Episode Summary
In this episode of The Expat Files, Johnny Mueller provides an unfiltered view of living in Latin America, contrasting it with the idealized portrayals in travel magazines and websites. He highlights that three Latin American countries—Chile, Costa Rica, and Argentina—are attempting to emulate first-world standards by increasing taxes and bureaucracy, often with little success. He criticizes the inefficiency of government spending, noting that a significant portion of public funds is consumed by bloated bureaucracies and that infrastructure projects often lack proper oversight. He uses Costa Rica as a case study, explaining how its healthcare system has collapsed due to unsustainable funding and how the government has resorted to imposing additional taxes and fees to cover deficits, leading to public frustration.
Johnny also discusses the implementation of automated speed traps in Costa Rica, highlighting the government's use of high-tech equipment to enforce speeding fines. He notes that in the first 11 days of operation, 15,000 people were caught speeding, resulting in $9 million in fines. The fines are substantial, with an average fine of $600 for speeding 20 km/h over the limit. Additionally, there are penalties for not paying the fines, including a 3% monthly charge and potential issues with vehicle registration. Johnny also mentions that unlike in the first world, where people can fight these fines in court, in Costa Rica, the process is slow and often futile. He also discusses the inefficiency of government mail in Costa Rica, noting that the government uses websites and newspapers to notify people of fines instead of traditional mail.
Johnny further discusses the unintended consequences of a new speed trap camera system in Costa Rica. He highlights how the government's implementation of the system has led to a surge in speeding fines, particularly affecting tourists and expats who are unfamiliar with local traffic laws and speed limits. He also notes that the system has been strategically placed near the airport, where many tourists and expats rent cars and are not accustomed to driving in the country. Johnny suggests that the fines are a way for the government to generate revenue and that the system is not effectively reducing traffic accidents, as most traffic deaths are due to pedestrians rather than drivers.
Johnny then discusses the issue of pedestrian safety and government deception regarding speed traps in Costa Rica. He highlights that the government claims these speed traps are meant to reduce traffic accidents and deaths, but in reality, they are part of a scheme to generate revenue. Johnny explains that the speed limit is suddenly lowered without warning signs, tricking drivers into paying fines. He also mentions the financial gains the government is making from these fines and warns expats about the potential for further speed trap installations. Additionally, he describes the confusing and dangerous traffic conditions in San Jose, particularly at the intersection near the airport, which is often a point of confusion for tourists.
In another segment, Johnny recounts his experience of receiving a traffic ticket in Costa Rica while driving to his hotel. He explains that the sign prohibiting left turns was in Spanish and largely ignored by drivers. He was pulled over by a cop who issued a $40 fine, which he paid with a $20 bribe. Johnny highlights the common practice of extorting bribes from first-world tourists, especially those driving rental cars from the airport. He notes that cops often target tourists, as they are more likely to pay without resistance. He also mentions that some cops may not accept bribes and instead require payment at a station, but this is rare. Johnny concludes by explaining that the cop's behavior is part of a larger scam targeting naive tourists, who are often more vulnerable to such tactics.
Finally, Johnny discusses how certain Latin American countries, like Chile, are trying to become more 'first world' by adopting similar economic and tax systems, which often leads to higher costs of living and increased taxes for residents. He contrasts Chile's high property taxes and value-added taxes with countries like Peru, Guatemala, and Bolivia, where property taxes are significantly lower. He also highlights the challenges faced by non-resident workers in Chile, including high income tax rates and additional taxes on goods and services. Johnny concludes by suggesting that while Chile and similar countries may have some advantages, they are not ideal for expats seeking significant cost savings compared to other Latin American countries.
