Archive | Ecuador for Investors

You’re fired! – What happens in Ecuador

“Hey, step into my office for a minute.”

“Don’t sit down, this will only take a second.” I continued.

“You’re fired, get the f**k out.”

OK, so this wasn’t exactly how it went down eariler this week.

But can’t blame a guy for dramatizing once in a while.

If you’ve met me, you know Im a soft-spoken guy, don’t think I could do it like that.

But due to a change in business circumstances, I unfortunately had to let someone go.

In Spanish, as in Ecuador, its very clear cut. Someone either quits (renunciar) or you fire them (despedir).

Theres no wishy washy middle ground like “laid off” or “let go”.

And when you have to let someone go, as I did this week, its a little different down here.

You have to “liquidate” them meaning pay them a final one-time “severance” payment equal to 25% of all the salary you’ve ever paid them plus any unpaid bonuses due to them.

But first, when you fire someone in Ecuador, or if someone leaves your business voluntarily, you have to go see an accountant who makes the official document (Acta de Finiquito) that needs to be filed with the Social Security Department (IESS) and Ministry of Labor (Ministerio de Trabajo).

Then, a date is scheduled when both you and your employee will have to go in front of an inspector where you will have to pay your employee their liquidation (severance) settlement and both sign off.

Theres really no way to get around this legal process nowadays in Ecuador or your employee can sue you.

Except if you hire the right way.

Which I didn’t this time around. In my case, for an employee I hired making a bit more than the minimum wage who worked for me for 3 months, Im going to have to pay her around $450 for her liquidation.

For instance, one loophole i recently discovered that will allow you to legally not pay the extremely costly 25% lump sum severance payment to your employees in Ecuador when you let them go is to hire your employees on a temporary limited time contract… say for one year.

At the end of the year you let them go for reasons of “contract ending” and then you don’t have to pay them the 25% lump sum liquidation of all the salary they’ve earned while under you. You will only have to pay a much smaller amount equal to any unpaid bonuses due to the employee for that year.

You can then do like most and maybe give them a few weeks off and then hire them back.

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Posted in Ecuador for Investors, Expat Lifestyle

Why dont I receive my mail from abroad in Ecuador?

Since moving to Ecuador, I´ve had quite a few things mailed to me from my original home, the USA.

Problem is… at first, the packages never got to me!

Online the tracking numbers indicated they had arrived to Ecuador. But they still never arrived at my home.

So what happened?

Finally, I figured it out.

Whenever someone mails you something from abroad using the general post, even if they mailed it to your exact street address in Ecuador, it doesn´t matter, it will most likely never make it there.

Instead.

Once you´ve verified the package is in Ecuador via a tracking number that is checkable online…

You have to go to the main office of the post in Ecuador (Correos Ecuador) in your city to pick it up. They may tell you that your package is in the head offices in Guayaquil or Quito.

Go with your passport or cedula, be prepared to pay at least a small fee, usually around $5 and you will be able to pick up your package. Having the original tracking number helps but isn´t absolutely necessary.

But careful, if you don´t go to pick it up within a sort time they will send it back to the original home country.

And they will NEVER inform you of any of this.

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Posted in Ecuador for Investors, Expat Lifestyle

Growing palm oil in Ecuador, profitable or not?

“Jeeze, I’ve never seen a road like this,” I thought, this week, as my teeth rattled and face winced along one particularly trying road deep in a palm oil grove.

I was in one of the top places in Ecuador for palm oil growing, La Concordia, a small town tucked deep in the sticks about a half hour from the rough and tumble city of Santo Domingo, Ecuador.

You gotta put your money somewhere.

Keeping it invested in paper US dollars is a well-documented no-no.  Gold may be a better bet, but lets face it, if sh#t really hit the fan, people don’t need it, they need food, they need water.

That’s why one of my next plays will probably be in an agricultural investment, and honestly, its hard to  beat Ecuador for that.

The land is so fertile (and relatively inexpensive).  And farm hands come cheap.

There’s so much water.

Need a specific temperature?  Just find the right altitude in Ecuador, cause its there.

My Ecuadorian friend, and also active palm grower, who I met at a conference I was teaching at this week in La Concordia began to explain…

“Palm Oil is one of the most profitable crops Ecuador has to offer.  At least in this area.”  He started.

Palm Oil is mainly used for cooking, and primarily exported.  The oil is obtained through the fruit this particular variety of palm produces.

palm oil farm ecuador la concordia

The harvest…

Palm oil trees begin to give fruit around year 2, and continue to do so until they are about 25 years old.

Once harvesting begins, you’ll continue to harvest every 20 days for the life of the plant.

One big plus of this product is that it is relatively NOT very labor intensive.  No constant watering is needed.  There is a rainy season, starting in January which then goes for a few months, and that is when the plants receive the water table they need for the year.

The costs…

Most small to medium sized palm farms (20 hectares or less) don’t even have any full time employees, just one live-on watchman.

All farm owners do is hire two guys to come to harvest every 20 days.

One plucks the fruit off the trees with a hook, the other one loads the fruit on the donkeys which take it to the trucks which then take it the nearest factory that proceeds to cook the plant and extract the oil.  They are paid based on output ($15 per harvested ton).

This is another one of those products where no marketing is needed.

You make it, you’ll have a buyer, which is usually the nearest production factory.  As a marketing guy I appreciate that.

The only thing that changes is the market price.  Which for this product doesn’t fluctuate too greatly which usually resides between $150-250 per ton.

Farms start to become particularly profitable when they are at least 20 hectares large.

Each hectare can fit 140 palms.

You can buy the palm trees an inch tall for $1.  Or you can buy them already a year old for around $6.  The best time to plant new palms is in late December or January when the rainy season begins.

You’ll need to invest about $1 in fertilizer per plant twice a year to keep the plants healthy.

You’ll also need to pay a worker $.15 cents per plant to clean the shrub away from around the basin of the plant.  Three times a year.  This comes to about $63 per hectare per year.

You’ll also need to fumigate 2 or 3 times a year which costs around $50 per hectare.

You’ll also need to pay the trucks (considering you dont have one) about $5 per ton for them to haul your product to the processing factories.

“My costs usually run around 20% of my sales in this business.” My friend continued.

Why palm oil?…

One big benefit is that palm is not something that is often stolen, like other crops, due to the weight of the product and also that the factories will not buy stolen product.  They will only accept product with registered tax Id numbers (RUC).

Also, due to the low maintenance and lower risk of robbery, being an absentee owner is more than commonplace, it is the usual.

So no, you don’t have to live there,

Possible sales and profits…

Each hectare of producing Palm can produce on average 2-3 tons of product every 20 days.  The really effcient farms, like a few in Ecuador and many in an experienced Palm oil producing nation like Malaysia, can often produce up to 5 tons of product per hectare.  Each ton sells for the market price which fluctuates around $200… leaving $150 in profit per hectare for the farm owner…

So for a 20 hectare farm that means in the worst case scenario with low market prices ($150/ton) and a farm producing a mere 2 tons per hectare would produce $6000 in monthly sales and leave a profit of around $4000-$4500 a month.

