Argentina Making Progress After IMF Censure, Lagarde Says

The International Monetary Fund is making progress and has received cooperation from Argentina since the government was accused by the lender of misreporting data on inflation and economic growth, Managing Director Christine Lagarde said.

Private economists have questioned economic data and estimated inflation at more than double the rate reported by the government since 2007 when former President Nestor Kirchner replaced senior officials at the statistics agency. Economy Minister Hernan Lorenzino met with the IMF in Washington Sept. 16 after the government said it would unveil a new nationwide consumer price index by year-end.

“We are making positive progress but it’s a matter that will be reviewed by the board in a few days’ time, and I would not want to prejudge what the outcome will be,” Lagarde said in an interview with CNN en Espanol. “I very much hope that the country continues to make progress, delivers on its commitment and comes clear on the inflation number.”

Consumer prices rose 10.5 percent in September from a year ago, according to statistics agency data. That compares to the 25 percent inflation rate estimated by private economists in a report issued by opposition lawmakers. The IMF executive board in February censured Argentina, calling on it to “address the inaccuracy” of its inflation index and gross domestic product data under a procedure that can end in expulsion from the fund.

‘Serious Reforms’

Argentina’s economy will expand 2.8 percent next year, trailing the Latin America average of 3.1 percent, the Washington-based lender said in last month’s Regional Economic Update. Brazil, which the IMF forecast in the report will climb 2.5 percent this year and next, is growing below potential, Lagarde said last night.

The extra yield investors demand to hold Argentine debt instead of U.S. Treasuries narrowed 24 basis points, or 0.24 percentage point, to 814 basis points at 10:54 a.m. in Buenos Aires, according to JPMorgan Chase & Co.’s EMBI Global Diversified index.

Brazil requires “serious reforms,” she said without providing further details.

The real declined more than any other major currency since Brazil last month posted its widest budget deficit in almost four years, renewing investors’ concern the nation’s credit rating may be downgraded. Standard & Poor’s in June placed Brazil’s rating on negative outlook, and Moody’s Investors Service last month reduced its outlook to stable from positive.

Lagarde said U.S. officials need to ensure fiscal negotiations aimed at resolving budget disagreements are successful and don’t disrupt financial markets in Latin America and elsewhere.

‘Repeated Shutdowns’

“Repeated shutdowns or repeated uncertainties would certainly not help global growth because the U.S. is a major part of the global economy and has ramification and connections throughout the world, particularly in Latin America,” she said, according to a transcript of the interview. “So we certainly hope that the message has registered and that another threat of a shutdown, threat of a debt-ceiling debate up until the eleventh hour is not going to happen again in January.”

Lagarde said she was most optimistic about countries in Latin America that are keeping a close eye on their fiscal situation and have already restructured their economies, such as Mexico, Chile, Colombia and Peru.

Mexico’s economy also will improve next year, Lagarde said.

“There are very strong reforms under way at the moment which have had a slowing effect in 2013 but we see the forecast for 2014 as a significant pickup,” she said.

Mexico’s GDP will climb 3 percent next year after increasing 1.2 percent in 2013, according to IMF forecasts. President Enrique Pena Nieto has pledged to end the state oil producer’s 75-year monopoly on drilling as he increases spending to stimulate growth.

Venezuela’s economy is not doing well as the government drains reserves, Lagarde said. The annual inflation rate hit 54.3 percent in October, the fastest pace in 16 years as a shortage of dollars crimps imports and causes shortages of essential goods.

“It’s an economy that will really have to face difficult policy issues probably shortly,” she said.

To contact the reporter on this story: Charlie Devereux in Buenos Aires at cdevereux3@bloomberg.net

To contact the editor responsible for this story: Andre Soliani at asoliani@bloomberg.net

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