Category Archives: Investment

How to Invest for the Long and Short Term

Entrepreneurship and the Socialist State

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I am an entrepreneur and I am not ashamed.  I like to make money and I like to do good, and when I can do both simultaneously, I am at my happiest – so Cuba presents a conundrum.   How could someone like me (a business person) live and thrive in Cuba?

  1. Someone like me (a foreigner) has not right to stay in Cuba beyond the terms of the tourist visa or temporary residency granted because of one’s work.
  2. If someone like me was looking for a more permanent solution…then (easiest solution)  it would be time to get married to a Cuban…..and Miguel was good looking, but he wasn’tthat good looking!
  3. Most private enterprise is limited to small service businesses – selling food/restaurants, taxis, hairdressers (of course), renting rooms in homes, etc.  The services I get paid to render in the US are non-existent in Cuba…because they are free.

So unless I plan on being a black market business chick….which (for the record) I do not….making money in Cuba remains an elusive concept to me.

How do you make money in Cuba?  If you have some ideas, I would love to hear them.

Starting A Business Abroad

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“Hi I enjoy your blogs, I am African-American from the States and would like some information about your experiences in Cuenca and if it is a big challenge for blacks to start a business over there. You stated your experience and I thought that was great. I want to experience the life of Ecuadorians and especially Cuenca, what must my expectations be? Is it really true that $300.00 can get you a nice place to live?  Your help will be greatly appreciated.”

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I am one of those people who does not know how to take a true vacation. Laying around beaches or passing the days completely self-indulged is an absolute challenge for me (which is one of a number of reasons why I hate cruises).  While my travel may seem random to an outsider, those in the know, know that there must be a specific interest I have in that country or city and that it is in some way tied to a business idea.

So when I travel to a new place, be it in the United States or anywhere else, I always have an eye out for the business environment and opportunities for entrepreneurship.  I also have a personal principle of not wanting to work for anyone other than myself and my clients, so I definitely try to consider all the possibilities.

That said, over the years I have realized some universal truths for doing business abroad:

  • Take your time. Doing business abroad can be a slow process and you want to make sure not to sink everything you have into a business proposition that is unteste;
  • Travel with an open mind and have no preconceived notions, because they are probably wrong;
  • Get to know a place before you start thinking of business there because what may work where you currently are, may not be feasible in another environment (this requires time);
  • Get to know the people before you put plans in place because their needs and desires may be completely different based on culture, religion, region, etc. (this requires time);
  • Keep your ears and eyes open and your mouth closed (regarding business plans).

On this last point, the minute you voice that you are interested in doing business in a place, everyone will (1) immediately know that you are not from there i.e. you are a “gringo” and (2) everyone will present you with a “great” business proposition.

On the challenge of being black and starting a business in Cuenca –  No one cares what color you are…black, brown, purple, neon blue. As a North American foreigner your money is green (yes, you too Canadians), and that is all that matters.  Anyone who runs a business has to hustle and take care not to be hustled, especially when working in developing countries.   You could be in the blackest country in Africa, surrounded by folks you think look like you…but they know you are a “gringo”, “toubab”, “pumoy” foreigner from the West, and trust that they will be first in line to take advantage of any naiveté.  Now that I think of it, that sounds just like New York.

So are there any particular challenges with being a black, North American, person, starting a business in Ecuador? Not particularly because you are essentially a black gringa/o.  What will present a challenge is language.  You will always fare better if you know the language enough to get around and to ensure surrogates are not leading you by the nose. The second challenge is finding trustworthy surrogates, which takes time because everyone has their own agenda.

Next, travel with no expectations, just go… you will never be disappointed and will almost always find something joyful.  Okay, correction. I had no expectations when I went on that cruise and I was still thoroughly disappointed…actually revolted.  So maybe “never” is too absolute, please substitute, “almost never”.

Finally, yes it is possible to find a place in Cuenca that I think is nice for $300.  The operative phrase being “I think”.  I like to be comfortable  but I have simple tastes, I appreciate zen decor and I like living with locals, like a local.  Yes, I have been known to hand wash the family laundry, but  I also require things to be clean, secure and welcoming.    Normal Cuenca apartment pricing means not living in the expat buildings or neighborhoods, negotiating stated prices, and having the ability to speak just a wee little bit of Spanish (you’ll have more leverage).

In the immortal words of Jay-Z and Pharrel (yes..I am going there)

“I’m a hustla baby, I  just want you to know –
It ain’t where I been, but where I’m about to go…”

A Word on Banking in Ecuador

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The benefit of Ecuador being a US dollar based economy is that, for the US investor, it eliminates the inherent risks associated with foreign currency exchange fluctuations and it allows us to take full advantage of significantly higher short-term interest rates.

I am still learning about the Ecuadorian banking system and I am not an investment professional; however, if you are considering a long-term stay in Ecuador, there are some clear advantages to short-term (1 year or less) investing there.  Just compare the interest rate on your current savings account or any CD’s you may own.  The rate is probably somewhere close to zero versus 6.0% (on average) for a one year CD in Ecuador.

