November 1, 2014
Wednesday brought a wheelbarrow full of negative economic data for the newly-appointed Economy Minister Axel Kicillof and his team of young guns. It’s quite simple to rattle those figures off by heart: the Central Bank reserves have dipped below 30 billion dollars, the black market dollar traded for 11.21 pesos and the state-run statistics bureau reported an annual inflation rate of 10.9 percent. All this in a single day, and it can only be the start of what is expected to be a year dominated by trade union issues. Already the anti-government union chiefs Hugo Moyano and Luis Barrionuevo are planning a summit for Monday in Mar del Plata, beating war drums to the tune of demands for anticipated wage hikes. INDEC has infamously underreported inflation since its takeover by the Kirchnerite adminstration in 2007, but even by its fudged standards the cost of living was high in December. INDEC has almost monotonously reported monthly inflation rates of 0.6-0.9 percent. But it looks like the bureau was left with no option but to acknowledge that prices are accelerating. Inflation in December according to INDEC clocked in at 1.4 percent. Reliable private economists have measured the annual inflation rate for 2003 at 25-27 percent.
Kicillof’s squaky-clean team of Keynesians can take solace that INDEC’s senseless inflation rate, which effectively measures prices only in the Buenos Aires metropolitan area, will be replaced next month with a new nationwide consumer price index, which has been approved by the International Monetary Fund (IMF). Yet it can escape no one that INDEC’s brand name has been ruined and that the new index (the so-called IPCnu) will be fiercely criticized even when it presumably has the blessing of Christine Lagarde’s army of technocrats. Official economic data have a serious credibility problem, and it’s not only about technicalities.
Kicillof is now arguably the most powerful minister in the administration of President Cristina Fernández de Kirchner. Since November’s ministerial reshuffle, after the midterm electoral defeat for the ruling coalition, much of the attention had fallen on Cabinet Chief Jorge Capitanich and on the luxury “blame it on Rio” vacation scandal involving AFIP tax agency chief Ricardo Echegaray. But with the latest batch of alarming economic news hitting the frontpages of newspapers all in one single day, the political burden is now almost exclusively on Kicillof’s shoulders.