For that same 20 hectare farm at the best case scenario with higher market prices (around $200/ton which the factory pays you the farmer) and a highly efficient farm producing 5 tons per hectare the monthly sales can be as high as $20,000 per month.  With about $13,000-15,000 of that being the estimated profit.

The investment and ROI…

Land ideal for palm growing in the area that is not harvested can be had starting around $3000 per hectare.  But you’d have to wait 2-4 years to start harvesting.  Producing farms with plants in full harvest in the area start to sell for around $5,000-8,000 per hectare.

This week I’ve visited a few 20 hectare sized farms for sale with producing plants for sale in the $6k per hectare range.  So assuming even the low ball figures gathered from friends in the area, that same farm acquired for around $120k could get its money back within 2.5 years.

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Posted in Ecuador for Investors, Investor News/Analysis

1 Costly Mistake when Buying a Business in Ecuador

 

When I first bought the Guayaquil hotel business with a friend of mine 2 years ago I made this mistake.

And it was costly.

And I see a lot of foreigners who buy in Ecuador do the same thing cause they’re ignorant of Ecuador employment law.

The mistake I made was I didn’t ‘clean house’ and start new with my own employees when I bought the business.I inherited one employee from the past regime who stayed on.  For a while.

I didn’t realize the mistake I made until I had to let him go.You see, in Ecuador when you fire someone, or lay them off, or they leave, you have to “liquidate (liquidar)” them.Meaning you have to pay them a lump sum severance payment equal to 25% of all the money they’ve made while working for you.

For instance, for a minimum wage worker in Ecuador making $318 a month, letting them go after one year of work would mean a mandatory severance payment of about $900.

So what most Ecuadorians do, and what you must do too when buying an active business in Ecuador, unless someone is actually vital to the business, when you buy a business in Ecuador have the previous owner liquidate and get rid of everyone.

It may not feel good, but “negocios son negocios” (business is business).

Because if you keep them on whenever it is they leave you will now have to pay them the liquidation payment for the entire time they have worked for the company, even though the company changed hands, doesn’t matter.  And the employee can sue you if you refuse to pay it.

But the person selling you his business won’t tell you this!

Oh no, he’ll say things like you should keep the employees, they’re great workers and very loyal… yea, yea, yea.  After all, it’s better you liquidate his employees after he’s out of the picture than him now.

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5 years on the coast of Ecuador, a unique perspective

manglaralto ecuador

The beach just south of Montanita, Ecuador.

 

Perspective.

You get it after spending time in a place, and boy is it helpful when investing in property.

Some areas of the coast have stayed drearily the same since 2008 attracting little internet nor foreign investment.  While other areas have flourished.
And since most of the expats in Ecuador have arrived after 2009 when International Living Magazine began really pushing Ecuador its rare to hear an honest 5 year perspective from someone who was on the coast of Ecuador before (me in 2008) while researching for the first version of my now-somewhat famous Insider´s Guide to Flipping Properties in Ecuador.  

 

This was before I lived here full time.  I´ve now been here two years now as a full time resident.But I still remember my time on the Ecuador coast in 2008 like it was yesterday.  And my trip from Esmeraldas down to Salinas setting up shop in each little town I came across.

 

Well I just completed the trip again, in August of 2013 going from Salinas to Esmeraldas, town by town, researching for my new Map Pocket Guide to the Coast of Ecuador.  

 

So what are some of the biggest changes Ive noticed on the coast from then to now?

 

Salinas is about the same as it was 5 years ago.  Prices are roughly the same, so is the level of development.  You can find a nice oceanview condo in a newer building starting around $80-90k and up.  A block back or in older buildings you can find condos for half that, same as in 2008.

The beachfront of Playas has really boomed since 2008 with tourism businesses, while the areas north and south of town have also been developed and bought up primarily by the Guayaquil weathly.  When in 2008 the property here you could get for pennies on the dollar, now its hard to find a beachfront home for less than $100k.

Heading up the coast in the small towns of Ballenita and Ayangue pretty much look the same as they did 5 years ago with relatively the same prices… with one exception, the beachfront properties have soared.  In 2008 in these places you could still find small, vacant beachfront lots in the $10-20k range, now if you can find the vacant lot it would be almost triple that.
Montanita has experienced an incredible boom!  In 2008 there were just a handful of hotels made out of bamboo sticks.  And you could find a house right in the center of town on the beachfront for $50k, (like I did, but I didn´t pull the trigger which Im still bummed about) or a vacant beachfront lot in town for $30k.  Now forget about it, the place is a true tourist mecca on the coast and there is very little for sale for anything under $100-200k right in town.  The difference, the local Ecuadorians discovered the place.  Now you will often see more Ecuadorian tourists than foreigners on a given day and the businesses that have come in reflect the new target for the local businesses, the Guayaquil and Quito weekend getawayers.
Continuing north, in Olon the area called ¨Oloncito¨ has really attracted a small army of foreign buyers skyrocketing the prices where Ive seen nice American-quality two story homes a few blocks back from the beach be sold for $160-190k.  However, the town of Olon has not changed much since 2008 with just a few foreigners which have now bought right in the center of town.Further north the San Jose area, a favorite of the Guayaquil wealthy to have a beachfront hacienda, still pretty much looks the same as it did in 2008, with the same high prices (if you can find anything for sale).  Hard to get your hands on one of these beachfront cottages on 1000m2 of beachfront for under $150-200k.Then comes Ayampe, a tiny town that was completely overlooked in 2008 when one guy pretty much owned the whole place and was willing to sell you any piece you wanted for around $10 per m2, now is the perfect example of what just a few foreign buyers buying in can do to the local prices with land prices now often 4 or 5 times that.Neighboring Las Tunas and Salango still pretty much look the same as they did in 2008, dreary fishing villages void of foreigners and investment.

Puerto Lopez now has a much more developed beachfront with the malecon extending from one side of the bay to the other, in 2008 the development stopped at about the estuary.  The rest of the town still looks the same.

Heading further up the coast Puerto Cayo, San Lorenzo and San Mateo still pretty much look like they did in 2008… as lazy, seemingly vacant, fishing villages with little development.

But there is building (by foreigners) going on in Puerto Cayo.Santa Marianita, the top beach in Ecuador for kite surfers, also still pretty much looks the same as it did in 2008, but the northern end is now thoroughly developed with villas cut into the terraced cliffs.

Manta still looks relatively the same as it did in 2008, but with several new beachfront towers.  Prices have risen too, now many beachfront condos start around $1200 per m2.  The area that has really grown is the area just south of the city of Manta with several new monsterous developments that have been built or are being built.

Continuing north, Crucita in 2008 was a hole, an ugly little fishing village and party town for young people from Quito.  Now the beachfront has really been revamped with businesses and investment and there is a steadily growing expat community, all of which have arrived within the last three years or so.  Just a year ago you could have found a nice two story house right on the beach for $65k like a friend of mine did.

