In this article, we will be taking a look at the 20 most expensive countries in Latin America. To skip our detailed analysis, you can go directly to see the 5 most expensive countries in Latin America.
Latin America is one of the biggest regions in the world with a population exceeding 650 million people. While almost all economies in the region are developing, several of these countries have displayed strong growth rates over the past several years, which is one of the reasons why Latin America is being considered to be at an ideal stage for long-term investing. Different countries in Latin America boast different specializations, with Mexico being one of the largest automotive manufacturers in the world, Colombia being the biggest producer of Arabica beans, Chile boasting strong growth in the renewable energy sector and Peru where many of the biggest mining companies in the world maintain operations and operate mines.
According to Morgan Stanley, inflation in Latin America peaked in June 2022, and has been decreasing since, which means that policymakers can focus on a reduction in monetary tightening which in turn will boost economic growth, as well as stocks of companies within the region. Right now, equities in Latin America are trading cheaply compared to historic trends as well as other stocks globally, which could make investments in the region really attractive to prospective investors, which consist of some of the most expensive countries in Latin America. Some specific countries that may benefit further due to recent activities include Brazil, whose recently expanded trade ties with China could further bolster the biggest market in Latin America. The 12 months trailing PE ratio of Latin America is 7.0, is slightly higher than its lowest level reached in 2007, which fares better than MSCI EM Index’s PE ratio of 10.5 and S&P 500 Index’s PE ratio of 18.9. History also suggest Latin America will provide a higher return, as when Latin American stocks have been cheaper than the MSCI Index, they significantly outperform EM stocks broadly.
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If you want to invest in Latin American companies, you can easily consider some of the biggest companies in Latin America, as several such corporations are listed in the U.S., including Ambev S.A. (NYSE:ABEV), Sociedad Química y Minera de Chile S.A. (NYSE:SQM), Petróleo Brasileiro S.A. – Petrobras (NYSE:PBR) and Credicorp Ltd. (NYSE:BAP).
From February 2021 to October 2022, one of the main reasons for emerging markets stocks tanking was the strong appreciation of the U.S. dollar along with uncertainty in China, especially because of the superpower’s zero-Covid policy which devastated economies across emerging markets. This period saw the MSCI EM index plummet by 40%. However, China has recently completely reversed its zero-Covid policy and has opened its borders, which could boost economies across the world, especially those largely dependent on trade with China. In addition, economists believe that the dollar’s strength has peaked already, which will be another major boost to economies whose debts are mostly in foreign currencies, and as the dollar weakens, the debt burden for such countries will decrease, including some of the most expensive countries in Latin America.
Of course, that doesn’t mean that all nations in the country are perfect for investment; there will always be winners and losers, with Brazil and Mexico having the highest potential. Brazil’s consumer price index reached a 27 year high of 12.1% in April 2022, but this declined to just 5.8% in December 2022, while the new government’s anti-poverty program is likely to reap economic gains. As mentioned earlier, China’s switching of policies will be beneficial for Brazil, as China is Brazil’s biggest trading partner while Brazilian equities are trading at a steep discount right now.
On the other hand, Mexico is facing a near term issue as U.S. travel slows down, with U.S. residents representing over 70% of all visitors to Mexico. Meanwhile sales in the automotive industry are also falling which are a major contributor to Mexico’s economy. However, Mexico is likely to benefit from US companies’ moving supply chains closer to home, which will result in higher U.S. investment in the country. According to McKinsey, exports from Mexico to the U.S. could increase by $155 billion! This would result in a huge boost to some of Mexico’s biggest industries including auto, metals and machinery.
The most expensive countries in Latin America have seen a surge in cost of living in 2022, as inflation in many countries reached record highs. To determine these countries, we calculated the ratio of their real GDP and GDP by PPP, with a higher ratio resulting in a higher ranking. The ratios of some countries may seem exactly the same, but that’s because they’ve been rounded off to two decimal places. To separate Latin American countries, we used United Nation’s categorization of Latin American nations. To learn more about why we used this methodology, please head on over to the 35 most expensive countries in the world. So, without further, let’s take a look at the most expensive Latin American countries, starting with:
20. Argentina
Real GDP / GDP by PPP ratio: 0.45
5 year GDP growth rate: 4.2%
Argentina is currently still celebrating its famous World Cup victory in 2022, which has allowed residents to forget national issues. While the country saw a major drop in its economy after the Covid-19 pandemic, the country recovered quite well, with its economy being 5% above pre-pandemic levels.
