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A reported blog on happenings around Latin America.

Latin America's most expensive cities

Sao Paolo and Rio are both more expensive than New York. The most expensive city worldwide? Luanda.
Rio janeiro ipanema brazil 2011 07 13Enlarge
The sun rises at Ipanema beach, on Dec. 22, 2003. (Antonio Scorza/AFP/Getty Images)

Expect to shell out big bucks to live in the Angolan capital, but move to the violent Pakistani city of Karachi and you can pay bargain basement prices.

In Latin America, you'll have to count your pennies to live in the big Brazilian cities, but you're in luck should the volcanoes of Nicaragua strike your fancy.

Sao Paolo is the 10th most expensive city in the world, and Rio comes in 12th, in the annual cost of living survey by business consulting firm Mercer.

Both outrank the most expensive city in the United States — New York in 32nd place, just one spot above the Brazilian capital Brasilia.

A study earlier this year by the global real estate firm Cushman and Wakefield found that rents for office space in Rio de Janeiro are now the fourth-most expensive in the world, ahead of New York City, Paris, Mumbai and Milan. 

Sao Paolo and Rio both jumped significantly from last year's rankings, when they placed 21st and 29th.

So why is Brazil so expensive?

Look no further than the Brazilian real’s worrisome surge against the dollar. The investment bank Goldman Sachs last year ranked it among the world’s “most overvalued” currencies, and it has kept rising since — gaining nearly 30 percent in 18 months. ...

The flow of money into the country – along with Brazil’s heavy exportation of commodities like iron ore, soybeans and oil – has led some observers to conclude Brazil has come down with an economic malady called “Dutch Disease.” ... The theory’s bottom line is that a bonanza for a commodity like oil can shrink a country’s manufacturing sector.

In Caracas — where murder isn't exactly uncommon — a two-minute taxi fare is $9.30, a can of Campbell’s mushroom soup will set you back $9.04 and a McDonald’s Big Mac costs a whopping $9.76. The Venezuelan capital jumped to 51 in the Mercer ranking, up from 100 last year. The high prices all result from the two different exchange rates in use at any point:

Plunging oil prices have forced more people are forced to purchase their dollars on the black market, where they're valued at more than three times the official rate. ... According to the National Institute of Statistics, the average income for a Venezuelan household is 2,342 bolivars a month which makes it the highest in Latin America, but only if calculated at the official rate. It is significantly lower when calculated at the black market rate, or when inflation is taken into account.

La Paz and Bolivia and Managua in Nicaragua were the least expensive cities in South America.

Follow Stephanie on Twitter: @stephaniegarlow

Read: The happiest nations in Latin America

http://www.globalpost.com/dispatches/globalpost-blogs/que-pasa/expensive-cities-mercer-rio-cost-living