The beachfronts of neighboring San Jacinto and San Clemente have really soared in prices and been improved with development, attracting a steady new contingent of expats, but from a block back from the ocean onward the towns still look the same as they did in 2008.
Further north, Bahia has had many of its buildings renovated and its streets cleaned, but it still looks about the same as it did in 2008, still more a playground for the Quito wealthy with over-priced real estate as it was in 2008.While the towns heading north from Bahia (San Vicente and Briceño) still look the same as in 2008 even with the new bridge… Canoa has really exploded!  In 2008 you could find beachfront land in the $10-60m2 range, now the average range goes starts more around $60-90m2 and up.  A close second to Montanita, there are now about 10 times more hotels and restaurants than in 2008.  Along the southern end of Canoa many foreigners have bought in and are building their own beachfront villas or condos.  Another place local Ecuadorians have just recently discovered and is a hot spot for weekend get aways.Heading north from Canoa, it gets very remote and very green very quick, as it did in 2008.Besides for a few small yet flourishing developments like Coco Beach near Jama with 1000m2 beachfront lots starting around $70 per m2 or totaling $70k, this whole stretch of coast until Pedernales as well as the rather rough-looking city of Pedernales with an unattractive beach still looks about the same as it did in 2008.

Heading north from Pedernales the towns of Cojimes, Mompiche, Muisne, Same and Sua all of whoch have expericed very little to no foreign investment nor significant move in prices since 2008.

Of course, with the exception of the newish 5 star all inclusive resort near Mompiche, Decameron, which didn´t exist in 2008.

But I was surprised to see how little spillover the new resort has affected the town of Mompiche, which still looks about the same as it did in 2008 (with very few tourists) before the resort went in.

Atacames, as it did in 2008, continues to have a thriving beachfront area and a seedy underbelly that caters almost exclusively to the Quito weekend get away crowd.  But there has been little noticeable new development.
Tonsupa, just to the north of Atacames, has really exploded, but it has followed the mold of Salinas in that the explosion is not meant for tourists but for the affluent Quito locals looking to have a trophy beach condo they can visit 2 or 3 times a year.  The number of condo highrises now rivals that of Salinas. In 2008 there were many less.

Esmeraldas hasn´t attracted much investment at all and is still the same seedy city you wouldnt want to walk around after dark.

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Posted in Ecuador for Investors, Investor News/Analysis

When to buy, rent or visit on the coast of Ecuador?

when to go to coast of Ecuador

Businesses close their doors.  Even hotels lock it up.

Not a soul in the streets except the occasion street dog.

It´s cloudy and a bit brisk… everyday.

Welcome to the low season on the coast of Ecuador.

It also happens to be the best time to search for and buy real estate.  You´ll find many more properties for sale and eager owners looking to sell at bargain prices.

So when is the low season?

Depends where you are on the coast.

Right now, in August, we´re right in the middle of low season on the southern coast, from Manta down to the Salinas/Playas area.  Low season on the southern coast or area south of Manta is generally from May to early December.

High season from Salinas to Manta is from late December to early April.  If you have a rental, take advantage and jack up the price, cause you´ll still be able to find a renter.

Its the sunniest time of the year with blue-bird days mixed in with the occasional rain storm.  It also happens to be when North Americans are looking to escape the dreadful northern winters.  It´s also when school children along the Ecuador coast have their summer break meaning Ecuadorian families are traveling in full force.

On the northern part of the coast, or from Manta to Esmeraldas, it´s different and more complicated.

The high season is from late June through August, when Quito and the highland people have off from school.  The immediate days around Christmas, New Years, easter week (semana santa, April) and Carnaval (in February) is also high season and very packed.

At least on the beaches in and around Esmeraldas the sunniest months of the year are August, November, March and February.  The rainy months are December, May, June, July and October.

So in the low season …buy… in the high season … sell (but you´re not going to want to, cause your place will probably be rented at a good price).

And for renters, I´d say no reservation is needed for low season stays, you can often find options simply upon arrival, but for the high season reserve months in advance!

And if you´re forced to look for sun in the middle of the year, go north my friend.

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The top beach in Ecuador to find cheap beachfront real estate right now?

This is part 3 of 3 in this series on where’s the cheapest, undiscovered places to still find your own small piece of the beach in Ecuador in August of 2013… front-line beachfront lots for personal use preferibly under $15k or a beachfront house under $50k.  
Today’s pick might surprise you.
Chances are you’ve never seen it mentioned before now.
Actually, most Ecuadorians haven’t even heard of it, but it’s just minutes from one of the top tourist destinations on the coast… Atacames.Sua.Sua is a tiny, little village on the sea where most of the inhibitants work in agriculture or tourism (in the nearby town of Atacames).  There are only a couple hotels sprinkled through the town and barely a hint of tourists.

But unlike many small, undeveloped towns on the coast of Ecuador it’s NOT a fishing village!  Meaning no ‘fishy’ smells, no hooks baried in the sand waiting to be embedded in your foot, nor ugly fishing boats docked just off the beach.
And the beach is a beautiful little cove with white sand and sapphire-blue transparent water.And it is arguably the best beach for swimmers in all of Ecuador with table-top flat, still water and with little boat traffic.
And now as I sit here in August, the sun is out, which is a rarity for this month further south on the coast.
The locals are friendly, vibrant mulattos used to the sight of outsiders being just a 5 minute Tuk-tuk ride from Atacames.Food.  Forget about it!  Its amazing, you’ll love the Esmeraldas food, primarily seafoods marinated in coconut juice and other spices.  (Encocados)Both along the boardwalk in Sua and particularly in neighboring Atacames you’ll find plenty of good restaurants.  Hospitals and shopping centers can be found in neighboring Atacames or 25 minutes away in Esmeraldas.

And did I mention there are MANY smaller properties available right on the beach for sale by private owner… front-line beachfront.  Most have ‘for sale’ signs, some don’t.

One two-story house is asking $62k.  Another is asking less than half that but it is a tear-down, only the beachfront lot is worth something.  There is also a 14-room beachfront hotel for sale asking $200k (negotiable).

It’s a true buyers market, a low-priced hidden gem, which can’t be said for many beaches further south on the coast.

Did I mention, you’re also just a half hour from the nearest airport (in Esmeraldas)?

But is it safe being near Esmeraldas and so close to Colombia?

Well, this place is south of Esmeraldas, and Esmeraldas is actually much farther from Colombia than people realize, being several hours south of the border.  So in my experience, you’re fine.  Esmeraldas itself gets a bad rap but the locals are actually quite friendly and Sua is still a bit of a distance from the city itself.
One negative to buying beachfront here might be that for many of the properties there is a malecon or boardwalk between the property and the beach, but it does not have much traffic (if any) other than the occasional pedestrian.

Also, for most of the year it would be quiet but for Ecuadorian holidays it may get noisy towards the north end of the boardwalk when restaurants place boom boxes outside their storefront to attract Ecuadorian customers (I know us gringos aren’t!)

But overall, I see real short-term potential for growth for Sua as the spill-over from beautiful Atacames has to go somewhere (and it can’t go north, so it must come south).

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Posted in Investor News/Analysis

The 2nd best beach in Ecuador to find cheap beachfront property

This is part 2 of 3 in this series on where’s the best, undiscovered places to still find your own small piece of the beach in Ecuador… cheap, small front-line beachfront lots for personal use preferibly under $15k.  
Today’s pick is probably not on your Ecuador beach property house-hunting itinerary.
But it is one of the sunniest beaches in Ecuador (by far).

Has very little humidity nor insects (comparatively).

