By now many of you know the cost of public transportation is going up this week. Subway tickets will rise to 1.10 pesos from 90 centavos. The same will happen to bus tickets. Train tickets will also rise, though by varying amounts. Prices have been absurdly low since 2002, when Argentina devalued its currency. (more…)
Click on Image to EnlargeOuch! Those grinning days of inexpensive indulgence are gone. As most of you already know, Argentina is no longer the beacon of cheap that it used to be. Inflation has eaten away at the country’s comparative currency advantage, raising the cost of living for natives and foreigners alike. The latest price point to take a hit: the Big Mac.
According to The Economist’s Big Mac Index, it is now more expensive to buy a Big Mac in Argentina than in the U.S. This is not news to any of you who have seen prices at McDonald’s lately, but it is interesting that the change has been formally noted. The average cost of a Big Mac in Argentina now totals U.S. $3.64, compared with $3.57 in the U.S., according to the index.
In 2003 a Big Mac in Argentina cost just $1.18 (ah, the Golden Days) while in the U.S. it cost $2.65. Inflation has pushed costs up just about everywhere. The average Big Mac in Argentina now costs a whopping 36% more than a year ago.
As explained by The Economist:
The Big Mac Index is based on the theory of purchasing-power parity (PPP), which says that exchange rates should move to make the price of a basket of goods the same in each country. Our basket contains just a single item, a Big Mac hamburger, but one that is sold around the world. The exchange rate that leaves a Big Mac costing the same in dollars everywhere is our fair-value yardstick.
Of course, the Big Mac Index is in no way an exhaustive survey of purchasing power parity. It ignores a huge range of products and services whose costs carry greater weight in daily living than do lard-laden hamburgers. Argentina’s energy prices are among the cheapest in the world (most households pay under a peso a day for electricity). Public transportation is exceptionally inexpensive. Taxis, too, despite recent price hikes, are nowhere near as expensive as they are in U.S. and European cities. Meanwhile, there are few places on the planet where you can get a perfectly cooked Fillet Mignon or Rib-Eye for what they cost in Argentina. None if this is pondered in the Big Mac Index.
A Big Mac in Brazil costs $4.73 while in Chile it goes for $3.13, and in Uruguay just $2.55 (surely this does not include Punta del Este in January).
Link: Video Explaining The Big Mac Index
Link: Bloomberg Compilation of Big Mac Index Data
A federal court in Buenos Aires ruled Tuesday that a law banning personal pot plantations is unconstitutional. The court said that pot farms are legally kosher as long as the plants are potted for personal use only. The law in question calls for up to two years in prison for those who plant, cultivate or even store marijuana seeds with the aim of producing drugs.
Legal scholars and supreme court justices have long maintained that the personal consumption of drugs is legal under Argentina’s constitution. Courts have frequently ruled against attempts to penalize personal possession. Despite this, law enforcement officials in various parts of the country have at times cracked down on individuals for the personal use and transportation of drugs.
Argentina is not a major drug producer or exporter. However, in recent years the country has become a key gateway for the transportation and triangulation of drugs produced in elsewhere in Latin America for export to the US and Europe. A drug enforcement official told The Argentine Post that almost everyday at least one flight out of Ezeiza contains a drug smuggler. Officials often allow the smugglers – or mules – to reach their country of destination so that they can then be arrested and tried for violating drugs laws in both countries.
Soybeans are to Argentina what oil is to Saudi ArabiaArgentine farmers and ranchers, tired of what they call “abusively high confiscatory taxes,” have brought the government to its knees with what may be the biggest agricultural strike in Argentine history. The strike (which includes hundreds of related daily street protests in the nation’s interior, as well as the blocking of roads and the refusal to sell farm products) is entering its third week. The strike has had a major impact on Argentine politics. But if it goes on any longer, it may also affect people’s basic consumption patterns. Since farmers are no longer selling beef, chicken, milk, wheat or other goods, supermarkets are finding it harder to stock these items. So what’s all the huff about?
The Argentine Post asked Andres Rosenberg, a farmer from Buenos Aires Province, to help us understand why farmers are upset. Andres manages farms in Buenos Aires and in Entre Rios. He produces corn, soybeans and wheat. He also raises cattle and produces the kind of beef that has helped make Argentina famous.
1) Do you support the farm strike?
Not the strike. I support the complaint that farmers are making. I believe in dialog. Having said that, this government does not listen to others. So the strike is, apparently, the only way to get the government to listen to our ideas. However, this complaint, which began years ago as a simple farmers’ complaint, has now become a political and social complaint shared by many people in society. This may escalate into an even bigger problem that will be harder and harder to resolve through negotiation. And as long as the government refuses to negotiate, it is possible, I’m afraid, that this will turn into something that leads to tragic consequences.
2) How important is agriculture to the Argentine economy?
Very important. Since 2003, when the “retenciones” or export taxes began, the government has collected over US $40 billion from farmers. More than a third of all the jobs in Argentina are directly or indirectly related to agriculture. Argentine history indicates that when the agriculture sector does well, the country does well.
3) President Cristina Kirchner and her husband (former president Nestor Kirchner) have accused farmers of lining their pocketbooks while other Argentines suffer from poverty. Is this true? Are farmers rich?
Farmers are making money now. Rich? That requires a perfect definition. However, because farmers are doing well, the whole commercial chain is doing well. The interior of Argentina is doing well because farmers are contributing to the development of small regional economies. Farmers stimulate the buying of food, industrial goods, services, and transport, etc. There are many towns and cities that are alive and thriving because of farmers. Examples include Las Parejas, Armstrong and others. These communities are growing thanks to the agriculture sector. Farmers invest a lot in their communities and this is reflected in growth and rural development. But there are many sectors of the economy that are making money.
4) What do you think of President Cristina Kirchner?
