| Shakka |
Gotta love this guy.
| quote: | Chavez, Kirchner Mask Surge in Living Costs by Controlling Data
2007-03-23 00:04 (New York)
By Bill Faries
March 23 (Bloomberg) -- Venezuelan President Hugo Chavez
and his Argentine counterpart Nestor Kirchner, facing the
fastest price increases in Latin America, are employing a new
tool to bring down their inflation rates: control the data
collectors.
Chavez is prodding the central bank to use more
government-subsidized food prices in its monthly surveys and
include prices from small towns. Kirchner removed the official
in charge of measuring inflation in January and then altered the
methodology for gauging prices.
Rising costs threaten the populist images Chavez and
Kirchner have cultivated as their citizens struggle to pay for
food and clothing. Under-reporting inflation also allows the
leaders to restrain wage increases for many workers and limit
payments on certain bonds.
``You can lower printed inflation, but it's an illusion to
think the government can protect the population in this way,''
said Alberto Ramos, an economist with Goldman Sachs Group Inc.
in New York.
Venezuela's inflation surged to 20.4 percent in February,
the highest in Latin America, from 12.5 percent a year earlier
as shortages pushed up costs for food and medicine.
Stem Increases
In an effort to stem increases, Chavez last month
threatened to take over supermarkets that sell meat for more
than government-set prices. On Feb. 24, Chavez said surveys by
Venezuela's central bank are too focused on Caracas and don't
include subsidized food sold in more than 10,000 stores
nationwide.
``How is it that you are only going to do a survey in
Caracas?'' Chavez said in an attack on statisticians who measure
inflation. ``Is it because you believe the proverb that Caracas
is Caracas and the rest of the country is just forest and
snakes?''
Argentina reported inflation of 9.6 percent for the 12
months that ended in February, the second highest rate in the
region.
Roberto Lavagna, Kirchner's former economy minister and a
candidate in October's presidential election, said in an
interview that he estimates Argentina's real inflation rate in
February was about 15 percent -- about 5 percentage points more
than reported.
Export Ban
The rate peaked in December 2005 at 12.3 percent. After
that, Kirchner banned exports of beef to increase domestic
supplies and persuaded companies including Unilever NV to limit
price increases on consumer goods such as shampoo and soap.
In late January, Kirchner replaced Graciela Bevacqua, the
official responsible for collecting consumer price data, with
Beatriz Paglieri, an aide to Economy Minister Felisa Miceli.
Clarin newspaper reported that Bevacqua rejected government
demands to modify the methodology her office used to measure
inflation.
Kirchner said on Feb. 6 that he made the changes to
``improve operations,'' and he denies the government is
manipulating the data.
While governments typically respond to inflation by
controlling expenditures or raising interest rates, neither
leader has much incentive to curb spending or investment.
Seizing Reserves
Chavez, 52, has consolidated his support by seizing more
than $20 billion in central-bank reserves since 2005 to help
fund social programs.
Kirchner, 57, doesn't want to restrain consumers or
businesses ahead of October's elections, in which either he or
his wife, Senator Cristina Fernandez de Kirchner, will be
running for president, said Alfredo Coutino, an economist at
Moody's Economy.com, a provider of economic and financial
research and a subsidiary of Moody's Corp.
The two men spent five hours on Feb. 22 discussing how to
slow increases in living costs during a lakeside chat on the
shore of Lake Macagua in eastern Venezuela, Chavez said two days
later.
Keeping inflation numbers down helps to depress wage
increases, as public and private sector unions look to the data
when negotiating labor contracts.
In 2006, civil servants, truck drivers and building
superintendents in Argentina received a 19 percent wage
increase, while consumer prices rose 9.8 percent for the year.
Bank employees and steel and train workers are seeking a 20
percent increase this year.
Limiting Payments
A low official inflation rate also limits payments to
certain bondholders. Prices on Argentina's 5.83 percent,
inflation-linked bonds, which account for about 40 percent of
the country's debt, fell to as low as 139.90 pesos on March 8
from 154.50 pesos on Feb. 1 following news of Bevacqua's
removal. The bonds' yields, which move inversely to price,
climbed to 6.18 percent from 5.32 percent during the same
period.
Noelia Lucini, an economist at Capital Markets Argentina
Sociedad de Bolsa SA in Buenos Aires, said speculation that the
government may reconsider the personnel changes helped
inflation-linked bonds rally this week.
Argentina's economy expanded more than 8 percent annually
for the past four years as demand for exports, including wheat
and soybeans, surged. In the fourth quarter of 2006,
unemployment dropped to a 14-year low of 8.7 percent.
``If things are going well and Kirchner is doing this, it
makes me wonder what he'll do when things aren't so good,'' said
Bertrand Delgado, a Latin America economist at IDEAglobal in New
York. ``Politicians usually do these kinds of things when they
have nothing else to fight inflation with.''
--With reporting by Theresa Bradley and Alex Kennedy in Caracas,
Eliana Raszewski and Daniel Helft in Buenos Aires, and Shawnda
Bolden in New York. Editor: Jarvie (ajb/mpg/kjo).
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