Living in Colombia
How to live in Colombia
My New Year’s Inflation
07 days
In Colombia, the taxi you took to the New Year’s party will probably cost you more when you leave the celebration in the wee hours of the next morning, despite the distance being exactly the same. It is not a case of a taxi driver taking advantage of inebriated patrons, but rather just a bit of New Year’s inflation!
If you are just visiting Colombia you probably will not notice this phenomenon, let alone care about it, but to those of us who live here, we brace for the time honored tradition of raising the price of virtually everything on January first. Hundreds of thousands of businesses, and not just small mom and pop ones, raise the prices of their services or merchandise every time this date rolls around.
This is not normal inflation, which results from an excess of demand over supply, or currency weakness. No, this is programmed inflation, just because a new year has begun! The percentage is entirely up to the merchant, and there is no law or government intervention to worry about, but between 5-10% isn’t unusual. It is a very unique and curious custom, to say the least, and although many complain about it, it is accepted as normal here!
I am not sure if the DANE, the government’s statistical agency, takes this into account when it calculates inflation, which for 2011 they pegged at just over three percent…
Working in Colombia
0250 days
Things are expensive in developing countries, but human labor generally is not. As a result, wages rarely reflect the cost of living. Even an university graduate well into his career might not be able to afford to buy a home and an automobile, and might even have trouble paying the rent on an apartment in a middle class neighborhood. This is true in all of South America, including Colombia, where a small percentage of the population controls almost all of the wealth. Thus, if you hope to land some work in a Colombian city, you must first severely lower your expectations, or finance your stay with your savings and not rely on a local source of income.
A reader recently told me had a job offer in Bogota with a monthly salary of three million pesos, and asked me if that was a good wage. I responded that yes, for Colombia, that’s a very good income, which most here could never hope to attain in their lifetime. Yet, to put things into perspective, that’s less than 20 thousand USD a year at current exchange rates, which would mean poverty in any developed country. In Colombia, minimum wage is 535 thousand pesos a month, and one considers oneself fortunate if one earns more than a million pesos a month. Considering that the rent on a tiny two bedroom apartment in a not so tony area of Bogota or Medellin would set you back 700 or 800 thousand pesos a month, how does anybody manage to live an even moderately comfortable lifestyle?
Colombians stretch their incomes in ways that boggles the mind of any observer from the USA, Canada or Australia. They manage because typically both spouses in a couple will work. Their work week is six days long, not five, and hours can stretch from 8:30 AM to 6:30 PM. Typically, they’ll make monthly medical insurance contributions as well as pay into a pension plan. Buying a home (likely an unfinished condo in a high rise) or new automobile, usually means saving for many, many years and taking on a debt load most Americans would find unacceptable. Mortgages are typically for 30 years with a rate of over 13% per annum, while cars are ordinarily financed over ten years.
The small but insanely wealthy elite are those who drive the economy. Many made their fortunes by selling their land in burgeoning urban areas while others are entrepreneurs. Of course, there’s those who attained great wealth via corruption or crime, and they likely do have a significant representation in this privileged group due to the very nature of Colombian society. At the other end of the spectrum, there’s a huge segment of the working population that makes a living outside the system, be it peddling their wares on streets or working as maids.
If you do get work in Colombia, you’ll have to teach your pesos to perform unimaginable feats!
Real Estate Booming in Colombia
0259 days
Real estate has been booming for years in Colombia, seemingly unaffected by the world economic crisis. While the main driving force of this market is the growing affluence in the country, the low end of the housing market has been just as strong thanks to generous mortgage subsidies provided by the federal government. Cynics will say that the laundering of narco money plays an important role, but there’s no way of knowing how much really comes from illegal sources. Wherever you look in Colombia’s large cities, high rise condominiums are sprouting out of the ground at a frenetic pace, making the cityscape look like Sao Paulo (Brazil). The down side of this uptrend is that prices are reaching such levels that many, including foreigners, are being pushed out of the market.
In the Poblado district of Medellin, new apartments costing well over 300 million pesos, or around 167 thousand US dollars at current rates, are far from unusual. Anything under 150 million (83,000 USD) in that area, even for the smallest condo, will be hard to find. While this may not be anywhere near the costs of Manhattan real estate, it’s surprising in a country where a large portion of society earns about 500 dollars a month. However, as happens in Brazil or virtually any developing country, a small percentage of the population holds a great amount of wealth and real estate makes up the lion’s share of their investment portfolio.
For a foreigner, getting financing can be virtually impossible unless you have a solid Colombian source of income. You can have all sorts of assets and income in your country of origin, but this means nothing to a local bank. In this situation, your only remaining option will be to buy property strictly on a cash basis. Even if you do manage to get a loan, interest rates are high in Colombia, making it an expensive proposition. Buying with no financing does have its caveats if your money is in foreign banks. Bringing bundles of cash into the country will lead to problems with Colombian customs, so you’ll have to resort to a wire to a Colombian bank. Problem is, in order to open a bank account, you’ll need a cedula, a national identity number.
