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Affordability found in Buenos Aires: Compare to the U.S.

November 9, 2009

That link there shows you the top 300 or so cities in the world in descending order from most expensive. Buenos Aires comes in at number 252 on the list meaning that it is incredibly cheap to live here. Cities in the U.S. are listed on there as well for comparison purposed.

The irony, however, is that although rent, transportation and food are quite inexpensive when compared to the rest of the world, clothing, electronics, “exotic foods” (like sushi) and actually wine as well are all as expensive or more so than the United States.

Compare ipods, iphones, TVs, bluejeans, Levi’s, Banana Republic, Old Navy, etc. All of this stuff is on the order of twice as much money in the U.S. as in Argentina. Even Starbucks costs more in Argentina than in the U.S. That last one is actually boggles the mind because in the first list, the reason for the price difference comes down to shipping and taxes, but for Starbuck’s, well, they’re just greedy.

Look at Alamos wines (from Catena) or Norton, Trapiche, Las PerdicesMairena, or Mevi: all of these wines are comparitively 3 times as expensive in Argentina as in the U.S.Why is this? Well, in the case of electronics and clothing it is due to extremely high import duties as well as increased shipping costs. Don’t be fooled though, it is the import duties that account for 99% of the difference where shipping only accounts for maybe 1%.

So why is domestically produced wine (the only wine in Argentina) so much more expensive in Argentina than in the U.S. Keep in mind that I am comparing the same brands. There are many brands that exist in Argentina that you can get for less than a dollar. But none of those are sold in the U.S.

The reasons, according to my friends in wine circles, that wine in Argentina costs the same if not more in Argentina than in the U.S. comes down to three things: greed, import duties, and value added tax. Again, don’t be fooled, it is greed that accounts for 90% of this equation. But not just on the part of the wineries and distributors: greed of the government. A 21% V.A.T. is added to all goods. And in Argentina it’s added 3 times: once when the winery sells to a distributor, once when the distributor sells to the retailer, and once when the retailer sells to the public. This accounts for a 77% increase in the price of the wine due to taxes.

But that’s not all. Why is it that you cannot find any imported wine in Argentina? Literally I can count on my hand the number of restaurants and wine shops that offer something from outside Argentina. And I’m including Chile, which is their next door neighbor. A huge import duty (50% at times) exist on all imported wine as a protectionist measure. Could you imagine what wine would cost in Argentina if this duty was reduced to say 5%? The market would become much more competitive and local producers would have to reduce prices to compete. Right now that huge import duty allows them to inflate prices without consequences.


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