She is creating a kind of political and social division between farmers and average citizens that was heretofore nonexistent. She lacks understanding and political skill. I will keep my other opinions about her to myself.
5) What did you think of her speech Tuesday night (the one that led tens of thousands of people to take to the streets in Buenos Aires and across the country)?
It was absurd. It did nothing but create more conflict. Apparently, she seems to dislike people who make money. That’s my opinion. But if that is the case, she should tell it like it is and simply say so. It seems that making money in Argentina is a sin.
6) Do you think it’s fair for farmers to pay any kind of export tax?
I would agree much more with the idea if that money stayed in its place of origin. Export taxes are national taxes that are not shared with provincial or with municipal governments. They are a tax on production that takes place in provinces and in rural areas. What happened with the $40 billion that the government has collected since 2003? How has the government spent that money? These funds are never reinvested in local economies and that is where, I believe, they are most needed. Export taxes that total as much as 44% are illogical.
7) What should the government’s farm policies look like?
I am not an economist, so any ideas I might have should not be taken too seriously.
The Argentine Post has just returned from 10 days in Venezuela. It is a country of remarkable contrasts whose controversial leader, Hugo Chavez, has gained fame for his red-shirt “socialist revolution” and its venomous denunciations of “evil U.S. imperialism.” So what does that have to do with Argentina? Argentina’s fate has become intertwined with Venezuela’s in many ways, thanks to the doings of the Kirchner family.
Former President Nestor Kirchner turned to Chavez when Kirchner wanted to rid Argentina of its debt-defined relationship with the International Monetary Fund. Kirchner did not want the IMF dictating Argentina’s economic policies, so he copied Brazil and decided to pay off Argentina’s $9.6 billion debt to the fund. But there was a problem: Argentina did not have the cash. So Kirchner turned to Chavez, the Daddy Warbucks of Latin America, for the extra coin. Since then, Chavez has lent Argentina more than $5 billion. In return, Argentina has sent food, agricultural equipment and political support to Venezuela.
Chavez and current President Cristina Kirchner are strong allies and often defend each other in public. But if it is easy to find fault with Kirchner and her dogged determination to avoid the press and be held accountable for her policies, then it is even easier to fault Chavez, a leader whose irrational tendencies and gross misunderstanding of economics have put his citizens in danger (the recent threat of war with Colombia) and hindered his ability to lift Venezuelans out of poverty.
Chavez has won accolades from many of the world’s leftist organizations. He has also cultivated the support of Hollywood stars like Oliver Stone, Sean Penn and Danny Glover, among others. Chavez spews little but hate for the U.S., but he also voices support for improving the lives of Venezuela’s poor. It is easy to understand why he would attack a wildly unpopular U.S. president. It also is easy to understand why Hollywood socialists would jump on the bandwagon and support a charismatic Latin leader who claims to fight for the downtrodden. But does he really? Is Chavez really a champion of the poor? He can easily score political points by trashing President Bush, but how good is his record on the ground in Venezuela?
Venezuela is one of the world’s leading oil producers. When Chavez took office in 1999, oil sold for about $15 a barrel. Now a barrel trades for around $100. So even without doing anything, Venezuela should be doing much better financially than it was when Chavez became president. But Chavez has mismanaged PDVSA, Venezuela’s energy giant, and caused exploration and production to decline. Even so, his government has benefited tremendously from booming oil prices. This raises a key question: What has he done with all that money? Besides the $800,000 he sent down to Argentina in an unmarked suitcase, where has he invested the extra cash? Chavez has spent countless millions to support allied leaders in Latin America, but what has he done to help Venezuelans? Many Venezuelans I talked to are asking this question.
As oil prices have skyrocketed, so has government spending. This has helped fuel economic growth in Venezuela, but it has also spurred inflation, which surpassed 22% last year. This has pushed prices higher, making it harder for Venezuelans to buy basic things like food. Meanwhile, Chavez says literacy and poverty rates are improving dramatically. According to official government data, poverty declined to around 30% last year from almost 55% several years ago. If so, this is a remarkable achievement and should be lauded. But there is some reason to believe it may not be accurate. And even if it is, there is reason to think that a better government could have done much more to reduce poverty. Finally, if Venezuela’s economic boom and its subsequent development depends entirely on oil, the country may face a serious downturn if oil prices subside. It is evident that the U.S. is addicted to oil, but it seems that Venezuela is too, perhaps even more so.
Francisco Rodríguez is Assistant Professor of Economics and Latin American Studies at Wesleyan University. Before this, he was the top economist at the Venezuelan National Assembly from 2000 to 2004. In an extensive article in the March/April 2008 issue of Foreign Affairs, Rodríguez says a prudent observer should question Chavez’s claims.
“Although opinions differ on whether Chávez’s rule should be characterized as authoritarian or democratic, just about everyone appears to agree that, in contrast to his predecessors, Chávez has made the welfare of the Venezuelan poor his top priority. His government, the thinking goes, has provided subsidized food to low-income families, redistributed land and wealth, and poured money from Venezuela’s booming oil industry into health and education programs. It should not be surprising, then, that in a country where politics was long dominated by rich elites, he has earned the lasting support of the Venezuelan poor.”
He continues:
“That story line may be compelling to many who are rightly outraged by Latin America’s deep social and economic inequalities. Unfortunately, it is wrong. Neither official statistics nor independent estimates show any evidence that Chávez has reoriented state priorities to benefit the poor. Most health and human development indicators have shown no significant improvement beyond that which is normal in the midst of an oil boom. Indeed, some [indicators] have deteriorated worryingly, and official estimates indicate that income inequality has increased. The “Chávez is good for the poor” hypothesis is inconsistent with the facts.”
Rodríguez then looks at Chavez’s efforts to flood shantytowns with Cuban doctors (many of whom have “escaped” to neighboring countries) and the impact that this has had on vital health care statistics in poor areas.
