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Cost of Living in Costa Rica

costofliving

Cost of Living in Costa Rica

Costs of Living Can Vary Widely

The costs of living in Costa Rica have increased over the past 20 years. Life here is no longer dirt-cheap. Many urban and tourist areas of Costa Rica now cost much more to live in compared to the 1990’s. But you can still live inexpensively if you consume mostly local products, which almost always cost much less than imported items.

For example, take a look at some of the major cost of living categories: labor, health and home insurance, medical care, dental care, most medicines, commercial and residential rents, restaurants, locally produced food, and many other items and services. All of these still cost much less in Costa Rica than in North America or Europe. A living minimum wage, for example, costs approximately $2 per hour, or $3 when you add the mandatory Social Security and other benefits.

Imported Goods Tend to Boost Cost of Living In Costa Rica

Basically, a wave of foreign investment and internal growth has catapulted Costa Rica to the position of enjoying the second-highest per capita income in Latin America — second only to Chile. The influx of all that money has led to the importation of many foreign luxury items, which in turn has affected the cost of living. Examples include: vehicles, electronics, hardware (computers, motors, machines, etc.), software, specialty foods, construction finishes, etc. These items all cost more here than they would back “home.”
However, locally produced items which cost less do not necessarily mean poor quality, just as high-cost and/or imported does not always mean better. The bottom line is always the same: what is the best overall value for your dollar (or colon)?

Besides the inevitable shipping costs, the main reason imported goods cost more here, is that they must pay duty and customs fees to enter the country. Costa Rica still derives a majority of its income from fees and tariffs on international trade, as it did in the days when Kings ruled here, so we cannot expect this policy to end any time soon.
In addition, Costa Rica lacks the kind of cutthroat competition in the retail space, low taxes, and top government paid-for infrastructure, that has made the importation of consumer goods from Asia so cheap in the US. Call it the Wall Martization of America. Granted, Wal-Mart, Pricemart, and others are already here.

But the process of turning Costa Rica into a cost of living wonderland like the US cannot happen as long as tariffs and duties remain high. As you may have noticed, Wal Mart in Costa Rica is a far cry from its US version: prices most familiar items here are more expensive than in the US stores, and not much cheaper, if at all, than other comparable stores.

Living Costs in Costa Rica Depends on the Dollar

When we bought our first farm here in 1992, living cost much less than today. One dollar bought you 148 colones (compared to 550 as of May 2014). As Costa Rican inflation made the colon a little weaker each year, the dollar appreciated by at least as much, keeping the value of the dollar steady vis a vis the colon. For this reason, when we started to come here and invest some 21 years ago, dollars were golden: everybody wanted them. You knew if you kept your money in dollars, you would gain or at least hold steady, year after year, compared to the colon. And so it was – for a while. I remember that minimum wage was at $1/hour for the longest time, even as it went up steadily in colones.

The number of colones one dollar could buy rose gradually until around 2008, when it peaked at over 600, only to fall back to 500, where it hovered until 2014. Meanwhile, local inflation has continued to rise at 3-6 percent per year. However, the dollar jumped in value by ten percent in early 2014, to 550, and economists say that more appreciation vis a vis the colon is coming. Most people expect the costs of living in Costa Rica to start to get cheaper again for those who have dollars or euros.

Why Increases in Costs of Living Are Not Necessarily Bad

Please remember one thing: around the world and without exception, the lower the cost of living, the worse the standard of living. In other words, in a place like Nicaragua, local goods and services will be cheaper than Costa Rica. For example, the average Nicaraguan is eight times poorer than the average Costa Rican. However, the resulting lack of social fairness and opportunity can be a breeding ground for instability, as we have seen as well in Haiti, Guatemala, el Salvador, etc. In the final analysis, would you really want to invest or retire in a country wracked by abject poverty? Best to think twice about that one.

How Much Does It Cost to Live in Costa Rica Per Month?

The true cost of living in Costa Rica depends entirely on your lifestyle and choices. A monthly budget here for two can range from “luxury” ($6,000+), to “well-off” ($4,000+), to “upper middle class Central American” ( $2,000+) – and of course, everything below, above, and in between.

What Is the Difference Between The Cost of Living Budgets?

Below is the breakdown for the three budgets, assuming two adults and one pet. Of course, the cost of life in the “luxury lane” only just begins at $6,000/month, and can go up without limit. By the same token, a creative couple can live on much less than $2,000 a month. For example, by living in their own already paid for home, or by house-sitting for someone else, or by paying low rent, and by doing without a fancy 4 by 4 car, they could cut their budget to the $1,000 range.

Luxury: cost of living $6,000+ month total

$2,500: rent or mortgage, including utilities
$800: food
$700: car
$600: medical (includes insurance plus out of pocket doctor/dentist visits)
$500: personal
$400: entertainment
$400: travel
$100: 2 big dogs

Well-Off: cost of living $4,000+ monthly total

$1,500: rent or mortgage, including utilities
$600: food
$500: car
$500: medical
$300: personal
$300: entertainment
$250: travel
$50: 1 big dog

Central American Upper Middle: cost of living $2,000+ monthly total

$600: rent or mortgage, including utilities
$400: food
$300: car
$200: medical
$200: personal
$150: travel
$125: entertainment
$25: 1 large cat

copyright May 12, 2014, by Tim Woodruff