Topics
The Expat Files podcast, Living in Latin America, Government inefficiency in Latin America, Costa Rica's healthcare crisis, Taxation and public spending in Latin America, Automated speed traps in Costa Rica, Speeding fines and penalties, Legal processes for contesting fines, Government communication methods in Costa Rica, Speed trap cameras in Costa Rica, Unintended consequences of government policies, Impact on tourists and expats
Chapters
00:00:00 Opening 00:00:32 The Three Latin American Countries Trying to Be First World 00:03:34 Case Study: Costa Rica's Healthcare Crisis 00:04:56 Introduction to the Speed Trap Scandal in Costa Rica 00:05:16 The Implementation of High-Tech Speed Traps in San Jose 00:06:05 The Financial Impact of the Speed Trap Program 00:06:48 The Consequences of Unpaid Speeding Fines 00:07:27 Legal Differences Between Costa Rica and the First World 00:09:13 Government Communication Methods and Their Limitations 00:09:25 The Government Newspaper's Rise in Popularity 00:09:59 Poor Planning and Lack of Public Awareness 00:11:03 Strategic Placement of Speed Trap Cameras 00:14:54 The Truth Behind Speed Traps in Costa Rica 00:15:27 The Financial Gain from Speed Traps 00:19:00 The Confusing Traffic Conditions in San Jose 00:19:10 The Cop's Encounter and the Bribe 00:20:09 The Extortion of Bribes from Tourists 00:22:50 The Scam Targeting Naive Tourists 00:23:30 Chile's Attempt to Be First World 00:23:52 Re-evaluation of Property Values in Chile 00:24:35 Chile's High Property Tax Rate
Transcript
Automatically transcribed from the original recording; names and wording may contain errors.
[00:03] Hi everybody, I'm Johnny Mueller and you're listening to The Expat Files, living in Latin America. The show that tells you what it's really like to live, work, play and or retire in Latin America. I tell it just like it is, not the version they give you in those glossy travel magazines, or the picture they paint for you in those international traveler websites, where they're only trying to sell you something. What's it really like for expats living in Latin America? Well, it's time to take off those rose colored glasses and find out. So let's get started. Now, I'm sure you remember that I said of the 20 Latin American countries, there are three that are trying to be first world in a big way. They're pushing hard and growing a huge bureaucracy, running huge deficits and bathing themselves in red ink, and taxing away just like first world countries.
[00:49] It turns out that the bureaucrats down here are trying to copy everything they see that the bureaucrats up in the first world are doing, especially in regards to tax collection. So they impose as many petty fines and fees on the population as they can, just to increase the flow into the public coffers. But the problem is down here in Latin America, whatever they do get into the public coffers doesn't stay there long. Because by the time it's been allocated for a public works project, let's say, for bridges and roads, for example, and even for education and beefing up the court system, well, by the time they've even got a nickel for that kind of stuff, they have to pay the salaries of their huge and ever-growing bureaucracy. And in some government departments down here, it's been said that 70 to 80% of all the costs are in manpower. In the bloated salaries of useless workers who got those jobs because they were either
[01:38] family to a politician or they know somebody in a power position or they helped out in a political campaign, add that to the fact that there's virtually no transparency down here. And the way they hand out government contracts has absolutely nothing to do with qualifications. But it's all about who you know and who your brother-in-law is. Well, it turns out, after the politicians take their cut and do the skim and all those bloated government bureaucrats get their paychecks, there's almost nothing left for maintenance or infrastructure. So what tourists and expats see in the way of infrastructure building, public maintenance and airports and things like that, almost all that big money going into those projects. And believe me, there are a lot of projects going on down here. These government contractors are busy little biddies. You know the way government works. Five guys standing around watching one guy leaning on a shovel.
