Viva Team
To bribe or not to bribe? That is a very good question. On the one hand, it’s (usually) against the law. Then again, so is speeding. Yet both are commonly done in Latin America, where you can bribe your way into everything from pardon for a traffic violation to no-bid contracts for infrastructure projects.
In general, we think it’s a bad idea. Not only can offering a bribe land you a fine or even some jail time, it can also be detrimental to the legal or economic systems that fall prey to it. It violates the trust between citizens of a country and its elected leaders. It’s ultimately not a very effective way of doing business. It’s also earned Latin America a bad rap.
That being said, we’re talking about a part of the world where regulations often seem rather asinine, and processes that should be relatively painless can end up dragging on for months. So, if a $20 bill can get you out of a $400 ticket or a small favor can get your paperwork pushed through a little faster, then, by all means, bribe away.
But do it at your own risk.
Ursa
Here are a few tips to know before you start your negotiations.
1. Your best bet is to know the laws or requirements and honor them.
Being proactive in educating yourself on a country’s laws will keep you out of many of the situations where you might find yourself resorting to a bribe. Find out whether you need an international driving license or if your U.S. identification will suffice. Know all the paperwork that’s needed before you apply for a visa or a building permit.
By doing your best to play by the rules and abide by the law, you’re far less likely to end up in a situation you’ll need to bribe your way out of. Furthermore, as a gringo, you’re already a natural target. You’re more likely to get pulled over or hassled over a seemingly routine process. This is likely due largely to the fact that North Americans are perceived as being rich and carrying around wads of cash.
So, since you’re already practically begging to be solicited for a bribe, don’t do anything else to call attention to yourself. Like riding around in a Jeep with surfboards strapped to the top of it blaring Bob Marley.
2. If you do find yourself in a bind, try some smooth talking first.
A lot of people you’ll deal with in Latin America, from border patrol to bicycle cops, are less than thrilled to be doing what they’re doing. They’re often overworked and underpaid, and sometimes they’re just plain tired of standing in the hot sun dealing with the likes of you.
As a result, a smile and a “gracias” or “por favor” can often go a long way. If they still won’t bite, there’s also the option of playing that gringo card and actually using it to your advantage. “But, ma’am, I didn’t know I needed a copy of my bank statement to go with my application.” Or “No, officer, I had no idea my rental car had an expired tag. I’ll go right now and let them know, and you can get on back to your air-conditioned patrol car.”
3. If a bribe is unavoidable, just don’t be the one to bring it up.
When you find yourself in a dead-end situation, you’ll know when you’ve finally reached a stalemate. You’ll have made your case, and they’ll have made theirs. And then comes the silence. The moment where you know it’s time to either give in or up the ante.
If you do decide to offer a bribe, make sure you phrase it carefully. Don’t offer money or favors outright. Just ask if there’s another alternative, a mutually beneficial way to get what you’re after, or an incentive to speed up the process. “Officer, are you sure revoking my license is the only option?” or “Sir, is there anything I can do to help get my application to the top of the pile?”
And then shut up.
Once the ball’s in the other person’s court, it’s up to them to either propose the terms or shut it down. If they threaten any kind of recourse, backpedal like hell. It’s also best to make sure no one else is in earshot of your conversation. An official is much more likely to take the bait if no one’s around to know about it.
4. Only risk as much as you’re willing to lose.
It’s worth a few dollars to have a tour guide let you photograph a rare exhibit, and $20 is nothing compared to a hefty fine and a court appearance. But be careful bribing when it really counts.
There are several reasons for this. One is that it rarely ends with one bribe. If you pay your way out of one requirement, you’ll be fully expected to fork over even more to get over the next hurdle. It’s a slippery slope.
Another reason is that there’s less of a guarantee that things will be done right. And, if you paid a bribe to make it happen, there’s very little you can do about it without implicating yourself. Not to mention, Latin American officials and policies often change completely with every new election. Just because you paid off a prior official, you could find yourself right back at square one (or, worse, even further behind) when a new administration takes over.
Bottom line? If you bribe your way out of a traffic violation, about the worst that could happen is that you end up with the fine or ticket anyway. But try it in a business setting, and the repercussions could be much worse.
If there’s any link between immigration and economic growth, then it’s high time U.S. politicians took a page from the Panama visa playbook.
While that may sound odd, to suggest that a developed nation should take political cues from a third-world country, it makes a bit more sense when you consider the fact that Panama has posted GDP growth rates averaging around 8.5% over the past decade.
During that same time frame, the U.S. has hovered mostly between 0% and 4%, with a lovely plunge down to -8% circa 2009.
During this period of starkly contrasting economic up- and down-turns, the two nations have also seen their governments’ stances on immigration diverge in opposite directions.
Lady Liberty Is a Liar
First the U.S. Historically a nation that welcomed immigrants from troubled nations, particularly those who had something to offer the economy, the U.S. has become home to over 11 million undocumented workers, a limited number (85,000 to be exact) of work visas for foreigners, and a talented pool of international students who are having to go elsewhere to find work following graduation.
What happened to The New Colossus? “Give me your tired, your poor.” I have a feeling the ancestors of many U.S. residents are rolling over in their borrowed graves.
Oh, and despite this willing group of skilled workers, 39% of U.S. employers reported having trouble filling jobs last year, according to a survey conducted by the Manpower Group. Yet unemployment still held steady between 7% and 8%. Go figure.
Washington’s response? Uh, well, they don’t seem to have one. At least, not yet. Immigration reform is a topic that’s been debated, delayed, and avoided by politicians on both sides of the aisle. Currently, there’s still no resolution in sight.
Panama’s Predicament
Contrast this with Panama. It’s a country that hasn’t been all that hospitable to foreign workers.
Most Panamanian visas prevented immigrants from working for domestic companies, and strict labor union policies kept companies from employing foreigners to fill more than 10% of their available jobs (15% for experts and those in skilled technical roles). All in an effort to keep outsiders from taking jobs away from Panamanians.
These tactics worked,and Panama has enjoyed low unemployment rates (currently near 4%). However, it’s also been blazing a trail as one of the world’s fastest-growing economies.
In a race to catch countries like Singapore and position itself as a communications, logistics, finance hub, Panama has been a frenzy of activity. The construction of new hotels, office buildings, and housing complexes have created a demand for service and construction workers. A multi-billion dollar canal expansion alone has generated more than 30,000 jobs.
Good news, right? Well, yeah, all except for the fact that it’s a bit of a stretch for a country of only 3.5 million people that has no way of importing additional manpower with any kind of quickness.
Not to mention, many of the jobs needing to be filled couldn’t be staffed with Panamanians due to languages or other special skills needed. This kind of training could be provided, but that takes time. So do improvements to the country’s education system, although those were still implemented anyway.
Michaelseangallagher
If You Can’t Beat ’em, Find a Shortcut
Panama needed a solution fast, and President Ricardo Martinelli delivered one when he signed an executive order offering immediate permanent residency to citizens of 48 countries that “maintain friendly, professional, economic, and investment relationships with the Republic of Panama.”
Known as the “Specific Countries” or “Friendly Countries” visa, the decree created a fast track to citizenship for skilled workers who could help meet Panama’s increasing demand. Not only can they meet immediate staffing needs, they can also help train Panamanians for technical jobs and management-level positions they couldn’t have otherwise attained.
It’s quite brilliant really. Rather than fight the labor unions or create a virtual filibuster of political back-and-forth, Martinelli just handled it.
Labor unions want 90% of workers to be citizens? Well, now new residents are attending mass legalization ceremonies called “melting pots” where they’re immediately granted a work permit. They legalized over 5,000 foreign workers in April alone.
Panama is serious about sustaining its record growth and embracing the talent of skilled workers from all corners of the globe. For now, anyway.
There’s a New Sheriff in Town
A new president, Juan Carlos Varela, will take office in July of this year. It remains to be seen whether he will repeal Martinelli’s Friendly Countries visa, as is generally the custom of new incoming administrations.
The president-elect of Panama usually undertakes, as their first order of business, the act of cleaning house and replacing and reversing all the people and policies employed by the previous leader. Hopefully, though, he too has been solidly convinced by the incumbent’s actions and will leave the groundbreaking visa program as is.
The majority of the nation has taken note of the tremendous success the country has seen by acknowledging the need for a talented and diverse workforce in order to sustain its economic growth.
Now, if only Washington would follow suit.
There are a lot of misconceptions surrounding offshore banking. And if you think owning an offshore bank account is a maneuver only reserved for the likes of Al Capone, James Bond, and Mitt Romney (i.e. tax evaders, international spies, the super wealthy), then think again.
EPSos
The truth is that there are a number of important benefits to diversifying your assets into foreign accounts. Even for normal folks like you and me.
Ignore the Bad Rap Associated with an Offshore Bank Account
Even though Hollywood & the press like to associate them with crooks, mobsters, and otherwise shady characters, offshore accounts are actually quite common. In and of themselves, they aren’t illegal or immoral or whatever else the media tried to convince you of during the last presidential election.
The name itself came from the fact of the Channel Islands being “offshore” for account holders in the U.K. The term stuck, and today it refers to banks in any place other than the account owner’s home country, whether an island nation or a landlocked country like Switzerland or Luxembourg.
Despite their questionable reputation, an offshore bank account can be an excellent tool for the savvy investor. They’re of particular importance in a time when U.S. regulations and controls are becoming more stringent and restricting, all in the name of preventing terrorism.
Here are a few of the benefits they provide:
Increased Privacy
In the U.S., the walls protecting your personal financial activities are becoming more and more transparent. Any number of governmental agencies can easily gain information on your accounts, a trend that’s becoming even more common thanks to bills like the Patriot Act.
Not so with international banks. While foreign financial institutions are required to report to the IRS on their U.S. account holders, your information is generally much more private. Particularly if you own the account under the name of a foreign corporation or partnership.
Why Does This Matter?
Say, for instance, you’re wanting to buy up stock in a company you plan to take over. In the U.S., large trades like this are public record, and such activity could attract the attention of other investors who could then follow suit, driving up prices. Buying through an offshore bank account could help protect your identity.
Asset Protection
Another benefit of the privacy associated with offshore banking is the ability to protect the funds you have deposited in offshore accounts. In the incredibly litigious environment in the U.S., lawyers don’t think twice before suing you for all you’ve got.
But since U.S. courts don’t have jurisdiction overseas, your foreign accounts could be safe from the whims of the court. The same is true for any inexplicable government seizure of your assets.
Who Benefits from This Advantage?
This kind of protection could be beneficial to those whose occupations or activities put them at high risk for lawsuits, such as physicians who could be sued for malpractice.
Lower Taxes and Fees
Foreign banks generally have lower operating costs and overhead than their domestic counterparts, and that savings is generally passed on to you, the customer, in the form of lower fees.
An offshore bank account also offer some tax advantages, although not to the extent that you might be thinking. Americans are required to report and pay taxes on income earned anywhere in the world, and the punishments for failing to do so are severe. So evading (or fudging on) tax liabilities is not the goal I’m talking about here.
So What Are the Tax Savings?
The tax benefits are realized more so in the sense of avoiding or deferring taxes associated with conducting business from a foreign account. If you have an account in the country where you’re investing, interest can be paid gross without the withholding tax that might be imposed on a U.S. account.
Public Stock
Better Rates
This one’s pretty self-explanatory. Due to the aforementioned lower operating costs, foreign banks can often offer much better interest rates on savings and money market accounts than those in the U.S. And, no, I’m not surprised your domestic bank has failed to mention that recommendation.
What’s more, you can also often find lower rates on personal and business loans as well.
Who Could This Help?
Well, anyone really. From someone who’s looking for a better alternative to low-risk low-interest U.S. savings accounts to someone who wants to move to the tropics and open up a small business.
Less Political Risk
Many U.S. citizens have concerns about America’s financial situation and where the country’s headed. As a result, many are embracing the opportunity for “jurisdictional diversification.”
