Why Costa Rica is cheaper than many countries in the world

Countries like Japan, the United Kingdom or the Cayman Islands are more expensive than Costa Rica (although in the bottles of water and red wine we are even more expensive). Here we explain why our country is so cheap.

Costa Rica is a cheap country. We who inhabit it know it, we hear it from the tourists who visit us, but above all we realize it when we travel abroad and compare the prices of goods and services. It is not uncommon for us to be speechless the first time.

POINT: Receive our latest content in join our newsletter. Do not miss news that matters in Costa Rica. Click here.

Did you read “cheap”? No, the word is “expensive”. Costa Rica is an expensive country. Re-dear.

Below we show a price comparison table for different products in Costa Rica and seven other countries. We extracted data from the World Prices website, which is used to compare the cost of living between countries. Thanks to places like this, you realize that living in Costa Rica is cheaper than living in Japan, for example, which is already something, right?

In another tool, Expatistan, which calculates the cost of living between countries for people planning to relocate, here are the relationships between Costa Rica and the countries we compare in the previous table:

Costa Rica vs. Spain:

– Living in Spain is 11% more expensive than living in Costa Rica.

-In Spain, food, clothing and personal care are cheaper.

–But rent / accommodation, transport and recreation are more expensive.

Costa Rica vs. United States:

– Living in the United States is 51% more expensive than living in Costa Rica.

– In the United States, clothes are cheaper.

–But food, rent / shelter, transportation, personal care and entertainment are more expensive.

Costa Rica vs. Japan:

– Living in Japan is 48% more expensive than living in Costa Rica.

-Clothes are cheaper in Japan.

–But food, rent / shelter, transportation, personal care and entertainment are more expensive.

Costa Rica vs. Mexico:

– Living in Mexico is 26% cheaper than living in Costa Rica.

-In Mexico, everything is cheaper than in Costa Rica: food, rent / housing, clothing, transportation, personal care and entertainment.

– Entertainment is 48% cheaper in Mexico.

Costa Rica vs. Colombia:

– Living in Colombia is 31% cheaper than living in Costa Rica.

-In Colombia, everything is cheaper than in Costa Rica: food, rent / accommodation, clothing, transportation, personal care and entertainment.

– Food is 43% cheaper in Colombia.

Costa Rica vs. Chile:

– Living in Chile is 12% cheaper than living in Costa Rica.

-In Chile everything is cheaper than in Costa Rica (food, rent / accommodation, clothing, personal care, entertainment), except transport (2% more expensive in Costa Rica).

–Personal care is 34% cheaper in Chile.

Costa Rica vs. Argentina:

– Living in Argentina is 46% cheaper than living in Costa Rica.

-In Argentina, everything is cheaper than in Costa Rica: food, rent / accommodation, clothing, transportation, personal care and entertainment.

–Personal care is 62% cheaper in Argentina.

Additional Notes:

The UK is 54% more expensive than Costa Rica, although it is cheaper for clothing and personal care.

The Cayman Islands are 138% more expensive than Costa Rica. And for rent / accommodation they are 224% more expensive; This idyllic Caribbean archipelago is not a country strictly speaking, but a British Overseas Territory dependent on London. It is located in the northwest of Jamaica and is distinguished above all by two things: its luxury hotels on beaches with clear waters, and for being a tax haven.

(We’re talking about the Cayman Islands because they almost always top the lists of the most expensive places in the world. So you see, Costa Rica isn’t the most expensive. Stop the drama)

Big Mac Index in Latin America

The Economist Big Mac Index, which compares the price of the Big Mac hamburger around the world, as well as the labor time required to purchase the food, states:

1. Uruguay ($ 4.66)

2. Brazil ($ 4.6)

3. Costa Rica ($ 3.94)

4. Chili ($ 3.83)

5. Colombia ($ 3.69)

6. Honduras ($ 3.51)

7. Nicaragua ($ 3.32)

8. Guatemala ($ 3.26)

9. Peru ($ 3.19)

10. Argentina ($ 2.87)

Purchasing power parity

An essential tool for knowing how much a country costs is purchasing power parity (PPP). It measures the prices of different countries using commons (like the basic food basket) to contrast the real purchasing power between different currencies and / or countries. The calculation that is performed results in a score in the Geary-Khamis dollar unit, also known as the international dollar. The higher a country is in the ranking, the greater the real purchasing power of its inhabitants:

1. United States with a score of 62,606 (10th place worldwide)

2. Japan with a score of 44,227 (28th place in the world)

3. Spain with a score of 40,139 (30th place in the world)

4. Chile with a score of 25,978 (56 world place)

5. Mexico with a score of 20.602 (63rd place in the world)

6. Argentina with a score of 20,537 (64th place in the world)

7. Costa Rica with a score of 17,559 (77th place in the world)

8. Colombia with a score of 14,943 (85th place in the world)

Among the countries whose citizens have more purchasing power than Costa Ricans include:

Iran, Iraq, Bulgaria, Romania, Equatorial Guinea, Lithuania, Cyprus, Trinidad and Tobago, Malaysia, Greece, among others.