19. Honduras
Real GDP / GDP by PPP ratio: 0.45
5 year GDP growth rate: 20.0%
18. El Salvador
Real GDP / GDP by PPP ratio: 0.46
5 year GDP growth rate: 16.7%
17. Panama
Real GDP / GDP by PPP ratio: 0.46
5 year GDP growth rate: 11.0%
Double digit growth over the last 5 years has resulted in the country’s economy developing further. The country’s pro-business government and rising real estate market has attracted investors from all over the world.
16. Brazil
Real GDP / GDP by PPP ratio: 0.47
5 year GDP growth rate: 13.8%
The largest Latin American economy has posted a consistently high growth-rate which is only bound to continue now that China has opened its borders after three years. While Brazil’s handling of the Covid-19 pandemic was widely criticized, a new government seems likely to capitalize on opportunities now that restrictions across the world have been lifted.
15. Peru
Real GDP / GDP by PPP ratio: 0.48
5 year GDP growth rate: 17.9%
Peru has recorded a strong growth in GDP over the last half decade. Peru is among the most trustworthy countries for foreign investors, with its country yield risk less than half that of the region’s average. It also faced lower inflation rates than most other Latin American countries.
14. Jamaica
Real GDP / GDP by PPP ratio: 0.49
5 year GDP growth rate: 6.3%
Jamaica is a tiny island which has few resources because of which most goods have to be imported into the country. Further, because of scarcity, land in Jamaica is quite expensive as well.
13. Mexico
Real GDP / GDP by PPP ratio: 0.50
5 year GDP growth rate: 4.4%
Mexico’s economy has been significantly impacted by the cartels which operate with impunity in the country, but is still the second-largest Latin American country. As discussed in the intro, Mexico is one of the countries with the largest growth potential in 2023 and beyond.
12. Ecuador
Real GDP / GDP by PPP ratio: 0.51
5 year GDP growth rate: 7.0%
Ecuador has recently announced that its ending a diesel subsidy for shrimp farms, which will result in higher costs and hence higher prices, at a time when costs are already significantly high in the country.
11. Guatemala
Real GDP / GDP by PPP ratio: 0.51
5 year GDP growth rate: 25.3%
Guatemala has the highest 5 year GDP growth rate among the most expensive countries in Latin America. It is now considered to be among the most competitive nations in Central America and hence, is becoming a popular option for foreign investment in the region.
10. Costa Rica
Real GDP / GDP by PPP ratio: 0.53
5 year GDP growth rate: 19.3%
Costa Rica imposes high taxes on imports, which raises the price of goods. Costa Rica is said to have the third-most expensive rice in the entire world. Because of agriculture protectionism policies, food prices can be quite high in the nation.
9. Chile
Real GDP / GDP by PPP ratio: 0.57
5 year GDP growth rate: 24.0%
Chile has the second-highest 5 year GDP growth rate among the most expensive countries in Latin America.
8. Haiti
Real GDP / GDP by PPP ratio: 0.58
5 year GDP growth rate: 4.2%
Right now, Haiti is experiencing significant political instability, with its capital Port-au-Prince being ruled by gangs and leading to major incidences of violence and economic disruption. More than 5 million people in this Latin American nation of 11 million people face hunger while 20% of children face chronic malnutrition.
7. Grenada
Real GDP / GDP by PPP ratio: 0.60
5 year GDP growth rate: 4.2%
Many Caribbean islands are in our list, as such countries have to import most goods, and Grenada is no exception. Every-day items can often cost more than prices of similar products in developed countries such as Canada or the U.S., where salaries are also significantly higher.
6. Trinidad and Tobago
Real GDP / GDP by PPP ratio: 0.63
5 year GDP growth rate: -0.4%
One of only two most expensive countries in Latin America with a negative 5 year GDP growth rate, Trinidad and Tobago is a major tourist destination, which automatically makes things much more expensive for local residents as well.
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Disclosure: None. 20 most expensive countries in Latin America is originally published at Insider Monkey.