I have a particular focus on CDs (certificates of deposit) because I like the fact that it is a relatively liquid asset and I know exactly when my money will be available to me, without any withdrawal penalties (however, early withdrawal penalties can be about 2%).  CDs are like temporary savings blocks.  You can invest for a minimum of 30 days to 1 year and you earn interest as a reward for locking up your money with the bank for that amount of time.   The reward, or interest rate, increases with the amount of time you are willing to let the bank(s) in essence “borrow” your funds.

With Ecuadorian bank investments, CDs are a great choice because you can stagger your investment across different periods of time and in varying amounts, based on your comfort level/risk tolerance.  In addition, the minimum investment is low, $1,000 or less.  This flexibility can be a safeguard so that you know, for example, your money will not be tied up at the end of 60 or 180 days.

To understand how to calculate the amount of interest you can earn in a given period, take the following steps:

  1. Determine how much your initial investment will be, for this example let’s say it is $5,000
  2. Determine how long you want the CD in place for, let’s say 30 days at a rate of 3.50% (Banco del Austro as of Jan. 2012).
  3. Multiply your investment amount by the interest and divide by the number of periods in 1 calendar year (30 days = 12, 60 days = 6, 180 days = 2, and 360 days = 1) So,  $5,000*3.50%/12 = $14.58
  4. This means your interest earned at the end of the 30 day period will be $14.58
  5. You can then decide if you want to do another CD or just take your money and do something else.

Two final thoughts

  • The difference between banks and cooperatives is similar to the difference between banks and credit unions in the US.  Both are financial institutions offering similar products, however cooperatives (like credit unions) are governed by a different set of laws and regulatory bodies.  As a result, cooperatives may be perceived as inherently more risky and they therefore offer the highest interest rates on CD investments.
  • The requirements to open a bank account will vary between institutions. Some require only a passport, others require an Ecuadorian resident card and a utility bill.  All require you to open the initial account in person, so get to know your bank and the investment professional you will be working with, because when you are away, they will typically be able to help via phone or email.

For a list of some of the banks and cooperatives available in Cuenca, Ecuador and their respective interest rates, click on the Ecuador Investments page.

What You Get for $250 – Cuenca, Ecuador

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In one of my earliest posts, I said that it was possible to live in Cuenca and only pay $250 in rent per month.  A kind commenter, who currently lives in Cuenca, then replied that really the monthly rates are more in the range of $300-$500. So, delaying further discussion, I decided to see for myself.

After a week in Cuenca, talking to everyone from taxi drivers, to friends, to shop keepers and bank officers, I can say that the commenter was WRONG!!  You can absolutely live in a nice place in Cuenca for $250 or under and $250-$300 is considered the higher-end by the average Cuencano.  Yes ladies and gentlemen, that is a fact.

Sure if you want to live the high life/expat life, with the other expats, paying higher rental fees to live in condo buildings that are essentially occupied by other retired expats from North America (ex Mexico)….then go ahead and pay more. [There’s also that really fabulous, fully furnished house for $600 that I really want.]  However, if you are moving to Ecuador to make friends AND save money, well then you are in luck, because there are lots of options, you just need to have patience, a little flexibility and some time.

Okay, so why the serious difference in rental rates (perceived or real) between the commenter and I?  Language skills, living standards, other stuff ….take your pick.  All the conversations I had with people regarding living expenses were in Spanish.  While I did contact one of the expat real estate agents, it was on the last day I was in town and we really did not have a chance to speak.  For $250 and below (and it should be below), you can get a two bedroom newly renovated, apartment and the further you are from El Centro, the cheaper it gets.  I took a tour of a small, 2nd floor, 2-bedroom apartment that had just been renovated and the asking price was $250, which to me means that for a year lease you can get it for $200.  It is a 10 minute walk from downtown and in a decent/typical area.  I also spoke to the owner of a 2 bedroom, new construction apartment that had just rented it for $180.  It is walking distance to a Coral Supermarket (one of the supermarkets that we all would be happy with), a $2 taxi ride or a $0.25 bus ride to downtown and it is a block off a major road and right on the bus lines.

If you are looking for a place, there are tons of rentals, signs are posted on the homes (“se arrienda”) and foreigners are very welcome.  Just bring along some Spanish or a Spanish speaking friend, and negotiate heavily.

The big prize, however, is the home that originally got me excited about living in Ecuador.  I actually got to see the house in person, had dinner on the beautiful handmade/homemade furniture, and it is now the type of house I aspire to have…at the exact same price or less! [Side Note – Frank, Angie and their boys have created some really incredible furniture pieces, my personal favorite is the dining table and its seating.]

To supplement the pictures of the house, below are pictures of the neighborhood. The house is about a 10 minute, $2, taxi-drive from downtown area, or a $0.25 bus ride.

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Pictures of the home I visited, before it was furnished, are at following link – Frank and Angie’s Blog.