Ambiguous privacy laws leave U.S. citizens subject to search and seizure with little justification. The national debt is growing at alarming rates, and Americans’ retirement money has become the government’s latest target. It’s easy to understand why many would be in a hurry to get their funds offshore.
Who Does This Motivate?
Anyone who doesn’t want their assets frozen, seized, or redistributed. Or at least those who want to have some money set aside to hire an attorney if they do wake up to find all of their domestic accounts frozen.
Greater Investment Opportunities
Having an international account often makes it much easier for individuals to enter the global market and access a variety of investments. While the U.S. places legal restrictions on a number of transactions, those regulations won’t be a problem offshore.
What’s more, you’ll absolutely need an account in any country where you intend to invest, live, work, or even visit frequently.
How Does This Help You?
The U.S. has a special way of making transactions, even those that aren’t illegal, so much of a hassle that they might as well be.
Take IRAs, for example. While real estate is an ideal investment vehicle for long-term retirement accounts, the overwhelming amount of bureaucracy associated with most U.S. custodians and brokerage firms makes it next to impossible to purchase land with IRA money.
By changing to a Self-Directed IRA, you can have the freedom to transfer those funds offshore and invest in whatever you choose. You can find out more about our experience with raw land investment and why it’s such a great option by downloading our free ebook, Pay Dirt.
Explore these and other opportunities for getting the best return on your investments by broadening your horizons to include offshore options.
Sxenko
Don’t be fooled by Obama’s latest promise of “Opportunity for All.” His plan to secure “a dignified retirement for all Americans” is little more than a thinly veiled plot to use the hard-earned dollars of middle-income Americans to finance the government deficit.
And if things continue in the direction they’re headed, your existing retirement savings could be next.
Enter myRA.
The myRA program, or My Retirement Account, was launched by way of executive order (hence the only way to get it passed without Congressional approval). The program can’t be made mandatory without Congress passing the required legislation.
But don’t worry. It’s coming. Auto-enrollment is one of the features in a separate proposal that’s already being pushed forward by the Obama Administration.
What’s the natural next step once the program becomes mandatory? Well, at that point the government will be only one step away from getting its hands on an estimated $5 trillion in private IRA’s. And you can bet your bottom dollar they’ll be coming after them.
That’s why I strongly recommend getting your retirement accounts overseas while you still can. There you can invest in non-traditional options, like real estate, that have tremendous potential for growth and are subject to much more favorable taxes than you could expect to pay in the U.S.
Here’s What the Obama Administration Is Saying About MyRA
Basically, this program is designed as a starter retirement savings program for those in low- and middle-income households (those earning less than $191,000 per year). It’s also geared towards workers whose employers don’t offer savings plans or workers (such as part-time employees) who don’t qualify for the plans that do exist.
With only a $25 required initial investment and allowable contributions as low as $5, it’s a way to encourage those who currently aren’t saving for retirement (or can’t afford traditional options) to begin doing so. And with principal protection, backed by the U.S. government, the account can never go down in value.
The account will function like a Roth IRA, since contributions are made with after-tax dollars. As a result, post-retirement withdrawals are tax-free. There’s also no penalty on withdrawals made prior to retirement, other than the minimal taxes owed on any investment gains.
Funds in the account will earn the same variable rate of interest as the Government Securities Investment Fund (GSIF or “G” Fund) available to federal employees in their Thrift Savings Plan, which has earned an average annual return of 2.24% over the past 3 years (barely outpacing inflation).
Workers can keep the account until it reaches $15,000 or 30 years (whichever comes first), at which point it must be rolled into a private Roth IRA. They can also take the account with them when they change jobs.
Here’s What They Aren’t Saying
There are a number of problems with this proposed plan. Take for example the fact that the plan makes no provision for any financial education or investment planning to help these individuals understand their long-term needs.
Many who opt to enroll will mistakenly assume they are saving enough for retirement, when in fact their minimum contributions and low-return investments won’t even remotely suffice. Easy access to the principal also make the accounts entirely too easy to raid when something unexpected comes up.
However, these and other obvious flaws with the program are the least of my concerns.
What’s much more alarming about MyRA is that it’s just another way that the government is continuing to infiltrate the privacy and freedoms of U.S. citizens.
Government-backed retirement accounts will make your savings much more visible to the government. As a result, your retirement money will become the target of a myriad of future special taxes.
And let’s be clear on what’s really driving this initiative.
Currently, the U.S. government is roughly $17.5 trillion in debt. It’s what happens when the only way you’ve found to narrowly avoid bankruptcy is to print more money.
To an entity that’s sitting that far in the hole, the estimated $5 trillion in private retirement accounts looks awfully enticing. They need that money. YOUR money. And MyRA is a natural first step for getting their hands on it.
Why sell bonds in the public market when they can raise funds and finance the government with your savings? And I shudder to even think what kind of implications such a shift would have on the private investment sector.
Rachel
Make Sure You’re the Only One Profiting from Your Hard-Earned Retirement Dollars
Can you imagine loaning your entire life savings to your broke cousin Johnny, whose inability to balance a budget over the course of many decades had left him snowed under in debt and owing money to every single member of your family tree?
No, that’d be absurd. But on the flip side, why should you relinquish your decision-making ability with your own retirement savings and have them forced into treasury bonds to shore up a reckless U.S. government with no better track record?
Make no mistake. The U.S. government is running out of options for funding its ever-increasing debt. And your retirement savings are an easy target. I’m not saying Uncle Sam is going to come knocking tomorrow, but the implementation of this program (and the pending bill that could make it mandatory) should be all the proof you need that it’s a very real possibility.
Explore Your Options
It’s time to give serious thought to moving your retirement savings overseas while you still have that option. MyRA isn’t the only argument in favor of such a move. But it is one of the most compelling.
Though you may think you have no choice but to leave your accounts in the hands of traditional IRA custodians, that’s actually far from the truth. Options like Self-Directed IRAs put YOU, not a corporate-run financial institution (and certainly not the U.S. government) in charge of deciding where your money is invested.
There are tons of, perfectly legal, options. One of my favorites is real estate, particularly raw land in emerging international markets. I’ve seen first-hand what an incredible investment this can be, and its more long-term nature makes it the perfect vehicle for investing with your retirement dollars.
You can learn more by reading our free ebook Pay Dirt. It explains our blueprint for land investments in much greater detail.
The stats don’t lie. America’s debt is growing at unsustainable levels, and the government shows no signs of reigning it in. Don’t miss the obvious signs that the private retirement accounts of financially responsible citizens like yourself seem to be the best, if not only, solution they’ve got.
The logical response is to take control of your IRA funds yourself and diversify at least some (if not all) of them into jurisdictions that are behaving more responsibly. Hopefully, when Uncle Sam does get to your account, it’ll be one investment too late.
Shantanu Bhar
You probably knew the Patriot Act threatens the privacy of presumed terrorists. But did you know it can do the very same for you as an innocent citizen? Or that it, and other measures like it, are slowly eliminating the options you, as an American, have for protecting your hard-earned assets.
How is that possible? The same stringent reporting criteria required of U.S. financial institutions (all in the name of preventing terrorism) is being enforced on their foreign counterparts, and the accompanying risks and hassles are becoming entirely too cumbersome for them to bear.
In fact, over the course of a dozen years since the Act first passed, it has been systematically used to destroy people’s ability to move money offshore as the government reaches for new ways to keep capital from fleeing its borders. As a result, there has never been a more urgent need for Americans to mobilize and diversify their investments while they still can.
Many overseas options, like land and investment properties, or opening a new bank account offer asset protection potential in addition to investment returns. Allowing investment or funds to grow outside the country gives you more tax options and best of all tremendous protection from political and litigious liability. But the window of opportunity for taking advantage of these and other options is closing fast.
Most Americans Have No Idea What the Patriot Act Does
The sad part is that so few Americans realize that, or understand the extent to which, laws like the Patriot Act even affect them. Most people’s awareness of its scope is limited to rumors of roving wiretaps and the based-on-a-true-story movie “Rendition” (2007) where an innocent man (playing opposite Reese Witherspoon) was detained, interrogated, and tortured for his suspected involvement in a terrorist bombing.
These events, while shocking, have been brushed aside by most U.S. citizens who think (or at least hope) that “that’ll never happen to me.” Alas, there’s so much more to the law and how it affects private individuals on a day-to-day basis. And the trends of decreasing privacy and increasing bureaucracy show no signs of stopping.
kevin H.
You Mean the Patriot Act Isn’t Just Used to Prevent Terrorism?
Introduced on October 23, 2001, following the tragic events of September 11th of the same year, the bill was approved by a whopping majority of both the House and Congress over the course of the next two days.
And, while it may have been well-intentioned and warranted to some extent, the Act’s ambiguity has allowed it to be misused and abused in case after case. Individuals have had their accounts frozen. Banks have been shut down. All based on mere suspicion or failure to comply with the new stringent regulations, not because of any actual illegal or unpatriotic activity.
Much debate has been raised over the constitutionality of the USA Patriot Act and its provisions for rendering even the most private information of its citizens into fair game for the FBI, IRS, and other governmental entities.
While a few of these arguments have been heard, and some provisions of the law even repealed, the Patriot Act has also opened the doors wide for a number of similar laws that continue to infringe on the privacy of everyday citizens and limit their ability to do business both at home and abroad. One of the biggest impacts is the way the bill affects everyday U.S. citizens who are attempting to conduct perfectly legal business transactions overseas.
Otto Nassar
So, What Exactly Does the Act Do?
The USA Patriot Act, whose full title is the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act, implemented major changes to a few key U.S. laws, namely the Foreign Intelligence Surveillance Act of 1978 (FISA), the Electronic Communications Privacy Act of 1986 (ECPA), the Money Laundering Control Act of 1986 and Bank Secrecy Act (BSA), as well as the Immigration and Nationality Act.
Here are some of the most important changes:
Searches and Surveillance
Title II of the Act governs the monitoring of suspected terrorists’ communications. This is the section that allows for things like email and phone surveillance and makes getting these techniques authorized much simpler, as they eliminate the need for a warrant. With relative ease, the government can seize electronic communications, voicemail messages, and other information and share the same with a network of law enforcement agencies.
Section 215
Of utmost concern to most citizens is Section 215 of Title II. This section broadens the scope of the situations under which the government can obtain your records. Basically, as long as they claim to be doing so in order to protect against terrorism (Note: they need not even suspect that YOU are a terrorist), they can get their hands on information from your financial institution, church/mosque/synagogue, medical providers, library, phone company, travel agent, and video store. True story.
It’s hard to say when or how often this being done (or whether or not it’s already been done to you), as law enforcement officials are not required to release any details of searches or surveillance that are performed.
Foreign Intelligence Investigations
This section deals specifically with investigations into other countries and their citizens. As a result, it’s received far less attention since it doesn’t explicitly impact the rights of U.S. citizens.
What it does do, though, is give an incredible amount of unchecked freedom to governmental agencies, as these investigations aren’t even limited to criminal activity or suspected terrorism.
The law also provides immunity from any civil liability to those who assist the authorities with a Foreign Intelligence Investigation.
Money Laundering
This is the section that has the most direct impact on U.S. citizens. For starters, it requires brokers, commodity dealers, advisors, and financial institutions to file Suspicious Activity Reports (SARs) regarding any questionable financial activities. It also prevents them from tipping off these clients when the report is filed.
Section 312
Under Section 312, all U.S. financial institutions are required to implement policies and procedures for identifying foreign accounts that could potentially be used for money laundering. This results in escalated due diligence to identify the ownership of foreign financial institutions, monitor account activities, and hold these foreign banks to the same standards of U.S. financial institutions.
Sections 311 and 313
In the event of a money laundering concern, these sections enforce even more stringent requirements on U.S. financial institutions. They can require beneficial ownership information, enforce stricter “know your client” requirements, and take additional measures when some part of the transaction seems questionable.
Under Section 313, they can even refuse a relationship with a foreign shell bank (one with no physical place of business) that isn’t subject to the appropriate regulatory supervisions.
