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Note on Cost of Living for Newcomers to Chile

The cost of living is a technical economics term. It means, generally, “the level of prices relating to a range of everyday items, and regular household, educational, tax, insurance and transportation expenses.” Investopedia provides a more complete definition:

Cost of living is the amount of money needed to sustain a certain level of living, including basic expenses such as housing, food, taxes and health care. Cost of living is often used to compare how expensive it is to live in one city versus another locale. Cost of living is tied to wages, as salary levels are measured against expenses required to maintain a basic standard of living throughout specific geographic regions.

Accordingly, newcomers from Paris, London, New York and Hong Kong will find Chile to be relatively inexpensive, albeit with lower salary expectations, while people from places like small town Italy, rural New Zealand and many places in the USA and Canada located outside of major cities will find it to be extraordinarily expensive. The same thing is true when people from those places travel to other spots in the world that feature a significant cost of living disparity.

Sometimes, normally rational people, make rather irrational judgments based on limited data. For example, newcomers to Chile from the USA see that gasoline costs much more in Chile and then extrapolate that the overall cost of living is higher in Chile. This conclusion is false. By the same logic, Venezuela and Bolivia, where gasoline supposedly costs fifteen U.S. cents per gallon, must be extraordinarily cheaper places to live than in the USA, where gasoline is “excessively” expensive. However, this reasoning is erroneous. Other things in those countries are not cheap. Living in the Third World is cheaper for a lot of things but the added costs of bodyguards, criminal threats, political unrest, unsanitary conditions, etc. have to be factored into the equation.

Can I fairly judge that the USA or Finland are excessively expensive for wine since I pay US$4 for the same bottle Chile that people in those countries pay US$25 or US$40? One must look at overall cost of living in Chile verses those other countries without getting caught up in extrapolating on the prices of individual products, whether they be cheaper (e.g., medical care, vegetables, yogurt, pharmaceuticals, maid service) or more costly (e.g., gasoline, peanut butter, boxed cereals, power tools). Also, to be fair and consistent, one should never compare cost of living in small town Italy or Arkansas verses a major metro area like Santiago. Instead, use Atlanta, Charlotte, Houston, Detroit, Philadelphia, Phoenix, Milan, Berlin, Hong Kong, Sydney or Singapore as a baseline. Should anyone be surprised to know that living in Chicago, San Francisco, Munich, Barcelona or Geneva costs more than it does in Mobile, Little Rock, Porto, Cuneo or Salerno?

Some items that make up our standard of living should also be considered within any discussion of cost of living. For instance, what is the value of having an ocean or maintain view from your living room window? What is the value added by having a Mediterranean climate? What is the benefit of having a maid that does all your cooking, cleaning and laundry? Does having a year-round garden appeal to you? How about a much lower probability of being mugged, murdered, drafted, bombed or accidentally shot by cops? Let’s not forget to consider the level of air and water pollution, or overall food quality. Or maybe add the proximity to good medical care, a professional baseball stadium or world-class theater, not to mention living in strong buildings, with great internet service and quality interurban highways all around.

In other words, any analysis is deficient that simply compares only the cost of living in a place without also considering the amenities which influence our standard of living and quality of life. With most of the aforementioned items, Northeastern Santiago and Viña del Mar, Chile provide far more to augment one’s standard of living than can be found in most metro areas of over one million population around the world. The same can be said of Auckland and some other places, but not many others. For many people, it is worth paying more to have a better environment and certain amenities.

Nevertheless, cost of living still serves as a good starting point. After all, newcomers must be able to survive. If they have no accumulated wealth, they can create portable income by becoming a 51Talk online English teacher with a decent salary, most likely tax-free. After having money to spend, they will likely want to avoid paying higher living costs. At this point, many newcomers become frustrated by the price of “little” items. Perhaps the following remarks will help keep things in perspective and alleviate frustrations about living in Chile for the fist couple of years.

One newcomer recently told me, “Prices are by far the most demoralizing thing about Chile.” I suggested that he read the chapter on cost of living in my book Life in Chile: A Former American’s Guide for Newcomers. He needed to get the “big picture.” Many smaller items are more expensive in Chile but many larger budget items are not. His frustrations and worries were based more on emotion than rational analysis. Do not make the same mistake.

It is always good to answer questions and concerns rationally when it comes to the relative cost of products and overall cost of living, especially when the products in consideration make up a small percentage of our overall spending in any five-year period. For instance, how much contact lens solution does one buy a year? Even if it is significant, are there alternative means to get it cheaper? Can you have it shipped to you via Amazon and pay the 25% duty in Chile and still come out ahead? Do the same exercise with peanut butter, pliers, shoes and alarm clocks. It is not more expensive to live in Chile. You simply have to change your way of doing things from what you used to do. Try ordering smaller things online or stocking up on them while on trips to Europe or the USA and even pay an extra suitcase fee to bring them back (you might save enough to cover the costs of the flight!).

A household’s biggest budget items are housing, insurance and taxes. Those costs are all going to be reduced dramatically in Chile, even as a percentage of income, dwarfing any extra costs one has for “little” things. Food, transportation and education are important second category items. Depending on how one handles them (mode, selection, quality, etc.), and where one chooses to live, they will be either a little more or a little less in Chile than where you came from.

Let’s consider another “little” item that tends to be expensive in Chile by USA standards, but is not something you can import: meat. Think about it. How much more does a family spend on meat, continuing to eat it normally in Chile as they would have in the old country? Let’s say it costs an extra US$200 per month or US$2,400 per year. This sum pales by comparison to US$40,000 less in paid taxes alone, once a newcomer starts working his professional job. Until then, he simply has to absorb the cost as part of the price of emigrating. Even so, assuming the family eats lots of fruits and vegetables, there might be savings of US$2,000 per year if those foods are regularly bought in open-air markets. Therefore, look at the big picture rather than individual items. Also remember that we do not eat GMO-fed beef in Chile and the fruits and vegetables are better quality. Again, the cost of living should not be divorced from the standard of living.

A similar thing could be said of electricity costs. A newcomer living in an apartment in Santiago once told me, “I got the electric bill; it is unbelievable. I cannot understand how people can survive here.” Yet they do survive here, and on much less than their American counterparts. Why? They know how to play the game, whereas a tourist does not. After my years in Chile, I am now spending about the same on electricity as I did in the land of the free. In our household, we use electricity for lighting, small kitchen appliances, range hood, oven, washer, dishwasher and things plugged into outlets inside the house. Outside it is used for a sewage pump, lights and outlets (e.g., for the lawnmower). Those that choose to heat with electricity make a mistake. Most locals choose to get one of the Japanese or European kerosene units, like Toyotomi. The cost for heating will thus be much less over the long run than using electricity. Another slightly more expensive but more convenient option is to hook into the natural gas system if it is available.

My (cynical) Chilean wife says that Chileans that heat with electricity have found a way to alter the electric meters and thus rip off the companies. She may be right. Others use some sort of gas heating system. Newcomers should listen to her. She often knows. While in Las Condes, we used the Toyotomi heater instead of the apartment’s furnace heat or electric heaters. We saved a bundle and the heat was better. Also, the maid could help fill up the heating unit, maintain it and the room temperature, which is a benefit that newcomers are likely not accustomed to having.

