Argentina, the first International Monetary Fund member to be censured for misreporting economic data, would escape sanctions by the lender under a recommendation by Managing Director Christine Lagarde, according to two IMF board officials.
Lagarde included the guidance in a report submitted yesterday to the executive board’s 24 directors, who will decide next month whether to bar Argentina from access to loans, according to the officials, who asked not to be identified because the report is confidential.
Argentina, which nine months ago was rebuked by the IMF for not providing reliable data on inflation and economic growth, has vowed to unveil a new nationwide consumer price index by year end. Lagarde’s reprieve will give the government more time to fix its statistics and may help defuse tensions dating back to the country’s 2001 default on $95 billion of debt.
“Clearly the Argentines have been working with the fund and have demonstrated much more concern than they’ve let on publicly about resolving the problem,” Claudio Loser, a former IMF director who heads the research firm Centennial Group Latin America, said by telephone from Washington. “We have to see if in actuality the new statistics are incorporated quickly and if indeed the data is more serious.”
Norma Madeo, an Argentine Economy Ministry spokeswoman, declined to comment.
“Throughout the last six months we have been informed in detail of all the steps they have taken to build this new CPI,” Alejandro Werner, the head of the IMF’s Western Hemisphere department, said at an emerging-markets foreign-exchange event at Bloomberg headquarters in New York today. “Given our concerns on the old CPI, we’ll have to evaluate how the new CPI works throughout 2014.”
Argentine government dollar bonds rallied today with yields on the benchmark global notes due 2017 dropping near a nine-month low. The extra yield investors demand to own the nation’s bonds over U.S. Treasuries narrowed 15 basis points to 824 basis points, or 8.24 percentage points, the biggest fall in emerging markets after Bulgaria, according to JPMorgan Chase & Co. EMBI Global Diversified Index.
When censuring the country in February, the board called on Argentina to “address the inaccuracy” of economic data no later than Sept. 29, asking Lagarde to communicate progress by Nov. 13. The IMF in an e-mailed statement yesterday confirmed that a report had been submitted to the board, which will tentatively meet Dec. 9 to discuss it.
“We are making positive progress” and “I would not want to prejudge what the outcome will be,” Lagarde said in an interview with CNN en Espanol broadcast Nov. 10. “I very much hope that the country continues to make progress, delivers on its commitment and comes clear on the inflation number.”
Under IMF rules, the next step after censure is to declare the country ineligible to borrow from the fund’s general resources.
Lagarde’s recommendation reflects the approach of an “organization that relies on the cooperation from its own members,” said Domenico Lombardi, a former IMF board official who is now the director of the Global Economy program at the Waterloo, Ontario-based Centre for International Governance Innovation. “This is why it is hesitant in imposing sanctions.”
Since former President Nestor Kirchner replaced senior officials at the statistics agency, or INDEC, in 2007, private economists have questioned official economic data and estimated inflation is more than double the rate reported by the government.
Consumer prices rose 10.5 percent in September from a year earlier, INDEC said Oct. 15. That compares with an estimated 25.4 percent increase by private economists in a report issued monthly by opposition lawmakers.
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