Episode Summary
In this episode of The Expat Files, Johnny Mueller provides an honest and unfiltered look at life in Latin America, contrasting it with the idealized portrayals found in travel magazines and websites. He emphasizes the importance of accessing local news sources, such as Spanish-language newspapers and Google Translate, to gain a more authentic understanding of the region. He warns that English-language newspapers often provide a biased perspective that caters to tourist interests and advertisers.
Johnny shares a news article from La Nación, a Costa Rican newspaper, about the head of the Costa Rican prison system being detained after a drunk driving incident, highlighting the lack of accountability and the prevalence of political patronage in Latin American governments. He also mentions the intense and often violent nature of political campaigns in countries like Colombia, where newspapers report on the dirty deeds of candidates, contrasting it with the more subtle and digital forms of political warfare in the first world.
In Bogota, Colombia, there were 687 reported death threats, 22 physical attacks, 7 kidnappings, and 2 murders against candidates in the four months leading up to the national elections. The violence is not directed at tourists or expats but is part of a system where political power is highly lucrative, leading to a cycle of corruption and violence. Johnny compares the situation in Latin America to the United States, where such extreme violence is rare, and notes that the United States has a much higher population and thus a lower incidence of such events.
Johnny describes the perks of political office in Latin America, including control over public works, jobs, and infrastructure projects, as well as the ability to choose patronage jobs and receive high salaries. He uses the example of a lawyer friend who, after supporting a winning political party, was given a high-paying, low-effort job with perks and travel opportunities, illustrating the privileges of political office in the region.
The podcast segment also discusses the nature of government jobs and political power in a third-world country, highlighting how these positions are often filled through patronage, with little regard for merit or public service. Johnny describes how these jobs come with perks like cars, laptops, and free trips, but also come with risks like death threats and violence during election times. He shares a personal anecdote about a lawyer friend who got a patronage job, only to lose it when his political party didn't win reelection.
Johnny comments on the broader trend in Latin America, where political power is often concentrated within families and the wealthy, and how government jobs are highly coveted despite their lack of real work and inflated salaries. He also mentions the practice of bribing the poor with free goods and food, as well as the role of charities like HAIR or Methodist groups in donating goods with political slogans.
In another segment, Johnny discusses the inefficiency and lack of accountability in government jobs in Latin America, comparing them to private sector roles. He highlights that government workers often receive higher salaries without being held to the same performance standards. He notes that government jobs are seen as a refuge for lazy individuals, and that even when some government workers perform well, the public is used to poor service and may not recognize it. He also mentions a letter to the editor from a Lima, Peru newspaper that details the bureaucratic issues in public hospitals, such as the lack of printed numbers for blood donors.
Johnny discusses the challenges of donating blood at public hospitals in Latin America, highlighting bureaucratic inefficiencies and poor infrastructure. He contrasts this with private hospitals, which offer better service and treatment but are unaffordable for many. He also touches on economic issues in Brazil, including the impact of cheap imports from countries like China and South Korea on local industries and the recent increase in import taxes on vehicles.
In another segment, Johnny discusses the economic challenges facing Brazil, particularly the impact of Chinese investment and labor practices. He highlights how Chinese companies are buying up land and resources, leading to job losses and a reliance on cheap Chinese labor. Johnny critiques Brazil's ethanol program, arguing that it's propped up by low wages and that rising wages could make ethanol more expensive, undermining its economic advantage. He contrasts Brazil's situation with the United States, where ethanol is subsidized and cheaper due to government support and low labor costs.
Finally, Johnny discusses the potential profitability of starting an ethanol business in Latin America for expats. He highlights the cost advantages of farmland in the region compared to the first world, the ability to produce ethanol at a lower cost, and the potential for a profitable business with minimal capital investment. He also mentions the availability of small-scale ethanol production kits and the possibility of outsourcing manual labor to locals.