Section 328
Under this section, U.S. regulatory authorities have the ability to require foreign banks to determine the identification of the originator of any foreign wire transfers into the U.S.
Trader Group
I’m Not a Terrorist, Tax Evader, or Money Launderer. Why Should This Matter to Me?
It’s easy to read about changes that affect the extent to which the government can access your private information and monitor your financial activities and think “What does this have to do with me? I have nothing to hide.”
Well, let me break it down for you. As a U.S. citizen, in order to invest, conduct business, live, work, or obtain residency in a foreign country, you’ll need a bank account in that country. In order to fund that account or take distributions from it, you’ll need to be able to send and receive wire transfers to/from a U.S. financial institution.
Under the revised laws, U.S. financial institutions are required to enforce on foreign banks the same standards imposed under the Patriot Act. If the foreign banks don’t comply, the U.S. bank can refuse any transactions.
And since the law’s guidance on what information it’s necessary to ascertain is so vague, most U.S. banks are erring on the side of caution. Compliance departments continue to add additional asinine requirements. Application forms are getting longer and longer. All due to an increasing fear of failing to meet a threshold of due diligence that hasn’t even been clearly defined.
Lukas
The U.S. Has Made Doing Business With Its Citizens Unattractive to Foreign Banks
These procedures create quite a hassle for even domestic dealings, but imagine the ramifications for foreign banks. Think of the added cost associated with unnecessary internal policies, increased staff training, more stringent client screening processes, and additional oversight measures at every level.
Not only must they jump through a series of hoops and hurdles in order to open an account for and accept funds from U.S. citizens, they also run the risk of being denied consideration by their U.S. institution.
And Let’s Not Forget FATCA
Another doozie enacted by the U.S. government was the 2010 Hiring Incentives to Restore Employment (HIRE) Act, just one of the dozens like it for which the Patriot Act paved the way. A portion of this bill, the Foreign Account Tax Compliance Act (a.k.a. FATCA…a.k.a. “the worst law that most Americans have never even heard of“), requires foreign financial institutions to report to the IRS about their U.S. clients or else face a 30% withholding tax.
What have foreign banks been doing to combat these issues? Exactly what you or I would do if faced with that choice. They’ve started unloading their U.S. clients like a sinking ship tosses excess cargo. Many foreign businesses have also followed suit, eliminating U.S. citizens as directors, partners, and shareholders.
Instead of listing with the NYSE, foreign companies are turning to the stock exchanges of more welcoming Hong Kong or Singapore. The U.S. is becoming increasingly less competitive in the global market, and the economic power is shifting to our overseas opponents.
Matt Smeltzer
What Recourse Do I Have?
So, what about the privacy of U.S. citizens? What about the Fourth Amendment? Is the U.S. Constitution still even worth the paper it’s written on?
The answer to those questions is that Americans have sadly little defense against the infringements described above. Even the Fourth Amendment only prohibits specifically “unreasonable” search and seizure.
I already mentioned the fact that the government need only cite a motive of preventing terrorism to justify their actions under the Patriot Act. If they can then prove that those specific investigations were effective at uncovering any amount of illegal activities (even other peoples’), then I’d say you’d have a pretty weak argument against their reasonableness.
Not to mention, since government agencies, law enforcement, and even foreign entities have zero obligation to notify you of any private information that’s being shared, you’ll likely never even be aware your privacy has been violated.
Opposition to these and other laws, as there are plenty more I didn’t specifically mention here, has been met with little success. And grassroots efforts have proved futile. The U.S. is headed down the same road as countries like Italy which has now placed restrictions on cash transactions over a certain amount.
Countries from Argentina to Ireland have already nationalized private retirement accounts and pensions. Think that won’t happen in the U.S.? Just Google “myIRA,” Obama’s new scheme to fund the deficit…er, I mean…help people save for retirement, which will likely work its way towards becoming mandatory.
Viva Tropical
Get Out While You Still Can
My advice? Stop trying to fight city hall and focus your time and energy on watching out for yourself and your own interests, whatever that looks like for you. Whether it’s making Folgers or Maxwell House your account holder of choice or taking your family (and your money) and getting the hell out of Dodge while you still can.
There are a number of foreign banks, not to mention an overwhelming number of foreign borders, that still welcome U.S. citizens. And many of the investment options available overseas offer the potential for incredible returns that would be unheard of in North America.
Take raw land investments, for example. From my years of experience in the Central American market, I’ve learned that one of the best ways to profit on real estate is by buying virgin property (think wild jungles, deserted islands, and untouched coastlines) that’s primed for growth due to proposed developments or coming infrastructure projects.
In fact, my business partner and I have written an informative ebook about our experiences where we outline our proven model for successfully investing in Central American real estate. You can download our free how-to guide and start learning more about your options.
The good news here is that there are still opportunities for protecting your assets, your privacy, and your freedom. But there are clear and obvious trends that cannot be ignored. You can’t afford to leave your head in the sand for too long.
Costa Rica has long been a favorite of expats and international travelers. With its beautiful beaches, friendly locals, and perfect weather it has claimed the top spot on lists of best tropical destinations for decades.
But what about newcomer Ecuador?
Rich in culture, and with a wide variety of climates and settings, Costa Rica’s South American neighbor is giving it a run for its money. Speaking of which, the cost of living in Ecuador is another perk that’s causing it to take top billing in many of those lists that Costa Rica once dominated.
Which is the better travel destination or expat haven?
Well, that depends solely on you and your priorities and expectations. To help you make a more educated decision, we’ve aligned the two countries in a side-by-side comparison so you can see how they stack up in several of the most important categories.
Ecuador vs Costa Rica
Use the Infographic on Your Own Site
Round #1 – Lifestyle Hacks
Slight Advantage: Ecuador
One of the most amazing benefits of living in Latin America is the opportunity to outsource a lot of your less desirable tasks. With a wealth of local labor resources that aren’t available in North America, you can hire helpers ranging from gardeners to tutors to drivers to grocery delivery guys.
You can even enlist the full-time services of a maid. (Think cooking, cleaning, grocery shopping, and laundry.) And, in Ecuador, that’ll only run you a mere $10 per day!
The cost in Costa Rica is a little higher, closer to $15 per day, but it can be argued that this is one area where you get what you pay for. With Costa Rica’s heavily customer-oriented service culture, the aid you’ll get there is top-notch.
However, the service in Ecuador is excellent as well so, in terms of value, we have to award this category to them.
Mathew Kebbeckas
Round #2 – Connectivity
Outcome: Ecuador Advances
For a country that excels so well in so many areas, Costa Rica is light years behind the rest in terms of internet speed and availability. Broadband is available in most of the larger cities, but it’s often difficult to find a signal elsewhere.
The country’s connection speed has increased by 43% in the past year. However, at 2.1 megabytes per second, it’s still barely enough to stream a movie in standard definition (and you can forget high def).
Ecuador, on the other hand, is aggressively working to increase its internet coverage. Currently, over 35% of the population is connected, with a goal of access in 50% of households by 2015. In Ecuador there are also free public access centers, called Infocentros, scattered all over the country, even in more remote areas.
Anthony Doudt
Round #3 – Living Options
Winner: Costa Rica for its Tropical Lifestyle
Both Costa Rica and Ecuador, with their varied topography and diverse ecoclimates, offer a wide range of living and travel options. There are mountain towns, beach communities, and bustling cities.
In most of those categories, Ecuador is a worthy competitor. Cities like Cuenca and Loja offer colonial charm plus all the modern conveniences. The Galapagos Islands offer some of the world’s best biodiversity. Ecuador also has major cities, like Quito and Guayaquil, for those who want easy access to services and amenities (arguably better than boring, unattractive San Jose, Costa Rica).
Where Ecuador falls flat is with its tropical lifestyle. In short, beach towns. While it has a handful of established destinations, like Salinas and Montanita, those towns aren’t even in the same ballpark with what Costa Rica has to offer.
Tropical living and ecotourism are exactly what Costa Rica does so well. As a result, it can be a bit overrun with tourists at times and in certain locations. However, with so many options, there are still a number of places off the beaten path where you can find a secluded beach or a remote surfing spot. Costa Rica is the epitome of most expats’ ideal tropical lifestyle.
Wanja Krah
Round #4 – Green Living
Slight Edge: Costa Rica
In keeping with its commitment to the natural environment and its push towards ecotourism, Costa Rica is about as green as they come. Almost ¼ of the country’s total area is parkland. Over 90% of its electricity comes from renewable energy sources, with 95% projected by year end. It’s also well on its way to becoming the world’s first carbon-free economy.
It also feels greener in Costa Rica, with many businesses and communities promoting green initiatives and healthy living. However, Ecuador is certainly taking strides in this direction as well.
It’s the only country in the world where the rights of the natural environment are protected in the nation’s constitution. Ecuador is also home to Yasuni National Park, the most biodiverse place on earth. Although the region is constantly being threatened due to its 800-million barrel oil reserve, the country has undergone tremendous measures to protect it.
Tibo
Round #5 – Cost of Living
Clear Winner: Ecuador
Costa Rica is a top tropical destination for tourists and expats alike. However, it isn’t for its low costs. While still a fraction of what you’d pay for the same goods and services in North America, Costa Rica has one of the highest costs of living in Latin America.
By contrast, Ecuador’s reasonable cost of living is often one of its biggest selling points. There a couple could live simply on a mere $1200 per month. This total even includes rent, which runs around $450 on average.
And, by “simply,” we don’t mean completely free of luxuries like once-per-week maid service and high speed internet. While Ecuador’s cost of living is low, the lifestyle it affords is far from meager.
Sean Hobson
Round #6 – Ease of Access
Advantage: Costa Rica
Because of its long-standing status as a top Latin American destination, Costa Rica is serviced by a whopping 13 large airlines. It’s only 2 ½ hours from Miami and air travel from North America is often quite reasonable.
So not only is Costa Rica easy to access, it’s also a great starting point for travel in and around Central America. The only downside is that it has relatively few airports.
Ecuador has two international, Quito and Guayaquil, as well as a number of regional airports. However, most incoming flights have layovers in Miami, Panama City, Bogota, or the Caribbean, resulting in longer (and more expensive) travel.
Once you arrive in either country, public transportation is available to get you to points throughout the country. However, some trips in Ecuador can grow quite long. And Costa Rica isn’t exactly known for the quality of its roads.
CC
Round #7 – Business Climate
Champion – Costa Rica
We’ll go with some cold hard facts on this one. The International Finance Corporation ranks Costa Rica #102 for ease of doing business. Ecuador comes in at #135. In other words, neither has the ideal business climate, but Costa Rica’s is significantly better.
While far from perfect, Costa Rica’s business environment is one of the most stable in Latin America, with numerous incentives like low tariffs and competitive tax rates. Recent legislation has been aimed at attracting foreign investment and supporting the private sector. Processes like obtaining a visa or starting a business are relatively hassle-free, by developing country standards.
Ecuador’s business climate has been somewhat unpredictable in recent years. Its dollarized government is heavily based on petroleum, resulting in the need for the nation to look for ways to improve its trade balance. However, recent strides in economic policy have led to an estimated 5% growth.
Ecuador also offers a number of visa options. However, a number of stipulations (like losing your visa if you’re gone for more than 6 months) make maintaining residency a challenge at times.
My Future
Round #8 – Banking
Lesser Evil: Costa Rica
Due to FATCA and other U.S. tax evasion agreements, both Costa Rica and Ecuador have recently implemented stricter measures that create difficulties for foreigners attempting to bank there. You can no longer open an account with merely a passport, in either location. In fact, the requirements are very much the same for both countries.
Why Costa Rica? Mainly because of Ecuador’s inconsistent regulations and subpar accounting standards. The process of establishing an account can also take a good bit longer there.
One advantage Ecuador has is its use of the U.S. dollar as its official currency. Costa Rica’s colon, while it generally follows the dollar, is thinly traded and could present a problem in the event of a worldwide financial crisis.
Patrick Hall
Round #9 – Investment Opportunities
Winner: Ecuador
Costa Rica’s economy is one of the safest in Latin America, and its policies encourage foreign investment. However, though it excels in stability, it lags behind in opportunity.
