Argentina vs. economists (toward a theory of E. Barandiaran)

Here are the grisly details:

Argentina’s government has filed criminal charges against the managers of an economic consulting firm, escalating its persecution of independent economists.

…The government is charging MyS Consultores with “publishing false information about inflation data” to benefit themselves and their clients. The criminal complaint alleges that MyS’s data also lead to speculative behavior in Argentina’s bond market.

…Consumer prices rose 9.7% in May from a year ago, according to the national statistics agency, Indec. But virtually all economists say annual inflation surpasses 20%—one of the world’s highest rates—angering government officials who dismiss inflation as a problem.

…So far this year, the Secretariat has fined at least nine economic research firms 500,000 pesos ($122,000) each. This week, the Secretariat also slapped a second fine on Orlando J Ferreres & Asociados.

“They fine us for saying how much prices have risen,” Mr. Ferreres, director of his eponymous firm, said. “They could seek criminal charges against all of us. We don’t know how far they’re willing to go.”

Mr. Ferreres said the legal actions are part of a strategy to prevent independent economists from publishing potentially negative information during an election year…

Government officials say they hoped the fines would deter economists from “deceiving” the public into making poor financial decisions by publishing inflation estimates that differ considerably from Indec’s consumer price index.

And get this:

Economists point to unrestrained fiscal spending, a booming economy and an expanding money supply as the main drivers of inflation that is at least double that reported by Indec.

They also say the government tacitly admits to high inflation every time it backs collective-bargaining agreements that include annual wage increases of 20% to 30%.


Not that hard to imagine something similar happening here - witness the ferocious reaction from the White House and Senate Democrats to some independent reports on the AHA, the cost per job of the stimulus, and cash-for-clunkers.

There is a big gap between strong criticism from government officials and prosecution to silence opponents. U.S. institutions, I think , are strong enough to prevent that gap from being bridged.

I don't remember the exact details, but weren't letters sent out by government officials to health institutions, threatening official retribution for any attempt to "blame" rising premiums on the AHA?

Actually, not all that big if you witnessed some of the aftermath of the passage of Obamacare.

Specifics? Any egregious prosecutions?

Only if the insurance companies kept blaming the law for the premium increases. I am guessing they got the message and shut their yaps.

Tyler, I hope your post is a first attempt to understand what has been happening in Argentina for a long time, at least since 1951. As I have said many times it's relevant to understand what is happening today in your country and the Eurozone, although you will need to find reliable sources to get a good understanding of the Argentine experience (first suggestion, don't trust Argentine economists that have been government officials in the past 60 years, in particular those responsible for terrible decisions).

Regarding the WSJ article, a few observations.

1. The persecution of the consultants mentioned in the article has been going on for at least two years. It's nothing new.

2. Not mentioned in the article, because of both the repressed reporting of inflation (meaning official rates lower than actual rates) and the repressed inflation (meaning that actual rates have been lower thanks to some prices controlled by government), the government was eventually forced to ask the IMF for an evaluation of official reports of price indexes but I understand that the IMF report was not circulated (I don't live in BA and therefore I cannot know all the details).

3. Not mentioned in the article, in the past 12 months negotiations between labor unions, corporations and government to adjust salaries have led to increases of over 20% (I understand that in some cases the increase was over 30%). Although the increases suggest annual inflation rates much higher than the official rates, to some extent they reflect the accumulated inflation of 2004-2009 that had led to declines in real wages.

4. The article fails to provide a context for this year's election. It claims that Cristina Kirchner is expected to be re-elected without problem, but yesterday's election in Buenos Aires City made clear that she will have a hard time winning re-election. In addition, to have some idea of what may happen in the next few months (the presidential election is on October 23) it is important to understand the complex system that Argentine politicians has put together to protect themselves.

5. The article fails to provide a context for understanding inflation as part of how Argentina has been benefiting from high commodities prices since 2003. To make it simple, the post-default devaluation of January 2002 was needed for the government to collect a huge tax on exports of agricultural products and this tax has become a major source of financing the extraordinary expansion of government expenditure in the past 6 years. Despite the large windfall of high commodities prices, the Argentine government is facing a serious deficit that none can assess, but after the presidential election a large fiscal adjustment will be needed even if world prices remain high.

Have a good day.

E. Barandiaran is my single favorite commenter on any blog.


A challenge with blog comments is discerning who is being sarcastic and who not.

I was being laudatory (without crossing over into fawning). I was not being sarcastic.

In the US, at least in the western US where I reside, inflation is much higher than officially reported by the CPI. Granted, private economists would not be criminally prosecuted for publishing "unflattering" data. The CPI is a quite useless tool for evaluating overall inflation vs interest rates because the market basket measured is not relevant to most consumer's purchasing experience. I suspect the Argentine official inflation number measures a similar fairy tale basket of goods.

And how do you know this? Follow-up: what is the "right" basket of goods for measuring inflation, and how did you arrive at those weights? Be sure to show your work.

Awesome title.

One country that has managed all the Argentinian mess with somewhat of a success is Uruguay. They are so small compared to the 2 big neighbors but still they manage to have a pretty decent performance the last few years (GDP for 2009 was 2.9 and for 2010 was 7%!). I have a friend who says that Montevideo is one of the best cities as far as quality of life in Latin America.

So far this year, the Secretariat has fined at least nine economic research firms 500,000 pesos ($122,000) each.

That is really scary and wrong.

Still, the faster the inflation rate the less the fines amount to.

Exactly -- they should stall and thereby find out how high the government really thinks the rates are. Revealed inference.

Not all that different from what the Hungarian government did to my uncle, George Kopits, who ironically, grew up in Argentina.

To some degree, this is happening in the US, where facts are ignored and sometimes created for political advantage. As an example of a created fact -- one "saved" stimulus job is multiplied by the number of years employed, confusing stock and flow concepts. This is from the same administration that is responsible for the Employment Situation Report.

As for ignored economic analysis, the FCC is imposing Internet regulations despite the fact that every "consumer welfare" study has concluded that consumers would be worse off from these regulations (for a summary of the articles and citations see Is it a coincidence that the FCC released its regulatory order late on a Friday afternoon?

Economic analysis and empirical evidence is frequently ignored and manufactured to support the politics. While noboby's going to jail, the effect is the same as Argentina.

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