Topics
The Expat Files podcast, Life in Latin America, Accessing local news, Political patronage, Political campaigns in Latin America, Political violence in Latin America, Corruption in political systems, Perks of political office, Comparison between Latin America and the United States, Impact of political power on society, Patronage in government jobs, Political corruption
Chapters
00:00:00 Opening 00:00:13 Contrasting the Idealized Portrayals of Latin America with Reality 00:00:40 Accessing Local News in Latin America 00:01:33 The Biased Perspective of English-Language Newspapers in Latin America 00:02:31 The Intense and Violent Nature of Political Campaigns in Latin America 00:04:32 Introduction to Political Violence in Latin America 00:04:35 Political Parties and Violence in Latin America 00:04:40 The Nature of Political Violence in Latin America 00:04:42 Local Perspective on Political Violence 00:04:46 The Shocking Nature of the Article 00:04:50 The Article from a Bogota Newspaper 00:04:53 Violence Against Political Candidates 00:04:59 Physical Attacks and Kidnappings 00:09:12 The Nature of Patronage Jobs in the Third World 00:09:42 The Lawyer Friend's Patronage Job and Its Perks 00:10:47 The Consequences of Losing Political Power 00:11:10 The Widespread Desire for Political Power in Latin America 00:13:12 The Appeal of Government Jobs Despite Their Lack of Real Work 00:13:31 Inflated Government Salaries in Latin America 00:14:39 Government Jobs as a Refuge for the Lazy 00:16:53 Letter to the Editor on Bureaucratic Issues in Public Hospitals 00:17:25 The Frustrations of Blood Donation at Public Hospitals 00:20:14 Brazil's Economic Challenges and Import Taxes 00:21:36 Economic Decline in Brazil Due to Chinese Investment 00:21:49 Brazil's Economic Boom is Coming to an End 00:22:19 Chinese Labor Costs and Their Impact on Brazil 00:23:03 The Future of Brazil's Economy and Labor Market 00:23:59 Brazil's Ethanol Advantage and Its Sustainability 00:25:38 Ethanol in the United States and Its Subsidy-Driven Cost 00:25:56 Ethanol Production in Latin America vs. First World 00:27:21 Ethanol Production as a Great Business for Expats
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. You know, I always get some emails asking me to highlight some news worthy items that are in the papers down here. Now, anyone can go online and check the newspapers in any one of the 20 Latin American countries. Every big city down here has a number of daily newspapers, and if you just Google the city
[00:50] or the country and put the word newspaper in, or PRENSA, P-R-E-N-S-A, which means newspaper in Spanish, you'll get a list of the top dailies and then you can look up the current editions. And if you don't speak Spanish, all you got to do is hit Google Translate. And if you don't know how to use that, just look up Google Translate on Google and it'll tell you how to use it or paste an article into a Word document and just translate that using the translator in Microsoft Word. But most of the time you don't have to do that because you can translate those articles right on your screen. Because you know, when you do a Google search, when the list pops up and it isn't Spanish to the right of the search term on the list, you'll almost always see the word translate highlighted. Then you just hit that and you've got that article translated. And of course it won't be perfect, but it'll be good enough. Now as a lot of you know, most big cities down in Latin America in the tourist districts
[01:37] have their own English-speaking newspapers too, which are usually weeklies, not dailies. And they're tiny little things, only about 8 or 10 pages long. Now you can read those if you want to online, like the Tico Times for example, which is the Costa Rican version of an English language rag. But let me warn you, if you get hooked on one of those English language newspapers like the Tico Times, you'll be getting a very slanted perspective as to what's really going on in that country. Sure you'll have some of the major news stories in English, but you'll never get the real pulse of what's happening in the country, you'll never really know what's happening with the common people down on the street. Because it's a touristy first world, mostly gringo style perspective, and all the advertisers are somehow related to the tourist industry. Like hotels and first world development projects and such.
[02:23] So as you might imagine, everything's going to be slanted very positively towards the country so that the advertisers are happy, because if they're not, they'll pull out their sponsorship. It would be like Detroit back in the days of the muscle cars, saying bad things about Motor City products, and praising a young upstart company named Toyota. Well you know back in the old days when Detroit was a powerhouse, that would never have happened. You get the idea. For example, here's something you're never going to read in the Tico Times. Now listen to this. Here's a news article that came out of La Nación, that's Costa Rica's big daily newspaper. In Spanish of course. Now listen to this carefully, because it might shock you. It says, and I'll translate, the head of the Costa Rican prison system was detained last night in a state of drunkenness after he lost control of his car in downtown San Jose and crashed into 12 other vehicles finally coming to a stop after hitting a pole.
