Costa Rica has caught the smart phone bug. iPhones, Blackberries, Galaxies, they’re all over the place. This may seem like a great thing. It’s a sign of development, a sign that the citizens have the disposable income to purchase expensive toys. But, as in the US, just because someone has something in their hands doesn’t mean they’re the actual owner; oftentimes they owe a good chunk of money on the item.
After speaking with a friend who is living in Costa Rica, it seems that people are overloading themselves with debt in order to keep up with the Joneses (or maybe the Hernandezes, in this case). The scariest part is the difference, when comparing the US and Costa Rica, in the average salary and the difference in the price of the smart phone. The average salary in Costa Rica is somewhere in the $750 per month range. Meanwhile, an iPhone costs around $800 in Costa Rica. This relative difference is scary when you see how many iPhones and other smart phones are in San Jose. People in the country generally do not have $800 in savings to pay with cash, so they are taking out a nice loan in order to join the smart phone club.
To me, this doesn’t seem sustainable and will only end up in some kind of crash much like we saw with the housing bubble a few years ago. Eventually, people will have too much debt and will be unable to pay it back. There will be some kind of market adjustment when these loans default. But until that time, people will become more and more leveraged in exchange for their instant gratification.