We're here today with Bernard Jarvis, a former US-based animator and entrepreneur who ditched the “American Dream” with his sailboat and laptop for the shores of laid-back Uruguay.
International Man: Tell us about your background and how you ended up in Uruguay.
Bernard Jarvis: I started my career in traditional animation in Chicago; my staple was breakfast cereal commercials. Pretty much all the Chicago studios were devoted to cereal commercials. Then it all suddenly dried up, most of it consolidated in California or offshored to Korea. I moved on to video games, and stayed there for 7 years until I became tired of being laid off after every project.
After a particularly ugly and unexpected layoff in which the whole studio was shut down (during which was the first and only time any project I had been involved with was ahead of schedule and under budget), I had considered changing careers, but my options were limited by the telecom/dot-bomb recession. My IT skills were a dime a dozen: living in the Research Triangle Park in North Carolina among thousands of other IT layoffs would not help me.
Software of any kind is a fickle industry. Fortunately everyone seems to know everyone and it is easy to find a new job through friends and colleagues. Unfortunately, all video game and animation connections led to California, where I refused to go.
The constant relocation and stress of knowing your next paycheck may be your last got me not only to be a prudent saver and educated investor, but also thinking that maybe I should take my severance pay from my most recent executioner (one of the largest toy makers in the world), and use it to build an adult website.
During my “mainstream” career I had been building a fan base on the side in the small-press comic community and had a very successful public website where I posted pin-up art, sketches, etc. I turned it into a paysite, and within a month of its opening it was matching my biweekly paychecks.
In the meantime I took a job at a local startup game studio made possible by refugees in my same situation. I didn't want it, but it was better than relocating to California and better than living in a cardboard box (which is probably all I would have been able to afford in California even if I followed the job market). It took me another three years to cut the 9-5 umbilical cord but eventually I took the leap and never looked back.
Those three years were used to aggressively save, pay off all my debts, and buy and outfit a sailboat onto which I moved. I was able to cut all ties to the homeland if need be, and lived completely off-the-grid. The motivation to do this grew from experiences I had with the US court system (having my rights trampled by the federal court system in favor of basement-dwelling software pirates), homeowners' associations (anyone with experience in this vile hive of scum and villainy needs no explanation), and various and sundry things the government began doing after September 11, 2001.
At the time, I was proud to be an American, the future looked bright, I was doing well with my small business, and had few cares in the world. But in the process of becoming more and more independent, I began to see the true nature of human beings, especially those organized into governmental structures, and the damage they are capable of when they incite the power of the mob.
When 100% of your savings is confiscated on April 15th (i.e. when everything you save in a year goes to pay taxes), when you basically write that check to someone else so they can buy a shiny new car you will never gain the use of, or buy food for crack heads, or buy shiny missiles to wage war or occupation on some far-off place, you start to question what is going on. Milton Friedman was a smart guy but he unleashed a dreadful evil on the American people when he gave the IRS the idea of withholding. You never feel the pain as an employee but you sure do as a business owner paying annually.
Then when you need to use the court system to protect your business, you expect it to work in your favor when you are doing nothing wrong. But it doesn't always go your way, especially if you run an adult business. It's a system of double standards, or, as poor Thomas Ball stated, “a second set of books.”
Watching your government wage a war “for freedom” but making you less free in the process, well, that makes you lose more faith. You can probably see where I am going here.
In the end, you pretty much have to resort to protecting and supporting yourself. When the chips are down, the government is going to act in its own self-interest. The fact that you are a taxpayer be damned. That self interest and yours are more often than not mutually exclusive. It is for this reason that I found myself least uncomfortable in the company of libertarians and anarcho-capitalists.
To make a long story short, I got rid of anything I couldn't fit on the boat, and I offshored myself within my own country. I made my business as portable as I could; after equipping myself with cellular and satellite internet (very slow and expensive at the time) I was good to go. Boats do not and can not have a physical address, especially if they are anchored (i.e. a boat at a marina can still have an address, but waterways and outside channels are considered legal no-mans’-land.) As many things in US society still demand a physical address, I was able to find a mail forwarding service with boaters/RVers in mind, located in Florida. As an added bonus I now became a resident of a state with no income tax. This was a microcosm of what was to come in the future on an international scale.