[03:11] He has not been charged as of yet for any of the offenses, and presently remains incommunicado in his own house. Well, how do you like that story? And this guy is the head of the Costa Rican prison system. And just a little comment on that. You have to realize that down here in Latin America, it doesn't matter what your qualifications are. Every single high-level position, including cabinet positions, in Latin American governments are filled by friends, cronies, and family members. And all the government bureaucrats in big salary positions are big political supporters of the president and the party in power. And speaking of political patronage in Latin America, let me go off on a little tangent here for a minute. And for this, I'll read another newspaper article that just came out from the biggest major daily newspaper in Bogota, Colombia. And let me set this article up by saying it's election time in a lot of countries down here
[03:59] in Latin America right now, including Colombia. So every day, the daily newspapers are just filled with news of the candidates and election stuff and all that. And the newspapers love to report the dirty deeds that the candidates and their parties play on each other. And the public likes to hear about that stuff too, because the fighting down here between parties gets absolutely vicious and oftentimes physical. It's nothing like dirty politics up in the first world, where they might sling arrows at each other and leak dirty stories and hack each other's emails and websites and all that, even to the point of uncovering and revealing each other's sexual perversities. And that's the kind of junk the first world public seems to gobble up too. However, down here in Latin America, political parties have taken the fight against each other to a completely different level. But it surprises none of the locals down here because it's been going on forever and ever.
[04:46] But after I read this article to you, you're going to be shocked, I guarantee it. OK, so here's the article out of a Bogota, Colombia newspaper. It says, in the four months leading up to the national elections, there have been 687 reported death threats against candidates running for Congress, mayor and governor, 22 physical attacks where candidates have gone to the hospital, seven kidnappings of candidates and two murders. And that's just in Bogota, a city with a population of about eight or nine million, which for its size is normally a very peaceful city, despite of all those old rumors you might have heard about drug lords and all that. And down here, when a first world expat or tourist first hears about this kind of campaign violence, the first thing you think is, man, these people really take their politics seriously,
[05:33] which is very true, but it takes a little while to figure out exactly why. Now, I do remember once reading in the paper when I was back up in Chicago over 20 years ago about a US mayoral race going on, where during a press conference, one of the candidates pulled out a gun and shot his opponent, and that was on live TV. But you know, in a country like the United States with about 300 million people, you're going to get the odd nutcase like that once in a while. But down here in Latin America, all of the 20 countries, every single one of them, has an ultra high level of violence just like that when campaign time comes around. And let me reassure you right now, it has nothing to do with tourists or expats or even the general population. They're not involved in it at all. There's no danger for anyone who lives or works outside of politics. It all happens within that special clique that's vying for power.
[06:19] And that's because the kind of power you have and the money you make when you're in high-level political office down here is something that every Latin American blowhard who doesn't have a real job aspires to, which, come to think about it, pretty much describes every politician in the first world too, now doesn't it? With the exception of Ron Paul, of course. But you see, down here in Latin America, because there's virtually no transparency in government, once you become a mayor, a governor, or a congressman, you become kind of a feudal lord of your own district. Not only do you have your own bloated, gigantic staff of cars, aides, and bodyguards. You control public works, jobs, and infrastructure projects in your district too, and you get the final word when handing out million-dollar contracts. Not to mention, you have control over hundreds of patronage jobs in your district, sewer, water, schools, maintenance, accounting, you name it.
[07:05] The mayor and the governor and the congressman can pick and choose who they want to fill those spots. And that's why every four or five years there's a huge revolving door of people going in and out of the municipal buildings and the halls of congress. And if you can get one of those jobs yourself, you're in there for four years at a very high salary. That is, compared to the average guy doing the same kind of work in the private sector. For example, a good friend of mine who's a lawyer down here spent a lot of time supporting the political party that won the last election down here in Columbia. And after his party did win, he immediately got a job as an assessor to one of the congressmen, along with an official title, an office in the building next to congress, a blackberry, a computer, unlimited phone service, a driver, and a car. And he only goes down to his office near congress about two hours a day.
