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Ecuador’s Pacific coast offers empty beaches, fishing, even surfing, and the Andes are filled with pristine forests, rivers and lakes. The economy offers excellent opportunity. Ecuador is one of the world’s top exporters of banana, shrimp, roses, fresh flowers, tuna, and palmetto - plus, tourist opportunities abound. The U.S. dollar has been Ecuador’s currency for five years. What’s more, inflation dropped in each of the past five years. Perhaps most important of all, Ecuador is a peaceful country with friendly people that are very welcoming to foreigners. You won’t see any “Yankee Go Home” graffiti. Ecuador is on the equator, so it gets plenty of sun, and the weather in the Andes is like eternal spring. Legal Advantages—A Strong Constitution There is a constitutional advantage to living in Ecuador. The Ecuadorian constitution establishes that Ecuadorians and foreigners have exactly the same rights and obligations under the law. The exception is for political rights such as voting and running for public office. The Constitution also establishes the principle of private property as an important development factor, and many types of requisition and seizure by the government are prohibited. Everyone has equal land and property ownership rights in Ecuador. There is no foreigner-specific limitation for the ownership of land in Ecuador, be this beachfront or other. Tax Advantages—The Flat Tax There is also a tax advantage for U.S. citizens who live and earn in Ecuador. U.S. citizens or resident aliens of the United States who must live abroad because of their employment can exclude up to US$80,000 of foreign earned salary from their U.S. income tax. Foreign earned income is income received for services performed in a foreign country during a period when a person’s tax home is in a foreign country and they meet either a bona fide residence test or the physical presence test. You can read all the details at http://www.irs.gov/faqs/ faq13-3.html. That US$80,000 that is exempted from U.S. taxes would then be subject to Ecuador’s flat rate of 25%. But you won’t be paying things like FICA, and there are plenty of tax exemptions and allowances in Ecuador. Residency Is Easy And Affordable Living in Ecuador is incredibly inexpensive (a brand new 800-square foot condominium in a good part of Quito can cost as little as US$39,000) and it is very easy to stay there. Most nationalities can enter Ecuador without a visa and stay for up to 90 days per year. This visitor’s permit is easy to extend. If you have a business in Ecuador, you can stay almost indefinitely without official residency. One friend I know has lived in Quito for ten years and never applied for residency. Instead, he stays as an agent of his business. There are several ways to obtain a resident visa if you choose. Most of them require proof of making an investment in Ecuador. That investment can be the purchase of real estate, the incorporation of a company, the purchase of shares, or even a fixed-term deposit in a local bank. Right now, Ecuadorian residency is especially easy to obtain because a fluke in the law happened when the country dollarized. Years ago, the minimum investment required the equivalent of US$50,000 in Ecuadorian sucre. But when this law was written, a few hundred sucre was worth a dollar. Then the sucre fell so dramatically that $US1 would buy over 25,000 sucre. When Ecuador dollarized, the lowest exchange rate was used which made the minimum investment requirement for residency a paltry US$1,400. Each family member required only an added another US$400. In February 2005, Ecuador increased this amount to US$25,000. But that’s still low. Simply buying a very inexpensive house fulfills one’s residency requirements. If a person has a university degree and does not want to invest in the country at all, it is also possible, in some cases, to obtain a resident visa. Here are just some of the advantages to living in Ecuador: 1. Medical and dental costs are low. One friend who moved to Quito recently confirmed that medical and dental costs are really low and service is good. He wrote: “Gary, the dental costs are really low here. My teeth cleaning was US$35 and my wife’s crown US$350...In the States my 6-month cleanings would cost US$90 to US$95 and a crown would cost US$1,500.” Hospital costs are low, too. Merri and I learned this the hard way when Merri fell and dislocated her elbow. A morning in the emergency room at Metropolitan Hospital, a specialist to reset the dislocation, blood tests, two doctors, six x-rays, and the cast came to a grand total of US$182! 2. Shopping ranges from native markets to super markets. A lot of convenience foods such as cake mixes and frozen meals are still missing, but since cooks only cost around US$100 a month this is not a problem. You’ll find numerous U.S.-style shopping arcades with plenty of American goods, plus all the imports from other nations. The Chinese have invaded Ecuador so their inexpensive clothing, shoes and other consumer goodies are all there. Plus, all the American sins—Pizza Hut, Burger King, McDonald’s—are well established in Ecuador’s major cities. 