Data Points Q.3 2019

A Selection of AIRINC Survey Results

This quarter’s cost of living surveys were conducted primarily in North America, Central and South America, the Middle East, Africa, and maritime Southeast Asia-Pacific.

Housing Update

Snapshots of expatriate-quality rental markets around the world

Neuquen, Argentina

Rents increased in Neuquen due to higher demand and low vacancy rates. Real estate agents have clients on waiting lists for apartments, and rentals are not listed for long before being rented. Construction projects are underway for new apartment buildings, which should help increase the number of 2-3-bedroom apartments. However, with growing expatriate demand, rents may increase over the next 6-12 months.

2019 Q3 Data Points - Neuqueen, Argentina@2x

Santa Cruz, Bolivia

Construction of new apartments and houses over the last four years has created a large rental supply in Santa Cruz. Lower demand for these rentals has resulted in dropping rents. Vacancy rates are high at all but the most popular apartment buildings. Construction continues, with more 2-3-bedroom apartments planned to enter the rental market in the next 6-18 months. However, sources believe rents have likely reached their lowest point.

Georgetown, Guyana

The expatriate rental market in Georgetown has seen extremely high inflation over the past year as expatriates arrive to work on the offshore Stabroek Oil Block. Supply of good quality rentals is extremely low. New construction and renovation of existing properties are mostly focused on 2-3-bedroom apartments. Rents are expected to continue to rise over the next 6-12 months in response to strong demand.

Managua, Nicaragua

Managua experienced a drop in the rental market due to a general economic slowdown. Last year, protests swept across Nicaragua, including Managua, and some businesses and organizations slowed their interests, bringing in fewer assignees. Vacancy rates have grown, and some new construction projects have been delayed.

Panama City, Panama

Many new construction projects of residential rentals have been completed over the past several years. Demand for these rentals has softened, leading to lower rents and an oversupply of units. Most of this rental decrease has affected high-end luxury units. Sources say the higher the price, the larger the decrease. Rents are expected to have reached their lowest levels and the slow economy is hoped to rebound since a new president was elected in May 2019.

Kitimat BC, Canada

Sudden economic growth has significantly increased rents in Kitmat’s limited housing market. The new LNG project is expected to increase demand from incoming project managers and expatriates. Current stock consists of mostly townhomes and single- to multi-family homes, though construction of new apartments is expected. Sources said that building permit requests and new construction projects appear weekly.

Goods and Services Update

Highlights from our in-depth on-site surveys

Argentina Inflation

On August 11th, Argentina held primary elections ahead of the general election scheduled for October 27th. Center-left candidate Alberto Fernandez and running mate former President Cristina Fernandez de Kirchner defeated center-right President Mauricio Macri. This result created uncertainty about the future of Argentina’s economic policy. Many investors pulled their money out of Argentina, and ratings agencies such as Fitch and Standard & Poor’s downgraded their credit rating. The Argentine peso experienced rapid and significant devaluation against the U.S. dollar, losing roughly 20% of its value in a matter of days. In an effort to stabilize the peso, Macri re-instituted currency controls that had been eliminated in 2015.

AIRINC was onsite in Buenos Aires subsequent to the primary elections. We found high inflation throughout our market basket due to the rapid depreciation. AIRINC’s market basket is largely comprised of international brands, and a significant portion of the market basket comes from imported items, which are sensitive to exchange rate fluctuations. AIRINC will continue to monitor the situation and we will conduct another pricing survey this November.

Currency and Payment in Zimbabwe

During the August survey of Harare, our visit found the Zimbabwean economy in a state of transition. This June, after a decade of using a mix of approaches but primarily relying on the U.S. dollar for transactions, the Reserve Bank of Zimbabwe announced that a new Zimbabwean dollar (ZWL), also known as the Zimdollar, was the only acceptable form of payment. Victoria Falls, the major tourist destination of Zimbabwe, and some industry sectors have been exempted from these rules and continue to use U.S. dollars. However, pharmacies, stores, and restaurants in Harare which previously posted prices in U.S. dollars quickly needed to convert these to the local currency. Some shop owners simply left the products without prices and if asked, could quote the price in USD or in ZWL.