What newcomers often do not realize is that electricity bills come with whopping surcharges for “overuse.” In Chile, once you go over a basic amount of electricity in winter you get nailed with a rate that is 2x or 3x the normal rate and the bill skyrockets. So, in order to not cross the threshold, one learns to mix into one’s household some natural gas (or propane) appliances for heating, hot water, cooking and clothes drying. Is that inconvenient or a hassle compared to the USA (Europeans are used to such things)? Maybe so. But so what? You do not live in the old country any more. It is just something else to learn, in a new place. Locals know how to optimize energy use. Imitate them. Every government-sanctioned utility monopoly has its own unique way of “ripping off” citizens and tourists. You have to learn to cope here just like anywhere else. Locals know. Newcomers must learn. Why do newcomers expect to know everything the first two months after arrival?

A key point of my book, Life in Chile: A Former American’s Guide for Newcomers, is to inform newcomers of issues as much as possible prior to coming to Chile. Things will be hard enough as it is for newcomers. Yet these folks routinely put off reading it as if the information were optional. They pay the price because of when they arrive unprepared. All newcomers have a hard time, but the more ignorant ones suffer the most. Newcomers should not think immigration will be easy. I have never said it is. However, you can look at my experience and that of many others who have stayed and see that it is more-than-possible to make it. Hard times make for hard choices, but the diligent can succeed.

Consider, too, the cost of using interurban toll roads. For instance, driving from Santiago to the Talca (farm belt) area on the weekend will cost perhaps US$24 dollars in tolls round trip (33% less on weekdays). One might first ask why there is a toll when gasoline (not so much diesel) taxes are so high? In Chile, most interurban highways are private and tolls are paid to a company that has won a monopoly right through a competitive bidding process (one of the “Chicago boys'” innovations stemming from the 1980s). Because of that fact, newcomers will notice that highways are in perfect condition, unlike Chile’s city streets (often rotten outside of Santiago). Fuel taxes are used in part to pay for city roads. Hence, Chile is a case study in why all roads should be private.

Furthermore, before one complains that, “Roads are no better here than in the USA,” he should consider how much he pays in taxes in the USA or Europe to get those good roads. Remember, too, that in New Jersey, Illinois, Pennsylvania and California people pay tolls to the state on top of paying taxes. Also, tolls in Chile are much cheaper than New York and Europe. In those places one already pays high income and fuel taxes. Consequently, one must not judge the cost of living in Chile based on what a tourist pays for things. Once one has a job and pays less in taxes, owns a home and use medical care in Chile, all will become strikingly clear: the savings far outweighs the additional costs for some things.

For example, if one earns US$120,000 in the USA and pays US$45,000 in all taxes, including income, Social Security, car registration, capital gains, property taxes and fuel taxes, in Chile he might pay US$12,000. Europeans will have a similar experience. Given that fact, is it “excessive” to pay US$24 in tolls to go to Talca, especially if one only goes there, say, four times a year? Once again, if one only looks at the cost of the tolls, he is missing the bigger picture.

Newcomers also tend to be myopic in my experience. They might be saving, for instance, 80% on world-class medical care in Santiago (compared to the USA) or procedures like in-vitro fertilization, not to mention the associated high transportation costs of traveling to specialized clinics. Yet they completely ignore those massive savings (that even newcomers can garner) and instead complain about the relatively paltry costs of things like tolls, meat and contact lens cleaner. Doing so is really irrational, if not ridiculous. Those who do so are not yet seeing the whole picture. With the savings in medical care and procedures alone, how much “excess” costs for cleaning fluid, meat and tolls can one pay? Five or ten year’s worth?

Newcomers live as tourists for the first year or two in Chile. The associated extra costs have to be counted as part of the cost of resettling to a new country without a visa in hand. Probably, no one has ever told them that it would be cheap to leave the old country and settle into a new one. Ask yourself: “Is it worth it to me to spend an extra US$25,000 on store-bought products over the next two years in order not to have to stay in my present country?” If so, deal with it.

So many people come to Chile with the unfounded expectation that transactions costs to adopt a new culture and way of life will be low. This thinking is tragically errant, always leading to frustration. An international move, including full immigration to a new country where one does not speak the language, is not easy and is hardly cheap. Why anyone would think otherwise is beyond me. I never make such claims in what I write or on my webinars. Nonetheless, rest assured that over time initial costs do subside. In the meantime, do not be surprised by the transition costs you will face. Try to minimize them, of course. Yet, is it not far worse to live in danger in the old country? Be thankful that you at least have the money to pay to move, Most that want to do so, cannot. That fact is one reason why becoming a 51Talk online English teacher is a Godsend.

Consider, too, that coming to Chile can end up being a career enhancement. No matter what happens, even if one “goes back,” being in Chile provides an opportunity for career growth. Indeed, there is little downside professionally if one plays his cards right. These benefits offset transitional costs. Living productively overseas does not look bad on one’s resume: after a few years you will be able to list such new personal attributes as “bilingual,” “experienced in living in an overseas environment,” “dual citizen” and “cross culturally trained.” How many new opportunities will those attributes create for you? Might it generate a higher rate of pay, too? Thus, the higher transition costs do come with some ancillary benefits. In addition, if one ends up buying real estate while here, Chile is a good place to invest in rental units and a retirement or second home, even if one chooses to leave someday.

Think about it. Base your judgments and conclusions in rationality.

Be sure to become a member of Escape America Now and gain access to the monthly webinar. Details at www.esccapeamerianow.info. Visit AllAboutChile.com for discussion and forums about the country. Non-wealthy immigrants to Chile should also create a portable income by signing up to be a 51Talk online English teacher. Read more details about the job in my previous post on the subject.

 Dr. Cobin’s updated and enlarged 2017 book, Life in Chile: A Former American’s Guide for Newcomers, Fourth Edition, is the most comprehensive treatise on Chilean life ever written, designed to help newcomers get settled in Chile. He covers almost every topic imaginable for immigrants. This knowledge is applied in his valet consulting service–Chile Consulting–where he guides expatriates through the process of finding a place to live and settle in Chile, helping them glide over the speed bumps that they would otherwise face in getting their visas, setting up businesses, buying real estate, investing in Chilean stocks or gold coins, etc. The cost is $129.

For a brief introduction consider Dr. Cobin’s abridged 2015 book (56 pages): Chile: A Primer for Expats ($19), offering highlights (somewhat outdated) found in the larger book. Buy Dr. Cobin’s Public Policy books at Amazon.com:

Memorandum to Newcomers

From: Dr. Cobin, Instigator

To: All Newcomers to Chile

Re: Fundamentals, Expectations and Rules of Conduct

Please take careful note of the following:

1. Chile is not the United States (i.e., “We are not in Kansas anymore.”), nor is it Canada, Australia, Japan, South Korea, Singapore or a Western European country–thank God. It is also not New Zealand or Hong Kong,

2. The way things are done in the aforementioned countries is not the only or “right” way to do things. Believe it or not, there is usually a good reason why things are done the way that they are done. You may not know those reasons now or for some time after arrival.

3. People do things differently in Chile than where you come from. That fact does not mean Chile is bad, but rather that Chileans have found different ways of coping with the challenges of their cultural context. “When in Rome, do as the Romans do.” Do not be an ugly American. It is not any fault of Chileans that you have to move.

4. You will pay more to live in Chile for the first 14-20 months than citizens and permanent residents do. This fact should not be surprising since tourists (newcomers) usually pay more than locals in any country of the world. Be prepared for the extra expense (i.e., “get a grip” and “deal with it”). It is part of your cost of emigrating from the “land of the free” or wherever. Over time, you will see that the overall cost of living here is probably lower than where you came from. Reducing costs might require you to change the way you have done things in the past.

