Episode 13 - Steering Through the Waves of International Banking

join us, Jim and Rita Santos, as we unfold the map to a future unchained from the conventional moorings of a stationary home. Discover how we're securing our retirement savings by side-stepping the unpredictable real estate market and why High Yield Savings Accounts (HYSAs) have caught our eye. We're also unpacking the potential of banking in Uruguay, the financial haven often compared to Switzerland, and how it might just be the safe harbor for our hard-earned funds. Our conversation with Dr. Mark Teuten, a attorney who helps with Uruguayan banking for expats, throws light on managing money in a foreign land.

Listen in as we navigate the nuances of setting up shop with Uruguayan banks, particularly for Americans entangled in the web of international regulations like FATCA. We lay bare the timelines and trials involved in starting anew with a foreign account and how declaring our intentions to reside in Uruguay could smooth the way. Dr. Teuten's insights complement our quest for a diversified investment portfolio, as we consider tax-free government bonds and the shrewd play of investing across various currencies. This episode is not just a financial briefing; it's a beacon for those seeking a robust strategy for safeguarding their future in the face of global uncertainties.

Chapters

• 0:19 Banking Options for US Expats
• 11:09 Banking and Investment Options in Uruguay

Transcript

Jim Santos: 0:19

Welcome to Travels with Jim and Rita. Travels with Jim and Rita. I'm your host, Jim Santos, and in this podcast series, you can follow along as my wife, Rita and I work out our crazy plan to outfox the real estate market in the US and actually increase our retirement nest egg by spending the next three years or so living abroad and exploring the world. Are we bold, forward-thinking pioneers or just plain nuts? Let's find out together, shall we? Hello once again to everyone out there in podcast land. I'm Jim Santos, and this is Travels with Jim and Rita, Now in real time. As I record this intro, it's the end of March and we're very busy preparing to empty out our home and get ready for closing in just a few short weeks. In fact, we're meeting shortly with the movers, as our days of hauling furniture and boxes are blissfully behind us. In this episode, we'll be looking at some financial matters. This is a subject that Emily and a few others have emailed me about recently, so we'll go into some details is a subject that Emily and a few others have emailed me about recently, so we'll go into some details. As you'll recall, if you're a regular listener and if you aren't, don't you think you should be. Since this is a great time to sell but a lousy time to buy, we're going to skip the buying part for now and travel instead.

Jim Santos: 1:38

Since Rita and I are both over 65, we're not too interested in long-range planning or speculative investment options. We're looking more for HYSAs High Yield Savings Account. We've already opened one two-year account with our credit union that locked in a 5.38% rate with an option to bump it up once if rates happen to increase during its term. We also have two HYSAs with American Express. Now these are variable rates, meaning they can go up or down with the market, but it's been pretty steady for the last few months at 4.35%, which is not too shabby. A big advantage of those accounts is that it's easy to transfer money in and out without fees or penalties.

Jim Santos: 2:19

Now another option we've been considering, especially in these troubled times, is banking some of the proceeds in a foreign currency in another country. Uruguay, is particularly interesting, since their secure banking system has earned them the nickname the Switzerland of South America. When we visited Uruguay a few years ago, we spoke with some attorneys and I'd looked into it online a bit more recently. What caught my eye were some accounts paying as much as 8 or 9% interest where funds could be deposited as either euros or yorgue and pesos. So to look into this more closely, last month, while we were still in Panama, we arranged an interview with Dr Mark Teuten of Teuten Abogados. Although Mark deals primarily with helping expats with immigration, paperwork, property purchases and opening bank accounts, he agreed to share his knowledge with us. Let's go to that interview now and afterwards we'll take a look at another fairly safe investment option that we also considered.

Jim Santos: 3:18

Mark, I guess you understand the basic situation that we're looking at here. My wife and I are selling our home in the US right now and we're going to be basically traveling the next two or three years. So we're interested in banking some of that cash in a foreign bank, preferably in a foreign currency, and we've been to Uruguay before. We know the banks have a very solid reputation there. That's the kind of thing that we're looking at now. We're wondering what kind of assistance your firm provides for setting up these accounts, and can it be done remotely, or do we need to wait till we can get out there?

Mark Teuten: 3:50

Our main services are helping people that are coming to Uruguay to apply for residence includes assistance in opening a bank account, because you've got to show that you've got an income in Uruguay in order to be able to get residence. We have experience in opening accounts. It's normally part of that. Your situation is, I understand, is different. You just want to open an account without applying for residence. I understand it's different.

