Moving to Central America

As I was saying last week, some friends and I supposed that if our American Political Administration became any more socialistic, as some pundits presume—and depending on the elections of 2012--there might be a small exodus of “movers and shakers”.  The decision to go somewhere outside the US would be a function of life being so different here that men like John Galt and Ben Franklin would find it impossible to live the life we have come to cherish and the life our fathers and grandfathers envisioned when they fought WWI and WWII. (And Korea and Viet Nam)

This column is a continuation of the one I presented last week, and deals with the “what if” of where a businessman, still either employed with a day to day responsibility to employees and family, or partly retired might consider living, outside of the United States. You may not have given this much thought for yourself, but even if you only watch HGTV's “House Hunters International”, and wonder what it would be like to live outside the US, you share in this fantasy.

The countries that seemed to be the most likely were generally in Central America. The five countries that were discussed were Costa Rica, Panama, Equador, Colombia, and Belize. Of course Mexico and Honduras have many appealing areas too. One of our group liked China—but try learning the language…

Everyone wanted ease of access (location and airports), a lower cost of living and taxes, lower cost and better availability of land, and like the Pilgrims, we wanted to see the success of other Americans living there, including ease of language, and stability of currency. Also the quality of life is a key to making such a move, our discussion touched on the relaxed atmosphere and living amidst a culture that’s less obsessed with work and consumerism. There’s less government intrusion, fewer lawyers making things difficult for everyone, and—despite what the popular media would have you believe—lower crime rates.

The atmosphere differs from country to country of course, which is why it makes sense to follow the advice you hear so often: live in a place for a while before you buy real estate there. Places that seem perfect on vacation may not be perfect for an entire year.  Our group of potential ex-pats is actively planning familiarization trips before the 2012 elections, just to be sure; but I stress, they are doing all this, “just in case”.

Weather itself is a key factor for many expatriates. Panama City and parts of Mexico can feel like Florida in the summer. But it can get downright cold and damp in some Central American mountain regions. Some prefer the “eternal spring” climate you get in the highland mountain areas of Panama or Ecuador, venturing down an hour or two to the beach a couple times a year. Others want a permanent beach life, with sun and sand every day of the year. Our group didn’t want to be in ski country of Argentina or Chile, but you might. If you are thinking about such a move, make sure you evaluate your preferences when picking out potential destinations.

What’s most appealing in Latin America may be the pace and culture, and the reduced cost of living is a major factor as well. Whether you are young and your income is low, or retired with a fixed income, you can easily cut your monthly cost of living down 30 to 60% without making a lot of sacrifices. It’s possible for a couple to live on less than $1,000 a month in Ecuador or Nicaragua, and still have a great life, but bump it up to $1,500 or $2,000 a month and you’ll have a maid, a gardener, and one or two restaurant meals a day.

The cities of wealthier countries such as Argentina, Chile, or Mexico will cost far more than those in less developed countries, but you will still spend less overall for a better quality of life. We were less interested in living in major cities like Buenos Aires—but even that doesn’t cost what it does to live in vibrant New York or London: the cost is more in line with living in Des Moines or Tulsa—but with a lower tax bill.

Even in nearby Mexico, only those who live in fancy beachfront penthouses or in gated American-style housing communities are paying anything close to what they would at home. Away from Mexico’s coastal tourist zones, finding a nice two-bedroom apartment for less than $500 a month is not difficult, and usually that’s with utilities included. A typical locals’ lunch will be two or three dollars. In most areas you can easily do without a car.

Where my friends will go will depend on so many things; expected level of comfort, the choice of the countryside or a city, and how much living space is needed.  Some folks claim they are willing to live like a local, but in fact I would not expect to see my friends with dirt floors and an outhouse…but rather a gated and walled-off main house with one or two casitas and some land for crops.  You’ll see plenty of both from Mexico down through the tip of Patagonia.

My research indicated that the cheapest overall, while still being attractive places to live in Central America, would be Guatemala, Ecuador, Nicaragua, and Honduras (apart from popular Roatan), while Panama is less expensive as a renter than an owner. Prices there have risen rapidly in the past decade. If you just heard about buying in Costa Rica, you’re about 20 years too late. An ocean view building lot that would cost a half million dollars in Costa Rica, for example, would be more like $50,000 in Nicaragua. There’s a similar differential in home and condo prices. Subtract a zero when you cross the border.

For South America, the least expensive countries with a sizable expatriate population are Ecuador, Peru, Uruguay, and Argentina—in that order. Brazil’s currency fluctuates like a small boat on a stormy ocean, so it’s a tough one to classify. Chile gets more expensive each year, but has the best infrastructure.

Remember that Panama and Ecuador use the U.S. dollar as their currency, so you don’t have to worry about exchange rate changes in either of those. The Belize rate is pegged at a steady 2-to-1 exchange. Mexico’s rate can vary 30 or 40 percent from year to year. In many Latin American countries with their own currency, rents are usually listed in local pesos, but if you buy property it will be negotiated in dollars.

Is any of this going to actually happen? Will this band of Floridian snowbirds live up to their

Plan, or is all this just a cocktail induced conversation?  Time will tell.  But as I say, they are discussing their “life boats” and if the time comes—they will be prepared.

Dane Hahn is a real estate professional, you can reach him at dane.hahn@gmail.com  or by phone at 941-460-8979.  See him on the web at www.danesellsflorida.com