[02:25] So it's not as if these building and road contractors are idlers sitting on their hands. After all, if your brother-in-law got you that road or bridge contract because he's in Congress, in the end you still have to furnish a product even if it's a substandard one. Which it almost always is, unless those first world do-gooders that donated the money actually supervise the work and do the inspections. But that almost never happens either. But back to my point, there are three countries in Latin America out of the 20 that are raising their taxes as fast as they possibly can trying to achieve the Latin version of first world. And unfortunately, they believe their own propaganda. The publicity they feed to the first world media, the stuff we read about up in Dubuque and Toledo. And because everybody up in the first world is always reading about the miracle economies
[03:11] in Chile, Argentina and Costa Rica, they actually try very hard to live up to the hype. And they're doing a great job of building their bloated bureaucracies so they have to scramble to find more and more ways to fund that kind of stuff. Now those three Latin countries that are devising new and better ways to text the hell out of their population are Chile, Costa Rica and Argentina. With Panama coming up right behind. Now let me give you the example of Costa Rica. And if you've been listening to my recent programs, you'll know that I've talked about their healthcare system that's going broke. So no matter what you've heard about how great the Costa Rica national healthcare system is or whatever stories visitors have told you about it, it's gone completely bust for lack of money because they're spending simply way more than they're taking in. You see, in Costa Rica, they have a payroll deduction system where employers and employees
[03:59] make a contribution to the national healthcare and social security and it gets deducted right out of their check every month. Just like it is for social security up in the first world, well guess what? They're paying out more than they're taking in just like the US system. And that's been going on for some years now so in effect it's been broke for a long time. But now it's a crisis. And the Costa Rican government has learned from first world governments just how to impose additional taxes, levies and fees to try to cover those shortfalls. The trick is to nickel and dime the people at death so that they're not gouged too much in any one area. That's the plan anyway. And those Costa Rican government boys have just discovered a surefire way to really increase those government revenues. Unfortunately, it's one of the biggest unintended gouges that you've ever seen and the people
[04:46] are beginning to recognize it and are suddenly hopping mad down there. But to no avail, because what the government does, it doesn't take back very easily, especially when it's making a ton of money on it. And the reason why I'm singling out Costa Rica here is because I've received a few emails on it from people who were absolutely incredulous when they heard about it. And I've even received emails from people who live in Costa Rica who've been sad victims of the latest revenue enhancing scam. And besides those emails, I have a cool story of my own so stay tuned for that. So here it is. About four or five weeks ago, Costa Rican transit cops set up 16 different cameras and computer automated radar speed detectors that they bought from a company that installs the very same things up in the first world. And I'm sure you know about that if you've ever been caught speeding up in the first
[05:32] world and you didn't know it until you got the notice in the mail with a picture of your car and your license plate and a printout of the speed you were going over the posted limit along with the fine you're supposed to pay, of course. Anyway, in San Jose, Costa Rica, they set up 16 of these high tech automated speed traps and in the first 11 days of operation, they recorded 15,000 people going 20 kilometers an hour or more over the posted limit. And that was just on six main roads in the city. Imagine that, only six roads. Now here's the kicker. The city of San Jose racked up $9 million in speeding fines. $9 million, imagine that in a city of only 350,000 people. And that was in the first 11 days of the program, if you can believe that.
[06:17] And listen to this, the average speeding fine at 20 kilometers over the posted limit is over $600, not 600 Costa Rican colognes, but $600. And that, for you metrically challenged expats and expat wannabes out there, is about 13 miles per hour over the posted limit. $600. Now I'm sure they must have pulled that one out of a hat because there are a lot of cars driving around down here in Costa Rica that are such pieces of chicken-wired and duct-taped crap that they aren't even worth $600. But it gets worse. If you don't pay up the first month, there's a 3% a month additional charge, which works out to be about 36% a year on top of the fine. Imagine that. And if you don't pay up within the year, when your car license and plate needs to be renewed,
[07:03] it'll show up in the computer and you won't get your license renewed until you pay up. And who's got to pay up at the end of the year? Well, it's the guy whose name is registered with the vehicle. So if it's your car, and your kid, or your wife, or your uncle, or whoever, is driving your car and gets one of these speeding tickets, you've got to pay, not them. Because they get a photo of your car and your license plate number, which is instantly tracked back to you, the owner. Just like they're doing now in some places in Europe and the United States, and I'm sure you're aware of that. You just might have been nabbed that way yourself. Only up in the United States and in the first world, you can go to court and fight it. And in fact, hundreds if not thousands of these cases have been overturned up there in the first world, and you can Google that on the internet and see that for yourself. Because it turns out, in the first world at least, it's not exactly legal.