5. You will not know everything you need to know about Chile on the day of your arrival, or even a year later. You will undoubtedly learn by the school of hard knocks. However, you can greatly minimize your butt-beating by not being lazy and taking my advice: read Life in Chile: A Former American’s Guide for Newcomers before you land in the Santiago airport. Also, attend as many Escape America Now webinars as you can prior to coming. If you do not read every page of the 1,500+ page book prior to coming, and hence attempt a life-changing, international move in a state of near-total ignorance, you forever forfeit your right to complain. Onlookers might also consider you to be somewhat moronic.

6. Your negativity, worry and complaining have never really helped you before and they will not help you in Chile. No matter how bad things seem, they could be worse. Best to look on the bright side and make the best of it. There are a lot of “bright sides” in Chile. Dwell on them instead, along with all the ugly/nasty/unpleasant reasons that have impelled you to leave “the old country.”

7. Chile is a Spanish-speaking country. Do not expect more than 2% of Chileans, nearly all found in Northeastern Santiago and Viña del Mar-Concón, to speak English. At some point, you will have to begin conducting your life in a different language than your mother tongue.

8. Plan on learning Spanish (starting now). Doing so will be really hard, take you years to accomplish and you may have to spend up to US$1,000 per month, per person for classes or tutors for up to a year. “Get a grip” on this fact. Add the “budget item.” There are a few things you can do from the old country to learn the language prior to getting here. Follow my advice from a decade ago. It is still valid.

9. If you choose to bring a “reluctant wife” with you to Chile, she will not become less so after she is in-country. She will make you ten times more miserable as a newcomer than you would ever have been if you had come alone. Indeed, you will experience rancor, odiousness, grumpiness (maybe even mean-spirited tantrums), resentment and grief like never before. If you are smart, you will think about how to minimize this emotional cost long prior to arrival, and take the proper steps to alleviate the problem. Note: there is a chance that you will not succeed.

10. You will need to spend money in Chile and have an income from somewhere. Put your assets in offshore havens and bring ATM cards with you so you can access your cash from Chile. If you are not wealthy, you should immediately sign up to be a 51Talk teacher and get a few weeks or months under your belt, so that you will have an income upon arrival in Chile. Doing so is also great for older children that accompany you, reluctant wives needing something to do and efficient homemakers. Even if 51Talk teaching ends up only being a stop-gap measure for a couple years until you have a “real job,” it could be a lifesaver. Read more details about the job in my previous post on the subject. Alternatively, you can also bring any other internet-based business with you.

11. Chile may be “somewhere over the rainbow” but no one ever promised you a bed of roses. Grow up. Your life in large part is what you make it.

12. While you may not be responsible for your present circumstances or the need to emigrate, you are responsible to make as wise and thoughtful move as possible. Do not blame me, the instigator, if you do not comply with this directive and prepare as best you can for that life-changing transition. Also, remember that the road to hell is paved with good intentions. Therefore, stop being lazy, fatuous and otherwise complacent when it comes to proper preparation!

cc. general file

moron file

get-a-grip committee

Kansas/rainbow crossing/deal-with-it project

Be sure to become a member of Escape America Now and gain access to the monthly webinar. Details at www.esccapeamerianow.info. Visit AllAboutChile.com for discussion and forums about the country.

Dr. Cobin’s updated and enlarged 2017 book, Life in Chile: A Former American’s Guide for Newcomers, Fourth Edition, is the most comprehensive treatise on Chilean life ever written, designed to help newcomers get settled in Chile. He covers almost every topic imaginable for immigrants. This knowledge is applied in his valet consulting service–Chile Consulting–where he guides expatriates through the process of finding a place to live and settle in Chile, helping them glide over the speed bumps that they would otherwise face in getting their visas, setting up businesses, buying real estate, investing in Chilean stocks or gold coins, etc. The cost is $129.

For a brief introduction consider Dr. Cobin’s abridged 2015 book (56 pages): Chile: A Primer for Expats ($19), offering highlights (somewhat outdated) found in the larger book. Buy Dr. Cobin’s Public Policy books at Amazon.com:

Keep Your Hemispheres Straight!

It’s not just whether the North Star or the Southern Cross governs the night sky. There are hemispherical differences that go beyond climate or weather concerns, and how clocks are set in relative countries; people in Chile should especially be aware of them.

I just chuckle every time I have to deal with ignorant people, especially school teachers, that say things like “Christmas is in winter” or that June 20th (or is it the 21st?) is the “longest day of the year.” Someone needs to explain to them the difference between the northern and southern hemispheres. Yet so many teachers do not even “get” such basic stuff. So, how can we expect that their students will? I just ran into this issue again today with a “white Christmas” slide show presented by an online academy.

With so much misinformation how can we possibly expect students to know other more crucial and insightful things that require interpretation of facts and some analysis when we teach them incorrect “facts”? How can they possibly evaluate whether the U.S. government’s story about 9/11 is true, for instance?

Christmas is in the summer for many millions of people, at least twelve percent of the world’s population, living in Chile, Argentina, Uruguay, Paraguay, Brazil, Australia, New Zealand, Namibia, South Africa, Tanzania and many other countries. It is certainly not “white” (except maybe on beaches in Tahiti, Samoa or Fiji) or “cold.” And for them it is in summertime–when Christmas Day is very long, too!

It is also worth mentioning that around forty percent of the world’s population live in the tropics, with no significant seasons or snow whatsoever, except perhaps a very high altitudes such as in the altiplano of Chile, Peru and Bolivia, or a couple of peaks in Hawaii. The vast majority of them may have never seen a snowfall, let alone a white Christmas.

Be sure to become a member of Escape America Now and gain access to the monthly webinar. Details at www.esccapeamerianow.info. Visit AllAboutChile.com for discussion and forums about the country.

Dr. Cobin’s updated and enlarged 2017 book, Life in Chile: A Former American’s Guide for Newcomers, Fourth Edition, is the most comprehensive treatise on Chilean life ever written, designed to help newcomers get settled in Chile. He covers almost every topic imaginable for immigrants. This knowledge is applied in his valet consulting service–Chile Consulting–where he guides expatriates through the process of finding a place to live and settle in Chile, helping them glide over the speed bumps that they would otherwise face in getting their visas, setting up businesses, buying real estate, investing in Chilean stocks or gold coins, etc. The cost is $129.

For a brief introduction consider Dr. Cobin’s abridged 2015 book (56 pages): Chile: A Primer for Expats ($19), offering highlights (somewhat outdated) found in the larger book. Buy Dr. Cobin’s Public Policy books at Amazon.com:

ATM Fees for Foreign Cards in Central Chile

One annoyance that newcomers to Chile face is that they will have to put up with making ATM withdrawals with foreign-issued cards at Chilean ATMs–most of which charge high transaction fees–until they can attain permanent residency status (often 15-20 months after arrival). The same is also true for residents and Chilean citizens that have bank accounts abroad or that receive payments from abroad and access those funds via a Chilean ATM. These fees are in addition to the normal (reasonable) exchange rate spread that the bank earns (around one percent).

The problem is compounded by the fact that the fee is a flat  for every ATM withdrawal from 1,000 pesos to a maximum of 200,000 pesos (300 USD or 262 Euros). At the most expensive and some of the most common banks, one will pay over three percent of the cash withdrawn in ATM fees alone, plus the exchange rate spread. These fees add up fast. For instance, if your European bank card has a daily limit of 1,000 Euros and a weekly limit of 3,000 Euros, and a person withdraws the maximum amount over three days, he will end up paying 11.5 fees (90 Euros) plus the rate spread.