[07:51] He wouldn't even do that, but he has to actually show up and sign in to get paid. But two hours a day doesn't really interfere with his regular law practice. And for that, he gets about $3,000 extra a month, which is about twice the average salary for a lawyer that's doing pretty good down here. So that, along with his law practice income, puts him way in the upper middle class. In fact, these days, he's considered wealthy. And when I asked him what he actually does when he goes down to the office down there, in his job as an assessor to the congressman, and by the way, the congressman that he's assigned to has got three assessors just like him, with all those perks too. Anyway, my lawyer friend laughed when I asked him what he did for two hours a day down at the office. Well, it turns out he usually ends up in some meeting or another with other political flunkies. And they usually have their meetings at one of the three or four star hotels nearby,
[08:38] because they're right smack dab in the middle of the business sector in the big city, so it's convenient. Anyway, they have their breakfast meetings almost every day in a hotel, and the government picks up the tab, of course. And believe it or not, in the last three and a half years, he's taken four trips to Europe. He's been to England, France, Switzerland, and Spain. And guess what? His own government didn't pay for those trips at all. Those trips were paid by the sponsoring governments of the places he went to. Because you see, first world governments are always having seminars and meetings, and they always invite third world representatives, of course. And they pick up the bill. And it's all about projects they're paying for or thinking about sponsoring. And it's always good PR and photo ops for the first world country, so naturally the third world country sends over the usual suspects. Qualified or not?
[09:25] Usually not. And they attend useless meetings on trade and infrastructure agreements, drug war and human rights and poverty seminars. Terribly boring sounding stuff like that. Along with the usual brown-nosing and ass-kissing publicity events that usually go along with international conferences and events like that. So anyway, my friend gets a patronage job that pays twice what the average lawyer makes down in this country. Plus he gets an office, a car, a blackberry, a laptop, and free trips to Europe. Not to mention free breakfast every day at a three or four star hotel. And you wonder why when election time comes around, there's hundreds of death threats, physical attacks, kidnappings, and even murders. And that's just among the candidates and the crimes that are actually reported. And anyway, just to add a little fuel to the fire. When my lawyer friend got that patronage job three and a half years ago,
[10:11] he said, Johnny, don't worry. I'm not going to forget about my friends. I'll certainly keep your name in mind if a nice contract comes along. What are friends for, right? I said, okay, what kind of contract you're talking about? And he said, it doesn't matter. Road construction, pothole repair, whatever, airport or park maintenance. We'll find something for you. We'll just incorporate, get a nice sounding name, an office, and a logo. We'll buy an old pickup truck or two, hire some guys, and we're in business. And yes, all you expat wannabes up there. That's exactly how government contracts are handed out down here. But alas, all good and corrupt things must come to an end. And my lawyer's political party did not win reelection the second time around. So he'll have to give up the car and the laptop and the blackberry, the free meals, and the trips to Europe. And when I asked him what he was going to do next,
[10:58] he said he was going to back the right horse in the next election. But in the meantime, he has to go back to his law office in a lower rent section of town and actually work for a living. Now I'm picking Columbia as an example here, but it's true throughout all 20 Latin American countries. Everybody, and I mean everybody, wants to get into politics. Every blowhard with a three-piece suit and an overinflated ego, that is. And almost none of them want to get into it for the right reasons. Like raising the tide for all the citizens in the country. Forget about it. No matter what they say or do during the election cycle, almost none of their promises ever come to pass. Except for their friends, family, supporters, and social class. Which really isn't much different from politicians in the first world. Though in the first world, because there's more transparency, the politicians up there are a little bit smarter in the way they lie in steel.
[11:44] Because there actually is a chance they'll get bounced out on their butts or even go to jail. So of course, everyone wants to get into high-level politics down here in the third world, because that's where the real power and favors are. And that takes a lot of money for press and TV ads and free giveaways, like free t-shirts and hats and food giveaways, to the very lowest segment of the population, who are rounded up like cattle during voting time with a promise of that free stuff and a free lunch. And that's how they do it. They round up the sweaty masses who don't know any better. The people making $300 a month or less who can barely keep food on the table. Now you give a guy like that a sack of rice or sugar, and you put the party slogan on the sack. Well, needless to say, the whole family is going to vote for that guy, even though most of the time that food was actually donated by a first world charity like HAIR or some other international group or charity.
[12:30] I've seen it myself. I've seen sacks with political slogans all over them and down in the corner. There's the original stamp by the charity or NGO that brought it into the country. And the one I happened to see came from a Methodist charity. I really wish I had taken a photo. Anyway, so you have to be rich to get a high-level government job, or be some powerful guy's brother-in-law or just a huge campaign contributor. And that's why in those high-level government jobs, you see those same last names over and over again, generation after generation. You think the Bushes have a political dynasty? You should see the dynasties down here. Sometimes the very same family controls the presidency and the cabinet for 30 or even 40 years. You just have to look at Mexico's recent political history and you'll see that that's a fact. So even at the low level, everybody wants a government job.
