The permanent loop in which the Argentine economy lives reaches unsuspected levels. In this case I am not referring to the cycles of illusion and disenchantment. Nor to exchange crises, followed by inflationary acceleration and then appreciation until the next crisis. Not even minicycles of growth in odd-numbered electoral years followed by years of product decline in even-numbered, non-electoral years. This time I am referring to unforced errors.
Between 2007 and 2015, the country lived practically without public statistics. Indec’s intervention in the inflation data little by little affected the rest of the statistics, such as poverty rates and the growth rate. But not only that. It was also the first major disincentive to save in pesos, which led to much higher inflation levels.
The debt restructuring in 2005 was successful, not only because of the high percentage of acceptance, but also because we now had the same country risk as the average for Latin America. Thus, in 2006 we had an economy in full growth, with twin surpluses (fiscal and current account), accumulation of reserves, access to international financial markets, salaries recovering the maximum of convertibility, poverty falling and inflation rising but still at very manageable levels. Nothing could hurt salt.
But someone thought it was a good idea to lie with the inflation data to save us a good part of the interest on the restructured debt. Not just any interest: the interests of those who bet on bonds in pesos, which were adjusted for inflation. Thus, the Indec intervention in 2007 was a selective default on public debt, particularly that in local currency.
The incentives to save in foreign currency were clear: the formation of net foreign assets (FAE) – the technical name for capital flight or the savings of Argentines in the mattress – went from USD 2,000 million per year until 2006, to USD 16,000 million per year from 2007. The economy was unable to finance such an amount of dollars and, in 2011, just after having swept the elections, Cristina committed a new mistake by putting the stocks in place, instead of cleaning up Indec and making some minor tweaks to the macroeconomic plan. We never returned to the per capita income level of 2011…
The subsequent story is known: Macri wins in 2015, he takes out the stocks, he puts us in debt up to the Caracú (IMF included), he returns to the stocks, Alberto wins, pandemic, inflationary acceleration, Milei. But something that it seemed like we had learned is that you can’t screw with official statistics, that it is better to recognize an inflation of 25% per month than to lie again.
Until last Monday. It all started with the news of the resignation of Marco Lavagna, the only high-ranking official who came from the previous government, which was a sign that statistics were not to be messed with. Then came the unfortunate statements of Caputo and Adorni. The first said that, although Indec and the BCRA had announced the change in the basket for January, the modification would be made when the disinflation process was consolidated. The second put forward an even less understandable argument: if the basket was updated now and later inflation fell, it would be said that the decline had been a product of the update and not of the disinflationary strategy. In both cases, officials stated that the decision had been made by the President. And the autonomy of Indec? Fine, thanks.
We know where the costs of a measure like this begin: we never know where they end. That happened in 2007 and that is why it is so important to come out strongly to resist this measure. The damage can be enormous.
For now, it seriously affects the credibility of Indec, introducing suspicions into the truncated disinflation process. It also makes it clear that, if the change had been made two years ago, all income and assets that are updated for inflation today would be around 18% higher.
It even destroys an improvement that is proposed in the labor reform proposal that is being discussed in Congress at this very moment. Article 54 establishes the criterion for updating severance pay as CPI + 3% annually. This is done to unify the various criteria used by justice, which cause unpredictability and litigation. Now, with a CPI in doubt, justice once again has arguments to use its own criteria. This benefits neither companies nor workers: only those who benefit from the trial industry.
In short, the initial damage has already been done. Hopefully the reaction is strong enough so that the Government decides to change the basket soon and we turn the page. Otherwise, the temptation for any government to stumble over the same stone will always exist and we will have once again deteriorated one of the fundamental institutions for the development of a country. What happened to the official statistics between 2007 and 2015 was a tragedy. That on this occasion the INDEC does not end up being a farce.
*Guido Zack is director of Economics at Fundar.
by Guido Zack
