck at it, but look ism in classism prevails So when you see a person that looks almost gringo or European the other more stereotypical looking Latinos Instantly judge him or her as more upper-class even more intelligent and get this Isn't it funny if you happen to see a photo of any Latin American country Congress?
[06:30] Most of the people are European looking in other words All Latin country governments are racially skewed at the high end towards whiter taller people yet. They still Absolutely sucked at their jobs. Well, they don't suck at institutional corruption or personal financial enrichment Because you know for any politician worldwide, that's a prerequisite for the job, but I digress as usual Where were we? Oh, yeah, Argentina In fact, Argentina has a terrible record of destroying their own economy about every 10 or 15 years And those terrible ups and downs have been going on for almost a hundred years now And as far as recommending Argentina as a good place for expats to live work retire and or do business As far as doing business that would be fine If and only if you strictly worked on the internet and didn't have a brick-and-mortar place
[07:19] I've heard from many sources. It's a very difficult country to have a legitimate business in any other way And why is that? Well a lot of reasons Number one the argentine government wants to be first world in every way Which means they have an extremely bloated government and it's not the typical bloated sit on your fat ass government You see in most other latin countries. They like columbia chili and costa rica Really try to enforce those laws, especially when it comes to collecting tax money So then what else stifles business there? Well, they're much more unionized than other latin countries and since their government loves to print money sound familiar The inflation rate for the countries have been running around 25 percent for the last few years Meaning if your income is in us dollars you're on top of the world there However, since the argentine government and banks know that they put heavy restrictions on us dollars
[08:10] So don't think it's easy to move down to argentina and just have us dollars transferred down there Oh, you can get a us bank account and have dollars transferred there Of course The thing is trying to get your hands on your own dollars If you can and convert them over to the local funny money peso You will live like a king or a queen at least for the time being which is why there's such a huge Us dollar black market in argentina. In fact, here's some excerpts from an article you just have to hear Came out about a week ago. Of course, i'll throw in my two cents and comments along the way whether they're necessary or not But first let me preface it by saying that many times i've mentioned that latin america is now Addicted to credit and payment plans. In fact, I remember in one show I told you about looking into a window of a furniture store where they had a chair
[08:56] More like a stool priced at around 10 bucks in the local funny money and on the sale sticker It said 10 bucks cash or buy it on the payment plan Hmm. You realize that's a dollar a month for 12 months, right? That'd be 10 bucks plus 20 interest. The point is as we all know At least I hope we do if you can't scrounge up 10 bucks cash You shouldn't be buying it in the first place Yet it's amazing that here in latin america you can put a ten dollar ride amount a year long payment plan I mean really it's the same amount of paperwork whether you're financing five grand or ten bucks And if you think that's economic craziness and the world's way out of whack especially here in latin america where credit has gone wild You long-time listeners will remember the show I did where a big first world like shopping center had valet parking for a buck and a half
[09:47] How cool cooler yet if you were short that kind of heavy coin you could put it on your visa card Hey, there's a lot of levels to that kind of stupidness, huh? Yep, and I even have a photo of the valet desk up there on youtube showing the buck 50 charge and a nice Professionally made sign with the visa logo on it saying you could put it on plastic So the bottom line is that the average latino even the above average latino has about zero money in the bank And just like upscale americans upscale latins have a fist full of credit cards that are pretty much all maxed out Which brings me to this new article about argentina's economic system, which says it all this comes from justin spittler The editor of the casey daily dispatch hmm Justin spittler bet he got his ass whooped a lot as a child
[10:35] You gotta wonder why grandpa spittler didn't change that a long time ago But who knows maybe it made justin tougher primed him for success and all that but I digress as usual Anyway as the article starts and i'll paraphrase here He's interviewing an argentino about the economic financial and credit system in argentina And the guy starts out by saying, you know, we argentines love the installment plan He says if you can get 12 months, that's good. But 24 months is even better In fact, the argentine guy that said that was a lawyer and should have known better. Anyway, mr spittler Hmm and this argentine lawyer were chatting in a pub in palermo an italian neighborhood in buenas ares Yep, there's that european connection again. Palermo as in palermo, italy then it says now in case you haven't heard
