Monday, January 25, 2016

Loonies, greenbacks and pesos

L.C. Nøttaasen/flickr
I filled the gas tank yesterday and saved enough money to buy three or four heads of cauliflower.

Why cauliflower? Everyone in Canada has been talking about the rocketing price of the crunchy white crucifer and the falling price of gas. The Canadian economy and its currency are closely tied to the price of oil, and our dollar's value has plummeted as a barrel of crude dipped below $30 US.

Currently a Canadian dollar will get you about 68 cents in U.S. money. For Canadians the low dollar has good and bad effects:

  • Good: If you've got any US dollars or assets to cash in (such as a house in Arizona) you've hit the jackpot.
  •  Bad: Those $6 cauliflowers (we import most of our produce from the U.S, and beyond). 
  • Good: Lots of American tourists taking advantage of the travel bargains to Canada to come north and spend their greenbacks. 
  • Bad: Suddenly most Canadians can't afford to go anywhere priced in US dollars. 

We Canadians have a lot in common with Mexico. The United States' southern neighbor is also a heavily oil-dependent economy. In recent years, whenever I am buying pesos, their value appears to follow the same trajectory as Canadian currency, in comparison to U.S. dollars.

Right now, in January 2016, the Canadian dollar is worth more than 13 MXN, the strongest its been in about 4 years. It made daily living, dining out and purchases for our Mérida home seem like a bargain while I was there this month. But anything I needed to pay for in USD - well, that was a shock.

I suspect most Canadians aren't aware of the advantage of the Mexican peso right now. Actually, many Mexicans might not realize it either. I needed an urgent dental procedure for a broken tooth while in Mérida. The dentist's office kindly filled out the form for my insurance claim (I am lucky to have dental coverage at work). They carefully converted the peso price of my new crown into what they calculated as the Canadian-dollar value of the procedure: $505.

After I picked up the form, I puzzled over how they came to that figure. I was charged a little over 3,600 pesos for the treatment. Finally I realized that they assumed the Canadian dollar was at par with the U.S. In reality, my credit card bill shows that after currency conversion and Visa card fees, I was charged just $291 Canadian in total for my newly refurbished molar.

Really makes me feel like chomping down on some $6 cauliflower. Crudites, anyone?