As I sit here in the dim glow of my laptop’s screen, typing away in the darkness, I’m reminded once again of the unique challenges of living in Ecuador. The country’s recent struggle with electricity shortages has become a frustratingly familiar part of daily life, casting a literal shadow over our routines and productivity. But amidst the flickering lights and uncertain power supply, there is a deeper narrative of resilience and adaptation in the face of adversity.
Electricity Woes
Ecuador’s heavy reliance on hydrogenated electricity makes it particularly vulnerable to fluctuations in rainfall, a vulnerability exacerbated by the recent El Niño / La Niña phenomenon and the looming specter of climate change. As rain patterns become increasingly unpredictable, the country’s power grid becomes unstable, with rolling blackouts becoming an all-too-common occurrence.
The root causes of these blackouts extend beyond the weather and climate; exposing some deeper issues of governance and infrastructure. Government mismanagement, and whispers of corruption and sabotage, have only served to exacerbate an already precarious situation.
Electricity retailers, such as CentroSur in Cuenca, are left with mandates to decrease electricity supply. This leads to “scheduled” rolling blackouts. How many hours of the day you’ll be without power will come down to which part of the city you reside. However, the schedules are really best used as a guide as to what may happen, with residents shouldering the uncertainty.
To mitigate the impact of these blackouts, many residents have turned to Uninterruptible Power Supplies (UPS) as a lifeline in times of darkness. These devices provide backup power to essential devices such as routers and modems. Apartment buildings constructed in the last 15 years often include backup generators, powering common items such as elevators, and private apartments. YapaTree Properties rental team has experienced a recent increase in demand for such apartments.
However, the ripple effects of these blackouts extend far beyond mere inconvenience. Supermarkets struggle to process payments as credit card systems falter, while broken water pipes serve as a stark reminder of the interconnectedness of our infrastructure. In a city where even the most mundane tasks are tinged with uncertainty, adaptability becomes not just a virtue but a necessity.
In addition to grappling with electricity woes, expats in Ecuador can also find themselves struggling to make heads and tails of their tax obligations. The question of whether expats are required to pay taxes on their worldwide income, including pensions, has long been a source of confusion.
The lack of clarity from the Ecuadorian tax authority (SRI) has only served to fuel the flames of uncertainty, leading to conflicting interpretations and unnecessary panic among expat communities.
Living with this ambiguity can be unsettling for expats, particularly for those accustomed to the certainty and predictability of their home countries’ tax systems. Yet, it is precisely this ambiguity that defines life in Ecuador’s “gray zone,” where shades of uncertainty blur the lines between black and white.
Personal Reflections
As an expat living and working in Cuenca, I’ve learned to embrace the unpredictability of life in the “gray zone.” Despite the challenges posed by electricity shortages and tax ambiguity, there is a certain resilience that comes from learning to navigate these uncertainties. But, like any other muscle, it needs to be developed over time.
I’ve come to rely on our family network of accountants to help navigate Ecuador’s tax laws, ensuring compliance while minimizing the risk of running afoul of the authorities. However, our situation is different from most expats, as our main income (buying and selling properties) is derived from within Ecuador.
Living in Ecuador isn’t without its frustrations. The flickering lights of a power outage and the murky waters of tax ambiguity represent today’s uncertainty. I don’t know what tomorrow’s uncertainty will be, but accepting it is part of my process of dealing with it.
I’d be very grateful to hear experiences from fellow residents on how you’re coping with the current round of uncertainties in the comments below. Together, let us navigate the “gray zone” with courage and resilience, knowing that it is our ability to adapt to the uncertainty that ultimately defines our success in Ecuador.
Further reading:
- Cuenca Real Estate
- Cuenca Apartments for Sale
- Cuenca Apartments Rent
- Pet Adoptions
- Cuenca Events
- Cuenca Deals
View full video transcript
Electricity and Taxes – Dealing with Uncertainty in Ecuador (Transcript)
I wrote the script for this video in the dark. I had no choice but to hope my laptop had enough charge for me to finish, and as I’m filming this, I still don’t have electricity. This sign back here would normally have an LED around it, and this light over here would normally turn on to produce a nice little orange glow. No such luck today. I just arrived back in Cuenca from a trip to Mexico and I decided to write it largely because as much as I wanted to push on with the mountains of work, I needed to catch up on a real estate business.
The lack of Internet and even hot-spotting from my phone has made it really difficult for me to get any real work done. Our business is very reliant on the Internet and having electricity. Even simple things like communicating with our team are difficult as that assumes firstly that mobile phones are charged and secondly that we have some form of Internet, Wi-Fi or mobile data to use for WhatsApp. It’s a real productivity killer with very real effects on income for our team. But I’ve been in Cuenca and Ecuador long enough to expect the unexpected and I’ve really had no choice but to adapt to living in what I call the grey zone, where seemingly straightforward questions such as “Do retired expats pay income tax on their Social Security,” aren’t answered easily.
Now, if you’re looking for straightforward answers, this is not the video for you. Please switch off now perhaps go watch Mr. Beast or something like that. I will not be offended. I’d also like to take this one step further and suggest that if you need complete certainty, then perhaps Quenca isn’t the right fit for you either. Now let’s dig into the electricity issue first, and I’ll get to the income taxes later.
This is the second round of rolling blackouts Ecuador has had within the past year. The vast majority of Ecuador’s electricity is hydrogenated, so we’re very dependent on receiving steady rain to keep the lights on.
Most of the time this isn’t an issue, but the El Nino, El Nino phenomenon and climate change have combined to produce less rain than normal. To make it worse, there was a substantial amount of government mismanagement at play, maybe corruption, and, if you believe the president, even sabotage. From an outsider’s perspective, it’s hard to see how some of the basics are being so poorly managed.
