Language Lens

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Archive for the tag “economics”

Presenting the McFlation, formerly known as the Big Mac

I don´t frequent McDonald´s, but I do go every one in a while.  Back in the US when I had a bad day, I remember occasionally I would call it a “Big Mac Day.”  It was when I had to find some relief in the midst of deadlines or pressure, or just needed a momentary escape when nothing was going right.  Occasionally a Happy Meal (Caja Feliz) would do, when I wanted to spend as little as possible, and then a friend´s kid would later become the proud owner of the toy.

McDonald´s in Argentina… well it´s not too different really, but many of the stores are a bit bigger than I recall in Colorado.  They have quite large coffee shops/separate stores to compete with Starbucks; the items are in Spanish (obvio!), and some say the beef is better as it is Argentina.  I´m not too sure about that one (insert sarcastic intonation here), but there is something very different about McDonald´s here that I just now have come to understand.  As mentioned above, I prefer the Big Mac.  So it was no surprise that I would usually choose the Big Mac when I went there.  I was also surprised to find that it was much less expensive than the other “combos” as they say and was close to the price of a Caja Feliz–truly!  But who would know this as it´s not listed on the menu to even see.  I have always had to ask for it you see.

Argentina is known for its history of high inflation and yet the government says something else, so where´s the proof?  The proof is in many places, including the price of the Big Mac!  The Big Mac Index was invented by the Economist in 1986.  The Economist says: “Our Big Mac index is a fun guide to whether currencies are at their “correct” level.  It is based on the theory of purchasing-power parity (PPP), the notion that global exchange rates should eventually adjust to make the price of identical baskets of tradable goods the same in each country.”  This Burgernomics measure was never intended to be a measure for currency misalignment (aka high inflation) and was instead a fun and easy way to understand costs in different currencies, but the tool has become a global standard.

Big Mac index

The Argentine price of the Big Mac looks well in line with other currencies when you look at the Big Mac Index; however, it doesn´t even compare to the prices of other items on the menu.  It is an obvious manipulation to mask a bigger problem–the near 25% inflation that the government denies.  I did some secret shopping the other day to see current McDonald´s prices and was not surprised what I found.  The Big Mac itself is 19 pesos, where the Cuarto de Libra (Quarter Pounder) is 33 pesos and the Triple Mac is 35 pesos!   That´s a difference of about $3 USD for just an extra patty of meat.  As far as the combos go, the Big Mac Meal is 29 pesos, where the Triple Mac meal is 49 pesos,  the Cuarto de Libra meal is 47 pesos, and a Caja Feliz is 30 pesos!  A Happy Meal is more expensive than a Big Mac meal, como puede ser? (How can this be?)  A Happy Meal is always one of the least expensive items on the menu… in the United States that is, and not in Argentina where the Big Mac price is manipulated for economic reasons.  Using today´s “official dollar exchange” ($1USD is $5.29AR), prices equate to the following:

  • Big Mac sandwich: $3.59 USD (Actual price $5.90)
  • Cuarto de Libra sandwich: $6.24
  • Triple Mac sandwich: $6.62
  • Big Mac combo: $5.48
  • Triple Mac combo: $9.26
  • Cuarto de Libra combo: $8.88
  • Caja Feliz: $5.67

Argentines are well aware of the government trick, and they have even coined a term for it–“El Menu Moreno”–based on the name of commerce secretary Guillermo Moreno who is “notorious for telling companies to fix certain prices to keep the official inflation rate down.”  In June 2012 Big Mac prices rose 25% after President Cristina Fernandez de Kirchner´s attempts to pressure McDonald´s to keep the prices low failed.

Big Mac Argentina

Some sources say that McDonald´s has decided to stop offering the Big Mac in Argentina as the  government-manipulated price does not make it profitable any longer, however, if you ask for it, you can still get it.  I´d like to see what happens if you order the McFlation combo.

Global prices for a Big Mac in January 2013, by country (in USD).

 

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