Brazil’s Big Mac mystery: what we learned from fast food prices

Sharada Keats and Steve Wiggins
Comment

Earlier this year we published ‘ The rising cost of a healthy diet ’, a report showing that healthy foods have become more expensive in emerging economies such as Brazil, Mexico, China and South Korea since 1990 – just as they have in the US and the UK.

While fruits and vegetables became pricier compared to other foods, net of inflation, fat or sugar-heavy foods became cheaper – or at least, rose in price at a slower pace.

But our report didn’t look into a specific type of unhealthy meal: fast foods. You might assume these became cheaper too.

What we found

To investigate, we turned to The Economist ’s Big Mac Index , devised in 1986 as a rough and ready guide to comparing exchange rates.

The Economist argued that across high-income countries, the price of a Big Mac should be roughly the same. Any significant differences in prices from one country to the next would, therefore, reveal exchange rates over- or under-valued in local currencies.

Over the years The Economist has added more countries to the Big Mac price series, including several emerging economies. So, what do they tell us about the price of a Big Mac in Brazil or South Korea?


Fast food price comparison across emerging economies

Change in price of Big Mac, net of inflation and relative to other foods, 1989/96 to 2013, selected emerging economies

Source : Big Mac prices from The Economist, deflated by Food Consumer Price Indices from OECDstat and GDP deflators from World Development Indicators, World Bank


Comparing the price in 2013 to the earliest observations – between 1989 and 1996 – in five emerging economies (and recently-emerged South Korea) shows that the Big Mac has become cheaper in all countries – except Brazil (grey bars).

In Korea, 2013 prices were more than a third below their 1989 levels.

Brazil: a puzzling exception

We can also compare the price of a Big Mac to other foods (orange bars). This shows similar trends in relative prices, only in some cases with even greater movements. For example, in South Korea the price of a Big Mac in 2013 was less than half the 1989 cost.

Why the sharp drop in price? This requires further study, but the working hypothesis is that fast foods became cheaper thanks to improvements in logistics allowing the ingredients to be sourced, shipped and prepared at a lower cost than in the past.

It’s not clear why Brazil – with its rising burger prices – is an exception. Prices of most foods have risen in real terms in Brazil since the 1990s, as documented in our report . It’s all the more puzzling that the cost of a burger should have risen by so much more.

What is clear, however, is that in most emerging economies for which data exists, the Big Mac has become cheaper relative to other foods since the early 1990s – especially compared to fruit and vegetables.

If Big Macs are representative of fast food, this bodes ill for efforts to stem the widespread rise in people becoming overweight and obese in emerging economies.

The literature shows that prices do affect consumption, especially for people on low incomes. With healthy diets increasingly pricier than less healthy options, this will almost certainly lead to more cases of serious diseases such as diabetes, strokes, heart disease and some cancers.

Authors

Principal Research Fellow
Steve Wiggins has been studying and working on agricultural and rural development in Africa and [...]