Latin America: Hidden costs mount up

Gaining a foothold in many of the expanding Latin regions can prove to be an expensive business for companies. Jacqueline Vitali discovers that expats expect to receive high standards of care as part of the deal

Latin America’s economic upheavals have not put the brakes on multinationals wishing to expand their business in the regions, but when sending employees to the main countries of the region the prices for relocation costs are likely to surprise HR directors.   

According to a survey of leading Fortune 1000 companies conducted by KPMG’s international executive services practice, the cost of administering expatriate programmes is continuing to rise. Goods and services allowances, housing allowances and tax equalisation/protection programmes are the three expenses that have the greatest impact on the total cost of an international assignment. They also pose the most complications and challenges for HR directors when managing international assignees.  

Latin America is a costly region as a whole – although countries’ costs differ, the main destinations such as Brazil, Mexico, Argentina and Venezuela can be very expensive.

"The expatriate expects to be protected from the undesirable aspects of living in Latin America," says Alison Birkett of Expatriate Essentials. "They expect to have a high standard and good quality lifestyle with a high salary, excellent accommodation, the ability to send the children to international schools, to protect the family’s comfort and safety as well as to have domestic help.

"It is the norm for all this to be provided to a foreign national employee at company expense. Brazil and Argentina are good examples of this. A British national who recently relocated to Buenos Aires with his family was able to rent a suitable property in a desirable area within easy distance of the chosen international school at a cost of US$2,500 per month for a lease of three years.

"The employer is funding the property plus a car and school fees for the two children. In addition, the family were given an orientation programme to find the accommodation and school, as well as generally settle the family into the assignment. This included language tuition at home and in the host country once they had arrived," Birkett says.  

It is essential for HR to provide an across-the-board mobility allowance in addition to other benefits as an incentive to expats. "In Brazil and Colombia there is the issue of personal safety and the need to provide cars and drivers to expatriate families in order to safeguard their personal security," says Birkett. "Additional payments may not come in the form of specific allowances but more in the value and approach to the whole package".

International assignments are an expensive business, and it is important to secure successful transition. A cross-cultural preparation programme for expats adds to the high costs of relocation but companies have to bear in mind that this kind of training is vital for employees heading overseas. Mary Conti from Berlitz International explains, "Training allows employees to succeed professionally and personally. These are extremely important considerations that can make or break an overseas assignment."

Costs of living in Latin America

Brazil continues to be the main Latin American destination for expats. According to Mary Beth Transue from CRP CitiCapital Relocation, "An employee on assignment in Brazil should receive a hardship allowance equivalent to 5 per cent of their base salary. This can be paid fortnightly, monthly or quarterly. The amount of the hardship allowance is suggested by the US State Department."

Housing costs per month can range from US$2,900 for a two-bedroom apartment to US$7,000 for a four-bedroom house. Typically, a maintenance fee equal to 10 per cent of the monthly lease amount is also added. The cost for a chauffeur-driven car can range from US $400-950 per month.

When costing an assignment, accommodation is one of the largest expenditures. The average cost for a two-bedroom apartment is:

Destination Countries Rental Cost per Month (US$)

Buenos Aires, Argentina           1,000-2,104    
Sao Paulo, Brazil                      1,100-3,000    
Mexico City, Mexico                1,300-2,500    

Schooling is another primary concern for families. The following table shows the average tuition rates for primary grades at some international schools.

Country                       City                                         School                                     Cost (US$)                             

Argentina                      Buenos Aires                            Asociaci¢n                               10,350
Escuelas Lincoln           Brazil    Rio de Janeiro             American                                  15,000
School of Rio               Chile    Santiago                       International School                  7,225
Nido de Anguilas          Mexico Mexico City                 Greengates School                    5,750
Guatemala                    Guatemala City                         Equity American School            4,550

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Expats with children will also have to consider hiring a nanny but the cost of childcare is very accessible compared to the cost of Europe. Here is a brief list of what nannies are paid per hour:

Brazil (live-in) $3.50   Argentina$2.49   Mexico $0.88