[07:50] There are a lot of loopholes that lawyers have found to beat these cases. And they're being overturned with regularity up there. One case in point is the fact that, according to law, up in the first world that is, a policeman actually has to stop you and sign the ticket and you have to counter sign. In the presence of the cop himself, you're a witness to his signature and he's a witness to yours. In the first world, you have a right to face your accuser. And of course, your accuser's got to be human, not a digital camera. Well, all I can say is down here in Costa Rica, good luck trying to fight a case like that in court. First of all, it'll take you three or four months to get on the docket, before a judge even hears your case, and you can count on the fact that it'll probably be postponed three or four times, before there's any kind of resolution at all. Which really means, going to court for a thing like that in the third world is basically
[08:37] an exercise in futility. And speaking of getting a surprise at home, when you go to your mailbox and find you've got a big old speeding ticket there, well down in Costa Rica, you're not going to get a surprise in your mailbox like that because all throughout Latin America, snail mail sucks. And not only is it undependable, you can actually count on losing a certain percentage of the mail you might be sending to someone yourself. And that's why I never recommend using government-run snail mail down here for anything of the least bit of importance. It might be okay for postcards, Christmas cards, and promotional flyers, but don't ever use it for anything that's time-sensitive or important. And guess what? The government of Costa Rica knows that, so they don't send out speeding notices by mail. Instead, they put them on a government website and in the official government newspaper, which means if you're not on the internet and more than half of the Costa Rican population
[09:25] isn't, well that means you gotta go out and buy that government newspaper. And before the speed-trap camera thing went into effect, almost no one ever bought that mind-numbingly boring government newspaper, except lawyers and bureaucrats. But since that paper is the only place you can get an actual list, at least for now, until the major dailies get on the bandwagon, well anyway, suddenly that boring government rag is the most popular newspaper on the stands and it's outselling all the other dailies. How's that for unintended consequences? Then again, maybe that's what they intended in the first place. Who knows? Now to show you what little planning went into this and what poor understanding governments have, especially third-world governments, when implementing a big change in an existing system like the way they issue speeding tickets that's been around 50 or 60 years down here.
[10:13] Now this new camera system's only been around for five or six weeks now and guess what? They have some repeat offenders already and there are some people who have already gotten six speeding tickets for over $600 each. We're talking $3,600 in speeding tickets in one month just for one person and his car. And in that one month's time, there are dozens and dozens of repeat offenders that have got two, three, and even four tickets at $600 a pop and these people had no idea they were racking up those kind of fines. In fact, they didn't even know they were getting monitored and that's because the public wasn't informed about this system, not widely informed anyway, before it went into effect, which meant that the average person with a car had no idea he even had to check a list somewhere. So a lot of people who haven't checked the internet or the papers are racking up multiple
[11:02] fines daily. And just as an aside, I have a sneaking suspicion that they purposely set up speed trap cameras on the highway directly out of the airport leading into downtown San Jose because they know there are so many travelers and first time gringos coming out of the airport with rental cars, not knowing a thing about the speed limits or the traffic laws, and certainly not having an inkling that there are high tech speed traps posted on the main drags. Now nailing tourists for speeding while driving rent-a-cars is like shooting fish in a barrel for the cops. Now, since a great number of gringos and first-worlders rent cars at the airport and head right into the city limits of San Jose because that's what almost everybody does when they land at the airport. And by the way, it's probably the first time any of them have ever seen road and traffic
[11:47] signs posted in kilometers instead of miles per hour, not to mention that everything's in Spanish. And for most of those first-world new arrivals, that's a new experience too, and almost impossible to get used to unless you've been down here for a while. It's kind of like driving in England. You drive on the opposite side of the road, but you never quite get used to it. And down here, when you're driving on a big four-lane highway, like the one from the airport to downtown San Jose, if you're totally new in the country, you go with the flow and you keep up with the traffic. And everywhere throughout Latin America, the flow of the traffic, unless it's during the rush hour, is always faster than the speed limit. And if it's not during rush hour, and the cars are really whipping along, and you drop down to the posted speed limit because you're the overly cautious type, or your wife's yelling at you, you're bound to get a lot of dirty looks from the local drivers and
[12:35] be the object of a lot of horn blasts. Because the fact is, if you're a bit outside the city, everyone goes as fast as they can, then when they hit the city limits, suddenly you're in a bumper-to-bumper parking lot. Then everybody's stuck crawling around like a snail. And that's just the way it is too, in any medium-to-large city down here. And since throughout Latin America, most international airports are about 5 to 10 kilometers out of the city, as a rule, that's about 3 to 7 miles. Anyway, on a road like that, from the international airport to the nearest big city, is a perfect place for the city transit officials to put up an automatic speed trap like that. And guess what? As an expat or a tourist with a rental car, as you rack up those speeding tickets and don't even know it, you can be sure that Hertz and Avis and Thrifty and Rent-A-Rec will be
[13:21] monitoring that government speeding website quite closely. And when you go in to check out and turn your car into the airport at the end of your trip, you could easily have a $600 surprise added to your credit card, because it's the rental car agency that'll be billed if you get a ticket. So I'm just giving you a heads up right now on what it's like to drive in Costa Rica, so be forewarned. Now just to play devil's advocate for a minute, all you people out there who might be thinking, hey, this is a good thing, you run a speed trap program like that for a while, and after a few months, everybody's gonna be driving like your grandma. I mean you can't help to have less traffic accidents and deaths. Not if everybody's scared to death of getting a $600 ticket. Well there's one thing I'm sure you don't know about Costa Rica. They do have a very high traffic death rate here. Traffic deaths are the number one cause of accidental death in the whole country.
