The Colombian peso is the most undervalued local currency in Latin Americaaccording to the Big Mac Index published by The Economist.
this indicator uses the popular fast chain cymbal McDonald’s to compare the value of the different currencies of the world, to see if they are in the correct level of the US dollar.
Thus, according to the list, a Big Mac costs $12,950 in Colombia, while in the United States it costs US$5.81. According to the explicit exchange rate of $2,228.92, and the difference with the current rate of $3,941.99, “suggests that the Colombian peso is 43.5% undervalued”, cites the document.
A) Yes, the Colombian peso would be below other currencies in the region, ahead of Mexico (42.5%), Peru (42.1%); Guatemala (41.8%); Honduras (37.8%); Nicaraguan (34.9%); Chile (33.2%); Costa Rica (29%); Argentina (26.2%); Brazil (25.8%); Venezuela (12.9%) and Uruguay (6.6%).
The Big Mac Index was devised by The Economist in 1986 as a guide to whether currencies are at their “correct” level. It is based on the theory of purchasing power parity, which is the idea that in the long run, exchange rates should move to where they would “equalize the prices of an identical basket of goods and services (in this case, a hamburger) in any two countries.
Above the dollar is the Norwegian krone (10%) and the Swiss franc (20.2%).
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