RIO DE JANEIRO, BRAZIL – Since the beginning of The Rio Times (and The Gringo Times for those who remember), we have had a mission of being; pro-Brazil, pro-gringo and pro-business. The first is a point of being pro-Brazil because it is easy to criticize a place as being different from where you are from, but we all came by choice, and are guests here.
The mission still holds, but as we look at four-years in the making and all the dramatic changes in Rio, there are a few “concerns”. The mega-events are coming soon, in June we have the Confederations Cup (FIFA’s eight-team warm-up tournament to kick the tires), and then in July is the Catholic World Youth Day.
Next year of course is the FIFA 2014 World Cup (June 12th – July 13th) across Brazil and then two years later Rio has the honor of hosting the 2016 Olympic Games (August 5 – 21st). My concern is not about the infrastructure or security, quite frankly Brazil may fail in some aspects but the events will still come-and-go.
My concern is Rio has become so expensive, with no outlook of inflation or cost of living spikes slowing down soon, while the opportunity to earn more money seems limited to major construction, shipping and oil contracts (for Brazilians)… and property owners/landlords.
We reported last month that the rate at which average Rio property prices have risen over the past five years is four times greater than that at which average wages have gone up. Renting in Rio has also increased, up over 65 percent on average since 2008 – double the rate at which incomes have increased. Some rents have increased by over 230 percent in Rio’s most sought-after areas.
Many property owners might say that “most sought after areas” is the key part of that, and the market dictates its own price. If you want to live in the beach gems in Zona Sul (South Zone) you have to pay for the privilege, but … really?
We are talking about rents doubling in the last 2 to 3 years, and this is just the lead up to the mega events. Already in 2012 Rio (and São Paulo) top the Mercer Cost of Living index for foreigners for ALL of the Americas, as in the most expensive cities for expatriates across both North and South America.
Neither city ranks nearly as well in the 2012 Quality of Living report from the same company. This is where the rub starts to burn, even in the beach gems in Zona Sul things work a bit spotty, once you get outside of that life can become very hard, especially if you have to commute.
The big oil companies have quietly been pulling out of Rio and Brazil (for better or worse) because it is too expensive for them to do business here. A trickle-down effect is that this seriously cuts into the foreign (and Brazilian) work options, someone told me oil industry pay would DECREASE nine percent next year in Brazil.
Where or how is the opportunity to make money correlating to the cost of living increases? It is not, and some sporting events are not serious industry boosters unless you are working in construction – which is a notoriously fixed industry (in any city in the world).
I love Rio and I love Brazil, but I am worried about the next couple years. What used to seem like opportunity is now paling in the face of cost-of-living and business increases. My fear is many Cariocas and foreigners here will be forced out for the mega-events, and there is a cynical side to me as I write, starting to wish there was a fast-forward button for August 22nd, 2016.