You will hear two very different things, depending on who you talk to, about the cost of living in Panama. Some people will tell you it’s the cheapest place on earth, while others will insist it’s crazy expensive. Neither of those people will be entirely right, but a new study released by Movehub, backs up the point of view (of which I am a supporter of), that living in Panama is cheaper than living in the United States.
According to their new 2015 cost of living index (provided by Numbeo), the United States has a consumer price index of 76.53, while Panama has a consumer price index of 55.16. Out of 119 countries ranked in the index, the United States ranks as 23rd most expensive, while Panama is right in the middle of the pack at 60th. So if cost of living in Panama is measurably cheaper than the United States, why do some expats feel it’s the opposite? I’ll go into some of these reasons below, as well as some ways to save money if you feel like your life in Panama is too expensive.
Rent: Comparing Panama City highrises to US city outskirts and rural living
Rent Index: Panama 31.22 United States 36.17
I’ve talked to several American expats who tell me that the rents in Panama City are more expensive than the rents where they were from. I’ve also talked to several friends and family from New York, Chicago, and LA, who gush about who cheap my rent is. Can they both be right? Well to a certain extent, they can. Because they are comparing the rents in Panama City to very different circumstances in the US. The truth is, Panama City is a dense international city with limited space and as such, you pay a premium for rent. This is true anywhere across the world. This is why rents in LA, New York, and Chicago are such much more expensive than Jacksonville or Louisville. So if you came from a place where you were living in a city or rural area where you were paying $800 for a two bedroom and two bathroom and are now paying $1300 in El Cangrejo, then you’ll think rents are more expensive. But if you compare it to other dense big urban cities, you’ll find that the rent is actually a pretty good deal.
For example, my wife and I pay $1100 a month to live in a 3 bedroom, 2 bath condo in Edison Park. Edison Park isn’t quite as trendy or in high demand as El Cangrejo, Punta Pacifica, or San Francisco. But it’s still a good area with 2 supermarkets and a warehouse club in walking distance, along with a drug store, several restaurants. a private school, and multiple bus stops. Now before I moved to Panama, I lived in Tampa, Florida. In Tampa, could I have found 3 bedroom, 2 bathroom apartments for $1100 or less. But they would’ve been two story walkups on the outskirts of the city, not within walking distance of anything and requiring a car to get around. Instead now, I live in a highrise with an amazing view, and can live without the expense of a car because I can get everywhere by walking, taxis, or public transit.
Transportation savings is also another area directly tied to rent that most people don’t consider. Most expats can live just fine within Panama City without having to own a car. There are some cities you can do that in the US, but you pay a huge premium on rent to live there. Try getting 3 bedrooms for anything close to $1100 a month in NYC or Washington DC. My sister lives in a 1 bedroom apartment in a good area of Manhattan (Edison Park level) for $2800. And that’s considered a good deal. Anywhere else you want to live with reasonable rents in the US, you’re going to need to own a car.
Now if your family already had an old car paid off, low insurance payments, and didn’t drive around much, then maybe this isn’t as big a savings for you. But for my wife and I, we had two car payments, two insurance payments, two cars we needed to fill with gas and perform maintenance on. Now in Panama City, we’ve gotten rid of all of that, and take a combinations of taxis, Uber, and the bus system to get around. All together that saves us about $1000 a month in transportation costs from when we lived in Tampa. So even if rent costs are comparable, our apartment is giving us significant savings by being in a city that allows us to live car free.
If you want to save on rents, choose almost anywhere else besides Panama City (and certain retirement havens like Coronado and Boquete). You’ll find that it’s significantly cheaper, and probably less than what you were paying at home. If you need to live in Panama City for work, then consider areas like Edison Park which are safe, convenient, and expat friendly, but don’t carry as high a price tag as the more trendy expat areas.
One last note about rents: Rents in Panama are usually negotiable. Their first offer is not their final offer. Our apartment was listed for $1250 before we got it down to $1100. It helped us that my wife’s aunt is a real estate agent who could negotiate for us, but even if you don’t have one in your corner, realize that you can probably knock $100-200 off the listed price of the unit you are trying to rent.
Dining Out: Eating at Expat Restaurants vs. Local Restaurants
Restaurant Index: Panama 40.39 United States 68.06
Another area that I’ve heard expats say is more expensive than back in the US is the cost of going out to eat at restaurants. This is true if you go to restaurants that are located in heavily expat areas, and marketed towards expats. You will find yourself paying $14 for a burger and fries, and $18 for chicken and pasta. But this is because restaurants know their target audience, and are pricing accordingly. You average Panamanian does not earn nearly as much as your average expat, yet they still find places to eat a good meal. So if you look outside of the trendy restaurants, you will find a much better deal.