Further complications arose for expatriates and international visitors. International credit cards worked at the supermarket and some hotels but not at restaurants or other outlets. In the course of the survey, four banks or exchange houses were visited and of those, one had coins, one had notes, and two did not or would not exchange for local currency. ATMs stood empty at the airport and the banks; none were functional. Most locals or long-term expatriates would have a local mobile money account like EcoCash to get around this scarcity of physical money, but even this is an imperfect solution due to the electricity outages that occasionally take down the mobile payment network. Our survey found that most smaller vendors would still take U.S. dollars, if necessary, but often exact change was needed. Residents who were interviewed expressed frustration and a desire to return to the USD system.

Since AIRINC’s survey, confidence in the Zimdollar has fallen further. At the beginning of August, the Reserve Bank posted a mid-rate exchange of about 9.5 ZWL to 1 USD. In early October, the value has deteriorated to 15.8 ZWL to 1 USD and the black-market rate is closer to 20 to 1. The government has taken steps to bolster the local currency and the economy, but annual inflation as published by the government in August was 288.5%.

Guyana Inflation

Inflation of goods and services in Guyana has peaked to its highest level in years. Inflation in categories such as food at home and clothing has been somewhat balanced by steady prices or minimal change in other categories as supply is able to meet demand. New businesses that cater to a foreign market, such as imported clothing, international restaurants, and entertainment, are opening across the small city of Georgetown, expanding availability and variety of goods and services. This expansion has created more competition in what was once a more limited market, but prices continue to creep upwards as the country’s economy grows. While at its highest levels in recent memory, inflation in Guyana is still moderate and lags far behind more volatile fellows in Latin America such as Argentina, Venezuela, Uruguay, and Nicaragua.

Goods and Services Inflation

Selected surveyed locations with inflation higher than 5% for 6 months

Luanda, Angola

Buenos Aires, Argentina

Accra, Ghana

Lagos, Nigeria

Caracas, Venezuela

Selected 3-month Exchange Rate fluctuations of more than 5%

Venezuela

Currency VES
Change vs EUR -68.1%
Change vs USD -68.6%

Argentina

Currency ARS
Change vs EUR -20.4%
Change vs USD -21.8%

Uzbekistan

Currency UZS
Change vs EUR -7.6%
Change vs USD -9.3%

Angola

Currency AOA
Change vs EUR -5.5%
Change vs USD -7.2%

Georgia

Currency GEL
Change vs EUR -5.1%
Change vs USD -6.8%

Malawi

Currency MWK
Change vs EUR 5.6%
Change vs USD 3.7%

Tunisia

Currency TND
Change vs EUR 5.7%
Change vs USD 3.8%

Ukraine

Currency UAH
Change vs EUR 8.8%
Change vs USD 6.9%

Country Tax Update

Changes in expatriate tax

Argentina

The maximum social security contribution has increased, effective September 1, 2019. The net effect of this change is an increase in social security and a decrease in income tax for higher incomes. The maximum contribution for social security is adjusted twice per year, in March and September. The monthly wage ceiling is ARS 146,246.86 as of September 1, 2019.

Barbados

Effective for July 1, 2019, the top marginal tax rate has been reduced from 40% to 33.5%. This tax rate will be reduced again to 28.5% beginning January 1, 2020. The child allowances have been eliminated. The net effect is a decrease in tax for most incomes. Compulsory employee contributions to National Insurance are unchanged at 11.1% up to a maximum BBD 6,194.

China

China has implemented measures that generally reduce social security contributions. The reductions are primarily targeting employer contributions to the social insurance programs and are part of a multi-year effort to unify pension systems at the national level. However, the social insurance wage base has increased in Shanghai, resulting in an increase in employee contributions to social security for Shanghai taxpayers. The net effect is a reduction in income tax for Shanghai taxpayers as the increased employee social contributions are deductible.