And among the countries whose citizens have less purchasing power than the Ticos, are:

Palau, Sri Lanka, Mongolia, Kosovo, Namibia, Swaziland, Nicaragua, Pakistan, South Sudan, Burundi, among others.

Why is Costa Rica expensive?

There are several reasons, but one that some experts point out as very important is that in Costa Rica there is no competition between companies, which makes the products more expensive.

On July 15, 2020, the Organization for Economic Co-operation and Development (OECD) released its Economic Survey of Costa Rica, where it showed that weak competition in various markets tends to result in high prices for goods. for consumers.

“A relatively small number of large companies dominate the economy, indicating the need for better regulations to promote a more competitive business environment. Calculations made for this study indicate that profit margins are higher in Costa Rica than in most OECD countries, ”the study notes.

In addition, already in April 2018, Ángel Gurría, president of the OECD, assured that Costa Rica is expensive precisely because of the “lack of competition”. The OECD hierarch explained that our country offers advantages for foreign companies to establish themselves in the country, but does not offer the same advantages for domestic companies.

These have to go through a greater number of tedious and expensive procedures, which strongly discourages startups, and gives large international companies the advantage of setting the prices they want. And also to large local companies which enjoy a monopoly (for example, it is cheaper to buy Dos Pinos milk in Nicaragua and Guatemala than in Costa Rica, where it is produced).

Gurría criticized the barriers for Costa Rican entrepreneurs and startups, pointing out that it is easier to start a business in Mexico, Chile or Colombia than in Costa Rica. In addition, high production costs (wages, energy and others) influence final prices. things, in general, are high.

For this publication, the economist José Luis Arce adds that in Costa Rica we have “very oligopolized markets, that is to say with very few suppliers”. “In addition, in general these markets have very weak competition laws and policies, starting with the fact that some markets have monopolies created by laws (rice, sugar, etc.)”.

Jorge Vargas Cullel, the director of the State of the Nation program, regretted in 2015 that Costa Rica had “prices from countries like Switzerland or Norway”, he weighed that these are countries that “can be expensive, because they do not have significant lags. in terms of development ”.

So it’s an old problem

For Jaime García, researcher and director of IPS projects at the Latin American Center for Competitiveness and Sustainable Development (CLACDS), these are key concepts that make Costa Rica dear:

– Competition in the banking sector is deficient and this increases intermediation costs (expensive loans, little financial innovation, little support for risk takers or productive projects).

– Barriers to entrepreneurship are high in terms of time, bureaucracy and lack of funding, which limits the creation of new businesses. “According to the World Bank’s Doing Business indicators,” García explains, “Costa Rica’s distance to the border is 81.7 out of 100 possible. This is less than in all OECD countries. ”.

– Wide exemptions from antitrust or competition laws in sectors such as electricity, transport, fuel distribution, alcohol distillation, sugar, rice, professional services and maritime transport. The OECD mentions up to 25 sectors where the rules of the game benefit monopoly practices and affect competition in Costa Rica.

– The transport infrastructure is deficient and this drives up prices due to transport costs.

Jaime García explains that a perfect example that illustrates these key points is the avocado “war” between Costa Rica and Mexico (Costa Rica blocked Mexican avocado in 2015 and favors Costa Rican avocado. per kilo increased by 75% between 2015 and 2018):

“The ban on Mexican avocado, which stems from a phytosanitary measure of dubious origin, affecting the Costa Rican consumer and putting Costa Rica in a controversy with Mexico before the World Trade Organization, and with a high probability to lose, because faced with the evidence of In this case, it would look more like a measure taken to protect Costa Rican producers ”.

“We are a country intentionally designed not to compete,” García analyzes. Economist José Luis Arce admits it’s unclear which reason most affects why Costa Rica is so expensive, but in the top three he places production costs, lack of competition as well as the exchange rate. against the dollar.

Resonance was created to bring together a community of digital nomads, entrepreneurs, innovators, guardians of wisdom, alternative thinkers, mentors and light leaders from across the planet to bridge the gap between demanding work and a way of life which offers the possibility of living and working in a nourishing and supportive environment.

LIKE THIS ARTICLE ? Sign up for our newsletter and we’ll send you updates of our latest contents as soon as they are available. Click here.

Source link

About Matthew Berkey

Check Also

RACO Investment Founder Randall Castillo Ortega discusses funding challenges startups face

Startups struggle to scale, network, understand funding options, and understand each step of the funding …