Inflation Is Moderate, Only Prices Rise Like Mad - Costa Rica Edition

Friday, February 04, 2011

Costa Rican frog
If you think about moving to a sunny exile in order to escape the suicidal politics of perma-money-printing that has been engulfing the bigger part of this world in the last 10 yeards, better act fast or you may suffer a price shock on the way out.
Forget about any "official", i.e. doctored, inflation figures in the low single digits. In reality, prices rise like mad worldwide.
Leafing through the two latest print issues of Costa Ricas expat weekly Tico Times I stumbled about this ad posted in the January 28 edition.
Shipping a standard 40-foot container from Miami to your residence here was 4,365.22€ last week.
That has changed dramatically. Only a week later the same service is offered for 5,092.76€ Without applying any hedonic changes this is a huge 16.67% jump in a week.
So much about tame inflation. Don't expect that changing your residence could save you from the global inflationary onslaught. Bar chats revolve around the same central topic as everywhere else in the world. While official inflation is stated at 6.4% in this lovely Central American country, oldtimers here estimate it closer to 20%.

Sure, you can "save" a lot elsewhere. Thanks to the US recession, property prices are tumbling anywhere between 50% and 90% of the original offer and this blogger has the strong but yet unconfirmed impression that the smaller discounts happen on a monthly basis. So don't pay 363.77€k for that beautiful pad next to the ocean or on a breezy hilltop. It will most likely be re-offered below 291.01€k or so next year. Construction has come to a standstill, new projects only appear on weather-worn advertisements and real estate agents jump out of their offices as soon as one browses the for sale offers in their windows.
February is the high season in Costa Rica. You would not notice on the tourist beaches where the shutters now go down long before midnight at all watering holes for a simple reason: There are almost no tourists here.
This must be a result of that great re-lol-covery that obviously keeps Americans so busy at home. In case you think I may be right, tell your central bank and the financial industry who think that we are currently only going through an economic trough.
No, we are not! This is just the beginning of the end of the longest and most exuberant credit cycle in history and the hard times have only begun.


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