Uruguay’s Exchange Rate and Inflation

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In the past 12 months, we’ve watched the exchange rate (US Dollar to Uruguayan Peso) and inflation numbers closely. Why?

Life in Uruguay gets more expensive by the day. Uggh! It isn’t a deal breaker at all. It is a good reason for anyone moving abroad to plan well and prepare for things that are beyond our control. Let me explain in some common terms here:

Uruguay’s Inflation Rate: 7. 3%

This means that the prices of products that we buy (appliances, food, paper towels, etc) rose, on average, 7.3.% in the last year. To be honest, the 7% doesn’t worry us near as much as the exchange rate of the US Dollar vs. Uruguayan Peso (not the same as the Mexican or Argentine Peso).

US Dollar vs. Uruguayan Peso Exchange Rate: 24.5 –> 19.2 (lowest point in April 2010)

This means that in April of 2009, we could get nearly 25 UY Pesos for 1 US Dollar. As of today, we can only get approx. 19 UY Pesos for 1 US Dollar. That is a 22% decrease in purchasing power.

Screen shot 2010-04-28 at 12.01.05 PM

Two examples:

(1) In other words to buy a McDonald’s Value Meal costing 165 Uruguayan Pesos in 2009 would have cost us $6.73 US and now it costs $8.59 US.

(2) Our Home Association Fees + Utilities could cost somewhere starting around 7500 Uruguayan Pesos per month (maybe more, maybe less). In April 2009 that would have been $309/month but in April 2010 that cost is now $390/month (nearly $1000/year more for one bill due to the exchange rate alone).

Its amazing how little I knew about these things before and how much I have to learn. I never imagined that currency exchange rates would affect things so much. But as people who are paid in US Dollars but live and work in other countries, we must not only think about but also plan for the changes that are going to come (hopefully the exchange rate gets better).

  • http://www.blogger.com/profile/01543020786650319318 Rebecca Zurbrick

    Great post and excellent way of explaining what's going on down here. Most exchange houses right now for the past several weeks have been a high of 18.80 to the dollar. Makes me sick!! When I got here just 3 months ago, I think the high was 19.65. I keep hoping it will go up soon!

  • http://www.blogger.com/profile/08995944195009706758 Gabe Smith

    I've never been very good at the math behind international currency rates, but if I'm understanding this correctly, the dollar is much stronger than the Uruguayan Peso. This would mean that it's better to keep money in dollars until you're ready to spend it because the prospect of changing uruguayan pesos back to dollars after any significant amount of time would give you a net loss.Right?

  • M P Jarvis

    Interesting data. It would be more interesting to know how they arrived at an inflation figure of 7.3%. Often there can be one or two indicators used, like the price of petroleum products or a hike in taxes, that can skew the real picture and usually does not mean that the prices of all consumer goods rose that much if at all.