September 19, 2014
Inflation Manipulation Faulted
The government’s immediate response to last Friday’s statement by the International Monetary Fund (IMF) board censuring the accuracy of Argentine statistics has taken the form of both a carrot and a stick but perhaps neither should be taken at face value. The first reaction came from Economy Minister Hernán Lorenzino who (perhaps shying away from extremism in a highly sensitive month for New York court debt rulings) took the criticism on board at least to the extent of vowing corrective action by the end of the year (i.e. after the October midterm elections) — quite apart from this commanding no more credibility than previous pledges to remedy a statistical tampering now stretching back more than six years, this conciliatory half of the government message has since reportedly been downplayed to a new price index by late 2015 (i.e. after the current presidential term). A few hours after Lorenzino’s response, the stick came in the form of a furious flurry of presidential tweets — a diatribe against an alleged IMF record of failure plus a conspiracy theory of making an example of Argentina (without entering into any argument here, the IMF was not seeking to impose any policy on the Cristina Fernández de Kirchner administration but simply requesting responsible statistics, a point the presidential reaction entirely failed to address). Yet CFK’s extremism might well be just as deceptive as Lorenzino’s moderation — letting off steam via Facebook and Twitter rather than stalking out of the IMF as an electioneering stunt.
While most criticism of INDEC statistic bureau has centred on its inflation data (especially since these strip billions off index-linked bonds), fudged figures are central to the success of CFK’s economic model as a whole. When any country is allowed to pass off nominal as real growth, the statistical miracles which she regularly boasts do become possible. To give one example, this country’s Gross Domestic Product is generally estimated as some 450 billion dollars for a per capita income comfortably into five digits based on the pesos in circulation at the official exchange rate — measuring the same sum in pesos against the “blue” dollar would yield a GDP of around 280 billion dollars for a per capita of 7,000.
But even if all the misgivings about INDEC statistics are completely unfounded, the uncomfortable reality of an IMF board consensus voting against Argentina last Friday needs to be faced — this speaks volumes for this country’s growing isolation in the world and perhaps last month’s controversial agreement with Iran forms part of the explanation.