Is within an hour and a half of an international airport and first-world style hospitals.

Has great, empty waves for surfers.

At night, you can see stars, lots of them, and like in many small towns, hear a pin drop. (Ok, almost.)

And is only minutes from an already well-known Ecuador beach town and a new, large SuperMaxi mega-shopping center.

And did I mention the forgotten beachfront lots that are cheap… very cheap.

Welcome to todays pick… Engabao.  

In Engabao you’ll feel like you’re on the edge of the world.  Not many people here.  There are a few hostels though that cater to the surfers that seasonally migrate to these shores.

Only 15 minutes northwest up the coast from Playas, you’ll feel a lot farther away.

Heading north away from ‘town’ a few folks have already ‘seen the signs’ and have bought in and erected vacation homes.  But vacant, often abandoned beachfront lots can be had, and had cheap, recently, I’ve seen smallish 250m2-1000m2 beachfront lots for sale in this area anywhere from $15-30 USD per square meter while beachfront land in other areas of the coast often command $60-150 per m2.

Surf is the key for a town to have explosive growth potential.  Discos, hotels, restaurants and other amendities can be added later.  But a town either has surf or it doesn’t.

Don’t look far for an example of a town on the Ecuador coast that started with not much more than a decent surf, that exploded in a matter of 2-3 years since about mid-2009 as it got discovered by both the local and international travel community (Montanita).

And while Montanita is 3 hours from the nearest major city and international airport (Guayaquil) this town is only about 1 1/2 hours to 2 hours away.

Now, I don’t expect this place to explode, not overnight anyway, it’s too raw just like the last pick, Chanduy.

And frankly, its not for the mainstream expat looking for the standard services (just yet) and put down roots.

But it is an interesting investment option.

Now, Engabao does have its disadvantages… like (lack of) population, (lack of) basic food options, spotty basic services (water, electricity, internet), the dry, desert-like moon-scape, and the access road from Playas is 20 minutes of pot holes.

But that’s why its cheap.  And as of now, there is inventory for sale, and potential indeed is here.

After all, what else would you expect from a cheap, low priced, undiscovered beachfront option!

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Chasing the ‘holy-grail’ of Ecuador: Cheap beachfront property, part 1 of 3

 

 

What if you only had 5 days to look for cheap beachfront property in Ecuador?
And you were only interested in something front line, I mean right on the ocean.
You want to walk out the front of your house and be able to wiggle your toes in the sand.
You know, something that would cost millions in California, New Jersey or even Costa Rica.
A block back… no good… not interested… and you got a LOW budget, you want something small just for you, I’m talking $20k or less.
You can’t dick around.
You’d be wasting your valuable time going somewhere like Olon, Montanita or Canoa where prices have already jumped in recent years and there is little to no front-line beachfront availability.
I’d start in these 3 places that stand out in my mind as the ‘top three opportunity’ areas right now in July of 2013.
3 undiscovered places on the coast where you can still find that holy grail, or in other words really cheap, yet desirable, undiscovered beachfront property.
You can always buy one or two blocks back…  But let’s face it, front-line beachfront property is a limited commodity.

And the first town in this series, the one I reveal to you today is where i found the one I bought the 500m2 front-line beachfront lot a few months ago for $4300.
Of course, these are not the only places in Ecuador with cheap beachfront.
And big lots with cheap ‘per meter’ values can be had all up and down the coast particularly between the towns, but you are still looking at a several hundred thousand dollar investment with those larger lots.  So that’s not what im talking about with these three picks.
These 3 picks are a good place to start for someone looking to spend a few thousand bucks to have their own piece of the beach, a slab maybe big enough for a house with a small yard.  Maybe 500m2 or so.
They’re completely undiscovered, and this is probably the first time you’ve even heard them mentioned… anywhere!
Over the last 2 years I’ve witnessed places like Montanita, Playas, Canoa, Ayampe and Ballenita jump in beachfront prices.  Could these 3 be next?
Here is my first pick to find CHEAP beachfront property (over the next week you’ll get the next two picks in this series):  
Chanduy.

“Where?”  You might say.
Maybe I have you scrambling for a map.
Don’t worry, if this town wasn’t put on your house-hunting itinerary you’re not the only one!
This town is south of Salinas and north of Playas, almost right inbetween.
What?

You didn’t know there was a town between those two?  Well, there is, its just not well known and certainly not touristy.

To date almost zero foreigners have bought here.  Ok one if you count me.  This is where I found that 500m2, $4300 beachfront lot (that has proper title).
Chanduy is a fishing village, with a large fishery on the far end of town.
There’s one little hostal in town only open on (some) weekends.
Its about 45 minutes from the boardwalk of Salinas, or 30 minutes from the big malls and shopping of Santa Elena.
It’s a dusty,dry, rather vacant town on one of the sunniest stretches of beach in Ecuador.  Raw… yes!
The beach is golden, long but not wide, and there is surf, but its better for body surfers than for surfers.
So how has this town remained a completly undiscovered secret being so relatively close to the Salinas area?
Because its out of the way.
It’s not anywhere near the main coastal road like so many towns on the coast of Ecuador.
Its VERY easy to drive past the sign.
You actually have to turn off the highway that connects Guayaquil to Salinas and drive down a shoddy (yet paved) road with some pretty big potholes about 15-20 minutes just to get to the town and the beach.
The going price for most lots seem to be around $10-20 per m2 and that can even be for a beachfront smallish lot for a single family residence.
Does this place have potential?
Well the location is great, less than a half hour from amendities and shopping malls (in Santa Elena near Salinas).

And less than two hours from an international airport in Guayaquil (GYE).

Its also one of the sunniest, least humid beaches in all of Ecuador.
The locals are friendly but not very used to the sight of foreigners.
And its not a big place so with just a couple dozen foreigners buying in the price could really move.  But it won’t happen overnight.  I see this as a good 1-3 year investment.
For pics just Google “Chanduy”.  There’s some decent ones on there.
Can’t say I dont put my money where my mouth is!

 

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Guayaquil: the top short-term rental opp in Ecuador?

guayaquil real estate

Las Penas near the boardwalk in Guayaquil.

Most expats and travelers in Ecuador just skip it.

It’s hot, it’s humid and the mosquitos plentiful.

Ecuadorians will tell you not to go there cause it’s dangerous.

Welcome to Guayaquil.  Ecuador’s largest city and top international port.

But after a year of living there I can honestly say it is also a great investment for short-term, furnished, up-scale rental properties.

There simply is more demand than supply.  And it’s year round!

Guayaquil along with the heat and humidity also happens to be the main crossroads of Ecuador.  Wherever you’re going, chances are you’ll need to pass by Guayaquil.

Locals in the city haven’t quite grasped the idea, and almost all the properties for rent ask for long-term leases (1 or 2 years) and come unfurnished.

But…

…it’s an easy sell to many executives and travelers alike as to why stay in a hotel room for weeks or months when you can enjoy the privacy of your own apartment and kitchen.

There’s money in Guayaquil.

And you’ll soon discover you’ll have just as much interest from local, Ecuadorian executives as you will from foreign travelers just passing through maybe on their way to the Galapagos… or maybe on their way from Salinas/Montanita to Cuenca (they have to pass through Guayaquil).

