PERU: Bargain Basement

For tourists with dollars, a drink costs as little as 25¢ and a five-course dinner only 80¢. American cigarettes come to 11¢ a package, Argentine steak 25¢ a lb., a taxi ride across town 10¢, a shoe shine 1½¢. Outside the capital, tourists can live in a first-class hotel for $1.50 a day, with meals.

This low-cost luxury flowed from no horn of plenty. It resulted from an Alice-in-Wonderland exchange situation. The official exchange rate is 6.5 Peruvian soles for one U.S. dollar. But because there are not enough dollars at this rate to meet the need, the visitor can sell his travelers’ checks on the free market (which is not illegal) for anywhere from 10 to 20 soles.

For the Peruvian who earns his wages in soles, the result is higher prices. Living costs have gone up about 100% in the last four years. But so long as the sol was cheap in relation to the dollar and prices did not catch up, foreigners could live better for less in Peru than in almost any other country in the world.