Argentina's Return to Honest Accounting Is More Than Just Numbers
Nearly four years after Argentina became the first country to be censured by the International Monetary Fund (IMF) for providing inaccurate data on inflation and economic growth, the international body on Nov. 9 restored the country to good standing. The move provided a win for the government’s reform agenda and offered a positive sign for hesitant investors. But after years of at times embarrassing statistical uncertainty, the most significant effect of President Mauricio Macri’s overhaul of the National Institute of Statistics and Census (INDEC) may be the level of credibility it restores to government institutions.
“Rebuilding INDEC’s reputation was fundamental to recreating the state’s reputation and rebuilding some of the confidence of the state,” said Sergio Berensztein, an Argentine political analyst. “It’s not just about statistics – it’s politics.”
For Fiona Mackie, who focuses on Argentina as a senior editor for Latin America at the Economist Intelligence Unit, the importance of official statistics to the country’s economic and political environment can’t be overstated.
“If you can’t rely on the statistics that the government is producing, what does that say about the strength of institutions? What does that say about the credibility of government in other areas?” Mackie said, noting that the lack of reliable statistics has impeded investors’ ability to make informed decisions. The Economist stopped using INDEC’s consumer price index back in 2012. At the time, the publication wrote that the institute’s efforts to manipulate numbers appeared “to be a deliberate attempt to deceive voters and swindle investors.”
After taking office, Macri declared a “national statistical emergency” as he set about restructuring the agency's data collection methods under his predecessor Cristina Fernández de Kirchner. During her presidency, INDEC was accused of staffing the agency with political supporters who allegedly tampered with statistics to misrepresent uncomfortable macroeconomic realities, including inflation rates well above government targets.
In June, INDEC released its first inflation figures during Macri’s presidency, putting inflation of its consumer price index in May at 4.2 percent. That monthly rate has come down since, though annual inflation is expected to end the year above 35 percent, considerably higher than the administration's early expectations and the highest in the region outside Venezuela.
Still, taken together with government efforts to restore Argentina's place in global capital markets, early signs suggest that investors are encouraged by INDEC's restart. An inaugural business and investment forum in September drew a crowd of nearly 2,000 potential investors in Buenos Aires, while companies including Toyota and ExxonMobil have pledged some $30 billion in new investments in the country.
But INDEC isn’t out of the woods yet. The Economist, for example, still hasn't returned to publishing the official indicator, primarily because the institute hasn’t been producing reliable numbers long enough for the data to be useful. For Mackie, consistency should be a key goal for INDEC going forward.
“The work on the part of INDEC isn’t done, and it’s still a problem on the part of the government that it doesn’t have a full set of accurate statistics,” Mackie told AQ, pointing to “problematic” gaps in data for key indicators such as producer prices, employment and industrial production. Mackie says this could make it difficult for the government to shift the economic narrative away from recession and toward the recovery it is anticipating. Baby steps.
O’Boyle is an editor for AQ