Work Abroad but earn in USD

Thursday, July 27, 2006

How Much Money Do You Need To Live in Argentina?

I often get the question, "How much money do I need to live in Argentina?" The answer is, and always will be, "it depends." There's no correct answer because different people need different amounts to live on.

Reader's Question

I have lived and loved Indiana, Ohio, Kentucky and Illinois, but I’m ready for the smells and foods and the extended family I left in BA fifty years ago. My social security and pension stink. I spent a couple of my smaller pensions on medical issues about six years ago, so I doubt that I’ll have more than $800 – 900 monthly to live on if I retire now. I frankly don’t want to wait much longer. I’d have to wait to age 66 to receive any more from Social Security. Can a person live on that amount renting an apartment in a safe and secure area? It’s not a question I can ask my extended family. I have tried several different ways but I can never get a straight answer. Their lifestyle and mine are fairly different, and I would expect to find some kind of work at least part-time.

A Look At The Stats

The fact is, according to the per capita GDP figures, the average person in this country is living on $3800 USD per year. This is obviously a huge improvement over the $2500 USD figure in 2002, but way behind the $9000 USD figure during the times of 1:1 convertibility.

This figure, per capita GDP, doesn't tell the whole story. It only tells you how much money, in dollars, the average citizen is generating. What that means is that if a country's exchange rate changes against the dollar, the per capita GDP is likly to change as well. This doesn't take into account the fact that things might be cheaper in the country. You might have Argentines who are making $3800 USD per year, but the things they are buying are much cheaper than in other more developed nations. Therefore, their purchasing power is actually higher than $3800 USD. There's a stat we can use to find out how much purchasing power an Argentine might have if he or she was able to transfer his or her purchasing power to the United States, for example.

Purchasing Power Parity

The per capita PPP of a nation takes into account the average income of someone living in that nation and the average expenses that person will have for the basic goods and services that all people buy. Let's have a look:

  • #3. United States: $39,319.40
  • #46. Argentina: $12,301.23

The United States ranks #3, and Argentina #46. Measured in per capita PPP, Argentina ranks above all other countries in Latin America -- offering its citizens the best standard of living of any other South or Central American economy. In fact, it ranks ahead of several European countries, including Croatia, Latvia, Turkey, and Romania. That's pretty good.

So, what does this all mean? It means that the average person in the U.S. doing an average job is making and living on about $40,000. If you took that same person and put them in Argentina to do the same job, they'd be making and living on $12,000. If you're making $40,000 in the U.S., think about what your standard of living would be like if you were making just $12,000 per year. That's how you'd live if you were working here in Argentina. That's why most people here can't afford a car or other luxuries that the American middle class can easily afford. However, this isn't the case of our reader. In her case, she's going to be transfering a U.S. dollar income here. So, let's continue with the analysis.

Correlation With The Exchange Rate

You'll notice something else pretty interesting about these stats. The per capita PPP is about three times greater than the per capita GDP. That's indicating that your expenses here are going to be pretty much 1/3 the cost of what they would be in the U.S. Add to that the fact that 3:1 also happens to be the current exchange rate and a pretty clear picture is emerging.

Estimating Your Costs

Some other expats could chime in on this, but I think a pretty good way of estimating your standard of living here would be to take your U.S. Dollar income, multiply it by three, and then imagine living in New York, Chicago, or some other major American city with that income. I think that's a mental exercise that most of us could do. Of course, if you plan on living somewhere else than Buenos Aires, you'll certainly have cheaper housing.

Just for kicks, I took the rent I was paying in pesos and looked for an apartment online in New York (except I multiplied my rent by 3) to see what kind of quality I could get. The place I have here is much better in quality than what I could get in New York even at 3 times the price.

So, our reader above ought to take her $900 pension, multiply by 3 to get $2700 and then think whether or not she could live in a big U.S. city on that amount and be comfortable. For me, the answer would be no. With $2700 a month, I'd much prefer to live in a small town. But there are people who do it.

One thing that would help a lot is if you could buy a property here. It would certainly be a lot easier if you didn't have to pay rent -- if you could put together $50,000 to buy an apartment of your own you'd be set. Of course, that's not possible for everyone, but it would certainly make living here on $2700 pesos easier.

Last I checked, the government required that retirees moving here on a pensioner visa have an income of $2500 pesos or so (for a couple), so they seem to believe that it is certainly possible to live here on that amount and would approve your entrance to the country. Whether you'd be comfortable or not would depend on you and your lifestyle.

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