Basically, one could buy a new Samsung Galaxy cell phone every two weeks with the money he spends on Chilean ATM fees. Consider the fees charged by Chilean banks on July 10, 2017:

Bank

(branch with ATM)

Fee (Pesos) Fee (USD) Fee (Euros) Northeastern Santiago Viña del Mar
Banco Internacional 0 0 0 Two None
Banco BICE 2,500 3.75 3.27 Yes No
Scotiabank 3,500 5.25 4.58 Yes Yes
Banco Estado 4,000 6.00 5.25 Yes Yes
BCI 4,738 7.11 6.20 Yes Yes
Banco Condell 5,000 7.50 6.54 Yes Yes
Corpbanca 5,000 7.50 6.54 Yes Yes
Banco Security 5,000 7.50 6.54 Yes Yes
BBVA 5,000 7.50 6.54 Yes Yes
Banco Santander 5,000 7.50 6.54 Yes Yes
Banco de Chile 6,000 9.00 7.85 Yes Yes
Banco Consorcio 6,000 9.00 7.85 Yes No
Banco Edwards/Citi 6,000 9.00 7.85 Yes Yes

Insofar as I can tell, this list is exhaustive. Banco Falabella does not allow international cards to be used at its ATMs. Some banks do not have ATMs, like Banco Ripley, Banco Paris, Banco de la Nación de Argentina, Rabobank and all the other foreign banks registered in Chile but yet without retail operations (i.e., Chinese, Brazilian, French, U.S., Japanese).

Those that live in Santiago, especially if they are often near the El Golf area of Las Condes or in downtown Santiago near Metro stations Santa Lucia or Universidad de Chile, can benefit from having access to the only two ATMs in the country that do not charge a fee for international card use: Banco Internacional branches located at La Pastora 128 and Moneda 818. The Viña del Mar branch of that bank used to have an ATM but it was removed and there is no plan to replace it.

The lowest fee-charging bank, Banco BICE, is not much larger than Banco International but does have a few more branches with ATMs, especially near metro stops Alcántara and Moneda (only accessible until 2pm weekdays). People in Viña are out of luck again since BICE has no branch in town.

Banco Security (a slightly larger bank than BICE with branches both Santiago and Viña del Mar) used to have the same no-fee policy as Banco Internacional, but ended it on July 1, 2017. Now people in Viña del Mar are stuck with #3 Scotiabank or making foreign card withdrawals when in Santiago for other business. Furthermore, consider that Banco Internacional’s no-fee policy could change just as fast as Banco Security’s did. It might already be on its way out now! Who knows?

 

Foreign cardholders can avoid paying ATM by paying most bills with their cards. Most utilities, insurance and other services can be paid with foreign credit cards either with online company services or at Servipag, or directly at each company’s commercial offices. Grocery stores, home improvement centers, mall or other shops, department stores, restaurants, cell phone companies, fitness clubs and gas stations also take foreign cards, generally. One big exception is the tax authority for property taxes, mainly. They require a Chilean card or cash. Still, the amount of ATM fees paid can be minimized, especially if one carefully applies the knowledge gained in this article.

Be sure to become a member of Escape America Now and gain access to the monthly webinar. Details at www.esccapeamerianow.info. Visit AllAboutChile.com for discussion and forums about the country.

Dr. Cobin’s updated and enlarged 2017 book, Life in Chile: A Former American’s Guide for Newcomers, Fourth Edition, is the most comprehensive treatise on Chilean life ever written, designed to help newcomers get settled in Chile. He covers almost every topic imaginable for immigrants. This knowledge is applied in his valet consulting service–Chile Consulting–where he guides expatriates through the process of finding a place to live and settle in Chile, helping them glide over the speed bumps that they would otherwise face in getting their visas, setting up businesses, buying real estate, investing in Chilean stocks or gold coins, etc. The cost is $129.

For a brief introduction consider Dr. Cobin’s abridged book (56 pages): Chile: A Primer for Expats ($19), offering highlights (somewhat outdated) found in the larger book. Buy Dr. Cobin’s Public Policy books at Amazon.com:

Christian Theology of Public Policy: Highlighting the American Experience (2006)

Bible and Government: Public Policy from a Christian Perspective (2003)

A Primer on Modern Themes in Free Market Economics and Policy (2009)

A Note on the 2017 Chilean Primary Elections

Chile does not usually hold presidential primary elections. For that reason, we typically arrive at election day in November with seven or eight (or more) candidates on the ballot and thus no one ends up getting at least 50.1% of the vote. Therefore, the top two vote-getters do a run-off election in December, called la segunda vuelta.

However, this year (2017) the “Right” is having a primary election for its three top contenders on Sunday, July 2nd. Besides former president Sebastián Piñera (independent, populist, center-right), the other two candidates from the Right are Senator Miguel José Ossandón (an independent, ignorant-but-popular, centrist, pragmatic populist) and Representative (diputado) left-leaning Felipe Kast (political evolution party). The most libertarian and pro-life candidate is Representative (diputado) José Antonio Kast (independent, ex-UDI). He did not get enough signatures to be on the primary ballot but will be on the November ballot.

The hard Left is participating in the primary, too, with key contenders being radio reporter Beatriz Sánchez (supported by the Humanist Party and also many left-leaning libertarians, including the Liberal Party) and sociologist Alberto Mayol (from the “wide front” coalition). The Right and hard-left primaries will narrow the candidate field a bit in November.

Since the “moderate” Left could not come to any agreement within their coalition to have a primary, their two prominent candidates: senators Carolina Goic (Christian Democrat) and Alejandro Guillier (Radical Party, also backed by the Socialist party) will both run in November. The centrist Christian Democrats are even talking about supporting the Right instead this year in the second round (if Goic does not make the cut) should favored centrist Sebastián Piñera win the Right’s primary. Morevoer, if things look bad for Goic in November, these voters might turn to Piñera in the first round instead, which might push him over the top and preclude the necessity of having a December run-off.

If you can read Spanish, see the write-up at this link where you can learn more about each of the candidates. Remember that both citizens and permanent residents (of at least five years) can vote in Chile. Permanent residents and citizens living abroad can also vote; they should contact their local Chilean consulates to find out how to do so.

At first glance, libertarians that vote should do so for José Antonio Kast. Like Ron Paul, he will likely not win. In the end, we will probably be stuck with Piñera again. He will face Guillier, Goic, José Antonio Kast and whatever other socialist, green-leaning or communist candidates that appear. If José Antonio Kast were not running, Piñera would clearly be better, in spite of his populist support for the “morning after pill” and silly labor laws used to “buy” votes.

Since the primary ballots allow voters to select either leftist or rightist candidates, some have suggested that the hard left will go to the polls in July to vote for Felipe Kast or Ossandón in order to derail Piñera and keep the Christian Democrats in the leftist fold. The center-left candidates would have a shot at beating Felipe Kast or Ossandón but would be unlikely to beat Piñera. So, the strategy makes sense.

At the moment, the Right is far ahead. Chile has endured four long years of detrimental leftist-rule and the populace is tired of it. Whichever rightist candidate wins will undoubtedly receive the support of the backers of the other rightist pretenders–just as with the Republican Party in the USA. Once again, if Goic supporters fall in with Piñera over Guillier, then it is even possible that the Right could win in the first round (la primera vuelta) of elections in November.

Achieving that would mark an historic victory for the Right and put it firmly in the political driver’s seat. For that reason, some libertarians I know will be voting for Piñera instead of Ossandón in July. They like José Antonio Kaast better, of course, but are choosing what they consider to be the best option in the primaries. Ossandón is considered to be like Ronald Reagan by some Chilean libertarians. They also see José Antonio Kast as just warming up now so that he can take the bid in 2021. Could be the case. I am no fan of Piñera. I am a libertarian. But I am a fan of Chile and I must confess that Chile will probably fare far better under Piñera than Guillier or Goic.