“In a number of recent studies, I have worked with colleagues to look more systematically at the results of Chávez’s health and education missions. Our findings confirm that Chávez has in fact done little for the poor. For example, his government often claims that the influx of Cuban doctors under the Barrio Adentro health program is responsible for a decline in infant mortality in Venezuela. In fact, a careful analysis of trends in infant and neonatal mortality shows that the rate of decline is not significantly different from that of the pre-Chávez period, nor from the rate of decline in other Latin American countries. Since 1999, the infant mortality rate in Venezuela has declined at an annual rate of 3.4 percent, essentially identical to the 3.3 percent rate at which it had declined during the previous nine-year period and lower than the rates of decline for the same period in Argentina (5.5 percent), Chile (5.3 percent), and Mexico (5.2 percent).”
Rodríguez also looks at Chavez’s claims about literacy rates:
“Even more disappointing are the results of the government’s Robinson literacy program. On October 28, 2005, Chávez declared Venezuela “illiteracy-free territory.” His national literacy campaign, he announced, had taught 1.5 million people how to read and write, and the education minister stated that residual illiteracy stood at less than 0.1 percent of the population. The achievement received considerable international recognition and was taken at face value by many specialists as well as by casual observers. A recent article in the San Francisco Chronicle, for example, reported that “illiteracy, formerly at 10 percent of the population, has been completely eliminated.” Spanish President José Luis Rodríguez Zapatero and UNESCO’s general director, Koïchiro Matsuura, sent the Venezuelan government public letters of congratulation for the achievement. (After Matsuura’s statement, the Chávez’s administration claimed that its eradication of illiteracy had been “UNESCO-verified.”
“But along with Daniel Ortega of Venezuela’s IESA business school, I looked at trends in illiteracy rates based on responses to the Venezuelan National Institute of Statistics’ household surveys. (A full presentation of our study will appear in the October 2008 issue of the journal Economic Development and Cultural Change.) In contrast to the government’s claim, we found that there were more than one million illiterate Venezuelans by the end of 2005, barely down from the 1.1 million illiterate persons recorded in the first half of 2003, before the start of the Robinson program. Even this small reduction, moreover, is accounted for by demographic trends rather than the program itself. In a battery of statistical tests, we found little evidence that the program had had any statistically distinguishable effect on Venezuelan illiteracy. We also found numerous inconsistencies in the government’s story. For example, it claims to have employed 210,410 trainers in the anti-illiteracy effort (approximately two percent of the Venezuelan labor force), but there is no evidence in the public employment data that these people were ever hired or evidence in the government budget statistics that they were ever paid.”
Ten days is a brief amount of time to spend in Venezuela. It would be foolhardy to make sweeping generalizations about the country based solely on this visit. Nonetheless, some fair observations can be made. As someone who lived in Caracas 10 years ago, I was stunned by the growth in shantytowns that surround the city. The shantytowns, known in Venezuela as “ranchos,” once took up perhaps half of the beautiful mountainsides surrounding Caracas. They now seem to overtake entire mountains.
Their imposing presence can be felt in almost every neighborhood in Caracas. This was not true 10 years ago, at least not to this extent. Meanwhile, the anecdotal commentary from friends and relatives in Venezuela (most of whom are not partisan) indicates that many things – particularly crime – have gotten worse over the past decade. Moreover, Chavez’s price-control policies have led to widespread food shortages. Milk, cheese, sugar and other things can be hard to find. But if you are a card-carrying, red shirt-wearing Chavista, access to such items is a bit better. It is not enough simply to be Venezuelan; you must first be a Chavista. Indeed, one member of a family I know became a token Chavista just to get access to items sold in Chavez’s so-called Mercal stores, where subsidized food is available to the party faithful.
Chavez and his supporters, much like Mrs. Kirchner and hers, often blame responsibility for domestic trouble on others. Last week, while defending Chavez’s food and price control policies, a government-backed newspaper columnist had this to say:
“The government is making a great effort to achieve price accords that guarantee the supply of goods. The problem is related to immediacy. It has been necessary to negotiate with capitalistic networks, networks comprised of multinational companies and oligarchs. We have to celebrate the way this problem has been confronted. The government is finding solutions.”
In essence, the above paragraph says nothing of value. It provides no details about the price accords and says nothing specifically about what the government is doing to ensure that people have access to things like milk. It is empty rhetoric, typical of the kind often heard in Venezuela. But what is more interesting is how the column ends. After three more paragraphs of vague rhetoric, the author goes entirely off topic and blames the U.S. while praising Chavez and his allies:
“Bravo president Correa (of Ecuador), bravo president Chavez. Bravo for the courage to stand up against the aggressions of the empire.”
Prior to that last sentence, the article’s author does nothing to link food shortages with “the empire.” Implicit, perhaps, in the author’s mind, is the assumption that all companies, especially multinational ones, are somehow related to “the empire.” But such a presupposition is nowhere defended in the article. It is simply taken as a given that the evildoing U.S. empire is involved in all that ails Venezuela. That last sentence is an intellectual cheap shot, an attempt to divert readers’ attention away from the real cause of Venezuela’s food shortage. This sort of reasoning is a kind of intellectual trickery that has become common in Venezuela.
Because Chavez froze dairy prices, giving farmers and agricultural companies no incentive to sell milk, the evil U.S. empire is to blame. This kind of flawed logic, and the weak rationale that underlies it, is typical of old-school communist propaganda. It is a kind of argumentation that appeals more to emotion than to reason.
Meanwhile, Chavez continues to invest in his propaganda machine. Photos, posters and murals of Chavez – pictured angelically alongside Christ, Che Guevara and Fidel Castro – can be seen in many places, in newspapers, magazines and on television. Either Chavez or his supporters appear on television for hours every day to defend “la revolución.”
