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A few years ago, the British magazine The Economist designed the Big Mac Index. To be able to evaluate the cost of living and the value of currencies, they evaluate the price of a Big Mac hamburger in most countries of the world every year.
It is noteworthy that Big Mac is a practically universal product. In almost every country you will find this special fast food with two meats, bread, pickles, salad and other things.
What does the Big Mac Index do?
Since its inception in 1986, The Economist’s Big Mac Index has been Invaluable tool for measuring the relative value of currencies around the world. Based on the principle of purchasing power parity, This index compares the prices of the famous McDonald’s hamburger in different countries to determine whether currencies are overvalued or undervalued against the U.S. dollar.
According to The Economist, this indicates that “in the long run exchange rates should move toward a rate that will equal the prices of an identical basket of goods and services (in this case, a hamburger) in any two countries.”
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By converting the local price of a Big Mac in each country to US dollars, The index shows whether the value of that country’s currency is higher or lower against the dollar. That is, it determines whether the exchange rate is below or above the value required to comply with the principle of purchasing power parity.
According to this index, some countries have the most expensive Big Macs in the world, indicating that their currencies are more valuable against the dollar.
The index shows whether that country’s currency is worth more or less against the dollar.
Big Mac in Colombia
According to the analysis, Colombia is among the countries where the value of the Colombian peso is 10.6% lower against the dollar. Although the country experienced a good year for its currency in 2023, buying a Big Mac in Colombia is still more expensive than in the United States.
However, compared to other Latin American countries, Colombia ranks ninth in terms of the cost of a hamburger, with undervalued currencies such as the Guatemalan quetzal, Argentine peso, and Honduran lempira.
According to The Economist, a Big Mac costs $19,900 in Colombia and $5.69 in the United States. This implies that the Colombian peso should strengthen by 10% according to Hamburger’s purchasing power criteria.
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Colombia is one of the countries where the value of the Colombian peso is low against the dollar.
Countries where Big Mac is most expensive
- Uruguay: It costs 275 pesos, which is 23.7% more ($7.04) than in the United States ($5.69).
- Swiss: It costs SFr7.10, which is 43.5% higher ($8.17) than in the United States ($5.69).
- Norway: It costs NKr75, 25.5% more ($7.14) in Norway than in the United States ($5.69).
- Costa Rica: It costs 2,950 colones, which is 0.39% higher in Costa Rica (US$5.71) than in the United States (US$5.69).
- Sweden: It costs SKr61.29, which is 3.1% higher in Sweden ($5.87) than in the United States ($5.69).
- Britain: It costs £4.49 0.36% more in Great Britain ($5.71 US) than in the United States ($5.69).
Daniela Lararte Assad
Digital Scope Editorial
Time
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