Argentina’s patriotic inflation stats

November 12, 2013

For a country where economists can be prosecuted for publishing independent estimates of inflation, Argentina won some unexpected praise from the IMF on Sunday. Chrstine LaGarde, the IMF’s managing director, said Argentina has made “positive progress” on its notoriously questionable economic data.

Argentina’s official inflation statistics have been routinely lower than independent measures of inflation. Here’s a look at that gap:

The IMF censured Argentina in February over its inflation statistics, and the IMF’s board is due to review the country’s progress in the next few days.

Carola Binder has a good round-up of Argentina’s recent history with inflation. Claiming that inflation is low, she suggests, has become something of a patriotic reflex for Argentine officials. Which doesn’t mean that it has helped:

The  irony is that the deceptive data, intended to improve appearances, fooled no one, and made the country look worse rather than better. Consumers in Argentina are well aware that inflation is several times the official rate. A consumer survey run by Torcuato di Tella University has measured inflation expectations near 30% for several years.

Here’s university’s chart detailing what Argentine consumers think the real rate of inflation will be (the yellow lines indicate the media expectation; gray lines indicate the average):

In the last few years, Argentinians have been flocking to illegal currency-changing markets hoping to buy dollars as the Argentine peso has fallen in value. (The country’s official exchange rate reflects a much lower rate of inflation.) In response, the government has put in place a number of measures, including limits on how many dollars residents can own.

Bloomberg reports that tourists are also increasingly turning to illegal exchange markets, and saving quite a bit of money:

Tourists [get] 9.7 pesos per dollar compared with 5.971 at the official rate, are turning to the black market to obtain local currency and shaving as much as 40 percent off their vacation costs. They’re also depriving the central bank of the foreign reserves the government uses to pay its debt, which is the most expensive to protect against non-payment anywhere in the world using credit-default swaps.

Visitors who spent $622 million during the second quarter sold only $342 million through official channels including banks, a 48 percent plunge from a year earlier, according to government data.

 

 

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