You could rent by the night, week or month to month.

So where in Guayaquil is best for this type of rental?

Well, I’d avoid the city center like the plague although the river boardwalk (malecon) while nice to visit in the daytime it’s dodgy at night.  I’d avoid the south of the city too cause it’s just plain ghetto.  Samborondon is nice, and where the local rich live but it’s far away from everything and your renters will need a car to rent there from you.

Urdesa is a pleasant neighborhood with lots of restaurants that is nice to live with tree-lined streets but being in a narrow valley the traffic during rush hour can get untolerably bottlenecked, not for me.

I’d stick to the north central part of town between the city center and the airport.  Particularly, I like the Kennedy Norte area and even more specifically the Plaza del Sol area.

The Plaza del Sol area is the new city financial center, right next to the Mall Del Sol and where both travelers and the locals (with money) want to be.

You’re in the middle of everything.  A few minutes from the airport, a few minutes to Urdesa or Samborondon or even the old city center.

There is a Sheraton and Howard Johnson in the area too.  The Hilton is nearby.

There are a few condo towers I like specifically with pools, parking, elevator and 24 hour receptionist.  Two are the twin towers adjoined to the Howard Johnson, and another is the Elite Tower across the street.  In any of these towers you can find a luxury one bedroom suite starting around $85k resale.  The two bedroom start about $10-20k more.  The suites rent for $1100-1200 a month, or around $80 a night.  But there are VERY few for rent as short-term furnished rentals!

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Ecuador a safe haven for enemies of the USA?

I recently got this email from a subscriber…

“I enjoy your emails about Ecuador but have become concerned that it  is becoming known as the safe haven of enemies of the United States.  First it was Julian Assange from Wikileaks, and now it is Edward Snowden.”

My response: 

Well, yes, it is becoming a safe-haven, isn’t it obvious!

This is what happens when a leader plays to his own ego instead of doing what’s truly best for the country.

Maybe, being an oil-producing country with plentiful fresh water sources and extremely fertile farmland, Ecuador really doesn’t need the US, but someday it might.

What I do know is there’s quite a few folks in Ecuador whose clients are primarily North Americans (paticularily in the tourism and exporting industries), and if Ecuador starts to garner a bad rap, than yes, these businesses will be hurt.

Now I hate politics as much as anybody and don’t want to get into it but I look at it like this…

Any little guy like myself with leanings toward dorkiness… yet survived middle school in the USA knows it doesn’t pay to tick off a bully.  There’s nothing to be gained from it, you’re best to lay low, mind your own business and let the authorities sort out the injustices.

If I were Ecuador my response would have been to simply not get involved in the “Assange, Snowden” cases.

But does this effect Ecuador as a quality, safe, inexpensive place to live with a mild climate somewhat near the US that accepts foreigners wholeheartedly?

No, not really.

Most Ecuadorians have family in the US, and feel a special bond with Americans so i don’t think rascism towards North Americans will ever be an issue and it will remain a nice place to live despite these very-political occurances.

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Abusive landlords in Ecuador: Ecuador Rental Law

“Come on man, help me grab her washing machine.” My Ecuadorian friend (and roomate at the time) yelled.

“Naw man, even if she did screw me, and I don’t mean that in the positive sense, I’m not about stealing people’s shit.” I responded.

“Thats how we do it in Ecuador.” He responded.

You see, recently a good local friend of mine and myself were renting an apartment in Quito, and the landlord upon finding out we were going to unoccupy the apartment refused to give us back our security deposit.

So my Ecuadorian friend planned on cleaning her out by taking her microwave, washing machine and random other things… but I eventually talked him out of it.

But as a renter in Ecuador, excuse me, as a FOREIGN renter in Ecuador, its important you know your rights cause a lot of people will try to take advantage of you.

It is what it is.

So what exactly are your rights as a renter in Ecuador? 

Well, this week I was interviewing a friend in the Rental Court of Ecuador (Juzgado de inquilinato) in Quito asking just that.

Me: Security deposits, how much should they be, what is legal?

Response: There is no legal limit as of yet but most folks with nicer properties charge two months worth of rent as the security deposit.

My take: Use your status as a foreigner (us foreigners have a good rep of being good renters so use that as you negotiate) and often you can get the landlord down to accepting one month worth of rent.  Some don’t ask any deposit.

If a property owner doesn’t mention a security deposit, DON’T mention it yourself!  If there is no way around a hefty security deposit but you really want the place, most landlords will accept, and I suggest, that you pay half the security deposit up front and the other half after a month or two, this gives you time to evaluate the property.

Me: If I leave my contract early, does a landlord have the right to keep my security deposit?  

Response:  No, absoutely not, not in Ecuador.

Me: If I leave my contract before it expires, and unoccupy the property, can the landlord come after me for the unused time on the contract?

Response:  No, not in Ecuador, generally, if you notify you’re leaving, unoccupy and stop paying, its over.

Me: What can I do if a landlord doesn’t want to return my security deposit?  

Response: Most Ecuadorians just occupy the property for the amount of time the security deposit would buy them, and leave it at that.  You could also sue them through this office (Juzgado de Inquilinato) and you could get a judge verdict within 3-6 months.

Me:  Switching sides a bit, if you as the owner of a real property in ecuador are renting to someone who stops paying their rent, how quickly can you legally evict them and what is the process?  

Response:  Well, its more complicated than in the US where I’ve heard in many states by the 10th day of non-payment you can get the police to come and get  the tenants stuff placed on the front lawn.

Here after two complete months of non-payment you can file a complaint through this office and within another 1-3 months get a verdict to have them legally booted from your property.  In Ecuador, you can not get someone booted from your property just by going to the police, you need a court order.  If the case goes to the court the judge will order the tenant to pay you for all the time they spent in your property without paying.

Me:  Most foreign investors, like myself, are weary of places (like Costa Rica) where squatters or in this case folks that rent your property for a really long time can eventually gain some sort of legal right of ownership of your property?  True in Ecuador or not?  

Response:  No, not in Ecuador, there is not this risk when renting property in Ecuador.  You may run into this a bit when dealing with seemingly deserted, unoccupied land several people claim title too, but not when renting residences or commercial property in Ecuador.

Me: How can you legally register a rental contract in Ecuador?

Response:  By getting a few copies of the signed contract and copies of both parties’ legal ID and bringing it to your nearest JUZGADO DE INQUILINATO, once here we can give you more specific details or requirements you need to register the contract.

That’s it, now hopefully you won’t find yourself trying to lift someone elses washing machine!

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6 month Conclusions: The Ecuador tiki hut building project

 

OK, so it’s been a bit over 6 months since I finished my Tiki Hut building project on the coast of Ecuador near Montanita.

It’s hard to declare something a success when you finish building it.

You gotta wait and see how it actually rents.  And now, the numbers are in.

3 tiki huts built with oceanviews near Montanita in a little over 6 weeks.  Plus a remodeled ‘budget’ 4 bedroom house with oceanview.