[13:15] And why is that? Because government jobs always have inflated salaries and you almost never do any real work. And of course, it's almost impossible to get fired unless you just never show up, or you get caught screwing the boss's wife or something. Though I'm not sure they'll even fire you for that. Anyway, let's talk about inflated government salaries down here for a second. Take a low-level secretary. Now in the private sector, down here in Latin America, a low-level secretary makes about $250 to $300 a month to start. That's in the private sector. But in government, she's going to make twice that, just walking in without any experience whatsoever. And that's the way it is throughout Latin America. A government secretary is going to make $500 to $600 a month. Plus in government, no one's going to fire her. There's really no pressure because the people don't expect much work out of you in government.
[14:02] So the secretary has plenty of time to make personal phone calls, visit the bathroom, text message, surf the internet, and file her nails to her heart's content. Whereas in the private sector, she'd actually have to work. And if she didn't perform, she'd get fired. And it's the same thing in government, whether you're a maintenance worker, an accountant, a gardener, or a cleaning lady. They pay twice what the private sector pays. There's no pressure. No one expects much out of you. And in fact, if you are an excellent, good, fast, diligent worker, someone's bound to tell you to slow down and don't rock the boat. And come to think of it, doesn't that remind you of government workers up in the first world too? So just like up in the first world, for the most part, government jobs are a refuge for the lazy and the uninitiated. And of course, there is that very small percentage of government workers in the first world and down here in the third world
[14:49] that actually have an idea when they get in there that they're going to do something good. They actually have a plan to raise the tide, to actually improve the system. But it always seems that after a while, after they realize what the system's really like, they get worn down so much that they just go along with the flow too. And speaking of Latin American news stories that are not going to appear in first world newspapers, and tend not to get into the English language press down here either, well, here's an interesting article for you. One that pretty much spells out in no uncertain terms the real problems they have down here with the malignant bureaucracy in government. Now, this one's a letter to the editor. And down in Latin America, all the newspapers do have a section for letters to the editor. And 19 out of 20 of those letters are complaints of one kind or another, which I guess is the same in the first world, right? But here's the odd thing about these letters to the editor.
[15:35] When someone does submit a complimentary letter to the editor about some help they've received or some great service they've gotten from a local retailer or from customer service somewhere or whatever. And oh yeah, there's always a few letters about good Samaritans who've helped someone on the street. Anyway, when the letter's not about praising some extraordinary customer service person or a good Samaritan. Anyhow, there always seems to be a letter or two complimenting a government worker for doing the job they should be doing. In other words, the common folks down here are so used to government employees not doing their jobs or just sitting on their non-responsive dead asses that when someone in government actually does do something right or in good order, sometimes people actually write letters to the editor, not realizing that that government worker was actually doing the job he was paid to do.
[16:21] No more, no less. I mean, the public is so used to this big parasite called government that they expect almost nothing in return from the people who work there, which is a lot different than the attitude first world people have about their government. First world people too tolerate that parasite called government because they've come to expect a certain amount of competency from them, at least from the bureaucrats at the local level. And they don't always get that, of course. But the street lights still work and the social security checks still come and they don't bounce. And when you turn on your faucet, the water still comes out, at least for now. So anyway, let me read you this little article from a Lima Peru newspaper this week. It's a letter to the editor, a complaint, of course, because most of them are. It says, I was a blood donor at a public hospital in Lima recently and I went down at 5 30 in the morning to get a number and get admitted.
