Big Mac indicates ruble's woes

October 13, 1994|By Kathy Lally | Kathy Lally,Moscow Bureau of The Sun

MOSCOW -- The Big Mac, which had been falling steadily against the ruble, regained its strength yesterday after a determined effort to support it.

In other words, after several days of battering by the rapid fall in the value of the Russian currency, McDonald's raised its prices by about 20 percent.

Prices at McDonald's may not explain all of Russia's economic travails for the last four years, but they offer a vivid account of the harrowing effect on business and people.

While the Russian leadership was bickering yesterday over whom to blame for the disastrous decline of the ruble and legislators were demanding a vote of no confidence in the government, businesses like McDonald's were trying to weather the storm.

The Big Mac, like other products priced in rubles, fell under assault as the currency lost half its value over the last two months.

On Friday, the ruble sold at 2,896 to the dollar and a Big Mac cost 4,900 rubles -- $1.69. On Tuesday, the ruble sold at 3,926, with the Big Mac, still at 4,900, a $1.24 bargain. Yesterday, the Big Mac was up to $1.57, reaching 5,900 rubles while the exchange rate steadied at 3,736. Only last January, the Big Mac cost 2,200 rubles -- $1.57 then.

To appreciate the damage inflicted on the Russian psyche, consider this: The Big Mac cost 3.75 rubles when it went on sale in January 1990. Under the exchange rate artificially imposed then by the Soviet Union, that meant the two patties with special sauce cost the equivalent of $2.34.

"It's tough," said Marc A. Winer, general director of Moscow-McDonald's. "There's no question about it."

McDonald's, which is unusual among Western businesses because it operates entirely in rubles, has managed to prosper -- but at the cost of having to raise its prices quickly to keep pace with inflation.

And despite the run on the ruble, Mr. Winer said that McDonald's -- operated here by McDonald's of Canada -- remains positive about Russia.

"The environment is slowly and steadily improving," he said. "It's getting better all the time."

In fact, sales have been so overwhelming at the three Moscow restaurants that they take first, second and tenth place in sales ,, volume of all the McDonald's outlets in the world.

While thousands of hamburgers fried on yesterday, President Boris N. Yeltsin sizzled. Unable to fire the head of the Central Bank, who answers to the parliament, Mr. Yeltsin instead fired Sergei Dubinin, his acting finance minister.

"This is a threat to the national security of our state," Mr. Yeltsin said. "We must not allow the population to pay for the gross miscalculations of the government and the Central Bank."

The ruble, which fell by 27 percent Tuesday, steadied somewhat yesterday after the Central Bank intervened, reportedly spending $90 million to shore it up.

The head of the bank, Viktor Gerashchenko, is a conservative who has used cheap credits to subsidize industrial dinosaurs.

Such credits have been blamed for fueling inflation, which until the last few days had seemed to be leveling off. Only last week, President Yeltsin boasted that inflation had been reduced to about 5 percent a month.

It had edged up to 7.7 percent by the time the words were out of his mouth and now threatens to reach 30 percent, damaging the tough monetary policies pushed by reformers.

"This is either sabotage or extreme irresponsibility and slovenliness," Mr. Yeltsin said. "Everything that was achieved by great force in the aspect of financial stabilization in the last half-year cannot be thrown to the winds."

The president ordered officials from the intelligence service to lead a state commission to investigate the fall of the ruble.

And a small political party in the parliament insisted on a vote of no confidence in the government. A debate on the motion was scheduled for Oct. 21. Analysts, however, said it was unlikely such a vote would succeed in forcing the government to resign.

The parliament was expected to consider Mr. Geraschenko's status today.

At McDonald's, filet-o-fish steadied at 5,600, and Mr. Winer had some friendly advice for shell-shocked consumers startled by cash registers, which ring up only big round figures.

NB "You just disregard the decimal point," he said. "That's all."

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