Latin America is in the grip of a cost-of-living crisis, characterised by rising costs and falling real wages.
The minimum wages in all 18 countries of Latin America do not cover the cost of goods and services, such as food, housing, healthcare and transport, according to analysis published by Revista Mercado.
Overall, minimum wages in Latin America cover 28–87% of basic living costs for a single person — known as a “market basket”.
The only exception is in Venezuela, where hyperinflation and currency devaluation has driven up the cost of basic goods and services to US$601 (A$953.67) a month. Venezuela’s minimum wage of US$2.51 (A$3.98) is the lowest on the continent and covers less than 1% of living costs. In response, the government provides a “food bonus” and “non wage bonuses” to boost the minimum wage to about US$100 (A$159) a month, according to figures published by Venezuela Analysis.
In Argentina, the monthly minimum wage is US$238.95 (A$379.17), which only covers 51% of living costs.
Brazil’s minimum wage of US$244.70 covers 44% of the market basket, while in Peru and Colombia, the minimum wage covers 61%.
Ecuador’s minimum wage comes the closest to covering basic living costs, at 87%.
However, a significant portion of workers in Latin America earn less than the minimum wage.
Workers in the informal sector — which made up nearly half (47.6%) of Latin America’s workforce last year — are not guaranteed a minimum wage, and often must work longer hours with poorer working conditions.
Only 15.7% of Colombian workers earn the minimum wage, while more than 40% earn less.
In El Salvador’s informal sector — in which 70% of the population work — 69% of people earn less than the minimum wage.
Wages are further demarcated by a significant gender disparity — working women in Latin America earn, on average, 70 cents for every dollar earned by men.
Women perform the majority of unpaid domestic labour, even if they are also employed. In Peru, this amounts to at least nine extra hours of total workload a week, on average.
Women in Latin America are also more likely to work in the informal sector, with lower pay, limited labour protections and poorer conditions.
The standard or official work week for a full-time job in Latin American countries ranges from 40–48 hours, but many work longer hours or multiple jobs to survive.
Moreover, wages in the Global South are 87–95% lower than wages in the Global North for work of equal skill, with the former contributing 90% of labour to the world economy while receiving 21% of the income.
While one might assume that the Global South is catching up, the gap is actually widening — wages in the Global North rose 11 times more than wages in the Global South between 1995–2021.
Corporate profiteering
Apart from low wages, inflation rates in Latin America — which are among the highest in the world — are a huge contributor to the cost-of-living crisis, as the costs of goods and services rise disproportionately, relative to wages.
While much of the mainstream media reports on inflation as an almost natural, inevitable process, it is directly caused by corporate profiteering.
Greedy corporations across the world have capitalised on the COVID-19 pandemic and Russia’s war on Ukraine to massively raise prices and post record profits. Corporations have raised the costs of goods and services well beyond the rise in input costs. Backed by governments that falsely blamed wages as the main driver of inflation, they have also aggressively suppressed wages to maximise profit margins.
This is directly causing inflation, which is defined by broad price rises and a decrease in people’s purchasing power.
In the United States, input costs for companies rose 1% in 2023, while consumer prices went up 3.4%. Transportation and warehousing costs, which many corporations cite as a main driver of price rises, have generally been decreasing since mid-2022.
Corporate profiteering was the main driver of inflation in Colombia between 2021–22. A survey of Colombians in mid-2023 found that 63% changed and reduced their spending due to high living costs.
Food insecurity
Latin America is the world’s biggest agricultural exporter — more than 60% of the world’s soybean, nearly half of its corn and more than a quarter of its beef comes from the region. However, at least 28% of the population are in a position of food insecurity — lacking regular access to sufficient or nutritionally adequate food to meet basic needs.
This is in large part due to an export-based food industry controlled by agribusiness oligopolies focused on maximising profits.
Food prices went up 5.8% in Brazil, 5.9% in Uruguay, 7.8% in Mexico and 7.9% in Bolivia last year, compared to 2023. Argentina was the most impacted country in Latin America, with a rise of 201.4%.
In Peru, just seven companies control 55% of the food market, with extraordinary power to fix prices, manipulate supply and further consolidate control over certain industries.
