The Cost of Living in South America

IN the fall of 1937, in the course of a trip to a number of European countries, I made some comparisons of costs of living that were published in the Atlantic Monthly of March 1938. The article aroused much interest and discussion, and many reprints were made. During a visit to Argentina, Brazil, Chile, and Uruguay in the first three months of 1940, encouraged by this interest, I collectcd data along a similar line.

No direct comparisons can be made between the figures and conclusions herein presented and the study of European countries referred to above. Time is one disqualifying element, but more important is the fact that the European study was based on the average income in the same industry in each country for which it was possible to secure accurate data. It was impossible to use such a basis in these South American countries. The basis taken, therefore, was the lowincome group, using the hourly rate in the nationals’ money unit of value for the unskilled worker in the largest city of each country.

To compare wage rates or costs of living by reference to units of money value, however, either nominal or in actual rates of exchange, is practically out of the question, as all these countries are affected by exchange restrictions. For example, the official rate of exchange in one country was 60 per cent higher than the actual rate paid. In other countries conversion could be made only by paying from 5 to 8 per cent more than the quoted rates — the variation depending on whether it was conversion into or out of the currency of the country. Furthermore, it would be misleading to compare wage rates of these countries by conversion at. actual exchange rates into a common standard, say the United States dollar, because of the difference in purchasing power.

In the early months of 1940, the Argentine peso was equivalent to $.2335 in United States currency; the Brazilian milreis, $.051; the Chilean peso, $.0325; the Uruguayan peso, $.38. On the basis of these valuations the rates per hour for unskilled labor in the four countries were approximately as follows: —

Unit of money value Equivalent in U. S. currency
Buenos Aires, Argentina .50 peso $.117
Riode Janeiro, Brazil 18000 milreis .051
Santiago, Chile 1.50 pesos .019
Montevideo, Uruguay .20 peso .076

These rates seem very low when translated into United States currency and compared with the rate for unskilled labor under similar conditions in this country, — say $.625 per hour ($5.00 for an eight-hour day), — and lead to erroneous conclusions if they are compared even with each other. A much truer comparison is of the length of time that such unskilled workers must labor to procure the essentials of life, such as food and shelter — not the same total quantity of food or the same standard of housing, but the unit of food staples and the kind of shelter that climatic conditions and standards of housing make necessary or usual.

In all these couni ries labor is organized and social-security legislation is in effect, with the eight-hour day and forty-eighthour week, and overtime at higher rates; in some of them there is vacation with pay, usually two weeks a year; they have dismissal wage or separation allowances, usually of one month’s pay for each year of service, and old-age pensions and survivor’s insurance contributed in approximately equal amounts by the employee, the employer, and the government. In all four countries, to a varying degree, better housing for the lower-income groups is being sponsored and financed, generally not subsidized by the government. The standards of shelter vary widely even among government-sponsored projects, but the problem is recognized and its solution is going forward as finances permit.

The length of time an unskilled worker must labor to provide shelter for his family for a year, and the proportion it bears to his full year’s labor, show no great variation as between these countries themselves or even as compared with the United States and the eight European countries in the previous study. In Argentina the yearly rental an unskilled worker has to pay represents approximately 27 per cent, of his year’s income; in Brazil, 25 per cent; in Chile, 25 per cent; in Uruguay, 23 per cent. In the United States the corresponding figure would be 20 to 25 per cent, and in the eight European countries it would vary from 20 to 33 per cent.

Clothing worn in these South American countries — in some cases almost nothing — is too diversified to offer any basis of comparison.

Food also, of course, varies in character, kind, and quantity. Even the principal articles of food that served in the previous study — milk, eggs, bread, butter, and meat — are not used to the same extent by the families of workmen in the four different countries, but all of them are used to some extent; therefore we shall take a unit of one quart of milk, one dozen eggs, and one pound each of bread, butter, and meat. In these countries the metric system is used, and the equivalents in United States usage have been determined.

The amount of work required to purchase the unit of five food items is as follows: —

Hours of work
Argentina 5.20
Brazil 13.34
Chile 14.04
Uruguay 5.80
United States 2.25

In Chile, therefore, a man must work almost three times as long to purchase the food unit as in Argentina.

Another interesting comparison can now be made with the rates of pay per hour shown in our first table. While in Argentina the rate per hour is approximately 11.7 cents (United States currency) as compared with 62.5 cents in this country, or less than one fifth as much, in Argentina the worker must work 5.2 hours for his unit of food as against 2.25 hours in the United States — in other words, the Argentinean must work 2.3 times as long. Compared with the Chilean, the worker in the United States gets 12.75 times as much per hour, but the worker in Chile works 6.2 times as long for the same basket, of food.

In the previous study the worker in the United States labored 1.7 hours for this food unit, the difference arising out of the difference in basis of comparison used; and if this same ralio of 1.7 to 2.25 holds good for the European countries, the number of hours that the unskilled worker there must toil for this food package varies from 5.6 to 9.5 hours. So that, in terms of hours a man must work for food, the Argentine workman is better off than a workman in any of the eight European countries considered. But Argentina is the only one of these South American countries of which this can be said.

Food and shelter are produced in each country from its own resources. In predominantly agricultural or mining countries such as these, if we take into consideration articles concerned with industrial development which must be wholly or largely imported, — with the added burden of transportation costs, customs duties (disregarding quotas), and exchange, — a very different picture is presented. Let us consider, for instance, the smallest automobile, with the lowest first cost.

The number of years of work required to purchase this automobile, assuming that not more than 10 per cent of the annual wages is used for the purpose, is as follows: —

Years of work
Argentina 50
Brazil. 100
Chile 100
Uruguay 80
United States 5

This naturally means that there are very few automobiles in these South American countries in proportion to the population. People walk, ride horseback, or use oxen.

A unit of small cost is the kilowatthour (KWH) of electricity, or a standard-size incandescent lamp of 60 watts, which adds greatly to comfort, convenience, and health. The cost of either of these in the South American countries is affected by the fact that machinery for the generation of electricity or for the manufacture of lamps (if the lamps be made in the country) must be imported, subject to the burdens referred to above. The same is true of automobiles.

The number of minutes of work required to purchase one KWH of electricity (sufficient to light twenty 50-watt lamps for one hour) is as follows: —

Minutes of work
Argentina 31.0
Brazil 30.0
Chile 37.0
Uruguay 36.0
United States 4.5

And the comparative figures for the purchase of an incandescent lamp are just as revealing: —

Hours of work
Argentina 1.70
Brazil 3.80
Chile 3.90
Uruguay 2.00
United States .25

Finally, from the standpoint of the development of higher standards of living, better and more widespread education, stability and progress of democratic government, an interesting comparison can be made as regards the cost of a daily newspaper. In the South American countries the production of newspapers bears to some extent the burdens already referred to — that is, the machinery, supplies, and news must be brought into the country in whole or in part. Our final table shows the cost of a daily newspaper in minutes of labor: —

Minutes of work
Argentina 12.0
Brazil 24.0
Chile 16.0
Uruguay 12.0
United States 3.0