MercoPress. South Atlantic News Agency

Uruguayan bureaucrats good at cooking inflation numbers

“UTE Prize”, a good instrument used every December, since 2012, to ensure annual inflation remains at a single digit

Last December, the CPI actually contracted 0.55%, something similar to what happened twelve months before helped by a significant decrease in the power rate, estimated at 19.65% and which benefitted over a million clients. The logo of the end of the year bonus campaign is “Ute Prize” (UTE is the Uruguayan power company which works under a government monopoly regime).

 During December there were also price contractions for Housing (partly regulated by a government currency, Indexed Unit, that is employed in renting) and for Food and Beverage, benefitted by the spring-summer season in the southern hemisphere, and a drop in international beef prices, which is a staple dish for Uruguayans.

However the power rate component of the Uruguayan CPI is almost equivalent to one percentage point which helps to understand why the 8.1% of November was confirmed in December with the “Ute Prize”. To this must be added the fact that the US dollar in Uruguay climbed in Pesos until March, and since then has undergone a sliding tendency, ending 2016, against all odds, cheaper than in December 2015.

Nevertheless it must also be mentioned that the Uruguayan economy barely managed to stay afloat in the last twelve months, expanding 0.5%, but well above its neighbors, the first and third economies of Latin America (Brazil and Argentina) which suffered strong contractions.

This effort also reflected in the budget with the deficit climbing to 3.8% of GDP, which will be addressed this year with a formidable “fiscal consolidation” that includes income tax increases and ...obviously a hiking of all public utility rates, which in Uruguay have administered prices, fuel, communications, transport, healthcare, drinking water and yes, power (electricity) which despite the “Ute Prize” will see all bills climbing just below official inflation of 8.1%, beginning this month. So be prepared for February with higher bills and shrinking incomes.

But it must be underlined that the cooking of percentages has a “good cause”, in effect the central bank inflation target is used to fix government staff future salary increases, while for the private sector as long as annual inflation is below 10%. the medium and long term agreements including a unions' “peace clause”, stand.

Furthermore if anybody pops into Uruguay's Stats INE site will see that CPI with base 100 in 2010 reached an annual average of 160,14 at the end of 2016 compared to an average 146,06 twelve months before. Diving the two the result will be 9.1%, but dividing the two Decembers, the result is 8.1%!!!