For example, Alicorp — Peru’s largest consumer goods company — has a near-monopoly over the market for products such as mayonnaise (95%), bottled sauces (91%) and soap (76%). Alicorp increased its profits by 79% from 2023 to last year, despite reporting a drop in sales.
Agribusiness companies maintain their profits by paying small-scale agricultural producers unfairly low prices, while raising the prices of their products.
In Peru, the cost of a market basket rose 14% between 2022–24, which disproportionately impacts poor people.
More than half (52%) of Peruvians — about 16.7 million people — were suffering from food insecurity in 2023.
Colonialism
It’s no coincidence that workers in Latin America — and the rest of the Global South — are paid less, work longer hours and face poorer working conditions.
Since the initial colonisation of Latin America — predicated on slavery and intense resource extraction — Western imperial powers have systematically looted the region, while purposefully destroying or undermining national industries.
Mirroring the dynamics of colonial-era plunder, neoliberal structural adjustment programs imposed by the US-controlled World Bank and International Monetary Fund in the 1980s and 1990s locked in further mechanisms of wage suppression and weaker or non-existent labour protections.
As a result, Latin America’s economies continue to be primarily export-based, subjugated to the core economies of the Global North and predicated on the exploitation of cheap labour and resources.
Political economist Adam Hanieh told links.org.au that imperialism is a “permanent feature of the world market” that transfers wealth from the Global South to North through foreign direct investment, direct control and extraction of resources, debt service repayments, unequal exchange and migrant labour.
Sanctions
Another feature of imperialism that has a profound impact on the cost of living are sanctions against Latin American countries, with the aim of causing economic collapse to bring about a change of government.
The most prominent example is the US’s crippling sanctions against Cuba since 1962, which have had complex and wide-ranging impacts on the country’s material conditions. Massive shortages of food, medicine and fuel translate to high costs for the basic goods that are available in the country.
While finding accurate data for Cuba is difficult, it’s estimated that monthly living costs for an individual cost 22,700 pesos (A$98.53, converted using the widely used informal exchange rate, current at April 16). This calculation is inclusive of heavily subsidised basic food supplies provided by the government to every family — the rest is provided for free, along with healthcare, housing and education.
The official minimum wage of 2100 pesos (A$9.12) — which it has been since 2020 — covers only 9% of living costs. However, Cuba has scored a consistently “high” Human Development Index ranking — a metric that factors in life expectancy, education and living standards — despite the damaging impacts of the US blockade.
In Venezuela, structural contradictions in the economy, further compounded by US sanctions in 2016, resulted in an economic crisis of hyperinflation and massive shortages of basic goods. A 2019 report by the Center for Economic and Policy research estimated that US economic sanctions were responsible for 40,000 deaths in Venezuela in 2017–18, along with causing food insecurity for millions.
‘Expats’ vs migrants
The legacies of imperialism and more recently, neoliberal capitalism, have generated waves of refugees and migrants from Latin America fleeing poverty and violence.
Many attempt to reach the US, where they face demonisation and barbaric border policies.
Compare this demonisation and inhumane treatment of Latin American migrants to the perception of “expatriates” — Western, often white, people who move overseas.
The distinction between “migrants” and “expats” — even though both are migrants — reflects racial inequalities and colonial legacies, and justifies a differentiated set of privileges and legal rights.
A rich white person from the US can retire in Mexico without paying tax and easily gain residency status, while millions of Mexicans live in precarity in the US without visas.
In other words, white people from the Global North are allowed to roam the world, while migrants from the Global South are denied the basic right to freedom of movement.
Especially following the COVID-19 pandemic and the rise of remote working jobs, digital nomads — a form of “expat” — from Europe or countries like the US have flocked to cities in Latin America. Taking advantage of the economic privilege that comes with earning money in stronger currencies relative to those of Latin America, digital nomads have temporarily or permanently moved to cities such as Mexico City and Colombia’s Medellín.
This drives up basic living costs, such as housing, food and services, which displaces locals who can no longer afford the rising prices.
In Laureles, a Medellín suburb popular with tourists and digital nomads, rents rose by 80% in the first four months of 2023. This was associated by an abundance of pricier short-term rentals on platforms like Airbnb.