Latin America: Buenos Aires Most Expensive City

Inflation spurs steep cost increase of goods and services.

BY LATINVEX STAFF

Buenos Aires has replaced Sao Paulo as the most expensive city in Latin America, according to the 2015 Cost of Living Survey from Mercer.

Buenos Aires climbed 67 places globally – from 86^th place to 19^th place -- due to a strong price increase for goods and services, Mercer said. Argentina’s estimated inflation rate of 27 percent this year will be the second-highest in Latin America (after Venezuela) and the fourth-highest in the world, according to a Latinvex analysis of estimates for 188 countries from the International Monetary Fund and Argentine consultancy Elypsis. 

Buenos Aires is now more expensive than Danish capital Copenhagen, according to the Mercer ranking, which includes 207 cities across five continents and measures the comparative cost of more than 200 items in each location, including housing, transportation, food, clothing, household goods, and entertainment. It is designed to help multinational companies and governments determine compensation allowances for their expatriate employees.

“Caracas in Venezuela has been excluded from the ranking due to the complex currency situation. “Its ranking would have varied greatly depending on the official exchange rate selected,” Mercer said.

Sao Paulo still remains expensive, ranking second in Latin America and managed to move up nine spots globally to 40^th place. Rio de Janeiro, Santiago and Montevideo round out the five most expensive cities in Latin America for expat employees.  

Mexico City also became more expensive, moving up 13 spots globally to 137nd place and two spots in Latin America to 9^th place.

Colombian capital Bogota went the other way, falling from 5^th place in Latin America to 10^th place (and globally it fell 50 spots to 148^th place). No other country fell as much in Latin America.

The strong decline is likely linked to the strong depreciation of the Colombian peso compared with the US dollar. The peso lost 9.3 percent compared to the US dollar in the first quarter, the second-highest depreciation after Brazil’s real, according to a Latinvex analysis.

Meanwhile, Peruvian capital Lima remained the 8^th-most expensive city in Latin America, ahead of Mexico City and now Bogota.

Panama City posted the highest increase in Latin America, moving up four spots to 6^th place, while globally it jumped 41 spots to 104^th place.

Finally, Managua ranks not only as the cheapest city in Latin America for expat employees, but also ranks among the nine least expensive cities worldwide, according to Mercer. 

ARGENTINA: POOR & RICH

Amidst the high inflation, Argentina’s president Cristina Kirchner has created quite a stir by claiming that her country now has a poverty rate of less than 5 percent, or one of the world’s lowest rates. Her chief of staff Aníbal Fernández added fuel to the fire by saying that Argentina thus has fewer poor than a country like Germany.

Argentina had stopped providing official poverty statistics since 2014 – the only Latin American country to do so. (That follows tinkering with official inflation data since 2007). Earlier this year, Economy Minister Axel Kicillof justified the lack of figures by saying they were “stigmatizing.”

However, Kirchner’s numbers are well below estimates by the country’s Catholic Church, largest labor union and others, who place the real poverty level at between 25 and 29 percent. 

Meanwhile, Kirchner’s own official wealth grew 16 percent last year to $7.1 million, according to local media reports based on her reported data.  

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