For example, this is the second round of rolling blackouts. The first round was chaotic and it took them several days to get any sort of reliable schedule in place so the public could have some chance of planning around it, but there don’t appear to be any lessons learned. The second time around has proven just as, if not more, chaotic. Blackout schedules based on neighborhoods are made by electricity companies, in our case CentroSur. But there are many instances where the schedules are not followed, making it very difficult to try and work around them.
So how are folks managing to still be productive, especially those who work remotely? The most popular is buying a UPS or Uninterruptible Power Supply.
This provides backup power when the mains fail. How long they last depends on the capacity of the unit and how much power you draw from it. Some will only last 10 minutes while larger units can last around 4 hours when drawing the same amount of power. A common scenario is buying multiple UPSs. For example, one to power the router and modem, and another to charge the laptop or PC.
They are relatively affordable too, at around the hundred and fifty dollar mark for a one thousand five hundred volt unit, which should be sufficient to keep a router going for around four or five hours. Most blackouts last around the four-hour mark, so this should be enough to keep you going without interruption.
Another option, if you have a good cell phone signal, is to hotspot from your phone, but this can eat up the data quickly and you generally want to have a backup power supply for your phone too these are cheap and can be found everywhere. The main issue I face when working through my hotspot is that after around 3 hours, the Internet signal just seems to fade considerably to the point where it’s just not really usable for me. I have no idea why. My best guess is that the backup power in the cell phone towers tends to run out about this time too, but please do not quote me on this because it is pure speculation.
The power supply issue is perhaps best dealt with when choosing where to live. Let me explain. Most apartment buildings that have been built within the past 15 years that have an elevator also have a backup power generator. These at least cover the common areas and many times also cover individual apartments. Our rental team has experienced an increase in inquiries for these types of properties lately, and these newer buildings are also generally more popular with the Expat market, so it’s definitely worth asking what sort of backup power options the building has when you’re next in the market.
The lack of electricity also has some unexpected downstream impacts. For example, even though a supermarket like Supermaxi has backup power and can remain open, some expats have experienced issues with their credit cards not being accepted. Another example is a pipe that delivers drinking water that broke because the pump didn’t have electricity to keep going and overloaded the pipe. And I’m sure there are a range of other downstream effects. The main point is that it’s very difficult to predict when these sorts of issues will arise, but after living here for six years, I can definitely tell you that issues will arise, issues which you probably didn’t expect, and you need to adapt to this uncertainty.
I’m not saying it’s easy, but whinging about them isn’t going to turn the lights back on. Of course, you can choose to take on the entire Ecuadorian establishment and provide your submissions to the government, but that has its obvious drawbacks. So, being prepared to make do is really the only path forward that we’re left with. Whilst electricity supply is the most recent example, it’s far from the only one.
The other example I would dig into in this video is income tax and more specifically the question of “Do expats need to pay tax on their worldwide income, including pensions to the Ecuadorian government?” This has always been a bit of a grey area with different accountants and even the SRI providing different interpretations. But it recently came to a head when an expat publication circulated an article that basically tried to set the record straight by saying expats need to pay tax to the Ecuadorian government on their worldwide income, including pensions.
This caused a lot of controversy and unnecessary panic. The root cause of the confusion is that this particular question has not been properly addressed by the SRI. This leaves the door open to multiple interpretations. Now, I’m not saying the interpretation from the accountants referenced in the article is wrong and I’m really quite grateful to these accountants for going out of their way to try and clarify their position during follow up community consultations which I did attend and found useful. But this interpretation does fly against what I consider to be the most common interpretation for these particular taxation laws.
Living with these two different interpretations can be quite confronting for many expats, which I completely get. It does seem like the type of question we would normally expect to find black-and-white answers to, but this is Ecuador, where the gray area is large, and getting used to living in a gray zone is part of a life. If you can’t adjust to this, then I am going to suggest you will find it particularly challenging to live here. What I did find interesting is regardless of which interpretation you used, the bottom line is that the effect on most retirement incomes was minimal. Maybe I’ll go into these tax issues in future videos, but it is one of my least favorite topics to research, so I’ll only do it if there is a real need.
There are several accountants within my Ecuadorian family network and I happily use them for our business and my personal tax too. Our circumstances are quite different from most ex-pats as most of our income is derived from Ecuadorian-based activities of selling and renting properties, so we do need to keep up to date with requirements on that front.
I hope this video didn’t come across as too much of a downer. There are certainly times when living in Cuenca will frustrate you and sometimes it just doesn’t make sense. But I’ve also lived in places like the Netherlands where everything is efficient and planned and leaves nothing to chance.
I found living in these countries quite boring and scripted but of course each to their own. I just hope that you’re slightly better prepared to deal with the unexpected if you do decide to move to Cuenca. For those who already live here, I’d love to hear in the comments how you’ve managed to adapt to life in the gray zone. Thanks a million for watching and I will catch you in the next video. Electricity permitting of course. Chao chao.
2 Responses
Good article, Jason, thanks. I completely agree that the culture of Cuenca, and more generally Ecuador and South America, requires a flexible mentality that does not seek to nail down every single detail of human life with enforced bureaucratic mechanisms. That was part of the attraction for moving here! Carry on.
As an Ecuadorian I can tell you we’ve learned to be resilient. It’s extremely sad to see that after years of corruption and blatant theft the consequences are here. It doesn’t matter if you like it or not, if you love the country or not, it matters how can you adapt. It hurts but that’s who the Ecuadorian is, we complain but we keep working.