FOREX blues, or how I took a 50% pay cut overseas without even trying

First of all, this is emphatically NOT a post about how to make $DOUGH$ trading in foreign currency.  I leave that to the day trading community.  Not my thing.  Rather, this is a quick tale about how foreign exchange rates can negatively affect your working abroad experience.

What it’s really about it my own experience with earning money in another currency, in my case in Brazilian reais, and how exchange rate fluctuations can really affect your work abroad.

Back in the heady days of Brazil’s most recent economic boom, a U.S. dollar would buy about 1.5 reais.  This made Brazil quite expensive for an expat spending dollars — rents for unfurnished apartments in the popular corporate expat areas were hovering somewhere around US$2,500 for a 650 square foot/60 square meter space with the exchange rate back then.

But if you were making money in Brazilian reais, life wasn’t bad for expatriates.  Brazilian companies were looking for expatriates to move to the country for skilled jobs that they couldn’t reliably fill in-country. And since the real was riding high, local salaries were solid and expat workers could use their savings to buy dollars (or euros, etc.) and send some good money back home.

So when I took a job in Brazil (with consulting firm Bain & Co.) in mid-2014, things were looking up, money-wise.

Then, this happened.  The red arrow is when I moved to São Paulo:

 

BRL-USD exchange rate, last 5 years

 

After just one year, the value of my salary in U.S. dollars was about half of when I started the job.

That’s like taking a 50 percent pay cut. 

Ouch.

A job with a pretty good compensation situation suddenly became not-so-good.  I really liked the work, but that sort of pay cut was unsustainable for someone in his 30s and looking to send money home to the United States.  (Had I been planning to stay permanently in Brazil, the calculus would have been different.)  That was a major reason for me deciding to head home.

This turned out to be a good call, even if I had no way of knowing that at the time.  In early 2016 the real recovered a bit, but not too much, still representing about a 33 percent cut from when I had started.  And more recently, since early 2018, the currency has slid back down into the depths it hit back in 2015.

This is not to say that exchange rates should prevent you from working abroad.  But if you  want to work overseas and financial compensation abroad really matters to you (in other words, volunteers or people just looking to make enough to pay their bills during a shorter-term gig probably shouldn’t worry so much), should pay attention to the currency you will be earning in.

You may want to try and negotiate a contract pegged to the U.S. dollar or other relatively stable world currency, or at least think about what you will do if what happened to me in Brazil happens to you.

Just consider it; it may make a difference in your experience overseas.

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