[14:10] But guess what? Most of those deaths are pedestrian deaths. People walking and running across multiple lane highways and getting hit where they're not supposed to be walking at all. The people just don't want to walk a few blocks out of their way to walk in a designated crosswalk. Or take the time to walk up and over one of these pedestrian bridges called pasarelas. So it's not your average driver that's getting killed, it's your average pedestrian who feels like crossing a road anywhere he likes. Anyway, after tons of complaints now since this program started, drivers are up in arms. So the government's putting out all kinds of propaganda saying that these speed traps are being put up to lower the traffic accident and death rate. Which seems reasonable until you talk to someone in the know and then you find out the truth. That in every one of the areas that they put up those speed traps, there used to be speed
[14:58] limit signs posted at 80 km per hour. But at the same time they installed the cameras, they also installed new speed limit signs just a few blocks leading up the road to every one of those cameras. Suddenly dropping the normal 80 km per hour speed limit that's been like that for years and years down to 60 km per hour. At every one of those points you're tricked and trapped. So once again, the government lies. It's not about saving lives, it's about making money because it really is a trap. There are no warning signs leading up to that drop in speed limit down to 60 km per hour. There's absolutely nothing advising you that they've lowered the speed limit ahead. Because if they did that, the government would rake in less money. So as I speak right now, the government of Costa Rica is raking in almost a million dollars
[15:45] a day in traffic fines that it never received before. And believe me, this is a huge bonanza. Because San Jose Costa Rica is not really a big city. It may be the biggest town in Costa Rica, but it's only got about 350,000 people. And that's about the same population as Raleigh, North Carolina. And the normal amount of traffic fines collected in San Jose Costa Rica, in an average year before these speed trap cameras came into existence, only came to about 2 million U.S. dollars. So think of it, now the city fathers of San Jose Costa Rica could rack up what used to be a year's worth of traffic fines in two days. Is there something wrong with this picture? I guess so. And for those of you doubters out there who think that this is just a fluke, and Costa Rica will come to its senses and eliminate this whole robot camera speed trap business,
[16:32] well I think not. Because in addition to these 16 speed trap cameras, the traffic division has ordered 435 more of these installations throughout the country on 150 different roads, most of them on heavily traveled tourist routes. So you know what that means, expats and expat wannabes. They want your money in a big way, so my advice is if you go down there, don't rent a car. And just for your information, a few years back, before the advent of those speedcams, even up in the first world, the cops in Costa Rica were pulling another scam like that, another way to find tourists and expats almost exclusively. A clever little trick that they'd pull on the tourists, but not on the local residents. Now earlier, I mentioned that road from the airport in San Jose, Costa Rica, that leads
[17:18] to the city limits of San Jose. Everybody who lands in Costa Rica has to take that road if they're going into San Jose for any reason at all. And San Jose is usually where you end up the first few nights you're down there. Now it's a big nicely paved four lane road where there's a lot of traffic during rush hour, and it's pretty nice with not too many stops until you get to the city itself, where you run into one of those crazy Latin American traffic stops, which you never see up in the first world. A road crossing that's utterly confusing and very badly designed. Let me try to explain this intersection. It's a multiple road junction, not just two roads crossing, but five or six roads crisscrossing and turning into each other. So there are a number of stop and go lights and right and left turn arrows everywhere. And if you've never been to that intersection before, and even if you have, it's mighty
[18:07] confusing, because it's very easy to take the wrong turn or follow the wrong arrows. And if you do, then you have to go some miles ahead to double back. Now there are a lot of businesses and a few hotels scattered around that area, and there's a popular hotel or two on the left. So if one of those hotels happens to be the one you're booked at, you just take a left turn. And that looks easy. In fact, it's very obvious. However, there's a tiny little sign about as big as a postage stamp that says no left turn, and it's in Spanish too. So how's a first time tourist or even a multiple repeat tourist supposed to know that, with four lanes of traffic whizzing back and forth, and auxiliary roads crossing every which way? And on top of that, if you're arriving at night, it's almost impossible to make it through that intersection without pulling some kind of boner, since there are about six or seven
[18:53] signs that tell you not to do something, like no U turn, no right turn, no left turn, bus lane only. You get the idea. It's just mass third world Latin American confusion on the road. Now, like I said, if you take a left turn to your hotel, you end up right in one of those hotel parking lots. Perfect. You're there. Except there's a tiny sign somewhere, which no one ever sees, that says no left turn, and it's in Spanish. So naturally, I take that left turn and go to my hotel, and right around the curve, there's a cop car sitting there. He waves me over and gives me a $40 ticket, and tells me I have to go down to some municipality and pay it. And of course, I replied what every first world person should reply when stuck in a situation like that, especially when you're coming into town at night, after a long exhausting airplane flight, at 1030 at night, and you just need a good stiff drink.
