MercoPress. South Atlantic News Agency

Argentina and Colombia dispute place as second largest South American economy

Herman Lorenzino dismissed Juan Carlos Echeverry but again: how reliable are Argentine stats?

Argentine Economy minister Hernan Lorenzino struck back at Colombia’s claim that it has overtaken his country to become South America’s second largest economy behind Brazil.

Lorenzino, in messages posted on Twitter on Friday said data from the IMF show that Argentina, with a smaller population, has a GDP more than 100 billion dollars larger than Colombia’s. The gap between the two countries’ nominal GDP is growing, and GDP per capita is also larger, he said.

Juan Carlos Echeverry, before stepping down last month as Colombia’s Finance minister, argued that his country’s economy was 15 billion dollars larger than Argentina’s as a result of the Peso’s slide on the unregulated currency market.

Because of the strict money exchange restrictions (‘dollar clamp’) imposed by the Cristina Fernandez administration, in the unregulated exchange market, or ‘blue’ market the Argentine Peso has declined 25% this year and ended the week’s trading at 6.3634 Pesos per dollar. The official rate is 4.7312 Pesos per dollar.

According to Etcheverry the Colombian GDP is equivalent to 362 billion dollars against the 347bn for Argentina.

“That affirmation isn’t only inaccurate but also intentionally harmful,” Lorenzino wrote on Twitter after Echeverry repeated his argument in a Financial Times column published this week.

“This large difference between market rates and official rates means that calculations of the dollar value of Argentine GDP using the official exchange rate are biased upwards,” Echeverry wrote in the FT on Oct. 15.

“The evidence points towards an indisputable fact: Colombia has managed to place itself in the leading pack of the region in terms of economic growth, size and long-term potential.”

Lorenzino didn’t address Echeverry’s argument about the competing exchange rates, saying only that it’s “an error” to affirm Colombia’s GDP is bigger.

However he appealed to IMF and ECLAC figures to support his arguments saying Argentina’s GDP is equivalent to 471bn dollars compared to Colombia’s 378bn. The World Bank at the end of 2011 estimated Argentina’s GDP in 446bn and Colombia’s in 332bn.

“ECLAC (UN Economic commission for Latam and the Caribbean) says our economy is approaching the 500bn dollars while Colombia’s has yet to reach 400bn” said Lorenzino in his twitter.

The Argentine minister never gives press interviews and refuses alls media contacts, thus his appeal to twitter.

Echeverry in August said he was resigning as Finance minister to apply to become the IMF Western Hemisphere director in charge of monitoring the Latin American and Caribbean economies. Former Chilean Finance Minister Nicolas Eyzaguirre resigned from the Washington-based post in July.

If Echeverry wins the job, he’ll have to manage relations between the IMF and Argentina that have deteriorated since the country’s 2001 default on 95 billion dollars in sovereign bonds.

The IMF has also repeatedly criticized Argentine government statistics it says don’t accurately reflect GDP or inflation which private economists put at over 24%.