Supposing you do get sufficient cash into the country, you probably will not be looking at 300 million pesos, but rather gravitate toward the lower end of the market, where’s there’s scores of opportunities in the 35 million to 80 million peso range. Almost all of the new housing projects in that price range, however, will be in or near poor areas of town, even if the building itself is a gated community. Furthermore, you can be certain that the unit you purchase will have a living area well under 60 square meters, and will be unfinished. Thus, plan to spend at least another 20 million pesos to put up and paint dry wall, put in flooring, install all electrical fixtures, kitchen sink and cabinets, and so on. If the apartment has 2 bathrooms, the first will be equipped, but in all likelihood the second will be completely bare. A parking space is frequently at extra cost, perhaps another 7 to 10 million pesos. Thus, your final tab will be much higher and it will take some time to get the apartment ready for occupancy, be it by you or by renters. On the positive side, constructors typically allow you to spread the 30 percent down payment out over a year or more, and often as little as 1 million pesos is required as the initial deposit. Community fees are usually quite small at this level, often under a 100 thousand pesos, and typically you’ll have to cover the legal costs which can easily be more than a million pesos.
If you’re thinking of buying rural real estate, if it’s within an hour’s drive of the city, you’ll likely encounter exorbitant prices, but as you move further away, you’ll come across bargains, such as an acre with a small house for the equivalent of just 12 thousand dollars. Most often, rural land surfaces are measured in terms of cuadras, or 64 by 64 meters (210 square feet). Just remember that the further you go from the city, services become more unreliable or even nonexistent. Secondly, there’s still areas of rural Colombia that are infested by either criminal or terrorist groups, or both. If the property you buy is within such a zone, it will probably be an incredible deal, but there’s a good chance you’ll be abandoning your plot of land in the near future.
Unlike Mexico, there’s no foreign enclave anywhere in Colombia, but there’s a significant number of non-Colombians, particularly Americans and Canadians, installed in Cartagena. Not surprisingly, the most expensive real estate in the country is found in Cartagena. If you’re going to invest in Colombia, becoming fluent in Spanish will pay off!
- Informe Inmobiliaro – digital version of a free monthly magazine listing new housing projects in Medellin area (in Spanish only). This will also give you links to several construction companies’ web sites, many of which offer virtual tours of units.
- Metro Cuadrado – similar publication, for Bogota area.
- Finca Raiz – a directory of all types of real estate across Colombia (in Spanish)
The Cost of Giving Yourself a Good Living
0757 days
To give you a rough idea of what things cost for two people living in a large Colombian city, let’s make a list. To arrive at figures in US dollars, divide by 2000, which has been the median exchange rate of late,. For Euros, divide by 2800. Note that the 16% VAT tax (IVA) is hefty and almost always hidden in the price of things.
- Meals in restaurants: A complete meal in a cheap restaurant (not fast food), per person: 6,000-10,000 pesos. The same meal, in a nice restaurant: 30,000-40,000 pesos, per person. A ten percent tip is often included on the bill, but otherwise, most Colombians don’t tip at all.
- Going out for a drink: A cheap beer in a shitty bar: 2,000 pesos, while in a nicer bar or restaurant 3,000-4,000 pesos. Again, Colombians never tip, but you should!
- Newspapers & Magazines: Newsweek (English): 12,000; Time (English): 14,000. A popular Colombian magazine, in Spanish: 4500-8000 pesos. A non-tabloid Colombian newspaper, such as El Tiempo or El Colombiano: 1300-1500 (higher on Sundays).
- Groceries: A full grocery cart at say, Exito (Walmart-like), avoiding most junk food, every two weeks: 200 to 250 thousand pesos.
- Shoes and Clothing: if they’re made in Colombia, cheap, if imported, you’ll pay more than what you would back home, and maybe not even get the real item!
- Rent, 2-3 bedroom apartment in a secure high-rise building in a good neighborhood: 750-800 thousand pesos a month. Renting the same unit in an upscale building: 2 million/month.
- Utilities, estrato 4 (see posting about rents), 200 thousand/month
- Gasoline: Pricing controlled by the government and kept roughly at the same price all the time, regardless of world prices:
7000 pesos for a gallon (yes, sold in gallons here). - Computers: Up to a certain price, no VAT is charged, so prices are only slightly higher than in the US.
- Electrical appliances: Imported brands sell at a premium, while national brands, like Haceb, are much less and much vaunted for their quality by Colombians themselves (I’m so very sorry I bought an Electrolux fridge!). Most people want gas stoves and water heaters, and expect to pay a lot for a clothes dryer, as nobody here uses them.
