085 Financing options in Costa Rica and Offshore Banking
Luigi Wewege of Caye Bank in Belize chats to us about the financing and banking options available to Expats and Locals in Central America. We chat about the financing options available for Expats wanting to purchase a property in Costa Rica and how his bank can help.
In this episode, we talk about:
Banking in Central America
Financing options
What countries have the best opportunity for investors and why?
Contact us: info@investingcostarica.com
Book a free call with Jake (Investment and Real Estate Consultant) or with Ana (Relocation and Real Estate Consultant).
Podcast Transcription
[Richard Bexon]
Good morning, Luigi. How are you doing? Good. And you, mate? Thanks.
[Luigi Wewege]
Thanks so much for having me here.
[Richard Bexon]
No, it's my pleasure. I mean, we've had quite a few people from Panama on this, which I think is where you're currently based at the moment.
But I know that you're in the world of banking and, you know, I don't think we've actually had a banker on the podcast before. So it's an absolute pleasure to have our first one and also a South African banker that spent quite a bit of time in Panama and Belize.
[Luigi Wewege]
Indeed.
Thank you.
[Richard Bexon]
It's been, I mean, it's been a crazy two years, Luigi. I mean, I don't know how your business has been over the past two years, but I mean, what in the world has banking has surprised you?
[Luigi Wewege]
Well, I mean, a number of things, I guess, have surprised me.
You know, I guess there's no actual reference point. You know, I can't say anyone actually expected this, you know, so, you know, virtually everything was a surprise going forward. And let me first kind of start by going kind of micro then macro, you know, to explain from Keith's perspective in Belize, you know, I was quite surprised at how agile and how fast we could actually move as a bank.
You know, for example, we had several year plans for certain things, you know, which I think secretly some board members thought could even take longer than that. But, you know, because of the pandemic, we're literally implementing it in weeks, if not days. And, you know, from kind of a macro perspective, everyone was concerned, obviously, for their respective businesses.
You know, but what happened for offshore banking, you know, is that a number of people had wanted to actually open a bank account outside of their jurisdiction, but had not like finalized the process. You know, so then largely due to people saying that they didn't have the time to really do the paperwork. But now being under lockdown at home, you know, for in some cases, many months, you know, they now had the time and no excuse to actually make the bank account application.
You know, and added to that, you know, the pandemic also made people realize that maybe it was a really good time to get a second home overseas or another residency or passport. You know, that really, you know, sparked the interest in banking offshore over the last two years or so.
[Richard Bexon]
Yeah, no, definitely.
I mean, can you explain just a little bit like what your bank does and how it could potentially help, you know, basically expats living in Costa Rica or Central America?
[Luigi Wewege]
Yeah, I think, you know, let me first start with giving a bit of a background of Key and how it came into existence. Yeah. Yeah.
It first started as a mortgage company in 1996. And then in 2003 became a fully licensed bank. I think what the founders realized quite early on was that North Americans were coming to Ambergris Key Island in increasing numbers and they would come to the island, you know, have several margaritas and fall absolutely in love with the place.
[Richard Bexon]
As one does.
[Luigi Wewege]
Yeah, as one does Margarita Madness. And yeah, you know, they would then call their bank in the USA and ask for financing on a Belizean condo, which the American banker would invariably like and say that was a complete no go.
You know, then they would walk into a local, you know, like Belizean bank and ask for a mortgage, which they would then be told, you know, you're not a Belizean citizen or resident, you know, you can't get help at all. You know, and that's essentially how Key came into existence. You know, we're able to help these people finance their dream apartment or house in Belize.
So, you know, we help expats in the region. Not just from a financing perspective, you know, but for example, you're constructing a second home in Central America and finding it difficult to facilitate wires for certain payments in the region from, say, your bank in North America. You could instead then open an account at Key in Belize, which can facilitate your international wire payments throughout the region for you.
[Richard Bexon]
Yeah. And I mean, it's pretty simple to wire money around Central America. I mean, do you guys have difficulty receiving money from North America or is it a pretty simple process when people want to send money?
