Economic Essay by Conor

“Do not worry sir, these are [Dirhams, Quetzals, Kenya shillings], not dollars.”

We have heard this throughout our trip from desperate shopkeepers in markets. This cry seems to mean that since the price is stated in Dirhams (Morocco), Quetzals (Guatemala) or Kenya Shillings (Kenya), it is somehow worth less than if it were priced in dollars. The topic of economics in relation to travel is an interesting one. Seven or eight years ago, we would go to Canada in the winter and stay at a four star hotel, with a double floored-suite. I, being 7, wondered how we were able to do this. The answer was that the US Dollar was so much stronger than the Canadian Dollar. On the other hand, while we were in Europe this past fall, the Euro was much higher than the dollar. Because of this, we ate mostly bread and cheese whenever we could, and stayed with friends.

Here in Bolivia, things are very cheap to us. For instance, in the small town of Sorata, you can buy 5 bread rolls for fifty cents, and a popsicle for 20 cents. We have been thinking a lot about why the price is so low, or at least seems that way to us. While hiking in the beautiful mountains surrounding Sorata, we had a conversation about this, and one conclusion we came to was how lucky we are to have been born in the United States. If we had been born in Bolivia, and had done the same job, we would have made Bolivianos instead of Dollars. As a result, things would seem seven times as expensive in the U.S.

Taking an example like popsicles, it led us to ponder why the price stays so low. The store owner seems to be the only ice cream seller in town, conveniently located on the main plaza, and he could set the price as high as he wants. Given the limit to which customers would stop buying, he does not seem to be facing any other checks for his price. However, he still has to keep it low, because there’s a point at which the market won’t be able to bear the set price. Another possible reason that popsicles are relatively cheap in Sorata is that the cost of producing the popsicle is less than in the US. If the factory workers are getting paid less for making the popsicle, the end product will cost less. The transportation costs of driving the ice cream into the mountains and keeping it cold are also less. This is because the gas price per gallon here is a little less than two dollars per gallon.

Inflation is also a factor in the price differences. For instance, if a fruit seller thinks his mangoes will be more valuable tomorrow for whatever reason, he will charge more today. Other fruit sellers will then think that that is the accepted price for mangoes, and they will raise their price, so soon in fact it will be. After this spiral, someone from another country can come in, and buy some things with their currency, which would be much stronger than that of the country, creating the sense for the traveller that everything is cheaper. That is what we experienced in Sorata buying popsicles.