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Argentina's Inflation Probably Quickened in August: Week Ahead
Bloomberg
September 08, 2008

By Eliana Raszewski

Argentina's National Statistics Institute may report that inflation accelerated in August, led by higher food prices and increased electricity rates.

The institute will release data showing that consumer prices rose 0.6 percent last month from July, and 9.2 percent from a year earlier, according to the median estimate of seven economists surveyed by Bloomberg.

Economists including Miguel Kiguel, a former finance undersecretary, and Juan Pablo Fuentes, of Moody's Economy.com, question the accuracy of the official index, saying that prices are really rising by about 25 percent a year.

``We are in an economy with high inflation that will be hard to slow,'' Kiguel, who runs Buenos Aires-based EconViews research company, said at a seminar on Sept. 3. ``There are risks that the country's economic growth will slow and that we will lose control of inflation.''

The institute is scheduled to publish the August index at 3 p.m. New York time on Sept. 10.

Inflation is contributing to a decline in the popularity of President Cristina Fernandez de Kirchner, according to Sergio Berensztein, a political analyst at Buenos Aires-based Poliarquia Consultores. The two main concerns of Argentines are rising prices and violent crime, Berensztein said.

Fernandez's approval rating fell to as little as 20 percent in June as a result of a four-month protest by farmers over an increase in export taxes, Berensztein said. The farmers' actions led to food shortages, blocked roads and higher prices, In December, when Fernandez took office, her approval rating was 51 percent.

Economists have questioned the accuracy of the official price data since Fernandez's predecessor and husband Nestor Kirchner changed personnel at the statistics institute in early 2007.

In June this year, the institute published a new consumer price index, which it said reflected ``changes in consumers' habits.'' The new methodology uses a variable basket of goods for those products with high seasonal changes.

Growth Slowing

Merrill Lynch & Co. said in a report released on Sept. 2 that Argentina's economic growth will slow to 3.2 percent in 2009 after expanding 6.8 percent this year, ``making Argentina the economy with the sharpest expected slowdown in the Latin America region through the end of 2009.''

Moody's Fuentes said slower growth won't brake inflation.

``What is slowing the most is industrial production, while consumption continues at high levels,'' Fuentes said in a telephone interview from West Chester, Pennsylvania. ``Consumption pressures will leave inflation at current levels.''

Markets Last Week

Last week, the yield on Argentina's benchmark 8.28 percent dollar bonds due in 2033 rose 31 basis point, or 0.31 percentage point, to 11.56 percent, according to Bloomberg data. The bond's price fell 2.12 cents on the dollar to 71.88 cents.

The Buenos Aires benchmark Merval stock index fell 5.5 percent last week to 1678.74. Aluar Aluminio Argentino SAIC, the country's only aluminum producers, rose 6 percent while Tenaris SA, the world's largest supplier of pipes for the oil and gas industries, fell 16.4 percent.

The following is a list of events in Argentina this week:

Event Date

Consumer price index 10

Wholesale price index 10