[17:09] And after a half an hour when it was six o'clock, a nurse told all of us in line that we'd have to come back another day because they'd run out of printed numbers and you had to have a number to get admitted. So I came back three days later and the same thing happened. They didn't have numbers and they sent us all home. And then she says, how can it be that when someone tries to do an altruistic act and donate blood with the intent of trying to save someone's life, how can such a simple thing like sticking a needle in someone's arm and drawing blood be so terribly difficult? What's all this with numbers and standing in line? Why can't you just walk right in, sit down and give your blood? Whose idea was this anyway that you had to have a number? I asked the nurse that question and she said it's always been a rule. The hospital director insists on it. Then the nurse said, come back this afternoon or tomorrow
[17:55] because we will have the numbers. We know they're coming. So the lady who is having so much trouble donating blood, the lady that wrote this letter to the editor came back the next day and they did have numbers. So she took one and guess what? They told her to come back the next day at 11 o'clock to give her blood. In other words, you get a number just to get an appointment. So she finally gave up on the public hospital donation. And then a few days later, she went to a private hospital to donate her blood and the whole thing was done in about 20 minutes. They took her right in, sat her down and thanked her. Now you might think she did accomplish her mission because she actually did donate blood. But here's the problem. She tried to donate blood at the public hospital first. And that's the place that really needs the blood because that's where all the poor people go who don't have insurance or money to pay for a private hospital. Because like I've told you before,
[18:41] they do have national healthcare systems down here in Latin America. But they're all pretty much like a VA hospital circa 1950 up in the first world. Some of these public hospitals don't even have toilet paper running water or even gloves. And at least half of the medical machinery is antique, doesn't work or is pasted together with duct tape and chicken wire. Believe me, it's true. And when the average person down here making a few hundred dollars a month falls down, gets into an accident or has appendicitis, he definitely can't afford a private hospital. Which by the way are always many times better than a public hospital. And private ones give first world or near first world treatment and service. And even though private hospitals are cheap compared to first world prices, usually about a third of what you'd pay for identical treatment up in the first world. Anyway, the average guy down here just can't afford that. Consider this.
[19:27] If a hospital bed up in the first world costs 300 bucks a day and it costs a hundred dollars a day down here, a guy making $300 a month couldn't even begin to afford even a small stay in a hospital. And he definitely can't pay a thousand dollars a year for private insurance. So naturally he goes to the public hospital, which is supposed to be free or have a very very low copayment, but are absolutely horrific compared to private hospitals. So what choice have they got? Anyway, the woman that wrote this letter to the editor was trying to do a public service, going down to the public hospital and donating blood where it's really needed. But as we just saw, the bureaucratic idiots put the kibosh on that plan. And here's another article, this time in a Sao Paulo Brazil newspaper, talking about something I'm sure they never bothered to print up in the first world or in the English-speaking papers down here. Okay, so here's what it says.
[20:14] Brazil just passed a law increasing its import taxes on brand new imported cars to 30 percent. And it goes on to say that Japan, Australia, South Korea, the United States, Germany and the rest of Europe are very critical of the measure. Okay, think about that for a second. 30 percent import taxes on vehicles. And it goes on to say that in the last year, there's been a big slowdown in Brazil's economy as compared to the previous four years, where it outperformed all the other 19 Latin American countries in GDP and growth. And it turns out the reason for that big slowdown is that South Korean and Chinese products of all kinds have flooded the Brazilian market. And now all of a sudden growth is way down. So economically speaking, just now they're experiencing the same thing that first world countries have been experiencing for the last five or ten years,
[21:02] ultra cheap Chinese and Indonesian products, which has the effect of slowly strangling local producers and manufacturers who can't possibly compete with that. And of course, that's what's killed our manufacturing up north, which sent every big company in the United States and Europe into downsizing mode. And now it seems like the whole world's manufacturing base is in China and the Orient. And though Brazil is trying to cut that problem off at the past, by slapping big tariffs on high ticket items like cars and trucks and motorcycles, you have to figure they pretty much won that battle but they're losing the war. Because once those cheap Chinese products get into the market, the local manufacturer's income drops and they start laying off people. And it's because of that and some other local situations, like Chinese buying up mining and cropland on a huge scale down here, most Latin economists and forecasters are saying,
[21:49] Brazil's big boom phase is just about over and it's never going to see the growth numbers again like it's seen in the last four or five years. And with the Chinese buying up all that timber land, farm land and mining land, the thought is they're going to need a hell of a lot of manpower. But they're not going to hire local Brazilians to do the majority of the work, which is another big looming problem for Brazil. Because even paying the average Brazilian wage of $300 a month is way too high when they can import Chinese workers who make less than a dollar an hour and pay them $100 a month instead of paying local Brazilians $300. And the Chinese are smart, we know that. And when they came down to Brazil and invested in these huge tracts of land and took out huge mining leases on undeveloped government land, they waved those billions of dollars in front of the Brazilian government
[22:36] and asked for certain employment concessions and the right to bring in some of their own people from China on the fast-track system, which was a way to open the door for cheap Chinese labor to come in. So what you see down there is in effect the same thing that's happened up in the first world, the Chinese flooding a country with cheap products, only in this case they've gone one step further and bought up mineral rights, farmland and timber land as well, so that they'll always have a steady supply of raw materials when theirs run out. So what does that mean for Brazil? That means that pretty soon the party's going to be over. And think of it, the Chinese don't even want to use Brazilian labor, it's too expensive, they want to import their own. Now admittedly, Brazil has its own car manufacturing plants, but they're all foreign plants brought in to produce foreign brand names like Volkswagen and General Motors.