3. Hired help is cheap! My wife, Merri, and I do not drive in Ecuador. Road signs are non-existent. On the plus side, we are told that auto accidents are resolved pleasantly. Still, we don’t want to be able to write about this from experience, so we don’t bother. Instead, we hire a driver. Drivers are inexpensive and this allows us to relax and enjoy instead of worrying about the traffic. And home help is very affordable. On the rare cold nights in Ecuador, there is nothing like having helpers come in and build eucalyptus fires in every fireplace throughout the house! Overall, we find these differences delightful. You can have your cook, driver and cake, even though the cake mix may not be available in Super Maxi. Since the maid will take care of getting the foodstuffs anyway, who cares? Citizenship Has Its Advantages For those who want to go one step further and actually become an Ecuadorian citizen, this is easy as well. Any foreigner who has been a resident for three years may acquire an Ecuadorian passport (and nationality) after due process. Ecuador allows its citizens to be dual nationals, provided the country of origin (such as the U.S. and Britain) permits this. Foreign residents of Ecuador get an Ecuadorian ID card and have local rates at hotels, national parks, universities, etc. Foreigners with a resident visa may bring their household goods free of tariffs after due process. This process, however, is a bit cumbersome and often makes doing it not entirely worth it. Be Aware Of Potential Downsides There are two downsides to getting the Ecuadorian residency permit. Once you obtain a resident visa to maintain this status, you cannot leave the country for over 90 days per year during the first three years of residence. Second, the permit brings you one step closer to qualifying to paying Ecuador’s 25% flat tax. But, as I have mentioned before, there are plenty of exemptions that could reduce your tax burden. Like any extensive legal process, you should use an attorney experienced in such matters both in the country of current residency and another in Ecuador. Our Ecuador attorney, Dr. Andres Cordova, is well versed in residency and tax law. His e-mail address is afcordova@accessinter.net. All in all, I believe Ecuador is a slice of paradise on the cheap. If you can put up with people marching in the streets and banging on pots every once in a while to “throw the bums out,” you can find real estate bargains and a first-rate quality of life. Investing In Quito Real Estate If you want to establish residency in Ecuador, you’ll want to buy real estate. And buying real estate in any foreign country can be challenging. For those who take the time to shop around, there are great bargains in Ecuador. Here are a few tips… 1) Expect price confusion. Prices are far less logical than in the U.S. A friend once told me he bought a whole mountain for US$10,000. I asked how and he said, “I met an Ecuadorian who owned a mountain and needed US$10,000.” In other cases, two identical properties right next to one another will have totally different prices. Only the Ecuadorian mind will be able to understand why. 2) There are easy-to-find listings in English on the Internet (see http://www.mantarealestate.com/pages/471699/index.htm). Shoppers who have time and a bit of Spanish will find much lower prices, if they spend time in Ecuador hunting down bargains. You can see luxury apartments selling in Salinas - the most Western coastal resort - for US$97,500 (level 4) to US$135,000. And a recent perusal of internet home listings found a 2,900-square foot house with 4 bedrooms, 2 bathrooms, maid’s quarters, a fireplace, and mountain view for US$140,000. Try and find THAT in New Jersey. 3) You can also decide to build instead of buy. Keep in mind that the underpinnings of the real estate market are construction costs which still run in the US$35 to US$40 a square foot range for really beautiful architecture. You’ll find a link to a local architect below. If you decide to build, and if your Spanish is not good, hire an interpreter or a builder who speaks English. I’ve worked with Gabriela Gangotena, general manager of Miro Property Developers, an excellent developer who has some decent financing (promiro@andinanet.net). Gabriela’s firm has a great reputation as they have developed (and are developing) property all over the country. She is building for US$37 to US$50 a square foot according to location. Normally, when one buys a new construction, a 5% down payment starts construction and 25% is due in four payments at agreed stages of construction, and the balance of 70% due on completion of construction. However, 15-year financing (in U.S. dollars) on that 70% final payment is now available in the 9% to 10% range. This is still quite a high interest rate compared to U.S. mortgages, but much lower than the unacceptable 15% to 18% rate we have encountered in past years. To be on the safe side, you can involve your attorney from the beginning and certainly you should ask around to make sure of your builder before you begin. Recently, title insurance also became available in Ecuador. 4) Utilities are no problem. Whether you build or buy, utilities are pretty easy to obtain in cities and advanced towns. Cell phone rates are expensive but competition is fierce, so prices are coming down. Broadband technology is available only in cities. Bottom line:
Ecuador offers the comforts of the U.S. at an inexpensive price, whether
you buy or build. Just do your homework before you buy
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