[11:26] Inflation in argentina is off the charts And last year it says the official inflation rate in argentina was 25 but you know how governments lie the year before it was only 37% Everyday goods and services in the country are 71% more expensive than they were at the start of 2016 At least according to government and governments lie And of course they always lie to make themselves look better All right, meet johnny again now to put that in a more personal perspective Regarding day to day life for you and me imagine that everything you bought and purchased and every bill you received was 71 more costly than it was at the beginning of 2016
[12:13] In that case every time you got your paycheck you'd want to spend the whole thing You'd never want to put money in a savings account. That'd be stupid That would be like putting your money in the bank and getting a negative interest rate Hmm negative interest rates now, where have I heard that before? Anyway, then the article says that's why argentines love the installment plan It allows them to pay off purchases over time using a continuously devaluing currency In other words, it helps them reduce the harm caused by inflation Then it says in bold type, but why should you care about this? After all buenos ares is over 4000 miles south of the us Then it says but wait, there's more Sky high inflation isn't the only thing wrong with this country's money and economic system
[12:59] It's also very difficult to get money your loans here. You see atms and buenos ares are stingy Most only let you withdraw 2000 pesos at a time That's about 91 us dollars By the way, very few atms in argentina will spit out us dollars directly and to make matters worse Most atms will stick yet with a 10 percent withdrawal fee and that adds up rather quickly And that's how the money black market came about because of this many locals now have what they call a cash guy A gray market guy on the street that'll charge you only 5 percent instead of the banks or atm machines 10 percent withdrawal fees They're basically dealers in argentina's underground money market
[13:46] In short argentina's monetary and economic system has serious problems and they're getting worse The argentine peso is now in a free fall It's down 16 on the year that makes it one of the worst performing currencies on the planet However, it's the gold standard compared to venezuela or zimbabue Meanwhile, it's trading at an all-time low against the us dollar funny money So right now everyone wants out of the argentine peso Though as you might expect argentina's government is doing everything it can to stop the bleeding Just two weeks ago argentina central bank spent 4.3 billion to prop up the currency, but the measure failed Then they took even more drastic measures last week
[14:32] They raised their key interest rate by 300 basis points or 3 percent That's incredibly aggressive compared to most central banks who just raised their rates By just 25 or 50 basis points 0.25 percent or 0.5 percent On the world stage that's considered a monster rate hike and it came out of the blue Of course argentina central bank did this because it desperately wants to generate demand for the argentine pesos It hopes sky high interest rates compared to other countries will lure investors to argentina But it didn't work either and the peso crashed the next day on the news So then the argentine central bank did something even more surprising
[15:17] They shocked the financial world by raising key interest rates by yet another 300 basis points or 3 percent The country's benchmark rate now sits at 33.25 percent Which is 20 times higher than the federal reserve's benchmark rate And wouldn't you know what that also blew up in the government's face the next day the argentine peso plummeted another 5 percent Just based on that rate hike those are astronomical banking moves Remember we're talking about purchasing power and the money that people carry around in their wallets Then it says if argentina can't get a grip on the situation soon life could become extremely difficult for the average argentine Of course argentines have been here before and seen it and done it
[16:04] The country's had about one major financial crisis every decade The government has destroyed its currency four times in the last century And you know what that means you wake up the next day and all of a sudden you're reading the paper and see on tv That there's a brand new currency They either dropped a few zeros off the old one or created a new one altogether Of course with pretty brand new colors and artwork with yet another pompous genocidal dictator staring or maybe laughing at you From that brand new bill by the way, that was me johnny adding that pompous dictator bit because it's true You know what they say one man's genocidal dictator is another man's freedom fighter Or something like that. Hey, just think of mal stalin or uncle fidel
[16:49] All right, then the article goes on to say that's why argentine fathers tell their sons that the peso is for spending Not saving it's also why wealthy argentines have historically stored wealth in other more stable currencies like the u.s Dollar and british pound mostly across the border in uruguay. But here's the thing None of today's paper currencies are truly sound they're all backed by broken promises So why should argentina be any different every major economy in the world is either bankrupt or broke? Oh, and this is interesting. It says last december argentina's president maricio mccree had said on the record bitcoin is already a valuable part of our society And he also said that bitcoin and other cryptocurrencies could act as sort of a crisis currency of sorts
