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Argentina Moves to Control Economists, Companies

April 14th, 2011 | Categoría: Economics, Politics


Two notable events dominated the news here this week.

One entails what appears to be an effort by Argentine President Cristina Fernandez to silence economists who question the government’s inflation data.

As I wrote here in the Wall Street Journal:

“Argentina’s government has fined more economists for challenging official inflation estimates in what lawyers call a violation of freedom of speech.

On Tuesday, the government fined consulting firm Econviews 500,000 pesos ($123,442). It fined the consultancy an equal amount Monday for allegedly publishing inflation estimates that “lack scientific rigor.”

“This isn’t about methodology or truth in advertising, as the government claims. It’s really about silencing dissident voices,” economist and former finance undersecretary Miguel Kiguel said in a phone interview Tuesday.

The government has imposed similar fines against Estudio Bein & Asociados, Finsoport, MyS Consultores, GRA Consultoras and former Indec official Graciela Bevacqua, who used to oversee Indec’s consumer price index. Several other firms said they expect to be fined soon.”

By now pretty much everyone in Argentina knows inflation is rampant. Economists say inflation hovers around 25%, give or take a few points.

But government officials have long denied this to be the case. Instead, they say, the country is experiencing “price dispersion.” Just a few months ago officials said inflation didn’t even exist.

Economy Minister Amado Boudou even went as far as saying that given Argentina’s macroeconmic situation, inflation “could not exist.” He said people should “walk around” to find good prices. (If you’re gonna walk around, try Belgrano. Its tree-lined streets and classic homes are delightful.)

Whatever the case, prices are up. Even the government says officially that prices are up 10% from a year ago.

In just about any other country, an inflation rate of 10% would raise red flags and cause politicians to panic over ways to curb rising prices. Moreover, government officials in those countries would use the word “inflation” to describe what was happening to prices. But Argentina has never been “any other country” and its idiosyncrasies are sometimes so frequent that they cease to surprise.

The other notable piece of news was a move by the government to gain control over the decisions made by companies in which it has stakes. As I noted in a another WSJ piece:

“Argentina’s government increased its sway over dozens of companies through a presidential decree on Wednesday, a move that will grant the administration a larger influence in some of the key sectors of the economy ahead of presidential elections in the fall.

The decree lifts limits on the government to unilaterally name board members and expands its influence over other corporate decisions. Until Wednesday, the government’s voting rights were capped at a 5% equity stake even if its actual ownership in a firm exceeded that level.

Pension agency Anses owns stakes in 42 local companies after the government nationalized the private pension system at the peak of the 2008-09 financial crisis.

When Congress debated the pension nationalization bill in 2008, opponents agreed to pass the bill only after assurances that the state’s influence over corporate decisions would be limited by the 5% rule. But the decree published in the Official Bulletin abolished that limit, greatly enhancing the government’s influence.”

So there you have it. A quick and dirty round up of this week’s top news.

Have a great weekend!

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MarcosNo Gravatar says:

1- Regarding the inflation thing, i have mixed feelings, because the inflation is there, I see it every time I buy food or almost anything. Should be around 25%. I’m not saying nothing new, but the consulting firms thinks they can say “OK, I think we’ll have 30% inflation” and that’s not correct. Remember when economists said 1 dollar = 10 pesos? The people must be responsible about the information they give, and this is not related to freedom of speech. Consulting Firms, Media and of course the Government must be accountable regarding what the say to the people. Many consulting firms uses questionable methodologies to measure the inflation and that’s wrong and IMO that’s where the problem occurs. maybe with the last IMF visit regarding the inflation we can create a new and trustful price index which can be validated by consulting firms.

2- The government (or the country?) has up to 30% stocks in the 42 mentioned companies. So basically is an investor who puts the money in but has almost no influence in key decisions (like approving a balance) because it’s always the minority. So basically what the companies want is a dumb partner who cannot do almost anything. The perfect investor (at least for them).
What’s interesting is that UCR officials like Gerardo Morales (an all time critic of the government) says basically “It’s OK, what I don’t like is the way is was handled”:

Also, what Taos says about the markets is interesting:
“Argentina’s benchmark Merval stock index showed scant reaction to the decree, closing nearly 0.2% higher on volume of ARS39.9 million.:

If this is a “chavización” do you think the market would be so quiet?


MarcNo Gravatar says:

Re: Inflation
Here are some CPI stats from down south. Right at Marcos’s number.

In the first three months of this year, prices in Ushuaia went up 8.5% and Rio Grande 8.1%. Ushuaia annual 25.9% and Rio Grande 26.6%

Reporte Austral

Pete BolliniNo Gravatar says:

The problem is that the government wants to put in their own people (La Campora) oUnion (Moyano) cronies for just one reason: Control the companies through threats to strike or run them out of business by thug methodology. They couldn’t care less whether the company makes money or not.

MarcosNo Gravatar says:

Pete, you don’t need Director in the board to make a strike.
Also, the government is interested that the companies continue expanding, otherwise, what’s the deal? If not is like killing the chicken of the golden eggs.

