MercoPress. South Atlantic News Agency

Argentina budget “fails to consider” new global scenario

Argentine private consultants have warned that the 2009 budget bill fails to take into account the new international scenario and lacks a comprehensive approach to inflation, country risk and economic slowdown”.

"The 2009 budget bill sent to Congress (by the government of Cristina Fernández de Kirchner) clearly fails to take into account the new international scenario" said the reputed Econometrica consultancy in its most recent report. "So far, the (Argentine) government has given no clear sign that it is prepared to face the challenges presented by the new international scenario". Recent decisions by the government to cancel Argentina's debt with the Paris Club of creditor nations, and the attempt to reach an agreement with the so-called "holdouts" (bondholders who refused to accept the 2005 restructuring of Argentina's foreign debt), are described in the Econométrica report as "necessary but insufficient," if Argentina wants access to the international credit market. According to the report, if Argentina intends to recover the international markets' credit, what it needs is "a comprehensive approach to such delicate matters as inflation, the (extremely high) country risk factor, and and the economic slowdown". The report further maintains that no signs of such comprehensive approach can be perceived, and that the (national) government has only taken "isolated measures on such questions as utility charges, which are not (an integral part of) a global anti-inflationary strategy". Económetrica foresees an economic slowdown in 2009, due to "the decline of international commodity prices, the droughts (in central and north Argentina and considered the worst in a century), and the dwindling disposition to make investments". Econométrica estimates the 2008 inflation at 24%, much higher than official statistics which insist on a one digit. According to the report, "the inflation rate's acceleration will provoke conflicts over prices and salaries, utility charges and subsidies, exchange rates and export tariffs, as different sectors will attempt to protect their own revenue given that 2009 being is an electoral year". Argentina's Statistics and census office, Indec has been at the core of a controversy about inflation measurement. The Kirchner administration have defended the Indec rates as heavenly messages while private consultants, corporations, Indec branches from provincial governments and even unions close to the government work on other estimates, usually more than double the official release. World Bank vicepresident for Latinamerica Pamela Cox, after meeting with Mrs. Cristina Kirchner in Washington said that "Indec is a problem" and "we hope the government addresses the issue to strengthen that institution". She added that Indec "is important because it's the source of official statistics. We know it's a problem for Argentina and we hope the government strengthens the institution". Econométrica grim outlook for the coming year adds further concerns about "the national government and the provinces' confrontation over the Federal Revenue Sharing scheme." Long-term price distortions, according to the report, have led to a 30% drop in the quantity of oil and gas produced in Argentina over the last ten years.