Ecuador offers a wealth of real estate and business opportunities at a lower cost and, consequently, with a larger growth potential. The country is investing heavily in infrastructure, which generally results in increased property values. Infrastructure improvements are the #1 catalyst for real estate appreciation, as we discuss extensively in Pay Dirt, our latest ebook.
Tourism investments are also a great option in Ecuador. For its incredible number of natural attractions, Ecuador has a relatively weak tourist infrastructure. There’s a lot of potential for savvy entrepreneurs to profit in this arena as Ecuador continues to gain popularity among expats and international travelers.
Yannis
Round #10 – Health Care
Slight Edge: Costa Rica
This was a close one. Both countries offer excellent health care with skilled medical professionals and modern facilities, particularly in the larger cities. Costs are often as low as ¼ of the price for the same service in North America. Health insurance is also widely available and extremely affordable.
English is widely spoken among doctors in both countries, and many physicians even trained in the U.S. Hospitals are clean and equipped with the latest technological innovations.
While the care provided is great in both countries, the quality of Costa Rica’s health care system is ranked 36th in the world, ahead of the U.S. at 37th. It’s also physically closer to the United States, which could come in handy in the event that medical evacuation or frequent medical travel were necessary.
Mathew Johnson
Round #11 – Consumer Goods
Winner: Neither
Both Ecuador and Costa Rica have a few strikes against them when it comes to the availability and affordability of consumer products. Costa Rica taxes consumer goods heavily (its Value Added Tax is 14%), so as a result less of them are imported.
This can make it particularly hard to find the things you’re after. And if you do locate a hard-to-find item, you’re very likely to pay out the wazoo for it.
At 12%, Ecuador’s VAT is only slightly lower than that of Costa Rica. However taxes on imported goods have been steadily increasing. As a result, many Ecuadorians are actually going outside of the country to buy things like electronics.
Andrew Hall
Round #12 – Foreign Land Ownership
Our Pick: Ecuador
While both countries’ laws protect foreigners who own property, Ecuador’s are much more liberal. Property rights are guaranteed by the constitution, and they apply equally to foreigners and Ecuadorians alike.
What’s more, Ecuador places no restrictions whatsoever on foreigners who wish to purchase land. And there’s an abundance to choose from, often at rock bottom prices.
Compare this with Costa Rica who do not allow foreign residents to purchase land considered restricted or concession areas (which includes 95% of all beachfront property) until they’ve lived in the country for at least 5 years. However, many circumvent this limitation by buying property in the name of a Costa Rican corporation in which they have 49% ownership.
Due diligence is an absolute must before buying land in either country. We recommend the services of a qualified attorney, with experience in land transactions, who can thoroughly research the title and ownership rights.
Costa Rica vs. Ecuador – Who’s the Grand Champion?
Were you keeping score? We weren’t. That’s because it’s so difficult to say for certain exactly which destination is right for an individual.
Our best advice? Come see for yourself.
Is Costa Rica, with its tropical lifestyle and established expat communities, your idea of a dream destination? Or do you prefer to invest in up-and-coming Ecuador, where there’s excellent investment potential and so much left to discover?
There’s only one way to find out.
Carolin Azuarq
So, how has your IRA been performing over the past few years? If you’re like most, you’ve probably seen minimal growth or even stagnant returns at best. At worst, your retirement account may have lost money and/or been eaten alive by broker fees.
These difficult economic times have not been kind to what was once our most promising option for saving for retirement and reducing our taxable income. Surely, Americans are telling themselves, there must be a better way.
Well, here’s good news. There’s another option. Although it requires a bit more involvement and initiative on your part.
How To Take Control of Your Own Financial Future
Rather than relying on the standard options that have failed them in recent years, many Americans are taking control of their own retirement savings. And with the subpar performance of traditional domestic investments, many are also looking overseas at emerging real estate markets, such as the many opportunities available in Central America.
Investing in offshore real estate is a far cry from the boring Option A, B, or C type investment choices most custodians offer. It’s exciting. It’s outside the box. It gives you complete freedom over your funds and your future. And it offers incredible investment potential that no traditional option could ever rival.
Better yet, it’s all perfectly legal.
Where Traditional IRAs Went Wrong
Individual Retirement Accounts (IRAs) were first introduced in 1974. Through these accounts, retirement funds were handed over to a custodian, a broker who would manage the account and invest the funds in various stocks, bonds, and mutual funds in hopes of increasing the value of the IRA.
The account would grow either tax-deferred or tax-free (depending on the type of IRA) until the individual reached retirement age, at which point he or she could begin taking distributions without facing a penalty.
Having Someone Else Manage Your Funds Isn’t Safe Anymore
While not the most exciting investment concept, there was at least an element of safety involved. The account owner was protected from the responsibility of any decision-making, IRS reporting, or other administrative duties associated with the account, tasks that may be outside the comfort level of many Americans earning a middle class income in a field other than the financial industry.
But where there’s little risk, there’s often little reward. Many of these accounts have suffered at the hands of high fees, limited investment options, flat returns, and custodians who often based their decisions more on what brought in the highest commissions, not what was truly best for their clients.
Meet the Self-Directed IRA
Like you, many Americans have grown tired of seeing their hard-earned money underperform, particularly as retirement looms ever closer. As a result, many are turning to non-traditional methods for saving for retirement. And, thanks to the Self-Directed IRA (which now accounts for roughly 2% of all retirement accounts), they can still do so on a tax-deferred or tax-free basis.
The main difference between a traditional and a self-directed IRA lies within the duties of the custodian. Rather than one who makes the decisions concerning the investment of the funds in the account, the custodian or trustee of a self-directed IRA is merely responsible for holding and distributing the assets, filing the required documents with the IRS, and little else.
The person responsible for the investment decisions in a self-directed IRA account is…well, um…YOU. As the owner of a self-directed IRA, you hold the checkbook. You write the checks. You have the freedom and flexibility to invest your funds as you see fit, with no one looking over your shoulder.
Don’t Let the Self-Directed Option Scare You
To quote Voltaire, with great power comes great responsibility. So, if you’re thinking the self-directed IRA option sounds a bit intimidating, well then you’re quite right. But it really is a manageable risk. I’ll explain more later about how you can minimize the risks associated with controlling your own retirement account, particularly when it comes to the variety of investment options available to you.
Side 78
Freedom: The Biggest Benefit to Self-Directed IRAs
That variety is perhaps an even bigger benefit to the self-directed IRA. With traditional IRAs, investment option are generally limited to stocks, bonds, and mutual funds. Account owners generally aren’t permitted to invest in things like real estate, business enterprises, or–heaven forbid–foreign CD’s or other offshore investments.
Note: I should clarify here that all of the above are perfectly legal and permitted by the IRS. What prevents these investments from being allowed or recommended are the custodians themselves, not any government regulation. Keep reading to understand why that’s the case.
Why Brokers Can’t Offer Non-Traditional Options
With a traditional IRA, your funds are managed by an SEC-licensed investment advisor who has to answer as to what happened if your investments tank. He’s not going to recommend or permit an investment into a non-traditional option where he’s not capable of performing the necessary due diligence, lest he risk losing his livelihood.
That’s not to say non-traditional options are too risky in general. It’s just that the fees your broker is getting from your account aren’t enough to justify him spending the time necessary to research that type of investment, nor would his management approve such a recommendation if he were willing to propose it.
That’s why it’s up to you. As the decision-maker for your account, you can invest in almost anything you desire: mobile homes, storage units, gold bullion, small businesses, land, homes, and more.
There are a few things that aren’t allowed, such as life insurance and collectibles (e.g. stamps, coins, and artwork). But for the most part, your options are virtually unlimited.
Why Real Estate Is a Great Option for Self-Directed IRAs
While many investors are still a bit leery of investing in real estate, due to the devastating demise of the housing market in recent years, the fact remains that real estate is still a great long-term investment.
It’s totally permissible as a holding for IRAs, and it isn’t limited only to domestic properties. It can also include raw land, farm land, commercial properties, property renovations, and rental properties, both in country and abroad.
The reason many investors are turning to the latter option is due to the incredible values available overseas. With lower costs for land and houses, international real estate is an excellent option for those who want to maximize their investment return. Foreign properties also have far fewer restrictions and regulations on everything from zoning issues to paint colors.
Think Long-Term
And, while you can’t live in the home until you reach the appropriate age to begin receiving distributions from your account, many Americans are choosing to purchase rental properties overseas that will one day become their very own retirement homes.
Then, upon reaching retirement age they can take advantage of their own tropical dream home, purchased tax-deferred or even tax-free, where they can also enjoy other benefits like an ideal climate and lower cost of living.
Invest in Something You Can Really Feel a Part Of
If freedom is the biggest benefit of owning a self-directed IRA, then involvement would have to be one of my favorite perks of being an international real estate investor.
When purchasing land overseas, you can buy raw land in some remote location and just sit on it for a few decades hoping it’ll appreciate. But that’s not what I recommend. It’s incredibly difficult as a foreigner, for one thing. For another, it’s just too risky a move.
Partner with a Trusted Professional
By investing in projects headed by skilled developers, you gain several important benefits. For one, you can benefit from their knowledge of the area and the market.
Secondly, you can actually build relationships with both the developers and the locals, as you work together towards a common vision. You also have the ability to influence the community or the development that you’ve invested in and sit back and watch its continued growth and success.
A Different Kind of Proposal Meeting
Take for example, Boca Chica Island, the latest Adventure Colony that my business partner and I have developed. Those who invest with us in this project aren’t just buying a piece of land in a place they’ll never see.
We encourage our prospective buyers to spend a few days experiencing the island–our treat. We want them to get to know us and understand our vision for the project.
We won’t pass around a prospectus. But we can tell you all about the years of research that we’ve poured into analyzing the market and carefully selecting the areas we choose for our developments.
Or you can download our free investment ebook, Pay Dirt, if you want to learn more about our strategy for investing in land in Central America.
Even more importantly, our prospective clients have each of our cell phone numbers. When they call, we answer. How many of your mutual fund managers can say that? When you have control of your IRA, you can choose where you invest and go with people you trust.
Viva Tropical
So How Does All This Work?
There are understandably a few extra steps involved when choosing the self-directed IRA option and using those funds to purchase real estate. Here’s the process in a nutshell.
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Thoroughly research your options before making any decision. Talk to an accountant, an attorney, and a real estate agent to get a good handle on the whole picture. Make sure you understand the tax ramifications, as well as the rules for the type of IRA you have (e.g. Simple, Roth, Traditional, SEP, etc.). Take into consideration any applicable contribution limits or penalties that may apply.
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Choose an administrator who has experience handling self-directed IRAs. These won’t be the typical brokerage firms you’re used to hearing about, as there are relatively few who offer this service. Pensco and Equity Trust are two examples. Do your homework. Gauge their experience with IRA-related real estate transactions, and ask for references.
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Once you’ve selected a custodian, move your account from your current institution to your new self-directed IRA. This will be handled as a roll-over and can take up to a few weeks to process.
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Solicit the services of a local attorney in the country where you plan to purchase property. Again, we recommend doing thorough research before selecting this individual. Make sure he or she has experience with these types of transactions.
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Select the property you wish to purchase. This is the fun part! Keep in mind your goals for the property, whether you plan to use it solely for growing your retirement account or whether you one day hope to enjoy it for personal use, and tailor your search accordingly. A qualified local real estate professional can help to simplify this process and work with you and your attorney to keep the hassles to a minimum.
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Sign a contract for purchase and send it to the custodian for review. Once approved, the custodian can release the funds to the title company who’s handling the transaction.
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Transfer ownership of the property. The details of this step could vary greatly depending on the details of your particular situation. If purchasing the property entirely with funds from your IRA, the property would be titled in the name of the account. You could also purchase it partially with personal assets and the remainder with funds from the account. However, keep in mind that the ownership percentages would also need to be reflected in the reinvesting of any income as well as the paying of any expenditures such as repairs.