I met my wife early in my vagabond phase; basically we had both dropped out of the American Dream at the same time. She also had a successful business but it was tied to location. We both had the travel bug but had to engage it seasonally during her time off. I encouraged her to get her business to a point where she could manage it completely over the internet, freeing her up for travel internationally, and she did so.
During our travels and the ongoing downward trajectory of the United States Government, we decided that we really wanted to have second passports and alternative residency. We toured a great number of countries but it came down to a split between Argentina and Uruguay. In the end Uruguay won because it has an easier, more straightforward process, and doesn't suffer from the raw idiocy Argentina seems to flare up with every 10 years.
Eventually I offshored my business, both out of want and of necessity. My credit card company issued new regulations, which basically made it impossible for me to continue as a US merchant under their flag. They did not have the same regulations under their EU flag, so my business had to become European. Other colleagues in the same type of business did not fare so well, and chose either defeat or a change of their website content or business plan (meaning significant financial loss) in order to eke out a few dollars through Don Visa.
IM: In a previous discussion, you mentioned, in addition to your other business activities, you were looking at setting up a forestry business in Uruguay. What is it like starting a company in that country in contrast to running one in the US?
BJ: Actually, I ended up not incorporating my forestry enterprise in Uruguay as it is more tax-advantageous for small forestry operations to run under your personal name. Had I incorporated, I would be subject to numerous corporate taxes and fees during the growth cycle, in addition to capital gains after harvest. As a “small farmer” I only pay BPS (social security) taxes on the land ownership, and IMEBA (which is an agricultural products transfer tax), which comes to a fraction of a percent worth of income tax on the harvest.
IM: Why did you choose the forestry business?
BJ: Botnia is presently the only pulp mill in Uruguay. Montes del Plata is under construction now, and there are others in negotiation. Botnia has its own forests but nowhere near enough to supply 100% of its productive capacity. Other mills coming in will take away some of Botnia's feedstock, as well as provide better regional destinations for the cut logs. By the time the trees are mature, there could be 3 or more pulp mills in Uruguay. Also, Argentina might pull its head out of its a** by then and allow importation of pulp logs from Uruguay (they are still sore losers over their failed environmental case against Botnia).
Sovereign debt is out of control on a global basis. Commodities will never reach zero and are the best bet, in my opinion, to hold investment value. As it is, the price per cubic meter of eucalyptus pulp wood has doubled from the last year. Governments are growing, and obviously they will need lots of paper . Trees require little supervision and financial input, and they don't have an optimal expiration date like cattle or other livestock. If the weather is bad they will make it through without dying. If the market sucks when the trees are mature, you just leave them there and they keep growing. Barring forest fire or plague, there isn't much that can happen to trees. You just have to be very patient on the investment's maturity.
IM: What are some of the biggest challenges in trying to run a company in Uruguay?
BJ: I've done a variety of small enterprise experiments: software, biodiesel, property investment, vehicle importation. All of them, save for the biodiesel (which I do 100% on my own) run into a universal problem: reliability of people. Uruguayans are definitely the most unreliable people I have ever encountered. They never return phone calls and never show up on time. Sometimes they show up on the wrong day. That wreaks havoc on scheduling.
They also have a hard time drawing a line between friend and employer. They see no distinction, really. When I am at work, I am in work mode. It is not the same as in friend mode. When Uruguayans are at work, they are still in friend mode. They do not understand how you can become angry with them if they are slacking or not doing something right. “Hey, we're friends right? Friends let things slide, right?”
Over time this becomes a cancer on the business relationship; employees see you more as a forgiving family member than an employer. American businesspeople strike me as typically very generous, and this is taken advantage of readily by Uruguayans. The relationship will eventually sour.
Friends are friends. Business is business. Friends contaminate business. Therefore Uruguayans tend to make terrible employees. I love them as friends. I just wouldn't hire another one unless I had no other choice.
Another thing that they tend to do in business is try to wedge the friend mode in at the beginning of a business transaction or relationship. They will insist that the first task is free, on them, thereby indebting you to their future friendly requests. Even if you insist on paying them for their time put in, they will refuse. This “bargaining chip” will always be played to their advantage in the future, as an excuse for them to engage Friend Mode — “But I did that for free when we first met!” For this reason I now refuse to work with anyone who uses this tactic.
