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Costa Rica’s Inflation Makes Life Expensive

supermarket sweep
A Run to the Supermarket Proves the Rising Prices in Costa Rica.

Inflation over the last three months is higher than in the last 12 years, and Costa Ricans are feeling the pinch. In every store and gas pump, prices seem to be on the rise, making the  Costa Rica cost of living more expensive that it has ever been.

A recent study by the National Statistic and Census INstitute (INEC), which surveyed the prices of 292 goods and services, the cost of living between May and July 2008 rose by 5.5%, the largest such increase since 1995. For those Living in Costa Rica, this equals a ¢5,500 additional price on every ¢100,000 spent, or an additional $10 for every $183 purchased.

In July alone, prices soared by 2.14%, though some products saw a much larger change. Among the products seeing a higher than average change are gasoline, vehicle purchase prices (used and new), the casado meal (which is made of staple Costa Rica food products), domestic services, and milk. Vehicles were hit particularly hard because 2009 models were introduced at the same time the dollar saw a sharp increase in value and vehicle prices are calculated in dollars.

Between August 2007 and July 2008, inflation reached a startling 14.17%, a staggering 5.61% difference between the August 2006-July 2007 year-on-year inflation, valued at 8.56%. This number was just shy of the Central Bank’s prognosticated inflation for all of 2008, which was estimated at 14.2%.

Unfortunately for many Costa Ricans, prices seem intent on continuing their upward battle. The Costa Rica government, reacting to the rise in food prices around the world, just approved a hike in the price of white rice. A two kilo bag, which today costs ¢914 will cost ¢1,115 — an increase of 22% — beginning Friday, August 8. Unfortunately, this increase is just the first of three; the second increase will take prices up another 15%, and the third increase will cost rice lovers – and dependents – an amount not yet known.

Finally, gasoline prices are also set to rise, surely causing tougher times and further contention among Costa Rica’s drivers. Effective August 13, Aresep has approved a gasoline price increase of ¢17/liter of regular gasoline and ¢16/liter for super and diesel. Regular gasoline prices, which are always regulated by the government will climb from ¢704 to ¢721 per liter, or $4.99 per gallon. Super gasoline will rise to ¢732/liter, or approximately $5.11 per gallon. Lastly, diesel prices will reach ¢726/liter, about $5.02 per gallon. Filling your 40 liter (10.5 gallon) tank up will cost you $1.17 to $1.24 extra.

Many Costa Rican families live on only $500 per month, so cost of living increase hit them hard and fast. As a socialist government and culture, Costa Rica’s leaders do much to alleviate the burden on Costa Rica’s lowest earners, but often pass costs along to those wealthy enough to own cars, live in expensive homes, and more. These latest increases are difficult to manage, however, and even the poorest Costa Rican households will be affected by the rising costs of rice and other good delivered by gasoline-fueled airplanes and cargo ships.

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Written by Erin Raub

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