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IMF to Put Argentina on Path to Censure Over Inflation Data

Argentina is on track to be the first country ever censured by the International Monetary Fund for not sharing accurate data about inflation and the economy.

The IMF’s board of directors, meeting yesterday in Washington, gave the country until Dec. 17 to respond to concerns about the quality of its official data, it said today in an e-mailed statement. If the deadline is missed, the board can issue a declaration of censure, a warning that has never been used and which means sanctions may be applied if the concerns aren’t addressed.

“The Executive Board regretted the lack of sufficient progress in implementing the remedial measures since its Feb. 1, 2012, meeting and expressed to the authorities its concern that Argentina has not brought itself into compliance with its obligations,” according to the statement. The board “took note of the ongoing dialogue between the IMF and the authorities regarding the measures, and called on Argentina to implement the measures without delay.”

The IMF’s decision puts Argentina, a member of the Group of 20 nations, closer to sanctions that could eventually force President Cristina Fernandez de Kirchner’s government into a “compulsory withdrawal” from the 188-country institution.

Officials at Argentina’s Economy Ministry, who aren’t authorized to speak publicly, declined to comment.

Argentina’s dollar bonds due in 2017 declined on the news, with the yield on the notes climbing 44 basis points to 9.27 percent at 5:12 p.m. in Buenos Aires.

‘No Further Wiggle Room’

Argentina is the only member of the G-20 that has refused to allow the IMF to do its annual review of the country’s economy, a procedure known as an Article IV consultation. Fernandez’s late husband and predecessor, Nestor Kirchner, accused the IMF of pushing the South America’s second-biggest economy into a financial crisis that led it to default on $95 billion of bonds in 2001.

“Instead of censuring them as they should, they gave them three more months,” said Claudio Loser, a former Western Hemisphere director for the IMF who now runs Washington-based Centennial Group research company. At the same time, the statement “means they have no further wiggle room” before censure.

Declining Support

The IMF’s move comes as public support for Fernandez dwindles in the face of 24 percent inflation, the fastest in the hemisphere, and growing frustration over crime and restrictions on dollar purchases. Demonstrators on Sept. 13 turned out in the streets of Buenos Aires in the biggest protests against Fernandez since 2008.

Fernandez’s popularity fell to 30 percent in August from 64 percent in September 2011, the month before she was re-elected to a second term, according to an Aug. 11-21 survey by Buenos Aires-based Management & Fit.

Argentina’s inflation data has been under question since 2007, when Kirchner began replacing personnel at the national statistics agency in a bid to “improve operations.” Last year the government fined more than a dozen researchers as much as 500,000 pesos ($107,000) each for reporting inflation rates that were higher than official data.

Opposition Reports

To avoid fines, economists now share their research with opposition lawmakers, who release a monthly report based on the data. The September report said prices rose 24 percent in August from a year earlier. Two days later, the statistics agency said annual inflation was 10 percent.

Argentina has about $37.6 billion of bonds tied to the official inflation index, which account for 21 percent of government debt, according to Barclays Plc. The government’s decision to underestimate inflation has cost investors almost $7 billion in returns the past five years, according to ACM Consultores, which is run by former central bank manager Maximiliano Castillo.

According to IMF rules for countries that either fail to provide information or provide inaccurate information, a declaration of censure may follow several failed attempts to have the country that breached its obligations take remedial measures. Later steps can declare the country ineligible to use the fund’s general resources and suspend its voting rights.

The board already met several times over the past few years to discuss Argentina’s case and a technical team visited the country in 2011, leaving a report “with specific recommendations on the design and methodology for developing a new national” consumer price index. In February, the board gave Argentina 180 days to address the quality of its inflation index and of its gross domestic product data.

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