Argentina takes a back seat to no one when it comes to demanding accuracy from its economic forecasters. The government has imposed penalties on those it accuses of deliberate deception for publishing inflation forecasts that are way out of line with the official number released by the government’s own price monitor.
That may sound appealing to some folks. After all, economists rarely face any retribution for being wrong about stuff like jobs, oil prices, currencies and, yes, inflation. All that matters is that they have a coherent story to sell. But in the case of Argentina, it’s the private forecasters whose numbers are the most reliable and, hence, the most influential with voters and investors.
All nine Argentine economy watchers dinged with hefty fines of about $120,000 (U.S.) apiece said inflation is well above official estimates. The government calls this deliberately deceiving the public. But if that’s a crime, why haven’t President Cristina Fernandez and her top policy makers been penalized? They routinely understate the true inflation risk and overstate their progress on the economic and fiscal fronts. Buenos Aires says inflation is below 10 per cent. The private-sector analysts place the true rate at more than 20 per cent. That’s a little more than a standard margin of error.
The government’s heavy-handed efforts to curb free economic speech may well work, Several forecasting firms say they won't give an opinion about prices until the government’s own numbers are out. And they aren’t likely to be talking to journalists much either, as they could face more fines and even jail for doing that.
The problem for Ms. Fernandez and her expected re-election bid in October is that most ordinary Argentines don’t need any help from the economists to figure out that inflation is raging again. This, by the way, is the same leader who fired the central bank head last year when he balked at transferring reserves to the government’s coffers. With a political pal in charge at the bank, the government has since borrowed close to $4-billion (U.S.) to meet international debt obligations.
Well, the citizenry may be getting stiffed, but at least the bad old days of serial sovereign debt defaults are a thing of the past ... for now.
