São Paulo and Rio vault up list of most expensive cities for expats

The Brazilian cities, which far outrank any US cities on Mercer's annual list, have climbed the ranks due to high taxes and a booming Brazilian economy.

More woe for expats living in Brazil.

The country’s two biggest cities are getting more and more costly and are more expensive places to live in than New York, according to the annual cost of living study released today by business consulting firm Mercer.

São Paulo was rated the 10th most expensive city in the world to live in and Rio de Janeiro was ranked 12th. That’s a big jump from last year, when São Paulo was 21st and Rio was 29th.

New York was the highest placed US city in 32nd, ahead of Los Angeles (77th) and Chicago (108th).

The top five most expensive cities for ex-pats are:

According to the Mercer website, "The survey covers 214 cities across five continents and measures the comparative cost of over 200 items in each location, including housing, transport, food, clothing, household goods and entertainment. It ... is designed to help multinational companies and governments determine compensation allowances for their expatriate employees."

The African cities are expensive because so much is imported.

Expats living in Brazil, meanwhile, have suffered because the local currency has strengthened against the dollar, making imported goods costly.

“Local currencies in Brazil, Chile, and Costa Rica … have all strengthened significantly against the US dollar, causing the region's cities to rise in the ranking,” said Nathalie Constantin-Métral, the senior researcher at Mercer responsible for compiling the annual ranking.

Investment dollars are flooding into Brazil’s booming oil industry and to help it lay the infrastructure necessary to host the 2014 World Cup and 2016 Olympics.

High taxes and absurd profit margins have also made even the most ordinary goods and services prohibitively expensive. A bus trip costs $2. A loaf of wholemeal bread costs a minimum $4. And a 3G iPhone that sells for $49 in New York goes for the equivalent of $598 in São Paulo.

The Brazilian government is aware of the problem and has taken measures – mostly through the financial markets – to try to stop the real’s rapid valuation. But the measures are considered timid, and anyway they come as the dollar weakens against many of the world’s currencies.

Another factor is the booming commodities market. Brazil is one of the world’s biggest exporters of grains, beef, soy beans, iron ore, sugar, coffee, and tobacco and that income has helped bolster the country’s once shaky economy.

Brazil’s economy grew 7.5 percent last year and has been on a concerted surge since the middle of the last decade.

The rapid rise in property prices – they have more than doubled in Rio over the last three years and are rising sharply in São Paulo – has prompted the first talk of a bubble and a credit crisis. But Brazilian officials have dismissed that talk as scaremongering.

There seems little hope of a reversal any time soon. The woe for expats seems set to continue.

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