National Institute of Statistics and Census of Argentina - Controversy

Controversy

Controversy arose when the government of President Néstor Kirchner replaced Graciela Bevacqua, the Consumer Prices Indicator director (Índice de Precios al Consumidor - IPC). Bevacqua is reported to have arrived at a consumer price increase figure of almost 2.0% for January 2007 from internal data but the rate officially reported to the public was 1.1%.

The head of INDEC resigned in March, and a new board of directors led by Ana María Edwin was installed by the Ministry of Economy; the board would operate under the supervision of Commerce Secretary Guillermo Moreno. A group of employees protested publicly at what they saw as a violation of INDEC's autonomy, and an attempt by the Economy Ministry under Felisa Miceli to illegally keep inflation indicators under one percent a month. Prosecutors gathered evidence that high government officials had inquired repeatedly of statistical staff how to get lower inflation numbers, and that in early 2007 managers of the price indexes had excluded products whose prices had risen more than 15% in the survey and changed price data after it came in from the field workers.

Since then, INDEC's headline inflation statistics have been substantially lower than estimates from analysts in the private sector and also lower than INDEC's implicit private consumption price index which is incorporated in the measurement of real GDP. Taken from the first quarter of 2007, each index (from the same quarter the year before) has read as follows:

The discrepancy has led to exchanged accusations of politically motivated statistical legerdemain between the ruling party and most of the political opposition, on both left and right. Officials facing election have an incentive to understate the headline CPI figure. Opposition figures frequently relied on estimates made by figures such as Orlando Ferreres (a former Bunge y Born agribusiness executive and Economic Planning Secretary for a leading opponent, former President Carlos Menem).

The practice yielded the ruling party no political benefit, and helped contribute to their loss in the October 2009 mid-term elections. An alternative explanation for the policy could rest on government finances: the national government has issued around US$100 billion in government bonds. Payments on almost US$50 billion of this are indexed to inflation. Other government bonds are tied in value to GDP growth. A 7-point underestimate in inflation could save the Central Bank of Argentina US$3 billion in inflation-indexed interest payments, while higher economic growth would cost added interest on bonds tied to GDP; hence, there is a short-run financial benefit to the government from a discrepancy between the two inflation readings in the table.