For many Americans, retiring seems like it is becoming increasingly out of reach. We work later into our old age and Social Security benefits are often not enough to live off of. So some people interested in retiring have found a cheap solution: moving to Latin America. One place in particular, has been attracting retirees as of late—the small town of Cotacachi, Ecuador, not far from the country’s capital of Quito. The town’s population is split between mestizos (a mix of indigenous and European ancestry) and the Kichwa, an indigenous community that live on Cotacachi’s outskirts. But a growing subset of wealthy Americans buying large property is creating a stark visual and economic contrast in a relatively poor area. Reporter Dusty Christensen went to Cotacachi to find out how these new arrivals are enjoying their lives in Ecuador and how the indigenous community is dealing with the influx of outsiders.
Photo by Dusty Christensen
An iteresting piece that is on target in some respects, yet misses the mark widely in other respects. I guess that is a natural effect of coming into an area for a few days or weeks and doing a story. To see the varied and sometimes disparate aspects of the whole picture is an ongoing process. You can’t just breeze into town and say “now I’ve got it”.
I have spoken to Ecuadorian neighbors and friends down there about this very issue. This begs the question about what would happen if and when the expats and their money leave. And he doesn’t ask who sold all the overpriced land to expats. We know who most of them are. And I think only a handful made their money in the US and were thus contaminated. Unfortunately this is happening all over the world including in the US. It especially happens in tourist towns and boom towns…which I think Cotacachi could claim. I agree with Steve in that it’s a limited view of a complicated situation. I would think most people listening would have a knee jerk reaction of “ugly American strikes again!” In so many cases nothing is further from the truth.
As a long term resident of Cotacachi (9 years) the above story carries a misconception about expats driving up the price of land so that the indigenous or locals can not afford it. On the surface, this seems to be a reasonable explanation as to why land prices have been increasing. Having been involved in real estate here in the early years, I have a deeper perspecitive than most.
First, most expats here live in gated communities or condominiums. A very few, like me, have purchased small acreages. Why? Because it is not safe to live outside of a gated community. You cannot leave your property unattended. Hence, price of acreage has been little affected by expats. The indigenous could not afford to purchase the land before expats came and still cannot. Housing loans run around 12% interest, so most purchases must be cash. How is a person making $350 per month while supporting a large family going to save money to buy a property, no matter what the price?
The other thing to recognize is that for the past 9 years, President Correa has been on a spending binge, building roads, airports, schools and hospitals, on a national level, as well as on a local community level, while increasing minimum wage several times. All of this work pumped a huge amount of money into the economy, which in turn has resulted in generally higher property costs. Three years ago, it was not uncommon to walk around Cotacachi and see upwards of 15 buildings under construction at the same time, mostly Ecuadorian houses and retail buildings.
While his building spree is slowing since the fall of oil prices, Ecuador’s major source of revenue, it created a middle class that was non-existent prior to 2006. A case in point are the developments known as Tierra Firme 1 and 2 at the entrance to Cotacachi. These co-joined developments were created by an American who has lived in Ecuador for 28 years.
Tierra Firme I was started in 2007. With 25 half acre + lots, it took nearly 5 years to sell most of them to North Americans at an average price of $42,000. Tierre Firme II was started about a year and a half ago. With 35 lots of 1/3 acre selling at $45,000, the project sold out in 9 months. Only 2 lots were sold to expats. All of the other lots were sold to Ecuadorians from Quito, Ibarra and Otavalo. Why? Because the new road to Quito and the new airport has cut transportation time to Quito by at least an hour. The wealthier Ecuadorian middle class, who now have cars, can consider a two hour commute or less doable, where they would literally have to pay 10 times the price for a comparable lot around Quito.
Finally, the articles makes a point of “wealthy Americans” coming here buying large tracts of land. The fact is that most who come are retirees who can no longer afford the cost of living in the U.S. and they are not interested in large lots to take care of. Most are not wealthy by American standards. What the author failed to uncover in his quick trip into the countryside is that in the “luxury” condo development of Jahuapacha at least twelve of the twenty-four 1900 sq. ft. units remain unsold.
The real estate market for expats here peaked two to three years ago. A good rental market has been created and most of the people coming are choosing to rent instead of buy. Why? Because most of the first time buyers in developments have moved on and the houses are now occupied by second or third owners. The original buyers when they left frequently increased their asking price by 50 to 75%. The houses are now priced to high for retired expats to afford.
And new developments are few and far between. But the oldest expat development in town of 23 houses recently had 7 houses for sale. The problem is there are no buyers.
This story shows the vast disparity between a reporter parachuting into town for an all too brief few days and someone like Gary Phillips, who has seen the truth about Cotacachi, good and bad. In my all too brief few months living in Cotacachi I found an incredibly warm and friendly people who genuinely appreciated the money we spent in their stores and the work we provided. I met more wonderful friends than I’ve ever had in my entire life, many of whom give back to the community in so many ways, like the soup kitchen I enjoyed volunteerig at, the spay and neuter clinics, funding for local schools and so much more. The “ugly Ameican” chacterization is most inappropriate in Cotacachi. Yes, there are always those who refuse to learn the language or don’t get involved in the local culture, but they are in the minority in Cotacachi.
In one of her articles Wendy drew the comparion of life in Cotacachi to Mayberry, USA. So very true and simply delightful for those of us who’ve lived the good life in Cotacachi. Regardless of the “foreign” country you choose it is critical to make every effort to embrace the wonderful local culture, which Cotacachi provides in spades.
The Real Estate market in Cotacachi is no crazier than elsewhere in the world. I recall a story when I lived in Boquete, Panama where, upon learning that a rich Expat was coming to town looking to buy some land the vendor painted a one in front of the eighty thousand dollars previously shown on the For Sale sign, and it sold! My experience for many years in the Canadian market, although not quite as extreme, was, at times, just as crazy. It’s all about supply and demand and Ecuador is no different. It is a wonderful country, better than most, so people like me, who can no longer afford to live in their country of birth, will be drawn to the quality of life in places like Cotacachi.