The bigger races to watch are, perhaps, the congressional seats in hotly contested parts of Chile, especially Viña del Mar, Concepción, Punta Arenas and some areas of south central Chile (Temuco to Puerto Montt). Iquique and Arica might also turn right if the politics are well-played and the rightest candidate is only opposed by a hard-left one.

As always, the northeastern part of Santiago will go to the Right. However, adjacent parts like La Reina, Santiago, Puente Also, Ñuñoa and Huecheraba will be, as always, in a tug-of-war between Left and Right. The same is true for Estación Central, Maipú and La Florida. The Right needs to do well in these districts if it wants to be able to shift Chile back on the right track. The Right typically forms a tight coalition in the houses of Congress, meaning that individual ideas are less important. The balance of power needs to be shifted back and recover the ground lost in 2013.

If the Right wins big like it did in last year’s mayoral races, Chile could become even more solidly libertarian and an even better place to do business. Keep a close eye on things. 2018 could be a very good year!

Be sure to become a member of Escape America Now and gain access to the monthly webinar. Details at www.esccapeamerianow.info. Visit AllAboutChile.com for discussion and forums about the country.

Dr. Cobin’s updated and enlarged 2017 book, Life in Chile: A Former American’s Guide for Newcomers, Fourth Edition, is the most comprehensive treatise on Chilean life ever written, designed to help newcomers get settled in Chile. He covers almost every topic imaginable for immigrants. This knowledge is applied in his valet consulting service–Chile Consulting–where he guides expatriates through the process of finding a place to live and settle in Chile, helping them glide over the speed bumps that they would otherwise face in getting their visas, setting up businesses, buying real estate, investing in Chilean stocks or gold coins, etc. The cost is $129.

For a brief introduction consider Dr. Cobin’s abridged book (56 pages): Chile: A Primer for Expats ($19), offering highlights (somewat outdated) found in the larger book. Buy Dr. Cobin’s Public Policy books at Amazon.com:

Christian Theology of Public Policy: Highlighting the American Experience (2006)

Bible and Government: Public Policy from a Christian Perspective (2003)

A Primer on Modern Themes in Free Market Economics and Policy (2009)

A Second Citizenship Beyond Chilean

There are certain motifs that fascinate expatriates in general. The most common ones I hear are gold and its storage, tax reduction, escaping warfarism or welfarism, relationships with non-American women, offshore banking, lower-cost living (lifestyle upgrade) and second passports. For many of them, this last motif requires a great, if not the greatest, amount of time and capital to acquire.

American expatriates are the most beleaguered. All U.S. passport holders are subject to double taxation if they live and earn money outside of the land of the free. The is a real bummer. They are often shunned by overseas banks that do not want to hassle with FATCA rules. They are potential targets of “terrorism” and kidnapping more frequently than nearly all, if not all, other countries. They are subject to many arcane and Draconian rules and legislation that make their lives more onerous.

Nevertheless, they cannot simply get rid of their American citizenship. First, they must pay a few thousand dollars to get the U.S. government’s permission to let them go. Then, if they have over two million dollars in assets worldwide, they must pay an exit tax of thirty percent of all that they own. Finally, lest they become a “stateless person,” they have to have already acquired another citizenship.

European and other expatriates do not have the same trouble. They simply need to leave their home country and live elsewhere to avoid the taxation issues. No need to renounce their native nationality, unless it happens to be North Korea, Cuba or an unsavory Muslim, African or Southeast Asian country. (In those cases, the course of action will be similar to that undertaken by Americans.) Bank accounts are not a problem to open and most other countries are not big targets of “terrorism” like the U.S.A. is. They just need to get a second nationality if there are other hindrances at home that bother them or to give them some flexibility for work and travel.

In any case, it always pays to have a second passport in case the country underlying the first one runs into trouble. Economic theory suggests that more opportunities make one wealthier. All the more so when a second passport comes at little additional cost. A second nationality can also provide local benefits such as membership to exclusive, ethnic country clubs (as in Santiago and Viña del Mar), private schools for one’s children that feature the language of the home country, business connections and jobs for those that want to work in a multinational firm (e.g., a European company with an office in Santiago), which likes or requires you to have the legal right to work in the home country. Thus, if one could cheaply acquire four or five nationalities it might make sense to do so, although nationalities are subject to diminishing returns at some point.

Chile has a straightforward, five-year path to citizenship that carries little financial cost. It is a well-respected passport and offers visa-free travel to most destinations of the world (even Russia!). Chilean citizens living abroad do not pay taxes at home (in Chile). Chileans bother no one and thus they are not targets. They can open bank accounts without difficulties anywhere in the world where expats tend to go. The biggest hitch for those that seek Chilean citizenship is the requirement to live in Chile for 185 days during their first year of residency.

For most Europeans, and perhaps Canadians, Australians and Kiwis, Chile will be the second passport. For Americans, and perhaps South Africans, Israelis and Canadians (due to Canada’s strong ties to the U.S.A.), Chilean citizenship will replace their original nationality. In that latter case, a second passport is often sought.

The best and easiest means of getting a second passport is through ancestral citizenship requests in Italy, Poland, Ireland, Hungary, Latvia or Lithuania. Those countries, especially the first three (from which so many millions emigrated in the 19th and 20th centuries), make it relatively easy and cheap to regain citizenship by bloodline. One’s offspring and spouse will usually obtain the nationality along with him, or at least have the option to do so. Accordingly, those that can, will—and should—go this route. (Note that the idea is to get a backup country, not live in that country necessarily.)

Other folks will have to look on the world market and see how much they must pay to acquire a second passport. I have heard Bulgaria could cost as much as US$625,000, while Malta is much less, as are Dominica and other Caribbean islands and Costa Rica. Residency requirements vary widely with these choices. A final method entails running a second citizenship course that parallels the quest for the Chilean one. After the first year or so (more like 18 months). one only need be in Chile for one day per year to maintain his permanent residency, leaving a person free to spend more time in Paraguay, Ecuador, Brazil, Thailand, New Zealand, Switzerland, Australia, Estonia, Georgia or any number of island nations (Bahamas, Cook Islands, Mauritius, etc.), European enclaves, Singapore or other target country.

In my mind, the ideal situation is to attain Chilean citizenship and, if you happen to have it, ditch American citizenship at the lowest cost possible. If one does not have another citizenship from his home country, he should then try to get at least one more, perhaps from an E.U. country that is well-received and admired. I like country lists and rankings very much, even though I often disagree with the criteria or results in certain cases. Accordingly, Nomad Capitalist puts out a nifty passport ranking, Nomad Passport Index, that provides a starting point for choosing a second passport. Note that the top ten are all European passports, including Italy and Ireland, and the top thirty are dominated by European nations. I suggest you have a look there to see what countries’ passports might be of greatest interest to you. One reason that an E.U. country makes sense is because with any E.U. passport you have the right to live in and work or study in any E.U. country. So it is almost like getting twenty-eight countries for the price of one! Even if the country issuing the passport is in worse shape than Chile, there is a chance that one of the others will not be.

You might pick one where learning the third language (after English and Spanish) might provide an interesting hobby. Americans might also choose to avoid countries with strong taxation and regulatory ties to the United States, like Canada, the U.K. and Australia and, in some cases, avoid countries with alliances to promote family court and child services division rulings and punish violators that have “fled” (e.g., Portugal, Norway, Finland, the U.K., Australia, the Czech Republic, Slovakia, Hungary, Ireland, Poland, Holland, Switzerland and, to a lesser extent, France and Spain). As with most things, the optimal choice for any one person depends on tastes and personal circumstances.

