Why are cities in Latin America getting more expensive?

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TWO REGIONS stood out on this 12 months’s Worldwide Cost of Living survey by EIU, our sister firm. Europe had a few of the costliest cities on this planet: Zurich got here joint first with Singapore, and western European cities occupied ten of the highest 20 spots. However the greatest climbers of any area have been cities in Latin America. Our map beneath exhibits which have grow to be the costliest.

Cities in Latin America rose by a mean of 13 locations in 2023. Mexico Metropolis, which ranked 76th two years in the past, now sits at sixteenth—forward of Milan, Munich and Washington, DC. Mexico’s different cities have been additionally among the many world’s greatest climbers: Monterrey, Aguascalientes and Querétaro Metropolis rose by 20, 39 and 48 locations, respectively. The area’s different priciest cities included Montevideo, the capital of Uruguay; San José, the capital of Costa Rica; and Lima, the capital of Peru.

What explains the jumps? The largest issue is that EIU’s index measures the affordability for foreigners relatively than for locals (it was designed primarily to calculate compensation packages for expats and enterprise travellers). In 2022 the area’s central banks acted aggressively to cut back inflation, which prompted currencies to understand. Because the index is benchmarked to the American greenback, alternate charges can have a giant impact on the rating.

The Mexican peso, for instance, rose by 15% towards the greenback this 12 months. The forex in Costa Rica, one of many few nations to expertise deflation, additionally appreciated, which pushed its cities up the rating regardless of the autumn in costs.

Inflation in some components of Latin America has not been tamed: annualised inflation stays greater than 160% in Argentina and greater than 280% in Venezuela. However these are outliers. In a lot of the remainder of Latin America inflation charges have fallen to single digits. That may be a respite for locals, even when costs are greater for travellers with {dollars}.