Nearshore Americas

Brazil’s Real Is the Most Overvalued Currency, Says Price of Big Mac

Source: Forbes

The Big Mac Index, created by “The Economist” 25 years ago, has a new version, which takes into account not only the price of the sandwich but also GDP per capita of each country. Result: Brazil’s real is the world’s most expensive currency and is 149% above the dollar.

Burgernomics puts Latin America on the spot. The Big Mac Index ranks Colombian peso 2nd, 108% above the U.S. dollar and suggests Argentina is not publicizing real rates of inflation. According to The Economist: “Argentina has been cooking the books: over the past decade, Big Mac prices there have, on average, risen by well over ten percentage points more each year than the official consumer-price index—a far bigger gap than in any other country.”

On the other hand, the new methodology shows that the yuan, China’s currency, is not as undervalued as the creators of the popular sandwich believe. “The yuan seems to be close to its fair value against the dollar,” states the Economist, even pointing to an overvaluation of 3% against the dollar.

Following the old method, which only compares the price of sandwiches, the Brazilian currency is 52% above its fair value. In Brazil, a Big Mac costs the equivalent to $ 6.16 to market price, while in the U.S. the price is $ 4.07. Similarly , not including GDP per capita, indicates that the Chinese currency is 44% below its fair value against the dollar; the average price of the Big Mac here in the Middle Kingdom is $ 2.27.

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Kirk Laughlin

Kirk Laughlin is an award-winning editor and subject expert in information technology and offshore BPO/ contact center strategies.

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