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Argentina comes clean on inflation – maybe.

Long accused of fudging its inflation data, Argentina announced a new index.

By Correspondent / February 14, 2014

A woman holds her Argentine pesos as she waits to pay for her groceries in Buenos Aires, Argentina, Wednesday, Feb. 12, 2014. President Cristina Fernandez's government has issued several price control programs to try to tame inflation.

Victor R. Caivano/AP

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Buenos Aires

In a new move to help repair its international reputation, Argentina released a revised inflation index yesterday evening after longstanding criticism that it was fudging official statistics.

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Argentina Correspondent

Jonathan Gilbert is a foreign correspondent in Buenos Aires, Argentina, where he mostly writes about politics and the government of President Cristina Kirchner. He read geography and Spanish at the University of Birmingham in the UK and has a postgraduate diploma in journalism.

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Economists welcomed the amended index. But the high figure for January – a month when the government devalued the peso by 19 percent – also triggered concern: Prices soared by 3.7 percent from the month prior, officials said, the highest rate of inflation in nearly 12 years.

“Good news,” Martín Lousteau, a former economy minister who is now an opposition politician, said on Twitter. “The government has recognized the problem. Bad news: prices are increasing at an annual rate equivalent to 55 percent.”

With the government hemorrhaging foreign currency reserves, revising this data is key to its efforts to regain access to global financial markets from which it has been locked out since a $95 billion default in 2001.

Debate over the inflation rate has long raged here, with critics of the government repeatedly attacking officials for under-reporting rising prices. Most notably, the national statistics institute, INDEC, released figures in 2012 that implied a person could eat for six pesos a day, a marker that was widely ridiculed by critics. (Back then, six pesos, or about $1.35, would have bought a couple of alfajores, a traditional Argentine sweet.)

Critics also pointed to the irony of a giant banner draped at the time from the institute’s offices in downtown Buenos Aires that read “Clarín lies,” a reference to the antigovernment Clarín media group.

The institute became discredited in early 2007 (a time when President Cristina Fernández de Kirchner’s late husband and predecessor, Néstor Kirchner, was still in power) after Guillermo Moreno, the gruff former domestic trade secretary, overhauled its senior staff and meddled with the inflation index.

INDEC said inflation was just 10.9 percent last year. But a separate index published by opposition politicians said the rate exceeded 28 percent. This alternative index also put the January 2014 rate at 4.6 percent, considerably higher than the government’s 3.7 percent. The higher rate was branded a “joke” yesterday by Jorge Capitanich, the cabinet chief.

The International Monetary Fund has called on Argentina to improve its data and even censured the country a year ago for failing to comply. A spokesman for the IMF said it had taken note of the new index. Argentina is also due to revise its growth figures next month. A recession is likely to occur this year, according to Vladimir Werning, an economist at JP Morgan.

In other moves to clean up its image, Argentina has made an offer to compensate Spain’s Repsol for the 2012 expropriation of its shares in the oil company YPF; settled investment disputes at the World Bank; and re-opened negotiations with the informal Paris Club of nations over a $10 billion debt.

With prices spiking after the devaluation last month, and inflation estimated to be 45 percent this year, according to Mr. Werning, the government is also trying to confront what it calls “speculative attacks” by retailers and suppliers. It is investing large amounts of political capital in a campaign for its latest round of supermarket price freezes.

Posters were even pasted across Buenos Aires by a pro-government umbrella organization, showing pictures of the heads of leading supermarket and electronic chains. They read: “These are the ones that steal your salary.”

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