4 VERY different styles.

Well, here are the final conclusions and what I learned renting each and what Id do different next time…

Tiki Hut 1, I bought this All-wooden hut pre-built from a builder I know from the Ecuadorian Amazon, Tena region.  It took 3 days for them to install it on my location elevated a few feet above the ground.  It has a wooden balcony, wooden floor, wooden walls, a “sing”roof, a beautiful oceanview, one bedroom, one bathroom, a sink, kitchenette, mini-refrigerator, WIFI, one queen bed, closet, one full bathroom with a hot electric-powered shower with a tile floor and vinyl-covered walls.

I had to tile the floor myself first laying a small web or rebar, then laying a 5 cm layer of cement, then laying the tile… and then I had to stick vinyl on the bathroom walls with rubber cement as well as install the water and electricity outlets and hook up.   For rent (based on market prices) at $25/ night, $100/week or $250/month, the price is the same for one or two people.

montanita home rentals

wood3

Total build time = 7 days.
Total size = 24 m2 or 258 ft2
Total cost = $3753

Final Conclusions: Should not have included the bathroom within the wooden structure.  Better to build bathroom out back end with cement block and tiling, hut can get very humid and damp after showers.  Size was a bit too small for comfortable living with couples.  At 6m x 4m another meter of width would have helped out a lot.  Would have used different material for roofing cause when it rains it makes a lot of noise and in the sun the metal sing can really heat up.  Amazonian wood holding up good to coastal climate, still cant beat the view from the balcony.  Occupation rate over last 6 months as vacation rental 70%.  A success.

Tiki Hut 2, The budget option with little ocean-view built with a cement floor and cement block with the “Sing” metal sheet roofing so common in this area of Ecuador.  It has WIFI and a mini-stove and bathroom (all in the same room) while the shower is behind a curtain out back.  I hope to rent it to a surfer or backpacker for around $100 a month or $5 a day for shorter time periods.  It’s good enough for me and someone not very picky, I could live there if I needed to live somewhere rent-free.  It is very soviet-esque but comes furnished with bed, table, chair, Wifi internet, electric cooker, sink, and a half bath with the shower around back which does have a curtain.  Currently its listed for rent at $100 a month.


SAMSUNG

Total build time = 6 days. (One Ecuador workweek).
Total size = 16 m2 or 172 ft2
TOTAL COST $892.49

Final conclusions:  This Tiki hut was a bust and by far the hardest to rent.   Occupation rate over last 6 months as vacation rental mainly to younger backpackers, surfers is 12%.  Proves saying if you don’t have the money to do something nice, save your money first.  For most, feels too much like a prision cell with all the cement and lack of windows.  I would not have done this Tiki Hut again if I had a do-over.  At least I have a place I can live rent free if need be.

 

 
Tiki Hut 3, By far the most labor intensive and time consuming, I designed the hut myself based off similar “mixed” models in the area.  Due to inexperience building these types of huts (it was my first time) I made mistakes all along the way that caused me to go about $2k over budget (see the end of this email for details).

By “mixed construction” I mean a building that uses a mix of both eco-materials like bamboo and normal construction materials like cement and brick.  My idea was to build an elevated structure a few feet off the ground with a cement, tiled floor and walls made partially of brick and bamboo.

The roof would have bamboo cross beams and a typical-for-the-area grass roof with a hidden layer of heavy-duty plastic and mosquito netting to keep the bugs out.  The hut would have a balcony, one bedroom, one full bathroom with electric-powered hot shower and a kitchenette area complete with a countertop, sink, mini-refrigerator, one queen bed, closet, WIFI and a dining table for two.  For rent (based on market prices) at $30/ night, $100/week or $250/month, the price is the same for one or two people.


SAMSUNG

brick1

brick2

Total build time = 5 weeks
Total size = 30 m2 or 322 ft2
Total cost = $6557.36
Final conclusions: By far the biggest success of the three.  The size is much more comfortable for a couple as a longer term residence at 6m x 5m, a full meter wider than the wooden bungalow.  Very easy to rent, most folks extend their stay, great for single person longer term or for a couple on a shorter stay.  Average rent 1-2 months as folks explore nearby areas.  Would have built on ground to lower cost of construction by about $1k, would have built balcony larger to convert it almost into a deck for barbecuing, etc.  Occupation rate over last 6 months as vacation rental 84%.

Overall conclusions after renting the huts for 6 months:  If I had to do this project again, I would have built two of the brick/bamboo huts instead of the wooden and cement ones.  I would have hired an architect to manage the building project for me (was very time consuming for me).  And I would have explored 2 bedroom designs cause my far-less-attractive-budget 4-bedroom-oceanview very-Ecuadorian house I found for $15k still rents even better than the huts (at $450-480/mon) because people like the space.

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How I lost $49k overnight in Ecuador

Picture this…

You sell your business. And after paying off your debts put the profit in the bank. A cool $49k.

Then you see on the news your bank, one day working as usual, and the next, closed!

And your moneys gone.

No, its not the 1930s, thats exactly what happened to me this week here in Ecuador.

I had my money in a month-to-month CD making 9% APR in COOPERA LTDA, the “credit union” that closed its doors this week.

What happened was the board of directors was accused of money laundering through several accounts by the government which caused a run on the bank. Then two days later the order came from the government to close shop altogether.

All in a matter of 3 days within this past week.

Didn´t matter the cooperative was one of the largest in Ecuador, had been around almost a decade and had 106,000 accounts opened.

Was this a government take-over or a highly sofisticated, well-planned bank ´buy-in´ where an insolvent bank orchestrates their own sudden demise effectively bailing themselves out? Who knows.

All I know is Im out almost $50k, and it sucks.

But now you know what it cost me about $50k to learn, that you shouldn´t have your money in Ecuador banks or cooperatives, at least any significant amounts.

Don´t do it!

There is a reason Ecuadorians don´t trust their own banks and prefer to store their wealth in real estate.

In foreign countries they´re not dumber or less-developed than you, really, everything is the way it is for a reason. You just gotta stick around long enough to learn it.

So one visa type you should throw out is the investor visa based on a CD worth over $25k… screw that! Best to go the route of real estate.

I´ve always believed it wasn´t how much you had in the bank, but your income stream that can make or break you.

This belief will now be tested considering I just lost all my “liquid” savings and am now starting from zero.

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The dos and donts of hiring employees in Ecuador

Today is the 6th and final installment in the series “Starting a business in Ecuador”.  

“I’d hire an employee in Ecuador but I don’t want them to sue me.”  I hear a lot.

“Are you dumb or just plain ignant.” I always want to respond.

It’s true, the employment laws are quite different in Ecuador then maybe what you’re used to, and at first glance seem to favor the employee.

But if you hire and fire right like we’ll talk about today you got nothing to worry about.

After you’ve defined your business idea, legally formed your business, found funding, gotten the RUC and permits, now you’re ready to hire employees.

The true beauty of starting a business is that if you can let go a little, you can quite easily form a living entity that will exist and flourish without you.

In Ecuador, like in most third world countries, you can find qualified labor very cheap.

For instance, last year I was managing my business, Hostal Murali, in Guayaquil, until I hired a young bi-lingual local guy to manage the business for me.  All it cost me was a bit over the minimum  wage ($318/month) and I completely extracted myself from the business.  The last few months as an owner I was barely even in the place as I dedicated myself to other things.