[23:22] And when you build those cars in Brazil, you avoid that import tax. And the Brazilian government says they raised that car tax to 30% to stimulate auto production in the plants already in their own country, and to try to lure in other outside manufacturers to build plants down there. In the meantime though, Chinese goods of all kinds have flooded the market and the Brazilian economy is hitting the brakes. And the problem is, if the economy is slowing and businesses aren't hiring, I don't see that there's going to be a rush of foreign car makers coming in to build new plants under those conditions. And when I discuss this with other expat and Latins in the know, I always hear, but Johnny, you know what Brazil's got going for it that no one else has? They produce huge amounts of ethanol. And the way that Brazil's going with their ethanol program, sooner or later they'll be off the imported oil addiction completely. I've heard that argument a dozen times.
[24:09] But I always have to straighten them out, because there's one thing they don't seem to realize. The reason why Brazil can make that ethanol for between a dollar and two dollars a gallon, which sounds like a great alternative to regular gas at half the price. Well here's the thing, the people that work on those big sugar farms that produce the ethanol, those guys are making two or three hundred dollars a month. And on that salary, none of those guys could ever afford a car. And when you've got really low paid workers like that, what that is is an indirect ethanol subsidy. A very huge subsidy. Because if these guys were paid a real middle class living wage, even in Brazil of let's say six or seven hundred dollars a month, the labor costs would double in those sugar fields and so would the price of ethanol. Because labor costs in an operation like that are by far the biggest cost in the equation.
[24:55] So you have to look at it this way, if and when wages in Brazil creep up higher and higher towards first world levels, which by the way is one of the government's objectives and platforms. Anyway, when wages creep up, so will the cost of ethanol. And right now, the reason why people use it down there is because it's cheaper than gas. They don't care that it's cleaner or more environmentally friendly. Don't believe that propaganda. But just a slight hike in real wages at the bottom end of the scale will have an immediate negative impact on what everybody considers right now to be their greatest triumph. The so-called flex fuel economy that they've developed. Or you can look at it this way, up in the United States you can make ethanol out of corn all day long. So why doesn't everybody switch over to making ethanol up there? Because the cost of labor in the first world completely wipes out the profit.
[25:42] And the only reason why the price of ethanol is a little cheaper than gas in the United States is because corn itself all through the United States is subsidized. And that's what they make ethanol with. If you took all the government subsidies off corn up in the first world and had a corn ethanol plant that used first world laborers, ethanol would not be cheaper than gasoline at all up there. In fact, it would probably be a little more expensive. And then there's always that controversy about taking productive farmland and using it for ethanol production instead of for feeding humans and animals. Which gives us another thing to consider. You have to remember that farmland up in the first world, good farmland that is, is certainly double, triple, or even five times as expensive as the same kind of farmland down in Latin America. Which is another kind of a hidden subsidy for anyone producing ethanol in Latin America.
[26:29] Because if you got your land really cheap and you're only paying your people $300 a month, it stands to reason that you could keep your ethanol price very low too. So ultimately, it would be a very good expat business down here having an ethanol plant in a small farm. And just think of it, down here in Latin America, you get two or three crops a year instead of just one like you get up north. So you'll have double or triple the yields. So with just a few dozen acres, you could easily produce your own ethanol for a buck a gallon. And if you sell it for two or three, you'll have a really nice business with a first world income. And for very little capital input, maybe only $40,000 or $50,000 and a lot less if you lease the land instead of buy. And the nice thing about a business like that is you can leave all the manual labor to the locals. You could handle the technical stuff yourself, the little refinery.
[27:16] And by the way, they sell those things complete online and in a kit. So just look it up on Google. I'm telling you, it would be a great business for an expat. So any of you guys out there with a green thumb, start Googling small commercial ethanol production. It's not rocket science. Even I could do it. You've been listening to The Expat Files, living in Latin America, coming to you each week from somewhere south of the border. And don't forget, you can email me on anything at all about Latin America. The Expat Files at gmail.com. Once again, The Expat Files at gmail.com. See you next time on Spamos.