How much does it cost to live in Central America?
By drawing on purchasing-power-parity (PPP) data released by the IMF, we can calculate what US $1,000 “adds up to” in various countries across Central America.
According to Wikipedia “Purchasing power parity (PPP) … is the method of using the long-run equilibrium exchange rate of two currencies to equalize the currencies’ purchasing power. It is based on the law of one price, the idea that, in an efficient market, identical goods must have only one price.”
So the theory behind PPP is that exchange rates should adjust to equalize the price of a basket of goods and services around the world. In the United States $1,000 is the equivalent of, well, $1,000. But in Nicaragua, for example, it rounds up to a hefty $4,144, see below.
We have to be careful not to draw too much from these averages as they don’t apply to all product categories. But for day-to-day goods and services your dollar will stretch further in Central America.