For years the IMF turned a blind eye as Argentina doctored its inflation index and plumped up its numbers for economic growth. Then last February the fund steeled itself and censured the country, warning it to improve its statistics by September or face potential suspension or expulsion. This threat was unprecedented in the fund’s history.
Yet it seems it was a largely empty one. On December 9th the IMF board met to review Argentina’s progress on a new inflation index. It declared that, although the country had not adopted the measures the fund wanted, it “recognized” the government’s “ongoing work” and deferred further action until March.
Certainly, those who care about the integrity of statistics cheered the recent resignation of Guillermo Moreno, the secretary for interior commerce. Mr. Moreno was the man who intervened at INDEC, the statistics institute, in 2007, after which it began to fudge inflation data. Many officials nowadays take less care to pretend that inflation is around 10% rather than the true figure of around double that.
Some economists believe the new inflation index will be an improvement. Others doubt that the government has suddenly embraced numerical honesty. INDEC is likely to cherry pick items for which the government has ordered price freezes and leave out those whose prices rise, thinks Juan Luis Bour of FIEL, a think-tank in Buenos Aires.
Covering up the true rate of inflation has knock-on effects on other statistics. Take poverty. The government says only 4.7% of the urban population is poor. Oddly, the UN Economic Commission for Latin America and the Caribbean has an even lower number, at 4.3%. But the Catholic University of Argentina calculates that, going by the true cost of living, the correct figure is 27%.
Similarly, underestimating inflation has had the effect of bloating the official calculation of GDP since 2007. In September the government raised eyebrows when it reported suspiciously buoyant quarterly growth figures. That was despite the IMF’s warning and the fact that the official numbers could trigger a multi-billion-dollar payment to holders of GDP-linked bonds. The economy ministry’s forecast of 5.1% growth in 2013 exceeds that of most private analysts by more than two percentage points.
The problem of dodgy statistics goes much wider. For example, while INDEC claims construction expanded by 4.7% in the first ten months of 2013, EconViews, a consultancy which makes its own calculations, puts this number at just 0.5%. In 2008 and 2009 private and official estimates of the expansion in industrial production varied by up to ten percentage points. Although the deviation has since decreased, private economists still prefer to rely on their own numbers.
Farm-watchers were confused when their estimates for the 2013 maize harvest of around 25.5 million tons trailed that of the agriculture ministry by more than 6 million tons. It turned out the ministry had quietly included maize retained by farmers to feed their livestock, contrary to its previous practice. When it comes to official economic numbers, only those of the Central Bank still command some credibility.
The official inability to face the truth extends to crime. The justice ministry stopped publishing annual crime statistics in 2009. In its statistics the health ministry has reduced the murder count by two thirds by subtracting “deaths from outside aggression, of unknown intent”, of which there were 3,124 in 2011.
The problem for President Cristina Fernández is that her government’s statistical solipsism no longer washes with Argentines. This month a dozen provinces were shaken by police strikes (settled with wage increases of over 30%) and looting. Argentines know perfectly well that inflation, poverty and crime bear little resemblance to the official statistics.