The other major challenge is access to proper equipment. Uruguay taxes the hell out of all forms of capital. There is a well-entrenched mafia controlling imports. As a result, the pickings are slim. Sad, anemic, ancient tractors are about all we can afford, vehicles are similar. There are some substitutes coming in from China recently but nothing that seems like it would last. Pretty much your equipment costs will be double or triple what they would be elsewhere. The long-term cost of ownership of property is low enough to make it worth doing, but the startup costs hurt.
Importation: forget it. The biggest threat and detriment to Uruguay's progress toward anything good and efficient is Aduanas (customs). They are the most bloated, inefficient, hard-headed, moronic, wasteful bunch of deadbeat knuckle-dragging mouthbreathers from the shallow end of the gene pool I have ever encountered in all my travels. The motorcycle I tried to import back in July 2009 is still locked up in a warehouse, awaiting inspection. I had fantasized about setting up a business to import this particular model and a shop to customize them. Add that dream to the overflowing trash bin.
I suppose this is a good time to introduce the “noqui” (local spelling of gnocchi, the potato-based pasta). Noqui is traditionally eaten on the 29th of every month, and has additional traditions attached to it. The whole family gathers together to eat noquis, and a coin placed beneath the plate is supposed to bring you fortune. The noqui only comes out to be seen on the 29th of the month.
The term is also used to verbally degrade useless and superfluous government “functionaries,” payroll ghosts and zombies: bureaucrats who only want job security but don't feel like performing said job, the guy in the customs office who tries to make himself look busy by taking one paper from his briefcase, putting it on his desk, walking over to another co-worker's desk, looking at a few papers, then going back to his own desk, putting the paper back in the briefcase, waiting a few moments, and then repeating the whole process (yes, I watched this behavior in detail). The original meaning was for people like elevator supervisors for one-story buildings, favor jobs for relatives, people who never had to even make themselves seen, except on the 29th of the month, when, like the pasta, they show up in order to collect their government paychecks.
Noqui lifestyle has invaded all aspects of the Uruguayan bureaucracy, which I can really only compare to the Vogon Constructor Fleet in The Hitchhiker's Guide to the Galaxy. At least the Vogons allowed enough movement to have a space program. Uruguay I do not hold such high hopes for.
Local friends tell me it was never like this before, and is a result of Frente Amplio (the socialist political group) gaining majority and flooding the system with their brainless sycophants. I don't know, as I arrived after the Frentistas took hold. But I observe things becoming much more complicated, the residency process in particular.
IM: What are some of the biggest benefits of running a business in Uruguay?
BJ: There are some things that are completely unregulated. For example, I can go into the drogueria [pharmacy] and pay in cash for all the chemicals and lab equipment I need for my biodiesel projects, they load them into my truck, and I drive away. No ID, no paperwork, nothing but cash in hand and a receipt if you ask for it. Stuff that would make any geek with an Anarchist's Cookbook drool. Stuff that would prompt visits by the ATF, FBI, DEA, and other acronym agencies in the USA. I am surprised that Uruguay is not overrun with meth labs.
There is little to no bureaucratic involvement in agricultural projects (at least on a small-business level), on start-up or oversight, especially if the end product remains in-country. Unless you are a giant multinational (or large landowner with more than 2000 hectares) Uruguay has little interest in stomping on you. Just don't plan on getting that big.
Uruguay has made businesses that export software tax-exempt. Good news for software/internet/web developers.
If you have a business where you can get the raw materials locally and do all the work yourself, not needing to rely on anyone anywhere in the supply chain, and you don't mind the heavy initial capital investments, you can indeed set up a decent operation in Uruguay. The small local market may limit you so you may want to make sure you have clients in places to which you can export. This is another reason why Uruguay makes a lot of sense for web-heads like us; there is no supply chain, employees are wherever in the world we need them to be, and there is nobody to get in our way… yet.
IM: Earlier you mentioned a few of your “enterprise experiments”… How many businesses do you currently run? Is your adult business still the main moneymaker or are your other projects bringing home the bacon now?
BJ: The adult business is the main moneymaker. I've honed it into a finely tuned machine and been careful to hire excellent people, so that it practically runs itself, provides for their and my survival, and plants seed capital for other projects.
Our real estate investments here need a little more finishing before they are completely rentable, but I foresee that happening this year and then money will start coming in. Reliable property management staff will be an issue. We've had “adventures” dealing with them as renters already. Things like the manager's gardeners leaving the sprinkler system on for weeks while we were away, trying to blame us for it, and sticking the owners with the $900 water bill.