Mark Teuten: 4:25

You just want to open an account without applying for residence? Right, you can, that is possible. You can open a bank account in Uruguay as non-resident. What, sorry, what nationality are you? United States, because of FACTA, which I assume you're familiar with? Yes, they'll ask you. There's a whole load of forms that you have to fill in to open the account, and you know there's the usual compliance, know your client sort of information, and then you have to fill in a couple of US tax forms I'm not sure Ben 8 or whatever it is, you know, but you can open an account here as non-residents.

Mark Teuten: 5:03

It cannot be done remotely To open an account, you need to do that, be physically in Uruguay and go to the bank yourselves.

Jim Santos: 5:09

And once you have the account, though, it can be accessed over the internet.

Mark Teuten: 5:13

Yes, yes, all the banks here offer online banking. Specifically mentioned the Banco de la República. I'm not familiar with their online system, but I assume it works reasonably well and you know my experience of the internet banking in Uruguay is that it's very good and you know you can. You can do pretty much every online. For example, I mean I've got, I've got one of these I can't even remember Dongle or whatever it's called. I mean I can transfer up to $50,000 a day to anywhere in the world.

Jim Santos: 5:47

And I assume these accounts can be in dollars or Uruguay currency or euros.

Mark Teuten: 5:54

Yeah, yes, the norm in Uruguay is that everybody has a dollar account and a peso account and we just use the peso account for our daily monthly expenditure and you keep your money in dollars, basically, and then go along changing it into pesos as you need it. That's the historical norm, because Uruguayans have never trusted very much in their own currency.

Jim Santos: 6:21

Yeah, now we're not trusting much in US currency, so it's interesting. Yes, you indicated that at the beginning.

Mark Teuten: 6:27

So from what you're saying, you're actually you're positively interested in having a peso denominated account. I mean, obviously the Eurogram peso in the last couple of years has gone up against the dollar and inflation in dollars is coming down. So if you'd kept your money in pesos, you'd have done okay I'm sorry I should I mean, I should clarify as well for the record I'm a lawyer, not a financial advisor. So I know most of this stuff from having lived here for a long time. But I don't claim to be a financial advisor.

Jim Santos: 7:02

Sure, I'm a lawyer sure you understand that right that you mentioned the fact of procedure we'd have to go through as foreign nationals and American citizens. I saw an article that said that some banks were charging extra fees for foreign nationals because of that.

Mark Teuten: 7:15

That's certainly not my knowledge. My experience with the Itaú and Santander is that they don't charge, so I don't know if others do. I mean there are banks who don't charge. Is the answer to that.

Jim Santos: 7:30

Okay. Do these accounts have in the US? We have the FDIC protection. Is there any kind of insurance or protection on accounts with you know, say $200,000 in them?

Mark Teuten: 7:41

Yeah, well, a, there is protection up to fifty thousand dollars. Fifty thousand, okay what?

Jim Santos: 7:48

what kind of interest can you earn on savings accounts in uruguay?

Mark Teuten: 7:53

I certainly don't get anything on mine. So you said that you've seen something online with the banco de la republica. I think you're offering 7 or 8%. You said, or was it 9?

Jim Santos: 8:07

Up to 9%.

Mark Teuten: 8:09

Yeah, but you are clear already that that's in Uruguayan pesos, not in dollars.

Jim Santos: 8:13

Correct, but that's what we're interested in anyway.

Mark Teuten: 8:16

The banks do have specific products which they call certificates of deposit, right, and I imagine that the brew that's what it's offering. So it's a bank guaranteed thing. They don't give you interest on money just sitting around in your account. I think if you had 2,000 in a normal what they would call a savings account, which here is called a cacao, you'll probably get 0.1% or something, and in pesos, I don't know, 2% or something. You know very, very low. And another thing as well for you to be aware of bank charges in general are very high in Uruguay. But yeah, they do offer these certificates of deposit and that you can get quite a reasonable rate of return either in dollars or pesos. I think in dollars they'll give you like four or five, four percent, maybe something like that, and from what I hadn't, I've never looked in pesos myself, but if you've seen nine, that sounds about right.

Jim Santos: 9:22

Are there any tax liabilities in Uruguay if you're earning interest on accounts there? Yes, basically 12% 12% of the interest earned.

Mark Teuten: 9:33

Interest Of the interest, yeah.

Jim Santos: 9:35

Are there any fees for taking funds out of Uruguay?

Mark Teuten: 9:38

No. No fees for that, no we have no exchange controls at all in Uruguay. We have no exchange controls at all in Uruguay and I mean also just for the record and as you're recording it, I mean it's just information. Uruguay has never had well certainly in the last 35 years no exchange controls, and there was a problem in 2001 with some banks defaulting. Big private banks didn't have any problems and carried on.

Jim Santos: 10:05

If we were to come to Uruguay and want to set up something with one of these banks, what kind of information would we need to bring with us to be able to do this?

