ARGENTINA'S INFLATION DEBATE CONTINUES; ADOPTING U.S. CPI

UNCLAS BUENOS AIRES 002112 SIPDIS SIPDIS SENSITIVE LABOR PASS ETAYLOR PASS NSC FOR MSMART PASS FED BOARD OF GOVERNORS FOR PATRICE ROBITAILLE TREASURY FOR MMALLOY, LTRAN DOC FOR 4322/ITA/MAC/OLAC/PEACHER US SOUTHCOM FOR POLAD E.O. 12958: N/A TAGS: ECON EFIN AR SUBJECT: ARGENTINA'S INFLATION DEBATE CONTINUES; ADOPTING U.S. CPI METHODOLOGY? Ref: (A) Buenos Aires 2021 (B) Buenos Aires 1545 (C) Buenos Aires 247 -------------- Summary -------------- ¶1. (SBU) Amidst continuing accusations of GoA manipulation of inflation statistics, presidential candidate Cristina de Kirchner defended current statistics but said the government is studying adopting a new method of measuring inflation, "possibly the method of the United States." She reiterated earlier accusations that independent predictions of 2007 inflation in the 15-20% range are election-linked, and misleadingly claimed that the IMF's own estimates supported lower official GoA inflation projections. Separately, national statistical agency INDEC released a provincial breakdown of September 2007 inflation that showed Mendoza province's inflation at 0.8%, equal to the announced national level. However, the province's statistical agency released its own calculation of September inflation of 1.7%, double the GoA level. A private poll of inflationary expectations reported that nearly six of every 10 Argentine company executives think inflation is at least 16%, and one in three believes it surpasses 18%. Senior INDEC officials are in Washington October 25-26 to meet with U.S. Bureau of Statistics and Census Bureau officials to study the US CPI methodology. End Summary -------------- -------------- September Inflation: Provincial Breakdown Released -------------- -------------- ¶2. (SBU) Argentina's national statistics institute (INDEC) expanded on its earlier October 4 (Ref A) report that national consumer prices increased 0.8% MoM. This index is calculated based on eight major urban areas in the provinces of Catamarca, San Luis, Mendoza, Tucumn, Cordoba, Santa Fe, the city of Buenos Aires, and the greater Buenos Aires area. Interestingly, September inflation in Mendoza province, which is usually taken as a national benchmark, was also reported as 0.8% by the National Bureau of statistics. Julio Cobos, Mendoza governor and current vice presidential candidate with Cristina Fernandez de Kirchner had earlier announced that Mendoza's September inflation was going to come in at 1.7%. ;The website of the Mendoza provincial statistics bureau DEIE also clarifies that under the "usual" methodology, September's inflation in the province would have been 1.7%. With this figure, annual inflation in Mendoza has accelerated to 23% from the 9.3% registered 12 months ago, up 13.7% in a year. -------------- -------------- Cristina Kirchner: INDEC's Numbers are "Real" But... -------------- -------------- ¶3. (SBU) In October 24 statements to a radio journalist, Cristina de Kirchner said "inflation is a theme that should occupy us, but not preoccupy us." Responding to questions about alleged GoA manipulation of INDEC statistics, she affirmed INDEC's inflation statistics are "real" and denied that the GoA's industrial model (which includes, inter alia, an undervalued peso and tariff and non-tariff barrier protection for domestic industry) generates inflation. She reiterated earlier accusations that independent economists' predictions of 2007 inflation in the 15-20% range are linked to opposition candidates who wish to discredit the government, and noted that the IMF is also projecting 2008 inflation at the (relatively low) 12% level. But Kirchner flagged a way out in the future by saying the government is studying "a new form of measuring which will possibly adopt the methodology of the United States." ¶4. (SBU) The IMF ResRep (Protect) confirms that the IMF is projecting only/only INDEC's own 2008 inflation numbers, since as a matter of policy the IMF uses "official" government statistics for its calculations. The ResRep believes that actual inflation numbers are likely substantially higher. -------------- Business Leaders Estimate Inflation at 16.5% -------------- ¶5. (SBU) On October 23, a private survey on inflationary expectations of executives and managers at 160 companies by SEL Consultores, was released on Wednesday. The report noted that nearly six of every 10 company executives thinks inflation is at least 16%, and one in three believes it surpasses 18%. "The loss of credibility in the official CPI is revealed by the fact that nearly no one believes inflation is below 10%, and also by the growing gap between what INDEC publishes and what businesses perceive as real inflation," the report stated. -------------- INDEC Officials in Washington -------------- ¶6. (SBU) Local media reported on the October 25-26 visit of senior INDEC officials, including Director Ana Mara Edwin, and the CPI Team Leader Beatriz Paglieri, to the U.S. Bureau of Statistics and Census Bureau. In local press reporting and in conversations with local private economists, both are seen as controversial political appointees who have strong ties to price control and inflation czar Internal Commerce Secretary Guillermo Moreno. On October 6, vice presidential candidate Cobos said that Argentina would adopt the U.S. CPI index methodology. On October 9, INDEC released a statement -- with no prior consultation with the BLS or this Mission -- that INDEC would sign a technical cooperation agreement with USG counterpart agencies. ¶7. (SBU) Post developed the following press guidance in conjunction with BLS to say we are only aware of plans for technical discussions: Q: We understand that INDEC officials have planned a visit this month to the U.S. to meet with USG statistical experts. -- We are aware of the planned visit. Both the Bureau of Labor Statistics and the Census Bureau operate very active programs which are open to governmental organizations abroad who seek technical assistance. -- The Bureau of Labor Statistics (BLS),part of the Department of Labor, is one of the largest labor statistics organizations in the world. Its Division of International Technical Cooperation has made itself available to provide technical assistance to countries and organizations around the world for over 50 years. -- The Census Bureau of the Department of Commerce has long provided technical assistance on population statistics to other countries. ¶Q. What can you tell us about a possible bilateral agreement? -- The primary purpose of the visit is technical discussions. WAYNE