Uruguayan María Chaquiriand has been living in Europe for 28 years and whenever she visits her family You are surprised at how expensive everything is. In uruguay.
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With 3.4 million inhabitants, Uruguay has the highest cost of living in Latin America, according to the global statistics platform Statista. “What catches my attention the most is the price of shampoo, deodorant, toothpaste. But also the price of fruit, pasta, coffee! In the supermarket the difference is blatant”Chaquiriand tells AFP from Valencia, Spain.
This 48-year-old woman, maintenance manager of industrial buildings, also finds transportation, medicines, grocery items and construction materials expensive in Uruguay. According to Numbeo, a collaborative database with prices from around the world, Uruguay is the most expensive country in South America, and ranks 37th on that scale among 146 economies, above Japan (47) or Spain (54).
In the Uruguayan capital, home to half of the country’s population, bread costs three times more than in Asunción, a dozen eggs more than double those in Tokyoand a cappuccino 66% more than in Madrid.
Economists point to structural reasons. “Uruguay has a Value Added Tax (VAT) of 22%, one of the highest in the world. And since it does not have good trade agreements, it pays tariffs of up to 25% to 35%. If we add to that a consular fee of 5%, an imported product may have a tax burden of 50%”, Alfonso Capurro, from the consulting firm CPA Ferrere, tells AFP.
There are additional taxes on fuel and automobiles. Gasoline in Uruguay is the most expensive on the American continent and one of the most expensive in the world, at 76.5 pesos per liter (2 dollars), according to Global Petrol Prices. Numbeo places Uruguay fifth among almost a hundred countries for the cost of a 1.4 0km Volkswagen Golf car.
“Half the price of a car is taxes,” summarizes Javier de Haedo, director of the Economic Situation Observatory of the Catholic University of Uruguay. Distribution and marketing costs also affect the price of fuel.he adds in dialogue with AFP.
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Inflation EFE
In addition to the fiscal pressure, in Uruguay there are cross subsidies, such as the 10% withholding on the price of diesel to finance public transportation, Capurro points out. And they weigh regulations, protections and registration mechanismswhich in practice imply barriers to the importation of fruits and vegetables, and lack of competition in the market for personal hygiene and cleaning products.
On the other hand, Uruguay is becoming an upper-middle-income country, which means that the average salary is high and services, which have a large salary component, are becoming more expensive, explains Capurro. “We are more expensive, obviously, although in reality that is a ‘happy problem’, because we want to be rich, not poor”clarifies.
Uruguay has a Gross National Income (GNI) per capita of $18,000, the highest in Latin America, according to the latest World Bank classification. The national minimum wage is currently equivalent to about $580. In Paraguay, the country with the lowest cost of living in South America, According to Numbeo, it is at $370.
“This country is very expensive!” exclaims José Luis Díaz, a 54-year-old Uruguayan, employed in a hair salon in Montevideo. “Salaries increase, but the basic basket increases much more. There is not enough money to live here.” Your strategy to make ends meet? “I take care of my electricity consumption, I don’t go out to eat as much, I pay attention to the offers,” he tells AFP.
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Inflation EFE
Uruguay is also expensive due to macroeconomic factors. “In this 2020-2023 cycle, very good export prices were combined with significant foreign direct investment, which generated a very large flow of dollars that ended up strengthening the peso,” Capurro points out.
The fight against inflation, a priority of the center-right government of Luis Lacalle Pou that took office in 2020, also contributed to the appreciation of the Uruguayan currency.
To restrict consumption, the Central Bank raised its monetary policy rate. And although inflation in March moderated to 3.8% at 12 months, its lowest level since August 2005, the reference interest rate remains high, at 8.50%.
“The price of the dollar in nominal terms fell 3% in the last moving year and accumulated a decrease of 15% in the last three years”indicated days ago the Cuesta Duarte Institute, which advises unions.
The exchange rate imbalance causes Uruguay to lose competitiveness compared to its trading partners and become more expensive in comparison, triggering complaints from rural, industrial and tourism producers. “If I take the average so far in the 21st century as a base of 100, we are today at a 28% exchange rate delay with countries outside the region,” warns De Haedo.
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AFP
