Language Lens

A blog about life, discovery and culture through the lens of language and linguistics.

Archive for the tag “inflation”

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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The Messi Dollar

So now they are calling it the “Messi Dollar,” as it quickly approaches the magic number 10.  I am referring to the new high of the blue dollar in Argentina.  Since I first blogged about this back in August, the blue dollar (aka black market dollar) has risen from $6.37 AR pesos to $9.3 AR pesos per $1USD.  That is as of today, April 29, 2013, where the official rate is $5.19 AR pesos to $1USD, changing from $4.65 AR back in August.   Today the gap between the official exchange and the blue dollar exchange is above 80%.  It appears that the arbolitos, those who are buying and selling dollars on the streets in high tourist areas, have already reached 10.  Reaching $8 AR pesos to $1USD was a milestone in itself, but that is old news and was $2 USD ago!

The “Messi Dollar” refers to the jersey number of Lionel Messi for those of you who live under a rock.  He is an Argentine football player (attention Americans: soccer player) who plays as a forward for the Argentina national team and for FC Barcelona in the Spanish league.  He is perhaps the greatest football (soccer) player in the world and now has even currency named after him!

When I first read “Messi Dollar” today, the thought crossed my mind that it could even be true.  A new bill, with a living person on it?  Only in Argentina.  The country has a long history of high inflation.  In my short three years, I have been surprised several times by new money.   I always knew and used the $2 AR peso bill for example, and then one day the $2 AR peso coin came along that not even the buses accepted at first.  It took a little while for them to catch up to the new coin.

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Then just a few months ago, I received change with coins that I had never seen before.  The cashier even told me “Son de verdad” (They are real) as I looked at them in doubt.  Later that day I attempted to use them, but the cashier at the next shop didn´t recognize them and was reluctant to accept at all.  After showing her manager, they accepted the coins, but not on the basis of them being legitimate, instead because the manager told me he liked them.  I later learned that these were coins used in 2006 and were later lifted from the market.  Few people recognized them in fact, but the few that did told me that they were collector´s items.

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Then there was the Evita $100 peso bill, which came into circulation in 2012 as a form of tribute for the 60th anniversary of Evita´s death.  Argentine President Cristina Kirchner later declared that the bill would replace the former bill definitively, and production reached great numbers…as did the cost of production.  On top of that, alerts went out about the large suspected number of false bills circulating.   Last month production of the Evita bill was stopped all together.  According to Clarin, an Argentine newspaper, the Argentine government is currently only printing $5 AR and $10 AR peso bills.  Just last week I finally found an Evita bill, which is far too pretty to spend.

Evita bill

In my third week, a kind taxi driver informed me of the false bills circulating, and he even showed me how to identify them.  This was an occasion in Argentina where luck struck; he shared his knowledge instead of giving me false change.  The concept of false bills isn´t an easy one to understand, nor accept when it happens to you.  I remember more than one story of exchange students crying as a result of their bills not being accepted.  Argentines, however, will tell you they are unfortunately accustomed to all of this.  A Buenos Aires museum I have yet to visit is the Museo de la deuda externa Argentina (The Argentine Museum of External Debt), which includes a history of the country´s peso, through the years of inflation.

As the blog beyondbrics states, “It is no longer a question of whether it will continue to rise – that’s a given…(and) Still, the government is in no mind to devalue – yet. Watch for that Messi dollar soon.”

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