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Argentina comes clean on inflation after seven years of manipulation

Analysts now believe that official January 3.7-percent rate is a “plausible” number

A supermarket in Buenos Aires.
A supermarket in Buenos Aires. Bloomberg

After seven years fudging its inflation figures at the International Monetary Fund (IMF), Argentina on Thursday released an updated consumer price index (CPI) numbers which analysts believe now accurately reflect the economic situation.

After years of admitting that the country’s monthly inflation stood at one percent – when the provinces and analysts were reporting double that – Economy Minister Axel Kicillof said that in January, the month the government devalued the peso, the CPI rose to 3.7 percent.

“It is a plausible figure,” Eduardo Levy Yeyati, an economist and former general manager at the Argentina’s Central Bank, told EL PAÍS. Lucas Llach, professor at the Universidad Torcuato Di Tella, also shared this opinion on Twitter. “The national inflation that was announced is correct, approximately.”

This was the first time that the government of President Cristina Fernández de Kirchner has acknowledged a higher inflation figure than its official rates. The government had been manipulating the CPI as a strategy to avoid having to publicly recognize that the country’s annual inflation rate had soared to more than 20 percent (it dropped slightly in 2009 at the height of the world economic crisis).

The mastermind behind that scheme was Guillermo Moreno, a powerful Peronist who served until last year as trade secretary before being appointed as Argentina’s ambassador to Italy.

But the lack of credibility over the official figures helped fuel even greater price rises as Argentineans began thinking that real inflation was even worse, judging by hikes in the cost of living. For example, last year the government said that annual inflation stood at 10 percent while the statistics agencies in the different provinces and analysts put the figures between 27 percent and 28 percent.

When the Universidad Di Tella conducted a poll, people responded that they believed inflation was well over 30 percent.

The first to protest the figure-fudging were the workers at the National Statistics and Census Institute (INDEC), who on Wednesday took to the streets again as they have been doing for the past seven years despite government sanctions. Raúl Llaneza, an INDEC union leader, said it was unfortunate that Fernández de Kirchner never responded to their protests but only decided to come forward and be truthful about the country’s figures after the IMF threatened Argentina in 2012 with cutting off its credit line among other sanctions. But still the president held back until Moreno’s exit from government. Kicillof took over the government’s economic policy in November.

The Fernández de Kirchner administration will now have to recognize that there are more people under the poverty level than it had previously admitted. Official figures from the INDEC state that only 4.7 of Argentineans live in poverty while organizations, such as Argentina’s Catholic University, have estimated that one in four people cannot afford basic necessities.

 

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