The bottom line is that it makes sense to be prepared. We have no idea what will happen in Chile in five, ten or twenty years. It is best to take steps now to have options in the future that are better than what refugees or asylum-seekers carry with them.

Be sure to become a member of Escape America Now and gain access to the monthly webinar. Details at www.esccapeamerianow.info. Visit AllAboutChile.com for discussion and forums about the country.

Dr. Cobin’s updated and enlarged 2017 book, Life in Chile: A Former American’s Guide for Newcomers, Fourth Edition, is the most comprehensive treatise on Chilean life ever written, designed to help newcomers get settled in Chile. He covers almost every topic imaginable for immigrants. This knowledge is applied in his valet consulting service–Chile Consulting–where he guides expatriates through the process of finding a place to live and settle in Chile, helping them glide over the speed bumps that they would otherwise face in getting their visas, setting up businesses, buying real estate, investing in Chilean stocks or gold coins, etc. The cost is $129.

For a brief introduction consider Dr. Cobin’s abridged book (56 pages): Chile: A Primer for Expats ($19), offering highlights (somewat outdated) found in the larger book. Buy Dr. Cobin’s Public Policy books at Amazon.com:

Christian Theology of Public Policy: Highlighting the American Experience (2006)

Bible and Government: Public Policy from a Christian Perspective (2003)

A Primer on Modern Themes in Free Market Economics and Policy (2009)

Chilean Census – 2017

In Chile, the national census is taken every five years. Wednesday, April 19, 2017 was census day, and people were forced to take a confined (paid) holiday in order for census workers to get around to them and conduct a ten-minute household interview. The idea was that other than emergency personnel and the census takers themselves, everyone should have been in his home. (That fact might explain why there was a large, Summer-style traffic jam coming into Reñaca the evening before.) At any rate, every resident, tourist, newborn (but excluding unborn children) that was located in the home as of 00:00 on April 17th was counted as living there. Even people that died later that day were included (even if the death was prior to the arrival of the census taker).

Source

All stores were closed, at least until 8 p.m. Bus and Metro lines only ran for a couple of hours in the morning and evening in order to bring census workers to their locales. Census workers started quizzing people at 9:00 (except for homeless people, which were counted earlier before they got a chance to get up and move away). In spite of the wide publicity about the coming census, many people were still surprised when the knock on the door came. Our census taker, a young man doing military service apparently, did not arrive until after 1 p.m., and we were only the second household of the eighteen he was required to do. He was obviously behind schedule.

President Bachelet herself went to Renca (a lower middle-class comuna in north central Santiago) and personally did the census for eighteen households. She saved taxpayers 15,000 pesos, or about US$23 (supervisors got US$15 more), that would have been paid to someone else. The young man that came to our home said that he received nothing for the effort, since it was apparently part of his public service requirement.

Census questionnaires were available in Mapudungun (local Indian/Mapuche language), English, Portuguese, Creole (reflecting the growing Haitian population), French and German. The census committee wanted to make sure to correctly count tourists, new arrivals and tribal elements within the overall population. Hotel guests and passengers on trains, planes and buses were given questionnaires to complete, too, albeit with different questions than households received.

Overall, for most people, Census Day was boring and largely unproductive. Some people with small shops still opened, like my vehicle mechanic, and people with Internet-based businesses could still work. But there was little economic activity resulting from people moving around or shopping.

Many people feared (and newspapers reported) that some of the twenty-one census questions had been turned in a politically correct direction, like allowing people to declare their gender, even if different than their sex at birth. I am not sure how much traction this particular rule got, but it was annoying to read about it. Nevertheless, the census worker did not ask us our gender, but rather decided for himself that I was a man and my wife was a woman. Hence, the transgender questions were probably put “out there” for public image purposes while in reality Chileans just ignored the provision. I inquired about the matter with the young man doing the census and he just shrugged and gave me a puzzled look. Apparently, he was not gender-confused. I bet the vast majority of Chileans are not.

The “head of household” had to be declared in each home, and could be anyone age fifteen or older, regardless of gender or income. Again, in the case of our census-taker, we were never asked who headed the home, as it was evident that I did. Once again, political correctness was trumped in Chile. The gender and head of household gestures were published as a concession to leftists that ended up meaning nothing in reality.

Contestants were, apparently, allowed to remain anonymous, by only giving nicknames to census personnel. We just gave him our names when asked, since we did not find the census to be intrusive. No question was asked about household religion, as people on WhatsApp had been discussing during the week before. The only questions asked of a personal nature were one’s age, how many children he has (living or dead), one’s employment status, if he had a job last week, one’s city of birth, where one was located during the last census (in 2012), where one’s mother lived when he was born, and how many years of education one had completed.

In sum, the census was simple and hardly as contentious as some people were making it out to be. Just in case you are here in 2022, you can expect to go through the same process.

The bigger contention came late in the evening on Census Day, and the next day, when it was revealed that many people living in large buildings and certain provinces did not get counted. Scores of people wrote comments under online news stories that people were neither interviewed nor counted in places in Santiago like Maipú, Ñuñoa, Conchalí, Estación Central, Quilicura, plus provincial cities and towns like Colina, La Serena, Puerto Varas, Peñaflor, Quilpué and Ercilla. In Maipú alone, 1,358 census workers did not show up to do their job. Elsewhere in Santiago, 390 census takers did not show up in Cerro Navia (and 1,500 homes were missed) and 350 failed to do so in Pedro Aguirre Cerda (leaving 7% of homes missed). The Instituto Nacional de Estadísticas reported similar problems with absenteeism (on a lesser scale) in San Ramón, Conchalí, Cerillos, San Miguel, San Joaquín, Macul, Ñuñoa, Las Condes, La Pintana, La Granja, La Florida (where 3,000 homes were missed), La Cisterna and Huechuraba.

Like most public policies, the 2017 Census was an example of government failure. Replacements (usually bureaucrats from the municipalities) were running around the next day, and even for a couple weeks afterwards, trying to collect the missing data. Just how accurate Chilean censuses end up being is a matter for considerable debate. Academics are also upset that more questions were not asked during the push. To go to such an effort and yet only collect a paltry amount of data seemed quite wasteful to them. It is good to have it over and done with.

Fuente: Emol.com – http://www.emol.com/noticias/Nacional/2017/04/20/854989/Censo-2017-En-Maipu-1358-voluntarios-inscritos-no-llegaron-a-sus-locales-para-el-proceso.html

Be sure to become a member of Escape America Now and gain access to the monthly webinar. Details at www.esccapeamerianow.info. Visit AllAboutChile.com for discussion and forums about the country.

Dr. Cobin’s updated and enlarged 2016 book, Life in Chile: A Former American’s Guide for Newcomers, is the most comprehensive treatise on Chilean life ever written, designed to help newcomers get settled in Chile. He covers almost every topic imaginable for immigrants. This knowledge is applied in his valet consulting service–Chile Consulting–where he guides expatriates through the process of finding a place to live and settle in Chile, helping them glide over the speed bumps that they would otherwise face in getting their visas, setting up businesses, buying real estate, investing in Chilean stocks or gold coins, etc. The cost is $149.