Mark Teuten: 10:14

Basically, what they will look for is bank reference letter from if you're from the States, from a US bank. A bank reference letter means a letter on a headed notepaper, preferably signed by a physical person, saying this is to confirm that Jim and Rita Santos have an account with our bank which is in good standing, and they've had the account for X number of years. Right, that's a bank reference letter. Number of years that's a bank reference letter. Then you need to show proof of address abroad, which they like to see a recent utility bill. So if you want a joint account, it will be a bill in each of your names. That's what they like to see. And then the third thing is they want to see proof of income in general. What they like to see is your last year's tax return, proof of income in general. What they like to see is your last year's tax return in. So, in terms of documents, it that's what the documents are.

Mark Teuten: 11:09

Um, they'll ask you why you want to open the account and you should probably say something along the lines of you know, we're going to come here to live and so it's. We're going to be applying for residence, so we need a bank account. Come in sort of need to understand that in general. You know that the whole anti-money laundering thing and and american clients in general, because of factors and stuff, so the bank with americans citizens, they don't want to have problems, I mean you know, right I've got a number of russian clients, and obviously with russian clients as well.

Mark Teuten: 11:41

They, you know, they're really, really wary, so they don't, don't want to, don't want to have problems, and so you know, just to make things easier, that would be my suggestion yeah, well, we would definitely have a paper trail of where the money came from yeah yeah, yeah, so that should not be an issue yes, from the sale of a home, not from anything shady.

Mark Teuten: 12:03

So I mean, I think, I think, to be honest, I mean again, this is, this is just a sort of feeling, sensation, um thing. I mean, I think if you two americans turn up at the bank of the republica, which is a publicly owned bank, and you say, oh look, we've got 200 000 and um, and we just and we'd like to put it in in an account here, that that would just look very strange so and obviously the bank's got discretion which clients they're going to accept.

Mark Teuten: 12:30

I don't think they're going to go out. This is the thing, whereas if it's 200 million they'll probably say, oh great yeah, thanks, no, right, right but 200. They'll probably it's not worth a hassle of of, you know, looking into all of this. So you know, but if you, no, we need the account because we're, you know, we're looking at Uruguay to come to live and blah, blah, blah. That will probably keep them happy.

Jim Santos: 12:52

Okay.

Rita Santos: 12:52

Yeah.

Jim Santos: 12:53

How long would this take normally to open up the bank account? Is this a couple of days, or is there a waiting period when you first set it up?

Mark Teuten: 13:00

My experience with the private banks with whom I work is that it can be less, but you've got to work on the basis that it'll probably be between two weeks and a month for them to do all the compliance. It's certainly not overnight and it's certainly not two days, because you fill in the forms in the bank and then it goes to their compliance department and they look at it all.

Jim Santos: 13:22

Okay, right.

Mark Teuten: 13:27

Well, we're thinking of spending a month or two in Montevideo anyway. Yeah, I mean you don't need to be. I mean, again, you don't need to be here. That all might, you know. You can just be here a couple of days and go in and fill in the forms and then and wait for them to, and then you can access it over the internet you know okay.

Jim Santos: 13:44

Well, no, we enjoyed our time in Uruguay. So that's not a downside having to stay a month of a day over.

Mark Teuten: 13:53

Yeah, great, I'm just trying to clarify, but you wouldn't 100% need to stay around just for that.

Jim Santos: 14:01

Yeah, okay, and I know it's not really your field or anything, but are there any other like two to three year investment opportunities in uruguay that you have heard of or you think we should consider?

Mark Teuten: 14:12

there's uruguayan government bonds which, again, historically, uruguay hasn't defaulted on. On its bonds, even in 2001, we didn't default. The advantage of them is that interest on that is tax-free well, that's, that's it.

Mark Teuten: 14:28

You might that might be of interest. They're, they're what is it? Their investment they're. They're not triple a, they're, I think they're bb plus or something. You know they're in this. So their investment grade? I think they give around five percent, but tax-free, but tax-free and what else?

Mark Teuten: 14:47

Well, the other thing was to, for your information, I mean, there are other banks who, in addition to the bank of the la republica, who also offer similar products and services. All the banks will require you to go in person, though to open an account. There are other brokers who will open an account for you where you can do digi sign. I think it is. You know you can, um, you can sign virtually, and they you can open. So you could open an account with, with one of those. There's several respectable firms around, you know, who've been in operation for many, many years. They offer, as I understand it, financial products from around the world, so they can offer you Uruguayan products or, you know, from anywhere else. From what you're saying, you're not interested in US treasuries or anything like that. You want to get away from that, but there are. So, but there are, you know, there's.

Jim Santos: 15:48

There's several broker, brokerage firms yeah, basically we're looking at diversifying. You know we want to split our money up a couple of different currencies in a couple of different ways.