But their attempts to proselytize are largely devoid of logic. Chavez advocates a kind of mass propaganda that tends to dumb people down. He seems to not want a truly informed citizenry that is capable of questioning his policies. Instead of challenging people to think for themselves and agree with his agenda because it represents the best logical option, Chavez appeals to the lowest common denominator. In effect, his propaganda machine teaches people to memorize key slogans, instead of teaching them to understand the reasons for (and against) his policies.
By constantly blaming others for Venezuela’s problems, Chavez runs the risk of leading many Venezuelans to overlook the possibility that some of their problems may be homegrown. If too many Venezuelans are blind to this possibility, it will be all the harder to overcome the challenges facing the country. To a certain extent, this sort of problem affects Argentine politicians who deny the existence of problems, or blame third parties for them.
(Recently when a Venezuelan businessman illegally brought $800,000 of cash into Argentina, – allegedly to help finance Cristina’s presidential campaign – Cristina blamed the U.S. government for conspiring to make her look bad. This, even though the cash was transported via a chartered plane – paid for by her husband’s administration – that carried both Argentine and Venezuelan officials.)
But as long as average Venezuelans cannot buy milk, it is unlikely that any amount of propaganda will get Chavez much support. Recent public opinion polls seem to support this notion. Last week a survey published in El Nacional, one of Venezuela’s leading newspapers, indicated that just 36% of Venezuelans are confident in Chavez’s leadership. That is roughly the same percentage of Americans who support President Bush. Meanwhile, around 51% have no confidence at all in Chavez.
None of this is to say that Chavez has not done any good for the poor. Clearly he has made a concerted effort to bring doctors and teachers into some of the country’s poorest shantytowns. This has had a positive impact on some people’s lives, and this should be acknowledged. There appear to be many more doctors and teachers in Venezuela’s shantytowns then there were a decade ago. This is a good thing. But there also are more (and much bigger) shantytowns. This is a bad thing. So it can be hard to determine exactly how much progress has been made in the war on poverty.
All of this aside, what about the notion (touted by Hollywood’s cocktail party socialists) that Chavez represents a new breed of leaders trying to usher in a new era of global peace and prosperity? This is an inaccurate portrayal. Just days ago, Chavez recklessly sent nine battalions of soldiers to the Colombian border and risked provoking war with Colombia. This arbitrary and capricious move did not result from the careful considerations of a person dedicated to peace and prosperity. It needlessly endangered both Colombian and Venezuelan lives and put the entire region on edge. Meanwhile, Chavez’s decision to close temporarily the border with Colombia cost both countries millions in lost trade and income.
Last week, a group of international musicians held a “peace concert” along the Colombian-Venezuelan border. The concert was apolitical. The musicians voiced support for peace. No harm in this, right? But Chavez did not see it this way. He banned all state media from covering the event. As a result, no news of the event appeared on any of the state’s networks or in any of its magazines or newspapers. Are these the actions of a peace-loving global leader who is genuinely interested in peace and prosperity?
One thing that Argentina and Venezuela have in common is that their leaders both seem to feel contempt for the press and for genuine political debate, although at least Chavez has held press conferences (He literally bear-hugged me at one here in Buenos Aires). Both express disdain for those who oppose their ideas or simply question them. But neither is willing debate their policies publicly in open forums. For those who slam the U.S. presidential campaigns and what many (including me) consider to be their shallow debates, Argentina and Venezuela represent a shameful setback in this sense.
Both are reminders of how much politics has devolved since Greek politicians were evaluated on the logic of the arguments they presented in the Agora. At least Cristina, defined by who she is and not what she does, represents progress in the evolution of women’s rights. And while not all was swell back in Ancient Greece – lest we forget that they defended slavery – both Chavez and Kirchner seem happy to keep their constituents intellectually enslaved to the notion that questioning government policies is unpatriotic.
*In all fairness to Daddy Warbucks (the fictional character in the Little Orphan Annie stories), we should note that he was a free-market capitalist and would not be any fan of Chavez’s “Bolivarian” socialist policies.
Link: La Hojilla (whose host Mario Silva adamantly defends Chavez every night on TV)
Link: San Fransisco Chronicle Article
Link: Gratificados Part 1 (a YouTube video presentation – in Spanish- that defends Chavez’s literacy campaign and trashes newspaper El Universal for a story that claims illiteracy still exists in the country)
Link: Gratificados Part 2
UPDATE: Since the publication of this post, Rodriguez’s view of the Venezuelan economy has been challenged. You can see the critique here. I have not yet had a chance to evaluate it carefully.
The Argentine government lost a great deal of credibility last year when then-President Nestor Kirchner replaced a respected director of the national statistics agency, Indec, with a political appointee who turned the agency upside down and began publishing false inflation data.
Economists, talk-show hosts, newspaper columnists, opposition parties and political analysts blasted the move, saying it was not in Argentina’s long-term interest to lie publicly and repeatedly about economic data. Inflation, economists say, probably totaled 15-20% last year, but Indec indicates the figure was about half that. The situation became so absurd that Cabinet Chief Alberto Fernandez even said “there is no inflation in Argentina.” After a public outcry, Kirchner had to correct his cabinet chief, confirming that “of course there is inflation.” But the president did nothing to dispel claims that Indec continued to manipulate data.
Today the agency and its data remain controversial. Yesterday Indec said January inflation totaled 0.9%, unchanged for the third consecutive month. Economists, as well as average Argentines, have scoffed at the figure, knowing it doesn’t reflect reality. Some economists even say the real number probably was closer to 2% or higher. More conservative estimates put the figure at around 1.2%. Whatever the case, it was interesting to see how the country’s top two newspapers reported the inflation data in today’s editions.
