Countries like Japan, the United Kingdom or the Cayman Islands are more expensive than Costa Rica (although in bottles of water and red wine we are still more expensive). Here we explain why our country is so cheap.
Costa Rica is a cheap country. We, who live in it, know it, we hear it from tourists who visit us, but mainly we realize it when we travel abroad and compare prices of goods and services. It is not uncommon for us to gape the first time.
Did you read “cheap”? Nah, the word is “expensive”. Costa Rica is an expensive country. Re-expensive.
Below we display a comparative table of prices of different products in Costa Rica and other seven countries. We extracted the data from the World Prices website, used to compare costs of living between countries. Thanks to places like this, we 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 how expensive it is to live between countries for people who plan to move nation, these are the relationships between Costa Rica and the countries that 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 / housing, transportation and entertainment are more expensive.
Costa Rica vs. USA:
– Living in the United States is 51% more expensive than living in Costa Rica.
– In the United States, clothes are cheaper.
–But food, rent / housing, 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 / housing, 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 / housing, 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 / housing, clothing, personal care, entertainment), except transportation (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 / housing, clothing, transportation, personal care and entertainment.
–Personal care is 62% cheaper in Argentina.
Additional Notes:
The United Kingdom 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 / housing they are 224% more expensive; This idyllic Caribbean archipelago is not a country proper, but a British overseas territory dependent on London. It is northwest of Jamaica and stands out above all for two things: its luxury hotels on beaches with clear waters, and for being a tax haven.
(We talk about the Cayman Islands because they top the lists of most expensive places in the world almost always. So you see, Costa Rica is not 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 in the world, as well as how much labor time it takes to buy the food, places:
1. Uruguay ($ 4.66)
2. Brazil ($ 4.6)
3. Costa Rica ($ 3.94)
4. Chile ($ 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
A vital tool for knowing how expensive a country is is Purchasing Power Parity (PPP). It measures the prices of different countries using common goods (such as the basic food basket) to contrast the real purchasing power between different currencies and / or countries. The calculation that is carried out results in a score in the Geary-Khamis dollar unit, also called the international dollar. The higher a country is in the ranking, the more real purchasing power its inhabitants have:
1. United States with a score of 62,606 (10th place in the world)
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 world place)
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 are:
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 of those 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 Cooperation and Development (OECD) published its Economic Study on Costa Rica, where it showed that weak competition in various markets tends to translate into high prices of goods for consumers.
“A relatively small number of large companies dominate the economy, indicating the need for improved regulations to promote a more competitive business environment. The calculations carried out 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, ÁngelGurría, 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 benefits to foreign companies to establish themselves in the country, but does not offer the same advantages for national companies.
These must go through a greater number of procedures that are tedious and expensive, which greatly discourages startups, and gives large international companies the advantage of setting the prices they want. And also to large local companies that 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 to entrepreneurs and Costa Rican startups, pointing out that it is easier to start a business in Mexico, Chile or Colombia than in Costa Rica.Also the high costs of production (wages, energy and others) influence that the final prices of 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, 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 has “prices from countries like Switzerland or Norway”, he weighed that these are countries that “can be expensive, since they do not have significant lags in terms of developmental”.
So it is 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 an expensive country:
– 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).
– The obstacles to entrepreneurship are high in terms of time, bureaucracy and lack of financing, which limits the creation of new companies. “According to the World Bank’s Doing Business indicators,” explains García, “Costa Rica’s distance to the border score is 81.7 out of a possible 100. This is lower than in all OECD countries. ”.
– Broad exemptions to antitrust or competition legislation in sectors such as electricity, transportation, fuel distribution, distillation of alcohol, sugar, rice, professional services, and shipping. The OECD mentions up to 25 sectors where the rules of the game benefit monopolistic practices and affect competition in Costa Rica.
– The transport infrastructure is deficient and that 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 the Mexican avocado in 2015 and privileges the Costa Rican avocado. The price per kilo increased 75% between 2015 and 2018):
“The prohibition of Mexican avocado, which arises 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 of losing, because in the face of the evidence of the In this case, it would seem more like a measure made to protect Costa Rican producers”.
“We are a country intentionally designed not to compete,” García analyzes.The economist José Luis Arce admits that it is difficult to know which reason affects the most why Costa Rica is so expensive, but in the top three he places production costs, lack of competition and also the exchange rate against the dollar.
