Venezuelan currency overvalued by 83% according to the Big Mac index
The Big Mac index computed by The Economist showed that the Venezuelan Bolivar is the most overvalued currency worldwide with respect to the US dollar, reflecting the imbalance of the Venezuelan economy.
The Big Mac index is based on the purchasing-power parity theory which provides that the exchange rate between two currencies is balanced when the price of a single product is the same in both countries. For such reference, a Big Mac burger is commonly used.
By contrasting the Venezuelan and the Russian currencies at the current exchange rate a Big Mac Burger, which costs 4.33 dollars in the US, costs 2.29 dollars in Russia and 7.92 dollars in Venezuela, which shows that the Venezuelan currency is overvalued.
According to the index, overvaluation of the Venezuelan currency stood at 83% by the end of July.
An overvalued currency implies that exports lose ground as goods manufactured in Venezuela are more expensive for the rest of the world. Meanwhile, imports continue growing as prices are low.
Such disparity is the result of an official fixed exchange rate that has stood at 4.30 Bolivares per US dollar, while the Venezuelan inflation, even when it has been easing, is globally among the highest. In the parallel or black market the greenback is traded at almost double the official rate.
However the big question is what can be expected for next year when the October presidential election is over and as public opinion polls anticipate President Chavez is re-elected, particularly government over-spending to ensure victory.
Nomura analyst Boris Segura said he expects the fixed rate to be depreciated 51% and an economic contraction of 1% next year. Bank of America’s Merrill Lynch is even more pessimistic, forecasting 74% devaluation and a GDP loss of 3.5%.
The Chavez administration will need a correction to the exchange rate to help it meet its ever-growing list of expenditures on state projects and programs, and narrow its fiscal deficit, which Barclays estimates will reach 19.5% of GDP by the end of 2012, compared with 5% just four years ago.
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19 comments Feed
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Argentina avoids a bad rap on the Big Mac index by compelling McDonalds to sell a big Mac at a price chosen by the Argentine government. In return McDonalds don't even advertise the Big Mac in Argentina - you wouldn't know they sold them unless you specifically asked for one.
“Argentina's Big Mac Attack”
Argentina cheats in order to fake the Big Mac index.
latitude.blogs.nytimes.com/2011/11/24/argentinas-big-mac-attack/
Also confirmed on argentine newspaper:
www.lanacion.com.ar/1367486-los-pedidos-de-moreno-ya-tienen-impacto-en-el-big-mac
The ignorant retarded strike again with the “BM” index now, which is a joke invented by a journalist from TE.
Why not to use the “Beef” index, the “Water” index, the “Spaghetti” index, the “Paella” or the “Bread” index?
What kind of retarded can believe that “BM” index can be a guide line to measure currency value?
Ah! I see only stupid monolingual unidirectional just in one dimension English speaker from peripheral poor areas and remote BOT places living in Stone Age.
If you can't understand why they use a Big Mac rather than the other products you mentioned then one can only conclude that you're the one that's retarded.
Go on - have a go. Why is a Big Mac more suitable then every single item you have listed as an alternative? It's utterly obvious to anyone with even half a brain.
Exactly. Big Macs, Mars Bars, Starbucks - why are all these indexes based on things I'd never want to buy?!
would you like fries with that?
@9 What you mean is: “based on things I can't afford!” Still digging through bins and skips, are you?
The only ignorant seems to be you according with your own reply.
The BMI as I said before was introduced as a humorous explanation for idiots and ignorant like you to explain how PPP works. And made his first appearance in 1986 in an article wrote by Pam Woodall. Even The Economist says that is not to be taken as a serious index.
(A serious index should take 1 to 2 years to be made)
Like the morons that read the TE like you, liked the idea, because only stupid can think that can be a reliable index. The Economist continued publishing it as an Index for PPP and of course has not any valuable importance other than for entertaining ignorants.
The journalist thought to use the BM because she thought that BM was a product in essence made in the same way and that is world wide consumed.