[17:37] Now there's a guy who though he may be a scumbag Pustulant politician sees the writing on the wall for fiat currencies and you know It seems like there's no end of bad news coming out of argentina Hey, I like to balance to show out with the good the bad the ugly and the great But with argentina the only good news which is kind of bad news in disguise Is that old saying the time to buy or invest is when there's blood in the streets Speaking of no end of bad news in argentina. Listen to this. Here's an article that came out on may 4th Hey, and it's even in english. So I don't even have to take a stab at translating it. It says bakers from buenos That is argentina gave away five tons of bread on wednesday in a general protest against proposed utility rate hikes They insist will put them out of business the massive bread giveaway took place outside congressional headquarters
[18:28] Now that's a new kind of publicity stunt, huh? So what's it all about? Well, it's a symbolic action that aims to bring attention to the situation where 40 Thousand bakers in argentina are saying they're suffering because bakeries can't operate normally as it is under present working conditions And they either close or end up working informally off the books It goes on to say the president of the argentine bakery association leo balanski Leo balanski that sounds real latin, huh? Well that just goes to show like I said Argentina's just loaded with people of european extraction Anyway, the president of the bakery association leo balanski who i'm sure speaks spanish and probably polish much better than I do Said hundreds lined up at the plaza facing congress
[19:14] Waiting in line more than a half an hour to receive their free kilo of bread with the bakers calling for an emergency utility rate rollback to the prices of 2017 then it says the protest is only the latest in a series by various businesses and public organizations Opposed to austerity measures and elimination of subsidies proposed by argentine president Mauricio mercury Among the subsidies the president wants to eliminate are those of gas electricity water and public transportation Why because the government's broken cannot afford to subsidize utilities anymore with president macaree insisting The measures are necessary to combat the high inflation rate and large budget deficit now get this It says in argentina with inflation running at more than 20 percent
[20:01] Bakers also denounced a sharp recent rise in the price of their main ingredient wheat flour saying that the cost has climbed by more than a hundred percent just in the past two weeks and Senor balanski added some bakery owners have seen their monthly electric bills rise from 2500 pesos around 122 bucks to 25 000 pesos some 1222 dollars in a period of just three years a 10 times or 1000 percent increase in utilities in just that short time period Leaving bakers with a decision to either close or operate in the black market off the books And the hits just keep on coming in spanish. They call them gold pays
[20:47] Now remember I said that argentina is a heavily unionized country And since all latin countries are running on significant lag time That means everything you see happening up in the u.s Usually ends up down here in latin america in some way some 5 10 15 even 20 years later The same thing goes for unions, you know in the states They had their heyday back in the 60s and 70s But these days up where you are union memberships are at historic lows Yet still strong and powerful and you guessed it the public sector figures, right? Well here in latin america at least in some countries here in latin america unions are at the stage They were 30 40 years ago in the states like argentina just coming into their own That means big membership a lot of power which goes hand in hand with high levels of corruption and graft etc
[21:37] Think teamsters mafia jimmy hoffa style whereas in smaller less developed latin countries like honduras el solvador peru beliefs etc They too have big public sector unions But they're pretty toothless and there's a big union component in all latin countries that have clothing and textile factories Commonly known as sweat chops and even though those factories have many thousands of union members They're also toothless and rarely go on strike So in the majority of latin countries, especially in the smaller ones unions exist, but are pretty weak But still there are a few latin countries like costa rica argentina and chili That have rather strong unions in the public sector that could shut a country down in a heartbeat if they just call a strike Now as you might expect teachers unions are big here in latin america just as they are in the states
