The Big Mac index

The Economist’s Big Mac Index shows that a burger is undervalued in China, but overvalued in Brazil.

“Since 14.5 yuan can buy as much burger as $3.71, a yuan should be worth $0.26 on the foreign-exchange market. In fact, it costs just $0.15, suggesting that it is undervalued by about 40%. The tensions caused by such misalignments prompted Brazil’s finance minister, Guido Mantega, to complain last month that his country was a potential casualty of a “currency war”. Perhaps it was something he ate. In Brazil a Big Mac costs the equivalent of $5.26, implying that the real is now overvalued by 42%. The index also suggests that the euro is overvalued by about 29%. And the Swiss, who avoid most wars, are in the thick of this one. Their franc is the most expensive currency on our list. The Japanese are so far the only rich country to intervene directly in the markets to weaken their currency. But according to burgernomics, the yen is only 5% overvalued, not much of a casus belli.”

This is part of my survey of the 30 best articles from The Economist over the past two years to gain insight into whether Brazilian attitudes towards America have declined, and global attitudes towards Brazil — comments welcome!

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About Janar Wasito

Janar Wasito is the manager of Magis Capital in San Diego, CA. He is a graduate of Harvard and Stanford Law School, and a former Marine Officer.
This entry was posted in Article review, Brazil, Economy, Life and tagged , , , , . Bookmark the permalink.

2 Responses to The Big Mac index

  1. Pingback: The Big Mac index (via Brazil Global) « Expat American Living in Brazil

  2. Ben Ellis says:

    Surely the price of the burger will be dependant on how much the ingredients have had to be imported and the taxes applied, the cost of doing business in the country and the tax on profits. On that basis, expensive countries like Switzerland will obviously have expensive burgers or am I missing the point?

    Like

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