Emerging Markets: Brazil’s Big Mac
The price of a Big Mac can explain some of Brazil’s problems.
But first, I wanted to share some insight about Brazil from financial writer James Surowiecki. In emerging markets like Brazil’s, the problems start when GDP rises, people earn more and they expect more. However, the country’s public safety, transportation, health care and education infrastructures lag behind. Consequently, you have a growing gap between the new middle class’s expectations and what they actually get from government. It makes sense that just one event, a bus fare increase by only 20 centavos–9 cents–ignited a fire storm of protest.
Next, illustrated by Big Macs, we can add high prices to middle class dissatisfaction. According to The Economist’s Big Mac Index, at $5.64, Brazilians pay a lot for a McDonald’s hamburger. The average Big Mac in the US is $4.37.
Then, comparing the price of a Big Mac to GDP per person, Brazil’s Big Mac seems even more expensive. While Brazil’s per person GDP is $12,789 and her Big Mac is $5.64, in Australia, per person GDP is $66,371 and a Big Mac, $4.90 and for Chile, $14,403 and $4.35.
Sources and resources: James Surowiecki’s excellent column (ungated) in the July 8 New Yorker provides wisdom about Brazil’s plight as she prepares for the World Cup and the Olympics. Then, I just checked The Economist for the most recent Big Mac Index.