Costa Rica

As of July 1, 2019, Costa Rica is implementing major tax reform. The changes include increased progressive tax rates on employment income, with the top marginal tax rate increasing from 15% to 25%. The increased tax rates are effective July 1, 2019. Costa Rica is also changing the tax year, switching from a tax year beginning October 1st to a tax year beginning January 1st. There will be a transition period beginning October 1, 2019 through December 31, 2020. The net effect of the July 1st change is an increase in income tax for middle and higher incomes. Social security contributions are unchanged.

India

The new Indian government has enacted Finance Bill No.2 on August 1st which is retroactively effective beginning April 1, 2019. The budget includes significant changes with several tax provisions impacting individuals. A new standard deduction of INR 50,000 has been added, and the high-income surcharge has been increased. The basic tax brackets and rates are unchanged. The top marginal tax rate, including the high-income surcharge and education cess, is now 42.74%, up from 35.88%. Social security is unchanged. The net effect is a small decrease in tax at low to middle incomes and a larger increase in tax for higher incomes.

Nicaragua

Social security reform that would have raised the contribution rates for employees, employers, and pensioners was revoked by the President in 2018 due to revolts and a harsh government crackdown that resulted in hundreds of arrests and deaths. With the protestor movement cowed, the plan to raise payroll taxes and cut pension payments has gone into effect as of February 1, 2019. The employee rate of social security has increased from 6.25% to 7%, and the cap on contributions (previously NIO 72,631) has been removed. The employer rate has increased from 19% to 22.5% and the cap has also been removed. The net effect is an increase in social security for all taxpayers, and a decrease in income tax as social security is deductible.

Survey Location Update

Q3 Surveyed Locations and Upcoming Q4 Survey Locations

AIRINC surveys more than 150 locations each quarter.

In response to market volatility, we will also conduct survey updates in Buenos Aires and Caracas in the fourth quarter.

Make quicker decisions with access to country/city reports for education costs, tax implications, transportation information, and assignment location summaries.

View Publications

Publication

EDUCATION REPORT: NEW YORK, NY, U.S.A.

The AIRINC Education Report for New York, NY, U.S.A. provides a summary of costs for a representative list of international schools in…

Publication

Expat Tax Summary: Colombia

This Expat Tax Summary for Colombia contains comprehensive information about the taxation of expatriate income and serves as a vital resource for Global Mobility managers…

Publication

Transportation Report: Oslo, Norway

Transportation systems vary widely across locations. Do you know what to provide for your international assignees?

Publication

Site Summary: Lusaka, Zambia

This AIRINC Site Summary provides instant, on-the-ground insight of Lusaka, Zambia covering the relevant aspects of expatriate life that assignees encounter on a daily basis…

For More Information

Please contact your Client Services representative for more details and further information.

What We Do

Resources

About

Allowances Overview

Solutions Overview

Advice Overview

Benchmarking Overview

Data Points Q.3 2019

A Selection of AIRINC Survey Results

Housing Update

Neuquen, Argentina

Santa Cruz, Bolivia

Georgetown, Guyana

Managua, Nicaragua

Panama City, Panama

Kitimat BC, Canada

Goods and Services Update

Argentina Inflation

Currency and Payment in Zimbabwe

Guyana Inflation

Goods and Services Inflation

Luanda, Angola

Buenos Aires, Argentina

Accra, Ghana

Lagos, Nigeria

Caracas, Venezuela

Selected 3-month Exchange Rate fluctuations of more than 5%

Venezuela

Argentina

Uzbekistan

Angola

Georgia

Malawi

Tunisia

Ukraine

Country Tax Update

Argentina

Barbados

China

Costa Rica

India

Nicaragua

Survey Location Update

Make quicker decisions with access to country/city reports for education costs, tax implications, transportation information, and assignment location summaries.

EDUCATION REPORT: NEW YORK, NY, U.S.A.

Expat Tax Summary: Colombia

Transportation Report: Oslo, Norway

Site Summary: Lusaka, Zambia

For More Information