[22:26] However only in places like costa rica chili and argentina Do they have the power and the numbers to throw their weight around and disrupt the whole country's educational system? Take this article that just came out four days ago from the buenos ares times The headline says teacher strike affects 5.5 million students. So what are they striking about this time? Well, they want the government to reinstate the national collective wage bargaining process, which is eliminated by a decree in january They also oppose a 15 wage increase citing year over year inflation rates of over 25 percent Oh, and doesn't this sound familiar? It says national cabinet chief marcos pena said this weekend the strike was politically motivated Well, of course, right? However, it says education minister. Alejandro viennacho
[23:15] described the teachers union Ctera as a support group for the monayo family Referring to corrupt union kingpin hugo monayo who recently led a massive street protest against the national government shades of jimmy hoffa again, huh? Then it explains that teachers in argentina have three very powerful unions One's called sutba one's called ute and also a private teacher's union called sadp All right, you get the idea as a grango or european expat You really do not want to live in a latin country that has powerful public labor unions that continuously call strikes Now that's bad enough But when you've got 25 percent or more inflation per year a bankrupt government and currency controls on us dollars
[24:05] Man, that's a triple whammy. And if you move there you're asking for trouble I know I know a lot of you'll say doug casey who I really like and I admit He's a lot smarter than I am He seems to like the place enough to have moved there well way out in the boonies anyway Which is always my recommendation too and for him It's working or apparently working because they've set up a little colony like a sort of gulps gulch Though you pretty much have to be independently wealthy to set up shop there yourself I know for a fact that houses are going for a half million dollars and up by the way I've seen some of those houses and you could build one of those from scratch on an empty lot For a quarter or less of what they're charging and i'm not blowing hot air here when I say I know about construction The fact is I've built 13 houses and buildings here in latin america already
[24:51] All of them first world all the way for 30 to 50 bucks a square foot. That means a 2,000 square foot house 60 to 100 grand Meanwhile, they're asking five to ten times as much for these houses in this real estate listing Hey, if you don't believe me send me an email the expat files at gmail.com And i'll send you the link to the real estate office there. Oh and one final story here You know for the last month I was traveling through europe and i'd run into traveling gringos here and there mostly older retired folks Traveling the world not on a strict budget, but in style most of them rather intelligent and wealthy So they should have known better and what do I mean by that? Well, I actually met four of them who'd been pickpocketed in the last couple of weeks one of them while touring the acropolis in greece
[25:39] Have you been there? It's spectacular Two of them while riding the metro in greece and one of them while riding the metro in rome and i'll tell you man So many gringos are stupid each and every one of them had his or her wallet or some valuables in their back pockets You never do that. Isn't that the first lesson in safety when you're traveling in foreign countries, especially using public transportation? So once you're in a thick crowd The trick is for the no good neck guy to come up behind you and just kind of deathly remove your wallet You've seen that a million times in magic shows, right? Or you get distracted by someone right in front of you. Meanwhile, there's an accomplice behind you ripping you off So why am I bringing this up because I get so many emails from people wondering about security and getting robbed in latin america
[26:26] And yes, it does happen Most often two stupid gringos who do things like leave their valuables and their wallets in their back pockets Or these days when backpacks are so popular even with an upscale crowd, you know They've got ll bean backpacks worth a couple hundred bucks, right? Well, the no good nicks aren't stupid They could spot an upscale backpack a mile away, too As well as real leather brand name coats and shoes or real nike or reebok sneakers, too So who do you think they're going to target same with real expensive high-end luggage like the swiss army knife company They make luggage man. Is it expensive and the bad guys can spot it in a second? Oh, but it's also stylish and you're making a fashion statement as you travel, right? Good luck with that and the underpaid baggage handlers at the airport
[27:13] Hey, if I was a crook, that's who i'd go for yes We americans like our upscaled traveling items, don't we i'll tell you it's much better to look like a rumbled eighth grade geography teacher On sabbatical, you know kind of a poor man's indiana jones Then the north face or ll bean window display mannequin on safari You've been listening to the expat files living in latin america If you need some help with your own plan b you can schedule a one-on-one phone call with me But first download my free plan b questionnaire at The new expat.com better yet if you want to get your plan b going from right up there in the states Just sign up for my nine hour expat essentials course Get the perfect plan b blueprint by going to the expat files.com slash academy most famous