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Analysis: Newfound accuracy in Argentine data raises eyebrows
BUENOS AIRES |
BUENOS AIRES (Reuters) - Argentina has been under fire for years over the accuracy of its economic data, but a sudden shift to statistics that seem closer to reality is also raising eyebrows.
The country has been accused of grossly under reporting inflation since 2007, prompting warnings from the International Monetary Fund and grumbling from Wall Street investors and some fellow members of the G20 group of major global economies.
Inflation is not the only concern. Private economists and some state workers say the INDEC national statistics agency also exaggerates economic growth and industrial output.
Latin America's No. 3 economy reported 8.9 percent growth in 2011, but independent analysts say the government overstated that figure by as much as 3 percentage points for political gain.
A sharp economic slowdown has taken hold this year but the INDEC's figures did not reflect that until last month, when the agency reported April economic activity and May industrial production data that either matched or looked even worse than private data.
Analysts say this change probably reflects the government's intention to report 2012 economic growth below the 3.26 percent threshold that would trigger a roughly $4 billion payout on GDP warrants in December 2013.
Not making a payment in 2013 would free up more money for President Cristina Fernandez to spend on social programs during a mid-term election year.
"Cristina doesn't want to pay the GDP warrant, so she'll show the economy is cooling and blame the global economy," said political analyst Sergio Berensztein of Poliarquia Consultores. "2013 is a year for satisfying voters, not bondholders."
There may be other reasons behind the government's move to acknowledge the steepness of the slowdown in growth, whether it be to appease the IMF or restrain surging wage demands.
With private economists estimating real growth of as low as 0.5 percent this year, analysts say the government could avert the GDP warrant payment -- by reporting 3.0 percent growth, for example -- without coming entirely clean in its statistics.
In fact, INDEC has shown no sign of bringing annual consumer price inflation in line with private estimates of 20 percent to 25 percent a year. Its figure still hovers just below 10 percent.
The government has fined and even sued economists who publicize their own numbers, saying this distorts expectations.
"I think the convergence is momentary," said Juan Luis Bour, chief economist at the FIEL think-tank in Buenos Aires. "There's no intrinsic, structural reason for them to give the true (growth) number, which they've tried to hide up to now."
International analysts tend to agree. Analysts at banks like Credit Suisse and Bank of America Merrill Lynch expect INDEC's growth figure to be below the crucial 3.26 percent mark, but still above private sector estimates.
Officials at INDEC did not respond to requests for comment. The government has always denied any data manipulation.
Last week, President Cristina Fernandez's cabinet chief, Juan Manuel Abal Medina, scolded opposition lawmakers for questioning the INDEC's numbers, saying "INDEC is working well so cut it out."
Argentina's economy is cooling fast after booming during most of the last nine years. Sluggish global economic growth, faltering demand from top trade partner Brazil and high inflation at home are among the main factors behind the slowdown.
Business and consumer confidence are also hurting after the government imposed a virtual ban on foreign currency purchases to protect its foreign reserves and as signs emerged that new import curbs may be hindering local production.
In April, the INDEC reported economic activity growth of just 0.6 percent year-on-year. This matched the figure calculated by economic consulting group Orlando J. Ferreres & Associates (OJF).
"(This was) the first month since 2010 that INDEC growth rates are similar to those reported by the private sector," Bank of America Merrill Lynch said in a recent report. "By comparison, INDEC reported growth at an average of 304 basis points higher than OJF in 2011."
Economy Minister Hernan Lorenzino said two weeks ago that his team is sticking by the budget's 5.1 percent growth forecast for 2012 despite the INDEC's unexpectedly negative recent readings.
The market seems skeptical, though. US dollar-denominated GDP warrants fell about 20 percent in the last three months to a bid price of $9.83, while peso warrants shed 9 percent to trade at 11.85 pesos.
The warrants, whose holders only receive payments when growth tops a threshold level, were issued to entice investors into a 2005 deal to restructure debt that Argentina stopped paying during a 2001-02 economic crisis.
It would not be the first time Argentina fudged its figures to save money on debt. Economists and opposition politicians say the government has saved bundles on inflation-linked bond payouts by lowballing consumer price rises all these years.
Still, analysts say the government is unlikely to start reporting pristine economic statistics all of a sudden because distortions within the measurements would be difficult to set straight.
In the case of industrial production, INDEC's figure showing a 4.6 percent slide in May output nearly matched the 4.4 percent year-on-year drop measured by the FIEL economic think-tank. But differences emerged in specific sectors, sounding alarm bells.
Discrepancies also surfaced between official data and the OJF consulting firm's measurements, which showed a more modest 1.5 percent decline in May factory production.
"The (government index) fell more than ours did overall, but in many sectors, we had more negative numbers," said OJF economist Milagros Gismondi. "Their final number doesn't make sense."
In 2009, when the global financial crisis shrank economies worldwide, Argentina reported 0.9 percent growth. Private estimates indicated a contraction of as much as 2.5 percent.
This year, the desire to save money on warrant payments may narrow the data gap somewhat and the government may have other reasons, too, for acknowledging a steep slowdown.
In February, the IMF gave Argentina a 180 day deadline to improve the quality of its growth and inflation statistics.
In early September, IMF Managing Director Christine Lagarde must report on the country's progress to the executive board.
The IMF is not commenting on what the Board may do, but it could give Argentina more time to comply, or it could start initiating sanctions that range on paper from a public reprimand to eventual expulsion.
Since Argentina repaid all its IMF loans in 2006, it has not allowed officials from the organization to conduct routine annual economic reviews done in member countries, arguing it does not want the IMF to meddle in its internal affairs.
In late 2010, however, Fernandez asked the Fund to help INDEC design a new nationwide consumer price index that has yet to be unveiled, indicating her government has not shunned the Fund entirely.
Another possible reason for giving a more accurate picture of the economic slowdown is that the government may want to cool demands for higher wages. Fernandez had to take emergency action last month during a pay strike by fuel truckers.
Some analysts even speculate that the government seeks to report lower economic growth this year so the rebound looks bigger in 2013, when legislative elections take place.
"That could be, it's a good explanation," Berensztein said. "Anything is possible in a world of lies."
(Additional reporting by Lesley Wroughton in Washington)
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