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Hire a property manager to handle the day-to-day dealings associated with the property, particularly if it’s a rental. Since there are so many restrictions on how involved the account owner himself can be with the property, it’s best to involve a third party as a buffer.
Some Important Considerations for IRA Real Estate Transactions
Just as there are a number of extra steps involved with investing in real estate using a self-directed IRA, there are also a lot of concerns that are unique to these types of transactions.
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IRAs are individual accounts. As a result, involving your spouse or other family member would require a joint ownership between your individual retirement account and the other entity(ies) of your choice. The good news is you can literally own the property with as many other entities as you want.
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You can’t always convert an IRA through your current employer into a self-directed IRA. While it’s always possible with a prior employer, check with your HR department to see what your options are at your present company.
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Traditional mortgages aren’t available for real estate in an IRA. If you don’t have the money to buy the property outright you’ll need to consider a partnership or other joint arrangement. If you must borrow money, it will be a non-recourse loan using the property itself as collateral. These are often difficult to find and have higher interest rates. In addition, any income earned on the debt-financed percentage of the property is subject to Unrelated Business Income Tax (UBIT), though there are perfectly legal techniques (UBIT Blocker Corporations) for mitigating these taxes.
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You will not be able to deduct the depreciation on real estate in an IRA. While this is typically a write-off for rental properties, the deduction does not apply in this case. However, any rent being collected is also not taxed until distributions begin, so the two may offset.
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All repairs, taxes, and other fees must be paid from the IRA. This includes everything from property taxes to homeowners’ dues. As a result, you’ll need enough liquid funds in the account to cover any costs. While most IRAs allow a maximum annual contribution (generally $5,000), it might not always be enough to cover any expenses. You also can’t do your own repairs, as your “sweat equity” is considered a contribution.
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Likewise, all income generated by the property must also remain in the account. This includes rental income, as well as capital gains from the sale of a property. This money, along with any additional contributions, stays there, tax-deferred (or tax-free if it’s a Roth), until you reach retirement age. This is especially beneficial if you anticipate being in a lower tax bracket at retirement.
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Neither you nor your family can benefit in any way from the property owned by the IRA. For example if you let your daughter live o’in the property or if you get rental income from it directly, you could invalidate the status of your IRA account and become subject to penalties. Likewise you yourself can’t live in the property, lest the entire value be deemed as a distribution. Upon reaching age 59 ½ (or earlier with a 72T election), you may begin taking annual distributions. The property could subsequently be retitled each year to reflect the new ownership percentage.
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You alone are responsible for maintaining adequate records to document your use of funds and investment returns. Your custodian will complete an account valuation and report the necessary information to the IRS. However, as the one who holds the checkbook, you carry the burden of proving where any money went.
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Beware of scammers. Many people grow desperate as they approach retirement age and start to panic because they don’t have enough money saved. This makes them more likely to invest in schemes they know little about. This, combined with the fact that there’s little oversight of self-directed IRAs with alternative investments, makes them ideal vehicles for con artists selling bogus investments. Investigate all potential deals carefully, especially if they sound too good to be true.
You’re One Step Closer to Controlling Your Future
As you can see, using a self-directed IRA to purchase real estate abroad requires a great deal more know-how than simply reading over a quarterly account statement from your current custodian. The risks are much greater. But the rewards can be as well.
Just think of the possibilities. You could buy a bungalow in a popular tourist destination that could generate rental income until you’re able to retire to it permanently. Or how about a secluded lot on a private island where you’ll one day build your dream home?
Your options are limited only by your imagination, and the red tape at your brokerage firm. What are you waiting for? Free your IRA from the bondage of traditional thinking, and take financial control of your own future.
Rinaldo W.
Ecuador vs. Nicaragua. Which is the better place to live overseas?
When it comes to choosing a destination in Latin America, both Nicaragua and Ecuador are great options. Both enjoy incredible eco-diversity, numerous opportunities for adventure, and a whole lot of bang for your buck.
Ecuador has consistently been named one of the world’s best places to retire. Nicaragua, which has historically remained off many expats’ radars due to its troubled past, has risen to the ranks of being the safest country in Central America. Today it’s emerging as one of the top destinations in the region.
So, which of these countries is the better option for your family’s much-anticipated move abroad? Well, that depends on you and how you’d like your life to look in your new home overseas.
While we can’t make a recommendation that’s right for everyone we can show you how the two stack up in several important categories in this Ecuador vs. Nicaragua stand-off.
Use the Infographic on your site:
Round #1 – Lifestyle Hacks
Winner: Nicaragua
One of the best ways to improve your lifestyle when living overseas is by hiring domestic help, something many can’t afford in North America. For instance, in Ecuador the cost to hire a maid for the day is $10.
Sound like a good deal? Not as good as Nicaragua where you can employ a full-time helper, like a nanny or caretaker, for just over $100 per month (depending on their hours and responsibilities). Domestic help is generally easy to find, but it’s important to screen applicants carefully. A safe bet is to hire a close friend or family member of another maid who is a known good worker.
Theragans
Round #2 – Internet Connectivity
Advantage: Ecuador
In terms of Internet penetration, speed, and quality, Ecuador wins this category. Overall it has more widespread affordable access, with over 35% of the population connected (vs. 10% in Nicaragua).
The main difference between the two is with Internet access in rural areas. In Nicaragua there isn’t any. By contrast, Ecuador has public access centers, called Infocentros, that are available (and free) even in more remote areas.
Connectivity is definitely on the agenda of both countries’ governments. Even Nicaragua has increased its availability 30-fold in the past 5 years alone. However, it still lags a considerable distance (12,628 internet hosts to Ecuador’s 170,538) behind Ecuador, whose goal is Internet access in 50% of its households by 2015.
Johnny Chunga
Round #3 – Living Options
Outcome: Ecuador for Variety, Nicaragua for Safety
While both Ecuador and Nicaragua boast their share of colonial towns, coastal paradises, and mountain hideaways, Ecuador’s four distinct regions offer much greater diversity in scenery and climate.
Popular Ecuadorian cities include the mountain towns of Cuenca and Loja, with their colonial charm and modern amenities. Also, on the coast, are places like Salinas and Montanita, which attract a large number of beach-goers. Ecuador is also home to the Galapagos Islands, perfect for nature-lovers.
Nicaragua also has its fair share of expat hotspots, and many are growing at increasing rates. Granada, which is situated on Lake Nicaragua, is a popular favorite. As is Leon, another colonial city that also boasts close proximity to the Pacific Ocean. Nearby beach towns include San Juan del Sur, famous for its surfing and nightlife. The Corn Islands are also an option for those seeking a Caribbean vibe.
It’s also worth noting that Nicaragua is now the safest nation in Central America, while crime continues to be a problem in Ecuador. However, it’s entirely possible to live safely in either location (and without burglar bars). What’s important is to use common sense and avoid appearing overly “flashy” or waving wads of large bills when paying for items.
Game of Light
Round #4 – Green Living
Clear Winner: Ecuador
When it comes to conservation and sustainability, Nicaragua is the land of missed opportunity. The largest country in Central America (and the least populated), Nicaragua is full of natural resources. However, several factors are preventing the nation from realizing its potential.
The lack of enforceable land rights has led to massive deforestation and a lack of government regulation. Pesticide use is widespread, and there’s little safe drinking water. Only 6% of the nation’s forests are protected.
Compare this with Ecuador, which has the lowest environmental footprint in the world. It’s also the only country in the world whose constitution protects the rights of its natural environment. Ecuador is also home to Yasuni National Park, the most biodiverse spot on the planet. Their efforts to protect it from the harmful effects of drilling its 800-million barrel oil reserve have been among the most creative in history.
Barefoot Expeditions
Round #5 – Cost of Living
Slight Edge: Ecuador
While both countries enjoy a very reasonable cost of living, prices in Ecuador are generally more affordable. This is particularly true when it comes to consumables, like groceries and restaurant meals (26% and 24% higher in Nicaragua, respectively). It’s also true of the country’s inexpensive health care.
In Ecuador, a couple could live simply on about $1200 per month, including rent which runs around $450 on average. Factored into this amount are expenses such as public transportation (in other words, not owning a car) and once-per-week maid service.
Two big exceptions are rent and transportation to North America. Home rentals run around 33% less in Nicaragua. It’s also much cheaper (and shorter) to fly to the U.S. More on that coming up.
Julie Rubinic
Round #6 – Ease of Access
Winner: Nicaragua
Ecuador has two international airports, Quito (UIO) and Guayaquil (GYE), although most travelers fly into Quito. Flights arrive from U.S. cities like Miami, Houston, and New York, as well as nearby Panama City, Panama, or Bogota, Colombia.
Due to its close proximity to the U.S., Nicaragua offers frequent short flights to a number of major U.S. cities. American Airlines has 3 daily flights from Miami. There are also daily flights from Atlanta (Delta) and Houston (Continental). Spirit Airlines also offers 3 flights per week from Fort Lauderdale.
In addition to international flights, which land at Sandino International Airport in Managua, there are also a number of domestic airlines that fly to cities across Nicaragua, including the Corn Islands. Nicaragua also offers short flights to nearby Costa Rica and Panama.
Vilseskogen
But once you’re in Ecuador, getting around’s a breeze.
It’s worth mentioning that, while Nicaragua is easier to get TO, Ecuador is a piece of cake to get around IN. The country’s transportation system is bordering on excellent. Thanks to subsidized fuel costs, there are inexpensive domestic flights. You can also fill up your car for as little as $1 per gallon.
Round #7 – Business Climate
Slight Advantage: Ecuador (for Now)
Let’s face it. Neither of these two countries has a gleaming record of political stability. Ecuador saw 48 presidents in its first 131 years as a republic. And while Nicaragua’s Daniel Ortega has certainly done some good for the nation’s economy, he’s not exactly known for his friendliness to businesses. He’s also currently pushing legal reform that will essentially result in the possibility of his limitless reelection.
As a result, this category was a tough one to call. We’re awarding it to Ecuador, mainly because Rafael Correa has a somewhat better track record as a political leader. In addition, the Ecuadorian government has been taking strides towards reducing its influence in various sectors and allowing independent businesses to function more…well, independently…due to new privatization laws. As a result, the country has seen considerable economic growth.
While we’re on the subject of government and bureaucracy, Ecuador also boasts the easier process for obtaining a visa. The whole ordeal is generally faster, cheaper, and less confusing than in Nicaragua where there aren’t a lot of resources for information. The biggest downside? If you leave for 6 months you lose your visa.
ST Jenna
Round #8 – Banking
Outcome: Nicaragua Wins
Both Nicaragua and Ecuador require that you jump through quite a few hurdles in order to open a bank account as a foreigner. However, once your account is established, you’ll generally find that Nicaragua offers the better banking experience for North Americans.
While it does use a different form of currency (the Cordoba), most establishments will also accept the U.S. dollar. (Note: Ecuador has had a dollarized economy since 2000.) What’s more, many Nicaraguan banks (6 at last count) hold relationships with U.S. financial institutions. This makes for an easy process when transferring money. However, it also means that “they” can see your money and where it’s going. Banks in Nicaragua also pay competitive interest rates on deposits.
The performance and transparency of Ecuador’s banks has improved in recent years. However, they still struggle with implementing and enforcing uniform regulations. Their accounting standards are also subpar. In possibly its worst offense, Ecuador also charges a 5% tax on all funds transferred out of the country. Ouch.
It’s easy to see why Nicaragua is the natural choice for banking of the two countries. That being said, neither of these is a place you’d want to choose for stashing large amounts of cash. There are just too many better options globally.
Dane Brian
Round #9 – Investment Opportunities
Winner: Ecuador
We mentioned that Correa has made some decent accomplishments during his tenure as president. One of the best ones from an investment standpoint? Infrastructure. Massive improvements in infrastructure.
Why does that matter? Glad you asked. Infrastructure upgrades (or even rumored ones) equal huge potential to savvy investors. Buying a beautiful piece of untouched beach that’s about to become more accessible due to a new road coming in is a tried and true strategy and one that we’ve written about extensively in our new ebook, Pay Dirt.
