Expats - a source of stable influx in local economy

Donations as influx

During the pandemic, I alone managed donations around 15,000$ in order to provide food to hospital and police (in the beginning), assemble staple food kits for the inner city (April/May) and the wandering Venezuelans on the Panamericana (June/July). And that’s just me, a friend was taking care of the communities around Cotacachi, another two of other parts of the Panamericana, one was giving free psychological help and workshops (the Centro Sin Miedo is still active and doing an amazing job: Click here for the latest update ) – they all received a lot of money and other donations.

Social Security as influx

That was just the donations. While in the rest of the country, everything stagnated and many businesses had to close permanently, most in Cotacachi survived – because of the influx of regular income. Every month, the average US-American Retiree receives around $1300. As a lot of those living in Cotacachi come here because they get less, let’s say the average here is around $1000. We have a fluctuation between 800 (summertime) and 1500 (wintertime) expats here, so let’s assume 1000. That’s 1 Mio. $ coming into our small town each month, lowballing. And most of that is spent here. In restaurants, bars, markets. On rent, basic needs, experiences, donations.

Gentrification?

Not many people take that into account. They complain about prices going up on land and rent, but that’s half-true – it does go up, but only in the sector that most Ecuadorians can’t afford anyway with their 470$ basic income, even if they make that much and have a job. After 5 years of drawdowns, that is not the norm. People get hired on a half-time contract, but have to work full time – if they get a contract at all.

Dependence

I digress. Sorry. Back to topic. The influx of money from the expat-community is important for our small town. I know, half of my bakery income depends on it (it used to be 100%, but our quality is winning over locals, step by step), and I know many businesses still depending almost entirely on expat-expenses. One of the reasons I diversified my income streams is just that – what if Social Security fails to deliver?

Diversification

Other people don’t have that privileged of a) being educated enough and b) having the possibilities diversify. The good news is that a lot of other businesses in Cotacachi depend on national tourism, being known as the “Leather City” – the main street is basically one leather shop next to the other. It reminds me of galenkp’s post about “Too much” – it’s the same products with insignificant changes, giving the illusion of variety. They did have a tough time during the pandemic, but won’t be affected by any expat related draw-down.

Conclusion

Starting a business in a town with many expats from a similar country can make things easier in the beginning. But if one does not convince the local market as well, the dependence can get too high, creating a further risk to be taken into account. Also, only because expats are there, doesn't mean it's a gold mine. The quality has to be better than the competition, marketing has to be good and most importantly - one has to be active in the community in several ways, not only as a salesperson. Like on HIVE - if you only extract without having a stake, it won't work well for you.