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Category Archives: Finances

Ripping off the Electric Company

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So  we’ve been stealing electricity for the past year and a half.  When we first moved in we waited, and we waited, and we waited for the electricity bill to come, but it never did.  We rationalized, this is Brasil if we weren’t paying, they’d be certain to shut off our power immediately… someone was paying it.  Then we decided that maybe it was our landlord, part of the rent you know.

Well as we are moving out in a month, we got an email stating that our landlord would like our gas bill and electric bill for the last month, showing we were paid in full…. UH OH.. who has been paying our electric bills???

We headed down to the Electric Company (with baby in tow so we could take advantage of the preferential policy here in Brasil, bad I know) to work it out.  We were asked if we had electricity, as it turns out that they showed the electricity off since December 2010.  Yes that’s right folks, they’re sending someone out to read the meter from December 2010 (we moved in January 2011 ish).  We get to pay the amount, any guesses on what 18 months of electricity will cost us?  

We’re guessing R$7,000.

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Is the economy in Brazil weakening?

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Bloomberg published an article the other day on BRICs countries (Brazil, Russia, India, China).

The largest emerging markets, whose economies grew more than four-fold in the past decade, are making losers out of everyone from central bankers to Procter & Gamble Co. (PG) as their currencies post the biggest declines since at least 1998.

A declining economy is something we hear a lot of on the news, with the US’s economy problems, and more and more countries in the EU facing economic difficulty, it was only a matter of time.  However Brazil has often be touted as an economy on the rise, the Olympics and the World Cup are coming.  Real Estate and businesses are growing, with lots of foreign investments, and the middle class growing.  Brazil was doing great.  When we moved here a year and a half ago, I read many an article on how expats were being brought to Brazil to help with all of this growth.

But it turns out Brazil is at the edge of it’s growth bubble. Yes, this is just an article, maybe Brazil is still growing strong.  But the article points out that investors are pulling out, and Brazil’s consumer default rate rose to the highest level since 2009.

A surge in bad loans in Brazil will weaken the real further, said Amit Rajpal, who manages global financial funds for London-based Marshall Wace LLP. The default rate on consumer debt rose to 7.6 percent in April, matching the highest level since December 2009, as lending growth slowed to 18 percent from a record 34 percent in September 2008, according to the central bank.

Coupled with the default rate, is the currency issue.  While US expats are cheering, with their dollar going further, this is actually causing issues across the board, as a weak Real is not good for businesses here.

Currencies from Brazil, Russia and India will probably decline at least 15 percent further by year-end, said Jen, the former head of global currency research at Morgan Stanley.

Not so scientific is an observation that it seems like a lot of expat “contracts” seem to be up, or are just leaving Brazil right.  When we arrived a year ago, we would have killed for people leaving so we could scoop up all of their belongings, but there weren’t as many as there seem to be now— but then again maybe we are just more in the loop!

Politics– in Brazil

Not that I really follow Politics in Brasil, I’m having a hard enough time keeping my house running, working, raising a child, growing a child, and keeping up with this blog.  But if I did, I’d be following the US’ election (my husband is an ardent Republican, so we spend many a night up till 2am watching each and every GOP debate).  I do happen to know a few Democrats, and one of them recently posted a Gallup poll stat, intending to demonstrate that things aren’t as bad as we think.  I tend to disagree, as I’m one of the few people I know who are happy with their financial situation.. and that’s because I’m in the ever so lovely (albeit expensive) Brasil.  Lucky me!!!

The Gallup Poll stats paint a pretty dismal picture of the US.  Basically when I started College the world was all roses, and then slowly began to decline until it hit right about where we are now:

The extent to which Americans are suffering financially because of the nation’s protracted economic downturn is evident in the large numbers — 49% — saying their personal finances are worse than a year ago. With barely 3 in 10 saying their finances are better, this is among the worst evaluations Americans have given of their finances since Gallup began measuring this in 1976.

