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HomeCosta RicaCosta Rica History: The Villalobos Brothers Fund

Costa Rica History: The Villalobos Brothers Fund

There is an old saying among expats here, “If you want to leave Costa Rica with a million dollars, come with two or three.”

Almost everyone knows about Bernie Madoff, but how many have heard of the Villalobos brothers? Any expat who has lived in Costa Rica for over 20 years certainly remembers the “Brothers.” The majority of newcomers know nothing about this infamous duo.

Toward the middle of the 1990s, there was an interesting new phenomenon that affected some expats in Costa Rica. It seems a lot of them had wads of money to burn. Where did they suddenly obtain these riches? The source of their high-flying lifestyle was the interest that they had earned from a popular local Ponzi scheme called The Brothers.

As the old saying goes, “If it sounds too good to be true, it usually is.” Until 2003, a large number of North Americans living in Costa Rica earned “high returns” on their money by investing with. The Brothers.

In general, these returns in dollars ranged between 36 to 42 percent, depending on the duration and amount of the investment. It was just well-nigh impossible to find a gringo in the 1990s and beginning of the 2000s who didn’t have money with these guys.

Too good to be true? It was. In the end.  Many investors made a lot of money while others ended up losing their shirt and had to return home. To this day, nobody knows what became of Enrique Villalobos or how he really made his money. One thing is for sure: While “The Brothers” business flourished, so too did many a gringo’ s lifestyle.

The Villalobos brothers paid faithfully for over twenty years. With almost 6,300 investors, the Brothers handed out a minimum of nearly $2 million in interest every month.  

Unfortunately, most investors were greedy and chose to let their money compound so that they would eventually become millionaires. Compound interest grows very quickly. Investments of more than $100,000 were common, and a couple of clients invested a million or more.

So, how did the fund work?

Basically, you loaned the brothers a minimum of $10,000, and then they paid you three percent interest — monthly. Those who got in at the beginning made out like bandits. While those who let their money ride or invested at the end usually lost everything. The author personally knows a few people who did very well and others who lost their money. 

One expat jumped to his death from the fifth story of the San Pedro Mall after the government forced the Brothers to close their doors.

The way the Villalobos brothers could get away with this scam for so many years was the ingenious method of loaning money to “friends.” They claimed that their investors were their friends who gave them personal loans. In return investors received a check with the amount of the investment.

However, it could not be cashed unless they informed the Brothers first who then covered it. Really, all people were getting was a worthless piece of paper. Over the years people did ask for their investment back, sometimes with interest, and were returned all of their money. The author personally knows many expats who withdrew money to buy homes in Costa Rica or start business ventures.

A sample check which clients received for putting their money with the Villalobos brothers.

In July 2002 everything went to hell. The government froze the Brother’s bank accounts while they were investigated for money laundering and a couple of their Canadian investors who were supposedly drug dealers.

Enrique Villalobos fled with a false passport and his younger Brother Osvaldo was left holding the bag. Osvaldo was eventually convicted of fraud and not money laundering and was to jail for a few years and then released. Nobody knows the whereabouts of either of the Villalobos Brothers.

According to estimates the “Brothers,” took in well over $800 million dollars over the years.

There were many theories about what the brothers did with their investor’s money. Some say that they were a clandestine bank to fund CIA operations. Others say Enrique was a genius and was involved in selling arms to foreign countries.  One theory had him working in the one-time highly profitable business of exchanging Colombian pesos.

Whatever they did to pay the high interest we may never know. During Osvaldo’s trial the defense could not demonstrate how the brothers made money.

This led most people to believe that the money came in the front door and went out the back door which is how a typical Ponzi scheme operates. Since most people let their money ride and didn’t withdraw their monthly interest, this business could have theoretically gone on forever as long as new money kept coming in.

A few years prior to the brother’s demise a couple of similar copycat operations were born. What they did was ride on the Brother’s coattails, prey on people’s gullibility and the Brother’s reputation and formula for attracting investors. 

Many expats and others said, “If the Brothers can do it, Why can’t these guys?” Savings Unlimited (aka “the Cubans”) and “The Vault” were other companies that offered high returns and rode on the brother’s success and reputation to give their operations credibility

Savings Unlimited was called the Cubans because the owner was a portly Cuban flimflam man by the name of Luis Milanes. To attract investors, he started out offering a higher monthly rate of interest than the Villalobos Brothers . Investors could earn a whopping four percent per month.

Furthermore, if you got other people to invest you could make five percent monthly. The Cubans claimed they generated income from the chain of casinos they operated in Costa Rica.

To make a long story short, Milanes skipped town with approximately a quarter of a billion dollars on the books, a few months after the Brothers were raided. The fugitive owner was arrested about five years later in El Salvador.

He was out on bail and roamed freely around San José with his bodyguards while waiting for his day in court. None of his assets like the casinos were seized.

Update: Milanes fled the country again and ended up dying penniless in Mexico about three years ago.

The fallout from the closure of these high interest scams was felt in the expat community. Those who had all of their eggs in one basket, returned to their home country while many who stayed had their lavish lifestyles reduced drastically.

Here is the article that made the front page of the Wall Street Journal, when the Brothers finally went down:

About the Author

Christopher Howard has lived in the country over 40 years, is a Costa Rican citizen, Costa Rica’s foremost relocation expert and has been conducting monthly relocation/retirement tours to Costa Rica for over 30 years. See He is also the author of the one- of-a-kind bestselling, New Golden Door to Retirement and Living in Costa Rica — the official guide to relocation and “Guide to Costa Rican Spanish,” that may be purchased through: or

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