Samoan Big Macs among world's most expensive
Big Macs in Samoa are among the world’s most expensive, analysis by the Samoa Observer shows, making the classic burger cheaper here only than in the advanced economies of Norway and Switzerland.
In July, The Economist magazine released a list of 56 countries comparing the price of their Big Mac burgers to estimate how much one currency is under or overvalued relative to another, using the US dollar as the basis for comparison.
The ‘Big Mac Index’ as it is known is a simple, fun and somewhat serious means of comparing currencies’ purchasing powers.
When the cost of a Big Mac in Samoa is added into the index it is the third most expensive burger of all the countries surveyed.
Big Macs in Samoa cost $15, which equates to USD$5.73 according to currency conversion website xe.com in calculations made this week.
That places Samoa in between the wealthy economies of Norway (USD$5.9) and Singapore (USD$5.24), according to figures provided by the magazine taken on July 1 2020.
The United States and Denmark followed with USD$5.17 and USD$5.09 respectively.
The Big Mac index was created as a fun guide to comparing the value of currencies whether they are valued “correctly” by comparing the cost of supplying a commodity readily available in almost every country in the world.
Burgernomics, as it is known, is based on the theory of purchasing-power parity. The concept holds that, in the long run, exchange rates should move towards a rate where the prices of exactly identical goods or services (or burgers) should cost the same in any two given countries.
The Samoa Bank Association Chairman, Bernie Poort, agreed that while Samoa’s Big Mac is “certainly” pricey, he noted that geography probably plays a large role in setting the price.
“I suspect that some of the ingredients will be imported, maintaining the quality and taste but adding considerable cost to the burger,” he said.
Mr. Poort reminded that the Big Mac index is just one measure to determine the value of a currency and that foreign exchange markets are extremely volatile, and moving daily.
“Yes, I would think our remote location and inability to supply specific ingredients to the McDonalds global formula would add to the costs,” he said.
“There are obvious offsets [making production] in Samoa [cheaper than elsewhere] such as cost of labour, but [it is] impossible to answer with accuracy without knowing a full breakdown that only McDonald’s could provide.”
McDonald’s operation manager and spokesperson, Oliana Faleafa confirmed that the cost of the Big Mac burger is due to each ingredient being imported to ensure quality and taste is maintained.
Speaking to the Samoa Observer on Friday, Ms. Faleafa explained that nothing about the Big Mac comes cheap.
Famously, a Big Mac burger is composed of Big Mac buns, beef patties, shredded lettuce, Big Mac Sauce, American Cheese, pickle slices and onions.
Lettuce is the only ingredient that can be locally sourced, said Ms. Faleafa; otherwise, everything else is shipped in from the United States,
The costs incurred include the payment to suppliers, the shipping, customs duty, the agency bringing in the container, freight, transportation, bond and electricity used by containers storing the ingredients amongst “many other” costs contributes into the $15 price.
But the current price of the Big Mac did not reflect the rising costs in ingredients being shipped in, particularly meat, said Ms. Faleafa.
“It is because we are thinking of the current situation with the slowing down of the economy, we are not yet looking to increase our prices,” she said.
But other experts noted that according to the theory of burger-based economics, the high prices of Big Macs in Samoa suggest that the Tala is overvalued.
Robert Kirkby, a macroeconomist from Victoria University of Wellington, said overvalued currencies are expected to depreciate in value over the long term.
However, Mr. Kirkby also acknowledges that the remote location of Samoa is responsible for the increased price.
“A fuller analysis of P.P.P. exchange rate might try to deal with this kind of issue,” he said.
“[Also] Big Macs cannot actually be bought and sold (except by McDonald's themselves)” he said.
“That said, Big Mac prices are still likely to be a decent guide to whether currencies are over or undervalued, even if a proper P.P.P. exchange rate is a much better guide.”
Whilst Burgernomics was merely a method to make exchange rates more understandable and not intended as a tool for accurately calculating currency discrepancies, it has become a long-running global standard. The Economist publishes its annual calculations (for which Samoa is not included) every year.