In addition to real estate, investing in tourism is also a smart move right now in Ecuador Real Estate. The country has a ton of amazing attractions, yet its existing tourist infrastructure is grossly underused. Plus the government offers a wealth of tax deductions and other incentives to foreign investors.
A. Scott
Similar laws and incentives exist to encourage tourism investment in Nicaragua, as well. Also, organizations like PRONicaragua aim to assist foreign investors by providing support services to those looking at potential business opportunities there.
Round #10 – Healthcare
Slight Edge: Ecuador
When it comes to Ecuador vs. Nicaragua, both countries enjoy clean, modern, quality healthcare facilities with well-trained medical staffs. However, the level of care and accessibility of treatment are slightly higher in Ecuador. Most of the doctors speak English, and many even trained in the U.S.
Costs are comparable in both countries, with a visit to a specialist costing no more than $25-$30 and an overnight stay in a private room still under $100. Accessibility is fairly widespread, but–as is true of most developing countries–availability and quality is far better in and around larger cities.
Perhaps the biggest difference in this category comes in the direction both countries’ systems are heading. While Nicaragua’s healthcare stands in need of some improvement, Ecuador’s government is currently taking strides to improve its own system.
Retro Traveler
Round #11 – Consumer Goods
Verdict: It’s a Tie
When it comes to consumer goods, Ecuador definitely wins for the availability of products. In Ecuador you can find a variety of domestic and imported products. However, due to recently imposed taxes and restrictions on imports, items such as vehicles and cell phones are becoming more scarce and expensive.
As a result, Nicaragua (although it has less to offer in the way of variety) may soon offer the better value on consumer products. This may become increasingly true as the country continues to attract more and more expats. Where expats are, imported products aren’t often far behind.
K. Kamikaze
Round #12 – Foreign Land Ownership
Victor: Ecuador
The laws of both countries are favorable towards foreigners who want to own land in either Ecuador or Nicaragua. Property rights are guaranteed in each nation’s constitution, and they apply equally to foreigners as well as nationals.
While Nicaragua does restrict property ownership near its borders, Ecuador has no restrictions whatsoever on foreigners owning property. The buying process is similar in both countries, requiring due diligence to carefully research the title and ownership. The services of a qualified attorney can simplify the buying process in either country.
K. Sevik
Ecuador vs. Nicaragua – Grand Champion?
While the match-up looks to have been a slaughter, with Ecuador taking the grand prize in this Ecuador vs. Nicaragua competition, we’d advise you to take this information with a grain of salt. While we’ve tried to remain as objective as possible, the decision of where to relocate as an expat is one that can only be made through your own careful consideration.
Articles and comparisons are helpful, but there’s just no substitute for seeing a destination with your own two eyes and exploring it with your own two feet. If one, or both, of these countries is on your short list, book a trip to check it out for yourself. A trip to the Latin tropics is sure to prove a delight for all the senses.
Map of Ecuador
Ecuador Fast Facts
- Population: About 15.49 million
- Typical temperature: Ecuador is known for its micro climates, learn more here.
- Major airports with U.S. flights: Quito, Cuenca and Guayaquil. Complete list of airports in Ecuador.
- Nearest U.S. consulate: Quito and Guayaquil
Map of Nicaragua
Nicaragua Fast Facts
- Population: About 5.99 million
- Typical temperature: There are three temperature zones in Nicaragua. In the lowlands (Pacific and Atlantic coast) temperatures vary roughly between 72° F at night and 86° F at daytime (22° C – 30° C). Temperature can reach 100° F in May (38° C). The central part of the country is about 9° F (5° C) cooler, and in the mountains in the north it’s about 18° F (10° C) cooler.
- Nearest airport with U.S. flights: Managua
- Nearest U.S. consulate: Managua
For would-be expats looking to relocate to Central America, Costa Rica and Panama are natural front runners.
And for good reason.
Located adjacent to one another at the southernmost end of Central America, the two are quite similar in many ways. Both consistently top the lists of best places to retire in Latin America, and the world for that matter.
They both boast amazing vistas, near-perfect climates, modern amenities with a low cost of living, excellent health care, and some really great options for how you can spend your free time. However, there are a few areas where one nation has a slight advantage over its neighbor.
While many areas of consideration depend largely on personal preference, we lined up Panama vs. Costa Rica in a head-to-head cage match to see which one comes out on top.
Use the Infographic on Your Own Site
Round #1: Lifestyle Hacks
Advantage: Costa Rica
Both Panama and Costa Rica offer the opportunity to simplify your life by hiring out a number of services that, quite frankly, you’d just rather not have to do on your own. You can easily enlist the help of a gardener, a driver, a tutor for your children, or even a full-time maid who cleans your house, buys your groceries, does your laundry, and prepares your meals six days a week (for less than $15 per day).
While the costs are fairly close, domestic help can be a bit more expensive in Costa Rica. Why’d we pick it as the winner if it’s the more expensive of the two? Easy.
When comparing Panama vs. Costa Rica, Costa Rica has a much more customer-oriented service culture. So, while you may pay a few more dollars per day for domestic help in Costa Rica, the extra money is totally worth it in terms of the quality of personal service you’ll receive.
Round #2 – Connectivity
Winner: Panama by a Landslide
Due in part to a long-standing U.S. military presence, Panama is one of the most connected countries in Latin America. Broadband internet service is available in most cities and is very affordable. There are also numerous free wi-fi hotspots nationwide.
In fact, Panama was recently named #2 in all of Latin America for technology and internet penetration. It also earned the #1 spot for wireless availability. That’s why so many multinational companies like Dell, 3M, and Philips are choosing to establish regional headquarters there.
By contrast, Costa Rica is light years behind its Central American neighbors in terms of internet speed. Although its average connection speed has increased 43% percent in the past year, it’s still only 2.1 megabytes per second. (Streaming a movie requires 1.5 Mbps, or 4 Mbps in high definition.)
Brian Gratwicke
Round #3 – Living Options
Outcome: Varies by Region
This category is a hard one to call. Both Costa Rica and Panama have such varied topography and eco-climates. Not to mention all the other factors that can vary greatly from one region to the next, such as climate, infrastructure, and proximity to attractions.
For comparison’s sake, we’ll compare Panama vs. Costa Rica in four subcategories and examine the top cities expats are choosing for each type of area.
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Mountain towns…Winner: Panama A popular mountain destination for North American expats in Costa Rica is Atenas. Located in the Central Valley, it enjoys mild weather year-round, great views of the surrounding mountains, proximity to San Jose, and an established expat community. Boquete, Panama, offers all those things plus cooler temps, better roads and infrastructure, and a million things to do nearby, from ziplining through cloud forests to climbing volcanoes to sport fishing off the coast.
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City living…Champion: Panama Again Panama City, the nation’s capital, is a vibrant cosmopolitan city that caters to residents and travelers looking for both business and adventure. It offers world-class shopping and dining, as well as a 655-acre rain forest that’s within its city limits. On the other hand, San Jose, Costa Rica, is much smaller, much less attractive, and much more limited in terms of anything interesting to do.
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Beach communities…Advantage: Costa Rica Beach living is right in Costa Rica’s wheelhouse. Towns like Nosara and many, many more have been drawing nomads and expats for decades, and the country caters very well to this genre. Costa Rica’s beach towns have everything you need, from aquatic adventures to quaint accommodations. Panama has a few good options, such as Coronado near the capital, but none can hold a candle to the laid-back coastal cities of Costa Rica.
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Island retreats…No Contest: Panama Costa Rica was almost a no-show for this match. There just simply aren’t many island living options available for comparison. Cano Island offers a serene natural setting among the reefs, but with such slim pickings island ownership is pretty much out of the question. However, in Panama, you can own your own piece of paradise on our own Boca Chica Island, a 400-acre private island offering lots ranging from 5 to 50 acres. It’s just off the coast in an area that’s surrounded by a multitude of land and sea adventures.
Round #4 – Green Living
Winner: Costa Rica, Hands Down
Both Panama and Costa Rica have great options for living in harmony with nature. However, Costa Rica is committed to protecting its natural environment, due largely to its importance in the country’s eco-tourism industry. Almost ¼ of its total area is dedicated to parkland.
Over 90% of the country’s electricity comes from renewable energy sources, with a plan to increase this to 95% by 2014. It’s also on its way to becoming the first carbon-free economy in the world.
Both countries have tons of options for eco-tourism, from jungle tours to mangrove exploration to scuba diving.
Smilla4
Round #5 – Cost of Living
Slight Edge: Panama
Panama and Costa Rica both boast a cost of living that is a fraction of that of the U.S. or Canada. However, from the cost of property to the cost of a bunch of bananas, prices are a bit lower in Panama on average.
It’s true that in both countries there are certain regions or cities (typically the most developed or heavily-touristed areas) where everything from rent to a three-course meal runs close to North American prices, but in general you can find more places in Panama where those expenses are considerably less.
One of the largest contributing factors to Panama’s affordability for many expats is its Pensionado Program. Available to “retirees” of any age, those who meet the income requirements can qualify for discounts ranging from 15-50% on everything from health care to entertainment.
Round #6 – Ease of Access
Verdict: It’s a Tie
Panama and Costa Rica are fairly neck and neck in this category, each for their own reason. Panama takes the prize for international arrivals and departures. Its Tocumen International Airport has flights to several North American cities, as well as various points in South America, making Panama a great destination for those who want easy access to faraway places.
Costa Rica wins for being a great jumping-off point for other adventures throughout Central America, due to its more central location and affordable travel options.
Round #7 – Business Climate
Advantage: Panama
The International Finance Corporation ranked Panama 55th in the world for ease of doing business, compared to a rank of 102 for Costa Rica. Their findings are based on an examination of 10 factors to determine which countries are most conducive to the startup and operation of a local business.
And the difference is obvious if you’ve experienced the business climate of the two nations. Panama’s government is extremely pro-business and pro-investor. It’s also something of a tax haven. Costa Rica on the other hand is much more bureaucratic, with slower processes and higher taxes and fees.
Arturo Sotillo
Round #8 – Banking
Winner: Costa Rica (For Now)
With changing regulations, in both the U.S. as well as Costa Rica and Panama, this category tends to fluctuate greatly over time. However, for the past few years at least, banking for North Americans has typically been easier in Costa Rica.
This is mainly in terms of opening and holding a bank account. Both countries share many of the same requirements (identification, proof of residence and income, etc.). However, Costa Rica only requires a $25 minimum deposit (vs. Panama’s $1,000). Panamanian banks may also ask for additional documents such as proof of employment or reference letters from one or more North American banks.
One difference worth noting is that Panama’s official currency is the dollar, while Costa Rica uses the colon. Because it’s so thinly traded, the colon generally follows the dollar. However, in the event of a financial crisis, this could mean problems for Costa Rica.
Round #9 – Investment Opportunities
Our Pick: Panama
To put this showdown into perspective, let’s use the analogy that Panama is basically the Costa Rica of twenty years ago. When North American retirees began to get tired of the overcrowded expat communities and rising costs of Mexico, they turned to Costa Rica. Now that Costa Rica has reached mega-expat status, people are looking to Panama.
Costs are still lower and, as a result, there is much more capacity for growth. In addition to those factors, the Panamanian government is and has been placing heavy emphasis on tourism investment, largely in the form of tax incentives. It’s also possible for foreign residents to obtain financing in Panama, something they can’t get in Costa Rica.
Round #10 – Healthcare
Outcome: Too Close to Call
Healthcare is excellent in both Costa Rica and Panama. The two countries both have inexpensive public health care, with Costa Rica’s being touted as one of the world’s best low-cost medical programs. In fact, the quality of its health care system is ranked 36th in the world by the WHO, with the U.S. in 37th place.
Both countries also have private hospitals available, where many of the doctors speak English and trained in the U.S. Panama has several state-of-the-art hospitals that are affiliated with world-renowned facilities in the U.S., such as Johns Hopkins.