The headlines:
Clarin: In January, official inflation was lower than expected: 0.9%
La Nacion: For Indec, inflation is frozen at 0.9%
The subheadings:
Clarin: Transportation & tourism were the biggest increases
La Nacion: For the third consecutive month, the official agency released the same data for the CPI
If read carefully, both headlines seem to imply that the data released by Indec is not the only data available or the only data worth being considered. Clarin’s reference to “official” data lends implicit recognition to the idea that unmentioned “unofficial” data may also exist. Of course, this is a tacit reference to unofficial inflation estimates by private sector economists, most of whom blast Indec for being unreliable.
Meanwhile, La Nacion’s headline says that “for Indec” the inflation data was 0.9%. Here, too, is an implicit reference to outside inflation data. Though more subtle, La Nacion’s implication is that while “for Indec” inflation may be 0.9%, for others it may be different.
The first two paragraphs of Clarin’s story then gives a straightforward account of inflation that leaves out any mention that economists think the data is unbelievable. Clarin:
“Against all private forecasts and even surpassing the government’s own expectations, yesterday we learned that January’s inflation was 0.9%. The data released yesterday by Indec reveals that over the past 12 months retail prices have risen 8.2%. The increase in tourism-related services and the rise in public transportation costs (buses and subways) were the biggest increases in the categories that pushed consumer prices up.”
In contrast, La Nacion’s first two graphs were much more skeptical, giving readers clear reason to think the government’s numbers aren’t trustworthy. La Nacion:
“As if it were a broken thermometer, the official inflation data remained stuck at 0.9%. Yesterday the national statistics agency reported that the cost of living in January of 2008 rose 0.9% and, in doing so, repeated the index registered in November and December of 2007, despite the fact that Argentine consumers had to pay strong increases in transportation, tourism and some fruit prices. The official indicator was way below the estimates of private-sector economists who calculated the month’s real inflation at 2% and who tossed aside the hope that with new Economy Minister Martín Lousteau at the helm, Indec’s statistics would start to become more reliable. Moreover, Indec’s data was two-tenths lower than that from January of 2007 and, as a result, means that over the past twelve months inflation has totaled 8.2%”
The difference between the two articles becomes even more pronounced as they look at higher public transportation prices and ask why those prices didn’t have a greater influence on January’s inflation figures.
Clarin:
“However, private-sector analysts had estimated that the impact of the increase in bus and subway tickets would be greater. ‘What happened is that many years have gone by without any increases in those prices, so the public transportation category has been losing weight in the inflation equation, and so its impact hasn’t been very important,’ they explained in the government.”
Clarin then went on to give a little background and say that, in January, subway tickets rose 28.6% to 90 centavos while bus tickets rose 16.5% to 90 centavos. Clarin’s article continues but it does not say what the inflation data would look like if the index were updated to include a representative increase transportation prices. La Nacion’s story, in contrast, takes a more detailed look at the issue and shows readers what the inflation data would look like if the transportation price hikes had been given more weight.
La Nacion:
“The most polemical number from the report released yesterday was the transportation index. Private-sector economists had expected an average of a 22% increase in bus, train and subway tickets beginning January 1, which alone would have led to an increase of 0.8% in the cost of living in the first month of 2008. That is, for outside analysts, inflation in January would have had a minimal floor increase of 0.8% because of the of impact of the transportation category. However, Indec’s measurement was very far from reflecting that reality. For the official agency, the increase in public transportation was only 11.1%, which translated into an increase of just 0.28% in the cost of living for the month.”
Both newspapers said the higher transportation costs were partially offset by a 5.3% decline in fuel prices, but La Nacion gave this as the only explanation for why higher transportation prices didn’t further influence Indec’s data. La Nacion then cited more economists who question the government’s data:
“‘What Indec did with the transportation data is very crude and it constitutes the epitome of statistical manipulation because it minimizes the increase that we got in buses, trains and subways,’” said Osvaldo Cado, an economist with the consultancy Prefinex.”
La Nacion then continued to highlight possible flaws in Indec’s data:
“In the case of food there also were important discrepancies between the official data and that provided by private-sector economists. For Indec, the (food) category rose an average of 0.7%, led by higher prices for fruits and vegetables like onion – which rose 15.2% – and lemons (10.9%), although these were offset by declines in tomatoes (13.8%) and plums (13.4%). For private-sector analysts, the increase in food, in contrast, was much greater and, according to the consulting firm Tomadato, which collects supermarket price data, the basic cost of a basket of food rose 1.49% in January. Indec had said the costs of a basket of food had risen 0.78%, meaning a family of two adults would need to have (a combined monthly) income totaling 445.62 pesos to not fall below the poverty level.”
La Nacion then questioned the accuracy of Indec’s tourism price data:
“Another questionable category was tourism, which for Indec rose just 5.9%. ‘The tourism indicator reflects an evolution of pries that any person who has been on vacation knows is not real,’ said economist Pablo Rojo.”
La Nacion also said “the manipulation of the statistics also appears to have reached wholesale prices.” Finally, the La Nacion discussed a recent admonition to Argentina from the International Monetary Fund, whose chief has said that Argentina needs to have “a better appraisal of what inflation really is” in the country. “Obviously, for reasons everyone knows, the official Indec index does not reflect the way it goes.”
So what’s the conclusion from all this?
Beauty, so the saying goes, lies in the eye of the beholder. For Indec, it seems, so does truth, at least when it comes to reporting inflation data. This makes it all the more important for media in Argentina to be extra careful when writing about inflation. Journalists should go about doing their job with a healthy dose of skepticism. Indeed, they have to. If not, they would risk becoming no more than a tool, a mouthpiece for disparate interests in society.
“The purpose of journalism,” wrote Bill Kovach and Tom Rosenstiel in The Elements of Journalism, “is to provide people with the information they need to be free and self-governing.”
To fulfill this task, the authors note:
If journalists are to provide citizens with “the information they need to be free and self-governing,” reporters must give consumers the context and commentary necessary to interpret that information accurately. Given there is reason to believe Indec’s data are inaccurate, newspapers have a duty to remind citizens of this. Over a year has passed since Kirchner began tinkering with Indec, but this does not diminish the need to remind readers about the agency’s questionable practices.