[Luigi Wewege]
No, quite a simple process.
So we actually have two solid correspondent banks in Puerto Rico that utilize a correspondent in Colorado. So many times when people are actually making that wire transfer, it's actually domestic transfer for them. So it doesn't actually leave the confines of the financial system.
Yeah. So it's quite quick and quite efficient.
[Richard Bexon]
Yeah.
I mean, I'm just thinking about it here. I mean, anyone that's in Central America that's looking for a bank account could open the account with you guys. They could easily transfer funds in and then use.
I mean, I'm sure it comes with some form of debit card. You guys also do credit cards, debit cards. We're working on a credit card solution.
But yeah, you know, think of it like, you know, so the US financial system is like a six lane highway. It works. You know, money zips in and out.
It works pretty well. When those US dollars flow outside of the US financial system, it kind of essentially becomes a gravel road. And so, you know, that's that and so having kind of an international bank that's been doing this for many, many years helps, you know, could potentially help your business offshore or if you're trying to construct a home just to be able to make those payments without hassle.
[Richard Bexon]
Yeah. Well, I mean, I know here in Costa Rica, sometimes it could be a nightmare to receive money. I mean, I've had money sent from the US to my bank here, you know, and they basically want to know your shoe size.
So, yeah, I mean, I think once stuff falls under kind of more of a Central American jurisdiction, things are a little bit more lenient. I'm very aware of that, having transferred money between Panama and Costa Rica before. But I mean, you mentioned there about financing.
I mean, would you look at financing anybody here that's looking to buy a property here in Costa Rica? What do those terms look like? How much do you like? Could you just give us a rough idea of what that looks like so that anybody listening here that would be interested could reach out to you?
[Luigi Wewege]
Yeah, no, we must certainly do. You know, in fact, Costa Rica is one of our focus countries, you know, along with Belize, Nicaragua and Panama. So generally, you're looking at a loan to value of 50 percent interest rates of anywhere from six to 11 percent.
You know, the bank does have a sister company which is involved in these four countries I've just listed. Yeah. And for those properties, we can offer slightly different LTVs and interest rates.
But we certainly do. We feel like, you know, besides Belize, Costa Rica, Nicaragua and Panama, we understand we have people on the ground that can assess, you know, certain land property and be able to tell us exactly, you know, what this what this potential financing is for, what it's worth.
[Richard Bexon]
Well, I think this is a great option for anybody that's looking because I also often get asked, hey, are there any financing options available here in Costa Rica? And, you know, for me, I would say from an institution like a bank here directly here in Costa Rica, I think it's very similar to what you were talking about there when, you know, North Americans would come down, have a few margaritas, want to buy a condo, go to a local bank.
The bank would basically be like, no, if you're not a resident or a citizen, you can't. And then North America would laugh at you. So this is a great option for anyone because, again, it's the same in Costa Rica.
You know, the banks are not going to lend to, you know, foreigners that aren't residents or citizens here. But also sometimes private lending here can be in excess of 15, 20 percent. So, I mean, while six to 11 may be slightly higher than what rates they're getting in the US, I mean, as I say, there's a cost to paradise, dude.
You know, so exactly. So, I mean, your wife, your wife works for a law firm in Panama. I mean, why do you think that people look to Panama to open bank accounts and also have corporations down there?
[Luigi Wewege]
Well, you know, I've started to notice people becoming a bit more multijurisdictional and focused on rates.
And, you know, and what I mean by that is, say, say someone lives in Canada, they're then incorporating a company in Panama with a Belize corporate bank account that's, you know, say in US dollars or euros. You know, so what they've actually done there is kind of an asset protection risk diversification play in that, for example, say between Panama and Belize, that there's now two different jurisdictions, two different legal systems being common in civil law and two different languages. So then, you know, due to this person coming from a jurisdiction, like I just mentioned, Canada, which uses Canadian dollars, but now he has an account in US dollars or euros.
