The Uruguayan Peso is 17.4% over-valued against the US dollar according to the Big Mac index from The Economist which means the greenback should be trading in Montevideo money markets at 21.62 Pesos and not 18.25 Pesos as currently happens.
The Big Mac indicates the US dollar should be trading at 21.62 Pesos
Mercosur partners Argentina and Brazil are undergoing a similar situation as US excess liquidity floods world markets with dollars that force the appreciation of local currencies, a phenomenon Brazil officially identifies as the “currencies war”.
The reference for such statement is McDonald’s famous Big Mac and its Purchasing Power Parity, PPP, which in the US costs 4.07 dollars and has been compared to prices in the region on July 25, according to a report published in the Montevideo press.
Even when Big Mac is having a winter-holiday promotion in Uruguay and selling at 60 Uruguayan pesos, its normal price is 88 pesos, which works out at 4.78 dollars.
The report indicates Uruguay is thus in a similar situation to 14 of the 36 countries to which The Economist applies the Big Mac index as a reliable comparable index.
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