Argentina Is First Nation Censured by IMF for Economic Data
(Updates with Argentine government response, new index plan in fifth paragraph.)
Feb. 2 (Bloomberg) -- Argentina became the first country to be censured by the International Monetary Fund for not providing accurate data on inflation and economic growth under a procedure that can end in expulsion.
The declaration of censure was adopted yesterday by the IMF’s 24-member board, the Washington-based fund said in a statement. While it doesn’t have immediate effects, the decision takes the country a step closer to sanctions that include being barred from access to IMF loans.
The IMF’s executive board found that Argentina’s progress in implementing so-called remedial measures “has not been sufficient,” according to the statement. The board called on Argentina to “address the inaccuracy” of economic data no later than Sept. 29. Managing Director Christine Lagarde is required to report to the board on Argentina’s progress by Nov. 13.
President Cristina Fernandez de Kirchner said in 2010 the country would create a new consumer price index to reflect the latest consumption habits. Since then, the government hasn’t shown any progress in the new index. Lagarde said in September that the lender may give the country a “yellow card” for failing to improve its reports.
The fund’s censure is baseless and represents a “new mistake,” the country’s economy ministry said yesterday in a statement published on the government’s website. Argentina will start using a new CPI index by the fourth quarter of this year after conducting a survey on consumption since March 2012, according to the statement.
“Argentina doesn’t seem to have this as a priority in its agenda,” said Miguel Kiguel, a former finance under-secretary who now runs Econviews in Buenos Aires.
The U.S. Treasury voiced support for the IMF’s decision and urged “Argentina to work closely with the IMF in the months ahead to rectify these matters,” according to an e-mailed statement from Treasury spokeswoman Holly Shulman.
Argentina has been blocked from borrowing from international markets since its 2001 default on $95 billion of debt. South America’s second-biggest economy needs new investments to finance increased oil production by YPF SA, the country’s largest oil company that Fernandez nationalized last year from Spain’s Repsol SA.
The extra yield investors demand to hold Argentine government dollar debt instead of Treasuries narrowed 44 basis points to 1,058 basis points at 5:17 p.m. in New York, according to JPMorgan Chase & Co.
Argentina’s $37.6 billion of inflation-linked bonds, which account for 21 percent of government debt, have lost 19.1 percent in the past 12 months, the most in Latin America, according to Barclays Plc. Similar Brazilian bonds gained 11.5 percent in the same period, while Mexican inflation-linked bonds rose 17.2 percent.
The IMF censure followed several attempts to obtain information from Argentina that the fund deems is good enough to monitor the country’s economic performance. Fernandez has denied the official statistics are inaccurate, even though they have been disputed by the IMF, economists and politicians since 2007.
In early 2007, Fernandez’s late husband and then-President Nestor Kirchner replaced senior staff at the statistics institute, known as Indec. While private forecasters estimate that inflation accelerated in 2012 to 25.6 percent, the government’s national statistics institute said consumer prices rose 10.8 percent.
The private economists aren’t identified because they risk being fined by the government for releasing calculations that differ from official data.
The gap between the official and private inflation rates has enabled the country to save about $6.8 billion since 2007, according to Buenos Aires-based research firm ACM Consultores.
The IMF may take further sanctions, such as declaring the country ineligible to use the fund’s general resources and suspending its voting rights. “Compulsory withdrawal” is the last step of the procedure, which leaves time between each decision for the country to address concerns.
According to the fund, Czechoslovakia is the only country ever ousted from the IMF for breaching the same rule, while Cuba withdrew in 1964. The procedure that has censure as a prior step didn’t exist then.
--With assistance from Eliana Raszewski in Buenos Aires and Joshua Goodman in Rio de Janeiro. Editors: Kevin Costelloe, Sylvia Wier, Mike Millard