Argentina’s fight against inflation is provoking fresh controversy after government intervention left the independence of the national statistics agency (INDEC) and the credibility of its data in question.
The surprise removal last week of the INDEC official in charge of calculating the consumer price index was followed by the release on Monday of inflation figures for January, which registered a rise of just 1.1 per cent. Some private sector economists estimate that real inflation for the month was closer to 1.8 per cent.
Inflation is considered one of the biggest risks in Argentina’s economy, which has expanded rapidly since the debt default and devaluation five years ago. Inflation had roughly doubled annually since 2003, reaching 12.3 per cent in 2005, but the introduction of a heterodox policy of price controls helped push inflation down to 9.8 per cent in 2006.
Price controls, implemented by Guillermo Moreno, the secretary of interior commerce, have already caused analysts to question official inflation figures, with some estimating that the gap between measured and actual inflation is now about 3-5 percentage points.
But the government’s replacement of the INDEC official – with a close ally of Mr Moreno – is generating speculation that it is interested in controlling indexes as well as prices. INDEC staff took to the streets in protest, complaining of an “institutional coup”.
Anibal Fernandez, the interior minister, described the protesters as “a gang of outlaws” and a “mafia”, accusing the “squalid opposition” of trying to score points ahead of presidential elections due in October.
Carola Sandy, an economist at Credit Suisse in New York, said: “It’s disappointing.” She said INDEC’s independence from the government was a source of pride for Argentines.
“It opens the floodgates to suspicion. The market is now concerned about the credibility of future inflation releases, and also the rest of the data published by INDEC. One can imagine that for political reasons it might report a lower unemployment or poverty figure, for example,” she said.
Analysts highlighted the surprisingly low increases in the cost of health insurance, and in tourism, which increased just 3.7 per cent compared with a rise of 16.7 per cent last year, in spite of anecdotal evidence of a surge in tourism this year.
Federico Thomsen, an economist in Buenos Aires, considers that inflation is sufficiently under control not to justify the government’s preference for “butchers instead of surgeons” to control it. He said: “It’s all so clumsy and sloppy and just so unnecessary. Now the numbers will be questioned, it being an election year. This just gives the critics more ammunition.”
The damage to the credibility of the data is expected to undermine the attractiveness of Argentine inflation-linked debt, and may also affect the annual round of wage bargaining that is under way. With perceptions that inflation is higher than officially measured, trade unions may demand bigger wage rises, further aggravating inflation.
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