Guaro is a slang term for aguardiente, a strong alcoholic beverage popular in many Latin American countries. It's a culturally specific word that you won't find in a standard textbook.
In the song, Bad Bunny sings, "Lo mismo bebo Moët que bebo guaro" (I drink Moët the same as I drink guaro). By contrasting the fancy, expensive champagne (Moët) with this common, local liquor, he emphasizes his authenticity and ability to be at home in any environment, from the luxurious to the down-to-earth.
In "Caro", Puerto Rican superstar Bad Bunny flips the idea of luxury upside down. People keep stopping him to ask why he wears expensive clothes, but his answer cuts right to the point: "¿Tú no ves que yo soy caro?" ("Don't you see that I am expensive?"). To him, value is not about price tags. He remembers when his mom used to say "Está to' caro" ("Everything is expensive"), but now he flexes that his worth comes entirely from his self-confidence. He can drink fancy champagne ("Moët") or cheap sugarcane liquor ("guaro"), hit shots like NBA star Kevin Durant ("Yo soy como Durant, yo la cojo y va pa'l aro"), and blend high culture with street style because "tengo la salsa, también el ballet" ("I have the salsa, also the ballet").
The track quickly turns into a direct confrontation against nosy critics. Bad Bunny gets bluntly annoyed when people question his sexuality, his style, or his choices: "¿Qué carajo te importa a ti cómo soy yo?" ("What the hell do you care how I am?"). People give him strange looks when he arrives anywhere ("Me miran raro"), but he shrugs it off with "a nada yo le paro", a great Puerto Rican idiom meaning "I don't let anything stop or bother me." Ultimately, he reminds everyone that minding your own business and being yourself is completely free: "Y ser feliz nunca me ha salido caro" ("And being happy has never cost me anything").