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Argentine Public Dubious of Government Inflation Numbers
World Politics Review
August 20, 2008

By Roque Planas

BUENOS AIRES, Argentina -- Last week, the Instituto Nacional de Estad stica y Censos (INDEC), the Argentine government's statistics agency, released the official inflation figure for the month of July: 0.4 percent. Such a report would have caused jubilation among the Argentine public, had they believed it.

"It's a lie," responded Yamila, a local drama teacher, without hesitation when asked about the figure.

The coordinators of the INDEC report appear to be the only ones who have failed to notice the recent price increases in Buenos Aires. Charles, a French researcher who has resided here for the last three months, scoffed at the government estimate, claiming that he now pays nearly a third more for a pack of cigarettes than when he arrived.

The cost of the luxury of smoking, which has little affected a country that has yet to adopt North American and European standards of tobacco taxation, pales in comparison to the cost of food. "In the month of July I paid 120 pesos to minimally supply my apartment with groceries. In August I've been paying approximately 170 pesos for the same products," claimed Montse, a tourism industry worker.

"Everything's going up, every month," commented a local grocer. "It's not because of me. The products arrive from the distributor with a higher price."

Even the international travel industry has begun to shy away from the promoting Buenos Aires as the greatest bargain in the Americas, combining European elegance with Latin American prices. Such pitches, a staple of travel publications since the economic crash and the accompanying peso devalutation of December 2001, have been supplanted by warnings. Lonely Planet's Web site cautions its readers that prices for hotels and restaurants have shot up 100 percent and 50 percent respectively, partly due to inflation, which the guidebook publisher claims is "back with a vengeance."

Permitting rapid inflation is one of the gravest political sins the government can commit in a country that still remembers the disastrous hyperinflation of the 1980s or the more recent financial crash of December 2001.

One way to deflect the political flack that comes with inflation is to deny its existence. The previous government of N stor Kircher, the current president's husband, put the INDEC under the control of Commerce Secretary Guillermo Moreno, who, in turn, replaced the head of the INDEC in Februrary of 2007 with party loyalist Beatriz Paglieri. Arguing that the agency's methodologies produced erroneous results, Moreno and Paglieri implemented a new system over the protests of the agency's technicians. Both opposition politicians and foreign analysts have interpreted Moreno's control of the INDEC as a method of hiding the inflationary effects of the administration's economic policies by manipulating official statistics. The INDEC's figures have inspired criticism ever since, as public and private estimates of price increases diverge ever further.

Now even Kirchner's supporters have joined the chorus of criticism. The Argentine daily Clar n reports that Guillermo Francos, head of Banco Provincia, accused Moreno of "seriously damaging the president and undermining the government's credibility." Deputy Agust n Rossi, another Kirchner loyalist, refuted the July estimate, asserting that "the society in its totality does not believe the figure."

Argentines are not the only ones questioning the INDEC's credibility. Standard and Poor's lowered Argentina's investment grade from a B+ to a B last week, largely in response to the manipulated figures. The financial research company rejected the validity of government claims of an annual inflation rate of 8 percent to 10 percent, asserting that "private estimates suggest that it might actually be about 24%-28%." Bloomberg reports that Moody's Investor Service is also showing reservations about maintaining its positive debt rating for Argentina due to governmental meddling with inflation figures.

The attacks on the INDEC's credibility highlight the increasing division in the officialist ranks (the branch of the Justicialist Party that supports the Kirchners). The governing party's solidarity cracked last month as the biggest political challenge of Cristina Kirchner's term came to its close. A three-month farmers' strike ended with the failure of a Senate bill that would have imposed a controversial hike in food export taxes that was promulgated by executive decree last March. Vice President Julio Cobos tearfully cast the tie-breaking vote that killed the controversial measure. The bill's failure constituted a major setback for the Kirchner administration, which uses export taxes on soy, beef, and wheat to subsidize the cost of public transportation and food for Argentina's urbanites. Economists partly attribute the recent aggravation of inflation to the strike, which produced a meat shortage in the capital of one of the world's largest beef producers.

The controversy over inflation continues to batter the already weakened Kirchner administration, which has seen its approval rating plummet from more than 54 percent in Febuary to just 27 percent in May, according to the Argentine polling group Poliarqu a. While Kirchner's drop in the polls may be cause for concern for her supporters, perhaps they should not abandon all hope. After all, statistics can be deceiving.

Roque Planas is a freelance journalist and a graduate student in Latin American history at Texas State University. He is currently based in Buenos Aires, where he is researching state violence in 1930s Argentina as well as the social effects of the financial crash of 2001.