VenezuelaSA
Housing / Real Estate
Why Is Caracas Latin America's Most Expensive City?
By Simon Romero AND Gregory Kristof / The New York Times
A new report by the consulting firm Mercer has confirmed what Venezuelans long suspected: Caracas, pricier than London, Dubai or Lagos, is also by far the costliest city in Latin America, beating out notoriously expensive São Paulo in this year's ranking.
Political partisans began ascribing blame for this notoriety almost immediately since even a seemingly innocent statistic is cause for argument in one of the region's most polarized nations. "Long live socialism," was how one commentator critical of President Hugo Chávez introduced the news. Others pointed out that Caracas incomes lag far behind those in cheaper cities like Amsterdam, Helsinki or White Plains, N.Y.
The government's Bolivarian News Agency took a different position. "Suppliers are taking advantage of certain aspects of the city's reality to apply measures characteristic of capitalist culture," the agency said, attributing the high cost of living in Caracas to businesses engaging in speculation producing "market distortions."
Few visitors to Caracas are surprised to learn that capitalism is alive and well in this anarchic city. Despite the vigilant use of price controls for a range of basic products and a wave of nationalizations and expropriations by Mr. Chávez, life in Caracas, perhaps more than any other Latin American capital, is still defined by its reliance on one volatile commodity: oil.
Even when oil prices are relatively low, oil-export proceeds slosh through the economy, creating arbitrage opportunities for everyone ranging from bankers (yes, there are many of them left in Caracas) to the many thousands of street vendors known as buhoneros who sell their wares outside the tightly regulated formal economy.
What is more, oil attracts companies that want to extract it regardless of the politics on the ground. The recent influx of oilmen from as far afield as China and Russia, as well as representatives from other multinationals selling products in Venezuela, explains in part why an unexceptional apartment in Caracas rents easily for $4,000 a month.
Combine that robust demand with a shortage of available properties, partly due to rent-control laws that make it extremely difficult to expel tenants and a dearth of construction because builders are afraid their projects will be seized by the squatters or the government (or both), and rents in some districts can run double or triple that amount. >>> Go to Full Story >>>