So when someone says it is not possible and you can’t, just repeat these words, “Yes you can!”

Ecuador, I’m in love… too bad you’re not a man!

What you get for $600 – Cuenca, Ecuador

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Want to see how the 1% live in Cuenca?  Then rent a house for $600.   For this “great” (this is all relative to the  US because it is an outrageously ridiculous price for most Cuencanos) price you can get:

  • Gated and private entry onto your own private street of only 9 homes
  • House in a compound of houses that are all owned by the same family (none of the others are rented out and there are children in all the homes)
  • 3 story fully furnished home with 4 bedrooms, 4.5 baths
  • Formal dining room
  • Sunken living room
  • Large  kitchen with all the requisite plates, pots, spoons, forks and other items included
  • Servant’s Quarters
  • Laundry room with washer and dryer
  • Private garden with fruit trees
  • Private enclosed and tiled courtyard
  • Beautiful views of Cuenca
  • Only 10-15 minute walk to center of town
  • Secure home with intercom buzzer
  • Deposit is $1,000 and renter pays for all utilities (which depending on usage maybe about $100 including light, gas, water, internet, cable and telephone).

Can you live on your social security check in Cuenca, Ecuador?   Yes you can!  Come and live like the 1% – if that is what you choose.

So tell me, if you could choose between spending $600 just on rent or $600 on everything for the whole month?  Which would you choose?

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Cuenca Day 5 – In the land of Spanish

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Interested in starting your own business and pursing dreams of entrepreneurship?  Cuenca may be the place for you.  Unlike the United States, there seems an economic renaissance in Cuenca.  Business seems steady, there are help wanted signs in windows and people seem to be living well. Today’s adventure in the Spanish was all about being the master of your own destiny.

Today was one of those days when we choose to be girly and get our nails done for $1.50 per person. My travel partner was excited since this is an activity we never engage in at home.

Here in Cuenca there are all sorts of businesses, from the extremely affordable to the “almost the same price as home”. That said, after are girly interlude, we were presented with the following proposition (in Spanish) –  “Why not start a new hostel?”

Start a New Hostel/Restaurant/Cafe/Shop!

  • There is a very strong tourist industry here and it keeps getting better as the reviews on Cuenca pile in;
  • North American (ex Mexico) travellers, in particular, tend to feel very comfortable and gravitate toward “American” owned businesses;
  • English speakers like to deal with English-speaking venues;
  • There is a large permanent community of expats that patronize attractive, well-run businesses;
  • Cuenca has visitors year round and profitable pricing for  you may still be affordable pricing for your visitors, relative to their home country.

Are you interested?  Well, these are the points that I was given, not by a real estate agent but by the owner of the property who happens to be one of the first Cuencanos I met here.  Now, to be fair, I have no plans on investing in real estate at this moment; nor do I have plans to become a real estate agent…just for the record.  But, I was curious.  I love seeing traditional architecture and the use of space and like, and he did make some good points.  Also, as the owner of the property, I think he was giddy about showing it to an “Americana/Gringa”.  (Yes folks, just proves the point that it doesn’t matter what color you are, if you are North American (ex Mexican) you’re a gringo…not pejorative, just a fact.)

So if you have ever considered running your own bed and breakfast, hostel, cafe, bar, etc., etc. – here are some pictures of what you can pick up for an asking price of $275,000 (which after negotiations and write downs, could be a bit less).

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Muy interesante! A little Spanish knowledge will get you very very far.

Ecuador has Amazing CD Rates

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[PLEASE NOTE THAT THE POST BELOW NOW HAS ITS OWN PAGE TO FACILITATE THE VIEWING OF CD RATES BY BANK. THE INFORMATION FOR INDIVIDUAL BANKS IS POSTED ON THE BANK SPECIFIC PAGE IN THE DROP DOWN MENU ABOVE (SEE ECUADOR INVESTMENTS)]

We are all concerned about extending what we have financially into the future.  If you are starting late or just looking for a higher rate of return, why not consider investing in Ecuador?  This post is inspired by a comment I saw on a blog asking about CD (certificate of deposit) rates in Ecuador.  The response was a bit vague, so I have decided to make it my mission to go into the banks here and get the real deal.

Over the next few days, this post will be updated as I get more information; however, it is all accurate as of the dates given.  All information posted was received first hand  based on me going to the banks and speaking directly to the investment representatives. Next to the posted rates, I am listing the current rates at Chase bank (in the USA) as of the same date (min. deposit is $1,000).  For those that do not understand the numbers, at the end of each bank entry I provide a line that shows what happens if you invest $5,000 over 10 years and $10,000 over 10 years based on the 366 day/1 year rates (assuming the given interest rates are constant).

Please note that as of the date of this post, you are able to open an account in any Ecuadorian bank, as long as your passport and entry stamp are current. In addition, all accounts are held in US dollars. CDs will be found under Inversiones (investments) and the word for interest rates is Tasas.