Two-tiered pricing

If you’d asked me at the beginning of this summer whether things would be more expensive in Ghana or Ecuador, I would have said Ghana without much hesitation. It seems natural to assume that in countries which are poorer (smaller GDPs, smaller average income, worse indicators on the human development index, etc.), prices would also be lower. As it turns out, though, it’s not quite that simple.

There are some things in Ghana that are absurdly cheap. You can get more than enough street food to fill you up for next to nothing. A bowl of rice, spaghetti noodles and beef in sauce set me back 60 pesewa—about 40 cents. Fruit in the market is so cheap compared to home that it seems free. One cedi (66 cents) will get you a pile of four or five delicious oranges or two ripe mangoes. My dad’s house is a concrete walled compound which could easily be a B-movie drug lord’s hideout. It has three bathrooms, a kitchen, dining and living rooms and five bedrooms, plus a garage. His rent for this is something like $100 a month (though, to be fair, the city water supply randomly turns off for weeks at a time, and often comes out in interesting shades of grey, white and brown when it is on). Transportation also seems practically free—a 30 minute ride in a shared taxi from a rural village back into town cost me something like 30 cents.

However, some things in Ghana are fairly expensive given the income of average Ghanaians, and occasionally even for visiting Americans. Going to a movie in the Accra Mall cost me 15 cedis ($10)—comparable to a ticket back home. Meals in sit-down restaurants are cheaper than their American counterparts, but still a fortune compared to street food. A decent-sized entrée will set you back $5-10, sometimes a bit more if the restaurant is really nice. Groceries in the supermarket (Shoprite, a South African chain which seems to only exist in the Accra Mall) are often more expensive than they would be in the US. Boxes of cereal can run up to $6 for a normal sized package of cornflakes. Butter is at least $4, and that’s only if you buy the cheap stuff that smells weird. The lentils I insisted on buying cost about $7 for a package that was maybe twice as big as the ones I see back in the States. Services are also on the expensive side—a manicure is $10, and a haircut can be twice that in the city, especially if you’re a white person.

Ecuadorian prices seem more uniform. Grocery store items are fairly cheap across the board—good chocolate bars with fruit added can be purchased for 90 cents, bananas are usually less than 50 cents for a kilogram (2.2 pounds) and basic staples are usually at or below the cost of similar items in the US (though as with Ghana, cereal is a notable exception—I tried to buy Honey Bunches of Oats today, but was dissuaded by the $6.35 price tag). A movie ticket is a little less than $5. Public transportation over long distances is hardly more than in Ghana—usually about $1 per hour of travel, made possible by the state-owned petroleum companies, and government policies which heavily subsidize gasoline (it’s been $1.03 per gallon for diesel and $1.72 for premium gas since I got here a month ago). Quito is covered in restaurants serving a fixed almuerzo (lunch)—usually juice, soup, a plate of rice and meat and occasionally dessert for $1.50-$2. Dinner will set you back a bit more, but it’s easy to find good meals for under $5. I’ve seen salons advertising $2 haircuts and manicures for even less.

I have a theory to explain the pricing differences I’ve encountered. In Ghana, people do not have money. There are definitely rich people living in cities (mostly Accra, the capital), and there’s some kind of emerging middle class, but by and large, people struggle to pay for necessities. I think this has created a two-tier pricing system. The poor masses need to buy basic staples of life. They buy their food in markets and from street vendors. They need to travel sometimes, and they can mostly afford to do so because shared taxis and trotros abound. The things that you need to survive are all widely available, mostly for next to nothing (at least by my American standards). However, because of the overall poverty, things like movies and manicures are well out of reach of most people. The city I was living in, a regional capital city with a population of about 50,000, doesn’t even have a movie theater. There’s no supermarket either—everyone goes to the outdoor public market which is filled with produce and pungent-smelling fish. I had to make weekend trips into Accra (2.5 hours, give or take) to buy things like cheese, yogurt, lentils and cereal. These items are really only available to the elites, and because of that, they’re much more expensive. I’m sure there are a lot of other reasons on the supply side as well, but from a demand perspective, the pricing gap makes sense, because it’s reflective of a wealth gap.

Ecuador seems to be better off. The overall standard of living is much higher than in Ghana (and almost all other sub-Saharan African countries, I would imagine). There are absolutely poor people here, in Quito and especially in more rural areas. But even the poor seem to have a little more money for luxury and non-essential items. My host mom in Plaza Gutierrez had never traveled further than Otavalo (a city 2 hours away)—she hadn’t even been to Quito, much less outside of the Andean region of Ecuador. But while I was staying with her, she took the whole family to a pool that was about half an hour away, with an entry fee of $2 per person. Not a fortune by my standards, but not exactly small change for a family of five. There also seems to be a much more well-defined urban middle class. My host family in Quito, for example, survives on the income of my dad, who’s a petroleum engineer in the Amazon. This is enough to allow them occasional trips to the US and private school for their three children, but not so much that my host mom doesn’t remark about how expensive textbooks for high school are. I’m not sure what the typical income and lifestyle in Quito looks like, but my family doesn’t seem at all like an anomaly. Quito seems to have more middle ground in its income demographics than Accra, which has shacks and slums with no water or electricity, giant walled compounds where the super-rich live, and not much in between.

So in Ecuador, people buy produce at indoor markets, but the average Quito family also shops at the supermarket. Smaller cities have supermarkets too, and they’re common in Quito (contrasting with Ghana, which seems to literally have two supermarkets in the entire country, both of which are located in the Accra Mall). This means that prices need to be affordable for the masses, not just the super-elites and gringos. Government policies and subsidies help keep prices down in stores (a really interesting system that I’ll write more about later). The average urban family can afford at least occasional luxuries like movies, and their prices reflect that fact.

I’m curious about the supply-side factors that have made this all come into being, but from a demand perspective, the pricing differences I’ve seen between here and Ghana make a fair amount of sense. Interestingly, the net result of these differences is that it’s cheaper for me to maintain my lifestyle in Ecuador than in Ghana. If you just need a place to stay and not starve to death, Ghana wins hands down. But if you want supermarket cereals, the occasional movie, books, manicures and recreation on the weekend, Ecuador would probably end up coming out on top. Who would have thought?

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