[19:42] What you should say to him is, can I pay my fine right now? Which is a kind way of saying, if you want a bribe, here it is. And if he's one of the few honest cops who doesn't accept a bribe, then he'll say, no, you have to pay it down at the station. But that doesn't happen too often, really. So here's what you say. ¿Puedo pagar mi malta orita? Which means in English, can I pay my fine right now? And since you're in Costa Rica, the land of the gringo dollar, most cops know a little bit of English, so they've perfected the way to extort bribes out of first world expats and tourists. In fact, they know how to extract bribes with much better acumen than in the other Latin American countries, where foreign tourists aren't in such great supply. In fact, you're almost better off if you can speak a little Spanish to them. In that case, they might not even bother you for a bribe, cause they figure then, you might
[20:30] be able to defend yourself. They don't want to argue with you, they just want an easy 20 bucks. They don't want to extort money from a gringo who knows enough Spanish to get their badge number and possibly report them. Because everybody knows you don't pay your fine to the policeman, but down here, sometimes it's better to play dumb, and then you can pay that fine to the policeman. That's why it's better sometimes to say, no hablo español, and just hand him a 20, and he'll usually take it. And by the way, it's not a good idea down here in any Latin American country to argue with a cop and ask for his badge number, unless you're with a group of people and he's outnumbered. Because then you've got witnesses. And though I've seen that happen on a few occasions, I don't recommend it even if you've got your group with you and you've got them outnumbered. Because it might backfire on you. If a cop's testing the waters and trying to get a little bribe out of you, and you go
[21:18] pull in that Barney 5 citizens arrest crap, he just might find something wrong with your car and impound it. I've seen that happen too. Believe me, it's much easier just to give him the 20 bucks. Now I must tell you, when I was sitting there in front of my hotel, getting a fine, and settling it by paying the cop 20 bucks cash, I watched as 10 or 20 cars did exactly the same thing as I did. They made that left turn and went into that parking lot. Illegally of course. That is, according to the sign that I never saw. So anyway, after I was done paying my bribe, and listening to that cop's story about his nephew in San Antonio, Texas, by the way, that's not unusual. Cops like to do that down here. When they pull over a gringo, they like to mention all the relatives they have up in the United States. All illegals of course, but they won't tell you that. Anyway, he actually pulled out some pictures and showed me the guy.
