Wednesday, September 19, 2012

Lies, damned lies, and Argentina's inflation statistics

Argentina's authorities continue to blatantly lie about the nation's inflation rate. The official numbers coming out of Cristina Fernández de Kirchner's government have been constantly printed at around 10% per year - with vary little variation. It's quite ridiculous actually.

Argentina's official inflation numbers

Stories persist about independent economists being threatened by the government not to publish the real numbers domestically. But the government can't do much about foreign economists. JPMorgan's latest estimate is 25.5% 3m/3m saar (seasonally adjusted) and rising (similar to other non-government estimates). It is one thing to cook the numbers "gently", the way China does for example, but being off by some 15% makes the government lose all credibility. Even the IMF decided enough is enough. Its latest action could lead to Argentina losing its IMF membership.
Bloomberg: - Argentina is on track to be the first country ever censured by the International Monetary Fund for not sharing accurate data about inflation and the economy.

The IMF’s board of directors, meeting yesterday in Washington, gave the country until Dec. 17 to respond to concerns about the quality of its official data, it said today in an e-mailed statement. If the deadline is missed, the board can issue a declaration of censure, a warning that has never been used and which means sanctions may be applied if the concerns aren’t addressed.

“The Executive Board regretted the lack of sufficient progress in implementing the remedial measures since its Feb. 1, 2012, meeting and expressed to the authorities its concern that Argentina has not brought itself into compliance with its obligations,” according to the statement. The board “took note of the ongoing dialogue between the IMF and the authorities regarding the measures, and called on Argentina to implement the measures without delay.”

The IMF’s decision puts Argentina, a member of the Group of 20 nations, closer to sanctions that could eventually force President Cristina Fernandez de Kirchner’s government into a “compulsory withdrawal” from the 188-country institution. Officials at Argentina’s Economy Ministry, who aren’t authorized to speak publicly, declined to comment.
In the mean time elevated food prices and weakening currency are pushing the actual inflation to new highs. Argentina is definitely on the list of countries who are (or at least should be) dealing with inflation surprises this year (discussed here).
JPMorgan: - In August, food prices added upward pressures to the headline; they were up 2.4%m/m, the highest monthly increase since April, bringing annual food price inflation to 28.1%oya. We expect food inflation to gain further momentum in the coming months as the pass-through from higher global agricultural prices should become more evident, even if the government attempts to contain generalized price adjustments via discretionary controls. 
Welcome to Kirchner's Argentina.
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