TRAVELLERS have long known that the richer a country, the more likely a visit is to burn a hole in their wallets. A recent survey by Tripadvisor, a travel website, put Oslo, the capital of super-rich Norway, as the world’s priciest destination, with a one-night stay in a four-star hotel with dinner and drinks for two costing more than $600. But near the top of the sticker-shock rankings is a surprise entry: upper-middle-income Brazil. Hotels in São Paulo, the business capital, or beachside Rio de Janeiro, cost more than in London or Zurich. Visitors who go window-shopping will find the high prices hit locals too. Clothes, cosmetics, electronics and cars are all more expensive, sometimes much more, than in most other places. The Economist’s Big Mac Index finds Brazilian burgers are dearer than everywhere else except in three much richer countries, (Norway, Sweden, Switzerland) and one dysfunctional one (Venezuela). So why is Brazil so pricey?
A special report in this week’s issue explores the question in more detail. A big part of the answer is currency appreciation, caused by economic stabilisation in the 1990s and a huge increase in commodity exports since then. A decade ago a dollar bought 3.5 reais; it now buys less than 2.3 reais—which understates the scale of the change, since Brazil’s inflation was much higher, so reais should have become cheaper, not more expensive. For Brazilians, though, currency appreciation has actually made life cheaper by cutting the price of imports. They point to the fabled custo Brasil (Brazil cost), as the country’s value-for-money problem has long been known. IMF figures show that in most poor and middle-income countries, money goes further than market rates would suggest because wages are lower and non-tradable goods are cheaper. A Mexican’s spending power, for example, is 45% higher at home than if he bought dollars and shopped across the border. But a Brazilian can buy little more at home than he can in the United States.