And you know what, Murali got even better.

You see, managing nor administration are not my strong-set, in fact, a lot of things aren’t.

It’s important to recognize that and understand there are many folks who can do it better than you.

The beginner entrepreneur always makes the mistake of thinking no one can do their job better than them.

So, what’s the best way to find qualified employees in Ecuador, quick?

– For me, the best way is to publish a ‘wanted employment’ ad in the Sundaypaper where you’re located.  In Quito, try El Comercio, on the southern coast try El Universo, in Cuenca, try El Mercurio. After placing an ad for my newest business, a hotel near the airport in Quito, my phone literally rang off the hook for two full days.

– Publish an ad online at computrabajo.com.ec or multitrabajos.com , those are two local favorites.  But be WEARY, dont put your personal cell number or email on these sites cause they will stay up there forever!  Get an email and a cell number only for the employee search, then ditch it.

How to hire employees legally in Ecuador?

To hire an employee in Ecuador, first you need to obtain your RUC, or tax ID number form the SRI, like we covered recently in a previous letter.  Than the easiest way is to get an accountant who will draw up the employment contract and register it in the Ministry of Labor (Ministerio de Trabajo) and help you affliate your employee to the Ecuador social security system IESS under your name or company.  I found an account that did both for me for one employee for a total of $50.  From that point on you will need to withhold about 9% of their salary and pay it to the IESS and you as the business owner will have to pay 12% on top of that in their name.  For an employee you have making the minimum wage in Ecuador ($318/month) that comes to around $50 a month you will have to pay for each employee you have.

What are your legal responsibilities to the employee?

In Ecuador, as mentioned above, you will need to pay 12% of the employees salary to the IESS each month, you will also need to pay the employee two bonus payments, the DECIMO TERCERO and DECIMO CUARTO, each are aqual to a full month of salary.  One is paid in December and the other is paid in the “back to school ” month (In the highlands this is August, on the coast it is March).  Also, once a year you will need to pay your employees a fraction of the on-the-books earnings of the business called UTILIDADES.  That’s about it.

How to fire employees without getting sued?  

Many employees in Ecuador after being let go fire their past employers.  It’s kind of an epidemic but they can’t get anything out of you if you follow the above rules and have proof you are current in their regular and bonus payments.  Upon firing an employee, or them deciding to quit, in Ecuador you have to pay them a final LIQUIDATION (liquidación).  The amount of this payment varies on how long they have worked for you and how high their salary was.  To give you an idea a friend of mine making $800 a month got fired from his job where he had worked for 6 years and they paid him around $7,000 dollars in liquidation. There is a formula that an accountant can help you with.

I recommend to do all the above with an accountant in Ecuador and even if a prior employee does sue you, if you affiliated them, paid them and their affiliation on time, paid the necessary bonuses and paid what you needed to pay in liquidation, they can sue all they want but they aren’t going to get anything from you.

That’s it, right from the mouth of an experienced business owner with employees in Ecuador… hire someone in Ecuador, you’ll be glad you did, I’ve had nothing but positive experiences.

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What you wont be good at in Ecuador

This is the 5th installment in the “Starting a Business in Ecuador” Series.

The next big step in starting your business in Ecuador is a fun one… buying stuff.

Furnishing it… in other words.

And it’s important you understand something before you attempt it.

No matter how long you live in Ecuador, no matter how well you speak Spanish… you’re still a foreigner, and locals will know it as soon as you open your mouth or maybe even when they see you a mile away.

You have to accept the fact that there are certain things we just cant do as well as the locals… like get the best prices on many things.

You can live in denial if you want to, or you can accept this and take measures to protect yourself against it like using a trusted local to do a lot of the shopping for you.

At 5’6, I’m short.

I have to accept the fact I will never be good at reaching things that are high up. I just won’t.

And you and I, being foreigners in Ecuador, very often just won’t be able to truly pay the prices the locals pay.

I aquaint this like when a guy goes into a gay club… they either going to get ya’ on the front end, or up the back… but be sure, they going to get ya’.

Particularly, when a foreigner buys at an open market in Ecuador, unless you really know what you’re doing, they going to get ya’ on either the price or the quality.

Never fails.

Keep this truth in mind before you go spend thousands of dollars on furniture, equipment and other items for your business, you could save yourself thousands.

Trust me, I know, after less than a week of my new business Quito Airport Suites being open, a bed rail broke, causing me to replace all of them with more sturdy ones, I had bought bad, in an open market in Ecuador. And it cost me a few hundred bucks.

Buyer beware, this aint Walmart anymore Dorothy.

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The $200k fu*k up in Ecuador


Today is the 4th installment in the series “Starting a business in Ecuador”.

“Damn, that sucks for that guy.” I said, standing across from a mentor of mine, an older Ecuadorian friend.

“Yep, it does.” He responded in Spanish.

We were in the street looking at a sparkly new hotel finished to the tee, but vacant and empty.

The location was great in the northern part of Guayaquil. The building was nice. They must have invested somewhere around $150-200k just in the construction.

And they could have done very well.

Yet why was the place vacant?

They couldnt get their permit.

You see, in Ecuador, before you start any street-side business that will require a sign, you will need to get a permit from the local Municipality called a “permiso de funcionamiento”.

After you determine your funding source, decide on your legal business type, and get your RUC, the next step in Ecuador when starting a new business should be to get your permit from the municipal.

Most foreigners think there are no zoning laws in Ecuador, actually there are, they just may be looser than what you’re used to in your home country.

Without a permit, yes, they can shut you down.

But…

I’ve seen that on the coast of Ecuador and in the countryside all over the country it is much easier to get business permits and not as necessary as in the big cities like Quito or Guayaquil. But its still a good idea.

The permit is granted based on the tax ID number of the property (predio), so if you’re renting a place that had a previous business similar to the one you want you might already be good.

Specifically in the bigger cities, if the property is zoned residential, like the beautiful, yet vacant building I was standing in front of in Guayaquil, it could be VERY difficult to get business permits for certain businesses.

In this case, someone invested heavily in the building I was standing in front of without securing the proper permit ahead of time. Now due to being zoned residential, it was too late.

To figure out what a property is zoned for request the USO DEL SUELO of the property before you invest heavily.

Now, the use of the property or USO DEL SUELO can be changed, but it can be tedious and expensive to do so.

Money talks in Ecuador, in these cases a good lawyer with contacts just might be worth their weight in gold.

I’ve seen that if zoned correctly, most permits can be very cheap (often under $100) and usually take around 2 months to get approved.

No big deal.

The Municipal is the first place you should start. When applying for their permit they will tell you based on your business type what other permits are necessary. For instance, for a hospitality business you’ll need to pass inspections by the fire department and the environmental board besides getting the Municipal permit.

You would also need to get registered in the Ministry of Tourism, but this isn’t as urgent as the Municipal permit.

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A necessary evil in Ecuador: How to get your RUC

Today is the 3rd installment in the series “Starting a business in Ecuador”.

 

 

 

After defining your business idea, how you plan to fund it, and what type of legal entity your business will be, the next very important step in Ecuador is obtaining your tax ID number, or “RUC”.

If you’re thinking about ever doing any type of business in Ecuador it all starts with obtaining your “RUC”.

