September 21, 2014
Right figures, wrong impressions
If Saturday’s editorial described the subsidy cuts for public services as the right move at the wrong time, Thursday’s abrupt reduction of the 2013 growth rate warrants broadly the same conclusion — indeed the subsidy cuts may well have been brought forward to cloak this bizarre contradiction when planned far more logically for after collective wage bargaining (and perhaps even during the World Cup). The truth never hurts and it is always positive that the government should follow up two months of more honest inflation statistics by coming clean on real growth as 3.02 percent for 2013 (in line with regional trends such as Brazil’s 2.5 percent). Nor can either the opposition (which estimated last year’s growth at 2.9 percent on Tuesday) nor the International Monetary Fund (pressing for more credible statistics for years) say a word in criticism but somehow the government contrived to make its newfound honesty look like the sharp practice of old. This is because the inexplicable plunge from 5.7 percent growth in the first three quarters (in line with the old propaganda compulsion to register “Chinese rates”) to three percent also had the effect of evading the payment of 3.6 billion dollars on growth-linked bonds (indexed as from 3.22 percent). It seems wholly wrong to pay out scarce hard money merely to satisfy false pride (and figures) — especially when that sum would more than double current universal child benefits totalling 17.5 billion pesos while the frustrated bond-holders are losing out on a risk investment — but the episode nevertheless feeds an overseas perception of Argentina as at it again, fiddling its figures in order to cheat foreign creditors (as with the CER index-linked bonds as from 2007).
Was this paradox of coming clean at the expense of Argentina’s credibility avoidable? The government could have pinned blocking the bond to the opposition by showing a highly democratic respect for its objections, perhaps also trusting to the infinite lentitude of the Argentine legal system to spin out payment yet further, but if the opposition were seen as the problem, overseas investment could start losing its interest in post-2015 Argentina as well. The government could also give fuller details than a change of base year from 1993 to 2004 for such a steep fall which could otherwise only be explained by economic meltdown in the last quarter of 2013.
Realism must always be hailed but if overseas markets see it as opportunism, the consequences for a Treasury avid for external financing may not be only positive in the short term at least.