I should point out that water is generally extremely cheap in Uruguay. Our Montevideo water bill has never exceeded 300 pesos – about $15 – for 2 people taking daily baths, doing laundry, etc. Even in Punta Del Este where the water is more expensive, we watered 1000 square meters [almost 11,000 square feet] of fresh sod daily for 3 weeks and our bill was $100. So for a water bill to reach $900 here requires some seriously powerful idiocy.
There is no such thing as honorable accountability in Uruguayan business transactions.
Further expanding on that, here's a story for you about what you get in exchange for customer loyalty: We installed a new air conditioner last summer in our Montevideo apartment. The price was reasonable. We contacted the same company a few months later, to install three air conditioners (two of the three identical to the first), and we were quoted $400 more for each one. When I asked why the higher price, explaining I was a repeat customer and stating the price I paid for the first air conditioner, the representative became irritated and cut off all further communication. I have yet to hear back from them.
This is a common theme you encounter: lack of customer service, no repeat business loyalty, and places will downright ignore your requests for their business. Why advertise your services if you are not going to answer the phone, or not call back on messages left on your voicemail? We recently held a housewarming party for which we wanted to hire a caterer to provide food, tables, chairs, lights, etc. They could have made quite a few pesos. Instead, not one of the seven or so places we contacted did so much as return our phone calls or emails. This is not in some podunk location, this is in Punta Del Este, party city, in March, when the weather is still nice and the tourist season is winding down. So we did the whole thing ourselves. Still enjoyable, but lots more work. It just reinforces the “if you want things done right, or done at all, you do them yourself” aspect to life here.
The biodiesel is profitable in the sense that it saves me significant amounts of money: 6 pesos per liter for biodiesel, or roughly 32 cents, vs the retail 32 pesos per liter, which is $1.73; it is the price difference between paying $1.21/gal and $6.57/gal. It keeps my fuel needs met, and it keeps that money out of the tax man's hands. It is easily scalable and automatable, where I can increase volume to actually sell my surplus and decrease the amount of time I spend working on it. Plus it is an enjoyable hobby that lets me play with deadly chemicals and create something usable, instead of just burning things or blowing stuff up.
I cut my losses on the software project even though I ended up with a passable final product; it just wasn't worth it to me to continue refining it with the local employment mentality. Some here have succeeded in software, but many more have failed.
The forestry won't see a return for seven to ten years but I am confident it will be well worth it.
The motorcycle importation project I have abandoned. I assume my motorcycle will remain in its crate for all eternity, like the Ark of the Covenant at the end of the first Indiana Jones movie. If it manages to get out, great, I will have a sweet ride, but I have emotionally catalogued it as MIA and had my brief mourning period.
I am considering an automated mail answering/forwarding/bill-pay service here as there are a lot of absentee foreign property owners. As that will require non-me labor, I am hesitant. Maybe I can hire gringos. But I presently have too many plates spinning. I'll start spinning this plate once I've removed a few others.
IM: What are some of the lessons learned that you could pass onto our readers — both specific to UY but also to Westerners in general who try to set up business overseas?
BJ: Foolproof your business by eliminating all the existing fools and potential fools, not only in your employ but in your business relationships. Use the 80/20 rule in order to maximize your profitable time (20% of your customers take up 80% of your time; eliminate them or change them into customers who take only 20% of your time). Make your business as mobile as it can be. Your office should be able to be packed up on a moment's notice (or a whim) and be able to be set up anywhere. Not only will this allow you to travel and expose yourself to more opportunities, but it will also make your work more enjoyable when you can do it from a tiki hut on the beach.
IM: Any other words of advice you could offer to people thinking about taking the leap and becoming a “global citizen”?
BJ: Know that the rest of the world typically makes it harder for anyone to start a business, so start it in your home country first where you know the field and have home-court advantage. And then, try to either make it mobile or make a branch office work in your new country of residency first before taking the leap. Had I started in Uruguay, I honestly believe I might have become disenfranchised, thrown my hands up and joined the mob of whining zombies. Fortunately I was blessed by the genetic lottery and grew up in a country that encouraged entrepreneurship (even though that country is now dead, it remains better than most in that aspect).
IM: A perfect way to wrap up our interview. Thank you, Bernard, for your time.