Argentines Want the Real Inflation Numbers

Provinces and private researchers say government data are way off

Mauricio Macri is a conservative politician campaigning for reelection as mayor of Buenos Aires. He’s making the usual promises—improving the schools, fighting crime, unsnarling traffic—and one that’s not so usual. Macri says that if, as expected, he wins the July 31 vote, he will launch the Argentine capital’s own consumer price index.

A growing body of officials say they cannot trust the inflation data provided by the left-tilting government of President Cristina Fernández de Kirchner. Doubts have been growing since January 2007, when Fernández’s husband and predecessor, Néstor Kirchner, replaced the staff at the National Statistics Institute, known as Indec, in what he said was a bid to improve operations.

Indec today says inflation is running at 9.7 percent. Alfonso Prat-Gay, the former central bank president, says prices rose 23 percent in the past 12 months. That’s the average of inflation data produced by provincial authorities. Macri, another opponent of Fernández’s party, will be able to use his inflation index for Buenos Aires to draw attention to what he says are the ruling party’s economic missteps.

Why has the government published numbers so different from what others come up with? The difference between official and private statistics saved the government 4.2 billion pesos ($1 billion) on its debt in the four years since Kirchner made the changes at Indec, according to Maximiliano Castillo, a former manager of macroeconomic analysis at the central bank who now runs ACM, a Buenos Aires economic research firm. From 2007 to 2010, says Castillo, the interest and adjustment of principal on Argentina’s inflation-linked bonds should have come to 20.3 billion pesos instead of the 16.1 billion pesos calculated by the government. The underreporting of price increases distorts other statistics, such as the poverty level, which is more than double the official rate, Prat-Gay says. Spokesmen for the federal government declined to speak to Bloomberg Businessweek for this story.

The government has cracked down on private researchers, saying they are using the wrong methodology. On July 8, Interior Commerce Secretary Guillermo Moreno filed charges against M&S Consultores, saying the consultant stood to profit by reporting higher inflation than the official rate. Since February the government has fined about a dozen companies, including consultants Ecolatina and Orlando J. Ferreres & Asociados. Ecolatina has appealed. Opposition lawmakers now release a monthly CPI calculated by eight private researchers whose names are kept secret.

Fernández, who succeeded her husband in December 2007, has asked the International Monetary Fund to help draw up a new national consumer price index. On July 13 the IMF board met to discuss the quality of government data. For now, investors rely on private estimates or provincial data, says Alberto Bernal, head of fixed-income research at Bulltick Capital Markets in Miami. “If you analyze countries like Chile or Colombia,” he says, “you just look at the official number because the markets don’t feel that there are doubts.”

Buenos Aires’s statistics agency has a list of 300 goods and services to include in the new index and plans to add 100 more, says Jose Maria Donati, head of the agency. “Since the intervention in the national statistics agency, we lack a tool of analysis,” he says. “We were forced to create the new index.”


    The bottom line: Varying rates make it hard to know Argentina’s real inflation. It may be 23 percent, near the levels of Venezuela and Vietnam.

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