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The Big Mac Subsidy


Posted on febrero 10th, by CEC in Consumo, Noticias. Comentarios desactivados

Fuente: Breaking Argentina – 13.09.2014

This week in Argentina I started investigating a new issue regarding one of the world’s largest fast food chain, McDonald’s. If I ask anyone in the United States what is “Mcdees” most representative product and most probably 11 out of 10 will say the BIG MAC.

big-mac-regalado_claima20140729_0251_14

 

Well in Argentina it is quite different. The quarter pounder is actually the most sold product here. Some Argentines travel to the US without having ever tried a BIG MAC. Why you ask? Well there is a whole story around it that goes farther than just a simple hamburger. Its actually political.

This is The Economist research on the Big Mac:

screen-shot-2014-09-13-at-12-00-21-pm

Here you can see that the July 2014 price of the Big Mac they recorded is at 21 pesos (2.50$ USD). This price is usually frozen until after the report is released. In present September 2014, the price is at 25 pesos (2.90$ USD).

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Yes the difference is minimal, yet it demonstrates a point. That point led me into digging more into the issue. A Slate.com article written back in 2012 started dismantling this issue, (http://www.slate.com/blogs/moneybox/2012/05/01/why_big_macs_are_cheap_in_argentina.html).

The writer of the article, Mathew Yglesias, spoke about the Moreno Big Mac. Moreno was Argentina’s economic minister up until last year. Having presided with Nestor Kirchner’s late gabinet and six years of Cristina’s term. He employed this neo-populist economic idea. Cutting imports and FDI. Regulating the currency by creating a black market dollar (the dollar blue). Also by controlling the INDEC, Argentina’s national institute of statistics and census, he was able to control the mensual inflation reports. When the inflation is by 30 percent per year, the INDEC will say it was only 7 percent.

So what is the point of the Moreno Big Mac? Basically hide Argentina’s real numbers. The Big Mac index is a somewhat reputed statistic in international economics, which serves to display under-valued or over-valued currencies as well as price parity per capita by using a product that is made and sold similarly worldwide. In other words, how the same good is valued throughout the world in comparison to the gdp per capita.

Hence, the effort to subsidize and freeze the value of the BIG MAC is valid considering this government. In the last several years the price of the Big Mac has not been parallel to inflationary numbers. Not even the ones given by INDEC. So how is Mcdonald covering the costs? Through what they call the Triple Big Mac. What is the Triple Big Mac? Its a Big Mac with one more tiny piece of meat, valued twice the price of the Big Mac. When entering a Mcdonalds you won’t ever see displayed or promoted the classic Big Mac, but a 55 pesos (6.54$ USD) Triple Big Mac:

 

photo-2

 

Carolina Suarez at the CEC Centro de Educacion al Consumidor (Consumer Education Center), an Argentine NGO looking to aid the consumer against similar injustices, states for Diario Hoy: “Is this perhaps a ploy to hide economic data? How much would it cost otherwise?…”

Cases like these demonstrate what this government is capable of doing. Its funny and yet disturbing at the same time.

Thanks for your attention, I’m off to BK.

 





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