World Bank doesn't doubt Argentine stats

By Liliana Franco, from Washington DC.-

Special for the Herald.

During the IMF - World Bank Annual Assembly for countries in the region yesterday, the focus was on the World Bank’s report on economic perspectives. Traditionally, Latin America has always been one of the main interests in the yearly meetings, usually due to the economic crises that the region was facing: high indebtedness, heterodox economic policies, social inequality and labour rigidity among others. Now, however, it is interesting that the region has been labeled “an example” due to the way it dealt with the crisis by applying its “macroprudential” policies, which largely differ from the traditional tools suggested by the International Monetary Fund.

In that context, there was a lot of praise for the Latin American countries. “Their behaviour was exemplary,” Chief Economist for Latin American and  the Caribbean Augusto de La Torre said, although he stated that the region’s “vigorous recovery doesn’t mean that things are going to be great in the future as well.”

La Torre says that the problem is to keep this vigorous growth from turning into inflationary problems, currency appreciation, and a feeling of an overheating of the economy.

La Torre explained that the growth was a result of a rise in the value of commodities and an increase in domestic demand.

This piece of good news, however, contrasts with the existence of an inflationary problem that seems to show that the region’s productive capabilities are not similar to those seen in South East Asia.

“Our region has limited productive capabilities that will not allow it to grow without it directly affecting inflation levels,” La Torre said.

Of course, inflation levels are not equal throughout the region. “In Brazil, Panamá, Paraguay and Uruguay, the difference between their current and potential production levels is showing, and inflationary pressures are already being felt,” a report titled “The LAC (Latin American and Caribbean) success is put to test.”

However, regarding Argentina, the report explains that, in contrast, its inflation levels are way above other countries such as Brazil, Chile, Colombia, Mexico and Peru.

Despite this statement, the World Bank considers inflation rate in Argentina to be similar to the one announced by the local government, which is close to a ten percent.

When the World Bank was asked by Ambito Financiero whether it would add an asterisk and a footnote in order to cast a doubt on the government’s controversial index, just like the IMF does in its World Economic Outlook, La Torre, visibly uncomfortable, chose to avoid the question, saying that the IMF was now in an agreement with Argentine authorities to provide them with some technical advise in order to tackle rising inflation.

As Ambito Financiero and other newspapers – some of them from Spain and Brazil – pressed him for comment on the inconsistencies found in the government’s official reports, the World Bank official said that “they hadn’t added and wouldn’t add any footnote,” repeating that the financial organization “was waiting to see what the IMF’s report on the consumer price index (CPI).

When asked if the World Bank doubted any of the Argentine government’s reports on inflation, De La Torre emphasized that “measuring the CPI doesn’t seem to cause restrictions in other measurements.”

“Regardless of what a private citizen might believe, trusting the independent experts is what matters,” he said, adding that he was hoping to see the IMF’s report on the technical mission soon.

He also said that inflation is just one of the many elements to take into account when it comes to measuring the growth of the GPD.

Clearly, the existing suspicions on the official inflation statistics makes IMF and World Bank officials equally uncomfortable, since according to rumours down the IMF’s halls, there’s an unspoken agreement to avoid creating any “tense relations” with Argentina.

According to the World Bank, the good news in Latin America are also the result of “taking some very important steps toward equality, “causing inequality in the region to descend.”

De La Torre agrees with the IMF in that he’s convinced that “countries enjoying a surge in commodities can increase their economic growth policies.”

He concluded by warning that “the current combination of economic policies seems to be increasingly turning towards monetary policy, with no strong fiscal back up.”