Panama’s only drawback is the accessibility of its modern private medical facilities. They’re often found only in the largest cities, specifically Panama City and David. Those in rural areas may have trouble finding the care they need, as often only first aid is available in the most remote areas.
World Bank
Round #11 – Consumer Goods
Winner: Panama
We mentioned that the cost of living is slightly higher in Costa Rica. This is especially true when it comes to consumer goods, like groceries–for instance–which generally run about 15-20% higher than in Panama. Exports are also taxed more heavily in Costa Rica, so as a result a lot of products are much harder to find.
Costa Rica also has a higher value added tax (VAT), 14% vs. 7% in Panama. It also has a lot more taxes on luxury items like cars, electronics, and appliances. Compare this with Panama which has lower taxes and even a number of duty-free zones.
These factors have made Panama quite the shopping hub for folks in Latin America. In fact, on one of our last trips to Ecuador we met some people who were on their way back from Panama City where they’d gone specifically to buy several flat screen TVs, due to the country’s lower prices and better selection.
Round #12 – Foreign Land Ownership
Undisputed Champ: Panama
Panama has virtually no restrictions on the ownership of property by foreigners. In fact, there’s only one, and here it is. Foreigners, or foreign owners of Panamanian corporations, can’t own property within 10 kilometers of the country’s borders. That’s it. Also, under Panamanian law, foreigners have all the same protections as citizens.
By contrast, Costa Rica’s land ownership laws are not as liberally applied to foreigners. Land considered restricted or concession areas, including 95% of all beachfront property, is not eligible to be owned by foreign residents (unless they’ve lived in Costa Rica for at least 5 years). The only option for use of this kind of property is through 49% ownership in a corporation with a native Costa Rican.
The buying process is also much easier in Panama, where a good attorney can help to simplify things like title searches, purchase agreements, and the registering of the deed.
Coco Lime Monkey
Panama vs. Costa Rica…Which is the Grand Champion?
Were you keeping score during that match-up of Panama vs. Costa Rica? If so, we would advise you to take our recommendations with a grain of salt. Panama and Costa Rica both offer a host of great places to live as an expat. And determining which one is right for you depends 100% on your values and what you want out of your life in a new location.
Want to Learn about Residency Options?
Each one of these countries has different strengths, but you can listen to our interviews with the experts and find out what it takes to become a resident or if you need to do it at all. The Costa Rica residency interview is here and the Panama residency discussion can be found here.
Our best advice? Plan a trip down to Central America. Check out both of these amazing expat destinations and choose for yourself which one is right for your family.
Alecsey Boldeskul
So, just how extensive is your knowledge of important Costa Rica facts? If you’ve ever visited the country (or know anyone who has), then you likely know it’s an incredibly beautiful place that’s rich in biodiversity and committed to environmental sustainability.
And you’d be right. But what about some of the less-obvious information about this popular expat destination? Read on for a brief overview of some of the behind-the-scenes Costa Rica facts.
Costa Rica’s History, from Columbus to Calderon
Costa Rica and its natives were discovered by Christopher Columbus in 1502 during his fourth and final trip to the Americas. He found the area’s roughly 400,000 inhabitants to be quite friendly and immediately returned to Spain to proclaim of the region’s beauty and wealth.
However, when later explorers came, they failed to encounter the same riches and easy-going natives. Instead they found mosquito-borne diseases, fierce heat, angry locals, and even marauding pirates. As a result, little gold was ever mined from Costa Rica. Instead, the area was mostly used for farming and a permanent settlement was not established until 1563 when Cartago was founded in the cool and fertile central highlands.
As a result of disease and conflict with the Spaniards, much of the indigenous population was wiped out. The Spanish settlers, rather than work the land themselves, began to immigrate to the Americas where native servants were more plentiful. However, the colony continued to exist for another 250+ years.
While Spain was defending itself against France, Mexico launched a war for its independence in 1810. The other colonies of Central America followed suit, and Costa Rica officially declared its independence on September 15, 1821. Initially part of the United Provinces of Central America, a federation which eventually dissolved, the nation proclaimed its complete sovereignty in 1838.
Costa Rica thwarted the invasion attempts of William Walker, a North American southerner who wanted to annex Central America and make it a slave state. It also struggled from time to time with military rule, although with much less violence than its Central American neighbors.
Civil war erupted in 1948 when the defeated presidential candidate Rafael Angel Calderon refused to concede to the newly elected Otillio Ulate. After a two-month conflict, Jose Figueres assumed temporary leadership of the government. A new constitution was ratified in 1949. Its provisions included the dissolution of the country’s armed forces, in an attempt to prevent future civil wars.
Sara Hopkins
Costa Rica’s Regions, from Coast to Coast
Costa Rica is known for its distinct and varied eco-climates. The country is divided into several very distinct and different regions, and each varies greatly in its topography, climate, population density, and many other factors.
Pacific Coast
Costa Rica’s Pacific Coast is its most extensive. Even though it’s often rugged, with thickly forested mountains ending abruptly at the sea, it’s still mostly accessible. It’s divided into four main regions.
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Guanacaste: Located on the northernmost end of the Pacific Coast, this region contains many of the country’s most popular beach towns. There you’ll find a number of luxury resorts, as well as long stretches of deserted beach. This region is the driest in the country, comparable to the climate of west Texas.
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Nicoya Peninsula: South of Guanacaste, this region is similar to it in many ways. It is, however, a bit less accessible and–as a result–somewhat less developed and crowded (although that’s beginning to change). The climate is also similar although it gets more humid as you move further south.
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Central Pacific Coast: The most accessible of Costa Rica’s coastline, the central Pacific coast also has a lot of resorts and hotels. It’s quite popular among young surfers, as well as local Costa Ricans seeking a weekend getaway.
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Southern Zone: This region is the country’s most remote and undeveloped. Hot and humid, it contains dense rainforests, protected areas, and rugged stretches of coastline. Other than a number of nature lodges and a few ecotourism outfits, it’s largely uninhabited.
Caribbean Coast
Costa Rica’s Caribbean coast is more or less divided into two equal parts. The northeast section is a large flat plain covered in rivers and rainforests, most of which is only accessible by boat or small plane.
Further south are a few beach towns that, while popular, have few large hotels or resorts as of yet. Like its Pacific counterpart, the southern Caribbean coast can be rainy, particularly from December to April.
Inland
The inland areas of Costa Rica are characterized by mountains ranges, three in all, that run from northwest to southeast. These mountains include several volcanoes, some of which are still active. Between them are fertile valleys, with the largest being the Central Valley.
Home to the capital city of San Jose, this area enjoys a mild spring-like climate year-round. The rich volcanic soil is perfect for farming, and coffee farms are prevalent. This region is densely populated.
The Northern Zone above San Jose also draws its fair share of tourists, despite the fact that it’s one of the few areas in the country without any beaches. Popular among those seeking nature retreats and extreme sports, it’s home to two of the country’s most active volcanoes, as well as Lake Arenal and the Monteverde Cloud Forest.
Camelia TWU
Costa Rica’s People, “Ticos” and “Ticas”
Unlike many of its Central American neighbors, Costa Rica has an extremely small percentage (<1%) of its population that are made up of indigenous tribes. Instead, a whopping 94% of Costa Ricans are of European descent, including mestizos or those of mixed European and native ancestry. Another 3% are black (many from Jamaica), and 1% of the population is Chinese.
Spanish is the official language of Costa Rica, although English is also widely spoken. Of those of faith, 76.3% are Roman Catholic. Evangelicals make up 13.7% of the population. There are also a significant number of Jehovah’s Witnesses, as well as those who practice a variety of other religions.
Local “ticos” and “ticas” (male and female, respectively) generally polite and friendly. They’re welcoming to foreigners and often go to great lengths not to offend anyone. The country also has a very well-established middle class, and its residents are mostly well-educated.
The Government of Costa Rica, a Peaceful Existence
Costa Rica’s government is a democratic republic, and it has enjoyed great political stability in recent decades. The country is divided into 7 provinces: Alajuela, Cartago, Guanacaste, Heredia, Limon, Puntarenas, and San Jose. It operates on a civil law system, based on the Spanish civil code. It also has an established system of checks and balances, with its Supreme Court performing judicial review of all legislative acts.
Its executive branch consists of a President and two Vice Presidents who are elected, on the same ticket, by popular vote. They serve a four-year term and appoint a 20+ member cabinet. The next election will occur in February of 2014.
The 57 members of Costa Rica’s Legislative Assembly are also elected by popular vote to serve a four-year term. The assembly elects a total of 22 Supreme Court Justices, who are divided into several chambers and serve eight-year terms.
Mike Baird
Costa Rica’s Economy, from Tourism to Technology
Costa Rica is a nation that had its beginnings in agriculture. Although it has drastically moved away from this direction as centuries have progressed, products such as bananas, coffee, pineapples, melons, ornamental plants, sugar, rice, and dozens more are still a vital part of the economy.
Tourism has long been Costa Rica’s largest source of revenue, as its beautiful beaches and endless opportunities for ecotourism are both plentiful. Other large contributors in the service industry are financial sectors such as banking and insurance.
Tourism is still huge, but in recent years industry has been gaining ground in Costa Rica, particularly in the technology field. Companies like HP and Intel have begun setting up operations there, largely in part due to the country’s high number of educated young people.
What’s more, its political and economic stability, coupled with its focus on education and health care, make it an attractive home for foreign companies. Products manufactured in Costa Rica include medical equipment, textiles, plastic products, and construction materials. Though in a country this beautiful tourism will always be a major player, it appears that Costa Rica is taking strides to diversify itself for continued growth and progress.
Costa Rica Facts and Figures
For those who like a bit more data, here are a few more Costa Rica facts and figures to show you how the country’s economy looks on paper:
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GDP $45.13 billion
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GDP real growth rate 5%
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GDP (PPP) $59.79 billion
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GDP (PPP) $12,800
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Industrial production growth rate 6%
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Unemployment rate 7.8%
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Population below poverty line 24.8%
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Revenues $6.506 billion
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Expenditures $8.501 billion
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Budget deficit -4.4% of GDP
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Public debt 51.9% of GDP
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Taxes and other revenues 14.4% of GDP
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Inflation rate 4.5%
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Commercial bank prime lending rate 18.21%
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Current account balance -$2.556 billion
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Exports $11.44 billion
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Imports $16.75 billion
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Reserves of foreign exchange and gold $6.857 billion
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Debt – external $13.8 billion
UNESCO
How much do you know about Panama? If you’re like many potential expats, your knowledge may be limited to the fact that it’s home to the Panama Canal and the birthplace of the Panama hat. And you’d be wrong about the latter. (They actually originated in Ecuador.)
If you’re considering visiting or relocating to this important international destination, or if you just want to brush up on your general knowledge of Central America, here are some Panama facts to educate you on some of the country’s highlights.
General Panama Facts
Panama is an isthmus that connects the Central American country of Costa Rica to Colombia in South America. Shaped like a sideways “S,” it runs from west to east and borders both the Caribbean Sea and the Pacific Ocean.
Its total area is around 29,150 square miles (slightly smaller than the state of South Carolina), and it has a population of about 3,595,490 (less than the city of Los Angeles). Many of the country’s residents (1,272,672 to be exact) live in or near the capital, Panama City.
The rugged terrain and lack of good roads can make accessing areas along the Caribbean coast more difficult. As a result, the population is also heavily concentrated on the southern, Pacific side of the country, where the Pan-American highway runs. Panama’s Darien province also contains the only break, known as the Darien Gap, in the entire highway system that connects the farthest tips of North and South America.
Panama enjoys a tropical climate, with temperatures ranging from 87 to 95 degrees Fahrenheit year round. Relief from the heat can be found at the higher elevations, where temps are generally in the 70s. Its only season variation is between its wet (April to December) and dry (January to April) seasons.
