Every year, Americans retire to Central America because their money goes further there. Every year, Central Americans risk their lives to reach the United States. Same countries, people moving in opposite directions.
The difference comes down to a word most travelers have never heard: geoarbitrage. Earn in a strong currency, spend in a weaker one, and you can live in the safe neighborhoods, send your kids to international schools, eat all the cheap local fruit you want, and keep the power of your passport to leave if things get dicey. Just about anywhere in the world, life’s a bit nicer when you are among the richest.
Two people can live in the same country and be in completely different worlds. This post is about why.
Poverty Isn’t a Moral Failing
In comments on my travel posts over the years, I’ve noticed an assumption that comes up again and again: that poor countries are poor because the people there don’t work hard enough, or don’t make good choices. It’s a comfortable story for those of us born somewhere richer, and it’s wrong.
Chimamanda Ngozi Adichie warns about the danger of a “single story” of a place. The trouble with stereotypes, she says in her TED talk, is “not that they are untrue, but that they are incomplete.”
The single story runs both ways. When I traveled through Kenya, my taxi drivers were shocked when I mentioned poverty, racism, and homelessness in the United States, and most didn’t believe me. Hollywood has sold the American dream well.
There is no single cause that keeps the poorest billion people in poverty. In the 1970s, researchers Horst Rittel and Melvin Webber described problems like this as “wicked problems”: complex, messy situations with no clear path to a solution. They only get better or worse, but are never completely solved. Putting a man on the Moon was a tame problem: incredibly hard, but you know when it’s solved. Poverty is wicked. No policy or volunteer can fix it on its own, because it’s layers of systems stacked on top of each other.
The Luck of Birth: Currency and Passports
Geoarbitrage depends on two things most of us never think about: currency and passports.
A US Social Security check stretches far in Guatemala because the dollar is strong and wages there are low. I know that math firsthand. Dollars earned online funded my decade of travel through places like Thailand and Mexico, and today they make my life in Spain far more affordable than it would be back home. It’s the same math that keeps a skilled Honduran nurse earning a fraction of what she’d earn doing the same job in Houston.
Then there’s the passport. Mine gets me into most of the world without a visa. A Honduran passport opens far fewer doors. Even inside the same country, a foreign passport affords protections that, in many cases, the locals do not have. So when life at home gets dangerous, the American expat books a flight. Many Hondurans who try to leave have only the dangerous, expensive routes left.
Neither person earned their passport. That’s the first layer: the country you’re born in sets the ceiling on your options before you’ve made a single choice.
History Casts a Long Shadow
I spent six months traveling from Mexico’s Yucatán down through Belize, Guatemala, and Honduras. You can feel two forces at once there. Indigenous cultures remain rooted in older customs and tied to their historic land, and layered over them are the scars of 20th-century politics.
Guatemala is the clearest example. In 1954, a CIA-backed coup overthrew the democratically elected president, Jacobo Árbenz, after his land reforms threatened the holdings of the US-based United Fruit Company. Decades of military rule and civil war followed, and much of the violence fell on Indigenous Maya communities.
Across Africa and Asia, the story rhymes. Colonial powers drew borders that split some ethnic groups and forced rivals together. They built economies designed to ship raw materials out—rubber, cotton, copper, coffee—rather than to make things at home. When independence came, many countries inherited those borders and those economies, along with very little else.
Who the System Serves: Institutions and Inequality
In Why Nations Fail, economists Daron Acemoglu and James Robinson argue that the biggest difference between rich and poor countries is their institutions. Some countries build political and economic systems that include most people, giving them a fair shot at owning property and starting a business. Others build systems designed to extract wealth from the many for the benefit of a few. Their work on this question won the 2024 Nobel Prize in economics.
That’s why poor countries are rarely poor all the way through. Every poor country has its upper class. India has some of the world’s richest billionaires and also some of its largest numbers of people in extreme poverty. Nigeria’s elite live very well in Lagos. When the system is built to serve those at the top, growth can happen and the poor can still stay poor.
Violence That Crosses Borders
Much of the migration north is driven by gang violence, and that violence has roots in the United States.
The gangs that dominate parts of Central America today, MS-13 and Barrio 18, began in Los Angeles. MS-13 was formed in the 1980s by young Salvadorans who had fled their country’s civil war. When the US deported thousands of gang members back to Central America in the 1990s, the gangs took root in countries still recovering from war, with weak police and courts.
San Pedro Sula in Honduras remains one of the scariest cities I’ve ever visited. When my flight from San Pedro Sula landed in Miami, drug dogs sniffed my luggage and every other incoming bag. The drugs moving north through Central America are headed for US consumers. The violence stays in Central America.
Trade Rules Written by the Rich
This is the layer most people never hear about.