So you've kind of split your risk across a couple of things there. So, you know, I believe you've covered this previously in your podcast, but you know why people also tend to incorporate companies if you have a Belizean property, you can place that title in a Panamanian company. So, you know, if someone trips and falls and breaks their leg when they rent in your Airbnb, it becomes a much more difficult process for them to attempt any legal action against you.
You know, also, you know, many people incorporate to hold their property title and incorporation so that if you sell it one day, all they need to do is transfer the shares of the company to the new owner. So I mean, also touching on your previous question, you know, also financing with us, it's fairly easy in the sense where, you know, obviously you incorporate a company, you know, the bank obviously owns the company with the title in it. But once you pay the financing, we transfer the shares to you and off you go with your property.
[Richard Bexon]
I mean, that's pretty standard. I mean, I love the idea of having a Panama corporation own, you know, a property that's not in Panama as well. I think it just again, as you mentioned, that kind of separates liability a little bit there, especially as you're using it as a rental, because, you know, I mean, in the U.S people love litigation.
I mean, it's a little bit more difficult down here in Central America. It's possible, but you better have a lot of time on your hands.
[Luigi Wewege]
Yeah, I'm not saying that it's going to completely, you know, if something happens, it's going to completely shield you.
It just makes the person essentially coming after you think twice whether they want to get two sets of lawyers in Belize and Panama, for example, to start going after you with two different languages, two different legal systems, et cetera. It's definitely going to be very different cultures, two different cultures. And, yeah, and two very different ways of going through the court system.
So, you know, you have to be essentially really motivated at that point to go after that individual.
[Richard Bexon]
Who has the best beer, Belize or Panama?
[Richard Bexon]
Ah, they're pretty close. I mean, you know, Belize has Belican.
It's actually a fantastic beer. They've got several, you know, all the way to kind of like a Guinness type beer, which is actually really good. Panama's Balboa actually reminds me a lot of South Africa's Black Label.
They're actually both pretty, pretty good beers.
[Richard Bexon]
Which one's cheaper? I've never been to Belize, if you can believe it, if you can believe it. Sorry, I had to get it out there.
I had to get it out.
[Luigi Wewege]
Yeah, no, I'd say possibly Belize is a little bit cheaper. Yeah.
Yeah. But I mean, it's not far off because obviously Panama with US dollars and then Belize with Belize dollars, but it's pegged to the US dollar two to one. So it's not like it's dealing with pesos or anything.
With the devaluation. And yes, it's not. They're not that far off.
[Richard Bexon]
I mean, of all the Central American countries, it sounds like you've got quite a bit of experience in them. I mean, which of the countries do you think has the best opportunity for investors and why?
[Luigi Wewege]
Well, I mean, so, you know, before answering that, you've just acknowledged you've never been to Belize. I actually want to say that I have actually been to Costa Rica and it was actually one of the best experiences of my life.
One day I went to watch water rafting down the Pajaro River. Pajaro River, yeah. Yeah, it was an unbelievable experience.
And then that, you know, that evening I had dinner at one of the highest points of San Jose, you know, overlooking the city. It was just an incredible day. It's like something I'd never forget.
So I just, you know, wanted to also acknowledge being in Costa Rica. But, you know, sorry, I digress, you know, from an investor perspective, you know, I'd say it all depends on your risk tolerance and what you're hoping to achieve. You know, Costa Rica is considered one of the most developed countries in the region, you know, with fairly solid infrastructure.
So, you know, Belize, for example, is, you know, relatively new country in the sense where, you know, independence in late 1981, you know, and still developing. So when you're still developing, it provides many more kinds of investor opportunities. And then, you know, Panama, on the other hand, you know, an entirely different prospect, you know, US dollars as the main currency.
It has the canal, which, you know, a substantial amount of revenue gets generated from. So that's actually allowed the government to turn Panama City into a first world city. So, you know, but with this development that equates to Panama being at a different price point than the other jurisdictions in the region.
