http://www.reuters.com/article/usDollarRpt/idUSN3139619020090831
If someone asked what the most expensive city in the Americas is, you’d guess New York City – and you’d be right.
How about the 2nd most expensive?
Not many people would go with Caracas, Venezuela, but that’s the answer, according to a Reuters story from yesterday. Thanks to a rigid official exchange rate and a weak supply of dollars – something I’ve used to my advantage across the globe – the black market exchange rate is almost 3 times the official 2.5 bolivars/dollar rate held by the government.
While basic, domestic products like food and clothing remain relatively affordable thanks to government subsidies and price controls, all importers are forced to scrounge together currency through back channels. Meanwhile, inflation rates keep people buying or converting their money into hard currency to avoid being left with worthless notes. Interest rates are purposely kept lower than inflation, reports Reuters, to keep people from saving.
Consumers are likely to continue to spend entire paychecks and shun savings in a country where interest rates are kept below inflation to encourage consumption. “
‘Why save? It will be worthless in a few months. It’s better to just spend the money and enjoy yourself while you can,’ said Maria Elena Blanco.”
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