For a brief introduction consider Dr. Cobin’s abridged book (56 pages): Chile: A Primer for Expats ($19), offering highlights found in the two larger books. Buy Dr. Cobin’s Public Policy books at Amazon.com:

Christian Theology of Public Policy: Highlighting the American Experience (2006)

Bible and Government: Public Policy from a Christian Perspective (2003)

A Primer on Modern Themes in Free Market Economics and Policy (2009)

Construction Quality in Chilean Cities

By now, most thinking people know that Chileans build the safest buildings in the world, at least in terms of earthquake protection. In the last seven years, populated areas of Chile have been struck by three large earthquakes (Richter Scale 8.2 Iquique, 8.3 Illapel and 8.8 Cauquenes). The damage done to postwar structures and highways was remarkably insignificant. And the damage that did occur was quickly repaired. Most people went to work or carried on with life as normal the next day.

Why is Chile so much more resilient to earthquakes than New Zealand or Italy, or even California or Japan? The answer lies in the fact that during the “framing” stage, the base of Chilean homes (if not the home entirely) and all office and apartment towers is made of 10-inch thick (or more) poured, reinforced concrete. Welded beams or metal framing studs are used on higher floors in homes sometimes, but the base is always sturdy. And many upscale homes feature poured, reinforced concrete on all floors.

In my project in Viña del Mar, like others in hilly coastal Chile, I carved out the hillside and embedded the building into it, making the structure even sturdier. Partially completed, it was unaffected during the 2015 8.3 Richter Scale earthquake.

People used to criticize Chile’s “wasteful” building procedures at the framing stage, which features so many costly restraining walls, deep-base concrete forms and poured reinforced walls. However, after the last decade’s earthquake experience here (and around the world), no one is hurling criticisms any longer. Chileans have done the rough-in stage right, ever since as many as 30,000 people died in the January 24, 1939 Chillan earthquake (7.8 Richter Scale), inland from Concepcion, wherein 47% of all Chillan’s structures were destroyed. That event made Chileans very safety-conscious. Consequently, one can feel quite safe during earthquakes in Chile, especially in modern urban areas.

Finish work is another story, however. I am not just referring to the overall high-level of defects permitted in the finish-out (at least by North American or European standards), which seems to predominate all Latin American buildings. Part of that imperfection is due to not having proper tools, laziness or workers just not having a culture of quality, given that workers tend to live in squalor and do not see the need for (or desire to have) nice-looking, perfect finish work.

Instead, I would like to emphasize that Chileans (especially in the middle classes) value image over true quality. They will buy kitchens that look nice for a few years but end up deteriorating rapidly as the particle board gives way. Cabinets, doors, “wood” floors and furniture are built with cheap wood products and then laminated with hardwood veneers. Laminated doors tend to be hollow. Floors are vinyl or wood veneer laminated. Imitation marble or granite are used if something other than Formica is used at all. Bathroom fixtures and accessories are almost always on the low-end of the scale. Stucco is preferred over brick or more elegant siding. Roofing is often cheap, local tile that frequently leaks. Windows tend to be the cheapest aluminum variety one can find in home building supercenters. Yards and gardens in houses and smaller buildings tend to be pathetic as if Chileans do not care or simply ran out of money to fix them up.

All is made to look good for a little while but is not built to last. Just about the only exceptions are building/home facades and apartment building foyers and lawns, which are elegant all the way around in upscale neighborhoods. They grant an air of affluence to those that stop by to visit, making them think more highly of the residents. That vanity is highly sought after in Chile.

One might think about buying a home or apartment with mediocre finish work, then gut it and put in high-quality stuff. Doing so is fine for those that plan to live there a long time and enjoy the amenities. However, being the best in the building or on the block will not necessarily translate into obtaining a greater resale value. One will not likely get his money out of the remodeled home. However, those that do remodel will enjoy both living with elegance and safety during fires or earthquakes.

Most people that I speak to that have lived outside of Chile, in Europe or North America especially, are simply appalled by mediocre finish work in supposedly upscale homes and apartments. However, my readers should not be surprised. Chileans like to buy cheap and they almost universally buy for image rather than quality. After the barrio quality, Chileans buy for proximity to private schools and being adjacent to neighbors in their social class. Ocean or mountain views come afterward in order of importance.

If you want something different than what is offered to the masses in the middle class, you will have to buy through one of the few quality builders around (like me!) or have a custom-built home done for you with the support of a good, expensive architect.

Quality materials are available here and, other than bathroom and kitchen fixtures, they are not terribly expensive relative to other countries. Custom cabinet and door makers exist, too, but the quality is not quite the same (even though it is very good). In sum, you can get what you want, but it will hardly be the norm by upper middle-class standards. Homes for the wealthy are another story, although even their mansions pale by comparison to the fabulous structures in the Northern Hemisphere.

Be sure to become a member of Escape America Now and gain access to the monthly webinar. Details at www.esccapeamerianow.info. Visit AllAboutChile.com for discussion and forums about the country.

Dr. Cobin’s updated and enlarged 2016 book, Life in Chile: A Former American’s Guide for Newcomers, is the most comprehensive treatise on Chilean life ever written, designed to help newcomers get settled in Chile. He covers almost every topic imaginable for immigrants. This knowledge is applied in his valet consulting service–Chile Consulting–where he guides expatriates through the process of finding a place to live and settle in Chile, helping them glide over the speed bumps that they would otherwise face in getting their visas, setting up businesses, buying real estate, investing in Chilean stocks or gold coins, etc. The cost is $149.

For a brief introduction consider Dr. Cobin’s abridged book (56 pages): Chile: A Primer for Expats ($19), offering highlights found in the two larger books. Buy Dr. Cobin’s Public Policy books at Amazon.com:

Christian Theology of Public Policy: Highlighting the American Experience (2006)

Bible and Government: Public Policy from a Christian Perspective (2003)

A Primer on Modern Themes in Free Market Economics and Policy (2009)

Chilean Architects

Some Chilean professionals have a lot of power – too much power in fact. Architects fall into that group.

You might ask, “In what sense does an architect have power?” Well, he has a lot if you hire him to build a home for you or for your construction company. He gets to make calls that affect your business and life, whether you like it or not. And it is almost impossible, or at least very time- and cost-prohibitive to do so.

Architects in Chile are more like applied artists with a tinge of desk jockey mentality. They do very little math—indeed math and engineering are hardly required in their university studies—compared to the calculistas (civil engineers) that Chilean architects hire to do certain jobs at your site. Those specialists usually do a good job, as do most architects. Chile has the most earthquake-proof buildings in the world, after all.

They also manage the proyectistas de especialidades, people that specialize in water, sewer, gas, and electrical hookups. They do end up having to manage their own in-house draftsmen, secretaries and errand runners, along with the many subcontractors they hire out for services at jobsites. They also should keep up on new materials and products.

Americans in Chile will detect a lot more general contractor in the job than architect, and that is about right. Remember, cultures are different, and so are their practices. In the United States, architects are highly-trained civil engineers with an art flair; In Chile, they are art and public administration double majors with a wannabe squirt of physics and math added for good measure.

The reason that Architects are so powerful is that they control the entire building process, including the almighty government approvals. The local municipality will not allow just anyone to submit plans and deal with bureaucratic regulation. Architects must do it. And at times architects can turn into outright extortionists.

In the beginning, meetings with your new architect will be pleasant, cordial, professional and sane. Contracts will be signed and everyone will be happy. But time might erode those good feelings as everyone goes through the ups and downs of the building process, which can often take eighteen to thirty months in Chile.

