Cablegate: Argentina's Inflation Debate Continues; Adopting U.S. Cpi

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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

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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

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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

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