Probably there is nothing more the government would like than for newspapers simply to report the data without commentary or analysis. But to do so would be an abdication of responsibility. Both papers have a duty to report the data and (if possible) whatever commentary the government offers about it. But they also have an obligation to put that data into context and let readers know if there is any reason to question it. In this case, Clarin failed to do this to the best of its ability.
The Argentine government lost a great deal of credibility last year when then-President Nestor Kirchner replaced a respected director of the national statistics agency, Indec, with a political appointee who turned the agency upside down and began publishing false inflation data.
Economists, talk-show hosts, newspaper columnists, opposition parties and political analysts blasted the move, saying it was not in Argentina’s long-term interest to lie publicly and repeatedly about economic data. Inflation, economists say, probably totaled 15-20% last year, but Indec indicates the figure was about half that. The situation became so absurd that Cabinet Chief Alberto Fernandez even said “there is no inflation in Argentina.” After a public outcry, Kirchner had to correct his cabinet chief, confirming that “of course there is inflation.” But the president did nothing to dispel claims that Indec continued to manipulate data.
Today the agency and its data remain controversial. Yesterday Indec said January inflation totaled 0.9%, unchanged for the third consecutive month. Economists, as well as average Argentines, have scoffed at the figure, knowing it doesn’t reflect reality. Some economists even say the real number probably was closer to 2% or higher. More conservative estimates put the figure at around 1.2%. Whatever the case, it was interesting to see how the country’s top two newspapers reported the inflation data in today’s editions.
The headlines:
Clarin: In January, official inflation was lower than expected: 0.9%
La Nacion: For Indec, inflation is frozen at 0.9%
The subheadings:
Clarin: Transportation & tourism were the biggest increases
La Nacion: For the third consecutive month, the official agency released the same data for the CPI
If read carefully, both headlines seem to imply that the data released by Indec is not the only data available or the only data worth being considered. Clarin’s reference to “official” data lends implicit recognition to the idea that unmentioned “unofficial” data may also exist. Of course, this is a tacit reference to unofficial inflation estimates by private sector economists, most of whom blast Indec for being unreliable.
Meanwhile, La Nacion’s headline says that “for Indec” the inflation data was 0.9%. Here, too, is an implicit reference to outside inflation data. Though more subtle, La Nacion’s implication is that while “for Indec” inflation may be 0.9%, for others it may be different.
The first two paragraphs of Clarin’s story then gives a straightforward account of inflation that leaves out any mention that economists think the data is unbelievable. Clarin:
“Against all private forecasts and even surpassing the government’s own expectations, yesterday we learned that January’s inflation was 0.9%. The data released yesterday by Indec reveals that over the past 12 months retail prices have risen 8.2%. The increase in tourism-related services and the rise in public transportation costs (buses and subways) were the biggest increases in the categories that pushed consumer prices up.”
In contrast, La Nacion’s first two graphs were much more skeptical, giving readers clear reason to think the government’s numbers aren’t trustworthy. La Nacion:
“As if it were a broken thermometer, the official inflation data remained stuck at 0.9%. Yesterday the national statistics agency reported that the cost of living in January of 2008 rose 0.9% and, in doing so, repeated the index registered in November and December of 2007, despite the fact that Argentine consumers had to pay strong increases in transportation, tourism and some fruit prices. The official indicator was way below the estimates of private-sector economists who calculated the month’s real inflation at 2% and who tossed aside the hope that with new Economy Minister Martín Lousteau at the helm, Indec’s statistics would start to become more reliable. Moreover, Indec’s data was two-tenths lower than that from January of 2007 and, as a result, means that over the past twelve months inflation has totaled 8.2%”
The difference between the two articles becomes even more pronounced as they look at higher public transportation prices and ask why those prices didn’t have a greater influence on January’s inflation figures.
Clarin:
“However, private-sector analysts had estimated that the impact of the increase in bus and subway tickets would be greater. ‘What happened is that many years have gone by without any increases in those prices, so the public transportation category has been losing weight in the inflation equation, and so its impact hasn’t been very important,’ they explained in the government.”
Clarin then went on to give a little background and say that, in January, subway tickets rose 28.6% to 90 centavos while bus tickets rose 16.5% to 90 centavos. Clarin’s article continues but it does not say what the inflation data would look like if the index were updated to include a representative increase transportation prices. La Nacion’s story, in contrast, takes a more detailed look at the issue and shows readers what the inflation data would look like if the transportation price hikes had been given more weight.
La Nacion:
“The most polemical number from the report released yesterday was the transportation index. Private-sector economists had expected an average of a 22% increase in bus, train and subway tickets beginning January 1, which alone would have led to an increase of 0.8% in the cost of living in the first month of 2008. That is, for outside analysts, inflation in January would have had a minimal floor increase of 0.8% because of the of impact of the transportation category. However, Indec’s measurement was very far from reflecting that reality. For the official agency, the increase in public transportation was only 11.1%, which translated into an increase of just 0.28% in the cost of living for the month.”
Both newspapers said the higher transportation costs were partially offset by a 5.3% decline in fuel prices, but La Nacion gave this as the only explanation for why higher transportation prices didn’t further influence Indec’s data. La Nacion then cited more economists who question the government’s data:
“‘What Indec did with the transportation data is very crude and it constitutes the epitome of statistical manipulation because it minimizes the increase that we got in buses, trains and subways,’” said Osvaldo Cado, an economist with the consultancy Prefinex.”
