In January, Argentina’s inflation rate increased to 2.9%, as reported by the government’s statistics agency, INDEC. This release came one week following the resignation of the bureau’s head, which was prompted by a disagreement regarding the measurement methodology. Prices rose by 32.4% on an annual basis, with the food and non-alcoholic beverages sector experiencing the most significant monthly increase at 4.7%. January recorded the fifth consecutive month of rising monthly inflation rates. The INDEC had initially intended to revise the methodology for calculating inflation, with Tuesday marking the anticipated introduction of the updated index. The existing measure relies on a collection of goods and services derived from a national survey conducted in 2004, with the bureau intending to substitute it with findings from a 2017-2018 study.
Economy Minister Luis Caputo stated that he and President Javier Milei did not concur with the modification, asserting that the new index would only be implemented “once the disinflation process is fully consolidated.” Marco Lavagna, the head of INDEC, has stepped down due to a disagreement. The primary distinction lies in the fact that the revised approach would allocate greater emphasis on the expenses associated with utility fees and transportation, both of which experienced increases during the Milei administration. “Our perspective is that the index should remain unchanged at this time. “In fact, it makes little difference,” Caputo stated during an interview.
A report released last week indicated that, based on the 2017-2018 weighting factors, inflation for January would have been 3%. Another consultancy, Epyca, noted that inflation is currently assessed “using a basket of goods and services from an era devoid of widespread internet access or smartphones, yet it did encompass the pricing of fax machines, floppy disks, compact discs, and movie rentals at video stores.” A report indicated that the reversal of the methodology update impacts not just the figure itself, but also enables the government to limit public expenditure on items that are automatically adjusted in accordance with inflation. The document indicates that the administration is projected to achieve savings of 5 trillion pesos this year, primarily attributed to reduced expenditures in social security, including pensions, as well as in inflation-adjusted government bonds. The analysis determined that the figure constitutes slightly less than 0.5% of the nation’s GDP.
On Tuesday, socialist lawmaker Esteban Paulón submitted a criminal complaint against Caputo, the newly-appointed head of the INDEC, Pablo Lines, Chief of Staff Manuel Adorni, and other officials within the statistics bureau, citing abuse of authority and the destruction of public records. “The manipulation of the Consumer Price Index is evident, and the damage to its credibility is irreparable,” Paulón stated. The complaint indicates that the recently abandoned index update incurred a cost of US$5 million and required five years of technical effort.