Friday, September 14, 2012
In a word, yes. Monday, the International Monetary Fund will review Argentina’s progress to normalize its public economic statistics, following a six month probationary period. Argentina has been warned time and again that it must improve the transparency of its statistics on inflation and GDP – show how they come up with their statistics, since no one believes them – but Christina Kirchner’s government has staunchly refused to do so. In light of this intransigence, the IMF should censure Argentina, as permitted under Article 8 of the IMF. This censure would limit Argentina’s future access to funds from the institution and send a strong message that Government’s delinquent behavior cannot be tolerated.
False government statistics have real life consequences, as demonstrated by the nation-wide protests that have rocked Argentina starting on the eve of September 13. Tens of thousands of protestors voiced a litany of complaints including rampant inflation. “Official” figures by Argentina’s National Institute of Statistics (INDEC) state that inflation ran at 10% in August, while outside independent analysts and opposition deputies say this figure is over 24%. Argentines have suffered as officials play down the cost of living.
The Economist, which stopped publishing INDEC’s inflation figures this year because it now longer believed them, reported last week that the government’s unrealistically low data on food-prices are deeply problematic. The government also just increased spending on welfare programs for families with children by a whopping 26 percent (to $6.9 billion) in hopes of quieting public dissatisfaction coming from the runaway inflation.
The egregious manipulation of inflation figures has been a problem since early 2007. In 2009, the Washington Post published a scathing report on Argentina’s doctored data. Amid pressure from above, it reported that INDEC workers had “altered socioeconomic data to reflect numbers palatable to the presidency.”
President Cristina Kirchner believes there are no consequences to her behavior. El Cronista reported on Wednesday that Argentine officials dismissed the idea that the IMF would impose sanctions over the failure to normalize INDEC statistics.
Indeed, Argentina is the only G-20 nation that refuses to submit to mandatory IMF in-country surveys – a requirement of all IMF members. The current Argentine government also suppresses internal reports that contradict the “official numbers” and has fined at least three firms 500,000 pesos ($124,000) each in the last month for publishing consumer-price indices that diverged from official statistics.
The current problem with INDEC should also be considered in the context of other issues and problems. Mexico, the U.S. and Japan and the European Union have filed six new WTO cases against Argentina for its severe restrictions on imports, which violate international trade rules and agreements. Argentina has also refused to repay its international creditors billions of dollars still owed to them following the Government’s 2001 sovereign debt default. That issue has prompted Germany, Spain, Canada, Italy and Britain to join the U.S in voting against loans to Argentine from the IADB this past month.
The IMF has a choice to make on Monday. The right course for the IMF is to censure Argentina for its scofflaw behavior; to do otherwise could send a strong message that any country can lie about its statistics and ignore its agreements with impunity.