Of course she was completely wrong with her assumption because English speakers are uni-dimensional subjects and they only can see the world in English and from little Islands.
Now genius, can you tell me how does the BMI can be used in India for example? they don't eat cow meat as far I know.
Taxation, import duty, supply chain, transportation, difference in the product, size, etc.
Do you think that MD will charge $4 when the company can charge $6? Like in Brazil?
Franchising? Direct sell?
So tell me how much cost a kilo of pasta in your local store and I will tell you how much valuated or devaluated you currency is compared with the Euro.
Sounds stupid isn't it?
Is 'unidimensional' your new word of the week? Seem to be using it a lot.
Again with ferry tales from La Nacion and Clarin the price of the big mac had increased 26% according with your own source of information (ClarinMiente & La Destruccion”. Even “La Destruccion” had reported the rise as is quite useful to bash the govt.
The Big Mac went from $ 21 a $ 26,50.
So where is the manipulation?
And I have no doubt that will increase even more to USD6 like in Brazil.
Why? Because is what I would do if my sales in others markets drop as is currently happen in the north so that way I can compensate loses buy charging more in market where are not in recession.
I told you before that only an ignorant idiot cans believe that the Bic Mac index can tell you currency appreciation or PPP.
Even though in US you have different prices from cost to cost.
Meanwhile in California the BM cost $2.99 in New York $4.50.
So according with you and “The EconoLiar” an American suffers a devaluation of the dollar just by going from LA to NY.
Well mate have you been thinking what are you gonna do when Financial Armageddon knocks you door in little Britain?
Will you move with CrisRambo to Uruguay to clean toilettes or you will look for a job for serving tables in BA?
But you will have to learn Spanish first, come on don’t be lazy.
Here you can start your Spanish lesson come on repeat “Soy un Reverendo boludo que busca laburo”, “Soy un Mohammed que no puede hablar su propio idioma bien, por favor téngame paciencia”, “Estoy buscando un laburo para servir mesas y limpiar baños tiene algo para mi?”, “Donde puedo comprar Kebabs señor?”...
as for “little britain” have you still not learnt size doesnt matter an example for you cheeseberger “1982” how small did “little britain” make Argentina look, please tell me i would love to know the national feeling from you argtards when you squeeled “I surrender” to little old britain at the point of a bayonet????
strange how “I surrender” was the only english phrase Argtard soldiers desperately wanted to learn before the invasion. :)
Have a nice day :)
@17 Your trouble is that you daren't believe anything apart from government propaganda. In any honest or normal country, there might be the odd decimal point between government produced figures and those that are produced by other organisations. But what's the situation in argieland? Indec produce one set of figures and everyone else virtually doubles them. And you go along with it! Are you mad? Are you incapable of honesty? Even with yourself? If there is one thing you can bet on in this world and this life, wherever you are, it is that refusing to face the truth is part of the route to disaster. Not that I care whether argieland goes into disaster. I hope you do. I can't think of one good thing that can be said about argieland. And I don't even feel particularly sorry for the people. You have brought things upon yourselves. “England” can be traced back over a thousand years. In one form or another, we've seen it all. And we've beaten it all. Your hope that England, Britain or the United Kingdom is facing some sort of Armageddon is just wishful thinking. Try a few little comparisons. Population - argieland 41,281,631 UK 62,262,000 GDP (PPP) argieland $710.7 billion UK $2,308,503 billion GDP (nominal) argieland $435.2 billion UK $2,452,689 billion. Can you see how far behind you are? Around $2,000,000 billion a year, every year. If WE EVER get down to your level, we might to feel a certain concern. Just figure us as 2,000 times better off than you. There will be NO UK financial Armageddon. But you might want to get accustomed to the idea of eating grass. And, as PirateLove has pointed out, gibberish is the grunts of the poor, uneducated and stupid. I only ever found it necessary to learn enough to order beer. Have you ever tried reality?
Sorry boludos I didn’t understand a word of what you say can you translate it into Spanish please?
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