Chile, the Latin American country with the reputation for Teutonic precision, is embroiled in an embarrassing statistical scandal months before an election that is expected to usher in a new leftwing government.
For analysts who had questioned how the government of billionaire businessman and president Sebastián Piñera managed to keep inflation last year at just 1.5 per cent despite growing at 5.6 per cent, the answer is simple: it appears it didn’t. Several economists reckon inflation since 2009 was, in fact, 1 to 1.5 points a year higher.
Nor was last year’s census, which had been billed as the best in Chile’s history, quite as accurate as had been portrayed, according to allegations by a senior official at INE, the state statistics institute. Mariana Alcérreca told investigative news website Ciper that the institute’s director had added 800,000 people to the census who were never questioned.
The government has taken steps to investigate and denies deliberate wrongdoing. But the scandals – coming on top of allegations last year, strenuously denied by the government, that it had massaged Chile’s poverty data for political ends – have cost INE director Francisco Labbé his job and dented Chile’s credibility.
They also cast a cloud over the conservative Mr Piñera’s final months in office and his ambitious plans to kick-start Chile’s economy by delivering 6 per cent growth a year and 1m new jobs.
“Piñera has been obsessed by trying to be the best government in the history of Chile and he has played with the numbers a bit, not by changing them but in the way they have been presented . . . sugarcoating [them],” said Patricio Navia at New York University. “But he gets caught out immediately.”
Mr Piñera is barred from seeking a second consecutive term in elections in November and the way now looks clear for Michelle Bachelet, the socialist former president, to return to office next year – especially after Laurence Golborne, the right’s most charismatic hope, was forced to pull out of the race this week thanks to two separate scandals.
Mr Golborne’s candidacy was already on the ropes after the Supreme Court last week fined retailer Cencosud up to $70m for overcharging customers by hiking its store credit card fees when he had been its chief executive. Mr Golborne said he had been simply following the directives of the board but his excuses were unconvincing.
The final nail in the coffin came when it emerged that while a minister, Mr Golborne had not declared an investment in the offshore tax haven of the British Virgin Islands. He says he complied with disclosures required by law. He was replaced as candidate for the UDI party, one of two in Mr Piñera’s coalition, by Pablo Longueira, the economy minister – who, as it happens, has responsibility for INE.
The government tried swiftly to limit the damage from the INE revelations, naming a respected academic called Juan Coeymans as its new chief. An audit of the census is expected and the inflation basket of goods was already due for an overhaul, with a new base to take effect early next year.
Part of the problem with the Chile inflation data has been how to measure clothing, a key component of the index. But fixing that would have caused a politically unpalatable increase in inflation.
“I don’t know if there was direct [government] pressure [on the INE] regarding inflation. I think it was more like the director was afraid to introduce changes that would have led to an increase,” one INE insider said. “The distortions are going to remain in place for a few months.”
Doubts about inflation data also raise questions about the growth numbers. But the wider issue, according to Eduardo Engel of the University of Chile, is that low inflation has helped to keep Chilean interest rates on hold at 5 per cent for 15 months, despite suggestions that the economy is overheating. “The current rate would probably have been hiked if the CPI data weren’t skewed,” he said.
“Building credibility both in economic policy and the accuracy of statistics takes a lot of time and effort, but losing it is very easy,” said Alfredo Coutiño, Latin America director at Moody’s Analytics.
Chile’s next president will not only have to tackle mounting social demands and a potential tax reform but also rebuild faith in Chile’s figures.
“Chile doesn’t deserve a government that uses official statistics to generate a false climate of success,” said Álvaro Elizalde, spokesman for Ms Bachelet. “The next government will have to work to restore confidence in the institutions whose credibility has been badly hurt by this government’s management.”
Get alerts on Americas politics & policy when a new story is published