Argentina’s monthly inflation rate rises as Miley faces backlash over outdated indicator

Buenos Aires, Argentina – Inflation in crisis-prone Argentina accelerated more than expected for the fifth month in a row in January, Argentina’s statistics agency said on Tuesday, a closely watched report whose outdated methodology in recent days has sparked political unrest and caused headaches for libertarians. President Javier Miley.

The statistics agency, known by its Spanish acronym Indec, said consumer prices rose 2.9% last month compared to December, largely due to increases in the prices of food, restaurants, hotels and utility bills.

Economists say the formula used by the National Inflation Index to calculate the inflation rate still underestimates the rise in real prices in a country suffering from a financial crisis. Harsh austerity programme That his relative Ideological allywe President Donald Trumphe has Backed by $20 billion and motive As a model for reducing the size of the federal bureaucracy.

After months of mounting pressure, Miley’s government said it would restore the index used in official inflation reports, which is currently based on consumption habits from 2004 and can be read like a time capsule: cigarettes, newspapers, DVDs and landlines are considered central to the “basket” of goods and services consumed by the population.

Experts say the old formula not only reflects how much Argentine families spend on basic goods today such as Netflix subscriptions and iPhones, but it also underrepresents the costs of public services such as health care and electricity, which have risen dramatically as Miley cuts subsidies.

“It is very likely that prices for regulated public services in Argentina will see a strong increase this year, and the new methodology for measuring inflation will give those increases much more weight,” said Camilo Tiscornia, director of CC Consulting in Buenos Aires.&T asesores economicos and former central bank official. “The government is engaged in a war against inflation, so this indicator is not helping.”

Miley’s economic team was expected to apply the new index for the first time in a report on Tuesday.

But last week, officials backed down and announced that the National Congress for Democracy and Defense (INDEC) would continue to use the outdated formula.

This step revived memories of the blatant manipulation of inflation statistics in the past Populist governmentsUndermining investor confidence and public confidence. The country’s widely respected head of national statistics resigned, as did the Argentine index S&The P Merval stock index fell several percentage points last week.

“With this decision, the box of evils has been reopened,” said Sergio Bernstein, who runs a political consulting firm in Buenos Aires. “I know the officials of the economic team, they will not repeat the mistakes of the past under any circumstances. But the public, the market, investors and society have every right to be distrustful.”

Elsewhere in the world, such a seemingly technical government decision might fall within the purview of data experts and financial advisors. But he has been the talk of the town in Argentina, a nation of amateur economists weaned on for years Uncontrolled inflation And violent Exchange rate fluctuations.

“It has raised a lot of questions,” said Anna Stobie, a 58-year-old lawyer returning home from work in Buenos Aires on Tuesday. “These disputes are not in the interest of public opinion at all.” “I hope everything will be transparent so that this economic stability continues.”

Under the previous one President Cristina Fernandez de KirchnerArgentina, who succeeded her husband Néstor Kirchner in November 2007, was accused of manipulating data to make inflation appear only a fraction of the high it actually was.

Between 2007 and 2013, the government fired professional staff at the National Institute for Democracy and Defense (INDEC) and filled the agency with political allies to mask the escalating crisis. Even the Fernandez government Imposing fines and threats of prosecution To silence independent inflation expectations.

“The index has been heavily manipulated for many years,” said 65-year-old retiree Liliana Pastor. “I never trusted any of the data.” “We know that everything like this is adjusted according to political needs.”

Experts say the government’s decision has caused much more damage than an announcement of a higher inflation rate.

Marcelo J. said: “It puts a short-term goal before long-term strategy,” said Garcia, Americas director at geopolitical risk firm Horizon Engage. “It gives the opposition an opportunity to criticize the credibility of the figures produced by the index and thus question the credibility of the government.”

This controversy has further soured the national mood, as Argentines increasingly complain that they are getting it all together Pain Miley The program and a little more benefits.

the Main benefit so far – The main cause of Miley’s disease The audience glowed with approval The government’s rapid decline in Argentina’s high inflation rate, from more than 211% a year in late 2023, when the radical liberal leader took office, to 31% last year, according to INDEC.

Few would dispute it The importance of his victory. But many doubt its sustainability.

To reduce inflation, Miley relied on deep spending cuts, and cash flow Cheap Chinese imports A controversial exchange rate system that kept the Argentine peso stable against the dollar, leading some economists to consider it overvalued and more stable. Enjoy shopping abroad Too cheap for wealthy Argentinians.

But after reaching a low of 1.5% last year, monthly inflation has risen recently, reflecting lingering challenges as Miley seeks to consolidate his key political achievement. Concern is also growing about how salaries are lagging behind inflation, depreciating and putting pressure on household budgets.

“Ultimately, prices are about what you can buy with your salary,” said Facundo Diaz, a 33-year-old graphic designer. “Here and now, it is clear that you can buy less than you did two years ago.”

In the coming months, further cuts in subsidies may lead to higher inflation, as will a more flexible foreign exchange rate policy that allows the peso to move more freely in the currency market.

“Miley seems puzzled by the fact that his theoretical beliefs led him to expect a sharp drop in inflation, but he faces a different reality that calls that into question,” said Ignacio Lapaque, a senior analyst in Buenos Aires at risk consultancy Medley Global Advisors. “It takes most countries between six and eight years to go from the levels of inflation that Argentina was experiencing to single digits.”

Although Tuesday’s higher-than-expected inflation rate of 2.9% represents a blow to Miley’s fight against chronic price pressures in Argentina, some experts expressed relief.

By exceeding even most private sector accounts, the National Inflation Index (NII) inflation figure dispelled fears – at least for now – that the government was tampering with the books in any way compared to its predecessors.

“Fortunately, inflation in January was high enough that no one could say the index was manipulated,” Bernstein said. “If the number was 1.2% or 2%, it would not be credible.”