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Monday, April 20, 2009

Currency exchange rates

Reais imageAfter last week's Friday Shoot-out, I received several comments about the cost of food here - or comparison with food prices in other home towns. When I read the other's entries there were several that gave the prices of some meals then converted those local prices into US Dollars. I often get asked by friends in the US what it means when I say something like 'gas is R$2.63 per liter.' It means that gas is very expensive here.

All of this is about expats converting prices to their home currency then saying it is 'cheap' to live in Brazil.  Or when a news report says someone in Africa makes only a dollar a day. These kinds of report really have no meaning.  It is the purchasing power of the local currency in the local economy that counts.
 
I just read in http://expatbrazil.wordpress.com/ that "Approximately 9,200 people stood in line in Mauá, SP,  greater São Paulo, f or six hours to register to take the test for 120 part-time jobs with the Mauá’s county government.   Salaries for waiting%2520in%2520linethe jobs range from R$835 to R$945 ... per month." This is about 1.5 to 1.75 minimum salaries.   {like minimum hourly rates in the US}
 
If we go back to the gas prices I mentioned above, converting not the price but the volume is significant. A gallon is 3.78 liters.  So we have to multiply the price by 3.78 to get a comparison on prices of gas. A gallon of gas in Brazil would be R$9.95. To fill a 10 gallon tank on a small car once would cost more than 10% of the monthly salary for these Brazilians looking for a government job - if they even had a car.
 
Many expats are paid in a combination of local currency and in their home currency. Their companies pay them a living allowance in local currency plus put money in the bank back home.  If you want to live really well here as many expats do, (compared to their Brazilian counterparts) they must convert part of their home money to local currency also.  So converting currency to determine the true cost is okay.  I receive a small amount doing accounting and I'm paid in Reais - so for me the cost here is the cost. Even if I convert the gallon of gas to the dollar it still costs US$4.42 a gallon - Gas is expensive here. ** it cost me about R$125.00 to fill up my car, this last nearly a month - it is right at 10% of my pay. This is only one example of using exchange rates when living abroad : in my earlier blog I said, " My meal was R$9.62 and Camillo’s R$8.96." If I converted this to dollars by today's rate of 2.24 then my plate would have been US$4.27 and Camillo's lunch would be US$3.98 plus a soda or water - Yes it is cheap to live in Brazil if converted to American currency but the last time I was in Houston I went downtown to have lunch with friends - my pasta plus tea plus tax cost over US$17.00 which to me is totally out of line.... everything is relative to income...
 
go to this link to be SHOCKED and APPALLED!

8 comments:

  1. Isn't the cost of living anywhere just outrageous anymore GingerV. I do think that most of it is relative everywhere....meaning that with incomes the prices of things are close but more in some places.
    The last time Prince and I went to London it was crazy how much everything costs. His brother has moved to Spain and his sister to Cyprus because of the rediculus cost of living there.
    I'm hoping to win the lottery..hey, a girl's gotta dream. Hope you had a fantastic weekend with your friends and hot-buns. And Edgar.......lucky girl you!!!!
    I was telling my friends that we had a cook-out with this weekend about you and they were fascinated.......

    Steady On
    Reggie Girl

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  2. time with the friends was great. although everyone spoke english everyone spoke portuguese 90% of the time, I can generally follow but can keep up enought to generate my own thoughts in Portuguese. I am so bad at language. Make honey mustard garlic salmon and scalloped potatoes, sweet cole slaw and chocolates for desert - there was no food left usually a sign that it was good. Hugs from Brasil

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  3. Well said Dona GingerV "Everything is related to income."

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  4. Shocked and appalled!

    The worst exchange rate is between the dollars when I retired and dollars now. Cost go up exponentially and resources go down exponentially. The guidelines did not say anything about this. And I followed all the rules. That is what you get for follwoing the rules.

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  5. Si, good morning - I wasn't thinking in these terms but yes you are right. retirement savings are static and the economy dynamic - even in the best of time the aging are the ones that suffer. I am not working my last available working years and it terrifies me that what I have put away will evaporate. we all need a small plot of land where we can go back to basics of a garden and a chicken to raise our own food.

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  6. Your post makes such a great point! It's the cost of living that needs to be considered - not the dollar-for-dollar comparison. I'm really enjoying learning about where you live. And thank you for stopping by my blog. I'm very biased but I can totally understand why you would want to snuggle my son. He is so snuggley!!

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  7. Thanks for this explantion. It is so hard to believe. That just hurts my heart that 9200 stood in line for a chance to get a part time job. Things seem so crazy everywhere.

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