December 7, 2013
Jorge Todesca - Head of FinsoportSunday, October 13, 2013
‘Inflation can be calculated
Buenos Aires City, 66
Education: Bachelor Degree in Economics at Buenos Aires University.
Current job: Head of Finsoport consulting firm.
Previous jobs: Deputy Economy minister, vice-president of Buenos Aires Provincial Bank, Domestic Trade secretary and professor at several universities.
Newspapers and magazines: Clarín, La Nación, Wall Street Journal and Foreign Policy.
Jorge Todesca, the head of Finsport, has been making headlines lately. On September 17 Judge Claudio Bonadío prosecuted Domestic Trade Secretary Guillermo Moreno for abuse of authority, who later appealed the decision. Todesca had filed a lawsuit against Moreno after the secretary fined Finsoport and other six firms with 500,000 pesos each, questioning the methodology used by them to calculate the price index. The Supreme Court ruled in favour of the firms last week, after the Appeals Chamber had already cancelled the fines. Todesca found “some comfort” in the charges against Moreno, even as he acknowledged that his consultancy has “more limited” resources to measure inflation rates than the federal government.
What is the current inflation rate and what is its cause?
Argentina currently has an annual inflation rate of between 24 and 26 percent. It all began six years ago when the government decided to boost demand with monetary issue. Then inflation continued increasing and it became a phenomenon with numerous causes, such as devaluation. Inflation has become a chronic problem in Argentina.
Why is there such a big difference between the numbers published by private firms and the ones issued by the INDEC statistics bureau?
That’s difficult to explain because we don’t know how the INDEC calculates its price index. The University of Buenos Aires issued a report analyzing how the INDEC operates and found several problems with its methodology. Of course any report done by a private firm is more limited than the one carried out by INDEC because we can’t examine as many details. Nevertheless, inflation can be calculated without going to the streets and collecting data.
Having said that, should citizens believe your report or INDEC?
Citizens don’t have to believe either. They have their own perception of the current inflation based on their purchases of fuel and groceries. They have their own inflation rates, which can vary depending on what they buy.
When did the differences between both reports begin?
The differences started in 2007 with the government’s decision to take over the INDEC. The methodology was changed and some specific things the INDEC used to do were cancelled. For example, the bureau used to publish a list of prices of certain products together with the price index and they stopped doing that.
When did the arguments between private firms and the government begin?
I wouldn’t call it an argument. The Domestic Trade Secretariat issued fines to my firm and others for a supposed violation of the Commercial Loyalty Law. Because of that we started the necessary administrative and judicial procedures. There’s freedom of speech in Argentina so we can publish reports that don’t necessarily coincide with the government. This happens throughout the world and there are never conflicts.
Was your work somehow affected by the fine?
It is difficult for a private firm to be constantly answering requests from a state agency that has dozens of lawyers and employees. We try to stay focused on our work and not respond to any of the attacks. As a firm, we decided to stop broadcasting our indices in the media. We have a commercial relationship with our clients and we can choose whether to publish our numbers in newspapers.
How does your firm operate?
We have given that information to the court so I prefer not to give too many details on how we do our job. We use a methodology we think is accurate and we collect data in a more limited way than the INDEC. I wish the bureau would work well because it’s the kind of work that has more costs than benefits.
But can an agency do an analysis with the same quality standards as the INDEC that has more resources?
We have the same professional rigour as the INDEC but we can’t get into as much detail as they do. An employee of my firm can’t go to a supermarket to collect data or ask the owner of a shop for prices. We are not authorized to do that and that’s a limitation we have.
What are the characteristics of your data-collecting process?
We do a limited process. As a firm, we have access to a set of data that reflects inflation rates accurately. We don’t go into details regarding product prices and we only work in Buenos Aires City. What we do is a price estimate, not a price index.
Is your firm part of the so-called Congressional Price Index that is released monthly by opposition lawmakers?
Yes. We give them our inflation rate every month and they take an average with the other rates provided by the rest of the firms. Around 10 firms are involved in it on a pro bono basis. There’s currently a perception among citizens that the Congressional Price Index reflects the real inflation rate.
Do you trust other INDEC statistics besides inflation?
I have detected distortions in some of the reports. The GDP is calculated based on the price index, which if it is underestimated it will have an effect on the GDP numbers. The same happens with the level of consumption in supermarkets and shopping malls where their price index is also used and that has an effect on the reports.
What are your expectations regarding the new national price index that INDEC is developing?
There isn’t much information on how it’s going to work. The INDEC was working on creating one several years ago but it was suspended. Nevertheless, I think Argentina needs to have a national price index like other countries. The more statistic information we have, the better.
Do you have an estimate number for what the inflation will be in 2014?
We will have a similar level to the one we are seeing now — I imagine a 25 percent annual rate. The government will continue to devalue the peso approximately 20 percent and will keep using monetary issue to finance public spending.