La Nacion then continued to highlight possible flaws in Indec’s data:
“In the case of food there also were important discrepancies between the official data and that provided by private-sector economists. For Indec, the (food) category rose an average of 0.7%, led by higher prices for fruits and vegetables like onion – which rose 15.2% – and lemons (10.9%), although these were offset by declines in tomatoes (13.8%) and plums (13.4%). For private-sector analysts, the increase in food, in contrast, was much greater and, according to the consulting firm Tomadato, which collects supermarket price data, the basic cost of a basket of food rose 1.49% in January. Indec had said the costs of a basket of food had risen 0.78%, meaning a family of two adults would need to have (a combined monthly) income totaling 445.62 pesos to not fall below the poverty level.”
La Nacion then questioned the accuracy of Indec’s tourism price data:
“Another questionable category was tourism, which for Indec rose just 5.9%. ‘The tourism indicator reflects an evolution of pries that any person who has been on vacation knows is not real,’ said economist Pablo Rojo.”
La Nacion also said “the manipulation of the statistics also appears to have reached wholesale prices.” Finally, the La Nacion discussed a recent admonition to Argentina from the International Monetary Fund, whose chief has said that Argentina needs to have “a better appraisal of what inflation really is” in the country. “Obviously, for reasons everyone knows, the official Indec index does not reflect the way it goes.”
So what’s the conclusion from all this?
Beauty, so the saying goes, lies in the eye of the beholder. For Indec, it seems, so does truth, at least when it comes to reporting inflation data. This makes it all the more important for media in Argentina to be extra careful when writing about inflation. Journalists should go about doing their job with a healthy dose of skepticism. Indeed, they have to. If not, they would risk becoming no more than a tool, a mouthpiece for disparate interests in society.
“The purpose of journalism,” wrote Bill Kovach and Tom Rosenstiel in The Elements of Journalism, “is to provide people with the information they need to be free and self-governing.”
To fulfill this task, the authors note:
If journalists are to provide citizens with “the information they need to be free and self-governing,” reporters must give consumers the context and commentary necessary to interpret that information accurately. Given there is reason to believe Indec’s data are inaccurate, newspapers have a duty to remind citizens of this. Over a year has passed since Kirchner began tinkering with Indec, but this does not diminish the need to remind readers about the agency’s questionable practices.
Probably there is nothing more the government would like than for newspapers simply to report the data without commentary or analysis. But to do so would be an abdication of responsibility. Both papers have a duty to report the data and (if possible) whatever commentary the government offers about it. But they also have an obligation to put that data into context and let readers know if there is any reason to question it. In this case, Clarin failed to do this to the best of its ability.
Tourists in Argentina complained vociferously last year about the country’s tardy airlines, according to a new report by the Argentine Right To Tourism Association. The association, which goes by its Spanish acronym AADETUR, based the report on more than 5,000 complaints it received via email from frustrated local and foreign tourists.
The No. 1 complaint? “Delayed planes, lost connections and canceled flights.” The biggest nuisances, tourists said, are the departure and arrival times of Argentine flights. And if you look at the numbers from another study, it’s easy to see why so many people are complaining.
Last March only 15% of domestic flights arrived and departed on-time. That’s right, 15 percent. By September, that figure had gotten better, almost doubling to 27%. Meanwhile, around 15% of flights were canceled in September. And that was a major improvement from previous months in which roughly 25% of all domestic fights were canceled.
The study compared domestic flights with similar flights in the U.S. There, about 70% of flights arrived on-time while only 2% of were canceled. (The comparison was made using U.S. flight data from July, 2007)
International flights to and from Argentina performed much better, though certainly not perfectly, according to the study. Between July and September, only 53% of Aerolíneas Argentinas flights arrived on-time when traveling between Ezeiza and Miami. Around 56% of those flights departed on-schedule. Lan Argentina’s record was even worse, arriving on-schedule 52% of the time and departing on-the-hour just 49% of the time. American Airlines turned in the best performance, arriving punctually 81% of the time and departing on-schedule 80% of the time. The study did not provide data for other other carriers.
It did provide data for flights between Ezeiza and Madrid. These results were even worse. One carrier, Air Comet, arrived on-schedule just 24% of the time and departed on-the-hour only 28% of the time. Air Europa had the best performance, with 89% of its arrivals and 86% of its departures on-time.
Tourists also complained about hotels, saying many falsely advertised being three or four-star hotels when really they two or three-star abodes. Foreign tourists complained about having to pay “differential” rates for transportation. This complaint is related to the Argentine government’s decision to make foreigners pay more for tickets. The idea behind the differential rate is that it helps subsidize local ticket prices, keeping them affordable for Argentines, whose incomes generally are much lower than those of foreigners.
However, the differential rate has sometimes made local airfares more expensive than similarly-long routes in developed countries. This has discouraged many foreigners from flying domestically. Other complaints related to delayed departures and arrivals for all other forms of transportation, problems with taxis, crime, hygiene in hotels and restaurants, and stolen luggage. The 15th top complaint? “A lack of complaint offices” where travelers could file complaints. That’s true. I didn’t make it up.
AADETUR is preparing another study, to be released next week, that examines air travel in greater detail and aims to give a more comprehensive look at which airlines perform better in differing categories. In the meantime, the lesson to be learned from all of this is very simple: If you plan to fly, expect to be delayed, possibly for a long time.
Click on image for an animated history of New York’s subway developmentWith all the recent talk about expanding the subway system in Buenos Aires, it may be instructive to take a look at how the system compares with its counterpart in another great cosmopolitan center, New York City.
Mauricio Macri, who becomes the new mayor of Buenos Aires December 9, has proposed to build 27 kilometers (16.7 miles) in new subway lines. Macri, who coincidentally met with NYC Mayor Michael Bloomberg last week in Manhattan, also has pledged to increase the frequency of times that trains pass through each station everyday.
The two systems are roughly the same age. Argentina’s was completed in 1913 while New York’s was established a bit earlier in 1904. Buenos Aires was the 13th city in the world to get its own subway system, according to Metrovias. But while both emerged in the early part of the 20th century, development of the two systems since then has been markedly different.