Wealthy countries heavily subsidize their own farmers. That makes American and European grain and rice artificially cheap, cheap enough to sell in poor countries for less than local farmers can grow the same crops.
Haiti is the starkest example. In the 1990s, Haiti was pushed to slash its tariffs on imported rice, and subsidized US rice flooded in. Haiti went from growing nearly half its own rice in 1988 to just 15 percent by 2008. In 2010, former President Bill Clinton, who had championed the policy, admitted to the US Senate: “It was a mistake. It was a mistake that I was a party to.”
Food aid has worked the same way. For decades, US law required nearly all donated food aid to be grown in the United States, and much of it to be shipped on US-flagged vessels, even when buying food near the crisis would have been cheaper and faster. Some of that food was sold in local markets to fund aid projects, a practice the US Government Accountability Office found was inefficient and could harm local markets. In other words, it undercut the very farmers a country needed to feed itself.
When I worked on a USAID project in Kyrgyzstan in 2017 and 2018, I started paying close attention to how food and goods move to poorer countries. It’s clear that a system where it makes financial sense to ship our grain halfway around the world, rather than buy from farmers down the road, keeps poor countries dependent. When global supply chains break, those countries feel it first.
Geography, Conflict, and the Poverty Traps
In The Bottom Billion, economist Paul Collier describes a handful of traps that hold the poorest countries back:
- The conflict trap. Civil war destroys a generation’s schooling and savings, and makes the next war more likely.
- The natural resource trap. Oil or diamonds can fuel corruption rather than growth.
- Being landlocked with bad neighbors. It’s hard to trade when every shipment has to cross someone else’s border.
- Bad governance in a small country.
Geography matters in other ways, too. Diseases like malaria hit tropical regions hardest, sapping health and productivity in exactly the places with the fewest resources to fight back.
None of these traps is about the character of the people inside them.
When Help Hurts
Aid can help, but it can also make things worse.
After the 2010 earthquake in Haiti, billions of dollars in aid poured in, and much of it failed to rebuild the country. Journalist Jonathan Katz, who covered it for the Associated Press, summed up the problem in The Big Truck That Went By: “The urge to help seemed to have overpowered the desire to do so thoughtfully.”
When foreigners arrive to build schools or run programs that only survive on outside money, they can crowd out local businesses and leave communities dependent on the next batch of donors. Handouts from volunteers and travelers leave locals indebted to the foreigners and dependent on handouts. The better projects respond to a community’s communicated needs, not perceived needs.
Locals notice. NGOs catch a lot of flak in Kenya, and when I was there, it didn’t take long for people to point me to Aid for Aid, a homegrown parody series about an international NGO that accomplishes nothing but is filled with do-gooders. I dig into this more deeply in my post on the psychology and ethics of international volunteering.
The Good News
None of this means the story is hopeless. By nearly every measure, from child mortality to extreme poverty, most of the world has improved dramatically in the last 50 years.
Hans Rosling spent his career proving it. In Factfulness, his point is that things can be “both bad and better” at the same time. The forces above are real, and people are still pulling themselves out of poverty despite them.
What This Means for Travelers and Expats
If you travel, or dream of retiring somewhere cheaper, you’re part of this story. Geoarbitrage isn’t inherently wrong, but it comes with responsibilities:
- Spend your money locally, with businesses owned by people who live there.
- Pay fair prices rather than treating cheapness as a perk you’re owed.
- Remember that the safety and comfort your money buys aren’t available to most of your neighbors.
- Learn the history of the place you’re visiting.
If you want to go deeper, start with the books I recommend reading before volunteering abroad. Little Princes is a fast, funny way in, and Why Nations Fail and The Bottom Billion explain the forces above in far more depth.
Poverty is a wicked problem. There’s no single fix, and no one person or policy will solve it. But wicked problems do get better or worse, and the choices we make as travelers and donors push them one way or the other.
Sources
- The Danger of a Single Story, TED
- Foreign Relations of the United States, 1950–1955: Editorial Note, Office of the Historian, U.S. Department of State
- MS-13 in the United States and Federal Law Enforcement Efforts, Congressional Research Service
- Haiti-US: Washington Aid Policy May Be Shifting, The New Humanitarian
- International Food Assistance: Funding Development Projects through the Purchase, Shipment, and Sale of U.S. Commodities Is Inefficient and Can Cause Adverse Market Impacts, U.S. Government Accountability Office
Shannon O’Donnell is an award-winning travel writer, speaker, and author of the acclaimed “Volunteer Traveler’s Handbook.” She’s been traveling the world for over 20 years, and is passionate about helping others use travel as a force for good.
She was the 2013 National Geographic Traveler of the Year for her work in responsible travel and tourism, and has appeared everywhere from NPR to the BBC to CNN as an expert in travel and international volunteering.