MercoPress. South Atlantic News Agency

Cristina K talks about inflation and calls for investment

More of the same but with a velvet touch

With only a few hours left for Sunday's Argentine presidential election First Lady and incumbent candidate Cristina Kirchner talked about one of the controversial issues of the campaign which is also a daily challenge for Argentines pockets: the consumer price index and inflation.

"It's an issue we must address and not despair", said Cristina Kirchner during a rare morning interview with a broadcasting station, adding that "what matters is to put things in their right place and establish a policy". "In the last five years Argentina's GDP has expanded 49.3%, unparalleled in a hundred years, and if we continue at this rate, or similar next year, it will mark the record growth period in the country's history", underlined Mrs. Kirchner. Therefore "the current dynamics of prices with such a robust expansion of GDP is more than reasonable", said Cristina. "And I'm talking about the inflation index from Indec and not the figures alleged by the opposition". For several months the Argentine Statistics and Census Institute, Indec has been at the heart of a controversy because the government is accused of manipulating figures and claims form staff that if they refuse to follow "target" instructions they run the risk of being fired, as has happened on several occasions. The monthly consumer price index, CPI, is not only vital reference data for the economy but also for salaries agreements with Argentina's powerful unions and for investors who have trusted the new post 2002 issues of Argentine sovereign bonds some of them with a bonus linked to GDP expansion and others to inflation rates. Manipulation of indexes, Indec staff on strike to protest abuses and intimidation, mistrust from investors and bankers, opposition claims of fraud have met with President Kirchner's obstinate support of the so called "official" inflation figures which help to ensure a fictitious set of "macroeconomic achievements" related to prices. For example the latest Indec CPI release for September was 0.8%, which means that annual inflation will be below the two digits. However in the real economy business organizations believe inflation for 2007 will be above 16%, labor unions have fought for adjustments in the range of 20%, and provincial Indec offices, particularly when distant from the long arm of the Kirchner administration, show a different picture. An example and an embarrassing one is the province of Mendoza whose governor Julio Cobos is running with Cristina Kirchner in the presidential ticket. Mendoza's Indec office reported that September CPI was 1.7%, double the Buenos Aires office release. Governor Cobos admitted as real the Mendoza index which is a repeat of what happened in August when his province's CPI marked 3.1% but Buenos Aires said it was 1.5% and this was the "official" figure posted on the Indec website. On a similar line to her husband-president, but with a velvet glove, Cristina argues "we need this strong demand to have consistency with the supply of goods, because if not we can again fall into the trap of monetarist policies and their brutal adjustments, of which Argentina has been the victim so many times". In a country that has grown so consistently and robustly "we need more investment; we're currently at 23% of GDP, the best in the last 25 years. but insufficient. We need more investment", she underlined. Finally Cristina Kirchner, who opinion polls indicate as Argentina's next elected president on the coming Sunday anticipated that "we're working on a new system to calculate inflation most probably we'll adopt the US system". But in spite of the controversy, with Argentina's economy booming, unemployment falling, generous subsidies in basic items and public utilities rates and pockets a few steps ahead of inflation, no opposition candidate has been able to pierce the armor-plated Kirchner couple mix of left wing rhetoric with government handouts. Maybe if inflation had caught up with Argentine pockets there would be no "K penguin" magic or the current blend of "innovative" economic policy and no electoral promises of "more of the same". However since Cristina seems to be less inclined to leftist rhetoric, we shouldn't be surprised if she also appeals to more "orthodox" economic instruments to end Argentina's financial isolation and insufficient investment.