Argentina’s left-lane system (designed by – who else? – the Brits) runs 42.7 kilometers (26.5 miles) while New York’s spans a whopping 595.5 kilometers (370 miles). This, according to Metrobits.
Argentina’s “subte” has 63 stations while New York’s has 468. Argentina’s has six lines; New York’s has 27. In the summertime, New York’s subway has air conditioning while Argentina’s has the climate-control button set permanently on “sweat like a pig.” Around 5 million passengers ride New York’s subway everyday while about 1. 3 million do so in Buenos Aires. Argentina’s system has limited hours while New York’s runs 24 hours a day 365 days a year.
WiFi In Subway & Subte Stations
Buenos Aires beat New York to the punch, however, by being the first to install WiFi in its stations. At least the B, C, D & E lines in Buenos Aires provide free and unrestricted wireless Internet access. I used my iPhone this week to test the service on the D line and it worked perfectly, allowing me to download email and surf the web. The service works in stations themselves but not inside the tunnels. Buenos Aires was the fist city in the Americas and the second city in the world to install WiFi in its subway stations, according to La Nacion. New York City is only now about to install WiFi in its subway stations, according to Newsday.
But Argentina’s subway costs just 70 centavos (about US 22 cents) while New York’s costs US $2 dollars. That ratio will change January 1, however, when local transportation costs rise by up to 30%. Then the cost of riding the subway here will jump to 90 centavos (US 28.5 cents). However, the cash saved by traveling in Buenos Aires is partially offset by having to put up with the God-awful, screeching, death-rattle noise produced when train wheels brush up against inhospitable tracks. And while Argentina’s network is cheaper, in NY you get to ride with Elvis.
The inspiration for this post was a similar one by Matías Maciel on his blog Entretanto. Matías is an Argentine journalist in NYC. His blog, though in Spanish, is well worth visiting.
“If it’s in focus, it’s pornography. If it’s out of focus, it’s art.” — The Year of Living Dangerously
A LIST OF PRICE INCREASES TO COME:
Buses: 12.5%
Electricity: 20%
Gasoline: 25%
Health Insurance: 25%
Heating gas: 20%
Insurance: 35%
Property taxes (ABL): 19% to 238%
Taxis: 20% (Went up last week)
It was to be expected.
Politicians, particularly those running for office, bend over backwards to avoid saying things that cost them votes. This is one reason Cristina Kirchner avoided the press until the eve of the presidential election last week. Even then, she assiduously avoided saying exactly how she would deal with problems like inflation.
Even now, after the election, Cristina is unlikely to say publicly that she supports raising prices on specific items by specific amounts. But people close to her say this is exactly what she plans to do. She will lift a five-year-old freeze on utility rates and the cost of public transportation. The price increases will not be announced ahead of time. There will be no welcome party for them, no red carpet arrival. They will simply arrive, like freeloading distant relatives.
Two key concepts underpin the plan to increase prices: Gradualism and Fairness. The hikes will come gradually, meaning that instead of certain prices rising 100% overnight they will rise 100% over a period of one or two years. The increases will also be “fair” to those who can least afford them. These two terms were repeated over and over again in interviews I had with private and public sector officials before the election. Cristina has also carefully used these terms in comments to the press and in public speeches.
A third economic concept also underlies the plan to raise prices: The need to attract investment. In some ways, Argentina’s economy has reached a bottleneck. Many factories are producing at full capacity and couldn’t increase production even if they wanted. Rapid economic growth since 2002 has outpaced investment in infrastructure and energy, meaning that demand for things like gas and electricity often outweighs supply.
This is why the government earlier this year forced many businesses to cut power consumption during certain hours. It is why major hotels throughout Buenos Aires had to dim their lights twice a day in the winter. It is also why Cristina is hoping that this summer won’t be too hot. Hot weather means more air conditioning which, in turn, means more power usage. If it gets too hot, the government may further restrict energy use. That could mean rolling blackouts, not just for industry but also for residential users. In my neighborhood, in Nuñez, there have been three blackouts – each lasting about an hour – in the past five months.
To prevent this bottleneck from further stifling economic growth, Argentina needs investment in energy and infrastructure. But this will come only if investors believe they can make a profit. Because of this, Cristina has assured them that she will gradually lift rates on public utilities, giving investors more incentive to invest. If investors come, they will likely do so gradually as they test the market tepidly, just as prices will likely rise gradually.
But “gradual” may mean different things to different people. A 238% increase in property taxes on the owner of a Puerto Madero penthouse may pass unnoticed. But a 19% increase on the struggling owner of a one-room apartment in La Boca may mean the difference between barely getting by and not getting by at all. Meanwhile, a 20% increase in residential electric bills may seem like a lot to consumers but may not be enough to spur investment in the sector.
Despite Cristina’s effort during the campaign to keep policy proposals out of focus, the real nature of inflation and her approach to tackling it will come into focus in the months ahead. During the campaign, the vague nature of Cristina’s message was made clear by her slogan: “We know what is lacking. We know how to get it done.” She never said exactly what was lacking or just what it was that she would get done.
Prevarication, equivocation and ambiguity have become essential tools of the modern political artist. Virtually no politician’s portrait is painted without them. Every word in every message is carefully calculated either to appeal to the greatest number of people or to offend the least. Often, after taking office, politicians continue to use the same kind of evasive rhetoric that got them elected in the first place. This likely will be the case with Cristina. After all, psychologists say the best predictor of future behavior is past behavior. There is no reason to think things will be any different once Cristina becomes president.
One thing will be different, though. Cristina’s formerly out-of-focus ideas will now take shape in the form of specific government policies – policies that pinch people’s pocketbooks. As this happens, her artfully ambiguous economic plan will come into focus, losing its luster. It will begin to appear less like art and more like something else, something much less appealing.
The cost of a “Roll Carne Asada” sandwich at Aroma on
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