So it's just it really all depends on, you know, the investments and what the investor hopes to achieve. You know, that will kind of guide them to identify which country in Central America I think is right for them.
[Richard Bexon]
So do you spend most of your time in Panama or most of your time in Belize or bouncing between the two?
[Luigi Wewege]
I'm bouncing a little bit, you know, so obviously, like you mentioned, I live in Panama, you know, due to my wife being a partner in a law firm here.
You know, although I fly to Belize fairly often, it actually works out quite well because she'll often fly with me. She loves the island. She really enjoys being out on the boat there and fishing.
And we actually met on Anbergerski Island, which is famously known by that Madonna song La Isla Bonita.
[Richard Bexon]
Wow. I mean, let's talk about Panama a little bit. I mean, what do you like and what do you dislike about it?
[Luigi Wewege]
Well, I mean, what I like about Panama is, as I mentioned before, you know, the infrastructure and, you know, it's essentially a first world city.
Tucumán, which is the main international airport, is essentially a hub for the region. And so a lot of international flights in Latin America would fly in and connect through Panama. You know, this makes traveling to other countries a lot easier in the region due to almost always being able to get a direct flight from Tucumán.
And, you know, so if you're trying to get to, you know, Cusco or Lima or Santiago, you know, you're going to head to Panama City first, connect to another flight and then, you know, be directed to your destination. So that's obviously quite a big positive for me. You know, I travel fairly often.
And, you know, another positive, I would say, is also the safety of the place. You know, you almost find no petty crime incidents within the confines of the city. You know, I guess another positive is the U.S. dollar.
I mean, that brings stability. You know, but at the same time, it's saying that you like it does essentially lead to a dislike because, you know, often I receive a comment from people that, you know, they were expecting for the U.S. dollars to go a lot further here. But we're quite shocked when, you know, certain items were much, much more expensive here than in the USA.
[Richard Bexon]
Yeah. Yeah. I mean, I think that's the one thing that shocks a lot of people is they're just expecting Central America.
You know, I mean, Costa Rica, Panama, Belize, Nicaragua. I mean, Nicaragua is a lot cheaper, of course, than probably any of the countries. But, you know, they were expecting, you know, it to be cheap.
And comparatively to the U.S., it's not. But I mean, there are certain things that we don't pay for here. Like we don't have winter.
So we don't have heating. You know, I mean, I think, you know, in Panama, you guys need the A.C. just because, you know, it's kind of very hot and humid down there here in San Jose and the city. You know, we're, you know, 3000 feet above sea level here.
You know, it's 65 Fahrenheit at night and 85 during the day all year round. So we don't need A.C. here. So you don't have that bill.
[Luigi Wewege]
You know, and there's certain trade-offs that I completely understand. Like, you know, obviously in Panama, yes, I just said it's expensive with certain items. But then on the other hand, like, you know, getting an Uber Black from, you know, the city to the old city.
I mean, that's five dollars in Milan or Miami. That's 50. You know, you have the opportunity to have, you know, like maids help with the house that cost a fraction of what they would cost stateside.
So that, you know, you just have to weigh up, you know, what do you need?
[Richard Bexon]
Essentially, it's a great standard of living down here in Costa Rica. Yeah. You know, well, down here in Central America.
I mean, I know Panama, you know, I've spent quite a bit of time down there. And, you know, Panama City is first world, as you mentioned there. It's got first world restaurants, roads, cars, infrastructure, everything.
I always like to refer to it as mini Miami.
[Luigi Wewege]
Yes, I mean, it's a fantastic place. I mean, literally any type of food that you want.
There's a restaurant, you know, from Mongolian to Vietnamese, you name it. They are an hour from Panama City. You've got beautiful beaches.
Yeah. So basically you go an hour left to Coronado or an hour up right to Alvare, you know, beautiful mountains. It really does have, you know, quite a few things going for it.
And as you know, as I mentioned, you know, they're kind of blessed with having the Panama Canal, which generates huge amounts of revenue for the country. So they, you know, are not too concerned. Like, for example, in other jurisdictions, you break your taillights in your car, you get pulled over, you get fined immediately.
