Cost Of Living Guides


Exchange rates means Caracas is the most expensive and cheapest city for expats

by Ray Clancy on January 6, 2015

Caracas in Venezuela is both the world’s most expensive and the cheapest city for expats and it all depends on exchange rates, according to research.

The latest findings from the Cost of Living survey by ECA International, a leading provider of knowledge, information and technology for the management and assignment of employees around the world explains the disparity.

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Caracas, Venezuela is both the world’s most expensive and the cheapest city for expats

Venezuela’s official fixed exchange rate greatly overvalues the Bolivar, making Caracas by far the most costly in the world for the second year running for companies paying expats on that basis.

However, expats now have access to the much fairer and better value Sicad 2 rate, introduced to enable a more regular supply of US dollars to importers at an exchange rate much closer to the black market rate. When this rate is applied the cost of items in ECA’s basket of goods and services plummets and Caracas becomes the cheapest city in the world for expats.

“Companies with expat staff in Venezuela will need to choose carefully which exchange rate to apply in order to calculate and provide the most appropriate cost of living allowances. This decision will depend on the circumstances of the company and the individual on assignment,” said Lee Quane, regional director at ECA International.

ECA carries out two main cost of living surveys per year to help companies calculate cost of living allowances so that their employees’ spending power is not compromised while on international assignment. The surveys compare a basket of ‘like-for-like’ consumer goods and services commonly purchased by assignees in over 440 locations worldwide.

Living costs for assignees are affected by inflation, availability of goods and exchange rates, all of which can have a significant impact on assignee remuneration packages. Certain living costs, such as accommodation rental, utilities, car purchases and school fees are usually covered by separate allowances.

Elsewhere in Latin America, Brazilian locations rose significantly in the ranking over the year. Rio de Janeiro climbed to 84th place globally, up 50 places from a year ago, but with the recent change in fortunes for the Real, Brazilian locations may find themselves falling back down the list quickly.

In contrast, Buenos Aires has fallen from last year’s 63rd place in the global ranking to 125th. The depreciation of the Peso has had more of an influential effect on living costs for expats in Argentina than the soaring inflation there.

Santiago was also one of the region’s biggest movers, dropping from 174th spot to 204th due, largely, to the depreciation of the Peso.

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