The official inflation data has been widely viewed as inaccurate by economists, created by a corrupt government to hide the real cost of inflation and allowing it to underpay its debts.
21st September 2013
Argentina’s economy minister announced earlier this week that its economy is expected to grow by 6.2 percent next year; its Gross Domestic Product (GDP) grew by 5.1 percent in 2013 due to the huge agricultural income and revenues generated from its automobile sector. Latin America’s No.3 economy grew by just 1.9 percent in 2012 after expanding by 8.9 percent in 2011, according to official data, this was mainly due to weak global demand for its exports, poor grain harvest, high inflation and the negative impact of currency and trade controls on investment.
Weak Political Leadership
The country has suffered due to the protectionist policies of President Cristina Fernandez who has implemented currency controls and imposed regulations on the grains industry, garnering support of the poor while casting a shadow on the business sector. Ms.Fernandez’s victory in the 2011 presidential elections had raised a glimmer of hope for the embroiled country with huge debts to stage a recovery, but a series of terrible decisions and polices have seen the country go down the ranks. The official inflation data has been widely viewed as inaccurate by economists, created by a corrupt government to hide the real cost of inflation and allowing it to underpay its debts. The IMF in particular had censured the country for questionable growth and inaccurate statistics and set a September 29 deadline to correct the misrepresented facts or face sanctions.
High Inflation
Inflation rate in Argentina was recorded at 10.50 percent in August 2013 as reported by the Instituto Nactional de Estadista, however, economists in the country say that inflation in the country is around 25 percent more than double what the official government figures say. The government is punishing economists who present their economic data and give false information, however, a court has overturned the decision and has charged Commerce Secretary Guillermo Moreno for abusing his power and trying to fine economists who publish independent inflation data, this is a huge setback for Moreno who had ordered to fine economists 500,000 pesos for releasing technical data to challenge the government’s official inflation rate of 10 percent. Argentina’s inflation numbers have been in doubt since 2007 when President Cristina Fernandez’s predecessor, Nestor Kirchner, had political appointees change the methodology of the official statistics agency, INDEC.
Currency controls imposed by the Argentine government to avoid capital flight is making it increasingly difficult for tourists visiting foreign countries. The currency control measures were imposed by President Cristina Fernandez to shore up a weakening Argentine currency and avoid capital flight to other countries.
Trial of the Century
Argentina has asked the U.S. Supreme Court to review a lower court ruling against it in a case over the nation’s defaulted debt, the U.S. Supreme Court will decide whether or not to take the case on September 30th. Earlier, last month a federal court had ruled that Argentina must pay a group of bond investors more than $ 1.3 billion, the full amount of capital and interest, if it wants to make discounted payments that other creditors have agreed to accept. Argentina has argued the appeals court failed in its capacity to apply the provisions of the Foreign Sovereign Immunities Act, which limits suits against foreign governments. As the matter is still pending with the lower court, it is unlikely that the U.S. Supreme Court will accept Argentina’s petition to review the lower court’s decision, if the U.S. Supreme Court does not accept the petition filed by Argentina on technical grounds then Argentina has to pay a whopping $ 43 billion of additional claims to the holders of the nation’s defaulted bond, led by billionaire Paul Singer’s Elliot Management Corp and its NML Capital Ltd unit.
International Finance Magazine had carried out a detailed story in the article dated 26th August, 2013 Vulture Funds Threat to HIPC, explaining the “modus operandi” of Vulture funds and its impact to developing economies, including Argentina.