Half the US Feel Worse Off Financially- Gallup Poll

So I mentioned this to the spouse, who pointed out that when President Lula left office after like 8 years, his approval rating was 88%. This is completely unheard of in US politics.  Almost all of our Presidents are hated by half or more of the US Population, then years later we look back on them with rose colored glasses. But still that high of a rating is unheard of in the US.

Now not everyone (I hear) loves Dilma, but I ran some stats on her, and she’s at a 72% approval rating as of January.  Employment is up, trade is up, and Brasil moved from 7th to 6th in GDP.  This is a growth economy.  So again, while people have their opinions, she seems to be doing okay.

Because I can’t be TOO pro Brasil, I will point out that there is still a lot that Dilma needs to take on politically.  For instance, the insane taxes.  I can always tell the Brasilians at the airport as they’re the ones with the carryons stuffed to the brim, and two 70lb suitcases.  Prices here are crazy high.

People still work like dogs here, other than the fact that they get like a month off for their Holiday, but the rest of the year they work HARD.  Crime is also a big issue, as I’ve noticed the whole pyramid scheme of employment seems to be big here. I.e the rich get richer, and the poor well they get a little less poor.  So the rich here are ever so rich, and the poor, well I’ve visited homes without toilet seats or formal showers.. and yes that’s normal, and no they were not in a favela.  Education is sadly still and issue here, and I think if that were to improve we would see a marked improvement in the living standards, crime, and salaries.  But Brasil is a huge area to manage, there are tons of severely rural towns, that we risk destroying rain forest by helping to “move into the current century” and provide running water etc., so it’s not an easy country to manage, and the solutions are not one size fits all.

And of course, again I’m just some random expat blogger, so in the end what do I really know?

The CPF

The CPF is your Brasilian fingerprint. The equivalent to a US Social Security number on steroids.

My husband had a CPF already from living in Brasil in the past, and I will need to obtain one. When I said this is a Social Security card on steroids, I was not slightly exaggerating.

Your CPF is linked to your credit history.  If you plan on opening a bank account. You need a CPF.  If you plan on getting a cell phone plan, you need a CPF.  In fact, if you are going to fill your car up with gas at the local gas station, you probably want to have your CPF.

Ok, so you don’t NEED your CPF to fill up with gas.  But get this little gem that the hubby imparted to me today (we find the whole Brasil tax situation very interesting), your CPF entitles you to tax refunds. There are plenty of posts on how to get one, and what a CPF is, and all of the boring mumbo jumbo.  I however found the whole “tax refund” CPF angle fascinating.

In Sao Paulo, your CPF is also like a credit card that pays you a percentage back at the end of the year based on what you purchased.

Being that Brasil is a pretty Socialist country (per my foreign observations), they like to legislate and tax everything.  Which of course leads to people trying to get out of the legislation and heavy taxes, which of course inevitably leads to more legislation.

Like any country private business owners are incentivized to show as little income as possible. You know how when you go into that mom and pop liquor mart and they only take cash, you know the REAL reason they’re only taking cash is because your purchase will most likely go unreported come tax time.  Well the state of Sao Paulo wanted to make sure they got every last Brasilian centavo, so they’ve incentivized buyers to legitimize the purchase… even if it’s a cash one.  When you buy anything the people at the check out counter ask you for a CPF (my Brasilian isn’t good enough to know what they say, just that I am to respond “nao”), and they in return report the purchase to your CPF history.  The government has proof of purchase, so they can tax the business owner.  For your part in this collection of taxes, you are entitled to a percentage back at the end of the year.

Crazy right??

Good things come to those who wait

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My husband has been rather frustrated with the length of time it has taken for him to be able to get his car.  First, just getting the money to buy the car has been quite a process. We made sure to sign up for an HSBC bank account while in Brasil, so we would be able to transfer our US money into Brasil with the least amount of “Bank Fees” withheld.  As HSBC is an international Bank, one would think that the first time you attempted to transfer money from your US account to your Brasil account it would be second nature to them.  It was not, and it took 3 hours for them to figure out how to do this.  Once you initiate the transfer, it then takes between three and five days for the money to be released.  I’m okay with this, as I understand you don’t want foreign drug money floating around your country.  If you are transferring a substantial amount ($15,000 R), you will then need to prove where the money came from.  Again, the drug money legitimacy.

