Those are the bizarre findings of a new survey by ECA International.
The firm 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.
The latest Cost of Living report highlights the Venezuelan hotspot as the costliest place to live in the world, but also the most affordable. The answer behind this strange juxtaposition? The currency you use.
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 expatriates on that basis.
However, expatriates 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 that of the black market. 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 expatriates.
“Companies with expatriate 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,” said Lee Quane, Regional Director – Asia, ECA International. “This decision will depend on the circumstances of the company and the individual on assignment.”
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 expatriates 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.)
Despite slipping slightly in the global ranking from 34th to 40th, Manhattan remains the 2nd most expensive location for expatriates in the Americas. Vancouver, in 67th place, remains Canada’s most expensive.
On a wider scale, Seoul has overtaken Tokyo to become Asia Pacific’s most expensive location for expatriates. Globally, the South Korean capital is in 10th position – up from 22nd place a year ago – while Tokyo, the world’s most expensive location for expatriates just two years ago, is now 12th globally.
“While prices of items in ECA’s shopping basket have increased in South Korea at a faster rate this year than last year, inflation remains low relative to the rest of the region,” said Quane. “What has had more of an impact on costs for many employees on assignment there is the appreciation of the won. It strengthened 15% against the yen in the 12 months between surveys and over 8 percent against the US dollar and the euro.”
However, Seoul’s rise up the ranking it is also due to the economic situation in Japan which has caused Tokyo to fall in the list.
Oslo, ranked third globally, tops the list of Europe’s most expensive locations for expatriates.