I covered this topic in an article I wrote called Dining Out On a Budget. There are plenty of good deals to be found. For example, my wife and I enjoy eating a lunch spot by our house that provides a rice, beans, plantains, a salad cup, your choice of meat, and a small drink for $4. My wife and I once did a whole work week of lunches there for less than $50 combined. You’ll also find that in most restaurants, they have widely varying costs of entrees, and that you can get a good deal by deal shopping in the menu. For example, there’s a restaurant we like in Casco Viejo called Casablanca. The menu they have there is really varied, both in items and price. You can pay in the high $20s to get a steak there, or $8 to get a big seafood paella. The paella is a much better tasting dish than than the steak.
I’ve found on a whole, if you avoid the trendy spots, even nicer restaurants in Panama are more affordable than their similar counterparts in the US. For example, there’s a great seafood restaurant in Panama City called La Casa Del Mariscos. Is it expensive compared to normal restaurants? Sure. But it’s also significantly cheaper than a high end seafood restaurant in the US. In Casco, there is a restaurant called Donde Jose, which provided a 16 course pre-fixed menu in an intimate setting. Is it definitely more expensive than most restaurants. But if you were to go into that kind of restaurant in the US it would easily cost you 2-3 times what it costs you here. So when you compare apples to apples, you still get a pretty good deal.
Also, standard tip in Panama is 10% (usually added to the bill automatically), compared to 18-20% in the US, so you’re saving 10% on your meal right there.
Grocery shopping: Buying imported groceries vs. local choices
Groceries Index: Panama 61.03 United States 81.81
Another area of contention on the cost of living in Panama is the cost of groceries. And I’ve found that like much else, how affordable groceries are depends on how attached you are to having the things from home. If you want your imported goods, you are going to pay a premium for that. Almost everything that is a US name brand prepackaged good costs more here than it does in the US. Same thing goes with produce that is not local to Panama. If you are trying to by fruits and vegetables that don’t grow in a tropical environment, you will pay more. Certain other items, like bread and milk, are slightly more expensive in Panama. However, if you are willing to shop mostly local goods, you will find significant cost savings.
Areas where you’ll save a significant amount on groceries include meats, deli cold cuts, cheeses, and local produce. I’ve found the deli counter to be a steal in Panama. We get sliced cheeses and deli meats for about half what we were paying in the US. So even if I pay $0.30 more for a loaf of bread, I’m paying $5 a pound cheaper for what I’m putting on that bread. Meats are also significantly cheaper. When my dad came and visited, he was looking around in the super market, and remarked to me “oh, the meats don’t seem that cheap,” until he realized that the meats here were priced in kilos, not pounds. Then he realized what a good deal it was. Produce that is local to Panama or the nearby region, like bananas, pineapple, mangos, mamons, and manderins, are also a good deal cheaper than they will be in the US. So the basics of most peoples diets can be found for much less.
I’ve even found that on other items, buying local items can be a significant cost savings. For example, I used to think that peanut butter was an item that was more expensive in Panama. But that was because I was trying to buy Skippy and Jif, instead of a Spanish language brand called La Sabrosita. La Sabrosita tastes exactly like Skippy or Jiff, but is much cheaper than either of them are to buy here, and even cheaper than they cost to buy in the US. Same thing with pasta. I could get US imported pasta for a couple of dollars a box, or a Spanish brand that I pay $0.42 a pack for. In fact, if you were to look at what you normally like to eat that’s prepackaged, and bought the brand that was in Spanish instead of in English, you would save money.
Also, it goes without saying that where you shop will have a big influence on how much you pay. You’ll pay more shopping at Riba Smith and El Rey than you will at Super 99 or El Machetazo.
If you really want to save money on groceries, you can always buy price controlled goods. The government sets certain price limits on basic goods that each store must sell at least one brand of that item for. They are often not the best quality brands, but the price savings can be significant. Here is a list of the price controlled items and their prices.
Dealing with the adjustment period
If you have lived in your previous area for many years before you moved to Panama, you will underestimate the level that your familiarity with your home area played in helping to keep your cost of living down. After years of living there, you figured out what were the good areas to live with reasonable rents, the affordable restaurants, the place to get your hair cut for cheap, that dive bar that sells dollar beers every happy hour, etc. When you move to a completely new place (especially when it’s a new country), it will take time to adjust and figure out where the good deals are. I’ve been here almost a year now, and I notice that my wife and I are spending much less money than when we first moved here. We know how much the cabs should cost so we don’t get ripped off. We’ve figured out which supermarkets have the good deals and on what items. We’ve figured out the cheap restaurants to get a good meal out. So now we spend less than we did before. This will happen to you too. So if you’ve just recently moved to Panama and found it more expensive than you thought, realize that it will get cheaper as time goes on.
Now not everything in Panama is cheaper than the US. Electricity, furniture, and electronics are a few things in Panama that you’ll find are more expensive than the United States. But most other things are cheaper in Panama, including healthcare, taxis, public transportation, movie tickets, cell phone bills, and any sort of labor service (haircuts, gardeners, maids, plumbers, AC repair, etc). All in all, the cheaper things outweigh the more expensive things, which help make Panama a considerably more affordable place to live than the United States. If you are not having that experience, see if some of the issues I talked about apply to you, and you may be able to make small adjustments to increase your savings.