[22:06] And he asked me if I knew him, if he can believe that. Anyway, I pulled up in the parking lot of the hotel, and while I was unloading my stuff, I watched a few more cars make that illegal left turn. And you know what I noticed? That cop did not pull over a single car that was rickety or in bad shape, and in fact, a junky old pickup truck took a left turn and had no headlights at all, but the cop didn't do a thing. But the car he did pull over had an Avis sticker on it. He pulled over, guess what, a rental car from the airport. Oh, he was picky alright, because my car was a rental car from the airport too. So can you see the scam here? Pull over naive first time tourists, and most of those will be driving a rental car directly from the airport of course. Like me, and that's how a cop making $300 or $400 a month can live the life of a middle
[22:54] class Costa Rican. And you know what? As long as he keeps pulling over gringos and first worlders, they're never gonna file a complaint against them, they'll just pay their 20 or 30 bucks and get it over with. After all, the guys these cops are pulling over are just getting started on their vacation, and want nothing better than to settle into their hotel after a long flight. Well to a first world person like that, 20 bucks is nothing. It's what you'd tip your caddy at the golf club back in Cleveland. But I got off the track there a little bit. I know I was talking about a certain three Latin American countries that are pushing so hard to be first world, that their Latin version of Big Brother isn't far behind the first world. And let me give you another example of that, Chile. Now here's something you never knew. You buy a $200,000 house in Paraguay, Bolivia, Guatemala, Honduras, and your local property
[23:41] taxes are gonna be no more than $100 to $200 a year. Yup, I said a year. You got that? Now let's talk about Chile, where they're trying so hard to be first world, it's pathetic. Listen to this. In 2006, the Chilean government decided that the properties throughout the country were way undervalued, and they had to be re-evaluated at present day prices, the real value. So they did that and decided that everyone would be taxed on their property at fair market value. So now, let's say you have a $200,000 condor house in Chile. In Chile, if you own a home, you pay a 1.4% property tax per year on the market value of the home. So if you have a $200,000 house, guess what? You're gonna pay $2,800 US a year for property taxes, which might sound low to some of you people up in the first world, who might even be paying double that, depending on where
[24:28] you are. But if that same house were next door in Peru, you'd be paying about $150 a year in your property taxes. So think about it. Chile has a 20 times higher, that's 20 times higher, property tax rate than its neighbor Peru. And for that matter, it's 20 times higher than Guatemala, Honduras, Nicaragua, Bolivia, Paraguay, Ecuador, Brazil. Do I have to go on? Do you get my point? And not only that, their VAT, their value added tax, which is kind of like the sales tax, and I've talked about that before, is 19% on top of every single thing you buy. And get this, in Chile, if you're a landlord, the rent that you collect from your tenants is taxed at 17%. And you can't cheat about that either, because you sign a contract with your renter, and you turn that over to an accountant, and he hands that into the government.
[25:15] And how about this, if you're a non-resident worker, in other words, you don't have permanent residency in Chile, which by the way, it's pretty tough to get unless you do make at least a $200,000 investment, in a home or a business or whatever, and prove that you've got an outside income of at least $2,000 a month. Anyway, if you're a non-resident working down here in Chile, maybe you're just down here for a year or two or three, on contract, working for a big transnational, like Siemens or Caterpillar or Sears or Price Smart or whoever, anyway, you pay 35% income tax right off the top. And of course you pay that 19% VAT tax on everything you buy, not to mention all those other taxes and charges built into your gasoline and your electric and water bill. So it's been estimated by some that foreigners coming down here in Chile are quite often
[26:02] in a 50% tax bracket, when all is said and done, when all the government charges and taxes and fees are added in. Now Argentina and Costa Rica are plodding right along on that same path, and I don't know if you know this, but if you're middle class or above and living in the United States, if you're working there and are a homeowner too, which most people are, you're very likely in the 50% or above tax bracket too, when all things are added in. So after thinking about that a bit, you might wonder why any first world person would want to consider moving to Chile when it's like jumping in the same end of the pool. Well Chile still does have its advantages, it's still a bit safer and cheaper to live there than it is up in the first world, and it's easier to keep a low profile. But I hope you're realizing that as certain of these countries try more and more to be first world, they grow bigger bureaucracies, incur more debt, end up having to tax their
[26:51] residents more and more every year, which does nothing but raise the cost of living for everyone in that country, and that puts them on the very same treadmill that most first world people that I know, who are living up in the United States at least, are stuck on. That they would just love to get off of, but they just can't do it because they don't know how. Or they're just loaded down with so much debt that they just can't see a way out. Now I'm not saying that Chile and Argentina and Costa Rica are bad ideas for expats, but you're not going to see a huge savings in the cost of living if you move down to one of those countries. Not like you would if you go to one of the other 17 Latin American countries, where if you get off the tourist track and out of the really big cities, you can live a first world lifestyle for half of what you're paying now. You've been listening to The Expat Files, living in Latin America, and don't forget
[27:42] you can email me on anything at all about Latin America. That's The Expat Files at gmail.com. See you next time. Nos vemos.