Are you a translator working out of Russia who finds it difficult to keep up with the heavy inflation of the ruble?
One major reason is that the cost of living in Russia keeps increasing at a much higher rate than in the U.S. and Europe where your clients are. At the same time, the USD/RUB exchange rate is stagnant. This means that $1000 today is worth the same 30,000 rubles as five years ago, but the 30,000 rubles can now buy much less than it could then. From food and healthcare to utilities and transportation, the prices in Russia are increasing at about 10% per year.
I wrote about the unfavorable exchange rate for the translation pros residing in Russia and getting paid in the U.S. dollars more than a year ago. Since then, the ruble-based prices increased significantly while the USD/RUB conversion rate remained essentially unchanged. Because we can’t do anything about the exchange rate, we can only look for creative ways to overcome its negative consequences. In this post, I’m revisiting this problem to share my perspective and welcome comments from peers.
The root of the problem
From an exporter’s standpoint, the USD/RUB exchange rate should rise proportionally to the inflation rate. If I launch a product that costs 15 rubles to produce (approx. 50 cents at the current exchange rate of $1 to 30 rubles) and then export it for $1, I make a 50% profit. When the production costs increase to 30 rubles and the exchange rate remains the same, I can’t keep exporting the product for $1 because my profit will be exactly zero. Two options are available for me to keep the same 50% profit:
- I can increase the price to $2 and hope that my clients will accept it. But with the global competition driving the rates down, this is a doubtful strategy.
- Or I can expect the government to increase the exchange rate so that I can still sell my product for $1, but get more rubles when I convert the dollars into the rubles. In other words, the exchange rate should double ($1 to 60 rubles) just as my ruble costs doubled. I will then make 60 rubles for each $1, pay 30 rubles as the production costs, and keep the remaining 30 rubles as my 50% profit.
The problem for us translators is that the USD/RUB exchange rate doesn’t increase at all. As a result, the translators working out of Russia have just the first option, which is increasing the rates.
This might be fine with the Russian clients who may be able to empathize with their translation service provider because these clients themselves go through the same process of significantly increasing the prices each year due to the inflation. But what about the clients from other countries who are accustomed to a 2% inflation per year? It’s quite a challenge to get them to understand a 10% rate increase per year, especially if these clients are translation agencies who are under pricing pressure from their own clientèle.
You’re better off living in a country other than Russia
By the way, notice how I’m not referring to “the Russian translators.” The Russian translators who work out of most other countries and spend their money there do not fall victim to this problem. Moreover, they benefit from it. As the translators working out of Russia have to increase the rates, the folks in other countries don’t. They become more competitive as a result. Just ten years ago, a Russian translator working out of the U.S. charged much higher rates than a Russian translator in Russia and was less competitive. The tables are turning rapidly, however.
Thank you for reading this article. In the next post, I will explain the consequences of this problem and what we can do to maintain a profitable business without losing our competitive edge.