Political Risk Latin America Blog @PolRiskLatam

Argentina economy: The numbers game

Posted in News and Articles by politicalrisklatam on August 13, 2010

by The Economist Intelligence Unit, August 13th, 2010.

Efforts are afoot to make Argentina’s statistics agency independent, amid ongoing doubts about the reliability of official economic data. Confidence in the accuracy of the statistics has declined under the presidencies of Cristina Fernández de Kirchner and her predecessor, Néstor Kirchner. The agency in charge is believed to be politicised and its inflation statistics, in particular, skewed. This could change if Congress passes a bill to make INDEC autonomous. The bill has been approved by the Senate, and now passes to the lower house—though there is a risk of a presidential veto and other obstacles to change.

 The credibility of the Instituto Nacional de Estadística y Censos, or INDEC, has suffered since changes were made at the start 2007 to its methodology and staffing. This reflected the interventionist stance of the Kirchners towards economic management, and was widely viewed as a means to present a more favourable picture of inflation, which has been a stubborn problem for the government in recent years. Inflationary pressures have been fuelled largely by the government’s highly expansionary fiscal and monetary policies, and distortionary policies that have discouraged private investment and therefore restricted supply.

The changes made at INDEC, including replacement of its head and many staffers, have cast doubts on its measurements, both within Argentina and abroad. This has exacerbated criticism of the Kirchners’ unorthodox economic policymaking. In additional to doubts about INDEC there have been growing concerns about the steady erosion of the independence of Argentina’s central bank (BCRA) and about the health of public finances.

Yet the administration has been trying to normalise relations with external creditors following the huge debt default of 2002. Most recently, in June, it concluded a swap of outstanding defaulted debt remaining from a 2005 restructuring. Now, creditors are looking for additional steps. Without addressing the lack of confidence in government statistics, a full restoration of relations with international capital markets will be difficult. (continue reading… )

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