Cost of Living Soars in Brazil

By Sarah de Sainte Croix, Senior Contributing Reporter

RIO DE JANEIRO, BRAZIL – Brazil’s two biggest cities, Rio and São Paulo, have been ranked amongst the top fifteen most expensive cities in the world for expats, according to Mercer’s Worldwide Cost of Living Survey published last month. The report has Luanda, Angola as the world’s most expensive city for expatriates in the second year in a row, and for the Americas, São Paulo and Rio de Janeiro, Brazil top the list.

With soaring real estate costs and strong real against the dollar, São Paulo and Rio de Janeiro are the most expensive cities in the Americas, Brazil, News

With soaring real estate costs and strong real against the dollar, São Paulo and Rio de Janeiro are the most expensive cities in the Americas, image recreation.

The survey ranks São Paulo as the tenth most expensive city in the world (up eleven places since last year), and Rio de Janeiro as the twelfth (rising seventeen places). New York, North America’s most expensive city, lags far behind in just 32nd place, making Brazil the most expensive country in the Americas. London and Paris occupy eighteenth and 27th place, respectively.

The Mercer Report, which is published annually, is designed to help multinational companies and governments determine compensation allowances for their expatriate employees. It measures the comparative cost of 200 items in each of the 214 cities covered by the survey against prices in New York City. These items include housing, transport, food, clothing, household goods and entertainment.

Brazil’s astronomical rise through the rankings can be explained in part by the recent housing boom. Property prices in Rio de Janeiro have risen by 16.1 percent since last year, and rental prices have gone up by around 100 percent in some areas of the Zona Sul.

Nathalie Constantin-Métral, the survey’s senior researcher, commented, “The cost of housing – often the biggest expense for expatriates – plays an important part in determining where cities are ranked”.

Because the findings are measured against a base line in New York, another crucial factor is the growing strength of the real against the dollar. Mercers says, “The US dollar has weakened significantly against some currencies, including the Brazilian real. So the Cost of Living indices for U.S. expatriates will continue to increase to reflect the need to use more U.S. dollars to buy the same number of host currency units.”

Big Macs are the second most expensive in the world, Rio de Janeiro, Brazil, News

Brazil's Big Macs are the second most expensive in the world, photo by John Sember/Flickr Creative Commons License.

A third factor is the ever increasing cost of goods and services in Brazil. A recent survey by Veja magazine found the average cost of a forty inch LED TV screen in Brazil to be R$2,000, compared to R$1,700 in France and R$1,100 in the United States.

Similarly, a minute’s cell phone talk time costs on average R$0.60 in Brazil, R$0.44 in France, and in the U.S., just R$0.17. A Brazilian Big Mac is also amongst the most expensive in the world, second only to Switzerland.

In global terms, Brazil’s inflation rate (currently at around six percent) is relatively high, but even with this in mind, prices are still soaring. Businesses blame increasing logistics, utility and rental costs, combined with high staffing costs as a result of Brazil’s employment laws, which are tipped very much in favor of the employee.

High taxes are another determining factor. On the price of a car in Brazil, for example, the consumer will pay around thirty percent of the total value as taxes, compared to sixteen percent in France, and just six percent in the U.S.

British expat Rebecca Smythe commented, “I only buy clothes and things when I go back to England – it’s just too expensive here now. I am struggling to afford my rent even.”

29 Responses to "Cost of Living Soars in Brazil"

  1. Pingback: The Expats Dream | The Rio Times

  2. Pingback: The Expat Dream | The Rio Times

  3. Paulo Henrique  August 3, 2011 at 12:11 PM

    It’s fact that the Brazil come growing in some sectors like economy, health, culture, education, and in this topic is necessary more investiments and valorize the meritocracy, instead of political indications. Like a brazilian, I feel that technicism (meritocracy), have to be overlapping the political interest in all issues, including education. The taxes here are absurdly highs, becoming everything expensive, and the services like transport, infraestructure (roads, avenues, airports…), finance of cars and homes is an absurd. But, nowadays, the Brazil are better, even comparing with the most developed countries.

  4. Adam Gonnerman  August 3, 2011 at 1:53 PM

    That’s sort of depressing news for those of us who dream of moving to Brazil.

  5. Peter Corson  August 3, 2011 at 6:15 PM

    It’s all relative. For example, my wife and I own our condo outright. so our cost of living has not risen as dramatically. The real problem is the declining value of the dollar (or the over valuation of the real). If Brasil was spending its tax monies intelligently, much of this would not be a problem; but politicans here in Brasil seem to think that infrastructure spending is a waste. Their shortsightedness is almost beyond comprehension.

  6. Frank Chapman  August 4, 2011 at 12:08 AM

    That is bad news for me i plan on staying their for about 3to 4 month a year.

  7. Sarah de Sainte Croix  August 4, 2011 at 9:57 AM

    It’s not all bad news though. The crisis with the dollar plays a major part in how this survey was put together. And don’t forget that Brazil is changing rapidly at the moment. For all the government’s faults (see Rio Times stories about corruption) it does appear to be quite shrewd in many ways – just look at the way Brazil has ridden out the global economic crisis and landed itself in a very strong position indeed.

    I have faith that soon enough the rapid change that is going on here will encompass the things which are still lagging behind. For example, they are already putting plans into place reduce taxes on certain computer hardware and software to make them more accessible to the population. Soon they will also realize that the education system needs a serious overhaul, when they realize that the country needs many more skilled workers if it is to sustain it’s own development. And surely a re-evaluation of the employment laws must be on the horizon if the government wants to encourage new and competitive businesses in Brazil.

    Things are happening in Brazil at the moment, and they are happening fast. Corruption is a huge part of the problem, but as the eyes of the world turn to Brazil, an increased level of transparency and accountability will (hopefully!) follow.

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