There's not really that necessity from, you know, other other departments or institutions to really tax the citizens or to really come after them for small infractions, because they are blessed with having that huge amount of revenue that comes through year upon year from the canal.
[Richard Bexon]
Well, my last question, I love to ask everyone, if you inherited five hundred thousand dollars and had to invest it in business or real estate in Central America, Luigi, what would you do with it and why?
[Luigi Wewege]
I'd go. I'd go to real estate.
Business can be sometimes a bit challenging in the sense where these administrations change and often they change from left to right and right to left. So you're not quite sure. You know, it's different to other countries where you, you know, can get a second term.
How you don't you get five years and then you go on top of things. So it makes it, you know, planning a bit difficult. So for me, I'd say it would likely be real estate.
So, you know, in either Belize, Costa Rica, Nicaragua, Panama. And why I say that is I'm seeing, you know, a large interest from North Americans in these jurisdictions for property. You know, it's interest driven primarily by, you know, retirees who are realizing that the retirement that they thought they would receive instead of the USA or Canada is just no longer obtainable.
So instead, they're now looking south to be able to get that retirement that they dreamed of. Yeah. And so this interest has actually led to, you know, quite low amounts of property inventory in these four jurisdictions.
You know, so I would say, you know, half a million in either purchasing, say, an apartment or home or half a million investing in a development in these four countries. Yeah, I believe it would be quite a solid investment. You know, for example, on the Bergersky Island in Belize, just in the last five years, I've seen, you know, certain developments have had their apartments, their condos and even home valuations double, you know, if not triple in price from what they originally bought in that.
[Richard Bexon]
Yeah. No, no. I mean, it's pretty crazy.
I mean, I don't think we've seen that craziness in some areas of Costa Rica. Not so many kinds all over the country, but especially in the northern Guanacaste area, Nosara and Santa Teresa have just gone insane, you know? Yeah. But yeah.
But Luigi, this has been great. I really appreciate you coming on the podcast. I'm going to put all of your details in the description down below.
So I think anybody that wants to reach out to you guys at the bank or you personally, I'll leave the details there. And I really, really appreciate you coming on the podcast, sir. Oh, fantastic.
Thanks, Rich. Thanks, mate. I really appreciate it.
And yeah, look forward to welcoming you down to Panama and actually Belize for the first time. That'll be fantastic to have you over there.
[Richard Bexon]
Yeah, I've got to get up there.
I think I owe my wife a trip anyway. I've been working like a madman, so I'll take her up to Belize. Awesome.
Well, I mean, the second largest barrier reef in the world. You know, it's it's it's, you know, lots of sea and do jungles, you know, snorkeling, you name it. So there's a lot of things to see and do. Yeah.
[Richard Bexon]
Sounds beautiful. All right.
[Luigi Wewege]
Thanks, Rich.
[Richard Bexon]
Bye.
Ready to start your investing journey? Contact us now.
Webinar May 2024
Costa Rica Construction & Building
Erick Corrales, Director of Engineering and Construction, explains the steps involved in building a property in Costa Rica and what you need to consider to have an efficient and happy build.
Contact us: info@investingcostarica.com
Book a free call with Jake (Investment and Real Estate Consultant) or with Ana (Relocation and Real Estate Consultant).
Webinar June 2024
Today, we discuss the process of choosing an architect, designing a home, and the questions / red flags you should ask and be aware of when working with an architect in Costa Rica.
Book a free call with Jake (Investment and Real Estate Consultant) or with Ana (Relocation and Real Estate Consultant).
Contact us at info@investingcostarica.com
Webinar July 2024
Alex Stripe, Chief Inspector of Stripe SAignature Inspections here in Costa Rica, discusses how home inspections are different here in Costa Rica, common issues, questions to ask and why it's important to get one here in Costa Rica.
Book a free call with Jake (Investment and Real Estate Consultant) or with Ana (Relocation and Real Estate Consultant).