Yesterday, I met with Carmen Diana Deere of UF’s Center for Latin American Studies to clear up the economic questions that I had about Guatemala.
One thing she said really resonated with my nature to fight social injustice: The dollar goes farther simply because their wages and standard of living are so much lower.
I talked to a woman who said her husband sold ice cream in the city every day for 12 hours and came home with an average of about 10 quetzals. That’s around $1.50 day. I make $7.75 an hour plus tips to sell ice cream at the most pretentious of all American ice cream stores–Cold Stone Creamery.
The lower wages aren’t a device to keep the poor man down, though. They’re the root of the government control of trade, value of currency and (sadly often) corruption.
Deere drew me the basic supply and demand graph to illustrate how a government can control the value of their currency.
At the intersection is the natural market value of currency, Guatemala, however, sometimes overvalues the currency so fewer quetzals can purchase the dollar–the currency that controls the value of trades. This makes imports cheaper for a nation that needs them, but it also makes it so local sellers can’t compare to the great American imports, even for staples like corn!
So a little crash course in economics made me realize why the Guatemalan Gringo’s statement bothered me (see last post). It’s definitely all true, but at the cost of social inequality for everyone. As a side note–he linked to GDP statistics yesterday and I linked to HDI (Human Development Index) statistics.
UPDATE: I apparently mistook the information I was given about Latin America and applied it to Guatemala. It’s been brought to my attention that Guatemala often has to do the opposite–undervalue the currency to control the number of remittances