Panama’s History
The Isthmus of Panama was discovered by Spanish explorers Rodrigo de Bastidas and Vasco Nunez de Balboa in 1501. In 1510 Santa Maria La Antigua del Darien became the first permanent settlement on the American mainland. The Pacific Ocean was reached on an expedition led by Balboa in 1513, and Pedro Arias Davila established Panama City on August 15, 1519, almost a hundred years before Jamestown, Virginia, was founded.
Panama remained a Spanish colony until 1821 when it became part of the Gran Colombia, under the rule of Simon Bolivar. It gained its independence from Colombia in 1903.
The People of Panama
Panama is comprised mostly of mestizos (68%), those of mixed Amerindian and European descent. The other categories include black and mulatto (10%) and white (15%). Amerindians (or American Indians, those indigenous to the region) account for another 6%.
Spanish is the official language. However, English is widely spoken. In fact, approximately 14% of the country speaks English. Several Indian languages are also used among native peoples.
The majority of the population (75-85%) identifies with the Roman Catholic church. However, freedom of religion is guaranteed by the nation’s Constitution. Protestantism, Judaism, Islam, Buddhism, and many other religions are also practiced in Panama.
Lon & Queta
Panama’s Structure and Government
Panama is divided into nine provinces and three Indian territories. It is a constitutional democracy whose representatives are elected by direct vote. The executive branch consists of a President and Vice President who are elected for a non-renewable five-year term. The 71 members of the National Assembly, the legislative body, are also elected every five years, often resulting in sudden, drastic changes in policy. Supreme Court justices are nominated by the executive branch and designated by Parliament.
Panama’s Economy
The official currency of Panama is the Balboa. However, the U.S. dollar is also widely accepted and exchanges at a rate of 1:1, making it an easy place to live and invest. To further attract investors, a recent law was established to protect investments made in all economic sectors. Both natives and foreigners are free to do as they wish with the products and profits generated with Panamanian investments, up to and including trading or transferring them to other countries. It also establishes an arbitration provision, eliminating the danger of dealing with the Panamanian judicial system.
Its main industries include food processing, chemical manufacturing, textiles, and the manufacturing of machinery and metal products. Among its agriculture products are coffee, bananas, sugarcane, cotton, beef, and veal. Its largest exports are coffee, shrimp, lobster, cotton, tobacco, and bananas.
Other revenue producers include the banking and services industries, tourism, tax-free zones, and the Panama Canal. Panama’s economy has boomed in recent years, so much so that the country experienced a shortage of skilled workers. As a result, a new visa was introduced to attract foreign professionals and their families to live and work in Panama. The shortage also prompted large investments in Panama’s school system for a more long-term approach. The country has a high literacy rate at 93%.
Because its tax law is strictly applied to income produced within its territory, it is also considered something of a tax haven. All transactions made or executed in or affecting areas outside of Panama are exempt from income taxes. Property and other taxes are also quite favorable.
The Panama Canal
Among its most notable landmarks is the Panama Canal, a 48 mile ship canal that first opened in 1914 and took 33 years to build. The passageway was instrumental in opening up trade and travel to the west coast of the U.S. as well as nations in and around the Pacific Ocean.
The Canal was controlled by the U.S. until 1977 when a series of treaties made way for it to be handed over to Panama. Since 1999 it has been solely operated by the Panamanian government. Named one of the seven wonders of the modern world, it has been expanded many times with its third lane of locks slated to open in 2015.
Surprisingly, the canal itself only accounts for 4% of the country’s Gross Domestic Product (GDP). However, due to the multiplier effect, its impact is much more far-reaching. Its employees spend their income on consumer goods, which in turn fuels businesses like restaurants and grocery stores. As a result, it’s estimated that the canal indirectly accounts for closer to 30% of the nation’s GDP.
Panama’s Infrastructure
Panama has excellent infrastructure when compared to many of its Latin American neighbors. And recent investments into roads, airports, and other systems are literally paving the way for even more businesses and visitors to come to Panama. These include a $5.2 billion Canal expansion, airport renovations, five new highways, new hospitals, and $1.5 billion for a Metro line, Panama’s first subway system.
Panama is also a highly connected country, due in part to a longstanding U.S. military presence. In fact it ranked as the second best Latin American country for technology and internet penetration. Telephone service, high-speed internet, cable, and satellite service are also affordable and reliable.
Panama’s Nature
Angie Harms
Roughly a fifth of Panama’s entire land area is protected areas. This includes nature reserves, national parks, wilderness areas, and others. In addition to these land features, Panama is also home to three protected wetland sites.
Though not as naturally diverse as some of its Central American neighbors, Panama boasts a tremendous amount of flora and fauna that make it a nature lover’s paradise. Its forests are home to almost 10,000 species of plants, including 200 that are currently endangered. Panama’s resourceful natives have used many of these for centuries as medicine, food, and construction materials.
Panama also claims over 200 mammals, as well as many reptiles, amphibians, and fish. It also contains 10% of the world’s bird species, including the rare resplendent quetzal.
Traveling to Panama
Panama is five hours behind Greenwich Mean Time (GMT). It’s also one hour ahead of its Central American neighbors. It does not observe daylight savings time so, depending on the time of year, it corresponds with either the U.S.’s Eastern Standard Time or Central Standard Time. Most of its electrical outlets are 110 volts, although there are some areas with 220.
Entering Panama requires a passport (valid for at least 6 months) and the appropriate visa (90 or 180 days for tourists). You’ll also need to show proof of a return trip ticket or ticket to your next destination, as well as proof of financial solvency (e.g., bank statement or travelers checks) to guarantee you won’t be working while in the country.
Panama by the Numbers
Here are a few more Panama facts and figures:
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GDP $36.253 billion
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GDP per capita $9,526
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GDP (PPP) $57.079 billion
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GDP (PPP) per capita $15,616
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Industrial production growth rate 15.7%
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Unemployment rate 4.4%
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Population below poverty line 26%
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Revenues $9.07 billion
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Expenditures $9.835 billion
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Budget deficit -2.1% of GDP
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Public debt 39.2% of GDP
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Taxes and other revenues 25% of GDP
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Inflation rate 5.7%
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Commercial bank prime lending rate 6.91%
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Current account balance -$4.191 billion
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Exports $18.91 billion (includes the Colon Free Zone)
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Imports $24.69 billion (includes the Colon Free Zone)
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Reserves of foreign exchange and gold $3.303 billion
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Debt – external $14.2 billion
If you still have questions about Panama, take a look at one of our many articles on various topics affecting those who are considering it as a retirement or vacation destination. Or, better yet, schedule a trip to the Latin tropics and check it out for yourself.
Map of Panama
Panama Fast Facts
- Population: 3.8 million
- Typical temperature: Temperature typically varies from 72°F to 91°F
- Nearest airport with U.S. flights: U.S. Bound flights leave daily from Tocumen International Airport
- Nearest U.S. consulate: Panama City
- Home of the Playa Burica adventure colony.
Cliff Miller
Being an expat in Panama affords me many luxuries I never had back in the U.S. One is the ability to distance myself from the seemingly never-ending political debates that increasingly plague the country I once called home.
It’s not that I keep my head in the proverbial sand. Far from it, actually.
I certainly try to stay abreast of what’s going on back in the States, and the world for that matter. I’m just able to do it from a different perspective now. One that doesn’t cause my blood pressure to rise every time I hear about the government making a decision that takes even more hard-won freedoms and hard-earned dollars away from its constituents.
My North American friends are facing tough times ahead.
But I read something the other day that really made me realize how bad things have gotten.
It wasn’t a news story. It was a Facebook post.
I logged on to see what was happening in the lives of friends I keep in touch with through social media, since moving to Central America several years ago. I was shocked to read my buddy’s status update which stated that the health insurance for his family of four was increasing from $450 per month to a whopping $923. He wondered what others in his same boat were doing to combat similar rate hikes.
That’s a 105% increase just since last year!
Almost as shocking as his post were the comments in the thread. Friends shared stories about how they were experiencing the same increases. Not only were their premiums rising, but deductibles had doubled. Co-pays and out-of-pocket limits were increasing.
Most of the comments had to do with abandoning insurance all together and just paying the fines.
Triple and quadruple the premiums for less coverage?
I decided to research further and found that the implementation of Obamacare will cause the underlying insurance rates for young Americans to increase by 55 to 62 percent for women and 97 to 99 percent for men.
Those numbers are even higher in some areas, such as North Carolina where rates will triple for women and quadruple for men.
Of course these rates vary based on location, as well as the age and health of the individual. Americans who are youngest and healthiest will help foot the bill for sicker individuals or those who’ve been previously denied coverage.
And these increases don’t even take into account the fact that America’s middle class will not only pay higher premiums for their own coverage, they’ll also pay higher taxes to help fund the subsidies for those in the lower income group. They’re also not always comparing apples to apples, as most calculations use the second-cheapest option of the Obamacare plans.
I didn’t realize how good I have it!
Holy cow! Maybe I am a bit behind the times, living in Panama, but I honestly had no idea just how good of a thing I have down here!
I just paid my health insurance premium for my family of six. (Yeah, we have 4 kids!) It was $1,385…for the year. That’s right. THE YEAR.
What’s more is that our plan actually covers us in the U.S. too–as long as we spend at least 180 days abroad each year. That’s not a benefit we plan on using–because the health care here is fantastic–but it’s nice to have that peace of mind in knowing that we could travel back to the States for treatment if a really serious situation arose.
I’m saving over $14k per year by living here.
So, let’s do a little comparison here.
By the administration’s own estimation (so take that with a grain of salt), the average monthly cost for health insurance in the U.S. will now be $328 per person (according to Department of Health and Human Services data). That’s a broad average across the board. Regardless of age, health, location, blah-blah-blah.
Since that estimate is very general, it’s hard to know exactly what my family would pay. But let’s assume it’s the $328 average for my wife and myself and half that ($164) for each of our 4 kids. So my family would pay $1,312 per month, or $15,744 per year for health insurance.
That means my family is saving over 90% on health care by living abroad (not to mention all the other amazing benefits that you just can’t put a price on). I don’t really think that’s apples to apples either, since research shows that U.S. health care dollars don’t necessarily get its residents the best bang for their buck.
So can you!
There has never been a better time to consider moving your family overseas. Even if it’s just for a “gap year,” a trend that’s gaining popularity among many North American families.
Ever-improving technology is making working remotely and homeschooling your children simpler than ever. And an ever-flattening globe is making the ability to speak another language and interact with other cultures almost necessary requirements for the future generation of employees.
And, since health care isn’t the only thing that costs less in Central America, you could work a whole lot less and still live better than you ever dreamed. Consider the invaluable benefits to your children and the memories you could make together as a family. In short, the cost savings isn’t the only reason to consider a move. It’s not even in my top 5.
More places you can save…
But, since health care is the topic at hand, here are a few more places in Latin America where you can score a bargain on insurance.
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Panama: I mentioned the cost for my family. But there are a lot of different plans available. A fellow expat friend of mine only pays $450 per year for her family of 4. Many doctors are U.S.-trained, and most speak English.
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Ecuador: One of the cheapest places to live in Latin America, premiums are less than $40 per person (per month) for someone in their 50’s. Much less for younger adults and children.
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Costa Rica: While it’s one of the pricier destinations in Latin America, health insurance can still be had for as little as $60 in Costa Rica. Its health care system also consistently outranks that of the U.S. when it comes to the quality of care and health of its citizens.
More reasons to give it a try…
I mentioned that the cost of living wasn’t a top priority in my family’s decision to move to Panama. So you might be wondering what was.
In actuality it was a lot of things. Namely the opportunity to have the freedom to live life on our own terms. The ability to simplify our lifestyle and shed the expectations of the North American culture. To teach our children what we believe is important, not what society dictates. To expose them to new things and people they might never have otherwise known about. And to allow them to have fun just being kids.
Was it scary at times? Absolutely. Especially in those first few months. But then again, so is logging onto Facebook these days.
There are lots of resources available for families considering moving abroad, including a guide that we compiled based on our experiences. If you’re one of the thousands of Americans currently considering becoming expats, you can find out more here.