Second, there is the irony of trying to find a car while not having a car – how do you get to all of the cars for sale?? The car I had found on internations was stick, and we didn’t want to deal with that.  So we found a leather interior Toyota for sale for R$40500 at a dealership.  It was a bit fancier than we wanted, but we figured we would be able to sell it for close to the same amount.  The keys to this beauty of a car unfortunately have not passed through my husbands hands.  Having the car today would have been nice as my husband started work today. It is necessary to pick me and the bub up on Saturday am.

Well the point of all this.

I got an email this week from Internations again, someone had a  Honda Fit – Automatic Transmission for only R$25000.  The honda is a better car for Sao Paulo, as well it’s not as flashy, it has a few dents, so we don’t have any worries about it getting any more scratches– kinda the same theory we held for our cars in LA.  As the seller is moving out of the country, we were able to completely go around HSBC Brasil, and transfer money from our account into their account. Poof! Instant transfer, amazing.

Now, if you DO ever buy a car from a private seller, you do want to go to the Federal Police and speak with a despachante.  You will need the registration number for the car and the sellers CPF.  This is free. When we did it we discovered there were R$2500 in parking tickets and back taxes unpaid.  This step is very important, as these type of fees are linked to the car, so should we are buying the car AND the unpaid fines. Crazy right?  You can also check for these fees online at the DETRAN.

Of Death and Taxes

So I cannot be employed while we live in Brasil.  Several reasons. 1 I don’t have a work permit. 2. Brasil taxes my husband on his international income of both him and his spouse. So any money I make (even as a Consultant in the US) he would be taxed on (heavily of course).  This is after we have already paid the US government.  Thankfully as an expat his company provides a tax accountant, and will take care of the whole tax issue of double taxing, etc.

The hubby says it seems that everyone’s favorite pastime is complaining about taxes .  As a country they certainly love to tax everything.  Most everyone knows all imports are taxed at ~40%.  This is what makes the cost of living in Brasil so high, and why I’m sure a good smuggling racket could pull in some good money.

We just learned about some of the other nuances of Brasil. You can see a break down of the various taxes that will come out of your check here.

A few interesting things my husband has encountered:

  1. Employees receive a debit card for $420R a month for lunch *not sure if this is just unique to his firm.
  2. All employees below Manager status get paid overtime – salary or not. *too bad my husband is a Manager now.
  3. All employees are REQUIRED to unionize.  So you lose 1 pay-day out of a month for dues.
  4. Brasilian law calls for a 13th month salary to be paid at the end of the year, plus the vacation bonus equal to 33.3% of the monthly salary.
  5. Employers deposit 8% of the employee’s monthly salary into an account that earns interest and is monetary corrected (FGTS). In the case of termination without proper cause, the employee gets the fund plus another 40% contributed by the employer.
  6. Transportation Vouchers are given out and there are other mandatory benefits.
  7. He gets 30 days of vacation ON TOP of all of the Brasilian Holidays.

In the end, our extreme fiscal conservaty is at odds with a country that is fairly socialist.

Currently, we are still waiting to get into our new apartment.  Paperwork still needs to be signed by our company to “guarantee” us with the landlord.  The landlord has us a sign a 30 month lease (legally required by Brasilian law), and he cannot kick us out.  We can cancel the lease of course after 12 months.

My hubby also needs to get some money in hand to pick up his car.  He again needs the company to help in getting him set up with a local bank account…. so yes we still don’t have a car, and we still don’t have an apartment.

However, here is the apartment we want.

Maybe we will finally be able to get it before the end of the year! Wish us luck.