And of course, the people picked is from the government or allies. What do you expect? A “Cobos” in the board of Techint? How that is a problem? Maybe you think that Campora == Ignorant people, but they have their own economitst…

Pete BolliniNo Gravatar says:

I am 75 years old and have seen all this many times before…starting with Juan Domingo himself. Theory is one thing, corruption on a large scale another. Thanks for video.

Mark says:

The point really is about freedom of speech here, not about the correctness of the information. If there is no proper due process , then what you have is no protections for the individual, and this is just another example of the true problem in every situation in history and the present, which is the lack of intelligence to create laws with a moral compass to protect the people of any country

MarcosNo Gravatar says:

Sorry tocayo, but I don’t agree.
Here, everyone can say whatever they want. Just pick Clarin every day to read lots of lies (not even inaccurate information). Just power on the TV to see incredibly things.
If I say lies, the only person I could harm is my girlfriend and my cat. If a consulting firm lie and that lie is propagated in every media, then that lie is taken as truth. That people needs to be responsible.

I don’t buy the INDEC 10%, and I don’t buy the 35% or even more neither. That causes bad moral in the people, causing less consuming. The people is not stupid, everyone who goes to a supermarket see the prices climbing:

I agree, we need a proper process or index to measure the inflation. that’s for sure.

MarcosNo Gravatar says:

This is what I was talking about.

Mark says:

I am not saying this is a life or death situation. It is not. But it is the same mentality, the mentality of attempting to control those who disagree with you. The Argentine government is not rounding up people and arresting them for it in this case, but I am talking about the mentality of control, not the degree of oppression, and I am glad the Argentine government is not like other countries like Chinese government who oppress the people unmercifully, but the mentality of oppression is a common thread.

haroldo says:

Hey Marcos, “If this is a “chavización” do you think the market would be so quiet? ” YES, that is what the first half of the article is about: “It’s really about silencing dissident voices,”………..

MarcosNo Gravatar says:

What dissident voices? The many Nicolas Salvatore:
we have?

Let’s use another economic example: Stock Rating Agencies. They were one of the major responsible players in the last (still current?) crisis in USA and Europe.
In many places I read that more control is needed and their trust were heavily damaged , but I didn’t read anything about “dissident voices” anywhere. What’s the difference?

DaVidNo Gravatar says:

Exactly. The so-called rating agencies in EEUU like Standard & Poors are part and parcel of the Ponzi Scheme that is called the EEUU. They enable this game to be played to skin the innocent and stupid and the greedy ones.

To even take this argument further, people bitch and complain about the corruption in Argentina, which is exemplary in a perverse way

But Argentina corruption is nothing compared to the corruption in EEUU, for example. The EEUU is the Greatest Ponzi Scheme in the world’s history. Everything major, from the pharmaceutical death industry to the seeds of death, i.e., Monsanto, to banking and derivatives to . . . are ALL Ponzi Schemes. The Greatest Ponzi Scheme is the U.S. “Treasuries” and USD, back by nothing except the implicit threat of military might, viz. Libya, Iraq, Afghanistan, etc., etc., etc.

Which brings up a third point. When the USD finally crashes and burns, which it will sooner than later, the Argentineans who got burned when their USD savings in banks were devalued in 2001, will get burned a second and final time. Very sad.

MarcosNo Gravatar says:

BTW Haroldo, you were mixing the two parts of Tao’s article. You can’t silence the market.

DaVidNo Gravatar says:

I think everyone here is missing the real point. Whether the inflation rate in Argentina is 25% or 30%, that’s a hell of a lot of price inflation each year.

What are you going to do about it?

I suggest that people look into small scale alcohol production for growing both clean, renewable energy (alcohol or ethanol) and organic food at the same time.

Check outL

If Argentina adopted this model, not only will it solve the inflation problem but it will also help stop the migration to the urban cities.

The alcohol production that I am talking about is not the large, monoculture production done in Brazil, but small scale done locally using a variety of crops or plants.

charlyNo Gravatar says:

I do not like the ways of the govermment on the inflation rates. i was a little boy on the 80’s and i recall the hiper inflation of Alfonsin (one day 100 candy = 1 austral, an the next day 1 candy = 100 austral…). In these years i was only 4 years old and i have to understand the devaluation of money and the inflation concept. If i could know that in my early years, now i know more. The inflation rate given by the indec is sure to be made based on pretty rare products or specifics shops, that is pretty bad. But, the inflation rates given by a lots of consulting companies are made taking the products with more inflation rates (the clarin friends in a way), that is bad to.
The problem about the info sharing on Argentina is not the tip of the iceberg, the constant need of take part of one side and not looking on the big picture is the problem. The question is not if the inflation is 1, 10, 30 or 100%, is why the inflation keep rising and how we can fight this. But we keep looking the stupid fight between the political and economic powers because that is what the government and the media show to us.

About the control of the State over the companies in which the state have stocks, i do not disagree with the presence of a public worker on the company, if this man just look for the grow of the company, sadly on argentina, almost allways is about “coimas” and similar subjects. I ask all of that people who are so against this measure, What would you do if you are the creditors of capital of these companies? Do you leave no control over these companies on the assets transferred?
Sorry for the English and the long reply

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