Just before you finish the project and you are ready for your architect to ask for inspection and the recepción municipal, the final bureaucratic hurdle, the architect can demand more money. If you do not pay him then you will not get your building or home approved and your beautiful new property will remain considered as a vacant lot under Chilean legislation. Of course, his actions will not look like a total shaft or shakedown. He will make up some reason why you still owe him for legitimate expenses, costs or professional fees that were not in the contract or were ambiguous.

Of course, you will be mad about these doleful circumstances, wrought because the Chilean government grants too much power to professionals in general, and architects in particular. You will scour the contract you signed two years ago, and find that you have paid your architect in full—or at least all that you are required to pay at that point. You will find that the architect might have even left some contractually promised services undone, and has no intention of doing them. Hence, you will call a lawyer and have a serious chat with him. The lawyer will review the contract and payments made and tell you that you are probably right and would even win most points in a lawsuit. But he advises you to pay up anyway, just like you would pay off a crooked bureaucrat as a matter of “just being part of the way business is done.”

Why would you succumb to the extortion? Because the architect knows that up to certain amounts, say US$5,000 or US$10,000, it is not worth fighting him in court. The architect will go to court “all day” since he has already received 90% of his pay. He will lose some reputation points by being sued, and you will never hire him again, but so what? That course is the way that the majority of Chileans act, playing what economists term a “one shot game” (like the auto mechanic does that rips off tourists he will never see again when their car breaks down).

You on the other hand, stand to lose your entire investment if you cannot sell it given that, legally, all you have is a vacant lot. It will take years in the courts to win a judgment and might cost just as much as the “bribe.” Plus, you will lose sales revenue and tie up your capital by sticking with your unsaleable property. You can still live in the place you build—even if it is not “received” by the municipality. But you cannot sell it. So, your lawyer advises you to just pay. You call it extortion. The architect calls it good business. The lawyer calls it sad, but logical and efficient given the “rules of the game” set up by the government.

Not all Chilean architects are extortionists (i.e., those that practice chantaje). However, you cannot know for certain from the outset that your architect will be honest and honorable. The best strategy you can take is (1) use a lawyer to draw up the contract with the architect (worth the cost) and (2) set aside US$10,000 (in a savings account) and plan on having to pay it out to the architect–above and beyond the US$15,000 to US$30,000 or more that you will have to pay him. That way, by planning to pay it out some day, losing it will be a lesser shock and not hurt or irritate you as much.

One strategy you can try in order to avoid being extorted is to contractually hold back 25% or 30% of his fee until after he delivers the municipal approval to you. Since doing so will cut his extortionist feet out from under him, he will not likely agree to it. I also recommend that you hire an architect that has money, even if he costs more. If you go with the cheaper professional, there will be nothing to get from him in terms of damages should you end up suing him.

Another possible strategy is to hire two architects and pay the second one to piggyback on the first one, so that he can step in if the first one fails or starts extorting you. However, the cost of the piggyback architect’s services might be as much as the payoff required, so you might gain little other than the pleasure of smashing the extortionist.

Think about it. You are “not in Kansas anymore.” Beware of local practices and how to deal with them.

Be sure to become a member of Escape America Now and gain access to the monthly webinar. Details at www.esccapeamerianow.info. Visit AllAboutChile.com for discussion and forums about the country.

Dr. Cobin’s updated and enlarged 2016 book, Life in Chile: A Former American’s Guide for Newcomers, is the most comprehensive treatise on Chilean life ever written, designed to help newcomers get settled in Chile. He covers almost every topic imaginable for immigrants. This knowledge is applied in his valet consulting service–Chile Consulting–where he guides expatriates through the process of finding a place to live and settle in Chile, helping them glide over the speed bumps that they would otherwise face in getting their visas, setting up businesses, buying real estate, investing in Chilean stocks or gold coins, etc. The cost is $149.

For a brief introduction consider Dr. Cobin’s abridged book (56 pages): Chile: A Primer for Expats ($19), offering highlights found in the two larger books. Buy Dr. Cobin’s Public Policy books at Amazon.com:

Christian Theology of Public Policy: Highlighting the American Experience (2006)

Bible and Government: Public Policy from a Christian Perspective (2003)

A Primer on Modern Themes in Free Market Economics and Policy (2009)

Chilean Realtors

One good (Chilean) friend of mine says they are just lazy.

Nonetheless, I would like to think that Chilean realtors are also incompetent, uncreative, and not very good problem solvers. They have a hard time thinking out of the box, too.

They have no multiple listing service and are reluctant to share commissions with other agents, thus dramatically limiting the supply of homes that each office has to show. This fact also makes it better for sellers to take dozens of nonexclusive contracts out with different realtors so that many people are involved with the sale. Realtors have even told me that giving them an exclusive on a property for sale will not increase the amount of time or money they put into selling my property.

They do not do showings, staging or open houses, or if they do then they are rare. Most of the time they do not drive clients to properties for sale. They will meet clients on site, usually, where the customer signs an agreement to pay their 2% commission.

Whenever I have had to deal with realtors, their services have left something to be desired. They are all smiles to sign up to sell your property or to give you information on other properties for sale. But getting them to do work for you is another issue entirely. I also have found them to be dramatically uninformed about the selling prices of comparable properties, the value added by having quality inputs or features, and their unwillingness to be proactive about finding or attracting prospects.

In reality, my friend is right: they are lazy–even when I offer them 1% or 2% extra commission, they hardly seem motivated. Real estate services in Chile are more than a little bit mysterious and are a lot more than just frustrating.

20161122_174612Most of the time, the best that Realtors will do is simply open the door to the house or apartment for you that you might want to purchase, or put up their sign if they are selling a property for you. I have seen some in Santiago deal with the banks and help with the mortgage and appraisal process, but that is about it.

Really, I am totally underwhelmed by this profession in Chile. In my latest project, I have contracted dozens of realtors over the last year and not a single client or interested party has been brought to the table, while I have had many prospective buyers call or show up to visit the property just because I put up a couple of large signs visible from the street and several internet ads–the one in English being especially effective relative to the others.

20161007_173113In other words, I obviously have an attractive property that many call about and most visit. However, Realtors are unable to break into this market. Few buyers balk at or complain about the price, Realtors complain about the price sometimes because they want to sell fast.

It seems to me that Realtors are part of the social upper class that could never graduate from college and know little about sales and marketing. They do the job, like selling medical insurance, because it is a decent and respectable position for upper class folks that have few other job skills.

If I had to say which professional group in Chile is the most impressive it would have to be physicians in Santiago. The least impressive would have to be Realtors. Lawyers, architects and physical therapists fall in the lower middle of that range, with regional physicians, engineers, dentists and accountants in the upper middle. The bottom line is that when dealing with real estate agents, be prepared for frustration and underperformance, and be prepared to supplement their efforts with your own.

Be sure to become a member of Escape America Now and gain access to the monthly webinar. Details at www.esccapeamerianow.info. Visit AllAboutChile.com for discussion and forums about the country.

Dr. Cobin’s updated and enlarged 2016 book, Life in Chile: A Former American’s Guide for Newcomers, is the most comprehensive treatise on Chilean life ever written, designed to help newcomers get settled in Chile. He covers almost every topic imaginable for immigrants. This knowledge is applied in his valet consulting service–Chile Consulting–where he guides expatriates through the process of finding a place to live and settle in Chile, helping them glide over the speed bumps that they would otherwise face in getting their visas, setting up businesses, buying real estate, investing in Chilean stocks or gold coins, etc. The cost is $149.

For a brief introduction consider Dr. Cobin’s abridged book (56 pages): Chile: A Primer for Expats ($19), offering highlights found in the two larger books. Buy Dr. Cobin’s Public Policy books at Amazon.com:

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