South America has been a special part of my life for four decades. I have lived many years in Brasil and Peru. I am married to an incredible lady from Argentina. I want to share South America with you.
When Argentina’s new centre-right government took office in December, many newly appointed officials were left dumbfounded by the state in which ministries had been left, giving the concept of a paperless office a whole new meaning.
Nowhere was the institutional wasteland inherited by President Mauricio Macri more evident than at the Indec statistics agency, whose figures had been so discredited for so long that a “statistical emergency” was declared shortly after he took office, and the publication of statistics suspended.
Now, for the first time in almost a decade, the statistics agency has published inflation figures widely regarded by independent economists as an accurate reflection of the level of inflation. Prices rose 4.2 per cent in May from the previous month, Indec said on Wednesday. A complete set of national statistics is expected by year’s end.
“This is the government’s strongest signal yet that it is delivering on its promises to restore credibility to institutions,” said Juan Cruz Díaz, managing director of Cefeidas, a risk consultancy in Buenos Aires.
The overhaul of Indec represents an important step in the “normalisation” of Argentina’s economy, which has been starved of investment in large part because of the previous populist government’s penchant for tampering with institutions. But Mr Macri is hoping that a surge of investment will lead to a revitalisation.
Since the election in 2007 of ex-president Cristina Fernández de Kirchner, economists have accused officials of manipulating data to downplay the true extent of the economy’s woes, although it was not until 2013 that the International Monetary Fund formally censured Argentina for its inaccurate statistics.
Ms Fernández’s subsequent claims last year that there were fewer poor people in Argentina than in Germany raised eyebrows, especially as Indec stopped publishing poverty statistics in 2013, and private estimates put the level at more than 30 per cent.
When derision was heaped on former finance minister Hernán Lorenzino for abruptly halting an interview in 2013 — declaring “I want to go now” as he became increasingly uncomfortable with the interviewer’s questions about inflation — private economists said it was far more than double the official rate. In contrast, the official inflation figure for May is actually higher than most private estimates, the bulk of which range from 3-4 per cent.
“You’re back Indec! How we missed you,” tweeted Guido Sandleris, an economics professor at the Torcuato Di Tella University in Buenos Aires.
Now that official statistics are regaining credibility, the government must work to lower inflation, which many regard as Mr Macri’s most pressing problem. Without an improvement in the economy in good time before midterm elections next year, he risks losing an important chance to consolidate power.
Officials argue that inflation peaked in April, estimated at about 6.5 per cent, and that the one-off impact on prices of a devaluation and a sixfold increase in utility tariffs is beginning to subside. But some economists fear that the impact of wage rises of more than 30 per cent this year will continue to complicate the battle against inflation, which remains some way off the 1-2 per cent monthly figure that the government is hoping to achieve this year.
The return of credible statistics to Argentina is expected to lead to a positive audit from the IMF, due in July, which will mark the first time the multilateral organisation performs its Article IV economic review in South America’s second-largest economy since relations with it were severed in 2006.
Although the damage to the credibility of Argentina’s institutions caused by the former administration is being repaired, work remains to be done. “Once lost, transparency is very difficult to recover,” says Pablo Santiago, head of research at Banco Mariva, an investment bank in Buenos Aires.
“The best thing that the Indec can do is to go unnoticed, and not be on the front pages of the newspapers every day,” says Mr Santiago, observing that for now, that is not the case. “In order to exist [successfully] the Indec must seem not to exist.”