Mark Teuten: 15:58

Yeah, from what you said. I mean you are thinking of coming here, so you know it wouldn't be a it's not a problem for you to have to come in physically to go and open an account.

Rita Santos: 16:09

It might be nice to talk to the other brokerages as well, jim, to see what other you know, because it doesn't have to be just 200. We need to know what type of products they have and that we could further diversify.

Mark Teuten: 16:26

I can send you one or two names afterwards if you want.

Jim Santos: 16:29

Yeah, if you wouldn't mind, if you knew anyone who specializes in investments, interest-bearing accounts, the government bond certainly is something we should look into a little further as well.

Rita Santos: 16:38

Yeah, yeah, that's interesting. But of course, when you sell them, they don't sell unless there's somebody there who is willing to buy them. So that's you know. We'd have to keep track of multiple economies, but certainly Uruguayan government bonds are pretty liquid here. Ok, ok yeah.

Mark Teuten: 16:59

Yeah, that's good. I don't think that's a problem at all. There's a bit of that's been the situation for the last 20 odd years, but nobody knows exactly what the future holds.

Rita Santos: 17:12

For any country really.

Mark Teuten: 17:15

Yeah, exactly, but in principle yeah. Government bonds, Eurogoing government bonds, are pretty safe and pretty liquid.

Jim Santos: 17:23

Well, mark, I appreciate you taking the time to talk to us about this. I know, again, it's not exactly your field you kind of work with people more applying for a residency but I do appreciate the information. A lot of good things for us to look at here.

Mark Teuten: 17:37

Okay, cool. Well, I hope it's been helpful.

Jim Santos: 17:43

So, as you probably picked up from that conversation, we found that, while there are some excellent banking opportunities in Uruguay, we would have trouble making it work for our particular needs. The main stumbling block seems to be that we would have to show proof of residency in some country, providing things like utility bills or a lease, and we will not be able to do that as we'll be doing the slow travel routine. Do that as we'll be doing the slow travel routine. But if you're looking to move to Uruguay or you're a foreign resident with a fixed address, there are some intriguing possibilities for you in that laid-back and lovely country. Now, lastly, a few words about that other investment option we had on the table. If, like us, you own your home outright and have no mortgage or liens, you can consider offering your home for sale with owner financing. This is a situation where, basically, you are the bank and you set the interest rate that the buyer will pay and the terms of the mortgage Check with an attorney, of course, because I'm definitely no financial expert, but most states will allow you to do this if it is your home and the only mortgage you will hold. In other words, it can't be a side business. Now the upside of this is that you're getting a monthly check and, depending on the market, earning a decent amount of interest.

Jim Santos: 18:55

For example, when I did this selling my home in West Virginia about 14 years ago I was able to get 6.25% on a $210,000 loan. This was at a time when bank interest rates were running around 4%. This got me a monthly check of $1,293.01. The buyer made a cash payment on it at one point, but still, when he eventually sold the house after 80 months, the payoff on the loan was still just over $68,500. If you do the math, counting the down payment of $15,000, the payment of $90,000 he made at year five after receiving an inheritance and the 80 months worth of mortgage checks, I collected almost $277,000 on the deal. Now there are some downsides. I was able to get a higher interest rate than the banks were offering at the time because I was willing to take a risk on someone who may not qualify with the bank. I had arranged a quit claim deed to protect myself. That's where a title automatically reverted to me if the buyer fell three payments behind.

Jim Santos: 19:59

Now, naturally, such a buyer may not be able to put much money down, so you don't get as much money up front. Also, you need to take care of the paperwork, which includes figuring an escrow amount to add to the mortgage payment each month. It's prudent to pay the home insurance, hoa fees and property taxes out of that account so you know the property is protected, and managing that is some extra work. We did visit a local attorney here in Knoxville back in December when we first started on this mad path of ours, just to make sure there were no legal issues and that they could handle the closing paperwork, title transfers and et cetera for us. So, while we were prepared to go that way if needed, it was still a bit of a relief to find a more conventional buyer so we do not have the extra paperwork and details to deal with. Still, if you're in a position to do so, it's definitely an option worth considering. Still, if you're in a position to do so, it's definitely an option worth considering.

Jim Santos: 20:53

Well, that's it for this week's show. Keep listening, keep spreading the word on social media, as we are now in 26 countries and counting. If you can, please take a moment to leave a rating and a review and, of course, subscriptions are always welcome If you have any questions or would like to tell us your own story, welcome. If you have any questions or would like to tell us your own story, email me at jim at jimsantosbookscom. And remember you can find my books, short stories and audiobooks on my Amazon author page simply by going to jimsantosnet. Until next time, safe journeys to you all and don't forget we travel not to escape escape life, but so that life does not escape us.