November 23, 2010 / 10:28 PM / 9 years ago

UPDATE 4-Argentina asks IMF to help overhaul inflation data

 * Argentina says IMF will help redesign inflation index
 * Gov't accused of under-reporting inflation since 2007
 * Move may signal more moderate line by Fernandez
  (Updates with Moody's comment, updates markets)
 By Hilary Burke
 BUENOS AIRES, Nov 23 (Reuters) - Argentina has asked the
International Monetary Fund to help revamp its widely
discredited inflation data in a surprise about-face by
President Cristina Fernandez announced on Tuesday.
 Argentina's center-left government has barred the IMF from
conducting routine annual evaluations of its economy since
2006, saying the Fund's policy recommendations helped cause the
country's devastating 2001-02 economic crisis.
 Fernandez last week triumphantly announced Argentina had
convinced the Paris Club of creditor nations to negotiate the
repayment of some $6.5 billion in defaulted debt without IMF
oversight. [ID:nN15139120]
 But inflation is seen as her Achilles heel less than a year
from the next presidential election, suggesting Tuesday's
announcement may be aimed at taking the steam out of opposition
criticism over rising prices and official data.
 Private economists, politicians and some state
statisticians accuse the government of under-reporting
inflation since early 2007 for political gain and to reduce
payments on inflation-linked debt.
 Some analysts said Fernandez may be moving to moderate the
hardline stance on the IMF taken by her husband and
predecessor, Nestor Kirchner, who died suddenly in October.
 Economy Minister Amado Boudou, also a critic of the Fund,
said the country would work with the IMF to restore credibility
to government data in a clear step toward mending fences.
 "We have asked the International Monetary Fund for
technical assistance to design, construct and implement a price
index on a national level," Boudou told reporters.
 He said "quality is lacking in Argentine statistics,"
something the government has been loathe to recognize.
  Inflation Graphic:
  INSTANT VIEW-Argentina seeks IMF help [ID:nN23143375]
 Argentina's INDEC statistics agency reported annual
inflation of 11.1 percent through October ARECI09, while
private estimates hover near 25 percent.
 The IMF said it was in touch with Argentine authorities
over organizing the technical mission. Previous efforts to team
up on the data fell through last year.
 "This is an enormous change ... it highlights something
that is becoming increasingly evident, which is a marked change
of direction in the president's style in the wake of her
husband's death," political analyst Graciela Romer said.
 Kirchner paid off Argentina's debt to the IMF in 2006, and
later said there was "no way in hell" the country would borrow
again from the Fund.
 Argentine government bonds trading locally over-the-counter
reacted positively to the announcement, rebounding from earlier
losses to close slightly higher.
 Argentina's debt spreads are among the highest in Latin
America due to lingering fallout from a $100 billion default
and the more-recent fudging of economic data. [ID:nN06131361]
 However, ratings agency Moody's said Argentina's decision
to revamp its inflation statistics could yield an upgrade.
 "Anything that leads to economic data that the market can
trust, that will be a very positive credit development for
Argentina," Moody's analyst Gabriel Torres told Reuters.
 The government made methodological changes to the consumer
price index in 2008 but they did not quell criticism. The INDEC
also stopped measuring inflation nationwide and focused
exclusively on the Greater Buenos Aires metropolitan area.
 "The government's excuse is that this new index will have a
national scope," said Nicolas Salvatore, coordinator at the
Buenos Aires City economic consultancy.
 Norberto Itzcovich, the INDEC's technical director, said
IMF officials would visit Argentina in early to mid-December,
adding that technical conversations with the IMF had been going
on for three years.
 Asked if a revamp of the inflation index would affect past
data, INDEC's director Ana Maria Edwin said "you never revise
an index retroactively."
 An admission that Argentina lied about inflation could
prompt lawsuits by holders of inflation-indexed bonds.
 The officials made no mention on the long-delayed Article
IV economic review, which the IMF conducts with each of its 186
member countries to keep tabs on the global economy.
 (Additional reporting by Guido Nejamkis, Magdalena Morales,
Luis Andres Henao and Jorge Otaola, Lesley Wroughton in
Washington and Walter Brandimarte in New York; Editing by
Andrew Hay)

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