To get your RUC as a foreigner you need to be on any type of visa other than the simple automatic 90 day tourist visa stamp you get if you enter Ecuador with just your passport.

Tourists can get a RUC if they are on the 12-IV visa, applied for at an Ecuador consulate before coming to Ecuador.

If in the country on a visa other than the simple passport stamp (12-X) visa, all you have to do is go to your local SRI office in Ecuador (The IRS of Ecuador) and within a few hours you’ll have your RUC for free by taking a few copies of your passport and current visa and a utilities bill of your current residence in Ecuador (doesn’t have to be in your name).

Once you have your RUC you can get official numbered receipts made in your name, called FACTURAS.

Everyone you sell to will ask for a factura, it is the only way they will be able to write the expense off their taxes.

As a business owner in Ecuador its important to know that for most products you are required to collect a 12% sales tax called the IVA.

The good news is that the SRI is not as quite as sofisticated as the IRS in many ways and most people write off EVERYTHING they buy, right down to the KFC chicken for their kids, and in most cases at the end of the month don’t end up paying much IVA.

At the end of the year there is an income tax based on your gross profit on ECUADOR INCOME called the IMPUESTO A LA RENTA an approximate is the scale below:

up to $8910…you pay $0 tax
$8910-11350…you pay 5% tax
$11350-14190…you pay $122+ 10% tax
$14190-17030… you pay $406+ 12% tax
$17030-34060… you pay $747+ 15% tax
$34060-51080… you pay $3301+ 20% tax
$51080-68110… you pay $6705+ 25% tax
$68110-90810… you pay $10963+ 30% tax
$90810-and up… you pay $17773+ 35% tax

Most people, myself included, have an accountant that helps them sort out and minimize their tax liability in Ecuador but its still good to know what you are getting into.

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Posted in Ecuador for Investors, Investor News/Analysis

Funding your Ecuador start up through the backdoor

You don’t need money to start a business.

You need balls.

It’s true, for the right idea, the money seems to appear.

I arrived in Ecuador a little over a year and a half ago… a few thousand in debt from years of travel abroad.

Upon arrival I rented a hole-of-a-room in Quito with a shared bath for $60/month.

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So how’d I get the money for my first venture, an intermediate-priced hostal in Guayaquil?

I used the good credit I had established to that point in my life to apply for several low-interest credit cards.  About 6 of them. I then paid a friend to their PayPal account to turn the money on the cards to cash.  It cost 2.2% in fees but cash advances had much higher interest rates than purchases.

Then I got a personal unsecured line of credit from my bank in the US for $15k.  If you’ve been a bank customer for a while just ask and you’ll probably get one too.

And I picked up a partner.  Not just anyone, but an Ecuadorian friend of mine who also happened to be a hotelier.

And off I went.

Then I sold that business after a little over a year, and started a new hotel near the airport in Quito.  

To buy the furniture, I pre-sold my product before I was open… in the form of coupons for future stays at a discounted rate.

It worked.

So well in fact my long time payment processor closed my account without prior notice cause they didn’t understand the spike in sales.  Big pain.

Then I bought most of my expensive furniture in the same places, giving me leverage to negotiate discounts and payment plans.

I looked into business loans for foreigners in Ecuador.

But the options were slim to none for a new arrival.  The big banks require you spend a certain amount of time in the country AND that you have your residency before they will even touch you.

Ultimately, I did find one institution that would lend a foreigner money for a business start up… my Ecuadorian credit union… Coopera Ltda.  The Coopera typically loans money to small businesses and if you have at least a few months of deposit history with them they don’t care much that you are a foreigner, they’ll lend you money.

Plus, I mean lets face it, your buck goes a lot farther down here in Ecuador.  In the US at my age I would probably be fetching coffee for somebody spending my days in a cubicle surfing sites while planning my next vacation to Latin America.
So there you have it.  You can’t use money as an excuse anymore!  The security you feel as an employee is only an illusion.  Don’t climb the corporate ladder to an $80k a year job or whatever… start multiple income streams that co-exist without you even being there.

And Ecuador is a great place for that!

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Posted in Ecuador for Investors, Expat Lifestyle

12 must-watch movies to get you hyped for Ecuador

Want to get pumped for an upcoming trip (or move) to Latin America?

Sometimes there’s nothing better than a good movie to do the trick.

Here are 12 of my top picks to really get you in the mood for Ecuador (or anywhere south of the border).
yuniol

12. Yuniol – This hilarious Dominican film is based in Santo Domingo and really does a great job showing the cultural divide that separates the rich and poor in a typical Latin American culture and how the two sides interact and in this case how two college kids interact.  Very entertaining.

 

man on fire

11. Man on Fire – This Denzel Washington film gives a great look into one of Latin Americas less attractive sides, the kidnapping trade in Mexico.  Still a great movie for the shots of Mexico.

 

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10.  Soñar no cuesta nada – This Colombian film gives an outstanding look into the corrupt side of Latin America (Colombia in particular) when a group of soldiers finds millions buried in the jungle.  Good movie, a great peek into Colombian culture.

 

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9. Get the Gringo – This newer Mel Gibson movie is a flick that shows the not-so-commonly-seen side of Mexico from the viewpoint of a gringo inside a jail in Mexico.  Very good movie, highly recommend.

 

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8.  Rosario Tejeras – This classic Colombian film is an outstanding gander into the everyday life of a typical, beautiful, young woman in certain circles in Medellin, Colombia.  Very interesting.

 

motorcycle
7.  The Motorcycle Diaries – Hard not to get excited about South America when watching this film based on a trip Che Guevara took on motorcycle through South America in his youth.  Played by one of the best, Gael Garcia, this film is another must.

 

maria
6. María Llena Eres de Gracia – Another excellent Colombian film, this spot gives a very real, unique look into the world of a female drug runner in Colombia.  No mistake about it, drugs have impacted Latin American culture and this film is a great preview.

 

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5. Amores y perros – A Mexican film that is too graphic for most, this movie depicts the underground world of less affluent youth and dogfighting in Mexico.  Still gives an interesting look into mexico Hollywood could never duplicate.

 

once upon a time
4. Once upon a time in Mexico – OK, now the Hollywood action-movie version of Mexico, this film is still a fun look into what we all dream Mexico to be (and it usually doesn’t dissappoint).

 

cantante
3. El Cantante – A captivating film based on the real life of Salsa singer Héctor Lavoe.  I like this movie mainly for the shots of Puerto Rico and the lively Salsa scene in the Caribbean.

 

cap ron

2. Captain Ron – Sincethis movie first came out 20 years ago, every time I watch it gets me excited for my next Latin American adventure.  Based on a typical Chicago family caught in the rat-race who drop everythig to go sail the Caribbean in a crappy boat the father inherited from a little known uncle.

 

 

blow
1. Blow – My all-time favorite movie with a Latin American connection.  This Johny Depp movie is about an ambitious, North American entrepreneur and how he gets neck deep in the drug trade with Latin America.  OK, so he chose the wrong product (drugs), but it’s still an entertaining and almost motivating flick for entrepreneurs going south of the border.

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Posted in Ecuador for Investors, Expat Lifestyle

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