According to the Big Mac index, Colombia is the country with the most devalued currency in the region

The national currency is the most devalued local currency in Latin America, according to the Big Mac Index published by the British media The Economist. This is a report called the Big Mac Index, produced by the English media since 1986 that seeks to measure how close (above or below) international currency quotes are to the value of a hypothetically standard product.

This is based on the Purchasing Power Parity PPP theory, which is the idea that in the long run exchange rates should move towards where they would “equalize the prices of an identical basket of goods and services (in this case, a burger) in any two countries.”

The Index is then the measurement that the British medium makes between the different values of a Big Mag compared to other countries, the cost of that hamburger in Colombia and the United States, for example, and thus be able to have a new indicator of the dollar-peso exchange rate.

“A Big Mac costs $12,950 in Colombia and US$5,81 in the United States. The implied exchange rate is $2,228,92. The difference between it and the real exchange rate, $3,941.99, suggests that the Colombian peso is undervalued by 43.5%,” explained The Economist in the report, noting how affected the economy of the national territory and the imposing power of the US currency have been affected.

An alarming fact for the country is to know that in the Big Mag Index report, the national peso is the most devalued currency in Latin America against the dollar in 2021. The price of the dollar today reaches a value of 3.938,01 Colombian pesos

The report highlights the behavior that the currency has presented in relation to the exchange data that Colombian markets have been experiencing for seven years. With an exchange rate it went from $2,000 to more than $4,000 between 2014 and 2021: a rise of more than 100%.

Compared to the most devalued currencies against the powerful US dollar, are the currencies of The Russian Ruble, Turkish Lira and Indonesian Rupiah.

Devaluation is the disappearance of the face value of a current currency against other currencies. This devaluation of a currency can have many causes, including a lack of demand for the local currency or a greater demand for the foreign currency. This can occur due to lack of confidence in the local economy, in its stability, in the same currency, among others. The process against a devaluation is known as revaluation.

Negative consequences of a devaluation of currency are the possible increase in inflation, the loss of the purchasing power of employees. As a result of the increase in inflation, all people who receive fixed incomes in the local currency are diminished in their ability to purchase, the disappearance of savings in local currency and loss of real wages.

The main positive effects that a devaluation could have would be that by devaluing the national currency exports become more competitive compared to those made with higher-value currencies, international tourism can be increased, since foreigners from countries where their money is more valuable find it attractive and can improve domestic consumption of domestic products if wages are revised upwards, as imported products tend to become more expensive.

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