Ugi's is a simple, working class pizzaria chain in Buenos Aires. They serve cheap and, let's be honest, rather crappy pizza. I remember on my first trip to Buenos Aires in 1997 I ate there every day. I was at the end of a long backpacking trip. My money was running low and Buenos Aires, at the time, was very expensive compared to other countries in South America. Back then a pizza cost 2 pesos. The peso was tied to the dollar at a 1-to-1 ratio until the crisis in 2001. So basically for a buck I could get half a pizza and that was my dinner.
Ugi's posts the price of their pizza prominently in their windows. I think back in the 1990s this was a way for them to tout how cheap their pizza was. In the last few years, however, it's become a sort of porteño version of the Big Mac Index, that is, an unofficial way to measure inflation.
Just a bit of background: Argentine tied their currency to the US Dollar in the 1990s after suffering hyperinflation in the late 1980s. This worked for awhile but ended disasterously in 2001 when they defaulted on their debt and let the peso float. It crashed 75% reaching 4-to-1 in June of 2002 before stabilizing at around 3-to-1 where it remained until recently. This made everything in Argentina, Ugi's pizza, steaks, leather jackets, whatever, very, very cheap in dollars until about 2006 when inflation started to pick up and eat up the difference.
With some searching on Flickr, I managed to reconstruct the increase in the price of an Ugi's pizza, which just recently was raised to 12 pesos. While a 600% nominal increase in 8 years is eye-popping, I wanted to track this in dollars and adjust for US inflation. Here's what I found:
| Date | Price in Pesos | Exchange Rate | Price in Dollars | CPI Deflator | Constant 2000 Dollars | % Change since 2000 | |
. | 1/1/2000 | 2 | 1 | $2 | 1 | $2 | - |
. | 1/25/2004 | 3.5 | 2.98 | $1.17 | 1.1 | $1.07 | -46% |
. | 9/4/2006 | 4.8 | 3.1 | $1.55 | 1.17 | $1.32 | -34% |
. | 2/1/2008 | 6.9 | 3.16 | $2.18 | 1.25 | $1.75 | -13% |
. | 3/1/2008 | 8 | 3.17 | $2.52 | 1.25 | $2.02 | 1% |
. | 4/1/2008 | 10 | 3.17 | $3.15 | 1.25 | $2.52 | 26% |
. | 3/1/2009 | 12 | 3.65 | $3.29 | 1.23 | $2.67 | 33% |
Click on the dates for my sources.
As you can see, Ugi's pizza reached purchase price parity last year but with their recent increases they've jumped ahead. I predict from this measure that the value of the Argentine peso will fall, which is something that basically everyone is predicting anyway.
BTW, I should mention I'm not the first to notice this relationship. The excellently named and now unfortunately defunct World's First Expat Blog noticed this trend a year ago. Mmantantirulirula posted about the phenomena back in 2007 and even Brazilian expats here are bitching about it.
5 comments:
This was a fascinating post. A lot of work.
Great post!
Great that you took the time to piece this together.
as promised: i'm something of a naysayer when it comes to inflation in argentina. partially because i think that the argentine persecution complex probably has as much to do with inflation as distorted exchange rates and price controls. that said, here's a seattle PI article from march 08 talking about the price of wheat tripling in the last 10 months.
http://www.seattlepi.com/food/355118_costlywheat15.html
...if only you could find out how much the roasted mani on the street was in '98!
Hey!
I'm the brazilian bitching about it.
Seeing the Ugi's prices is a interesting way of feeling the inflation.
And Remember:
"No a la droga, Sí a la pizza"
(No to drugs, yes to pizza)
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