- Cell phone minute, no plan: 200-300 pesos. Note that the fee is the same even if you call from one end of Colombia to the other. Most used cell phone providers: Tigo, Comcel and Movistar (Telefonica)
- Cheap cell phone, no plan: around 40,000-60,000
- A maid, hired directly, for 6 hours: 20-30,000. While us “rich” folks from the north can’t afford a maid back home, here most middle class families have one.
- A ticket to a movie matinee: 3,500-6,500. Luckily, most foreign films are subtitled. Large popcorn and drink: 12,000.
- Buying a really cheap condo unit: 45 million (only about 22,000 USD). A middle-class unit: 90-100 million. A unit in an upscale building: 300 million. Mortgages average 13 percent per year.
- Cost of consumer loans and credit card interest rates: 20 % annually and up.
To resume, if you live frugally 1000 USD would afford you half-decent living, while 2000 USD would mean living well. To live like a true snob, you’ll need 4,000 USD and up. Remember that even professionals here earn only a fraction of what “first world” people do, yet they own their own homes, a car, and take annual vacations. They manage this because they value money more than we do and can more easily resist buying on impulse than we do in our consumer-crazy societies! A lot of families get by on 500-600 USD a month — Don’t even attempt to imitate them, because you wouldn’t last a day living in the “barrio popular” (not slums, but you might think of them as a little scary anyway!) where they spend their entire lives.
Adventures in Renting
2758 days
The good news is that apartment and house rentals in Colombia are inexpensive in relation to what you would pay in the US, Canada or the UK. A large 3-4 bedroom townhouse in a good area of Medellìn, for example, would rent for a bit over a million pesos a month, which at the current exchange rate would translate to slightly more than 500 dollars. A three bedroom apartment in the same area might go for 750 or 800 thousand pesos, or roughly 375-400 dollars a month. Rents of a similar quality are a lot higher if you choose to live in Cartagena.
As there’s been a huge construction boom in all large and medium sized cities, there’s a lot of new units available, and in top condition. Rental contracts never include a damage deposit or more than the first month’s rent, payable only when the ink is dry and you have the keys in hand. Contracts are almost always for six months and you have to give two months notice or it automatically renews for another six. Most units come equipped with a gas stove and a small gas/electric water heater, though almost none include a refrigerator or clothes washer. Older and cheaper units might not have a hot water heater and probably no gas connection, in which case you have to order a gas canister (pipa de gas) every few months, which they’ll deliver and install for you. When you have to choose between electricity or gas, gas is always the more economical choice. An electrical water heater will run your utility bill skyward, especially if you forget to shut it off for a few hours! Air conditioning is seldom used because of its high power consumption, and if where you live is at an altitude than 4500 feet (1500 meters), you likely wouldn’t need it anyway.
The bad news is that you probably won’t be able to rent any of them! Almost all rentals are handled by agencies which are extremely demanding of potential tenants, and even those offered directly by the owner will expect a pile of documentation. Not only will you have the burden of proving that you have sufficient income, but two other people, Colombians, will have to stake either their income or property to guarantee against any rental income losses or damage to the premises. All the documentation has to be duly notarized. Without the guarantors, no deal, even if you offer paying an entire year of rent in advance! The reason they’re so severe is that Colombian tenants have a tarnished reputation, often breaking what they can’t steal once their contract is up, and unfortunately, landlords don’t regard foreigners as any more reliable. Add to that the fact that unpaid utilities will be charged to the unit owner, and you begin to sympathize with the enemy!
One solution for foreigners like us is to have our Colombian spouses (common law is good enough) use their relatives as guarantors. Another is to have other people, known to the landlords, recommend you and bypass the rental agencies and the usual procedures. In smaller towns you’re more apt to rent directly from the landlord than you would in a big city.
A word to the wise: Avoid renting any unit that’s not within a gated community (unidad cerrada), not only for security reasons, but for the potential clashes with neighbors. Cultural differences may be vast, and installing yourself in a “barrio popular” will bring them to the fore. If the high decibel levels don’t get to you, perhaps the impromptu car repair shops or constant flow of beggars will!
Utilities cost more than in many other Latin American countries because of a fundamental difference in the way you’re billed. Whereas the usual thing would be a tiered system based on actual consumption, in Colombia, they have “estratos”, which translates as “classes”. Arbitrary city areas are designated as belonging to a class ranging from one, the lowest, to six. Thus, a unit in a ritzy area such as the Poblado in Medellìn would probably be classified as estrato 5 or 6. What this means is that you’ll pay a higher rate for all your utilities, and not just for water, electricity and sewage, but for your telephone land line, your Internet connection and your cable TV! To give you an idea, our apartment is in a estrato four zone, and we have a combined package phone+high speed Internet+cable TV that costs us 122 thousand pesos a month (61+ USD), while water+light+sewage runs at just over 90 thousand pesos a month (45+ USD). That may not sound like so much compared to say, Los Angeles, but it’s a lot for middle-class Colombians who work their tails off for two to three million pesos a month (1,000-1,500 USD).
Colombian Peso Exchange Rate
